Lull Before The Storm
Most commentators in the media of late have been talking about the forthcoming Federal Budget. However, there's been some other news, which may impact on some segments of the SME market, including:
• The announcement of the Japanese Free Trade Agreement has pleased some industry groups, whilst others think it was not as good as they expected. Most importantly, the deal will introduce more income into the Australian economy.
• The Australian dollar has been moving upwards over the last couple of weeks. Each time it moves, it makes trading more difficult for exporters.
• The uncertainly for small business operators has not been helped by the Federal government's decision to place about 100 Federal government grant programs into 'recess' until after the Federal Budget is announced. The grants in 'recess' include the two largest grant programs, targeted at SMEs – Commercialisation Australia and Enterprise Connect. A number of SME operators are expressing dismay at the notification of the 'recess' months after they submitted their applications to the government organisations.
• There are some speculations about interest rates rising. The Reserve Bank has left the prime rate at 2.5%. The 10-year bond rate is currently at 4.096%.
• The International Monetary Fund (IMF) has sharply downgraded its estimate for Australia's economic growth to 2.6% (2.8%) this year and by 2.7% (3%) in 2015. Commentators believe this will mean the economy will remain in the 'slow lane' for at least the next two years.
In these uncertain times, it is best for small business operators to be closely watching business performance, by monitoring debtors, stock, work in progress, preparing weekly estimates of profitability and monthly financial accounts. Businesses should also be monitoring their potential exposure to the problems that have been caused by the Personal Property Securities Register (PPSR) by not registering security interests on the register.
Hopefully, some clear indication will be given on the government's monetary proposals, grant programs, etc, when the Federal Budget is delivered on Tuesday 13th May.
If you have any queries on any aspect of your business operations, please don't hesitate to contact us.
Superannuation Contribution Caps Increase
The Australian Taxation Office (ATO) have advised that the concessional superannuation contributions cap will increase to $30,000 for the 2015 financial year and that the non-concessional superannuation contributions cap will increase to $180,000. Please note that anyone aged 49 years or over on 30 June 2014 will have a concessional contributions cap of $35,000 for the 2015 financial year.
If you have any questions in relation to the superannuation contribution caps please feel free to call.
SuperStream Requirement for Self Managed Superannuation Funds (SMSF) and Employers from 1 July 2014
Employers - From 1 July 2014 employers with 20 or more employees will need to make super contributions using SuperStream. From 1 July 2015 small employers (with 19 or fewer employees) will also need to comply with these changes. They require contribution data to be sent electronically in a message format to the recipient fund and the contribution payment to be paid electronically through the banking system. SuperStream introduces common data items, electronic communications and channels for employer contributions.
Many of the key components required for this change, including e-commerce infrastructure and software solutions, are already available in the marketplace and perhaps by your existing software supplier
SMSF - From 1 July 2014 SMSFs will be required to receive contributions electronically from employers however as some employers have a delayed start date of 1 July you may need to check with the employers about their start date. The trustee will need to obtain an electronic service address for the delivery of contribution messages and also provide their ABN, bank account details and electronic service addresses to their employer by 31 May 2014.
Funds do not need to upgrade their reporting software to comply with the changes.
For further information or assistance please contact our office.
Credit Application Form – Helps Effective Debtors' Management
An effective debtors' management system commences with a written credit application form. Do you ask your potential customers to complete a credit application form, which encourages them to identify exactly who they are, the business name with which they will be trading with you, their business address, contact address, etc?
The form should invite them to supply details of the type of business they are operating. After all, they want you to supply the goods and services to them and take at least 30 days to pay you. You're entitled to know:
• if they are operating in their own premises;
• if they are leasing their premises;
• their turnover;
• their average investment in stock; and
• the names, addresses and contact details of at least three of their current suppliers as trade references.
This also gives you the opportunity to specify your terms of credit, as per your credit application form.
If you would like to discuss an appropriate credit application form for your business, please don't hesitate to contact us.
Gross Profit Percentage – A Good Indicator
A good indicator, to determine whether you have purchased stock at a higher cost than what you would normally do, is to calculate the 'gross profit percentage' at least on a monthly basis.
Gross profit is determined as the difference between your selling price and your cost of goods sold. The calculated figure, the gross profit, is then divided by your sales figure and multiplied by 100/1.
Sales – $140,000 Cost of Goods Sold – $86,800
140,000 – 86,800 = 53,200 (Gross Profit)
53,200/140,000 x 100/1 = the gross profit percentage is expressed as 38%.
If your normal gross profit percentage was, say, 49%, this would give you an indication that the 11% variance could have been caused by:
• paying more for your purchases than you normally have, or perhaps paying more for your freight in;
• damaged or deteriorating stock, which has been written off – the effect of which is reflected in the gross profit calculation;
• paying for stock you haven't received; and
• there may have been a reduction in effective selling prices for the stock items sold.
Continually evaluating your gross profit percentage, in your various departments and lines of stock if you can, is a great way to give you a quick key performance indicator (KPI) on the efficiency of your purchasing within your stock control area.
If you would like us to review a gross profit percentage earned within your business, please don't hesitate to contact us.
Third Party Reporting To The Australian Taxation Office
The ATO now receives information from third parties, for each taxpayer, in relation to:
• wage and salary data;
• dividend income; and
• government welfare payments;
• private health insurance details.
• interest income;
From 1 July 2014, the third party reporting regimes will be extended to include:
• the sale of real property;
• sale of shares and units in unit trusts;
• sales through merchant debit and credit services; and
• taxable government grants and other payments
will result in more frequent reporting of information throughout the year to the ATO, on an event-based style reporting.
An ATO discussion paper mentions that, for an investment of $80 million, the ATO expect to recover an additional $610 million from taxpayers because of the third party reporting process.
High Risk Industries Targeted For Superannuation Obligations
Employers in the hairdressing and beauty, clothing retailing and management advice and consulting industries have been identified as having a higher risk of not meeting their superannuation obligations. From July 2104 the ATO will be undertaking more audits of employers who continue to not meet super obligations for their employees.
It should be pointed out once again that directors can become personally liable for any unpaid employee superannuation. To avoid this all superannuation obligations should be paid by the 28th day after the end of each quarter.
Security of Payment Changes for the Property Industry
Amendments have been made to the Building and Construction Industry Security of Payment Act effective 21 April 2014. This has arisen as a result of the Government's response to the Collins Inquiry. The amendments were passed by the NSW Parliament in November 2013 and introduce maximum payment periods, a supporting statement requirement for head contractors and remove the requirement that a payment claim state that it is being made under the Act.
Caution is needed to ensure all claims that may be subject to the Act are identified to ensure that a challenge to the claim can be identified and are made within 10 business days.
Information on these changes including a series of fact sheets is available at www.procurepoint.nsw.gov.au/before-you-buy/framework-construction/security-payment.
The status of the Statutory Retention Trust Fund requirement for the holding of retentions is still being considered.