Month: October 2019

Amendment to Housing Affordability Measures introduced

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The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 was re-introduced to parliament on 23 October 2019. This comes after it was first announced in the 2017-18 Federal Budget.

The amendment introduces a new system where the government will provide up to an additional 10% capital gains tax (CGT) discount for resident individuals who invest in qualifying affordable housing from 1 January 2018. This increases the maximum CGT discount to 60%.

For the discount to be received, housing investments must meet qualifications and provide proof of eligibility. Tenants must have low to moderate incomes and landowners must charge rent at a discounted rate below the private market rental rate.

A registered community housing provider (CHP) must manage the properties and the investment is to be held for at least three years before the discount applies. The discounts will go through managed investment trusts (MITs). CHPs determine the tenant eligibility criteria, including the rent charged, consistent with state and territory affordable housing policies.

Investors who already have invested in affordable housing with the National Rental Affordability Scheme (NRAS) will not receive the additional 10% discount as they already get a yearly financial incentive.

Do you need to pay superannuation for contractors?

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A contractor can turn into an employee for legal and financial obligations, so when working with contractors, employers need to test whether they count as an employee or contractor for superannuation purposes according to the rules stated in the Superannuation Guarantee (SG).

The ATO states that even if contractors quote an Australian Business Number (ABN), they are identified as employees for superannuation guarantee purposes if they are paid mainly for their labour.

Employers must make superannuation contributions to these workers if they are being paid:

  • Under a verbal or written contract where more than 50% of the dollar value of the contract is for their labour.
  • For their personal labour and skills and not to achieve a result.
  • To personally perform the contract work and not delegate the work to someone else.

If any of the above criteria are not met, then employers may not have to pay superannuation. For example, if an employer makes a contract with a company, trust, or partnership who provides someone else to perform the labour, then they do not pay super to the labourer.

The minimum amount of super that needs to be paid is 9.5% of each worker’s ordinary time earnings (OTE), which is what employees earn for their ordinary hours of work such as commissions, allowances, bonuses, and shift loading. For contractor employees, employers calculate the minimum super amount on the labour component of the contract. If the labour portion of the contract cannot be calculated, a reasonable market value of the labour component can be used.

Ignorance of worker relationships and entitlements cannot be claimed as a defence by employers. Employers who attempt to avoid financial and legal obligations to workers by disguising an employment relationship as an independent contracting arrangement can be held liable for ‘sham contracting’ under the Fair Work Act 2009. This can incur fines up to $54 000.

Public speaking like a pro

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Public speaking can be intimidating and challenging, especially if it is in front of other business professionals. Chances are, if you work in a business environment you will be required to speak in public at some stage in your career, whether it’s for a presentation, meeting, or seminar. Here are three tips to help you improve your public speaking and deliver your message effectively.

Prepare and practice:
Spending enough time preparing your notes, pace, presentation visuals, and timeliness before the day is crucial; it can help tame your nerves and provide you with reassurance that you know what you’re going to talk about. Try preparing an opening line or run over a personal story you might want to use to engage the audience and show charisma.

As well as this, you should also prepare your material to run slightly under time, i.e, a 15 minute speech if you’re given a 20 minute time slot. This accounts for audience interruptions, comments and questions, and allows you to implement thought-provoking pauses. Prepping if you are going on a stage is also useful in preventing embarrassing blunders during your presentation, so make sure to test your microphone, presentation slides and lighting if possible.

Speak slowly:
A common mistake people make when they are nervous is to talk too quickly. Mumbling or talking at a fast pace to rush through the content and end the ordeal shows your nervousness and is one of the easiest ways to lose your audience’s attention. It is a good idea to speak slowly and use pauses throughout your presentation, and not just at the end of phrases or sentences. You’ll often find that if you go quiet for a moment, the audience will wait for you and anticipate what you will say next. This way you retain audience engagement while also getting a chance to take a full breath and slow down.

Be passionate:
Speakers that show passion exude confidence and engage with their audiences. If you focus on giving to your audience rather than appearing to speak for your own benefit, you can almost guarantee that your audience will respond positively. Showing that you want to benefit your audience and that you care can be done through tactics like explaining high-level topics thoroughly, asking questions to ensure they understand what you’re saying, or even sharing a funny, moving, or relatable anecdote. Don’t hold back when discussing subjects that evoke emotion in you; if you feel strongly about something then convey it. Passionate speakers are much more likely to be remembered, and even favoured, for their authenticity.

