Changes to McPhail & Partners operations during current Victorian Stage 4 lockdown

As part of the ongoing fight against COVID-19, the Victorian Government has now imposed a strict Stage 4 lockdown which, amongst other things, requires all non-essential businesses to temporarily close.

McPhail & Partners are fully committed to doing our part to support this endeavour and have closed our office as of 5pm Wednesday 5^th August 2020, with the entire team now working from home.

We remain fully operational but have outlined below some of the changes that we have made to enable us to continue to provide all the services you may require.

GETTING IN TOUCH

Under the Stage 4 restrictions, no physical client meetings will be held either at the McPhail & Partners offices or at client premises.

The team will still be available during normal office hours (8:30am - 5:00pm Mon-Fri) and can be contacted by the following methods:

Phone – the main office number is 9898 9221 and your calls can be transferred to the relevant team member
Email – either directly with one of our team members of to office@mcphail.com.au
Zoom – phone or email us to book a Zoom call

EXCHANGE OF DOCUMENTS

With the 2020 financial year now ended we know many of you are keen to get your tax returns and financial statements prepared. To enable the most efficient and timely turnover we ask that where possible you provide your source documents electronically to avoid any unnecessary delays.

We can accept documents via Email however if your records contain sensitive information such as TFNs or HIN/SRN references for shareholdings we have 2 secure online portals available that can be used.

Both the MYOB Client Portal (also used for electronic tax return approval) and Secure Returns can be accessed from our website at https://www.mcphailandpartners.com.au/client-login/. If you aren’t already setup on one of these portals please contact us to arrange a new user setup.

We understand that not all clients will be able to utilise these online systems so our PO Box (PO Box 40, Mitcham, VIC 3132) will still be monitored if mailing your records is required. We expect the postal system will be under significant strain during the lockdown so delays should be expected if the post is used.

As the Mitcham Office will be unattended we ask that no records be left at, or delivered directly to the office. If none of the options above are suitable to you please call us on 9898 9221 so we can make alternate arrangements.

APPROVAL OF DOCUMENTS

We will be unable to produce paper-based products during this lockdown so all tax returns, BAS/IAS returns and financial statements will need to be sent via our electronic portals or via email for review and approval.

Further guidance on the use of these electronic approval systems will be provided by the team as our work is completed and we are happy to walk you through the process over the phone or on Zoom if required.

If these alternatives are not suitable for you then unfortunately you will need to wait until we return to the office after lockdown to produce the paper versions for you.

We thank you for your ongoing support, understanding, and patience through these challenging times. We hope that you and your families stay safe and healthy throughout the pandemic and look forward to seeing you all on the other side.

If you wish to discuss any of these changes further please do not hesitate to contact the office on 9898 9221.

by McPhail & Partners

Australian Government announces $130 billion JobKeeper Payment in Response to the Coronavirus Pandemic

The Government is introducing a subsidy program to support employees and businesses. The JobKeeper Payment is designed to help businesses affected by the Coronavirus to cover the costs of their employees’ wages, so that more employees can retain their job and continue to earn an income.

Overview

The JobKeeper Payment will support employers to maintain their connection to their employees. These connections will enable business to reactivate their operations quickly – without having to rehire staff – when the crisis is over.

In summary:

Under this proposal the government will provide eligible businesses with funding of $1,500 per fortnight per eligible employee for up to 6 months.
The JobKeeper Payment is provided in addition to the previously legislated stimulus packages and goes a step further to help support those businesses and employees that have suffered significant financial impacts as a result of the ongoing Coronavirus pandemic.
Importantly this payment will also be available to the self-employed and not-for-profit organisations.

Eligibility - Employers

Employers will be eligible for the subsidy if:

their business has a turnover of less than $1 billion and their turnover has fallen by more than 30 per cent; or
their business has a turnover of $1 billion or more and their turnover has fallen by more than 50 per cent; and
the business is not subject to the Major Bank Levy.

To calculate if a business has faced the required percentage fall in their turnover, the business would need to compare their turnover for the month of March 2020 (for monthly BAS lodgers) or three months January-March 2020 (for quarterly BAS lodgers) with the income reported for the relative period a year earlier.

The Tax Commissioner will have discretion to consider additional information where special circumstances exist, such as a new business which was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover. We suspect there will be a special application required in these circumstances however further details will be provided by the ATO in due course.

Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.

Eligibility - Employees

Eligible employees are employees who:

are currently employed by the eligible employer (including those stood down or re-hired);
were employed by the employer at 1 March 2020;
are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
are at least 16 years of age;
are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
are not in receipt of a JobKeeper Payment from another employer.

If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia as they must report their JobKeeper Payment as income.

Application Process

The Government has advised all employers to register their interest in applying for the JobKeeper Payment via ato.gov.au so they are kept up to date with when information becomes available. This registration only takes 30 seconds to complete and requires the business to simply provide their ABN and contact details.

Once this legislation has passed through Parliament, eligible employers will be able to apply for the scheme via an online application with the ATO making the first payments to employers in the first week of May 2020.

Payment Process

Eligible employers will be paid $1,500 per fortnight per eligible employee. Eligible employees will receive, at a minimum, $1,500 per fortnight, before tax, and employers are able to top-up the payment.

Where employers participate in the scheme, their employees will receive this payment as follows.

