Many businesses operate through a Company structure or through a Trust with a Corporate Trustee (ie a Company). What some don’t know is that there are obligations and requirements of Company Directors and Shareholders. Here’s 5 things to know about Companies.

• A Company is a legal entity.  This means it, as an entity, has legal standing in the eyes of law. A legal entity has legal capacity to enter into agreements or contracts, assume obligations, incur and pay debts, sue and be sued in its own right, and to be held responsible for its actions.

• A Company is not the Directors and Shareholders by another name. Although Companies have Shareholder/s and Director/s the Corporations Act 2001 governs how a Company is to operate; its obligations and requirements. It is not at the whim of the Shareholder/s and Director/s how it should be governed.

• A Company’s money is not your money. Being a legal entity, if a business is run through a Company then the receivables and payables is the legal obligation of the Company. Money coming in and going out needs to be properly recorded for the Company as per its operations. Shareholders and Directors need to think about a Company at arm’s length. Unless the Company owns for example a car or mobile phone, then expenses associated with these are not the responsibility of the Company unless used for work purposes. Learn more about this by clicking here.

• Director/s and Shareholder/s must comply with the Australian Securities and Investment Corporation (ASIC) requirements. Being a Company Director or Shareholder is not just about running the business. ASIC is the primary administrator of Companies’ legal obligations and as Director/s and Shareholder/s there is a responsibility to understand the legal obligations and to comply with them. For example, there is an annual review requirement of ASIC to continue the registration of the Company, to ensure Company details are correct and for the Director/s to declare that the Company is trading solvent. A further example is if a Director or Shareholder changes residential address, there is a requirement to advise ASIC to update the Company information. Penalties apply for failing to comply with Company obligations. These are only two examples to highlight that there are obligations to having a Company structure not just a set-up and forget situation.

• A Corporate Trustee has the same obligations and requirements. As mentioned previously, sometimes businesses are run through Trusts with a Company as the Trustee (ie Corporate Trustee). This Company, although it may not have money coming in and going out (as this is done through the Trust), Company obligations under the Corporations Act 2001 still apply.

These are by no means an exhaustive list and explanations about Companies. Many businesses utilise their Accountant as their Registered Agent and Registered Office for their Company to facilitate ensuring that all Company obligations are met. Please note, at the end of the day Company Director/s and Shareholder/s are ultimately responsible for the Company. If you need assistance or more information about your Company please contact Balanix Solutions 07 32644783.

Do you use a mobile phone, the internet or home phone for work purposes?

Clearly, any personal usage of these devises is private in nature and non-deductible for Tax purposes, however, if you use any of these devices for work purposes you may be able to claim a percentage as a tax deduction provided you can substantiate the percentage of business/work use and your employer has not reimbursed you the cost i.e. you have directly incurred the cost.

But wait …  it is a bit more complex than this  …  The Australian Taxation Office (ATO) provides  guidance in relation to the different types of scenarios.

If the business/work costs are incidental then provided you are not claiming more than $50 as a deduction you can claim the following:-

• $0.25 for work calls made from your landline,
• $0.75 for work calls made from your mobile, and
• $0.10 for text messages sent from your mobile.

If you receive a bill which itemises your account then you need to determine the percentage of work use over a 4 week period that can be applied for the full year.  The main thing being the percentage is reasonable.

Here’s an example the ATO publishes to explain:

Example – phone calls are itemised on your bill

Julie has an $80 per month mobile phone plan, which includes $500 worth of calls and 1.5GB of data. She receives a bill which itemises all of her phone calls and provides her with her monthly data use.

Over a 4-week representative period Julie identifies that 20% of her calls are work-related. She worked for 11 months during the income year, having had 1 month of leave. Julie can claim a deduction of $176 in her tax return (20% x $80 x 11 months).

Ok, so what if I receive a bill which doesn’t itemise the account?  Here you need to keep a log of all the calls you make over a 4 week period that is representative of the year.

The ATO provides the following example to explain:

Example – non-itemised account

Ahmed has a prepaid mobile phone plan which costs him $50 per month. Ahmed does not receive a monthly bill so he keeps a record of his calls for a 4-week representative period. During this 4-week period Ahmed makes 25 work calls and 75 private calls. Ahmed worked for 11 months during the income year, having had 1 month of leave.

Ahmed calculates his work use as 25% (25 work calls /100 total calls). He claims a deduction of $138 in his tax return (25% x $50 x 11 months).

