Posted in: business
The Australian Government has increased support for businesses to manage cash flow challenges under the ongoing COVID-19 circumstances.
The Boosting Cash Flow for Employers measure announced on 12 March 2020 will be increased to provide up to $100,000 for eligible small and medium-sized businesses. To be eligible employers must have been established prior to 12 March 2020 and have an aggregated annual turnover of less than $50 million and employ workers.
The measure will provide employers with a payment equal to 100% of the tax withheld from wages and salaries. This is a rise from the original 50%, with maximum payments being increased from $25,000 to $50,000 and minimum payments being increased from $2,000 to $10,000.
Employers will receive payments from 28 April 2020 from the ATO as automatic credit in the activity statement system upon lodging eligible upcoming activity statements.
Eligible businesses will be provided with an additional payment during July – October 2020. The payment will be equal to the total amount received under the Boosting Cash Flow for Businesses scheme. For monthly and quarterly activity statement lodgers, these payments will be provided as automatic credit in the activity statement system for each lodgement up until October 2020.
The Government has also introduced the Coronavirus SME Guarantee Scheme to support the flow of credit for small and medium enterprises (SME) by providing a guarantee of 50% to participating SME lenders for new unsecured loans that will be used for working capital. To be eligible, SMEs will have a turnover of up to $50 million and the loans must comply with the following terms:
- The loan is a maximum of $250,000 per borrower.
- The loans will be up to three years, with an initial six month repayment holiday.
- The loans will be in the form of unsecured finance.
The SME Guarantee Scheme will still require businesses to repay these loans and approval is subject to regular lending requirements. The Scheme will commence by early April 2020 and be available until 30 September 2020.
Posted in: money
Many businesses, whether they are only just starting up or have been in the market for a number of years, will need a bank loan at one time or another. However, before you apply for a bank loan, it is important to think things through to ensure that you know if you should get one, if you are getting it at the right time and how you can make the most out of a loan.
Here are some questions business owners should ask themselves before beginning their bank loan application:
How likely is it that I qualify for the loan?
If you believe that your business won’t qualify for a bank loan, then you will only hurt your credit rating if you apply for a loan you won’t get. Being rejected for a loan can also make it more difficult for a business to borrow in the future.
Will the loan help the business grow?
Instead of using the loan for aspects like routine operating expenses that don’t generate much revenue, owners should consider putting the borrowed money into parts of the business that will generate more revenue and help reduce future borrowing needs.
How much do I need?
Before making requests of the bank, try to make an accurate estimate of how much cash you’ll really need. You can do this by creating a cash flow forecast with projections of your monthly income and expenses.
Are my personal finances in order?
Until a business reaches a substantial size, many banks will rely heavily on the owner’s personal financial statements and credit scores to determine the business’s creditworthiness. This may involve bankers looking at your personal information like student loans, personal credit card debt and mortgage payments.
Do I have adequate documentation for the loan?
When applying for a business loan, you will need a lot of documentation. Requesting a loan when an owner is not fully prepared makes the business look unprofessional.
Do I have adequate cash flow to repay the loan?
When a business owner applies for a loan, their banker will require the owner’s estimated financial projections for the business. It is important for owners to include their debt repayment plan in those projections.
Posted in: business
Business loans and business credit cards are the most popular financing options, but there are key differences between the two that you should consider to help you make the right choice for your business.
A business loan is a lump sum of money that you borrow. They can be a good option for your business if you require funding for a larger one-off purchase, such as buying new equipment or machinery, real estate, business acquisition, capital investment or refinancing existing debts.
Business loans typically range from $5,000 to $50,000 and can be paid as a lump sum or through multiple set payments. Depending on your bank, you can generally make repayments in monthly or quarterly instalments that are tailored to you and your cash flow.
To get your business loan approved, there is usually a strict approval process you must pass, which can include details such as your business’s financial position and a financial spending plan.
In terms of extra costs, a business loan generally comes with signup fees and late repayment fees. The interest rate for a loan is often lower than a credit card and can be a monthly or annual rate, which typically ranges between 3-10% p.a for secured loans.
Business credit card:
A business credit card is a suitable option if you want funds for short-term needs. Business credit cards are also generally more flexible than a business loan. They usually allow for a limit of up to $50,000 and are often used for working capital, emergency money and smaller ongoing expenses.
In terms of fees, business credit cards typically have a higher interest rate than personal credit cards, however, you only need to pay interest on each month’s expenses. The interest rates are higher than a business loan and can vary between 10-20% p.a. Fees such as annual fees and late repayment fees will apply to business credit cards.
A business credit card also comes with bonus features, such as bonus points for spending, free deliveries, frequent flyer points, complimentary insurance and a reputable company credit score with good use.
Business credit cards can be beneficial in the sense that it offers flexible funding and continuously available money, however business owners should be confident that they will be able to manage the minimum monthly repayments to avoid overdue fees.
Posted in: super
Shares and property are two popular investment options for those with a self-managed super fund (SMSF). However, they both have very different attributes and choosing the one that will achieve the best outcome for an SMSF depends on your personal goals and situation.