If an employee ordinarily receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper Payment will assist their employer to continue operating by subsidising all or part of the income of their employee(s).
If an employee ordinarily receives less than $1,500 in income per fortnight before tax, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
If an employee has been stood down, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
If an employee was employed on 1 March 2020, subsequently ceased employment with their employer, and then has been re-engaged by the same eligible employer, the employee will receive, at a minimum, $1,500 per fortnight, before tax.

It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment. Payments will be made to the employer monthly in arrears by the ATO.

What you need to do:

Eligible employers should register their interest for the JobKeeper payment with the ATO straight away via the ATO website
Business accounting records should be updated to the end of March 2020 as soon as possible to determine impact on business turnover
Identify all eligible employees of your business as you will need to provide these details to the ATO once applications open
Wait for further information on the application process and finer details of the scheme to be released by the Government

These are the details which have been announced at this stage however further clarification on the operation of the scheme is expected over the coming weeks once legislation has been passed. We will be doing our best to follow up with all effected clients who may qualify for this payment. However, if you wish to discuss any of these items and how they may impact on your business, please do not hesitate to contact the office on 9898 9221.

by McPhail & Partners

Australian Government Changes to Income Support Payments for Individuals Effected by the Coronavirus Pandemic

The Australian Government’s stimulus packages include measures to provide support to those Australians whose employment has been negatively impacted by the Coronavirus Pandemic. We have outlined below the main elements of these measures which will apply over the next 6 months.

Sole traders and self-employed eligible for JobSeeker payment and Youth Allowance.

The eligibility criteria to access income support payments will be relaxed to where you’re:

a permanent employee who has been stood down or lost your job
a sole trader, self-employed, a casual or contract worker whose income has reduced
caring for someone who’s affected by coronavirus.

Centrelink will waive asset testing from 27^th April 2020 for 6 months although income testing will still apply. The usual waiting periods for these payments have also been waived and Centrelink are applying additional resources to process all applications as fast as possible.

Please note that you can’t access employer entitlements, such as annual leave or sick leave, or income protection insurance at the same time as getting JobSeeker Payment or Youth Allowance for job seekers.

What you need to do:

If you meet one of the eligibility criteria above, you should contact Centrelink to discuss and lodge your application for support as soon as possible.

Temporary Coronavirus Supplement

For the next 6 months the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be in paid to both existing and new recipients of the eligible payment categories and is in addition to the regular amounts paid.

This supplement will automatically be paid from 27^th April 2020 to individuals receiving the following payments:

JobSeeker Payment
Youth Allowance for job seekers
Youth Allowance for students
Austudy for students
ABSTUDY for students
Parenting Payment
Farm Household Allowance
Special Benefit.

What you need to do:

If you are already receiving one of the payments listed above, you do not need to do anything. Centrelink will automatically add the supplement to your regular fortnightly payment.
If you are not yet receiving one of these payments but are eligible you should submit your application ASAP via myGov using a Centrelink Online account or by calling Centrelink.

Two rounds of One-off stimulus payments of $750

The Government will provide two separate tax free one-off payments of $750 to recipients of certain income support payments.

The first one-off payment of $750 will be made from 31^st March 2020 with most recipients receiving it by 17^th April 2020. This payment will be automatically paid to those individuals receiving the certain payments between 12^th March 2020 and 13^th April 2020 or those holding certain concession cards. A full list of the eligible payments and cards can be found on the Centrelink website here

The second one-off payment of $750 will be made from 13^th July 2020 if, on the 10^th July 2020, you are eligible for any of the payments or concession cards that were eligible for the first one-off payment mentioned above.

However, this second one-off payment will not be paid to anyone receiving the Coronavirus Supplement mentioned previously.

What you need to do:

If you are already receiving one of the eligible payments, you do not need to do anything. Centrelink will automatically pay the relevant one-off payments to you in April 2020 and July 2020.
If you are not yet receiving one of these payments but are eligible you should submit your application ASAP via myGov using a Centrelink Online account or by calling Centrelink.

If you wish to discuss these items and how they may impact on you, please do not hesitate to contact the office on 9898 9221.

by McPhail & Partners

Australian Government Changes to Superannuation in Response to the Coronavirus Pandemic

The Australian Government’s stimulus packages include two key changes to the existing Superannuation rules to help both retirees and individuals who find themselves in financial distress as a result of the Coronavirus Pandemic

Temporary reduction in minimum superannuation draw down rates.

The current superannuation rules dictate a default minimum pension drawdown for those Australians who have converted their superannuation benefits into a Retirement Phase Income Stream (previously known as an Account Based Pension). These rates start at 4% of the opening account balance for those under 65 and increase based in the member’s age up to 14% for those over 95.

In light of the significant impact the Coronavirus has had on the global stock markets the Australian Government has announced the annual minimum pension rates will now be reduced by 50% for both the 2019-2020 and 2020-2021 financial years. The rates for the next two years will therefore be as follows:

Age	Default minimum drawdown rates (%)	Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
Under 65	4	2
65-74	5	2.5
75-79	6	3
80-84	7	3.5
85-89	9	4.5
90-94	11	5.5
95 or more	14	7

These measures are designed to assist members to preserve the capital values of their superannuation benefits and prevent them from being forced to sell the underlying investments at significantly reduced values in order to meet their minimum pension requirements.

Some members may have already withdrawn pensions for the 2019-2020 financial year in excess of the amount calculated with the new minimum rates. Unfortunately, in these circumstances you are not permitted to return the excess amount to your Superannuation Fund.