Contractor obligations for business owners

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Contractors bring with them different obligations that business owners need to comply with. Employers that incorrectly classify employees and contractors can face hefty penalties and charges as well as claims for entitlements and superannuation contributions. It must be established whether they are employees or contractors to get tax and super requirements right.

When hiring an individual contractor, the contractor may wish to enter a voluntary agreement for owners to deduct PAYG withholding amounts from their payments. This arrangement helps the contractor manage their tax by making contributions towards their expected income tax liability. Employers will need to check whether a contractor is eligible for super guarantee and if they can choose a super fund. If so, employers will need to;

  • Give the contractor a Standard choice form (or equivalent) within 28 days of them starting, so they can nominate their preferred super fund.
  • Check that the fund they’ve nominated is a complying fund.
  • Give their tax file number to their super fund the next time you make a payment for them, or within 14 days, whichever is the later.
  • Set up an electronic system to report and pay your super contributions using SuperStream.

Employers should also promptly start keeping records about the contractor as they will be needed to meet tax and super obligations.

Business owners will generally need to withhold 47% (from 1 July 2017) from payments to contractors that are a company, partnership or trust, and do not provide an ABN. Employers are also required to give a completed “PAYG payment summary – withholding where ABN not quoted” to the contractor with their net payment, include the payments in the “PAYG withholding where ABN not quoted – annual report” and lodge the report with the ATO by 31 October.

Business owners will need to meet other obligations when employing contractors such as preventing unlawful discrimination in the workplace as well as supporting working parents, people with a disability and those with carers responsibilities.

Being aware of copyright infringement  

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When sourcing content for your business, it can be tricky to determine what materials you can use without putting your business at risk of copyright infringement. With the internet providing a range of easily accessible sources, it can be easy to forget about the legalities of using material you did not produce yourself.

Just because material is published on the internet for anyone to see, doesn’t mean that its copyright is waived. Copyright guidelines can usually be found on a website’s ‘terms of use’ page.

In Australia, the Copyright Act 1968 (Cth) covers all sorts of sources including text, videos, images, audio, icons, artwork, maps, and computing programs. It protects the rights of an owner to profit from their content, prevents unauthorised use of their material and enables them to recover damages if their material has been used without permission.

Copyright protection is automatically applied, in Australia, to written and artistic works from the time it was originally created and generally exists from the publication date until 70 years after the owner’s death.

Infringement will occur if a substantial amount of the copyrighted material is used without the permission of the owner. A substantial amount isn’t necessarily just about how much of the material is copied. Even if only a small amount is reproduced, it can still constitute copyright infringement depending on the quality of the content copied. This includes how important the content is, how distinctive and recognisable it is to the original, and the level of skill and amount of time required to create it.

The owner’s permission must be obtained before using, reproducing, or disseminating copyrighted material. Unauthorised use of this material can result in penalties or remedies for the damage caused. This could include:

  • Financial penalties of up to $585 000 for corporations.
  • Financial penalties of up to $117 000 for individuals.
  • Imprisonment of up to 5 years for individuals.
  • Awarding damages for any losses suffered.
  • Accounting for any profits made.
  • Injunctions preventing any further use of the material.

It is useful to note that copyright does not protect ideas, but the way in which they are expressed. This means that you can work with the concepts of someone else’s material for your own individual creation, so long as you do not copy it outright.

What are the tax implications for different business structures?

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The structure of your business determines how you would pay tax and other business obligations you would need to consider. Whilst you are able to change your structure as your business develops, business owners must keep up with the changing tax responsibilities that may occur as a result. There are four major business structures in Australia that come with different tax implications.

Sole trader:
This is the cheapest and simplest business structure as it only involves a single individual running their business. They declare the business revenue as part of their personal income tax return and are taxed at the same rate as an individual. This means the more the income the business earns, the more tax the sole trader will have to pay. If their income is $18,200 or under for the 2018-19 financial year, then they are under the tax free threshold and do not have to pay tax. They can also receive a discount on Capital Gains Tax (CGT).

When more than 50% of a sole trader’s income from a contract is from their own personal labour, skills, or expertise, then they can earn personal services income (PSI). In this case, they need to complete specific questions in their tax return and the deductions they claim can be affected by this.

