“Don’t forget to give to others this Christmas” by Steve Marsten

Well it’s that time of the year where we are at our busiest doing as much as we can before the holiday break. Fitting in time to do the Christmas shopping, finalise the decorations and preparing to bake heaps of goodies. Christmas is all about giving and in my opinion, thinking less about ourselves and taking time out to think about others.

This year as in past years, the team at Sothertons has chosen to prepare a basket of food and gifts for a family of four - a single mum and her three children. This year has been a more difficult year for the Gladstone region with many people losing their jobs and there seems to be more families than ever struggling with the current sluggish economy.

We are thankful we have jobs and as a result, we always practice giving back. It’s always easy to help another. We can’t always solve other people’s problems, however we can take the time to smile and brighten someone’s day.

It’s a time when doing the things to others, that you would want them to do for you - really makes sense.

Though many think that Christmas is about the presents, the tree, the lights and the good food, I feel it’s actually about the satisfaction you get from people being happy to receive something, especially if with our changing economic times, everyone is asking for help in some form. There are as many reasons to give, as there are ways to give.

And at the end of the day if you can’t afford to give a gift, we should just remember that there are many people who just want you to stop and take the time to listen and be present for them.

Always remember when giving we enhance our sense of aliveness in others while enriching our own.

The team at Sothertons wishes everyone a safe and happy Christmas break. See you in the New Year.

“You don’t know what you’ve got till it’s gone…” by Tina Zawila

In the last few weeks we have seen several iconic local businesses in Central Queensland announce that they are closing their doors.  Some have been in business for 15, 30+ and 40+ years.  All of them offer our local community a specialist product/service, or simply independent and unique products coupled with good old fashioned customer service that usually goes hand-in-hand with a business owned and operated by a local, employing local people.

There are many reasons why a business simply closes its doors, and it’s not always a “forced” or sad decision, however, in most cases it does arise out of necessity rather than choice. 

Unfortunately, many small businesses now find themselves competing with multi-nationals next door offering low priced products and services, and/or competing with their own suppliers who sell their goods online to the same customers the local business is trying to serve!  This increased level of competition is putting a tremendous strain on small business owners.

If the current trend continues, we will face a future where we will not be able to “go shopping”!  We won’t be able to stroll through a local store, chat with the shop assistant, touch, feel and try on the products, and share the experience with friends. 

So if you were saddened to hear that local businesses are closing their doors, or if you want to preserve your shopping experience, what can you do about it? 

Independent, local businesses need local support.  They need you and I, who live and work in this community to buy from them, to shop here in our own home town.  After all, these same small businesses offer many of us employment!

So the next time you are shopping, give a thought to who you are spending your money with.  Can you buy the same or similar product or service from a local, independent business? 

Sothertons Gladstone is a locally owned and operated business, supporting locally owned and operated small businesses.  If we can support you, please call us on 4972 1300.

“What happens when the Business Owner respectively dismisses themselves?” by Steve Marsten

At the recent National Sothertons Conference in Adelaide we had the opportunity to listen to a truly inspirational speaker in Donald McGurk, the CEO of Codan.  Codan is a publicly listed Australian company that manufactures mine and gold detectors as well as high frequency radio and satellite communications technology.

This isn’t the easiest space to compete in. They are dealing with third world governments like Angola and Afghanistan and competing with US and Chinese companies, yet here they are forging profitable business in some of the most challenging nations and markets in the world because the technology is world class!

What we learnt from Donald’s presentation was his internal approach to leadership. Codan has had major profit fluctuations in recent years due to the ebb and flow of contracts - something that many of our company clients here in Gladstone will attest to. Hence, he has often had to explain the results to his board and as a result he utilises a technique which is to “respectfully dismiss himself” each week.

Now many of us have been dismissed or changed jobs, at least once in our lives and nowadays it seems to be the norm rather than the unique. The younger generation are told that they will have 5-8 jobs during their lifetime and 1-3 careers- hence they are a little more primed for it.

When we change jobs, often we take time to assess what lead up to the job change? What could I or should I have done differently or approached from a better angle? What will I focus on more in my next role? He focuses on “above the line” thinking – what are the “right” things that should be carried out? What level of intensity should I inject into this or that task?

