Are you the only “normal’ person at your office?

Ever wondered why you’re the only normal one at our office? Better understanding your behavioural profile, those of your colleagues and customers can help break sown communication barriers and help you achieve results. It also helps overcome that feeling that everyone else around you is obviously completely insane.

The DISC model looks at a person’s natural behavioural style and the way they approach the world around them. Using the psychological theories of Carl Jung, William Moulton-Marston defined the four dimensional behavioural map (or DISC)

Characteristics of ‘D’ people

Think Gordon Gekko from Wall Street. ‘D’ represents dominance. The characteristics of people with a heavy ‘D’ profile are likely to include:

• Hard & fast decision making
• Like to be in charge
• Results focused
• Often perceived as aggressive or assertive
• Appears to lack patience
• Risk takers
• Bold

This is a driven, results orientated person. You can often find ‘D’ profile people in management because it gives them the control they need to feel comfortable. They are also not generally known for worrying about everyone else’s point of view.

How to deal with a ‘D’

• Be prepared; have the facts ready to go
• Be assertive; you need to be able to back up your opinion or they are likely to dismiss it
• Be concise; ‘D’s’ don’t want you to take up their time getting your thoughts together
• Don’t be offended. It’s natural for this profile to be assertive.

When a ‘D’ profile gets stressed, they can be bullying, rude and aggressive.

Characteristics of ‘I’ people

These people who like to be the centre of attention and share their thoughts, energy and enthusiasm with everyone around them. ‘I’ represents influence and are often entrepreneurial. Think Richard Branson. You can often find ‘I’ profiles in the public domain as speakers, trainers, and sales people or entrepreneurs reaching for dizzying heights. Characteristics of the ‘I’ profile include:

• Talkative
• Motivated & persuasive
• Animated and energetic
• Upbeat and optimistic
• Receptive, open and agreeable
• Are not great listeners – they’re just waiting for you to be quiet so they can start to share their views with you

How to deal with an ‘I’

• Show interest
• Don’t ask for their feedback if you’re not prepared to acknowledge it
• Put details in writing and set goals
• Be constructive in your criticism

When an ‘I’ profile gets stressed, they complain, can lose focus and be dramatic.

Characteristics of ‘S’ people

The team players. ‘S’ represents steadiness or submissive. These are people who look out for everyone else around them. They are:

• Calm and stable
• Supportive
• Like to work with a structure and procedures where the rules are known
• Like to work through issues, plan and then implement
• Don’t like change or being put on the spot

How to deal with an ‘S’

• Make sure they have time to digest information and make decisions
• Don’t be confronting
• Be supportive and build trust
• Plan for change

When an ‘S’ profile gets stressed, they tend to internalise their problems, can be emotional, indecisive and lose confidence.

Characteristics of ‘C’ people

The specialists of the behavioural world, the ‘C’ profile is happy to be locked away and focus on the one thing until they reach a conclusion. Key characteristics include:

• Logical and questioning
• Sceptical and persistent
• Has high standards for themselves and expects everyone else to have these same standards
• Likes things to be right (regardless of how much time that takes)

Dealing with ‘C’ people

• Set time limits
• Be logical in your approach
• Show competence
• use a more formal approach

When a ‘C’ profile gets stressed, they stop communicating, become critical and over analytical, isolate themselves and get bogged down.

There are no wrong or right characteristics. It’s just that some profiles are better suited to some situations and roles than others. Most people are capable of adopting other characteristics when they need to; it’s just that most of us will always revert to what feels natural. Think about the jobs you avoid doing or have to force yourself to do – chances are these jobs are inconsistent with your behavioural type. You can do them, but they take a whole lot more energy than those jobs that are consistent with your natural behavioural style.

Jack Welsh, former CEO of General Electric once told a reporter that he spends 50% of his time on people issues. Looking at the different characteristics of the people you work with, you can see why it takes so much energy.

For you customers, understanding how they need to work with your company and your products can mean the difference between a successful and viable relationship and one that goes nowhere.

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

[QUOTE] “A ‘No’ uttered from the deepest conviction is better then a ‘Yes’ merely uttered to please, or worse, to avoid trouble.” MOHANDAS GANDHI

Plain and simple advice to help things stack up in your favour

Knowing when to change your business structure

For successful businesses, simple business structures often do not work. They leave you risk exposed, are ineffective for tax purposes, and are not efficient for succession or sale. In the early stages of business life the philosophy often is; keep it simple and low cost. This may mean trading as a sole trader, in partnership, or through a simple company structure. Where the business stays small this can be entirely appropriate and may serve you well for the lifetime of the business.