What you need to do:

We will be contacting all clients with Income Streams within their Self-Managed Superannuation Funds (SMSFs) to discuss the impact of this change with you and what needs to be done prior to 30^th June 2020.
For those clients who have an Income Stream from a public retail or industry fund you will need to speak with your Superannuation Fund or Financial Planner directly to discuss your options if you wish to reduce your payments for the remainder of this financial year or next financial year.

Early release of superannuation

From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-2020, and a further $10,000 in 2020-2021. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.

To be eligible to access your superannuation you need to meet at least one the following requirements:

you are unemployed; or
you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
on or after 1 January 2020:
- you were made redundant; or
- your working hours were reduced by 20% or more; or
- if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

What you need to do:

If you meet one of the above conditions and wish to access funds from your superannuation balance you should register for myGov, if you haven’t already, and submit your application once the facility opens in mid-April 2020.

If you wish to discuss these items and how they may impact on you, please do not hesitate to contact the office on 9898 9221.

by McPhail & Partners

Australian & Victorian Government Support to Business Taxpayers in Response to the Coronavirus Pandemic

The Australian Government has announced two stimulus packages which have now passed through both Houses of Parliament. These packages include a number of plans to support Australian Businesses during the current Coronavirus Pandemic, with the most relevant highlighted below.

Tax-free payments up to $100,000 for small business and not-for-profit employers.

Under this proposal any business who employ staff and have an aggregated annual turnover of less than $50 million (for the most recent income year) are eligible to receive 2 rounds of tax-free payments with each round worth a maximum of $50,000 with a minimum payment of $10,000.

These payments will be made to eligible employers by way of a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.

The “relevant period” depends on a business’s PAYG Withholding cycle. Those lodging monthly IAS returns will have a relevant period covering March 2020 to June 2020 whereas those with a quarterly obligation will have a relevant period covering January 2020 to June 2020.

The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

In addition to this first round of payments, a second round of payments will be made up to a maximum of $50,000, accessible from July 2020. The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase and will be paid over the period of July 2020 – October 2020 with lodgement of activity statements.

What you need to do:

Lodge your Business Tax Return for the year ended 30^th June 2019. This is used to confirm your business income is below the aggregated annual turnover of $50 million.
Prepare and lodge your monthly or quarterly activity statements as soon as possible after the end of each period – the ATO will then automatically calculate and apply your relevant credit

Business Investment – increase and extension of the instant asset write-off and accelerated depreciation

From 12 March 2020, the instant asset write-off threshold will increase from $30,000 to $150,000, and access to the write-off will be expanded to include businesses with aggregated annual turnover of less than $500 million until 30 June 2020.

The instant asset write-off is a tax deduction that reduces the tax liability of your business. It enables your business to claim an upfront deduction for depreciating assets in the year the asset was purchased and used (or installed ready to use).

Assets will need to be used or installed ready for use from when the changes were announced on 12 March 2020 until by 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify for the higher rate but may qualify for one of the other thresholds. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.

In addition to the increased instant asset write-off rules, accelerated depreciation deductions will apply from 12 March 2020 until 30 June 2021. This will bring forward deductions that would otherwise be claimed in later years. Any assets eligible for the Instant Asset Write-off do not qualify for this Accelerated Depreciation incentive

What you need to do:

To qualify for the Instant Asset Write-off, trading businesses will need to purchase a new asset (up to $150k) and have it installed and ready for use by the 30^th June 2020.
To qualify for the Accelerated Depreciation, trading businesses will need to purchase a new asset and have it installed and ready for use by the 30^th June 2021.

Wage subsidy of up to 50% of an apprentice or trainee wage

Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. The payments are accessible to businesses with less than 20 employees. Employers will receive up to $21,000 per apprentice ($7,000 per quarter).

Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

In order to qualify for this payment, the apprentice or trainee must have been in training with the business as at 1 March 2020. Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will also be eligible for the subsidy.

It is expected that employers will be able to register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.

What you need to do:

Contact your relevant Australian Apprenticeship Support Network (AASN) to register for the subsidy from 2^nd April 2020.

Access to working capital for SMEs – SME Guarantee Scheme

The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to eligible SMEs with turnover up to $50 million.

The guarantee will apply to loans with the following terms:

Maximum total size of loans 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, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainly of the current economic conditions.

The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

What you need to do:

Contact your bank or financial institution to confirm they are “eligible lenders” under the scheme
Engage with your eligible lender to complete the application before the 30^th September 2020

In addition to the announcements made by the Australian Government there have also been proposals released by the Victorian Government to support Victorian Businesses. The most significant of these are outlined below.

Payroll Tax to be Waived for the 2019-2020 financial year for eligible employers

Businesses with annual taxable wages up to $3 million will have their payroll tax for the 2019-2020 financial year waived. There is still a requirement to continue to lodge payroll tax returns however no further payments will be required for eligible businesses for this financial year.

The State Revenue Office will contact eligible businesses directly in relation to refunding any payroll tax already paid for this year from 27th March 2020.

These businesses are also eligible to defer paying payroll tax for the period 1st July 2020 to 30th September 2020 until January 2021.

What you need to do:

Continue to lodge your payroll tax returns each month but do not make any further payments for the 2020 financial year
The SRO will contact all eligible businesses with instructions on how to request refunds of previously paid amounts – this will be done online via PTX Express
Details regarding the process to defer the Sept 2020 Quarter payments will be provided by the SRO in July 2020

2020 Land Tax payments to be deferred

Some land owners are eligible to defer their 2020 land tax payment until after 1 January 2021.