He sets his values as the leader of his company and then he goes “all out” to stand by those values. Every time he sees someone within his organisation not exuding the right corporate behaviour that aligns with the values of the company – he calls them out! Every time – without fail. That’s what we tend to get lazy at.

If you are the leader in your business, consider setting Company values that are clear to you and then implement them to the letter while respectively dismissing yourself on a regular basis. At Sothertons we enjoy sharing business techniques that can improve our clients approach to business. Call us for a meeting on 07 4972 1300.

“Activity Breeds Activity” by Tina Zawila

Last week Steve and I travelled to Adelaide for the National Sothertons Biannual Directors Conference. When we jump in the car from the airport, we strike up a conversation with the driver and we ask "how's business in Adelaide?"  The driver was upbeat, positive and replied with pride.  He rattled off all the construction activities happening in the city, mentioning how many cranes are on the city skyline and how the retail economy, in particular, dining and entertainment had shown signs of resurgence.  He said his own business has been growing year on year for the last 3-4 years with no signs of slowing down.

He also told us stories of the excellent service we can expect in Adelaide, including anecdotes of his own "great service stories" from sewing a button on a client's shirt, to delivering Subway to a guest at a hotel!  Again, he spoke with pride about his business and the referrals he received.

It was a pleasant ride to the hotel and it made me excited to be in the city of Adelaide!

Afterwards, when I reflected on the conversation, I was reminded that in business (and in life!) "activity breeds activity".

All of the construction activity on public facilities, hospitals and universities has a very positive flow-on effect on the local economy.  Creating jobs and supporting local business.

Further, our driver's own activity breeds more activity for him via referrals and repeat business.  I have no doubt that his great customer service ethic, friendly demeanour, pride in his city and positive attitude would all guarantee him success.

So if you could use some more activity in your business, ramp up your own efforts.  Get out there and sell yourself, your business and your local economy.  Remember, "If it's going to be, it's up to me!"

At Sothertons Gladstone, we are here to support you in business and in life, call us on 07 4972 1300 if you need some fresh ideas or someone to keep you accountable.

“Starting Early Reaps Rewards” by Steve Marsten

I was talking to some 20 some things this week who admitted that they really don’t like paying for financial advice. That said, when I queried them further - they really weren’t sure what a financial advisor could really offer them.

Now this couple still lived at home with mum and dad and didn’t really pay board but occasionally “chipped in” from time to time - seemingly at their own discretion. What a great deal! Both had jobs and apart from a car payment there was not much else they were paying for other than entertainment, clothes and cosmetics. Interestingly, they didn’t really know where all their money went.

The first thing we worked on was measuring where the money went. So we established a Xero file to get the figures up to date. You can’t manage what you don’t measure!

Then we put the plan together. Firstly, they needed to get over the shock that 47% of their income went on entertainment! This largely included alcohol as well. They came to the realisation that they may have overspent in this area – I didn’t need to tell them this. By the end of the session we had smashed out the action sheet which concluded that they could actually save nearly 40% of their earnings. They valued their relatively “free” accommodation; had a super plan assisted by the Government; had a plan to build on their super; had a plan to obtain health insurance before they turned 27 and worked out they would have a healthy deposit for the next stage of their lives over the next 18-24 months! We also agreed that we would meet for 30 minutes in 3 months to ensure that the plan was on track.

The value of financial advice is always debateable, however good advice should add value immediately.  When you are in your twenties, if there is a regret that I had, it was not starting with a plan sooner. Bringing health to your wealth starts with people who may not have many assets now but at least have a desire to start somewhere. At Sothertons we encourage “Early Planners” to get the ball rolling with an initial consult to flesh out the real goals and objectives. The sooner the plan starts, the sooner the rewards arrive – call Sothertons on 07 4972 1300 to commence your plan.

A Question of Ethics by Tina Zawila

According to Google, "Ethics" is defined as the moral principles that govern a person's behaviour or the conducting of an activity.

In business, just as in life, there will always be differences in the interpretation and application of ethical principles.  What may be "normal practice" for some, will be completely off limits for others.  However, as a society, we do have rules to follow, to protect us all. 

Recently, I have encountered a few situations where ethics have been questioned in business, such as the interpretation of the "spirit" of a written contract or agreement, versus the exact wording, or in relation to the conduct of an individual or business as a whole. 

