Month: June 2019

The legal obligations of marketing

Posted on by Adam_Admin

Businesses must be mindful of the relevant regulations when setting prices and advertising products or services, to ensure they aren’t misleading their customers. Like many other areas of business, marketing efforts are regulated and need to comply with the legal requirements.

Advertising:
When promoting products or services, businesses must ensure that any branding, statement, quote or other representation is not false or misleading. There are some tactics businesses use to try to advertise products that make them more appealing but don’t necessarily give the full picture, such as:

  • Component pricing; when the price of a product or service is advertised or displayed in separate parts. When advertising uses component pricing, companies must also provide the full price inclusive of additional costs in a prominent way.
  • Bait advertising; where a product is advertised at a certain price without a reasonable supply. Bait advertising is illegal if a business sells the product knowing that they cannot meet expected demand.

Being aware of advertising regulations is an important aspect of running a business to its full potential.

Email marketing:
When using an email marketing service for your business, there are specific Australian email marketing laws to comply with. The Spam Act 2003 governs email marketing and messages sent via SMS, MMS and instant message in Australia. The Act covers three main areas:

  • Consent; you must have consent from the recipient in order to send a commercial electronic message that offers, advertises or promotes the supply of goods or services. Consent can either be expressed (the recipient has deliberately opted in to receive emails) or inferred consent (refers to the relationship between the sender and the recipient, e.g. subscriptions).
  • Identification; the sender of the communication must identify themselves and provide accurate contact information that is valid for at least 30 days after the message is sent.
  • Unsubscribe options; there must be an unsubscribe option for emails or an option to opt out of other electronic messages

Factual messages such as emails that provide a price, quote or product description to a customer are exempt from the Spam Act as their purpose is not promotional.

Signage and brochures:
Before you place a sign, you need to apply for a permit for display from the state or territory government and in some circumstances may also require public liability insurance. Signage includes ‘A’ frames, sandwich boards, or permanent signs on buildings, footpaths or roads.

Handing out brochures, flyers or promotional materials on public property also typically requires a permit. Under state environmental protection legislation, it may be illegal to place advertising material on a vehicle. Both permits can be downloaded through the ABLIS website for the relevant state or territory.

The art of reinvention 

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Small businesses often rebrand or reinvent themselves to keep up with marketplace trends. Knowing when to let go of an idea so you can grow is a smart trait for a modern business owner to have. Those who resist change and leave it too late to reinvent risk stumbling behind and even failing. Instead, businesses should focus on a proactive approach to growth for optimal performance and success.

Know when to reinvent:
A new idea may seem exciting and different but rebranding without properly considering how it will affect the business can doom an idea before it can take off. Look at your reasoning for wanting to change. Is it the market? Has the economy shifted? Are you not challenged anymore? While these are all valid reasons for wanting to reinvent your small business, practicality is key. Know your means and what it will take to rebrand.

Continually forecast:
Industries are continually shifting, competitors introduce new products, customer needs change and technology is constantly transforming the way business is performed. Anticipating market changes is essential to being a competitive leader in your industry. High performing business owners understand that remaining competitive means you need to expect changes and prepare as such.

Focus on strategy:
Strategic planning is imperative to make reinvention possible. Businesses need to be able to detect shifts in their industry, ideally before they happen. The best way to predict these shifts is to involve line managers, frontline employees and store managers into the strategy process, as they often pick up on insights that business owners can easily miss. For a business to reinvent itself, it needs a permanent strategy which continually scans the market for unsolved problems and untapped customer needs.

Invest in talent:
Successful businesses need dependable teams to run and grow the business effectively. Business owners should not only hire the right type of candidate but prepare individuals for the challenges that will arise when reinventing. Businesses need to invest time in developing their employees to enable them to succeed in their work. By first looking at what their employees are required to do day to day, business owners can assess what factors are fueling or limiting their success and take this into consideration when rebranding.