Eligible land owners must have at least one taxable non-residential property and total taxable landholdings below $1 million to qualify for the deferral.

Under the deferral mechanism land owners can request a refund of 2020 land tax already paid but full payment will be required by the 31st March 2021.

What you need to do:

The State Revenue Office will contact all eligible land owners and provide further information so nothing further needs to be done at this stage.

These are the main announcements that have been made at this time which we feel will impact on our client base. We will be doing our best to follow up with all effected clients who may benefit from these incentives. However, if you wish to discuss any of these items and how they may impact on your business, please do not hesitate to contact the office on 9898 9221.

by McPhail & Partners

Succession planning: A competitive advantage strategy

Sidestep the negative effects of change with thorough succession planning and you’ll put your business ahead of the curve. Not only does this improve your company’s value, but it also provides something every good business manager strives for: your employees’ peace of mind.

You know this is true – succession planning is the cornerstone of any business that lasts. It smooths the way as one leader leaves and another takes over, creating an environment in which the new management – and your business – can be successful while reducing the effects of the unavoidable turmoil of change.

Yet succession planning is so often overlooked.

According to Deloitte, 86 percent of leaders see leadership succession planning as ‘urgent’ or ‘important’, but only 14 percent believe they do it well.

This is something that I’ve seen regularly as the CEO of Star Business Solutions – an MYOB business partner.

Here it is in a nutshell:

Succession is inevitable
Planning is imperative to manage risk
It can affect your entire business
Consider the emotional aspects
Data provides objectivity during uncertainty

Succession planning for a family business is especially important because the organisation is more than just a company – it’s a legacy, tied to the life’s work of just a couple of people. It’s so complex that there have been entire books written on the subject.

But even in traditional businesses, the process of letting go and handing over the reins to a successor can be surprisingly painful for the exiting leader.

Managed poorly, it’s not uncommon for the process of succession to stir up feelings of resentment, resistance and even hostility in otherwise level-headed business people.

In the middle of all that upheaval, the organisation and your team are left struggling to keep the doors open and the lights on.

A great succession plan doesn’t just create organisational stability, market confidence and value, it also comes with a raft of other benefits.

More diverse leadership – with the objectivity that comes from succession planning, you’ll be able to more clearly see what your company needs, rather than simply replacing leadership like for like.
A career pathway mapped for emerging leaders – this means you’ll be more able to attract and retain top talent with the promise of genuine opportunities to come.
A strong and healthy culture – panic-purchasing leaders are the fastest way to erode staff goodwill, and damage that intangible, yet utterly important element: culture. When you have time to consider your options, you’ll be able to choose leaders who will embody your company values and maintain a strong and healthy workplace culture.

Why succession planning will get you ahead

Having an eye on those inevitable future changes means you’ll transition more smoothly, and your new leadership will get fully operational faster. But that’s not all.

A succession plan is about more than just planning for the future – since so many businesses fail to do it, it actually gives you a competitive advantage.

You’ll be sidestepping the messiness, infighting, and underperformance that so many of your competitors will deal with.

Systems ready for change

While software isn’t the be-all and end-all of business, an old or inefficient system can make a succession process far more difficult.

At the most basic level, when BAU relies too heavily on the knowledge of one leader, it creates risk – when that leader leaves, even with the best preparation, it’s likely they’ll be leaving gaps through which leak money, time and goodwill.

This is especially important if you’re replacing first-generation leaders, who’ve built the business almost from scratch. They may not even be aware of how much they know – the ratios, the leading indicators, and warning signs, for example.

These can, and should, be taken out of leaders’ heads and embedded into the business intelligence reporting. This will mean the system plugs the knowledge gaps and keeps everything ticking over, while staff and new leadership get their feet under them.

These systems should also enable leaders to track progress simply and quickly. This delivers much-needed oversight, allowing others in the leadership team, the board and any consultants to keep an eye on the business as the incoming leaders learn the ropes. This gives new leaders a safety net – they can trust that any major misses will be caught early by those in the business with more experience. Similarly, during a hand-over period, it allows the outgoing leadership to stay engaged with performance, without feeling like they’re breathing down their successor’s neck.

The data objectivity can also help minimise resistance and resentment. Planning for and finding a successor based on transparent, accessible data will let all management be engaged in the process, and more readily accept outcomes.

Plan for changes of leadership team, not just the CEO

Succession planning is so often focused on protecting the business when the CEO is replaced.

The reality is that this role, while truly critical, is only one piece of the management puzzle.

Any sudden or poorly planned exit of any of your senior leadership team can create problems. The new leaders, underprepared, could have gaping holes in their knowledge of your business systems and processes, and in their understanding of the new team.

At best, this will mean they take much longer to begin working at capacity. At worse, they’ll lose the respect and support of the people they’re leading, and make decisions that abjectly affect their department and the business as a whole.

A well-prepared leader will be equipped with the context and understanding needed to be successful in the role from day one – and for that they need to be entering the business under an agreed plan.

Establish long lead times

The ideal time to plan for succession of an organisation as a whole is when a business is established.

For senior leadership, preparing for their departure should begin as part of their induction process. Obviously, that rarely is the case, but it indicates how critical early preparation is.