It's also interesting to reflect on how we, as human beings, form our own ethics and morals (guided by society, family, friends, religion etc), and how we will defend our own position passionately against anyone who may take a different view.  Sometimes even to our own detriment.  After all, it's often very difficult to admit we may have been wrong.  

However, there are times when we must follow our own "moral high ground" even if that means not giving in to the temptation to take the "easy" or more favourable option.  Whilst that is often not an easy choice, it is one that most of us will face at some time during our lives. 

At the end of the day, each of us has to be able to look in the mirror and know that we have done our very best to follow society's rules and to serve and respect others.  In business, this means your clients and customers, suppliers and alliances, and the community which you serve.  

Sothertons Gladstone has been serving the local community for almost 40 years, and we are here to listen to your challenges in business.  Call us on 07 4972 1300.

“Is Life Insurance a risk?” by Steve Marsten

Article by Steve Marsten

Have you had a chance to review your Life Insurance recently? In the words of an old rock commentator – do yourself a favour! As financial planners with Professional Investment Services,  we see what’s happening in this space quicker than most people and at the moment the increase in premiums is a big concern.

I understand everything tends to go up in price and with Life Insurance this is particularly the case. The older we get, the more it costs to be insured. Usually we have expected increases of some 5-8% with each year we get older during our 40’s and 9-12% during our 50’s. Each birthday puts you one year closer to your life expectancy and thus you become a higher probability to cause a payout to the Insurer.

But in recent times we have noticed that some companies (well known and in the industry more than 20 years) have suddenly put the prices up 20-30% and some have put their prices up 10% and then added a further 10% 6 months later. The reason is, apparently, they have been told by their actuarial advisers and underwriters that they are short on funding as the general population ages, to meet the potential major payouts in the medium term. Hence they quietly raised the premium.

Now of course they must let you know and they do that by some form of correspondence. My advice is – take the time to read it. I know many people sign up for their life insurance and it becomes a set and forget approach. Recently I have found clients who have life premiums built into their super so they don’t realise that these huge increases are eating away a fair chunk of their super and they can’t understand why their super isn’t growing fast enough. Or it is simply a direct debit from their account and they have seen it but assumed it hasn’t moved much.

These increases will discourage people taking up Life insurance, however you should review your insurance and make sure it’s still relevant and of value to you. Has the original purpose or objective changed?

At Sothertons PIS - we can review your insurances to make sure you are not paying too much for them or making sure that the cover is still relevant for your purposes.  Call us for a free review on 07 4972 1300.

Start Me Up! by Tina Zawila

In the last few weeks I have had the pleasure of working with several new business owners – both start ups and those who are buying into established businesses.   These new entrepreneurs are full of passion, excitement and enthusiasm for their new venture.  However, what I respect the most is that they have all sought professional advice at the start of their business journey.

“Getting things right” from the start can mean the difference between success and failure.  There are a myriad of things to consider when starting a new business – premises, renovations, stock, equipment, finance, pricing, your target market, advertising, website, staff, and the list goes on.  That list though, didn’t include the legal, financial and taxation matters that must also be addressed, including:

• choosing the appropriate legal/taxation structure and getting it set up correctly,
• registering for a Tax File Number (TFN) and Australian Business Number (ABN),
• registering for GST, and
• setting up your record-keeping and accounting systems.

In the 2015 Federal Budget, one of the incentives for ‘start ups’ was to allow new businesses to immediately deduct certain capital costs incurred when starting up a business (which previously had to be deducted over 5 years).  So now you can also claim an immediate tax deduction for your investment in “getting things right”.

Your professional advisor can also help you with the ‘fun stuff’ – making sure you have a clear vision for your business, and a documented plan to achieve that vision.  He/she can help you identify the key drivers in your business and the key performance indicators that you can use to measure your success.  And most importantly, he/she can be your mentor, sounding board, and hold you accountable to do what you say you will do.

Just as in the lyrics of the infamous Rolling Stones song “Start Me Up” – “If you start me up I’ll never stop”, if these passionate new business owners are given the right advice and support from the start, there will be nothing stopping them from achieving their goals and dreams!

At Sothertons, this is what we love to do.  Call us on 4972 1300 to discuss your business journey.

