Mtge & Finance Brief Oct 2008

Chartered Accountant and registered tax agent Jo Kelab of australianbiz.com.au says income taxs laws on the provision of fringe benefits to employees, their associates and clients are complex, especially at Christmas.

Holding a Christmas party is fraught with tax requirements, so its best to run any ideas past your accountant. Again, it all get back to the planning. “Christmas parties consitute ‘entertainment benefits’ and as such are subject to fringe benefit tax (FBT) unless specifically exempt, or they are subject to the ‘minor benefits’ exemption,” explains Kaleb.

A minor benefit is one that is provided to an employee or their associate on an ‘infrequent’ or ‘irregular’ basis, which is not a reward for services, and the cost is less than $300 per benefit inclusive of GST”

He says holding the Christmas party on the business premises on a working day is usually the most tax effective, because expenses such as food & drink are exempt from FBT for employees with no dollar limit, but no tax deduction or GST credit can be claimed.

“Alternatively, Christmas parties held off the business premises are exempmt from FBT where the cost for the employee and their assocaite is each less than $300 inclusive of GST, bit no tax deduction or GST credit can be claimed.”

In regards to gifts, Kaleb says that non enterainment gifts provided to employees are usually exempt from FBT where the total value is less than $300 inclusive of GST. A tax deduction and GST credit can also be claimed. These include flowers, wine, perfumes, gift vouchers and hampers.”

Kaleb recommends keeping these tips in mind:

• Non Entertainment gifts given to clients and suppliers do not fall within the FBT rules as they are not provided to employees. Generally a tax deduction and GST credit can be claimed for these gifts, provided they are not excessive or overly valuable
• The provision of entertainment gifts has different tax implications ( examples include threatre tickets, passes to attend musical, live play, movie, tickets to a sporting event or providing a holiday) Where the cost for the employee and their associate is less than $300 each GST inlcusive, there is no FBT, no tax deduction is allowed and no GST redit can be claimed
• However, if the cost for the employee and their associate is each $300 or more GST inclusive, a tax deduction and GST credit can be claimed, but FBT is payable. The cost of any entertainment gifts provided to clients is not subject to FBT and no tax deductions olr GST credit can be claimed.

Peter Switzer

Mtge & Finance Brief 10/2008

Business needs to proactive about their obligations to close off 2008 and avoid any shortfalls in the new year.

As the end of the 2008 draws to a close, have you consider all your bases? SME’s need to plan ahead to close off the year and make sure they abide by all their obligations - the taxman - as well as keeping the business on a firm financial footing. This includes everything from cash flow over Christmas and the tax implications of employee gifts or Christmas bonuses, to things that can be easily overlooked, such as where your mail gets sents when you’re on holidays.

So Where to start?

A leading debt agency warns small business owners that Christmas is a time when cash crisis occurs, and that your better off being realistic than leaving your head in the sand and exposing yourself to a potential New Year Shortfall.

Roger Mendleson, CEO of Prushka, debt recovery experts, explains why Christmas can burn cash. “There is generally a heavy cash burden on small business, with Christmas pays, and reduced output amd billings/orders in the week leading up to Chjristmas’ says Mendelson. “Those businesses running tight before Xams are more likely to ‘fall over’ in February/March than in any other time of the year.”

The time left to head off a cash crunch before Christmas could be tight, but your New Years’s resolution has to be to get into cash & tax planning.

We’ve all been told that Christmas is the time to be merry, but it should also be the time to be well prepared. The Five Ps adage applies: perfect planning prevents poor performance.

Silly Season Strategies

The festive season comes upon us usally when we are dying for a break and a bit of lateral thinking makes smart business sense. The thinking should be applied to the all-important areas of customer service, staff management and supplier management.

The handling of this unsual buisiness experience should be easier if you have traded through or closed down over the holiday period before. However, that doesn’t mean you’ve done it right in the past.

You might not know if you lost business because the prospective client who rang on 2 January- when you took an extra day off because New Years fell on a Thursday- never ring back.

You never know who your ptoential clients are. Perhaps he was a customer worth $100,000 a year profit, and part of a network of past-past growth businesses. So he is out there referring business he finally went to, when you weren’t there!

The bottom line is that you have to plan for this period, of course, it means you need to have systems in place to handle not only the expected but also the un-expected.

Taking Care of business

Lets start with the closed down operation. It’s obvious this busines needs to tap into telecommunications options available. The reality is that anyone ringing up over the festive season is desparate for supplies or service. They could be in the biulding sector where supplies or services could be vital to honouring a contract.