With long enough lead time, preparing for this change becomes BAU for everyone in your business, rather than something that seems to come out of nowhere. It also gives you time to properly develop criteria for evaluating candidates and gives the outgoing leader a chance to prepare for the change – both practically and emotionally.

There can be huge problems with the outgoing CEO not letting go emotionally and practically. It can make the new leader’s job impossible and they’ll go elsewhere.

In a best-case scenario, you’ll have five years to prepare for a change in CEO, with three years being the minimum. Succession plans for the remainder of the executive, and other management will need less time.

Establish accountability and advocacy

According to research from Deloitte, succession planning is often overlooked due to a lack of ownership – it’s not clear who bears responsibility for creating the plan or for finding top talent.

This means that while people acknowledge the importance of succession planning, they’ll assume it’s someone else’s job until told otherwise.

Similarly, having advocates at executive level will help build a succession culture into the organisation – staff at every level will expect succession planning as a normal part of growth and success.

Design for where you’re going

Most succession planning looks at what you need in order to maintain the status quo.

A moment’s pause will reveal the flaw here – succession planning should be about the future of the company, not it's present.

Focusing on the needs of your business in the future won’t just better prepare your next leaders for the changing world but can help remove a barrier to successful planning itself: fear.

In most businesses, staff at all levels are incentivised to appear irreplaceable – and that butts up against the most basic goal of succession planning, which is, quite literally, to replace people. That often leads to leaders spending time protecting their patch and holding back from preparing people to take over.

If the goal is to build leaders for what the business is next, it removes the feeling that leaders are replaceable now.

This makes it easier for the outgoing leadership to accept that their replacement will – and should – do things differently. This can be particularly difficult if the outgoing leader still has an ongoing financial relationship

You might think, ‘It’s my money so I have a right to be involved here’, but it becomes counterproductive. You have to trust that you’ve made the right choice of leader, and then let them get on with their work.

Sidestep the messiness, smooth the transition

A successful business doesn’t stand still – it grows, innovates, maybe even diversifies. Meanwhile, your leadership can either stand still or move forward with the future of the business.

A great succession plan, not just for the CEO but for all the individuals on the management team, creates an environment of stability, confidence, and value in business – definitely a competitive advantage. Not only that, but it diversifies the leadership, offers career paths for promising staff, keeps an eye on the future of your business, and maintains a healthy work culture for the present.

A smart leadership team will recognise the emotional and cultural risk of a poorly planned succession. You’ll manage a smoother transition by keeping software systems up to date (retaining specialist knowledge that’s currently in the heads of the Old Guard), assigning responsibility and advocacy for succession, and establishing clear future goals.

Most importantly, your plan will begin long before it’s needed, so when succession time happens, everyone is well prepared and ready for the inevitable.

Who knows? They might even look forward to the fresh air of change.

Source : MYOB

Reproduced with the permission of MYOB. This article by Trish Hall was originally published at https://www.myob.com/au/blog/succession-planning-competitive-advantage/

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

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by McPhail & Partners

Tax news, views and clues November 2019

Getting the benefit of your business tax losses

When you’re starting a new business venture, it may take some time before the business becomes profitable. And there may be other situations where an established business operates at a loss in a particular year. So, what does this mean tax-wise? When your deductions in an income year are greater than your assessable income, you have a “tax loss”. You generally can’t receive a refund for a tax loss, but you can use it in other ways.

If you’re a sole trader or individual partner, you may be able to use your business tax loss to offset other assessable income you earn personally. This includes salary and wages from employment and income from personal investments.

But watch out: if the loss is “non-commercial”, you can’t use it immediately to offset your other income. Instead, you must defer it.

Downsizer super contributions: getting it right

“Downsizer” contributions let you contribute some of the proceeds from the sale of your home into superannuation – but there are several important eligibility requirements.

Are you thinking about selling the family home in order to raise funds for retirement? Under the “downsizer” contribution scheme, individuals aged 65 years and over who sell their home may contribute sale proceeds of up to $300,000 per member as a “downsizer” superannuation contribution (which means up to $600,000 for a couple).

These contributions don’t count towards your non-concessional contributions cap and can be made even if your total superannuation balance exceeds
$1.6 million. You’re also exempt from the “work test” that usually applies to voluntary contributions by members aged 65 and over.

Health insurance and your tax: uncovered

If you don’t hold private hospital cover – or are thinking about dropping it – make sure you understand the financial consequences. You could be hit with an extra tax surcharge of up to 1.5% or cost yourself extra premiums in future.

Levies, surcharges and loadings – the terminology around health insurance and tax can be bewildering! But if you don’t hold private hospital cover, you need to understand how this may affect your tax.

The Medicare levy surcharge (MLS) is a tax penalty you must pay if you earn above a certain amount and don’t take out a sufficient level of private hospital cover for you and all of your dependants. It’s designed to give you a financial incentive to insure privately. The MLS is applied by the ATO at tax time and included in your assessment.

Small business CGT concessions: when do I qualify?

CGT concessions allow you to reduce – or in some cases, completely eliminate – the capital gain from the sale of a business asset, whether it’s held directly by your business entity or in another related structure.

What’s more, the concessions also allow you to make extra super contributions – sometimes up to $1,515,000 – in connection with the sale of business assets. This is an attractive opportunity for many small business owners heading for retirement, especially given the restrictive annual contributions caps that usually apply.