“Pensioners need to heed new pension laws” by Steve Marsten

We have had a few clients reading about changes to the Age Pension rules in the near future. So lets talk ‘Aged Pensioners’ and ‘Assessable Assets’ by way of property.

From 1^st January, 2017 the government is changing the amount that an aged pensioner can have via the Assessable Asset test, to determine how much pension the government will provide. The good news is the initial threshold is increasing from $286,500 to $375,000 for couples and $202,000 to $250,000 for singles. This is for Home owners.

The family home in which a pensioner lives, is not classed as an Assessable Asset .

The “upper limit” threshold amount in which the test allows a pensioner to receive a part pension and to have assets - currently is $779,000. This will reduce to 547,000 for single pensioners and $1,163,000 to $823,000 for a couple. Once this amount is met, Centrelink is no longer providing pension assistance. These decreases will impact many aged pensioners  and possibly many may not be fully aware that the deadline is near.

This has some advisers recommending to the pensioners to update the family home which is seen as exempt from the Assessable Asset test.  While this sounds logical, there are many things to be considered before committing to upgrading, renovating or selling and buying a new home.

To sell and buy a home, there are fees such as Legal fees and agent’s commission that would need to be accounted for as well as every-day bills that may increase due to having a larger home, using more electricity to cool your larger home, possible larger rates bill, not to mention other possible fees such as body corporate.

When these extra costs are taken into account, it could leave a pensioner with even less available funds.

Therefore making changes could potentially find the pensioner in a worse position down the track, so although there could be a slight decrease to an individual’s pension, decreasing one’s assets should be made with clarity rather than changing because of the asset test.

At Sothertons our financial planners review these options carefully to ensure that all scenarios are considered before making rash decisions. Time is running out however, hence you should consider calling us 07 4972 1300 for an appointment.

“How BIG is your Tax Refund?” by Tina Zawila

At this time of the year, there’s still lots of talk about tax refunds, and often it’s a competition about “who’s is bigger”!  However, it often surprises us how many people have no idea how their refund is calculated or what they should expect from their tax refund.  And recently we’ve seen first hand the potential problems that arise when you simply apply “the biggest is best” principle!

So let me explain some basic tax facts:

• You can only get a refund if you have paid tax during the year – some obvious examples of paying tax during the year include: where your employer has deducted tax from your wages, or the bank has withheld tax from your interest income, or you receive franked dividends (which gives you a tax credit for the tax paid by the company who paid you the dividend).  If you have not had any tax deducted from your income, then you cannot receive a tax refund.
  
  
• You can’t get back more tax than you have paid – same principle as I mentioned above, but with a slight variation.  If you have only paid $1,000 of tax throughout the year (let’s say it’s been deducted from your wages), then the maximum tax refund you can receive is $1,000.  No additional deductions can increase your refund to exceed the tax you have paid.
  
  
•  You don’t get $1 tax back if you spend $1 on a tax deductible expense – A $1 tax deduction, will reduce your taxable income by $1.  Which depending on which tax bracket you find yourself in, could save you anything between zero and 49 cents in tax.  So at most, you will get 49 cents back on your $1 tax deduction, and you may not receive any tax back at all if your income is below the taxable threshold.

Most importantly, sometimes it’s not the size of the refund that matters, it’s what you do with it that counts.  How do you use your tax refund each year – do you invest it to create more wealth, or does it just seems to go towards those never-ending bills? 

At Sothertons Gladstone, our goal is to minimise your tax and maximise your wealth.  Everyone’s situation is different, call our team today on 4972 1300 to discuss your individual tax position.

"It's hard to avoid the preferential payment trap!" by Steve Marsten

It’s hard enough in business to build a customer base; deal with staff issues; secure decent suppliers who are ethical and professional; look for well positioned premises and deal with the multitude of red tape and licences to get up and running and then you need your customers to pay you! So it completely blows me away when a good local business who operates with a proper purchase ordering system and a good debt collection team, gets stung by the fact that they are paid by a business that collapses!

OK so you are asking how is that a problem if they get paid? The problem is – in Australia, if you happen to be paid by a customer that goes into liquidation or administration within six months of you receiving your payments, you may be considered a “preferred creditor” or a “preferred payment”.

A preferential payment is a payment or transfer of assets to creditors that gives that creditor a supposed advantage over other creditors. These payments or transfers may be recoverable by trustees in bankruptcy under the provisions of the Bankruptcy Act.

