What Will 2013 Bring?
What a start to a new year! Bush fires, floods, and tornadoes causing immense problems to primary producers, small business operators and residences all around Australia. The Prime Minister has announced an election will be held on the 14th September 2013. It will be interesting to see what the unprecedented advance notice for a Federal Election has on the business community during the next 8 months. What is likely to happen during 2013? Various economists have had their say on the key economic data, as follows:
• Growth in 2013: 2.4-2.8%
• Business investment in 2013 – 10-10.5%
• Budget deficit 2013 – $12billion
• Cash rate 30/6/13 – around 3-3.25%
• CPI growth during 2013 – 2.5-3.25%
2014 Forecast Figures:-
• Growth – around 4%
• Business investment – around 9.5%
• Budget forecast – $25billion
• Cash rate 30/6/14 – 5.25%
• CPI growth to December 2014 – 3-3.5%
These figures will be significantly distorted if there are continued uncertainties on the European debt situation and/if the federal election does not give a majority to either the Coalition or ALP and we end up with another hung parliament.
Unemployment is expected to be around 5.5% nationally, but in some States, will be over 6%. Currency rates between $AUD and $US is expected to remain around $AUD.95 to $AUD1.05.
Whilst there have been some questions in relation to the Chinese economy, most economists believe that China will continue to purchase large quantities of product, primarily iron ore and coal, from Australia.
Many of these items are outside the direct control of small to medium enterprise operators but the market uncertainties dictate the need for continuing planning of business operations, the monitoring of interest and exchange rates, and changes in Government policies. It is a good idea to prepare a calendar year budget and to ensure that you then receive departmentalised management accounts monthly or quarterly (at the most), so you can check actual performance against your budget. There is still a high priority to monitor debtors, stock and work in progress, as these are the key ingredients for effective cashflow control within a business.
If you would like our assistance on reviewing your business performance, or preparing a budget and cashflow forecast for the 2013 calendar year, please do not hesitate to contact us.
Audit insrauce provides cost effective tax audit protection and peace of mind against the substantial cost that may be incurred should the ATO or other Australian government agency conduct a random review, investigation or tax audit. Tax insurance is beneficial to cover the costs of processes that are being made to ensure a business or taxpayer is in compliance with various tax and legislative requirements such as:
- Income, Land and Payroll Tax
- BAS/GST Compliance
- Workers Compensation / WorkCover
- Superannuation Guarantee and Compliance
- Self Managed Superannuation Funds
- Record Keeping
- Research and Development Grants
- Any query of any lodged return where the client is compelled to respond or act
If you are interested in taking out this type of insurance please contact us.
Impending Tax Changes
Julia Gillard addressed the National Press Club on 30 January 2013 where she indicated that the government will announce substantial savings that maintain the sustainability of the Budget and make room for "key Labor priorities". Although the exact nature of the proposed changes is speculation they could possibly come in the form of removing or reducing the CGT Small Business Concessions or reducing the concessional and/or non-concessional superannuation contribution limits. Any such changes could be introduced effective on the evening of the May Federal Budget.
Even though you may not be in a position to sell your business and utilise the CGT Small Business Concessions one way they could be utilised is to conduct an internal ownership restructure now so you can access the available concessions and realise their current value. If you plan on topping up your superannuation contributions in June 2013 you may consider doing this a little earlier just in case changes do occur.
Kick Start Initiative
If you are in the building and construction industry and are contemplating starting a new apprentice, a reminder that the Federal government's Kick Start Initiative is a grant of up to $3,350 payable to an employer for the employment of a new apprentice within a trade listed in the National Skills Shortage list. This grant closes on the 28th February 2013.
Director's Duties Update
• Some recent court cases have reconfirmed that directors and senior managers, irrespective of the size of the company, can face heavy penalties if they have breached their duty of care and diligence in the company's operations. The court cases also confirm that officers, under the definition contained within the Corporations Code, includes directors and the company secretary and can include senior management, such as the executive management team or other people who contribute to making decisions.
• The cases have also emphasised the necessity for the accurate preparation of the minutes for the Board of Director meetings and, in particular, highlighting the names of any directors who vote against a motion.
• Another company's directors were severely criticised for approving misleading financial accounts which related to misclassification of liabilities in the company's financial accounts. Liabilities which should have been treated as current liabilities (i.e. debts repayable in the next 12 months) were treated as long term liabilities. The court decided "the directors have a responsibility to read, understand and focus on the financial statements before approving:-
- Directors should be financially literate and ask appropriate questions to satisfy themselves on the accuracy of financial accounts.
- That the directors cannot uncritically rely on other people".
The court also emphasised that the directors need to read management reports and make their own decisions.