PAYG reporting dates approach

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Changes have been made throughout the year regarding SMSFs and their pay-as-you-go (PAYG) withholding. As the end of the financial year and the due date for PAYG reporting approaches, SMSF trustees should be checking whether they are meeting new withholding obligations for capped defined benefit income streams paid to their members.

If you have PAYG withholding obligations in 2018–19 you must provide your members with a PAYG payment summary by 14 July 2019 and lodge a PAYG withholding payment summary annual report with the ATO by 14 August 2019.

SMSFs have PAYG withholding obligations for super benefits paid to members who are:

  • Under 60 and the benefit is an income stream (pension) or a lump sum.
  • Under 60 and the death benefit is a pension which is a capped defined benefit income stream where the deceased was 60 or over when they died.
  • 60 or over and the benefit is a pension which is a capped defined benefit income stream.

Capped defined benefit income streams include life expectancy and market linked pensions which were payable before 1 July 2017 and reversionary income streams paid to beneficiaries.

SMSF trustees who are paying a capped defined benefit income stream to a member must ensure to meet all obligations. These include registering for PAYG, providing your member and the ATO with payment summary information, and making sure to comply with the withholding obligations of your activity statement. By doing this, the ATO can ensure individuals are paying the correct rate of tax once all their pension income from all their funds is taken into consideration.

How to deal with loneliness at work

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Feeling isolated while at work is something an increasing number of people experience in their lives. Studies suggest loneliness in the workplace can pose health risks as harmful as obesity or smoking. For both business owners and employees, here are some effective strategies that can help to make you feel less alone.

Encourage face-to-face communication:
Technology can often be to blame for an increased feeling of loneliness among workers. While it does enable greater workplace collaboration and digital connections, it can create the opposite effect when overused. Face-to-face and phone interactions create deeper and more meaningful connections with co-workers. Instead of sending an email or instant message, consider picking up the phone or walking over to your colleague’s desk to talk to them instead.

Have virtual get-togethers:
With a rise in remote workers in an increasingly digital and flexible working environment, sometimes face-to-face interactions are not always possible. To help create more personal connections among your workplace, employers may consider organising virtual meetups over applications like Google Hangout or Skype to enable remote workers to feel a part of the team.

Cultivate workplace friendships:
Regularly organising social events outside of work can help staff to create more meaningful relationships with each other. This can also break down barriers between an employer and their employees, encouraging company loyalty and a sense of community. Activities you may consider include team lunches, after-work drinks, or group sporting activities. Employees who have more friends at work are more likely to be happier and consequently more productive.

End-of-year Single Touch Payroll changes for employers

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Single Touch Payroll (STP) will change how employers report their employee’s end-of-year information to both employees and the ATO. The first year of STP for employers with 20 or more employees will soon come to an end at the completion of this financial year.

Employers that are reporting through STP will no longer need to:

  • Provide payment summaries to their employees for amounts reported and finalised through STP, as an income statement will get sent to employees’ ATO online services account (accessed through myGov) instead.
  • Lodge a PAYG payment summary annual report to the ATO for information that is reported and finalised through STP, as long as the finalisation declaration is completed by the due date.

Employers who started reporting through STP in the 2018-19 financial year will have until 31 July 2019 to make the finalisation declaration through their STP-enabled solution. The declaration states that you have completed your reporting for the financial year. Employers should ensure that all STP information is true and correct before making their finalisation declaration.

To get ready for end-of-year reporting, further things for employers to consider include:

  • The sooner that employees’ information is finalised, the sooner they will be able to lodge their tax returns.
  • Amendments should be made as soon as possible if any corrections need to be made to information after finalisation. This can be done by submitting an update event in your STP-enabled solution.

Employee payment summaries and PAYG payment summary annual reports are still required for all payments that are not reported and finalised through STP, due 14 July 2019 and 14 August 2019 respectively. Where further assistance is needed, registered tax agents can assist employers with their end-of-year STP reporting.

Increasing website traffic and sales

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Successful websites are those that get continual traffic, grab visitors’ attention and convert visits to sales. Businesses who utilise the following features on their website tend to attract more traffic and achieve noticeable returns from their online presence.

