Trust Distributions Before 30th June 2012
The Australian Taxation Office has withdrawn an administrative ruling given some years ago that trustees had until the end of August each year to decide on trust distributions. They have indicated that it will be enforcing the full meaning of the law which is that trust distributions have to be made by the 30th June each year. The Australian Taxation Office has indicated that they will be doing spot checks to ensure that distribution minutes have been prepared and signed prior to the 30th June 2012 setting out the distribution of the income of the trust. We understand that officers of the ATO have already commenced some spot checks to ensure that Trustees understand their obligations regarding Trust distributions having been documented prior to 30th June 2012.
If you have any questions relative to this, please contact us at your earliest opportunity. This will ensure that a decision can be made on the trust distribution so that a meeting of the trustees can be held and minutes prepared confirming the decision of the trustees relative to the trust distribution, prior to 30th June 2012. In particular, if your Trust has earned any capital gains or franked income since 1st July 2011, it is important that we have a conversation regarding the distribution of the income of the Trust.
What A Confusing Picture!
The state of the Australian economy at present creates a confusing picture, especially for small/medium business operators. Only days after the Australian Reserve Bank reduced the official interest rate by 0.25% to 3.5% to improve economic activity, the Australian Bureau of Statistics released figures which show strong economic performance was achieved in the March quarter which ABS have calculated grew by 1.3% to achieve an annual growth rate of 4.3% - the best performance since the September quarter 2007!
The annual growth figures have been driven by strong economic performance in the Northern Territory, Western Australia and Queensland. Annual growth figures are as follows:
- Northern Territory 16.9%
- Western Australia 14.5%
- Queensland 7.5%.
The other states have shown significantly less growth:
- ACT 3%
- Victoria 2.7%
- South Australia 2.3%
- NSW 1.9%
- Tasmania -0.8%.
The financial report indicated that household consumption was up by 1.6% in the March quarter primarily because of extra spending on food, clothing, health services and recreational activities (such as gym memberships and movie tickets).
There has been an expectation that the Reserve Bank would announce further interest rate cuts in July/August however, the pace of these cuts may now be restrained because of this reported positive economic activity.
It is of great interest whether this strong activity will continue in the June quarter although many small/medium enterprise operators would say it is not, especially in the states other than Queensland and Western Australia.
Immense problems still remain in Europe, particularly in Greece and Spain. The Spanish Prime Minister stated recently that "Spain can no longer raise money on global markets or roll over their sovereign bonds".
In recent days the Australian dollar has fluctuated highlighting the need for exporters and importers to monitor the currency's position.
Closer to home the Federal Government Carbon Tax commences on the 1st July and this will cause problems for some small businesses.
The government's announcement of changes to the superannuation rules is also causing concern for some small business operators. Unfortunately liquidators are reporting that they are very busy at present. On a brighter side, the Government's announcement of Capital Expenditure 100% write off for purchase of assets costing up to $6,500 and the immediate write off of $5,000 on the purchase of cars for business operations after 1st July 2012, will be welcomed by many small/medium enterprise operators.
Within this confusing economic picture, business operators need to be mindful of cashflow management, primarily monitoring debtors and ensuring that bankers' covenants relating to individual loans are being closely monitored.
Small Business Has Achieved Some Tax Recognition
Every successive government always appears to try and claim that they are out to help the little Aussie battler small business owner. For many years this was something that never really had any substance, but in recent years, the small business entity regime has emerged as part of the Income Tax Assessment Act. This means that small business has become eligible for various useful tax concessions.
One of the most useful concessions for small business owners has been the depreciation and pooling allowances provided to eligible businesses. Small businesses (turnover less than $2m) have the ability to claim an immediate deduction for any asset costing less than $1,000 in a tax year and for any asset costing more than this, they get an immediate deduction of 15% followed by 30% in the following year by allocating it to a small business general pool. This is claimable up to the 30th June 2012. This gives rise to more immediate and more generous deductions than other businesses which must depreciate any asset over $300 and often at a rate of between 10 and 20 per cent.
From 1st July 2012, small business entities are now able to claim immediate deductions for any asset costing less than $6,500 and all assets other than buildings will be allocated to the small business general pooling. As an additional benefit, if the asset is a motor vehicle, a small business entity will be entitled to an immediate deduction of $5,000 and the residual value is depreciated at 15% in the first year of use and 30% thereafter.
This provides many planning opportunities for small business and helps reduce the tax burden in line with the reality of a small business' cashflow needs.
If you would like to discuss end of financial year planning strategies, please contact us as soon as possible
Possible Risk Management Issues
Some of the potential risks for small business operators to consider include:
- business continuity planning
- emergency planning eg cyclones, floods, tsunamis, bush fires, epidemics
- business planning
- corporate governance
- financial management
- human resources management
- research and development
- protection of intellectual property
- products/service development
- contract management.
If you would like us to assist you in the development of risk management mitigation strategies, please contact us.
Government Grants For SMEs
Commercialisation Australia – Experienced Executives
For companies who have developed a new product or service and who would benefit from bolstering their senior management team, Commercialisation Australia has a grant of up to $350,000 on a 50/50 basis, over a 2 year period for an eligible company to engage an experienced Chief Executive Officer or other executives, who can bring real practical senior management skills to the company to assist in the commercialisation of the product or service that it has produced. This grant is designed to assist small innovative firms and people new to business to gain access to skilled executives with management experience. To be eligible an applicant must have a combined annual turnover (including the applicant and any related body corporate) for the last 3 years, of less than $10 million per annum. The applicant must have access to, or the beneficial use of, the intellectual property necessary to carry out and/or commercialise the project.
Planning Successful Succession Within Your Business
Succession planning is a very important issue for all businesses irrespective of size. Succession does not just relate to older persons wanting to retire nor does it only relate to the owner of the business. Succession planning is important at every level of the business as it relates to effective mentoring and coaching within the business to improve the skill levels of all team members.
There is no doubt that succession issues are a very topical subject amongst small business owners at present. This is because of the large number of "baby boomers" who will want to sell their businesses from now on. Therefore it is prudent for people who are contemplating selling their business over the next decade to start planning for succession now. There are some key questions to be answered relative to implementing a succession plan. The first series of questions start with the current owner:
- What do you want to achieve from the business?
- Are you building the business for a lifetime or an exit?
- Have you identified your fears?
- As part of your succession plan have you thought about your options for exiting the business?
- Are you motivated by a significant change or event to influence you to quit the business?
- Will the business survive with the reduced reliance on "you"?
- As part of the professionalising of the business can you effectively make yourself redundant?
- Do you think your business is "exit ready" or succession ready at this stage
- If you don't believe the business is "exit ready" what are your motivations for staying in the business?