Partnership:
A partnership is when more than one person runs a business and distributes income or losses between themselves. Each partner must pay tax at the individual tax rate on their share of the business’ net income. They also need their own Australian Business Number (ABN) and Tax File Number (TFN) to use when lodging their annual business income tax return. An annual partnership return showing the income and deductions of the business must also be lodged. Similar to the sole trader, PSI can also be earned in which case deductions on this income may have to be treated differently.

Company:
A company is a separate legal entity with higher set-up and administration costs. They must apply for a company TFN and ABN if they are registered under the Corporations Act 2001. They must also be registered for GST if the annual GST turnover is $75,000 or more. There is no tax free threshold and no discount on CGT. Companies are responsible for paying income tax on their profits at the company tax rate, which is currently 30% under 2019-20 tax rates, or 27.5% for base rate entities. If PSI rules apply, the income earned from it will be treated as individual income for tax purposes. Deductions claimed may also be affected.

Trust:
If a business is run through a trust, they must also have their own TFN and ABN, and must register for GST if annual GST turnover is $75,000 or more. They are are not liable to pay tax because their beneficiaries who receive the trust net income are individually assessed for tax. If the trust generates net trust income and does not distribute it, they are assessed on this accumulated income at the highest individual tax rate. Each year, all the revenue earned by the trust and the income distributed to each beneficiary must be shown on their tax returns. Similar to a company structure, if a trust earns PSI, then the income from it is treated as individual income for tax purposes.

Evaluating your social media campaign 

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The evaluation part of a social media campaign is often just as important as the campaign itself as it provides insights of consumer behaviours, sales data, and the failures and successes of the strategies and tactics implemented. This is crucial to your company’s future as it will help determine how the next campaign should run based on an analysis of previous campaigns.

People typically associate evaluations with the end of a project, however, it is important to have regular, ongoing evaluations of your social media campaign to see if any changes should be made earlier. Ongoing analytic tools can be already integrated into the social media platform such as Facebook insights, Youtube and Twitter analytics, or can be third-party apps such as Buffer Analyse, Sprout Social, and Zoho Social.

You can learn a lot about how your campaign is being received from measuring important metrics and KPIs. These include:

  • Engagement: The number of Likes, Comments, Shares, profile visits, and account mentions.
  • Follower or subscription decline/growth.
  • Reach and awareness: the amount of people you have reached both within and outside your audience.
  • Optimal times for engagement: daily activity and which days of the week your followers are most active.
  • Audience demographic: age, location, interests, gender, etc. of your audience.
  • Referral traffic: how many customers have come from your social media pages to your website.
  • Social conversions: when someone makes a purchase from visiting your social media page.
  • Click rates: number of clicks received on each post, showing which posts are more popular.

It is also useful to gather qualitative data by reading comments and replies to understand the overall customer sentiment towards your business and releasing customer feedback surveys. Survey questions could ask customers what they thought about the company, products, or services before and after the campaign, what they think could be improved, and how likely they are to recommend the company to a friend.

After gathering all this data, it is a good idea to create a social media campaign report, as well as graphs and charts to analyse the information and determine what parts of the campaign were successful, and what aspects could be improved.

Start saving for the Christmas period early

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If shopping centres aren’t even putting up their Christmas decorations yet, then the holiday period may seem to be a concern of the distant future. However, the season has a tendency to creep up on people and can often come with financial burdens. Planning your holiday expenses early can cut out one of the biggest stresses of the season and allow you to focus on enjoying the festivities and spending time with your loved ones.

Less than 20% of Australians start saving for the Christmas period two to three months in advance. Those who don’t set aside enough time to save often turn to using a credit card. Over a quarter of Australians rely on credit cards to cover the costs of the holiday season, which can result in post-Christmas debt. If you need to use a credit card, consider setting a spending cap to help you stick to your budget and reduce the risk of debt.

On average, Australians are spending $1325 each during the festive season. This includes gifts, decorations, travel, parties, food and drinks. In 2018, the average Australian spent $573 on Christmas gifts alone, with 15% of millennials splurging over $1000 on gifts. Despite this, 56% of Aussies start their shopping without a budget, and 39% do not keep track of their expenses.