There are various concessions available, each with their own eligibility rules. There are two basic conditions you must meet before you can access any of the concessions. The first requirement tests whether your business is “small” enough to qualify. There are two alternative tests: a turnover test and a net assets test. The second major requirement is that the capital gain must arise from the sale (or other CGT event) of an “active” asset.

Unpaid super: important amnesty update for employers

The launch of Single Touch Payroll (STP) will dramatically improve the ATO’s ability to monitor employers’ compliance with compulsory super laws moving forward. This electronic reporting standard is now mandatory for all Australian businesses and gives the ATO fast access to income and superannuation information for all employees.

The government is getting tough on unpaid compulsory super guarantee (SG) contributions, but fortunately for businesses, it has recently announced a revised “grace period” to rectify past non-compliance. All businesses should review their super compliance to consider what action they may need to take.

The timing of your disclosure is important. The proposed new amnesty will cover both previous disclosures made since 24 May 2018 (under the old amnesty scheme that the government failed to officially implement) and, importantly, disclosures made up until six months after the proposed legislation passes parliament.

Selling shares: how does tax apply?

Whether you own just a few listed shares or have an extensive portfolio, understanding how capital gains tax (CGT) applies when you sell your shares can help you plan your trades effectively. If you trade shares on a scale that amounts to a business of share trading, talk to your tax adviser about the different tax regime that applies.

Each time you sell a parcel of shares, you trigger a “CGT event” and you must work out whether you’ve made a capital gain on that parcel (where the proceeds you receive exceed the cost base) or capital loss (where the cost base exceeds the proceeds). You also trigger a CGT event if you give the shares away as a gift – perhaps to a family member. For tax purposes, you’re deemed to have disposed of the shares at their full market value.

All of your capital gains for the income year are tallied and reduced by any capital losses. This includes your gains and losses from all of your assets that year, not just shares. If you have an overall “net capital gain”, this is included in your assessable income and taxed at your marginal tax rate. If you have a “net capital loss”, you can’t offset this against ordinary income like salary or rental income. Instead, a net capital loss can be carried forward to future years to apply against future capital gains.

ATO to scrutinise every return for tax time 2019

The ATO has announced that it will scrutinise every tax return lodged during Tax Time 2019 as part of its ongoing focus on "closing tax gaps".

Assistant Commissioner, Karen Foat, said taxpayers who have done the wrong thing may be subject to an audit, even if the over-claim of deductions is minor. Third party data indicating under reported income, and deductions that appear high compared to people with a similar job and income level, tend to raise concerns, Ms Foat said.

If you’re subject to an audit, it’s not always doom and gloom. In some cases, you may get a higher deduction if the ATO discovers that you haven’t claimed something you’re entitled to. For example, you may be entitled to a deduction for depreciation on a laptop or other technology used for work but had incorrectly calculated the claim or omitted it altogether.

In the event of an audit and you’re found to have over-claimed, the ATO may apply penalties depending on your behaviour. If you’re found to have over-claimed based on a genuine mistake, for example, if you’ve claimed the costs which are private and domestic in nature that are sometimes used for work or study (eg sports backpack or headphones), the ATO may choose not to apply penalties.

Beware of insurance changes in superannuation

Since July this year, super funds have been required to cancel insurance on accounts that have not received any contributions for at least 16 months unless the member elects to continue the cover. In addition, inactive super accounts with balances of under $6,000 will either be automatically consolidated by the ATO with other accounts you may hold or transferred to the ATO. If your super is transferred to the ATO, any insurance will also be cancelled.

This applies to life insurance, total and permanent disability (TPD) insurance and income protection (IP) insurance that you may have with your super fund.

Another change coming to super funds in the not too distant future of 1 April 2020 is opt-in insurance for members under 25 years old and those with account balances of less than $6,000. From that date, members under 25 who start to hold a new choice or MySuper product will need to explicitly opt-in to insurance. Currently, the onus is on the member to opt out of insurance if they do not want it.

Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas. This article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

by McPhail & Partners

Customer service makes small businesses the first choice of consumers

Zendesk has released a newly commissioned report titled Big Expectations, Small Businesses: What Customers Want, revealing that small businesses have a distinct advantage over big businesses when it comes to the customer service they provide. In fact, customers are happy to pay more to a small business for this reason alone.

Almost all customers reported clear benefits from working with a small business when compared to a larger company. It’s the small, personal touches that make working with a small business so good. For customers, it comes down to working with someone who knows their specific situation and creates the feeling of having a valued relationship.

Beyond this, customers enjoy working with small businesses as they feel good about supporting smaller organisations and find the relationship convenient. As a result, customers are actively looking for ways to support small businesses. Over two-thirds of customers will find ways to work with small businesses – even when it is less convenient for them.

Amy Foo, Managing Director, Zendesk A/NZ said, “Australia is well known as being a nation that champions the underdog, and it is no different when it comes to purchasing behaviour.

“Small businesses have a unique advantage in the personalised, earnest customer service they provide, giving them the one up on larger businesses. By maintaining a focus on providing positive and unique experiences, small businesses have a great opportunity to be competitive against bigger, more well-known competitors,” Foo added.

With almost all Australians reporting a good customer experience with small businesses, this has a big impact on behaviour. Nine out of ten customers will positively change their buying behaviour following a good customer experience – by buying more or recommending a brand to friends and family.

While this is a clear advantage for small businesses, customers have now come to expect a high level of customer service. To meet these high expectations, business owners should ensure they are communicating with customers when, how and where they want.