The transfer of funds must take place during a specific period before the bankruptcy.  As I mentioned above, this period is usually 6 months before the filing of the creditors petition.

The creditor has three arms of defence. These include:        

1.       The transfer was in the ordinary course of business

2.       The recipient of the funds acted in good faith;

3.       The recipient gave market value consideration or service.

However the Administrators or the liquidators will often go to court spending down the assets of what’s left in the defunct Company to secure the (so called preferentially) paid funds. These are funds often paid in the normal course of business and more often then not - in good faith. So the customer who has acted in good faith now has to incur legal fees to attempt to keep the funds that they have genuinely earnt. These are funds that have been used to pay the wages of his employees and costs of operations.

If the Trustee can prove that the company that paid the funds was insolvent at the time of payment, regardless of the good faith of the creditor, they can often force the repayment of the funds. This area of the Bankruptcy Act is not fair by any means.

At Sothertons we can assist businesses to prepare a case with their legal advisers to minimise the chances of losing hard earnt income. Contact us on 07 4972 1300.

What to expect from your Accountant or Tax Agent by Tina Zawila

So the ATO letters are starting to flow through to Bechtel workers and therefore we are fielding enquiries from taxpayers keen to 'do the right thing' and avoid the possibility of penalties.  Remember, the ATO is offering an exemption from penalties if you voluntarily request an amendment of your return/s prior to 31st October 2015, so time is running out!

What we are discovering is that many of these people do not have a copy of the original return lodged, or if they have been able to get a copy of the return, there is a lack of detail around their deductions.  There are simply amounts shown at the deduction labels in the return.  Upon enquiry it seems that most taxpayers are unaware of how those deductions were calculated or what they consist of. 

As I have said in previous articles, it is imperative that you understand your tax return and that you are fully aware of the content.  Ultimately, it is your responsibility.

However, it has led me to consider what clients should expect as a minimum, from their accountant and tax agent:

• A complete copy of your return with all associated schedules detailing items/labels in the tax return.
• An explanation of the content of your completed return and what has been claimed.
• Advice on the basis of your deductions and your substantiation requirements for deductions claimed - e.g. receipts, log books for vehicles, diary evidence for other deductions.
• An invoice or receipt for the cost of preparation of your tax return.

If you are not receiving this minimum level of service, then I strongly encourage you to request this from your accountant/tax agent. 

If you are concerned about your tax return, or just want a second opinion, please contact our professional team at Sothertons Gladstone on 49721300, we would be happy to help. Article Content”

"Do you know who you are in business with?” by Steve Marsten

One of the issues in business where I count my blessings is the integrity and loyalty that I have relied upon with my business partners, both past and present.

Business partnerships are almost as important as your marriage. In some cases more important because often it can involve a lot more debt and assets. So the question is, how well do you know your business partner? 

You need to know them Very, Very well!

I recently assisted a client secure some financing only to discover that his new business partner had some legal issues in a previous business career. As a result, the business was precluded from any reasonably priced financing. This also raised issues of integrity and honesty and caused some disruption within the partnership. The bank also wanted cross guarantees from each of them!

Such issues happen more often then not. I see it more regularly when we are dealing with people who have known their business partners for less then 12 months and hence they place blind faith and friendship ahead of the need to draw up a partnership agreement.

The fact is, people change, especially when under pressure. It's important to understand your potential partner's finances, time commitments, communicative personality and long-term goals, before making the relationship official.

You spend ample time dating before you get married and you should treat your relationship with a potential business partner the same way. Entering into a business partnership is a serious commitment of time, money and reputation. Knowing as much as possible about your business partner before formally signing on the dotted line to the partnership can save you a lot of trouble down the road.

Often - how your potential business partner manages their money can tell you a lot about how they will run your business. Although it might be uncomfortable to ask about certain matters, the “knowing” is more important.

Business is tough on a friendship if it does not have strong foundations. Equal commitment to the company is paramount. 

At Sothertons we spend considerable time assisting new business partners to understand the commitments ahead and identify matters to include in a partnership agreement that all will sign up to. For more information – feel free to call us on 07 4972 1300.

“Dangerous Technology” by Tina Zawila

How many emails and text messages do you send/receive a day?