If you’re worried you’re going to be tempted to dip into your savings, it can be a good idea to set up a Christmas saver account. This is typically done at the start of the year and is offered by some banks. You can make deposits throughout the year, but can only withdraw from the account when the festive season arrives, usually around 1 December. While interest is offered on these account savings, it should be noted that you can generally find better interest rates with other savings accounts such as a bonus saver or online savings account.

Alternatively, you can manually set aside an amount weekly or fortnightly in the months leading up to the holiday period. Setting up an excel sheet can help keep track of this, and can also be used to categorise different budgets for various needs (gifts, travel, food etc.). This can help you plan ahead and estimate how much you will need to cover the cost of the holidays, saving you from the bite of unexpected expenses and keeping you in control of your finances.

If you’ve left things a little late, it can help to cut out a few luxuries to save some extra money. Whether it’s having a cheap night in, or skipping a coffee run every now and then, a little can go a long way.

Knowing when to cut a product

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Businesses looking to improve their profitability may need to consider cutting under-performing products and services. How a product contributes to growth strategy, brand management and production efforts can help you determine whether you should discontinue it. Underperforming products can drain the company’s resources and finances that could be used to profit elsewhere. It might be time to discontinue if a product fits the following scenarios:

  • Low profitability.
  • Stagnant or declining sales volume or market share.
  • Maintaining your market share is too costly.
  • Risk of technological elimination.
  • Poor fit with business’s strengths or declared mission.

When deciding whether to discontinue a product, there are a few ways you can examine your services and make the decision that is best for your business.

80/20 rule:
A commonly used marketing and business rule states that businesses should focus their attention on the 20% of the products that generate 80% of revenue. Using this principle, companies should compile a shortlist of the products and services that bring in the most profit and scrutinise the products that fall short of this mark. The 80/20 rule can provide a solid framework for your sales and marketing objectives, identifying areas in which you could successfully cut with minimal loss.

Trial run:
Making the right cuts can be difficult and you may not see the value of a product until it is gone. For this reason, businesses can consider doing a trial run for the product in question. Try going a week to a month (no longer) removing all promotion and marketing for a product. This can help the business to visualise what it would look like without that service and see if there are any clients who miss it.

Harvesting:
Harvesting is a strategy used to generate the most money out of a product whilst it last. By cutting the costs associated with the business or increasing the price of the product without increasing production or operation costs, the business can continue to generate revenue on a failing service. Once the product ceases to provide a positive cash-flow, it can then be discontinued.

Super law changes to NALI and LRBA

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Integrity measures included in Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019 have now been enacted with an effective date of 1 July 2018. There have been amendments made to non-arm’s length income (NALI) provisions and Limited recourse borrowing arrangement (LRBA) amounts will now be included in total superannuation balance (TSB) calculations. The bill passed both houses on 19 September and reached assent on 2 October 2019.

NALI provision amendments:
The definition of NALI has been expanded. From the 2018-19 income year onwards, the ordinary or legal income of a super fund will be NALI and taxed at the top marginal rate. This has been introduced to ensure SMSFs and other complying superannuation entities cannot evade the NALI rules by entering into schemes involving non-arm’s length expenditure, including where expenses are not incurred. Any capital gains from a subsequent disposal of an asset may also be treated as NALI.

LRBA amounts included in TSB calculation:
Where an SMSF has an LBRA that was made under a contract that has been entered into on or after 1 July 2018, the calculation of an individual’s TSB will now include any outstanding LRBA amount attributable to each member’s interest. This will apply if:

  • The LRBA is with an associate of the SMS. In this case, all members of the fund whose interest is supported by the asset purchased with the LRBA must include their portion of the outstanding balance of the LRBA amount in their TSB calculation. Or;
  • A member of the fund met a condition of release with a nil cashing restriction. In this case, the member must include the outstanding LRBA amount attributable to their super interest in their TSB calculation.

This change does not include the refinancing of an LRBA that was made under a contract entered into before 1 July 2018, where the new borrowing is secured by the same asset or assets as the old borrowing and the refinanced amount is the same or less than the existing LRBA.

If you’ve already lodged your 2019 SMSF annual return and are affected by these new measures, you may need to amend your return. Members of an SMSF that has an LRBA affected by this new law, may have an inaccurate TSB. If affected, you will need to calculate your own TSB until March 2020 at the earliest while the ATO systems are being updated.