Posted in: money
Financial ratios are useful tools for business owners to monitor, analyse and improve their business performance. By using ratio analysis methods, you can gain insight into a company’s liquidity, efficiency and profitability by comparing the information contained in its financial statements.
Solvency ratios measure the company’s capacity to fulfil long-term financial commitments. Debtor days is one of the key measures of this ratio analysis method. It shows the average number of days that a business takes to collect invoices from their customers. The longer it takes to collect, the greater the number of debtor days. When debtor days increase beyond normal trading terms, it indicates that the business is not collecting debts from customers as efficiently as it should be. The formula for working out debtor days is:
(Trade receivables ÷ Annual credit sales) x 365 days
Profitability ratios help measure and evaluate the ability of a company to generate income relative to revenue, balance sheet assets, operating costs and shareholders’ equity during a specific period of time. The net profit margin measures what percentage of each dollar earned by a business ends up as profit at the end of the year, the formula is:
Net income ÷ Total revenue = Net profit margin
Posted in: tax
The ATO will start processing 2018-19 tax returns on 5 July 2019 and are expected to start paying refunds from 16 July 2019, with the majority of electronically-lodged current year tax returns completed within 12 business days of receipt. There a few changes to tax returns that individuals should take note of going into this end of financial year.
Private health insurance statements:
From 1 July 2019, health insurers are no longer required to send private health insurance statements, it is now optional to send this information. Private health insurance information will be available in the pre-fill report, expected by mid-August. If it is not populated by then, taxpayers may need to request a statement from their health insurer.
Low and middle-income tax offset:
Taxpayers may be eligible for an income tax offset if they are an Australian resident for income tax purposes or their taxable income is in the appropriate income range. It is not compulsory to claim this offset, the ATO will work it out when their tax return is lodged.
Employers reporting through Single Touch Payroll are not required to provide a payment summary to their employees as income statements will replace them. Employees can access their income statements through ATO online services at any time. Employees will receive a notification through myGov when their income statement is ‘Tax ready’, so they can complete their tax return.
Posted in: business
While hiring the right staff is a key element when running a business, to be successful you will need to build a strong team. Here are some tips on turning a group of individuals into a cohesive, collaborative team that will help your business to reach its full potential.
Have a vision:
When starting a new business, defining what your motivations are can help you to visualise the type of organisation you want to create. This can help your staff to know what you are aiming for and understand the goals of the business. Don’t just focus on your products or services, outline the principles and characteristics you wish to build in your organisation. For example, some of your core goals may be to have outstanding customer service or to create a supportive workplace. Once you have outlined your vision, you can use it as a guideline for both you and your employees.
Involve your staff:
By getting your employees involved in the day-to-day operations of your organisation, it will allow them to use their strengths to integrate and develop into the business. Challenge your staff by giving them timelines or specific goals to strive for. If they have achieved these, acknowledge their success. This will motivate them to work hard if they know they are being recognised for their efforts. Consider team-building exercises or activities outside of work as a way to foster a friendly and positive environment. When your employees are happy and enjoy coming to work, this will reflect in your business.
Posted in: super
A number of changes to superannuation will come into effect from 1 July 2019. The ‘Protect Your Superannuation’ Bill passed through Parliament in February and forms part of the Government’s package of reforms that were announced in the 2018-19 Federal Budget.
The new legislation is designed to protect Australians’ superannuation savings by ensuring that their super balance isn’t negatively affected by unnecessary fees on insurance policies. Changes that may affect you are;
For those who do not act before 1 July, your insurance may be deemed inactive. Under the Protect Your Superannuation Bill, super accounts that have been inactive for 16 months will have their automatic insurance cancelled. Members will be able to ‘opt-in’ to protect their insurance cover and stop their account from being inactive, but this must be done before 30 June.
Ban on exit fees:
The new laws will remove the need to pay exit fees from all superannuation accounts. Trustees that are currently charging exit fees will need to review the current fee structure in order to implement any necessary disclosure and product changes.
All superannuation trustees and members will need to review these changes to ensure they are meeting all necessary obligations. If further help is needed about how the changes will impact you, consult your financial advisor.
Posted in: super
The event-based reporting (EBR) framework for self-managed super funds (SMSFs) commenced on 1 July 2018. This system allows the ATO to administer the transfer balance cap. Reporting under the EBR framework commences when your first member begins a retirement phase income stream. The transfer balance account report (TBAR) is then used to report certain events and is separate from the SMSF annual return.
An SMSF must report events that affect a member’s transfer balance, these should include details of:
- Pre-existing income streams being received on 30 June 2017 that;
- continued to be paid to them on or after 1 July 2017.
- were in retirement phase on or after 1 July 2017.
- New retirement phase and death benefit income streams including value and type.
- Limited recourse borrowing arrangement (LRBA) payments, including the value and date of each relevant payment, if entered into on or after 1 July 2017.
- Compliance with a commutation authority issued by the ATO.
- Personal injury contributions.
- Commutations of retirement phase income streams that occur on or after 1 July 2017.
All SMSFs must report events that affect their members’ transfer balances. If no event occurs, there is nothing to report.
Timeframes for reporting are determined by the total superannuation balances of an SMSF’s members. In the events affecting members’ transfer balances, reports must be made within 28 days after the end of the quarter in which the event occurs. Unless a member has exceeded their cap and the fund needs to report an event sooner, the first due date for the lodgment of TBARs is 28 October.