How many are sent to you that you didn’t receive, so you don’t even know about them?

How are all of these electronic messages affecting you and your relationships?

Just this week, I have heard half a dozen stories of how this electronic form of communication has led to misunderstanding, frustration and even damaged relationships.

It can be as simple as this – you send an email or text to someone asking them an important question or requesting that they do something for you.  Then you wait patiently for a reply.  Depending on the urgency, within hours, days or weeks, you become frustrated or disappointed that they haven’t replied or acted.  Eventually you might pick up the phone or you might bump into them in person and you finally ask why they didn’t reply to you, only to discover that they did not receive the message at all!   So your frustration, disappointment, anger or even feelings of resentment are totally unfounded, all due to the failure of technology, and dare I say it, the failure of our ability to communicate effectively with one another.

We are all living in a fast-paced society where efficiency and the effective use technology seem to be the Holy Grail.  We are all trying to “get things done” and dare I say even “document” all of our conversations  via email or text message.  However, in this pursuit of efficiency, I believe we are losing the art of communication and the sacrificing the reward of building genuine relationships with other human beings.  And in my opinion this is the danger of technology.

In a business environment these mishaps with electronic communication can have disastrous consequences and damage relationships that you have worked hard to nurture.  My advice, let’s get back to picking up the phone, or catching up face to face and use electronic communication carefully. 

Call us at Sothertons Gladstone on 49721300.

"Beware the scam artists" by Steve Marsten

Scammers and fraudsters are alive and well here in Gladstone. This week a client was contacted via phone from someone claiming to be from Telstra. He even gave my client his “personal (Telstra) phone number” which looked legitimate. After several calls my client felt uneasy and realised his banking system had been compromised via his own computer. 

This is not the first example in Gladstone of the “Telstra employee” ringing to discuss checking your line or your bills. After a couple of hours all bank accounts, credit cards and phone lines had to be shut down. It can be debilitating and a nightmare to get re-established. Think of all the direct debits that may have to be changed over or as in this case, various direct credits from their investments had to be changed.

Yes its peak trading conditions for the fraudsters. Apparently over the past six months the ACCC revealed that approximately $45 million was siphoned out of Australian bank accounts and into the back pockets of these scam artists. The ACCC believes that this represent only 10% of the real scams being perpetuated on the average Australian. The average amount people are losing is $9,000 a claim. So it’s not small bickies.

Small business needs to be most wary about possible scams however it can happen to anyone. Scams to be on the lookout for include:

1.       Online shopping – if the sale is too good to be true, it probably is. Remember you get what you pay for.

2.       Always ask questions if you are unsure of the person or the company. Ask for their phone number then stick it in Google and see what comes up. Ask for their full name and ring the head office. Often if it’s legitimate - the home site should come up – if not more than likely you won’t have been the first one scammed!

3.       Never open suspicious attachments – ever! Often the email address is a giveaway; i.e. we recently saw an email supposedly from the ATO however 00ATO1.net was the giveaway. Australian organisations have very clear initials in their emails.

4.       Always use passwords to lock your digital devices and change them every few months.

5.       Never agree to transfer money or goods for another person. It may turn out to be money laundering.

And finally if it looks a little odd and doesn’t feel right, it’s often not right. Trust your intuition. 

At Sothertons we keep our clients scam aware whenever possible. Ring us for more information on 4972 1300.

The Value is in the Relationship - By Tina Zawila

 

A few weeks ago I wrote an article on the notion that you "get what you pay for", referring to the principle that generally speaking the cheaper the price, the lower the quality.  I strongly encouraged everyone to choose their accountant or tax agent not based solely on price, but based on trust and confidence.  When it comes to your professional advisors - your accountant, your banker, your solicitor, you should choose the person or business based on your relationship with them.  

Therefore, take a moment to consider the following questions: 

 

- Can you talk openly and honestly with them?

- Do they know you, your circumstances, your business?

- Do you have confidence in their ability and knowledge?

- Can they explain things to you in a manner in which you understand?

- Do they have a professional and capable team to assist you if they are not around?

What value do you place on these factors?