However, if your expectations are greater than this, or if you can see that your business is likely to grow in a significant way, then you will need to change structure at some stage.

Successful fast growth businesses typically operate through a mix of company and trust structures…

These structures are not for show. They create separation, tax efficiency, help to risk manage your business interests and allow for orderly transfer at the appropriate time.

The challenge is; when is the right time to put in place a more efficient structure? The answer is the earlier the better. Change comes with a cost. You can be exposed to capital gains tax and stamp duty, and this can be expensive and a distraction from the main focus of your business growth. If you have a very clear vision for your business and it is going to grow to a significant size then there is a lot of merit in putting the basic structure in place at the beginning. Equally, if your plan is to maintain a micro-business, keep it simple and don’t be seduced by advice that over complicates what you need. Your structure should be appropriate and consistent with your expectations for the business – be they large or small.

If you have a clear vision at the beginning then the question of how to get your structure right can be an easier question to answer. For many business operators though, the reality is that you are not sure. You may start off small and the business booms with growth exceeding your expectations. Or, you may have hopes for something significant, but also know that it might not work. So, if you’re in this situation, what are the signs that it is time to make the change?

The first should be when you can identify that there is significant value building in your business. This might be reflected by the assets held in the business or the development of goodwill or intellectual property. The existence of these assets means that you should be considering risk protection and ways to protect against the unexpected. Ideally, significant capital assets of the business should be separated from the operating structure.

If you would like to ensure that your business structure is right for you now and in the future, talk to us today.

Your SMSF and Borrowing

Knowing what assets your Self Managed Superannuation Fund (SMSF) can own is an important part of being a fund trustee. You should also know what assets your fund can acquire from you or related parties. New rules recently introduced may give more scope for your SMSF to borrow funds to acquire these assets but there are unique rules and guidelines that need to be adhered to.

As the trustees of your SMSF, you need to ensure that all assets held in the fund are consistent with the fund’s investment strategy. That is, as trustee you need to consider issues such as risk and return, diversification of the fund’s assets, liquidity within the fund, and of course, the ability of the fund to discharge liabilities.

Here are the common questions we’re often asked about borrowing:

1. Can I move my existing rental properties into my SMSF?

If these are residential properties then in most cases the answer is no. Your SMSF cannot acquire property from a ‘related party’ unless the property is used in a business (called business real property). A related party includes you, your relatives, and in some cases your business associates. It can also include entities that are controlled by these people.

2. Can I own my business premises through my SMSF?

Assuming that the purchase of a commercial property makes sense for the fund, there is nothing to prevent the fund from purchasing a commercial property. The fund could even acquire the existing business real property from a member or related party! Your SMSF could then lease the property back to your business so long as the lease is on commercial terms. This could be a great way to boost your retirement savings as the rental income is taxed at a maximum of 15%.

3. Can my SMSF borrow money to buy property?

Since September 2007, SMSFs have been able to borrow to acquire assets. It’s important to recognise that as there are strict rules surrounding this, you should always seek professional advice. Your SMSF can only borrow to acquire assets that it would otherwise be allowed to acquire – so in some cases your SMSF could borrow to acquire the member’s business premises. Be careful though as the SMSF cannot use the borrowings to improve the property (no extensions or renovations), so what you buy is what you’re stuck with until your SMSF has paid off the loan.

4. Can my SMSF own property overseas?

As long as holding or purchasing the property is in line with the fund’s investment strategy, there is nothing in the superannuation rules to prevent your SMSF owning property overseas. But again, beware of some of the traps.

In some cases it might be prudent for a company or trust to own the property and for your SMSF to own shares in the company or units in the trust. This may protect the fund from being sued by a tenant. However, there are restrictions on the company/trust under the superannuation rules. For example, the company or trust could not borrow or lend money, or place a charge over any of the assets. And, the company or trust may not be able to hold an overseas bank account.

You need to weigh up the benefits of using an ‘interposed’ company or trust to hold the asset with the restrictions that can be imposed. In all cases, you should make sure that you have adequate insurances in place both over the asset and also inside the SMSF.

Did you know?