It would be smart to consider emailing or mailing to current customers informaing them of the times you plan to close your business down. This is a courtesy call and its not only showing you are a caring supplier, but you are giving them an alert if they need to order more of your goods or services for Christmas.

Your Customers could be serviced by an’Out of Office’ automatic reply to emails, which remind customers and tells new ones when you are back on deck. A special answerng machine message should be planned to give dates for the break, emergency contact number if you really are into customer service, and you might even pay for a messages to be answered by a messaging service with real people.

Cover all the Bases

It wouldn’t hurt to pay a visit to a telecommunications expert to find out what options are available. Being time poor and being unwilling to talk to experts can make you poorer in money terms.

For those trading over the holiday period, assume nothing. Make sure crucial suppliers know what your expectations are and if need be get written undertakings that you’ll be recieving deliveries. This is the perfect time to make a list of the things that could go wrong and then ensure you have these vulnerable basis covered.

Planning Ahead

For staff, managing expectations is important. Many small firms have encountered problems with staff around festive period because of poor communication. It has also underlined the problem of not having a written contract between you and your staff.

Calling a meeting after informing everyone in writing about your Christmas trading plans is a good idea. Many employers & employees do not get their entitlements and responsiobilities. The mixture of public holidays, holiday leave loading and staff managing their families’ expectations means that you have inform your staff as early as possible about your trading plans. Addressing early give you plenty of time to arrange replacement if need be.

Failure to plan for this all important time might not only mean you lose customers, you could also loose staff! Wouldn’t that be a great start to the New Year?

If these recommendations have you thinking, well, think a little bit more. The difference between a good and bad business is often linked to the systems put into place to handle all sorts of situations.

An effective system developed to handle the holidays makes you and your business more proffessional and hopefully more profitable.

BHP and Rio agree, Steve Keen is wrong.

by Michael Pascoe

posted on Oct 23 09:24am

Michael Pascoe

Economists can occasionally be dangerous things when radical or simply wrong ideas fall on fertile ground. Karl Marx, for example, never personally hurt anyone that I know of, but some of his ideas eventually helped cause incredible suffering and death.

Domestically, an associate professor at the University of Western Sydney, Steve Keen, is currently scaring the easily-frightened with especially dire forecasts about the Australian economy. Keen’s predictions aren’t taken very seriously by most economists, but he’s still enjoyed plenty of media attention, much of it unquestioning. Some of my media colleagues are happy to search out the most extreme and alarmist views - they make bigger headlines.

Keen is predicting the economic equivalent of the earth splitting open, spewing forth fire, toads and serpents, the seas turning to blood, the Four Riders of the Apocalypse loping off random heads and limbs and so on. He represents a tiny minority of economic opinion.

(Part of Keen’s appeal to populist media is that he has put his unit on the market, claiming housing prices are going to crash. As Rory Robertson, Macquarie Bank’s respected interest rate strategist, observed, Keen would have more credibility as a housing forecaster if he had sold his unit last year.)

Journalists can be as dangerous as economists too when they needlessly scare their audiences and perhaps provoke them into doing the wrong thing. I’m writing this on a flight to Perth and have just watched the Channel 9 Inflight News with a couple of prime examples.

There was doom and gloom story that treated the rash of redemption freezes by mortgage funds as if it news - it’s been going on for months. And the report used the sorry house of Citi Pacific as its main case study. Citi Pacific blamed Kevin Rudd - I think the over-geared Gold Coast outfit should look much, much closer to home for the root of its problems. Quite frankly, Citi Pacific was on the nose with the stock market before the sub-prime crisis hit.

More importantly, a serious young English reporter (well, young compared with me) filed a cliché-riddled yarn from Shanghai that gave the impression China might be grinding to a halt and that it would take the rest of the world down with it.

What rubbish.

China is slowing, but slowing from an unsustainably high growth rate to what remains strong growth in anyone’s language. The 9 per cent growth it recorded in the September quarter would of course be the envy of any other country - down from more than double-digit growth last year.

If you want to know what China is doing, turn to the experts, the two companies that are intimately entwined with the China story: BHP and Rio.

Last week Rio released its quarterly production numbers and included the comment that the expected re-bound in Chinese demand from the Olympics close-down looks like being delayed from the December quarter and was more likely early next year. That caused a sharp sell down of Rio and other resources shares.

It’s perhaps not accidental then that Rio’s chief economist, Vivek Tulpule, turns up in an interview in today’s Sydney Morning Herald putting a bit more perspective on those China remarks. As the SMH reports:

“He said the downturn in metals demand in China during the second half of this year had taken the market by surprise.

But he said China could next year surprise the market in a different way - once its economy rebounded, its metals requirements would be larger than most analysts were forecasting.”