In most industries we are spoilt for choice and many products and services are much the same. However, the people that operate the business and their team are all different.  They bring to the buying experience a feeling that accompanies the product or service.  Think about your favourite coffee shop - chances are if you are a regular customer, you will know the people who make your coffee, and whilst you could probably buy a similar coffee somewhere else, you generally like to go back to the cafe where they know you and your order.

At the end of the day, people do business with other people, not with the products or services they provide.  

If you are in business, think about your relationship with your customers or clients.  If you are a customer or client; think about who you like to do business with and why.  At Sothertons we care and we are committed to our clients.  Call us on 49721300 for a chat about how we can look after you.

"And the roller coaster continues....." Article by Steve Marsten

It’s been another week of nervous markets and even more nervous investors. The week saw the Chinese stock market collapse by more then 17% in three days. It’s a true indication that the Chinese Economy is dealing with fundamental flaws. Though the general stock market plunge should not affect Australian stocks directly, we are more susceptible to the slumping Chinese economy.

On top of the issue of a sluggish China, you have a stock market buoyed by borrowed money to invest and inflate the stock market bubble. All very Storm Financial style and we all know where that left us! Even after the falls on their stockmarket, would you believe they are still over 30% above where they were 12 months ago while our market (the ASX) is down by 3%.

The other issue to consider is the Chinese government has been scrambling to halt the slide in its markets by reducing its interest rates. These now stand at 4.6% compared to Australia’s rate of 2%.

Meanwhile the economy that’s been on the improve is the US. Their market also caught a dose of the Chinese market flu! They fell by 10%. That said the S & P index has been travelling way above its pre GFC peak for about 2 years. This compares to Australia’s market that seems to be restrained and conservative in comparison as we have yet to reach our pre GFC peak.

The USA is also been impacted by the fact that over the last few years their Government has been pumping money into the economy via several quantitative easings. This was brought to halt some months ago and hence a correction to their market was always a possibility. That said their economy still has a reasonably good outlook.

The conclusions we can draw is every few years the markets take a deep breath and correct themselves. It’s expected. It’s part and parcel of the volatility of markets. If your portfolio is exposed to small caps or high risk companies – they tend to be even more volatile. If your portfolio is diversified amongst larger profitable companies then they are likely to recover first and foremost.

 At Sothertons understanding risk is part of anyone’s portfolio management. Markets going up or down should not be a big concern as long as objectives haven’t changed and your portfolio is diversified. To understand more call us on 4972 1300.

All Great Changes are Preceded by Chaos by Tina Zawila

A few years ago we became aware of a phenomenon referred to as “Digital Disruption” which refers to the changes that are occurring due to the development of digital technologies at a pace and magnitude that will disrupt established ways of value creation, social interactions, doing business and more generally – the way we think.

Digital disruption explodes the status quo. 

It challenges you to find new ways, new procedures, new thought processes and to learn new skills.

As advisors we assist business owners and leaders in many different industries who are struggling to cope with the rapid changes occurring, and who are struggling to lead their teams into the future. 

Even in our own industry, Steve and I as leaders of our team need to cope with the pace of change.

Generally speaking, many of us are reluctant to change.  We like the comfort of knowing.  Knowing that if we do this, we will get that result, knowing our tried and tested procedures and systems, knowing how and what our competition is doing, and knowing where we stand with others.

In times of change, we often “don’t know”.

However, as leaders, we need to embrace change, and support our team during periods of transition.  We need to make informed decisions, but we also need to make them quickly and communicate clearly and openly with our team. 

We need to minimise the chaos of change.

Socrates is quoted as saying “The secret of change is to focus all of your energy, not on fighting the old, but on building the new.”   So let’s focus on the possibilities that digital disruption offers us and be courageous and innovative in our approach.

At Sothertons Gladstone we support our clients in times of change and pride ourselves on providing innovative solutions.  Call us

on 4972 1300.

"We get what we pay for" Article by Tina Zawila

Recently a new client provided us with their financial statements and income tax returns from last year.  Unfortunately, we could immediately see several glaringly obvious errors.  However, these errors were not obvious to the client and they had signed the documents in good faith and reliance on their former professional advisor.

The concerning thing about this, is that it is the client, not the advisor, who is ultimately responsible for the accuracy of the documents.  It is the client that signs the declaration that usually says something like “you (the client) are responsible for accuracy and completeness” and “the onus is on you (the taxpayer) to ensure that your return is accurately prepared and contains no misleading statements or information”.  And finally that you “understand your responsibilities”. 