The situation that is becoming more and more common is the bundled phone and internet plans, ie. phone, internet and mobile phone are bundled together with no clear cost of each service.

.  In this case you are required to apportion each of the services provided. 

The ATO explains this with two (2) examples:

Example 1 – apportioning bundled services

Sujita has a $100 per month home phone and internet bundle. The bill identifies that the monthly cost of Sujita’s phone service in her bundle is $40, and her internet service is $60. Sujita brings in her mobile phone plan of $90 per month and receives a $10 per month discount. Her total costs for all services are $180 per month.

Sujita worked for 11 months during the income year, having had 1 month of leave.

Based on her itemised accounts, Sujita determines that the work related use of her mobile phone is 20%. Sujita also uses her home internet for work purposes and based on her use she determines that 10% of her use is for work. Sujita does not use her home phone for work calls.

As the components are part of a bundle Sujita can calculate her work related use as follows:

Step 1 – work out the value of each bundled component

Mobile phone

$90 per month minus the $10 per month discount = $80 per month

Internet

$60 per month as identified on her bill

Home phone

Sujita does not need to determine the home phone costs as she does not use this service for work purposes.

Step 2 – apportion your work related use

Home internet use

10% work related use x $60 per month = $6 work related use per month x 11 months

Sujita can claim $66

Mobile phone use

20% work related use x $80 = $16 per month x 11 months

Sujita can claim $176

In her tax return Sujita claims a deduction of $242 for the financial year ($66 home internet use + $176 mobile phone use)

Sujita cannot claim work related use of her home phone as she did not use it for work.

End of example

Example 2 – apportioning bundled services

Des has a $90 per month home phone and internet bundle, and unlimited internet use as part of his plan. There is no clear breakdown for the cost of each service. By keeping a record of the calls Des makes over a 4 week representative period, he determines that 25% of his calls are for work purposes. Des also keeps a record for 4 weeks of the data downloaded and determines that 30% of the total amount used was for work.

Des worked for 11 months during the income year, having had 1 month of leave.

As there is no clear breakdown of the cost of each service, it is reasonable for Des to allocate 50% of the total cost to each service.

Step 1 – work out the value of each bundled component

Internet

$45 per month ($90/2 services)

Home phone

$45 per month ($90/2 services)

Step 2 – apportion your work related use

Home phone

25% work related use x $45 per month x 11 months = $124

Internet

30% work related use x $45 per month x 11 months = $149

In his tax return Des claims a deduction of $273 ($124 + $149) for the year.

Yes, this can be complex however, hopefully this article gives you some guidance. If you have any doubts or concerns, contact me at Balanix Solutions (07 3264 4783) for specific advice about your individual circumstances.

Many include saving money (or saving more money) as one of their new year’s resolutions. Problem is, life quickly gets in the way and before they know it their resolution is long forgotten.

Here’s 10 simple tips to help you be successful in your money management.

1. If you have a credit card pay it off in full each month thereby paying no interest. If you are not in a position to pay it off each month seriously ask yourself whether you should have a credit card in the first place.  Remember some cards carry interest rates of 19% or higher;
2. If you have a large number of bank accounts incurring fees review whether you really need all of them;
3. Promise yourself to bank a percentage of your regular wage/income to savings/wealth building. You can put this into a separate bank account, or, if you are minimising bank fees by reducing the number of accounts, use a spreadsheet to monitor the allocation of the money in the account.
4. If you don’t have private health cover and you are paying the Medicare levy check with your accountant if the income you are earning means you may save money by taking out private health cover;
5. If you’re a low or middle-income earner and make personal (after-tax) contributions to your super fund, the government may also make a contribution (called a co-contribution) up to a maximum amount of $500.  The easiest $500 you will make this year!;
6. Look at the option of paying insurance from within super but remember that while this means that you are personally not paying the insurance thereby saving you money remember that it also means that you are losing some of the benefit of compounding your income through super.  Before doing this speak to your financial planner about whether this is a suitable option for you.
7. Consider salary sacrificing some income into super thereby reducing you tax and at the same time providing for your future;
8. Use negative gearing where appropriate to increase wealth and gain a tax advantage, but discuss this with your accountant and financial planner before going down this path;
9. If you are in business make sure you have the correct business structure to minimise your tax liability;
10. Keep fit and healthy – might seem a strange way to save money but if you go to the medical professionals less then you will be paying them less as well as less sick leave and at the same time enjoy life more;

If you would like to discuss any of these points further please call Balanix Solutions 07 32644783.  Please note: The above comments are not meant as financial advice but rather general comment.  For financial advice you should consult your financial planner for advice that is suitable for your individual circumstances.