While the price of shares can vary drastically, property is a relatively stable asset, making it appealing to those who want more security and predictability. Property prices are also negotiable unlike shares, and you can generally borrow money at a lower rate for property purchases.
It may seem hard to find the perfect investment property, but older and undercapitalised properties can be renovated for profit. However, returns from property rentals can be dented due to factors such as land tax, utilities and rates, maintenance and tenancy vacancies.
Shares are more dynamic and volatile than property. One advantage is the accessibility of investing in shares, as you can enter the share market with a few thousand dollars – much less than what you need to invest in a property.
Maintaining a portfolio of quality shares that pay tax-effective dividends may be a good way to fund retirement. With the right portfolio allocation, shares also have the potential to provide a better, stronger income than property rentals, as long as that income is sustainable and increasing.
Property can generally be used as a wealth-creation tool, while shares can create a reliable retirement income. For those who can afford to put more money into investments, it may be a good idea to consider investing and diversifying in both. If you’re unsure about which investment option is right for you, seeking financial advice may be the best option.
Posted in: tax
Are you an Australian living or working overseas with a family home in Australia? Or you know someone who is? If so, be sure to consider the impacts of the capital gains tax (CGT) on you from 30 June 2020.
Since 1985, the exemption of Australian expatriates from the CGT tax has been available for homes which have never been rented out for more than six years at a time. However, following the scrapping of the CGT exemption under the A$581m federal government plan, Australians working overseas will have to sell their property before the 30th of June 2020 to avoid CGT and still be eligible for CGT main residence exemption.
With the removal of CGT exemption past June 2020, Australian ex-pats who own property in Australia will be required to pay CGT dating all the way back to when they first bought the property. That is, if an ex-pat was to have bought their property in 1985, they would have to pay an accumulation of their tax owing in CGT from 1985 to 2020. The only way to avoid such hefty tax payments would be to sell your property on or before the 30th of June or to re-establish Australian residency before selling the property.
Understandably, the new change will impose a sizable cost on Australian ex-pats and has come as a result of the influx of speculative foreign investors as well.
As every situation is unique, taxation planning customised to every taxpayer’s specific circumstances are advised. In order to avoid the accumulated CGT payments, Australian expats need to be aware of their financial standings and be ready to make a quick decision regarding the selling or keeping of their Australian property.
Seeking out tax advice from knowledgeable tax specialists, employing organised bookkeeping services and detailed financial statements written up by accountants in preparation for making such an important decision regarding your Australian property is heavily recommended to ensure the new CGT laws don’t cause you financial problems.
Posted in: business
A career mentorship program involves partnerships between employees to develop professional skills and gain industry knowledge. Due to their requirement for a collaborative effort, career mentoring programs are often seen as powerful development tools for cultivating both leaders and employees within a business.
Whether you are a small business owner or a multinational corporate leader, the implementation of a mentorship program will always be profitable for businesses as not only does it create a harmonious workplace culture, it also helps to attract and retain employees.
As straight-forward as career mentoring sounds, there are a few key tips to keep in mind when building a mentorship program for your business:
Make sure your mentoring program is clearly defined:
To create a successful mentoring program, both mentors and mentees should have a concise understanding of their roles and what they would like to gain from the mentorship. By succinctly outlining the purpose of the mentoring program, mentors and mentees are more likely to keep organised and communicate respectfully with the guarantee of mutual rewards.
There should also be short-term and long-term goals established for all parties involved, including the business. These goals could be the narrowing of particular skill gaps or creating a more open workplace culture. By having these goals set in stone, both mentors and mentees and have a clear direction to work towards.
Personalise the match-making process:
Often times, businesses will match a mentor and mentee together depending on their skill-set and position within the company. While on paper, this may appear to be an efficient process, but the lack of chemistry between a mentor and mentee may prove to be devastating for the workplace environment.
As a result, be sure to involve both mentors and mentees in the match-making process and take into account personality traits. You could do this by asking employees to take a personality test to ensure compatibility in career goals, personal interests and preferred communication methods.
Be involved as a third-party:
Lastly, it is the responsibility of the business to check-in on the progress of mentorship programs in order to understand how mentors and mentees can grow together and what improvements can be made to the program. Remember to always refer back to the long-term goals established and consider the feedback provided by mentors and mentees from the program.
Posted in: super
Whether you are a newcomer to the workforce or have been working full time for 30 years, you must have come across the concept of superannuation. Chances are, you’ve already been steadily building your retirement funds in one of the 500 Australian superannuation funds but are still unfamiliar with how exactly your super is being managed and where your super fund is investing your money in.
With the beginning of a new decade and social issues on the rise, it is time to take a more conscious stance on what you are doing with your super and what causes you are supporting through the employment of your money through your super fund.
A recent investigation into Australian super funds by the Australian Centre for Corporate Responsibility (ACCR), released in February 2020, found that 50 of the largest super funds in Australia are proxy voting against local climate-change initiatives. These organisations are instead approaching climate change from a global perspective, whilst ignoring more pressing domestic challenges to reduce carbon emissions..