Digital channels like social media, live chat and texting have become increasingly popular methods of communication. Yet, small business customers still show a preference to look for self-service options before reaching out. Making it easy for customers to answer their own questions is the first step in providing good customer service.

“One thing is clear – it’s not just about providing the best experiences for the customer. Small businesses should also be thinking about their front-line employees. Armed with the right tools and resources to have a complete view of the customer, they will be empowered and enabled to create better customer experiences,” Foo said.

Click here for original article source

by McPhail & Partners

Tax news views and clues October, 2019

Small business income tax gap: ATO update

New figures released by the ATO estimate that almost 90% of income tax from small businesses is paid voluntarily or with little intervention from the ATO.

“This shows that the vast majority of small businesses in the tax system are trying to do the right thing”, Deputy Commissioner Deborah Jenkins said. “Considering how much small businesses have on their plate, we’re grateful for the level of work they put in to get their tax right.”

The ATO estimates the 2015–2016 income tax gap for the small business sector to be approximately 12.5%, or $11.1 billion, with over $7 billion attributable to “black economy” behaviour.

TIP:Around 90% of small businesses use a registered tax professional to help them meet their obligations. Get in touch today to see how we can support you.

ATO sets its sights on undisclosed foreign income

Do you have any amounts of offshore income you haven’t declared to the ATO – perhaps interest from a foreign bank account? Even if it seems like a small amount, you must declare it. International data-sharing arrangements are making your overseas financial affairs increasingly transparent, so don’t get caught out.

The ATO is keen to emphasise that its techniques for detecting offshore amounts are becoming increasingly effective. Cross-border cooperation between different tax jurisdictions means your financial information is being shared more than ever before.

If you’re an Australian resident for tax purposes, you’re taxed on your worldwide income. This means you must declare all foreign income sources in your return.

If you’re a non-resident, you generally only pay tax on your Australian-sourced income.

TIP:The main test for tax residency is whether you “reside” in Australia. There’s no single factor that determines whether you meet this test.

What if you’ve already paid tax on the income overseas? You still need to declare it to the ATO. However, you may be able to claim an offset for the tax already paid in order to prevent double taxation.

Got any amounts you’ve overlooked? Now is a great time to get help from your tax adviser with making a voluntary disclosure. You’ll often receive a reduction in ATO penalties and interest that would otherwise apply – and the outcome is generally much more favourable if you make a disclosure before the ATO commences an audit of your tax affairs.

ATO announces “Better as Usual” program to improve your experience

ATO Commissioner Chris Jordan has announced the launch of “Better as Usual”, a new ATO program aimed at improving people’s experience with the tax system. The program will include four parts:

Whole-of-system experience:looking at the end-to-end experience to address people’s frustration at sometimes feeling like they have to start all over again when dealing with a new ATO area or staff member.
Quality of feedback loops:better understanding and documenting people’s past experiences and actions (eg mistakes versus evasion) to make better ATO decisions in the future.
Complex cases team:a dedicated team to work on the most complex cases, devoting the time and resources necessary to deal with complicated affairs that fall outside the ATO's normal processes.
Procedural and cultural safeguards:established to reduce (and ultimately eliminate) any cases where ATO mistakes could have a severe impact on taxpayers.

Salary sacrificing loopholes: are you receiving your full benefits?

Most workers understand that their employer must make compulsory super guarantee (SG) contributions of 9.5% of their salary and wages. However, things can get a little tricky when you choose to salary sacrifice.

Under current laws, employees who sacrifice some of their salary in return for additional super contributions may end up receiving less than they expected because of two legal loopholes. Employers may:

count the salary sacrifice contributions towards satisfying their obligation to make minimum SG contributions of 9.5%; or
calculate their 9.5% contributions liability based on the employee’s salary after deducting sacrificed amounts, rather than the pre-sacrifice salary.

Proposed new laws will close the loopholes by requiring employers to pay compulsory SG contributions at 9.5% of the pre-sacrifice amount of salary (that is, the salary actually paid to the employee plus any sacrificed salary). Further, any salary sacrifice contributions will not count towards the compulsory SG contributions. If passed, the new laws will apply to quarters beginning on or after 1 July 2020.

Claiming work trips for business owners

As a business owner, do you sometimes take work trips? When a trip is clearly for business purposes only, the rules for deducting your expenses are fairly straightforward. But what happens when you’ve planned a holiday or to catch up with family or friends while you’re travelling?

Airfares

Assume you travel to London for a two-week trade show and stay a few extra days for sightseeing. If business is the primary purpose of the trip, you can claim the whole cost of the return airfares as a business deduction, because the sightseeing is just incidental. If you have a significantly longer holiday, so the primary purpose of the trip is not just business, you may need to apportion your airfares. And if the primary purpose is clearly private with some incidental work activities, you generally can’t deduct airfares.

Accommodation

Accommodation deductions are limited to the nights that you’re required for the business purpose. In our London example, you couldn’t deduct your accommodation costs for the nights you stayed for sightseeing. This applies even though you could deduct the full airfares.

Record-keeping

Sole traders and partners must keep a diary if they travel for six or more consecutive nights, detailing each business activity, the location, the date and time it began and how long it lasted.

If your business runs through a company or trust structure, it’s not compulsory to keep a diary, but it’s strongly recommended.