There were 425,300 Self Managed Superannuation Funds in Australia at 30 June 2010 with 29,405 new funds created in the 2009/2010 financial year. Of those, 25% had a total asset value below $200,000, and 49% had a total asset value between $200,000 and $1m. Just over 30% of all new funds in the same time period were set up by 45 to 54 year olds. As at December 2010, SMSFs owned assets worth a total of $420,612,000,000 – 31% in listed shares

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Preparing for the rollercoaster ride

Standards and Poors has downgraded America’s AAA credit rating, local and international markets are volatile and easily spooked, picking changes in interest rates is more akin to

crystal ball gazing, the carbon tax is coming, consumer sentiment remains tight and no one is feeling particularly confident. Welcome to the 2011/2012 financial year. Over the next 12 months business will be working with a range of domestic and external influences that will cause uncertainty. These swings can be a benefit as well as a headache – but only for strategically sound businesses.

Most SMEs (Small to Medium sized Enterprises) are well downstream from major economic triggers. We don’t cause the problems but are affected because of what is happening to larger businesses, the economy, and consumers. Some industries are more impacted than others.

Expecting business conditions to be ‘more of the same’ over the next 12 months is wishful thinking. If your business strategy is simply to turn up, work hard, and expect business to come to you then you are likely to be disappointed. If you have not already, it’s time to do something different. When business gets tougher, ‘me too’ businesses come under pressure. A ‘me too’ business is one that simply replicates what everyone else in their industry or sector does. You work on the basis that there is a consistent and proven formula and if you follow the formula everything should work out. Sounds ok in theory (and says a lot about human nature) however the problem is that you are doing nothing to differentiate yourself in your market. This lack of differentiation may leave your customers with no compelling reason to continue doing business with you.

Business, and in particular small business, needs to be more strategic. The objective needs to be more than carving out some market share but to create a sustainable business.

This is where your business strategy comes in. Your strategy should set the direction for your business and allow you to carve out a sustainable position in your market. In a buoyant market you can survive without a strong business strategy; there is plenty of business for everyone. Turn up, work hard, and you will pick up some market share. The challenge in the good times is generally supply rather than demand.

In a volatile market, demand can be patchy and in some cases depressed. Everyone is chasing business and if you don’t have a clear business strategy then it is likely that you are trying to win business by chance or competing on price. Most SMEs are not equipped to compete on price. You don’t have the capital reserves or the economies of scale to compress your profit margins. Go too far and you can trade yourself out of business.

Developing a business strategy takes time and hard work. You need to understand your industry sector, your market, where the opportunities lie, and how you can differentiate

your position in that market. It’s not easy but get it right and it will pay big dividends. As a starting point you need to identify what your current business strategy is. You should be able to clearly articulate it and write it down (in your head is not good enough). If you don’t have one then accept reality and start working on one. Your strategy should flow into your

business plan and then be reflected in your operating and cash flow budget for the year. Typically, your business strategy will contemplate your end game – be it a sale of the business or some other exit event.

Good businesses always have a clear strategy in place. For the coming year it will be more important than ever; it will separate the successful from the strugglers.

Don’t pay more tax than you need to

If you are finalising your end of financial year accounts and calculating your tax position, keep in mind that there are still options available to save you tax. One of these options impacts on the valuation of your trading stock and if stock is a material asset in your business, you should most certainly consider it. This option provides you with different valuation methods that can be applied to your trading stock.

The majority of businesses value their trading stock at cost and in many cases this is the right valuation approach. However the Tax Act gives you the choice of valuing your stock at the lower of cost, market, or replacement value.

Your trading stock is an asset that is recorded on your balance sheet. In most cases it should be tax neutral to you. The cost of purchasing stock is expensed in your profit and loss account and is offset by the value of the stock asset, until you sell it. So, while the amount of stock you are carrying will impact on your cash position, because you have your funds tied up in it, there is no direct impact on your profits or taxable income until you sell that stock. However, if at June 30 some of your stock is worth less than its cost price, you have the option to value it at the lower figure and take the tax write off now, rather than wait until the stock is sold. This reduction in your stock value will produce a tax saving for you.

There are a range of reasons why stock values may be less now than at the time you purchased the stock. For example, stock becomes out of date, obsolete, damaged or changes in demand mean that the stock can only be realised at a discounted price. Other than when you sell your stock, your tax return gives you a once a year opportunity to adjust your stock values and realise on any losses.