Mobile version:
Businesses need to ensure their customers’ mobile visits to the website are seamless as the majority of people now accessing the internet on portable devices rather than computers. Google values mobile-friendliness when ranking websites, providing another reason for businesses to ensure they have a mobile version of their site. As of January 2019, 40% of internet views were from a mobile phone and 10% were from a tablet. Making a website mobile-friendly allows customers to access from any location at any time.

Fast loading time:
Slow loading time often results in potential customers leaving before they look at content and what you are offering. Many free sites provide an opportunity for businesses to test their website’s speed. Elements such as image size, embedded videos, widgets/plugins and ads can all affect speed. Find out what needs to be fixed and make the necessary adjustments, as having pages that take too long to load remotely will drive customers away.

Email signup forms:
Having an email signup form gives businesses a way to collect visitor feedback and make connections. By receiving potential clients email addresses, you can engage them with promotions, announcements or newsletters. Businesses can easily embed a signup form on their website to collect email addresses and additional details from their customers.

Social media linking:
Make it easy for customers to follow you by adding social media buttons and icons to your website. Providing links to social media pages, such as Facebook or Twitter, allows customers to access various elements of a company that they showcase on different sites. This can help increase overall exposure, making it more likely that prospective customers will discover the business. Websites should make it easy for customers or followers to connect with a company through social media, as it can help people stay up to date and easily find out more about new services or products they might be interested in.

Further contact details:
To further connections with new customers, businesses can list their physical address and a contact number on a Contact Us page or at the bottom of their homepage. As some people prefer to talk directly rather than email, having this option allows communication from a wider range of prospective clients.

What to consider in an employee share scheme

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Employee share schemes (ESS) provide employees with a financial share in the organisation that they work for. They can be offered by organisations as a way to grow their business by attracting, retaining and motivating their employees.

How they work:

ESS gives employees shares in the organisation they work for at a discounted price, and the opportunity to purchase shares in the future. The discount refers to the difference between the market value of the ESS interests, and the amount paid by the employee to acquire them. This discount forms part of an employee’s assessable income, and will need to be included in their tax return.

Employee share purchase plans offer eligible employees the chance to purchase shares from their employer, often through a loan. The shares can be paid through a salary sacrifice plan over a set period, or by using the dividends received on the shares. Employees who are on a higher income may be eligible to receive shares as a performance bonus or as a form of remuneration instead of receiving a higher salary.

On 1 July 2015, the ATO adjusted the tax treatment of ESS to make them more attractive to employees with the possibility of tax concessions. However, these depend on the employee’s financial situation and the features of the share scheme. If the ESS interests that an employee receives in the business that they work for are not discounted, then the ESS tax rules will not apply. Capital gains tax can still apply in these cases.

Possible limitations:

There may be restrictions on when employees can buy, sell and access their shares through an organisation’s share scheme. For example, employees may have to get permission from the business before buying or selling their shares, or there could be an annual window during which shares can be bought or sold.

What to consider:

Employees should take time to research the organisation they are considering participating in an ESS with. This will help determine how well the scheme is doing, and whether the shares are likely to increase in value. To avoid losing a large part of your investment portfolio, consider purchasing shares that are part of a diversified investment plan.

Before entering into an employee share scheme, consider seeking professional financial advice that is specific to your circumstances.

How bullying brings your workplace down

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Bullying is a serious issue in workplaces and can affect your business on many levels. Workplace bullying is where repeated and unreasonable behaviour is directed towards an individual or group of employees. It is considered to be workplace bullying where it poses a risk to health and safety.

Examples of bullying behaviour include verbal abusive, unjustified or unreasonable criticism, singling someone out, spreading misinformation or malicious rumours, or humiliating someone. Workplace bullying doesn’t just affect those involved. The wider workplace can suffer through lost productivity, low morale, and toxic company culture. Here are some of the ways that bullying can negatively impact on your business.

