Debt Management

A Tip on the Road to Financial Happiness

HappinessOne of the biggest economic impacts on both business and private costs over the last 12 months has been the drop in oil prices internationally which has resulted in lower fuel prices. The price per barrel has dropped from over $100/barrel down to $47/barrel. Watching Sunrise the other morning Craig James from Commsec stated that the flow-on effect was the equivalent of a .25% drop in interest for a person on a $350,000 home loan.

Given that the Reserve Bank yesterday dropped the official rate by .25% we should really be making sure that we are taking advantage of the current situation.

The old saying of paying down non tax deductible debt as your primary goal is never more true. I have not in my 40 years as an adult seen an economic environment where the opportunity to reduce debt has been more favorable. Yes there are some concerns on the job front with the end of the resource boom in Australia but with home loans at their lowest rates for a longtime and petrol prices way down from when they were above $1.50 to now (the lowest I have seen at 97.8 cents) it really is a great opportunity to reduce personal debt and set yourself up for the future.

If you take the 50 cents per litre on petrol and the quarter of a percent interest cut on home loans and put this against your credit card or home loan you are on your way to financial happiness.

These opportunities do not come along every day and it is very easy for us not to realise just how much this saving adds up when you take into account how not only can you reduce your debt but in doing so reduce the interest you will have on your reduced outstanding balance. It is a win win situation.

David Balwin FCPA Registered Tax Agent Accountant Business Advisor

David Balwin
FCPA | Registered Tax Agent | Business Advisor


Balanix Solutions – Taxation | Accounting | Business Advise

Situated in Strathpine on Brisbane North, we partner with our clients to assist them in their accounting, business management and bookkeeping needs. Our clients vary in industries from professional services (such as law, vet and dentist) to the trades (mechanic, bricklaying, plasterer etc), hospitality and retail. Are clients are located in the Pine Rivers area (including Brendale, Lawnton, Albany Creek and Eatons Hill) through to Kallangur, Petrie, North Lakes and Caboolture, as well as Brisbane South, the Gold Coast and various other parts of Queensland.

It’s About the Investment-Not the Tax

"David Balwin

David Balwin
CPA | Accountant | Business Advisor

I am forever hearing small business complaining about the tax they pay and asking how to reduce their liability.  I find this very interesting as if these business owners spent as much time focusing on increasing revenue then the tax issue would not be such a focus.

I agree  …  No one likes to pay tax … but at the end of the day Government needs taxes to fund services to the community like police, education, health, roads etc.

The point a lot of small business owners forget is that the main focus of any business decision should be based on the return that the investment is going to provide.  If the investment does not stack up then any potential tax advantages are not worth considering.

I suggest that the first criteria when considering making an investment is – does the opportunity provide a suitable return for the risk you are taking e.g. if you were to invest $100,000 purchasing a business what return would you want to make on your investment.  A simple starting point in considering the return on investment is to look at what would one of the big four banks offer you to invest the money with them – (somewhere between 3% and 5% depending on the period the money was invested for etc).

So, if the bank was offering say 4% with minimal risk, then what is the risk/return you should be seeking from a business that does not have a credit rating, may have little management skills and lack policies.  Maybe a 20 to 30 percent return would not be unreasonable, for if you were not to achieve this type of return would you simply invest your hard earned money in one of the banks or government bonds where risk is low.

Same applies if you are looking to invest in, for example, property.  For example, if you were considering purchasing a commercial unit in Strathpine on Brisbane’s north for say $250,000 you would need to consider the return on investment, tenancy trends, out-goings etc and see how it all stacks up well before considering tax benefits.

Having said this, once you have determined whether the investment is sound from an economic return perspective, then look at how tax can be minimised within the boundaries of the legislation.

The bottom line to any business decision should therefore always focus on expected returns for risk first and only then look at the tax consequences before making a final decision.

8 Bad Money Habits to Kick – Final 2

"David Balwin

David Balwin
CPA | Accountant | Business Advisor

Welcome to the final blog in which we look at 8 money habits business owners should make sure are NOT occurring in their business.