You don’t have to use the same valuation method for all of your stock as the trading stock valuation options can be taken on an item by item basis. So, you can elect to use different methods for different stock items. In many cases cost price will be the appropriate valuation method. You would normally consider using market value or replacement value for stock items only where there has been a fall in value. It will be important to have sufficient documentation to both record what action you have taken and also to justify the value you arrived at. If you are subject to a tax audit you will need to be able to substantiate the value being used. This means having your stock count and also the itemised values for each stock item. Where the value being used is not cost price there should be a clear basis for the amount used.

Where you have experienced a fall in stock values it normally makes sense to take the tax write off now. We all know that cash is king at the moment and the tax saving will help to cushion some of the loss.

5 Tips to differentiate your business

• Focus on the customer experience. What’s it really like dealing with your business? Do a blind test and see whether your business and your team really want customers and sales. For most businesses, you’re not delivering a product/ service, you’re delivering an experience.
• What do your customers really want and can you give it to them and still make a profit? Starbucks closed 61 stores in Australia by 2008 (73% of their stores). They misunderstood the sophistication of Australia’s coffee market and no amount of advertising was going to make us change our barista.
• Solve the problem. What is it that your business does for your customers? The more you can solve the problems they face and make life easier, the more likely it is that customers will choose you over your competition. It might be as simple as refining how customers choose and order your product, access to information that is valuable (think of the freight companies who offer freight tracking and schedules of a customer’s history) through to product development (online banking didn’t always exist).
• Know your product. Do all of your staff know your product or service and do they know what to say about it? The business might seem simple to you but your staff might not naturally realise what needs to be done or said. Inexperienced or poorly trained staff area huge turn off to all but the keenest customers.
• Not everyone wants to be your friend. For many years marketers told you to develop a close relationship with your clients. As a result, everyone wanted you on their database primarily to market to you (almost zero value to your customer). There is no question that there is value to having a tangible customer base. But realise that your customers are looking for different relationships with different businesses. Understand what it is they want from you and develop the relationship from there. If you make contact give them value – don’t just talk at them about your product.

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of thisinformation alone. If expert assistance is required, professional advice should be obtained.

[Quote] “Price is what you pay. Value is what you get.” WARREN BUFFETT

Giving you the facts to help you in your next move forward

What’s the difference between price and value?

You are looking to buy a small business. You see something you are interested in: right industry, right location but is it the right price? In today’s market everyone is looking for a bargain. The difficulty in assessing the price of a small business is that there may not be a lot of ready comparisons available in the market. If you are looking to buy a business where there is a large and active market – like a newsagency, pharmacy or coffee lounge – then comparisons will be available. And, there are industry models that typically set the pricing for these types of business. However, if you are looking at a more unique business where there is not a lot of public information, the going can get tougher.

If you need an opinion on price, be careful and make sure you get the information you are really after.

When you value a small business it is not unusual for the valuation to come in under the asking price. A normal reaction to this is that the business must be overpriced. While this is sometimes true it is not automatically the case. In a perfect market, price and value are the same thing – but we don’t operate in a perfect market. As a result, this causes price to trade at either a premium or a discount to value. Over the past decade in Australia, price has traded at a premium of up to 30% on value for good quality businesses. To test the price of a business, you need to understand both its value and also any information on the price that businesses of the type you are looking at have traded for in the market.

When you ask for a valuation of a prospective business, the real question you might be seeking an answer to is should I buy this business? This is a very different question to one about valuation. Should I buy this business is about a range of both financial and non-financial indicators. It is as much about whether the business suits your lifestyle expectations and core capabilities as it is about the financial performance. If the business is a growth business and needs lots of marketing push, then it will not suit you unless you like the marketing aspect and have the time to dedicate to it. To assess all of this you need to understand the business and the business model in operation. You then need to compare the model to your expectations and also your business strengths. None of us are good at everything. You need a business that matches your strengths.

You don’t want to pay too much for the business but equally you don’t want to miss out on the right business because the asking price is a bit more than you expected or what someone has told you it’s worth. Whether or not you are prepared to pay a premium to value will depend on how much you want the business and what growth you can see in it. Good quality businesses with good growth prospects will almost always command a premium as there are always buyers for these types of businesses. Understanding the true value of a business, is understanding what it is worth now and also what value you can add to it. Once you know both these numbers you should be ready to negotiate on price.