Reduced productivity:
As people don’t perform well in high stress and anxiety situations, businesses will face a loss of productivity due to workplace bullying. When workers are distracted by bullying, research suggests that productivity could decline by 40%. Employees who are being bullied may also experience a loss in motivation, which will cause them to avoid putting in any effort or time into their work.

Higher staff turnover:
People that do not feel comfortable at work due to the effect of bullying will be inclined to look for work elsewhere. This can cause a business to have high rates of employee turnover, which will have significant economic impacts on the employer. This includes the replacement costs associated with recruiting, hiring and training new staff. A culture of bullying within a workplace can also create low morale, making the business even more susceptible to high turnover rates.

Financial impacts:
There can be many legal costs and other financial impacts associated with bullying within a business. In some cases, employers may be found to be liable for the bullying that takes place within their organisation. They may be required to pay for damages, costs of legal proceedings, or even settlements in more extreme cases. Further financial impacts may be associated with rehabilitation costs if the bullied worker chooses to stay with the business. These costs may include counselling fees, team-building activities or anger-management training.

Penalty interest deductibles

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The ATO has recently replaced the Taxation Ruling (TR) 93/7W on whether penalty interest is deductible to the new TR 2019/2. This new ruling highlights the circumstances in which penalty interest is deductible and the situations where it is not.

“Penalty interest” refers to an amount charged by a lender to a borrower under a loan agreement if instalments are not paid. The payable amount is then calculated by reference to a number of months of interest that would have been received.

The new ruling made provisions that directly related to the previous rulings of:

  • Section 8-1: general deductions.
  • Section 25-25: borrowing expenses.
  • Section 25-30: expenses of discharging a mortgage
  • Section 25-90: specific debt deductions relating to foreign non-assessable non-exempt income.
  • Section 40-880: business-related costs.

TR 2019/2 says that penalty interest is generally deductible under section 8-1 where:

  • The borrowings are incurred when gaining or producing your assessable income; or
  • It is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

Penalty interest that is incurred to discharge a mortgage is also deductible under section 25-30, to the extent that borrowed funds were used to produce assessable income. The ATO makes a note that unlike the general deduction provisions, there’s no influence from the expense being capital or revenue in nature.

You cannot deduct a loss or outgoing under section 8-1(2) to the extent that:

  • It is of capital or capital in nature.
  • It is of a private or domestic nature.
  • It is incurred in relation to gaining or producing your exempt income; or
  • A provision of the Act prevents you from deducting it.

Is your SMSF adequately diversified?

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When forming a fund’s investment strategy, diversification is a notable consideration for SMSF trustees. By spreading the investments of a fund across different asset classes and markets that offer varying risks and returns, SMSF members can better position themselves for a secure retirement.

Why diversify?
The intention of diversification is to spread the investment risk of an SMSF. The idea is that if one asset underperforms, it can be offset by the success of other assets and keep the fund on track to meet its investment objectives. Diversifying investments across uncorrelated assets, such as shares and bonds, may also make it possible for investors to lower the volatility of the portfolio.

How to diversify your fund:
Accessing certain asset classes can be challenging for SMSFs due to minimum investment requirements or other ownership restrictions. Managed funds and exchange-traded funds (ETFs) are two options that can provide easy access to diversification. Managed funds pool together money from multiple investors which professional managers then invest in a variety of assets, such as global or local shares, offshore property or high-yield investments. ETFs, on the other hand, aim to replicate the performance of a particular index or group of assets, which can give an investor exposure to an entirely different market or asset class. These two methods can give SMSFs the ability to access more diverse investments.

Consider the benefits of listed investment companies and other digital investment platforms that further allow low-cost access to different markets when looking into other ways to diversify an investment portfolio

Trustees should always document their actions and decisions made, as well as their reasons for doing so. A record kept of these details will demonstrate that they have satisfied their obligations as a fund trustee.

As having an appropriately diversified portfolio can have a significant impact on members’ retirement savings, trustees may consider seeking professional financial advice in the management of their SMSF’s investment strategies.