Social Media

Eclipse Accounting Group has entered the social media world.  We can’t promise to be as interesting as one of Australia’s favourite cricketers but we will try to use these resources to communicate more effectively with clients, friends and associates on news and current affairs that may be of interest from time to time.  

We also see it as a good learning experience for us which we can then pass onto our clients who are interested in using similar resources or tools to promote their businesses.  

Technology is moving so fast it’s easy to be left behind so we all need to have an open-mind and see what works and what doesn’t.

If you’d like to learn more about these resources we would only be too happy to share our experiences although we are still only in early days!

B1G1 Seminar

On 2 August, Paul Dunn presented to over 50 clients and non-clients at the Novotel Hotel Brighton le Sands.
Paul spoke about Adding Speed, Adding Purpose & Changing Lives.  The feedback from people was truly “remarkable” and a number of businesses have since partnered up with B1G1 as a result.  

This has helped in the cause to change lives for the better around the world.  Thanks to Paul and thanks to all of those people that attended.

Click on this link to view a 4 minute video of a recent trip to Kenya which Paul Dunn, Masami Sato (Founder of B1G1) and a few B1G1 givers undertook to give some goats to some very needy families and communities.

Preparing for the rollercoaster ride

Standards and Poors has downgraded America’s AAA credit rating, local and international markets are volatile and easily spooked, picking changes in interest rates is more akin to crystal ball gazing, the carbon tax is coming, consumer sentiment remains tight and no one is feeling particularly confident. Welcome to the 2011/2012 financial year.

Over the next 12 months business will be working with a range of domestic and external influences that will cause uncertainty.  But these swings can be a benefit as well as a headache – but only for strategically sound businesses.  

Most SMEs are well downstream from major economic triggers.  We don’t cause the problems but are affected by what is happening to larger businesses, the economy, and consumers.  Some industries are more impacted than others.

Expecting business conditions to be ‘more of the same’ over the next 12 months is wishful thinking. If your business strategy is simply to turn up, work hard, and expect business to come to you then you are likely to be disappointed.  If you have not already, it’s time to do something different.  When business gets tougher, ‘me too’ businesses come under pressure.  A ‘me too’ business is one that simply replicates what everyone else in their industry or sector does.  You work on the basis that there is a consistent and proven formula and if you follow the formula everything should work out.  Sounds ok in theory (and says a lot about human nature) however the problem is that you are doing nothing to differentiate yourself in your market.  This lack of differentiation may leave your customers with no compelling reason to continue doing business with you.

Business, and in particular small business, needs to be more strategic. The objective needs to be more than carving out some market share but to create a sustainable business.  This is where your business strategy comes in.  Your strategy should set the direction for your business and allow you to carve out a sustainable position in your market.  In a buoyant market you can survive without a strong business strategy; there is plenty of business for everyone. Turn up, work hard, and you will pick up some market share.  The challenge in the good times is generally supply rather than demand.

In a volatile market, demand can be patchy and in some cases depressed.  Everyone is chasing business and if you don’t have a clear business strategy then it is likely that you are trying to win business by chance or competing on price.  Most SMEs are not equipped to compete on price.  You don’t have the capital reserves or the economies of scale to compress your profit margins.  Go too far and you can trade yourself out of business.  

Developing a business strategy takes time and hard work.  You need to understand your industry sector, your market, where the opportunities lie, and how you can differentiate your position in that market. It’s not easy but get it right and it will pay big dividends. As a starting point you need to identify what your current business strategy is.  You should be able to clearly articulate it and write it down (in your head is not good enough).  If you don’t have one then accept reality and start working on one.  Your strategy should flow into your business plan and then be reflected in your operating and cash flow budget for the year.  Typically, your business strategy will contemplate your end game – be it a sale of the business or some other exit event.

Good businesses always have a clear strategy in place. For the coming year it will be more important than ever; it will separate the successful from the strugglers.

Talk to us today about how we can help you refine and improve your business strategy.

Phoenix companies - new legislation

‘Phoenix’ activities involve the liquidation of a company to avoid paying debts often including outstanding employee entitlements such as superannuation and taxes. A new entity is then formed with the same owners or group of owners as the old company and the same or similar business operated through the new entity which is now free of these debts.

The Assistant Treasurer is seeking submissions on draft legislation to protect employee superannuation and other obligations from ‘phoenix’ directors and their companies. However, the legislation will have an impact beyond phoenix companies making all directors personally liable for the employee entitlements.