If you are thinking about buying a business, come and speak to us before you begin negotiating a price.

More than just the sale price

If you thought reaching an agreement on price was difficult, wait until you get to the fine details of buying or selling a business.

So you’ve reached an agreement on price. But, there are differences between the parties on how the sale price should be apportioned across different assets. A solution that’s sometimes proposed is to simply show the sale price on the contract and let both sides manage their own apportionment but this depends on what assets you are buying. Try and avoid this trap.

In a typical business you might be buying plant and equipment, goodwill and stock. These assets will have different tax treatments and this is why there are differences between the way a vendor and buyer wish to allocate the price.

The goodwill is a capital asset. The vendor will calculate a capital gain or loss on the sale of the business. Even with a capital gain they may be able to reduce the tax to nil using the CGT small business concessions. For the purchaser, there is no tax deduction on the purchase of goodwill; it becomes a capital asset and a tax offset will only be available if and when the business is later disposed of.

The plant and equipment is also a capital asset. The vendor will account for their tax position on these assets based on their written down value. Where the assets have been substantially depreciated there will be more of an income adjustment. For the purchaser, the plant is normally a depreciable asset and will be written off over its effective life. So, you get a tax writeoff but it takes time.

The stock is on revenue account. For the vendor, they will account for the stock in their assessable income in the year of sale. For the purchaser, the stock is deductible as it is sold. With this mix the tendency is for vendors to want to push more of the sale price into the goodwill as it will create a better tax outcome for them. Purchasers will want to take full value in the stock and plant as this will give a faster tax write-off. For the purchaser, this may be about timing of the tax benefit; over time it may equalise, although there are circumstances where tax benefits can be lost.

Try to avoid the position where the contract is silent on the apportionment of the price and both parties make up their own minds. The Tax Office has a strong data matching capability and where they detect a difference between how the price was accounted for by the parties this is likely to trigger further investigation. The price should be apportioned on a fair market value basis and the ATO does have the power to allocate price where they believe there has been an artificial apportionment to achieve a tax benefit.

While they can do this even where the contract shows the apportionment, they are less likely to take this step where the parties are dealing at arms-length.

So, it’s worth working through an agreement on price. It could save some later tax headaches.

How to sell your business

We’re often asked the best way to sell a business.

There are two key components at play in the sale of a business: structuring the transaction; and, positioning the business to the market. Both elements are important and can significantly impact your result.

Structuring the transaction covers things such as pricing the business, the terms and conditions attaching to the sale, key terms in the contract, and ensuring the transaction structure is as tax effective as possible. Much of the structuring is about ensuring the vendors secure the most efficient and effective outcome from the sale. It is about maximising vendor position.

Positioning the business for sale is all about ensuring that you achieve a sale and that you maximise your price. It covers areas such as ensuring there are no hurdles within the business that will limit its saleability, identifying the competitive position of the business within its market segment, ensuring that operating performance is as good as it can be, and that the business benchmarks well in its market. Positioning also includes identifying the best time to take the business to the market, how to take it to the market and who the most likely buyers will be.

Positioning is about doing everything needed to maximise the probability of a sale occurring whereas structuring is about getting the best outcome from a transaction once it has occurred. A lot of people make the mistake of spending most of their energy on the structuring of the transaction. It is important but it only becomes important if the sale is achieved.

Discuss structuring first with your advisers to help identify any key decisions that need to be made but put most of your effort into positioning the business.

To do this you need to get an objective assessment of how the business compares in its market, its competitive position, and what if any impediments to sale exist – all the things a buyer will look at and look for when they assess your business. Most buyers believe that we are currently in a buyer’s market and will try to drive down price expectations. Whether or not you are in a buyer’s market depends on your industry segment but regardless of this, you are in a competitive market. Buyers may be comparing your business with similar businesses but also opportunities in other industry segments. Securing a sale at the best possible price is about having your business positioned for sale. Preparation time is needed to achieve this so talk to your advisers well in advance of putting your business on the market.

Thinking of selling your business? Talk to us today about how to achieve the best possible outcome.

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

[ Quote ] “Your present circumstances don’t determine where you can go; they merely determine where you start.” NIDO QUBEIN

Offering a structured approach to your: Business Regulation & Business Development

Business Regulation Packages

We believe that there are 10 key areas which all businesses should address to properly manage risks associated with Business Regulation.