Another very important issue that relates to small to medium enterprise companies is that each director has the same legal responsibilities and that one director cannot safely opt out of their responsibilities. A court, in all probability, will assess that an "opt out" director is equally liable with the director who has been performing the director's duties.
It is now an appropriate time to revisit risks of "trading whilst insolvent". Directors have to ensure that the company is not incurring debts that the company cannot pay for in the normal course of business. Taxation laws have also been updated whereby directors can now be responsible for paying PAYG tax deducted from a company's employees' wages and superannuation payments on a personal basis.
There is also onerous responsibilities under the Workplace Health and Safety laws. Directors and officers need to satisfy themselves that there are no inherent risks in the workplace to employees or visitors. Directors cannot delegate this responsibility; directors need to physically inspect premises to ensure that risks have been eliminated.
If you would like us to have a discussion with you relative to your responsibilities as a Company Director, please do not hesitate to contact us.
Pricing Strategies - Do You Have Procedures? - Part 2 (continues on from December 2012)
Some of the areas to consider relative to setting prices include:-
• "Gut instinct". When people set their prices based on gut instinct, sometimes it works out OK, but it is far better to try to institutionalise a process of gathering customer feedback and analysing historical sales patterns and requests for the products from customers and prospects, analysing the hard numbers, knowing the gross profit margins on various products, knowing which ones are being sought by your customers, preparing a stock matrix, knowing the "Stars", the "Cash Cows" and the "Problem" lines.
• "Changing prices at regular intervals" e.g. 1st January, 1st September. This is a very methodical approach to changing prices. The better practice is to change prices based on marketplace changes. What new patterns are occurring? It is best to set your price strategies as being responsive to market conditions.
• "Scenario Modelling". Don't be too mechanical in your approach to setting prices. Whilst scenario modelling can assist, don't be a slave to a mechanical pricing calculation. You need to have undertaken real market due diligence, rather than just having all of your calculations determined on a "set formula" approach.
• Price change might be "unfair to customers". It's your business, not the customers. Customers are free to purchase from someone else. You need to worry about your bottom line and concentrate on the extra values that you deliver to your customers through the pricing differentiation policies already mentioned.
Its far better to link your pricing to changes in marketplace conditions and fantastic customer service. This is differentiation that encourages customers to come back, even though you've effected some price changes. Setting a price strategy is scary for many businesses because there is no set methodology on how pricing changes should be made. Why not establish your pricing strategy reliant on the marketplace differentiation you have for your products highlighting your emphasis on customer service, rather than setting pricing on an internal cost recovery basis? Have you considered that the problem you might be experiencing in your business is being caused by an incorrect pricing strategy rather than a marketing problem?
Safeguarding Your Intellectual Property (IP) – Part 2 (continues on from December 2012)
If you have reasonable concerns about whether someone has illegally obtained copies of your intellectual property, its best to consult your solicitors and see if they can obtain a "search order". A "search order" is applied for at a closed Court Hearing attended only by the applicant and the applicant's lawyers. The benefit of a "search order" is that the Court grants an order to be supervised by independent people who are entrusted with overseeing the process to conduct searches at specified premises, which could include homes, business premises and other locations to identify whether there are any documents in hard copy or data format which have originated from your business.
If you have any concerns in relation to Intellectual Property being stolen from your business, we recommend that you contact your solicitor.
"BEWARE" "ATO" Email And Phishing Scams
A new year, a new "Australian Taxation Office" apparently as the "ATO" has suddenly become big believers in sending emails and text messages to taxpayers and tax agents, or so you would believe by the number of phishing emails and text messages being sent out. Significant numbers of tax agents and their clients are receiving emails that look very similar to the normal business and tax newsletters and email correspondence from the ATO, even so far as the ato.gov.au email address and letterhead.
Currently what appears to be the "majority email scam to tax agents" is an email that contains a list of "delayed tax returns". This email appears to be exactly the same as the majority of ATO automatically generated correspondence from an apparent seeming to be ato.gov.au email address. This email also includes a zip file which the email states contains a list of clients that have had the lodgement or processing of their tax returns delayed. The emails even include the warning to be aware of email and phishing scams and that the Australian Taxation Office will not send sensitive information via email.
The other email which is being sent to taxpayers is an "increase and recalculation of your tax refund" email scam which has a form attached to it asking for personal details. The forms are often copies of electronic tax returns which have been modified to include additional information specifically credit card details. These forms are looking quite sophisticated.
The Australian Taxation Office is aware of these email scams and is attempting to educate the public via the media and a list of current ATO SMS and email activities, however many taxpayers are not even aware that these events are occurring at all. The old adage applies that if it looks to good to be true, it usually is.
If you have any concern about the legitimacy of emails claimed to be originating from the ATO please contact us urgently.