With businesses relying more and more on technology to drive business success how well are small businesses protected from cyber crime?  Just because a business is small doesn’t mean cyber criminals won’t think it worthwhile to target your business.

If we assume that generally small businesses are not well protected and cyber criminals don’t discriminate between sizes of businesses, how then can we protect our business from cyber crime?

The first thing all businesses should do is review their business insurance and check whether they have cyber insurance.  If you don’t have the insurance then contact your insurance broker and discuss the type of cover that would adequately protect your business as not all policies are the same.

The second step should be to contact your IT specialist and have your IT systems checked to determine the level of protection your business has against a cyber attack.  The process should include the development an IT strategy to prevent an attack and at the same time a strategy to deal with a breach should it occur.

Some things to consider as part of these strategies include ensuring:

• you have adequate cyber insurance,
• you back up your systems on a regular basis,
• your systems are appropriately password protected,
• you have a process in place to recover data should it be lost or compromised, 
• that you understand what your obligations at law are if client information is breached, and
• you have sufficient training for staff in what they should do to both prevent and respond to  a breach.

The above is not intended as a complete list to ensure your business is protected but hopefully it will give you some food for thought that you can have a meaningful discussion with your IT provider about the level and type of protection your business needs.

And don’t forget to talk to your insurance broker about cyber insurance!!!

If you want to talk more about your business and how I can help, please contact me on 07 32644783.

There has been a lot said over the last few weeks about businesses being forced to close or being placed in administration.  Quite a number of these businesses have been around for significant periods of time.

So what has caused these closures and what can small businesses learn from them. 

If it were simply a changing environment then one would question how a company such as JB Hi-Fi can buck  the trend and increase it’s share price by around 89% over the last twelve months insight of potential damaged by Amazon opening in Australia and taking market share.

When looking at what makes a business successful the most important thing, in my view, is how good the management is in running the business.  This applies whether the business is a large one such as JB Hi-Fi or a one person micro business.

In relation to the recent spate of businesses that have been put into administration the administrators have in one or two cases talked about closing down unprofitable stores or there has been suggestion that some businesses have not moved with the times quick enough.

In both these instances this suggests to me that management may not have been on top of things to the degree they should have been.   If an administrator can come in and determine there are unprofitable stores then surely management should have been well and truly on top of this issue and already taken appropriate action to close these stores.  Likewise, slowness to move with the times does not occur overnight and may reflect on management not being alert to the changing circumstances.

In the case of the one person micro business failing to acknowledge that the business is having significant cash-flow problems is one of the greatest failing of unsuccessful businesses and is certainly an area that your accountant can help you manage.  Early warning signs are not necessarily that different for large businesses and micro businesses when you look at who the largest creditors are in a lot of these closures – the ATO and unpaid wages and superannuation.  

If the business has simply not paid theses liabilities then it is bad management because simply using someone elses money to keep afloat without advising them that this is what you are doing is certain to lead to failure.  For small to micro businesses this is a critical area knowing how to properly manage your cashflow and debt and knowing when it is the right time to seek alternative management strategies or, in the worst case scenario pull the plug and close the business before the debt gets out of control.

In relation to managing changing time this should theoretically be easier for micro businesses because of their small size.  Put simply, it is easier to implement changes into a one to five person business than a business which has a thousand staff or a hundred plus stores.  While a micro business has an advantage over larger businesses it can only take advantage of this strength if management understand the threats or challenges the market is facing.

Again, micro businesses have a significant advantage in that management, yes you the owner, can be a lot closer to your client than a large multi store business can be.  If you are closer to your clients and understand the needs and desires then you can quickly implement the necessary change compared to a large firm.  Further you can take advantage of areas where large firms cannot obtain economies of scale.   An example of this type of advantage is supplying goods that the larger stores don’t want to sell.  In this instance you do not have to worry about price or competition.

So if you are a business owner and great at what you do but not necessarily a great manager seek the help of your accountant to implement the systems and reports that you need as a manager to run your business successfully and most importantly don’t be afraid to ask for help.  See your accountant as an independent sounding board and spend the time to develop a strong trusting relationship with them.