Package A – Business Regulation Review

This package is designed to review the current regulatory risk minimisation measures you have implemented for your business, identify where gaps exist and provide detail on how to fill in these gaps.

This review is designed to provide a cost effective plan to manage your regulatory risk.

This review would be useful for:

• Businesses that have already implemented a large number of risk minimisation measures and want to know what gaps remain;
• Businesses who have done some work and need a plan to finish the process;
• Businesses who have done very little work and need a plan to get started.

Our process includes:

• An initial 3 hour workshop style meeting to review all major regulatory issues and get a detailed picture where you are currently at.
• Preparation of a comprehensive report outlining each of the major regulatory risks applicable to your business. This report will provide a summary of how well your business is currently prepared for each risk, will highlight gaps and provide a to-do list of steps which are required to achieve a ‘best practice’ result.
• Presentation of the above report in person with a comprehensive explanation of our findings.

Indicative Cost $1,800 + GST

Package B – Business Regulation Program

This package is designed to review your current regulatory risk minimisation measures, identify where gaps exist, provide an action plan to fill in these gaps and work with you to put this plan in place.

Many of the action items we recommend take time to implement and refine and we recommend implementing this program over a twelve month period. Implementing risk minimization measures over time also improves the likelihood that changes made to improve your business will be enduring.

This review would be useful for:

• Businesses who have done some work and need help to finish the process;
• Businesses who have done very little work regarding regulation and have a lot yet to implement.

This program includes:

• An initial 3 to 4 hour workshop style meeting to review all major regulatory issues and get a detailed picture where you are currently at.
• Preparation of a comprehensive report outlining each of the major regulatory risks applicable to your business. This report will provide a summary of how well your business is currently prepared for each risk, will highlight gaps and provide a to-do list of steps which are required to achieve a ‘best practice’ result.
• Presentation of the above report in person with a comprehensive explanation of our findings. Part of this presentation will include a monthly program to systematically work through each risk area.
• Attend regular meetings to assist in monitoring the progress of the program and assist in it’s implementation.
• These meetings would be held on either a monthly or quarterly basis.

Indicative cost $3,600 to $6,000 (plus GST).

Business Developments Packages

We believe that there are 12 key areas which all businesses should focus on to make the most out of the opportunities available to their business.

Package A – Business Development Strategy Review

This package is designed to review your current business strategy and to review alternate strategies to improve your business.

The review is designed to provide a cost of effective analysis of your total business operation.

This review would be useful for those businesses who need direction and help to determine where best to focus their energy to achieve their goals.

Our process includes:

• An initial 3 hour workshop style meeting to review; where you are at; where you want to go to, and how to get there.
• Preparation of a comprehensive report outlining our findings and recommendations. The report will provide a summary of areas requiring attention and resources to achieve your desired goals.
• Presentation of the above report in person with a comprehensive explanation of our findings and analysis.

Indicative Cost = $1,500 – $5,000 + GST

Package B – Business Development Program

This package is designed to review your current business strategy and to review alternate strategies to improve your business. We then work with you over a 12 month period to assist in the preparation of and implementation of a business development program.

This package would be useful for those businesses who need direction and help to determine where best to focus their energy to achieve their goals but also require that regular mentoring to assist the implementation proves and to provide encouragement and support throughout.

This program includes:

• An initial 4 hour workshop style meeting to get a detailed picture of where you are at and the challenges you face.
• Preparation of a comprehensive report outlining alternative strategies and analysis required to improve your business.
• An action plan will then be developed to assist with reviewing current practices, analysing alternatives and implementing changes over the next 12 months.
• These meeting would be held on either a monthly or quarterly basis.

Indicative Cost = $6,000 – $12,000 + GST

Note: Costs depend on how much detail is required and how much work you have already completed as well as whether quarterly or monthly meeting are required.

What a difference a year can make. Since our budget summary 12 months ago, we have had a change in Prime Minister, a federal election, the resources super profits tax was scrapped, a carbon tax was announced, a new NSW state government was elected, there were several natural disasters in our region, the US government finally got Osama Bin Laden and there was a royal wedding!

We were warned that this would be a tough budget to get us back on the road to surplus as the economic effects of the GFC subside and our economy strengthens off the back of what the treasurer refers to as the ‘Mining Boom Mark II’. The final result however is more of a nip and tuck budget rather than a major slash and burn.