Did you get all that?   Let me make it clear - ultimate responsibility rests with YOU, not your advisor, and if things are wrong, you will pay the price.

So how can you protect yourself? 

I think the key is find an advisor that you can trust, that will take the time to explain things to you, and one that is suitably qualified and is a member of a professional body.

Unfortunately, anyone can call themselves an “accountant”, but to be part of a professional body such as the Chartered Accountants (CA’s), or Certified Practicing Accountants (CPA’s), you need to do post-graduate studies, commit to ongoing professional development, and most importantly, your work must meet minimum quality control standards.  In fact, you will be subject to regular reviews of your work by the professional body, just to maintain your membership.

Just as in most things in life, there are always cheaper, lower quality products and services you can choose to buy, or you can pay a little extra to get high quality, reliable, superior products and services.  It’s your choice, and you run the risk.

At Sothertons Gladstone we are Chartered Accountants and members of National and International groups.  We are dedicated to providing high quality financial products and advice.  Call us on 4972 1300 for your own peace of mind.

Is Negative Gearing a Positive Investment by Tina Zawila

At this time of the year we meet with many clients who own rental properties and who are very keen to have their income tax returns prepared and lodged so that they can access their tax refunds.

There’s also been lots of talk in the media about the suggestion that the government may abolish “negative-gearing” in the future, which would potentially wipe out the rental property investor’s annual tax refund!

Before we talk tax, let’s talk about the fact that purchasing a rental property is a major investment decision. Like all major decisions, careful thought should be given to the worthiness of the investment prior to signing the contract. As a minimum you should consider the following issues:

1)      Rental Returns – what is the current state of the rental market?

2)      Capital Growth – what are the long term prospects for the property?

3)      Funding Capacity – can you manage rental expenses including loan repayments if the property is untenanted for a period?

4)      Liquidity – how long will it take you to sell the property if you need to realise your equity?; and

5)      Comparison - how does the investment compare with alternatives such as shares, managed funds, listed property trusts etc?

You will note that tax isn’t mentioned in the list above, and the reason for that is that “saving tax” should be an added ‘bonus’, not the predominant reason for the investment.

So what is “negative gearing”?  Quite simply it is where the expenses exceed the income received.  This net loss can be offset against other income in your tax return, reducing your tax payable, or creating a tax refund.  The amount of the tax benefit is essentially the net loss multiplied by your marginal tax rate. The higher your marginal tax rate, the higher your tax benefit from negative gearing.

Remember, the difference between the tax benefit gained and the actual loss on the property comes out of your pocket.  In order to break-even each year, the property must be growing in value by at least your out-of-pocket costs.

The professionals at Sothertons Gladstone are here to help you understand taxation minimisation strategies, call us today on 4972 1300.

Understanding the Game of Business: Article by Tina Zawila

Recently, we had the opportunity to present to business owners on behalf of the Department of State Development.   The objective of the workshop was to improve the financial literacy of business owners to help them make better business decisions.  

To make it easier for participants to understand some of the concepts, we often compare being in business to participating in a sporting game.  You generally wouldn’t play a game where you did not know the rules, (such as ‘offside’) didn’t know the language (such as what a ‘try’ is in a footy game) or where you had no idea how to read the scoreboard to know if you are winning or losing!  Yet many business owners, don’t know the rules of business (such as profitable businesses can and do go broke), don’t know the language (accounting terms), and can’t read their scoreboard (their financial statements).  Yet this Game of Business is probably one of the most important games they are playing!

We talked about how understanding your numbers, and being able to interpret your results, allows you to make sound business management decisions, which become activities within our business which lead to our results.  Again to use the sporting analogy, the coach of the team regularly uses the scoreboard and the time remaining in the game, to influence the decisions he makes regarding on how his team plays the game.  As the coach of your business team, are you interpreting your results correctly and making the right decisions based on this information?

Now don’t panic, you don’t need to become an accountant, but you do need to get a basic understanding of the most important principles.  Your accountant or business advisor is there to support you and assist you at any time with any of the more difficult concepts. 

At Sothertons Gladstone, we are passionate about improving the financial literacy of the business owners we work with.  If you need help with the Game of Business, please call us today on 49721300.