TIP:For companies, be careful about your business paying for any private part of your travel, as this could have consequences under the “deemed dividend” rules about benefits for shareholders and their associates.

Thinking about setting up an SMSF?

SMSFs can be a great option for building retirement savings, but they may not be suitable for everyone. Before you jump in, make sure you understand the differences between SMSFs and other types of funds to help you make an informed decision. Here are a few issues to consider.

Management

While public offer funds are managed by professional licensed trustees, for SMSFs the management responsibility lies with the members. Every SMSF member must be a trustee of the fund (or, if the trustee is a company, a director of that company). This is an advantage if you want full control over how your super is invested and managed, but it means the members are responsible for complying with all superannuation laws and regulations – and administrative penalties can apply for non-compliance.

Costs

Fees charged by public offer funds vary, but they are generally charged as a percentage of the member’s account balance. Therefore, the higher your balance, the more fees you’ll pay.

SMSF costs tend to be more fixed. As well as paying establishment costs and an annual supervisory levy, SMSFs must hire an independent auditor annually. Most SMSFs also need professional assistance, such as accounting services, financial advice, administration services and asset valuations. An SMSF can sometimes be more expensive than a public offer fund.

Investment flexibility

A major benefit of SMSFs is that the member-trustees have full control over investment choices. This means you can invest in specific assets, including direct property, that wouldn’t be possible in a public offer fund. SMSFs can also take advantage of gearing strategies by borrowing to buy property or even shares through a special “limited recourse” borrowing arrangement. However, with control comes responsibility. SMSF trustees must create and regularly update an “investment strategy” that specifically addresses things like risk, liquidity and diversification.

TIP:There are other important considerations for SMSFs, including decisions about insurance and arrangements for dealing with any disagreements between trustees. It’s important to ensure you have the whole picture and good advice before getting an SMSF started.

by McPhail & Partners

Rebranding? Here’s why you don’t let your domain name lapse

Have you ever wondered what happens to domain names that you let lapse after your business is bought/sold or you rebrand and change to a new domain name? In this article, we'd like to share a true story, written by an experienced business writer, Ingrid Moyle.

True story

I admit to being one of those people who didn’t think too deeply of the implications when I let an old domain name that I had traded under for many years go.

After all, I had been trading under the new domain name for a few years, and the only emails that were going through to my old email address were spam, so no biggie if I just let it lapse. Right?

Wrong!

Scammers and hackers are always looking for new ways to do their thing, and re-registering lapsed domain names is simply the latest in their long arsenal of ways to stuff-up business owners.

In my case, the scammers found a way to circumvent the auDA domain name registration rules to re-register my expired domain name.

They then organised hosting with a hosting provider with a murky reputation and proceeded to scrape a full copy of my website from many years ago and make it live once again in a zombie parody of what it once was.

The scammers then filled the zombie site choc-full of malware and had the e-commerce component of the site redirected to their personal PayPal accounts.

For good measure, they added a stack of add-on domains selling male enhancement medications under my old domain name.

Why is this an issue?

Remember when I said that they scraped my content? This included photos of me and all of my marketing wording.

If someone searched for my name, my company or my services, the zombie site would pop up in the Google’s search results, and legitimate clients checking out my business would either pick up a dose of malware for their troubles, or potentially buy a product and get nothing in return leaving them less than impressed with my business.

But wait. There’s more.

They also added in a catchall email to the account, which meant that anyone sending email to the old email address communicated directly with the scammers and not me.

A growing security problem

The zombiing of websites as a way to either deliver malware or access old emails is rapidly becoming a significant security issue for business.

Gabor Szathmari, a cyber-security expert in Australia, had his company re-register six domain names of law firms in Australia that had re-branded to test the scope of the problem.

They then set up catch-all email accounts to monitor emails coming into the old domain names.

As part of the research, they were able to:

Access confidential documents of former clients;
Access confidential email correspondence;
Access personal information of former clients;
Hijack personal user accounts (LinkedIn, Facebook, etc.) of former staff working in their new jobs; and
Hijack professional user accounts (Commonwealth Courts Portal, LEAP, etc.) of former staff of the businesses.

In other words, if you let your domain name lapse and at any time you had an email account attached to the domain, you are potentially leaving your business wide open for disaster.

What happened in my case?

I would like to tell you that getting the domain name back from the scammers was super simple and straightforward. It wasn’t!

Stopping the scammers had more twists, turns and heart-stopping moments than a Marvel movie.

Getting the scam site taken down, the domain name registration cancelled and getting it back under my name took loads of paperwork, legal advice, a battle with an SEO company who got in the middle at the wrong time, and a few too many late nights and alcoholic beverages.

However, finally, good prevailed, and my old domain name is back under my control. Sure, it is now radioactively toxic from an SEO perspective, so will never again be used to host a site, or be redirected to my new site, but at least that is one cybersecurity gap closed.

Should you let your domain name lapse?

Domain Names are the new cyber vulnerability. The new rules for every business, no matter the size, is if you have ever had a domain name registered that had a website on it and/or an email account linked to it, NEVER LET IT LAPSE.

Domain names are something that you need to keep for life. Yes, you can let your hosting lapse if you don’t need a live site anymore, but never let your domain name lapse. Keep it under your control at all times.

And if you have changed your domain name and let your old one lapse, your first task for today is to see if you can re-register your old domain name. Do this before you take the first sip of your coffee (it is THAT serious)!

Source: FlyingSolo July 2019

by McPhail & Partners