Posted in: business
Starting your own business can be as daunting as it is exciting. There are many aspects that need to be considered when making the change to becoming your own boss. Here are a few of the essentials to get you moving.
Do not go into a business blindly, as a good idea can only get you so far. A business model shows possible investors that you are serious and gives you a blueprint for how to run the business going forward. Look at elements such as start-up costs, risk assessment, hiring and outsourcing when making your strategic, operational and financial plans.
Be in the know:
Having an idea is all well and good but if you do not have the industry knowledge to back it up, your dream may be over sooner than you think. Experiencing an industry firsthand will assist with practical knowledge whilst research can help on a technical side. When you’re creating your business plan, you need to honestly assess your own skills and expertise so you can identify where you could use assistance.
Insurance and trademarks are essential to protecting your property, both physical and intellectual. Though this may not be an exciting step when creating a new business, it is your responsibility as a new business owner to manage the risks associated with your business. Implementing the proper insurance ensures your company is protected in the event of disaster or litigation.
Posted in: tax
The ATO has made recent changes to the application process for an Australian Business Number (ABN). The changes have been made as a measure to protect the process’ integrity and identify those who are attempting to misuse it.
An ABN is a unique 11 digit number that identifies your business to the government and the wider community. The recent changes focus on:
- Ensuring that those who are entitled to an ABN are the only ones who will receive one.
- Identifying people going through the application process multiple times.
- Confirming entitlement and helping people to understand their obligations.
You are only entitled to an ABN when carrying on or starting an enterprise in Australia. An enterprise includes activities done in the form of a business, including operating a charity, renting or leasing property, or acting as the trustee of a superannuation fund. It is compulsory for businesses with a GST turnover of $75,000 or more to have an ABN and be registered for GST.
There is no single test to determine cases where you are carrying on a business. However, features of a functioning business include:
- An intention to make a profit from the activity that is demonstrated by a business plan (unlike a hobby).
- The activity is a significant commercial activity that is a reasonable size and scale, involving the sale of goods or services.
- The activity is organised, systemic and is carried on in a business-like manner with records kept.
The ATO’s changes better define who is eligible for an ABN, helping business owners to understand their obligations in cases where there may be doubt. Consider consulting your professional advisor if further help is required.
Posted in: business
Conducting meetings is a regular way of communicating what needs to be done around the office, but if nothing gets accomplished it can be discouraging. When organised properly, however, business meetings can be effective and efficient.
Meetings need purpose. If they are not planned well then topics needed to be addressed may get missed. Before starting ask questions like, ‘is this meeting necessary?’, ‘What is the purpose of the meeting?’, or, ‘who needs to attend?’ This can give you a solid direction for the meeting. Topics that need discussing could be listed on the agenda. Try itemising each issue to give everyone a firm guideline of what is expected to be discussed.
Timing is everything:
Starting a meeting on time reinforces the idea that others will fall behind if they are late. Punctuality can help to ensure that adequate time is spent discussing each item properly. Timing also applies to the practicality of the items you wish to discuss. Having specific deadlines for your objectives to get accomplished can assist in keeping everyone on the same page.
Do not let a meeting be dominated by only a few people. Instead, create a friendly atmosphere where everyone feels comfortable, this can help others to speak up and express their opinions. Exploring the views of other people can give you valuable insights into who can handle certain responsibilities or whose ideas are worth implementing.
Posted in: tax
The ATO has identified particular areas relating to business expenses that are commonly entered incorrectly in tax returns. Owners should take the time to carefully review tax returns to ensure all information is correct.
Individuals who use a motor vehicle entirely for their business can claim a deduction for the whole amount. However, if they use the vehicle for a mix of business and private use, they will need to divide the expense amount and only claim the business portion.
Business expenses must be kept separate from an individual’s private expenses, such as personal rent, fines, travel, food and renovations of a private residence. Those who operate their small business as a company or trust need to be aware that paying private expenses from these accounts may have other tax implications such as fringe benefits tax and shareholder loans.
In the event a business is upgrading its accounting software, remember to check that business and private expense codes are correct. The business expenses must be claimed at the GST exclusive rate if they are registered for GST, not the GST inclusive rate.
Small businesses should note that falsely or incorrectly claiming expenses is not something the ATO takes lightly. Penalties can apply based on the extent of the misinformation.
Posted in: super
Under the super downsizer scheme, eligible individuals that are 65 years and older may be able to make a contribution into their superannuation of up to $300,000 from the proceeds of selling their family home. This scheme came into effect on 1 July 2018 as one of several measures announced in the May 2017 Federal Budget.
Benefits to downsizer contributions:
- It can provide a way to boost your super balance. For those who may not have saved enough to fund their retirement, tax-free downsizer contributions can be a good opportunity to top up their already existing savings.
- No work test applies. This test requires that taxpayers aged 65-74 who wish to make voluntary contributions must be employed for at least 40 hours within a 30-day period. By removing this requirement, older Australians who no longer work significant hours will still be able to add large sums to their super.
- There are no contribution caps, as concessional and non-concessional contribution caps do not apply.
- Downsizer contributions aren’t subject to the $1.6 million total super balance restriction.
- For couples, both spouses are able to take advantage of downsizer contribution. This means that up to $600,000 per couple may be contributed towards their super.
Other considerations to be aware of include:
- Contributions must be made within 90 days of receiving the proceeds of a sale.
- The sold property must have been owned for at least 10 years and must have been your main place of residence at some point in time.
- The property must be in Australia and excludes houseboats, caravans and mobile homes.
- Downsizer contributions are not tax-deductible.