The lack of support from Australian super funds for localised climate action is growing problematic, as Australia fails to address its appalling record on carbon emissions and is falling behind new-age global goals to fight against environmental degradation and climate change.
In contrast, some of Australia’s most environmentally and socially conscious super funds lack the reputation to attract long-term users. To look for more environmentally friendly Australian super funds, the Responsible Investment Association Australasia (RIAA) grades supers based on their ethical contributions and makes this information available to the public.
Instead of mindlessly joining Australian super funds that are neglecting growingly problematic domestic climate change issues, Australians need to become more conscious of our indirect actions and super investments. Rather than investing in an unethical super fund, looking into self-managed super funds may be another good option. We need to learn to take matters into our own hands and become more socially conscious of where exactly our money goes.
Posted in: tax
Running your business from home can have great benefits, such as being able to spend more time with your family, not having to travel, and deciding your work hours. To make the most out of your home business experience, it is important to be aware of what tax deductions you can claim.
If your home is also your principal place of business and you have a designated room space for business activities, then you are considered to be running your business from home. However, if you only do some business activities from home, then you may be considered to be working from home and the following tax implications don’t apply to you.
You can claim deductions for your home business on expenses that you need to undertake work that produces income. Tax-deductible costs include:
- Utility expenses of the rooms you use for business. This can include electricity, water and gas bills that have been apportioned between business and private use.
- Work equipment such as computers and printers. For items costing up to $300, you can claim the full cost of the item. For equipment costing $300 or more, you can claim the decline in value.
- Cleaning and repairs for work equipment.
- Work-related phone calls. If you have a phone that you use for both business and private matters, you can claim a deduction just for the business calls.
- The depreciation of work equipment, where you must apportion the costs of business and private use.
- Occupancy expenses such as rent, insurance and mortgage interest, where you have apportioned the business and private spaces in the house. You can work out how much to claim by measuring the floor area of your business room as a proportion of the rest of your home.
Posted in: money
Investing in shares is a popular method of growing your wealth, however, there are tax obligations you need to be aware of to get an accurate sense of how much you’ll need to put aside for your investments.
When you own shares, you need to declare all your dividend income on your tax return. It is possible to claim tax deductions for certain expenses you pay to receive income from your shares. The deductions you are eligible for will depend on if you are carrying on a business of share trading or if you are an individual share investor, but they can include:
- Management fees: the payment of ongoing fees or retainers to investment advisers are tax-deductible.
- Borrowing expenses: the expenses of borrowing money for shares may be tax-deductible. This can include establishment fees, legal expenses and stamp duty on the loan.
- Interest: if you received a loan to buy shares, you can claim a deduction for the interest incurred on the loan if it is expected that assessable dividends will be derived from your shares.
- Travel expenses: if you need to travel for the sole purpose of working on your share investment, such as travelling to consult with a broker, you may be able to claim a deduction for the travel expenses incurred.
Individual share investors cannot claim a deduction for the cost of acquiring shares, such as costs for brokerage and stamp duty, however, they can claim deductions on the prepayment of expenses related to the shares such as internet fees or seminars.
Buying and selling shares can involve capital gains tax (CGT), depending on whether you make a capital gain or a capital loss on your shares. Your capital gains or loss is the difference between the price you paid for the shares and the price you sell them for. If you end up selling your shares for more than you paid for them, then you make a capital gain which may be taxed.
How much CGT you need to pay varies depending on:
- How long you’ve owned the shares for: if you have held the shares for more than 12 months, you can usually discount a capital gain by 50%.
- Your marginal tax rate: your capital gain will be added to your assessable income in your tax return and taxed as part of your income at your marginal tax rate.
- If you’ve also made any capital losses: only your net capital gain will be taxed with your assessable income, meaning that if you’ve also made capital losses then they will be subtracted from your capital gains. If you have more capital losses than gains, you are generally able to carry the capital loss forward and deduct it from any capital gains you make in future years.
Posted in: business
If you are a small business employer wishing to dismiss employees, you must do so according to the Small Businesses Fair Dismissal Code, as a breach of the code could result in legal action taken against you. If your business has less than 15 employees, it counts as a small business.
Employees can apply for unfair dismissal if they believe they have been unreasonably dismissed from their job. These cases could include when:
- The dismissal was harsh, unjust or unreasonable
- The dismissal was not a case of genuine redundancy
- The dismissal was not consistent with the Small Business Fair Trading Code.
Employees working for small businesses can only apply for unfair dismissal when they have been employed for at least 12 months. If the business had a change of ownership during their employment, then their time with the first employer may still count as service with the second employer when calculating the minimum employment period.
When dismissing an employee, there are three main valid dismissal reasons:
- Capacity (poor performance)
- Genuine redundancy.
Employers must also adhere to employee entitlements upon dismissal, meaning they must pay:
- Accrued leave and annual leave loading
- Accrued or pro-rata long service leave
- Redundancy pay if applicable
- Outstanding wages.
An employer can make objections to the unfair dismissal claim by submitting an Employer response to unfair dismissal application, or an Objection to application for unfair dismissal remedy.