This morning BHP released its quarterly production numbers. I’ve been keenly awaiting BHP’s China comments as I rate them the best source of intelligence on the China economy. The Biggest Australian didn’t disappoint:

“Consistent with the outlook statement given at our interim and preliminary results, China has not been immune to the global slowdown. Macroeconomic indicators show that Chinese growth has softened during the quarter, albeit from very high levels. We expect volatility and uncertainty to continue in the short term. Notwithstanding this short term uncertainty, we remain confident that the ongoing industrialization and urbanization of China and other developing economies will continue to drive strong longer term demand for our products.”

And that’s a key part of the reason why I think Steve Keen’s dark forecast is fundamentally wrong. There are other reasons, but that’s the bedrock - the China story is not dead, BHP and Rio agree on that.

Please note: This is not an attempt to scare anyone, more to alude to opportunities to protect your business moving forward in times of financial market flux.

Your banking arrangements have been fantastic over the last 7 years, You’ve made all your payments on time. The Bank has given you most of what you have wanted when you generally wanted it.
When things are good there is little to be worried about from yours or the banks perspective. But for the last 12 months things are not so good!

The Banks and other lending institutions haven’t been able to get money/capital the way they use to. If they are, the cost of obtaining it is going up.
What does this mean going forward?
Well … we all know that:
Interest rates, Fuel and Food have all moved up.  The RBA is suggesting that there is a need for 100,000 jobs to be lost over the coming period. With the reduction in confidence and the slowing of the economy, small business is going to come under some great pressures if it hasn’t already. Debtors starting to stretch – Creditors starting to push.

This being the case, banks are likely to take a position that they ‘need to conserve our reserves’. They are doing what is important for their business and that is reasonable! But the implications for your business may be profound. If not today it will be in 6 to 12 months time.

Consider this:   All your savings, house, super and perhaps one or two other things that you have forgotten, along with Credit Cards, home loan, Business loan, Business account are all with the one Institution. You have met all your payments since Adam was a boy. But the bank changes their approach or assessment of your business. Because the Banks need to conserve their reserves! 

What happens then, the relationship you thought you had along with the good payment history doesn’t count for much. Your effectively left financially hamstrung

What would happen if they used your savings to cover some of the house debt or credit card, because the mortgage I signed has an ‘All Monies’ Clause which allows surplus funds to be utilised to cover other debts. (Usually if you are in default). Or the credit card is behind but everything else is up to date, you could be considered in default on all your borrowings. Guess what happens then?! You’re in a little trouble with not that many options to fix the problem. If you think taking to another bank, you need to think again. They are under the same pressures.

When you are most likely to need some flexibility or assistance from your ‘banking relationship’ there is a strong possiblity your that your bank is not going to be prepared to help you.

Is this the time to consider finance and banking options for you & your business?

Is it time to be protecting your financial flexibility before it’s too late?
Talk with Finance Know how obligation free to determine some options. There are various opportunities that you may not have considered.

Courier Mail

July 11, 2008 02:22pm

NEARLY half of Australian businesses have been affected by the fallout from the global crunch but the worst could still around the corner, a credit insurance company says.

Atradius Australia and New Zealand managing director David Huey said payment defaults and insurance claims reported to his firm had doubled since last year.

“Our enquiry rate for new business has also doubled, in part due to the high-profile insolvencies like Beechwood Homes, which has meant that industry segments like construction have been looking at insuring themselves against non payment,” Mr Huey said.

Companies in United States had the highest response in a 14-country survey.

About 68 per cent of US firms said they had been affected by the credit crunch, followed by Mexico, at 60 per cent.

Other nations where companies said the credit crisis had a high impact were Italy with 58 per cent, the UK, 46 per cent, Spain, 44 per cent and Australia/New Zealand, 43 per cent.

The Atradius credit crisis survey analysed comments from 2,500 respondents about their company’s experiences and the likely effect of tougher financial conditions.

“Factors that may be contributing to these reports include reliance on the building and construction or the financial services industry for GDP growth, a relatively large percentage of GDP tied to trade with the United States or heavy use of receivable securitisation,” Mr Huey said.

Restrictive credit and increased default payments would dampen growth and raise business defaults globally for the rest of 2008 and into 2009, the survey said.

Some 71 per cent of companies said an increase in payment defaults was their biggest concern, 67 per cent worried about restrictions in sales growth and 65 per cent feared increased capital costs.

Mr Huey said it was essential for a healthy company to be aware of how to protect themselves from risk exposure.

“The credit crisis is highlighting the importance of protecting your cashflow,” he said.

“The reality is that without good cashflow your business will be in jeopardy.”