The government has targeted high income earners and will reduce ‘middle class welfare’ payments, such as the Family Tax Benefit and the Baby Bonus, by $2 billion. Rather than take current benefits away, the government has chosen to freeze income tests from being indexed each year so as wages naturally grow, fewer people will become entitled to benefits.

The other major group targeted are welfare recipients with the extension of the earn-or learn requirements to 21 year olds, re-structuring single parent payments and introducing a new set of work tests for people under 35 on Disability Support Pensions.

This is also the first budget in eight years not to deliver a personal income tax cut.

New spending initiatives were announced in the areas of regional health care, skills & training and mental health.

The focus on returning to surplus so quickly is economically sound though heavily politically driven and the treasurer will be banking on a strong performance by the resources sector and no major interruptions to the economy during the next twelve months to deliver this promised surplus.

There was also no mention of the carbon tax in this budget, which is appropriate given that the policy has yet to be finalised and costed, though will be certain to raise significant political debate.

While there have been no wholesale changes to our taxation and superannuation systems, several specific changes were announced which may affect you. These changes are detailed below.

The budget at a glance

• Total expected government revenue of $342.4 billion during the 2011-12 financial year, up from $303.7 billion in 2010-2011.

• Total expected government expenditure of 349.7 billion during the 2011-12 financial year, up from $336.9 billion in 2010-2011.

• A net budget deficit of $49.4 billion or 3.6% of GDP for the 2010-2011 financial year

• A net budget deficit of $22.6 billion or 1.4% of GDP for the 2011-2012 financial year

• An expected budget surplus of $3.5 billion in 2012-13 financial year

• Expected national unemployment rate of 4.75%

• Expected economic growth of 4%

• Expected inflation rate of 2.75%

• Total expected government debt of $82.4 billion by 30 June 2011. Government debt expected to peak at $106.6 billion during the 2011-12 financial year.

• Investment by the mining sector is expected to be a record $76 billion during the 2011-12 financial year, which is more than the rest of the private sector combined.

• Spending aimed to address the challenges of a ‘patchwork’ economy whereby different sectors and locations will experience different rates of growth.

Tax Changes – Individuals

The ‘Flood and Cyclone Reconstruction Levy’ will apply from 1 July 2011. A 0.5% levy will apply to individuals with taxable income of between $50,001 and $100,000 and a 1% levy will apply to taxable income above $100,000. This levy is expected to raise $1.7 billion.

The dependant spouse offset will be phased out from 1 July 2011 for taxpayers with a dependant spouse aged 40 years or less without dependant children. The maximum rebate was previously worth up to $2,243 for eligible recipients.

Minors will not be able to access the low income tax offset on unearned income. This will mainly affect discretionary family trusts who distribute taxable income to children and grandchildren by reducing, though not eliminating, the amount of tax free income distributable to minors.

In response to the recent Anstis case in the High Court where a student taxpayer successfully claimed self education deductions against her Youth Allowance, the Government will amend the tax legislation to ensure taxpayers cannot claim a deduction against government assistance payments.

As previously announced, the Government will increase the amount of the Low Income Tax Offset (LITO) that is delivered through regular payments of salary and wages from 50% to 70% of their total entitlements (the remaining 30% is paid as a lump sum in the taxpayer’s tax return). The total LITO entitlement remains unchanged. Low income earners will effectively take home more each week though receive a smaller refund when they complete their tax return.

The Medicare levy low income thresholds will increase to $18,839 for individuals and $31,789 for families. The additional amount of threshold for each dependent child or student will also increase to $2,919. The Medicare levy threshold for single pensioners below Age Pension age will increase to $30,439.

Tax Changes – Businesses

The Government will replace the current rates that apply when using the statutory formula method to determine the taxable value of car fringe benefits with a single rate of 20% that will apply regardless of the distance travelled. The change directly targets salary sacrificed and employer provided vehicles.

Employees using the log-book method to determine business use will remain unchanged and this method will become much more attractive for employees who have a significant amount of work related travel.

As previously announced, the Government will enable small business to claim up to $5,000 as an immediate tax deduction for motor vehicles. The remainder of the motor vehicle value will be added to the general small business depreciation pool (depreciated at 15% in the first year and then 30%). This measure is in addition to the previously announced immediate write off for new business assets worth less than $5,000 from 2012/2013.

As announced in last year’s budget, the company tax rate will reduce to 29% from 1 July 2011 for small businesses.