The amendments propose the following changes:

1.    Extension of the director penalty regime to make directors personally liable for their company’s failure to pay employees’ superannuation guarantee amounts.

2.    Giving the ATO the power to immediately pursue directors to recover unpaid PAYG withholding tax or superannuation guarantee liabilities where the obligations remain unpaid or unreported for 3 months after the due date.

3.    Allowing the Commissioner discretion to prevent directors and their associates from obtaining PAYG withholding credits where the company has an outstanding PAYG liability.

NSW Payroll tax update
The NSW payroll tax threshold for the period 1 July 2011 to 30 June 2012 is $678,000.  Businesses which pay wages and super exceeding this amount are potentially liable for payroll tax of 5.45% on the excess amount.  Any businesses that are anywhere near this amount in salaries should review the payroll tax rules and regulations as they may include some payments to subcontractors and also fringe benefits.

Did you know you can get a payroll tax rebate for employing more staff?   
A new scheme by the NSW Government gives employers a payroll tax rebate of up to $4,000 per employee (equivalent to the annual payroll tax bill for one employee on an average wage).  So, if you added five new team members in new jobs that could be $20,000 less to pay in payroll tax over the next two years.  The rebate is paid on the first and second anniversary of the team member’s employment.  But, as always, there are a few provisos:

The rebate is available to full time, part time, and casual employees.  For part time and casual employees, the rebate is calculated on a pro-rata basis on the hours of employment.

The rebate is only available for the first 100,000 new jobs created under the scheme.  Of those 100,000 jobs, 40,000 are prioritised for non-metropolitan areas (you can find a listing on the Office of State Revenue’s website) and the rest in metropolitan areas.

You have nothing to lose by being a part of the scheme.  If you cannot maintain the level of employment required, then you either lose the rebate or will have to pay it back.
 
How to claim the rebate

1.    Register the new employee on the Office of State Revenue website within 30 days of employment.

2.    You will need to know how many full time equivalent staff you have. The calculation for part time/casual staff is based on the number of hours worked in the previous pay period.

3.    For full time staff (and assuming you maintain the level of staff required) the first $2,000 is paid on the employee’s first employment anniversary and the second $2,000 on the second anniversary.

Don’t pay more tax than you need to – revalue your stock
If you are finalising your end of financial year accounts and calculating your tax position, keep in mind that there are still options available to save you tax.  One of these options impacts on the valuation of your trading stock and if stock is a material asset in your business, you should most certainly consider it. This option provides you with different valuation methods that can be applied to your trading stock.

The majority of businesses value their trading stock at cost and in many cases this is the right valuation approach. However the Tax Act gives you the choice of valuing your stock at the lower of cost, market, or replacement value.

Your trading stock is an asset that is recorded on your balance sheet. In most cases it should be tax neutral to you. The cost of purchasing stock is expensed in your profit and loss account and is offset by the value of the stock asset, until you sell it. So, while the amount of stock you are carrying will impact on your cash position, because you have your funds tied up in it, there is no direct impact on your profits or taxable income until you sell that stock.  However, if at June 30 some of your stock is worth less than its cost price, you have the option to value it at the lower figure and take the tax write off now, rather than wait until the stock is sold.  This reduction in your stock value will produce a tax saving for you.

There are a range of reasons why stock values may be less now than at the time you purchased the stock. For example, stock becomes out of date, obsolete, damaged or changes in demand mean that the stock can only be realised at a discounted price.  Other than when you sell your stock, your tax return gives you a once a year opportunity to adjust your stock values and realise on any losses.

You don’t have to use the same valuation method for all of your stock as the trading stock valuation options can be taken on an item by item basis. So, you can elect to use different methods for different stock items.  In many cases cost price will be the appropriate valuation method.  You would normally consider using market value or replacement value for stock items only where there has been a fall in value. It will be important to have sufficient documentation to both record what action you have taken and also to justify the value you arrived at.  If you are subject to a tax audit you will need to be able to substantiate the value being used.  This means having your stock count and also the itemised values for each stock item.  Where the value being used is not cost price there should be a clear basis for the amount used.

Where you have experienced a fall in stock values it normally makes sense to take the tax write off now.  We all know that cash is king at the moment and the tax saving will help to cushion some of the loss.

Got a question?  Talk to us today about how we can make a difference to your businesses.