Crackdown on Family Trusts by Federal Opposition
Recently, Mr Shorten announced the intended crackdown on Family Trusts should the opposition come into power at the next federal election. The plan is to simply tax all distributions from Family Trusts at 30 per cent which totally ignores the major reason many small businesses set up a trust. Trusts are an instrument which enables the protection of assets from potential claims against the assets. Also, something the Opposition has not thought about or has elected not to bring into play is the capital gains benefits gained through a trust that are not available to a company structure.
There is no denying there can be a potential tax benefit but any crackdown has to take into account the whole package not just a part of the package.
Purely, from an income tax or company tax perspective a company at a reduced tax rate of 27.5% may become appealing as opposed to 30% for family trusts leaving aside asset protection and capital gains.
However, I hold that for the majority of my clients, who have a family trust, will be disadvantaged as their level of income is not excessive and the purpose of asset protection plays a significant role in having the trust and are therefore being punished for having the most effective structure for their business.
I am truly amazed that the Federal Government has effectively remained silent on this issue. Given the current status of the political polls showing that the Federal Opposition will be our next Government this is not something small business should take lightly if the polls remain as they currently stand heading into the election period.
I would like to strongly state that Balanix is not politically aligned to any party but will support good policy by any party and likewise condemn what is believed to be bad policy by any party.
We will always act solely in the best interest of our clients and speak on their behalf where we think they are being hard done by!
Confidence is growing for SMEs
Recently, the National Australia Bank (NAB) released the “Moments that Matter: Understanding Australian Small to Medium Businesses” Whitepaper which details the growth, challenges and opportunities encountered by Australian business owners today.
The research found that Australian Small to Medium Enterprises (SMEs) are confident of the future, with two thirds of millennial SMEs set to expand their businesses over the next three (3) years. A snap shot of information gathered found:
- 57% of Australia’s GDP is contributed by SMEs.
- 23% of Millennial SMEs are online-only businesses.
- 66% of Millennial SMEs intend to expand their business over the next three years.
- 23% cite ‘competitive pressures’ as a trigger for expansion.
- 32% rated high profits as an important measure of a successful business but this was well behind other things such as financial management (58%), positive word of mouth (56%), productive staff (49%) and happy staff (45%). 11% ranked large turnover as a measure of success.
For a full analysis of the Whitepaper follow this link: http://business.nab.com.au/wp-content/uploads/2017/06/J002580_MTM-Whitepaper-IPSOS-FINAL_C1-2.pdf
Call Balanix Solutions today for your SME health check 07 3264 4783.
Changes to Credit Cards Rules and Minimum Payments
There have been changes to the credit card rules as the Government tries to tackle the increasing levels of personal debt.
The current Government is proposing four reforms:
- Assessing applications on the basis of being able to pay off the debt in a reasonable time frame rather than minimum payments;
- Extending banning unsolicited offers to include electronic or over the phone offers (currently the ban is of unsolicited written offers of credit limit increases);
- Interest to be calculated on outstanding amount from the end of the statement period and not the date of purchase;
- Provide online options to either cancel credit cards or reduce the limit.
While these reforms are positive, in my opinion, the mandatory increasing of the level of minimum repayments, as the first reform does, does not go far enough to help those credit holders who for whatever reason only make the minimum payment. The time it takes to pay off a credit card under the current rules could be up to 30 years + depending on the credit card limit and the interest rate.
What is the point of a bank assessing a client’s ability to pay the debt off in a reasonable time if in fact the client’s history shows that that is unlikely even though they may potentially have the financial capacity to go so.
If people have not been taught good financial management at an early age then managing debt is not always easy to do and unfortunately, here at Balanix we see the outcome of poor financial management far too often.
Contact me today on 07 3264 4783 if you want to talk about managing your money either in your business or personally.
A Good Read
If you are looking for a good read, I recommend “Never Split the Difference-negotiating as if your life depended on it” by Chris Voss. This read is for anyone who does any form of negotiating, which, let’s face it, who of us doesn’t on a daily basis (unless of course you are not having any contact with any other human being during your day).
Many years ago (too many to remember) I read the book “Getting to Yes” by Roger Fischer and William Ury that was for many years considered the book to read if you wanted to learn something about negotiating.
Enter Chris Voss who has, in his book, challenged the way we should look at negotiating based on his years spent as a FBI trained hostage negotiator.
A couple of interesting points Chris makes are:
“”No” is the start of the negotiation, not the end of it”
“The most powerful word in negotiations is “Fair””
“When calculating the final amount, use precise, nonround numbers like, say, $37,893 rather than $38,000. It gives the number credibility and weight.”
“In a study of the components of lying, Havard Business School professor Deepak Malhotra and his co-authors found that, on average, liars use more words than truth tellers and use far more third-person pronouns”
Having recently finished reading this book I found a lot of it applies in both the private and professional life. So, if you are looking for something to read and enjoy while at the same time learn a few skills that will help you in your personal life as well as your business then pop down to your local bookstore ($22.99 at QBD) or go on-line (from $8.30 on Amazon) and grab this good read.
Choosing an Accountant
Choosing an accountant is much like choosing other professionals like a solicitor or plumber or insurance broker. The most important thing to work out is whether the accountant can meet your needs and support you in the way you need.
The accounting profession has changed over the years and will continue to do so into the future. Many, when they think about an accountant, think about tax. An accountant can do your tax return each year, provided they are a registered tax agent. You can check their registration on the online tax and BAS agent register.
Compliance will always be a part of an Accountant’s services however many accountants also provide services which add value to particularly business owners and people with investments. Accountants can provide tax planning advice, business advice, systems and processes, budget and cashflow as well as general CFO (Chief Financial Officer) services, by way of example.
So, before you approach a prospective accountant, know what you want to get from the relationship. Once this is clear, when contacting a prospective accountant, here are some questions you may wish to ask:
- What is the accountant’s specialisation/s? – What services do they offer? Do they regularly deal with people in similar situations to you? Do they have the right experience to help with your specific needs?
- What is their level of customer service? – Do they respond to phone calls and emails promptly? Do they communicate in plain language with limited use of jargon? Do you enjoy your interaction with them?
- What are the accountant’s fees? – What will you be charged, and when?
- Does the accountant hold appropriate registration for the services offered? – If they are going to do your tax return, is your accountant a registered Tax Agent (refer above)? If they are providing investment advice, they must have an Australian Financial Services Licence (AFSL) or be an authorised representative of an AFSL holder, check the financial advisers register.
- Is the accountant appropriately qualified? – Do they have appropriate tertiary qualifications and are they a member of a professional association? Examples of professional bodies include the Institute of Chartered Accountants in Australia, Certified Practicing Accountants Australia and the Institute of Public Accountants. Professional bodies impose certain standards on their members and can deal with complaints if you’re not happy with your accountant.
- Ask for references/testimonials – subject to privacy requirements, an accountant maybe able to put you in contact with some current clients for you to talk to. Alternatively, check the accountant’s website, Facebook page, Google reviews (to name but a few) to find any testimonials or reviews that may contribute to your decision making. Caution must be taken when considering this information as only the best reviews/testimonials will be published if the accountant is in control of the publication. On the flip side, if there is only one or two not so good reviews, check out how the accountant has responded to them – sometimes there are two sides to the story.
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