The Entrepreneur’s Tax Offset (ETO), which was described in the budget as being poorly targeted and complex, will be abolished from 1 July 2012.

Changes to government allowances and benefits

Freeze indexation of Family Tax Benefits supplements for 3 years and freeze indexation of upper limits and thresholds of family payments for a further 2 years. This measure will not cut existing payments though will reduce the number of families eligible as wages naturally increase.

Changes to the age cut offs and interaction between Newstart and Youth Allowance to discourage those studying from ditching their course and collecting higher unemployment benefits when they turn 21.

Changes to the Family Tax Benefit A for dependent 16 to 19 year olds in full time secondary study (removing the need to choose between the FTB and Youth Allowance).

Deferred introduction of paid paternity leave by 6 months to 1 January 2013. No change to the current Paid Parental Leave Scheme which commenced on 1 January 2011.

Limit Family Tax Benefit Part A to children under 21.

Increased audits of new disability support pension claims and the bringing forward of new and stricter assessment criteria. There are currently 800,000 Australians receiving disability support payments.

Allow disability support pensioners to work up to 30 hours per week and remain eligible for disability support benefits.

Introduce participation requirements for recipients on the disability pension who are under the age of 35 with capacity to work more than 8 hours per week, whereby recipients must demonstrate that they are seeking work. Manifestly disabled persons able to work only 8 hours or less per week will not be effected. • Compulsory participation in work or study for teenage parents (once child turns 6 months). Pilot programs in 10 targeted areas (including Shellharbour).

Incentives for single parents to join the workforce by adjusting the income test for government payments.

Requirement for the long term unemployed i.e. those who have been without work for more than two years, to do 11 months of work-for the-dole (currently 6 months) or lose their payments from 1 July 2112 onward.

Transitional activities for school leavers who leave before completing year 12.

Reduction in HECS scheme incentive to pay contribution up front from 20% to 10% from 1 January 2012.

Bonus on voluntary HECS payments to the ATO reduced from 10% to 5%.

Superannuation Changes

Individuals who breach the concessional contributions cap by up to $10,000 can request that these excess contributions be refunded to them from their fund from 1 July 2011. This refund option will only apply to first time breaches.

Clarifying last year’s budget announcement, the Government will set the higher concessional superannuation contributions cap for eligible individuals aged 50 and over with total superannuation balances of less than $500,000 to $50,000 rather than the general concessional cap of $25,000.

In previous years, the Government halved the minimum pension payment amounts. From 1 July 2011, the Government will start phasing down the minimum pension drawdown relief back to pre-GFC levels. Minimum payment amounts for account based, allocated and market linked (term allocated) pensions will be reduced by 25% for 2011/2012 and will return to normal in 2012/2013.

The annual Self Managed Super Fund levy will rise from $150 to $180

Other Measures

Mental health will receive significant additional funding of $1.5 billion over 5 years and the establishment of a National Mental Health Commission.

Infrastructure projects will receive an additional $1 billion in 2011-12. The biggest NSW based project will be $750 million in extra funding to upgrade the Pacific Highway

An increase in the permanent migration target to 185,000 split between skilled migration places of 125,850 (the highest skilled migration target on record) and family allocations of 58,600.

Border protection costs, including the recent asylum seekers deal with Malaysia, will be $1.1 billion in 2011-12.

A $715 million skills package which aims to place industry at the heart of the training system. Industry will be expected to match government funding. The first sectors planned for the new system will be aged care and construction.

Defense spending will be curtailed significantly due to efficiencies and deferrals or purchases. Savings in the 2011-12 financial year are expected to be $2.4 billion.

The top 10% of teachers will receive bonuses of 10% of their income from 2014 onward.

The planned tax break for ‘green buildings’ that was to take effect from 1 July 2012 has been deferred by 12 months. This scheme proposed to offer businesses that invest in eligible assets or capital works to improve the energy efficiency of their existing buildings a one-off bonus tax deduction of 50 per cent for the cost of those improvements

‘Phoenix’ companies or new companies set up to trade in the same or similar manner as a former insolvent company, will be targeted by new measures in this budget. The director penalty regime will extend to superannuation guarantee payments making directors personally liable to pay employee super. The ATO will be given additional powers to commence recovery action against suspected phoenix company directors and, in some circumstances, company directors will be prevented from claiming PAYG withholding credits in their personal tax return.