Funding Tax liabilities at the last moment.

All business owners are certain of two things  ….  Cashflow will  have ebbs and flows and there is always a tax liability in some shape or form.

Depending on the nature and size of the business various tax obligations and liabilities may apply.  There is company tax, goods and services tax (GST), payroll tax to name but a few.

Unfortunately, some business do not plan for these liabilities and find themselves stressed and unsure where to find the money when the taxman comes knocking.

Like all good business practices, plan the business’s tax obligations and set up a process of putting the money away on an ongoing basis so it is there when payment is due.  If need be, set up specific bank accounts for GST and long term liabilities so the money goes out of sight thereby reducing risk of spending by accident.

Saving what’s left after paying everyone else.

Debts have to be paid.  Businesses need to establish good credit profiles in order to maintain good suppliers and financial arrangements.  With cashflow in and required cashflow out not always dancing in harmony, business owners need to save along the way to ensure adequate funds when needed.  Set a percentage of income to be saved on a regular basis and don’t rely on scraps if and when there maybe some.  Also, manage the payment of bills ensuring they are paid on time but not necessarily the minute they come through the door.  Budgeting and forecasting is another tool to stay on top of cashflow and the financial health of the business.

Need help – Call me today – 07 3264 4783

8 Bad Money Habits to Kick – Part 3

"David Balwin

David Balwin
CPA | Accountant | Business Advisor

Welcome to Part Three of four Blogs in which we will look at 8 money habits business owners should make sure are NOT occurring in their business.

Not seeing how the little things add up

“While I’m here I’ll just grab some of this and some of that – I’m sure we need it or it will be useful somehow in the business.” or “I know there is a fee if I withdraw from this ATM, however, my Bank’s ATM is outside and round the corner, and the time it would take me ….”

Sound familiar?  It’s the little purchases and expenditures that start to add up and can significantly affect cashflow and health of the finances.  Make sure you monitor what office supplies and purchases are needed and when  ..  and only spend to the plan!  If you need to withdraw money, either keep a petty cash float or go the extra mile to your bank- those charges can really add up.

Generally think  …  do I need to spend that money  …  am I maximising the money I am spending … so there are no nasty surprises at month end.

Not planning for retirement.

Of course we’re planning for retirement … the retirement funding plan is established and  superannuation is set up – usual questions such as, is there enough contribution and is the fund performing well, are being asked and monitored.

But what about the business at retirement time?

Plans need to be developed to migrate the business when it is time to enjoy the fruits of your labour.  Is it intended to sell the business?  If so, what lead time would need to be considered?  Will the business be wound down?  If so, how will this occur?

As with start up, at business end we need to plan, plan, plan.

Call me today if you need help managing your business’s wealth – (07) 3264 4783

8 Bad Money Habits to Kick – Part 2

"David Balwin

David Balwin
CPA | Accountant | Business Advisor

Welcome to Part Two of four blogs in which we are looking at 8 money habits business owners should make sure are NOT occurring in their business.

So far we have looked at:

  • Spending without a Budget
  • Carrying a Balance on Credit Cards

Read on for this blog’s money habits not to have.

Not Monitoring Interest Rates

Whether it is your investment rate or what you could get on a borrowing refinancing it pays to continuously monitor borrowing and investing prices.  No one wants to lose money if they could have got a better investment rate – and no one wants to pay more than they have to for debt.  With profit margins reducing and costs of running businesses rising it is good management to stay on top of interest rates and trends which impact both your business and personal finances.

Not properly insuring for income protection and disability

Anyone who runs their own business and supporting themselves needs to consciously assess the risks of not properly insuring for loss of income due to injury or illness.  If something prevents you from working for a few weeks or more, proper insurance could be the difference between tightening the businesses expenditure for a while until you are back on your feet and closing the doors.  Business insurance coverage can be expensive with defined conditions.  Do your homework and shop around for the best value for money for your price range.  Remember, with the benefits of being your own boss comes the responsibility to ensure proper business coverage.

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