Author: Adam_Admin

Dealing with customer breaches of contract

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When two parties enter into a contract, they must follow the agreed terms and conditions outlined. If one party does not fulfil the obligations they agreed to, then a breach of contract has occurred. Businesses often enter many contracts with their clients, and figuring out what to do next can be difficult and stressful.

The first step is to review your contract to confirm that a breach has been made. Having a written contract policy is a great way to make this process easier, as you can refer back to the specified terms and conditions. Written evidence will usually make it easier to resolve the dispute and receive compensation. If your contract was verbal, look for ways to prove that you both agreed on the key terms of the contract.

Businesses are often entitled to a payment that will cover ‘reasonable costs’ of any losses they incur as a result of a consumer breaching a contract. It is expected under the law that both consumers and businesses take reasonable steps to minimise the losses incurred as a result of a contract breach.

Some deals are bigger than others, and you should consider how much the breach will cost your business. For contracts dealing with a small amount of money, common forms of compensation include:

  • A payment plan
  • Commercial settlement
  • An agreement between you and the customer.

If the customer refuses to reach an agreement with you, then you may need to take further legal action by taking them to court. Legal services and efforts to recover a debt can be expensive, so this option would only be suitable for large value contracts. To do this, you need to file a statement of claim, which lets the customer know that you are taking legal action against them. This file will include details of:

  • The relationship between you and the customer that breached the contract
  • What the breach was
  • What sort of compensation you are after.

If you and the breaching customer are still unable to reach an agreement after a statement of claim has been made, the court will then decide if a breach of contract has been made and award you with damages.

Increased cash flow support for businesses as COVID-19 continues

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The Australian Government has increased support for businesses to manage cash flow challenges under the ongoing COVID-19 circumstances.

The Boosting Cash Flow for Employers measure announced on 12 March 2020 will be increased to provide up to $100,000 for eligible small and medium-sized businesses. To be eligible employers must have been established prior to 12 March 2020 and have an aggregated annual turnover of less than $50 million and employ workers.

The measure will provide employers with a payment equal to 100% of their salary and wages withheld. This is a rise from the original 50%, with maximum payments being increased from $25,000 to $50,000 and minimum payments being increased from $2,000 to $10,000.

Employers will receive payments from 28 April 2020 from the ATO as automatic credit in the activity statement system upon lodging eligible upcoming activity statements.

Eligible businesses will be provided with an additional payment during July – October 2020. The payment will be equal to the total amount received under the Boosting Cash Flow for Businesses scheme. For monthly and quarterly activity statement lodgers, these payments will be provided as automatic credit in the activity statement system for each lodgement up until October 2020.

The Government has also introduced the Coronavirus SME Guarantee Scheme to support the flow of credit for small and medium enterprises (SME) by providing a guarantee of 50% to participating SME lenders for new unsecured loans that will be used for working capital. To be eligible, SMEs will have a turnover of up to $50 million and the loans must comply with the following terms:

  • The loan is a maximum of $250,000 per borrower.
  • The loans will be up to three years, with an initial six month repayment holiday.
  • The loans will be in the form of unsecured finance.

The SME Guarantee Scheme will still require businesses to repay these loans and approval is subject to regular lending requirements. The Scheme will commence by early April 2020 and be available until 30 September 2020.

Practicing social distancing in the workplace

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With COVID-19 threatening the health and safety of all communities around the world, it is now more important than ever to practise social distancing in the workplace. Social distancing includes ways to stop or slow the spread of infectious diseases and as the name implies, lessens the amount of contact between you and other people.

It is important to apply social distancing wherever possible within your workplace to minimise the risks of person-to-person infection and fulfil the responsibility you have to the safety and health of your colleagues and clients.

In the context of a workplace, social distancing means avoiding direct contact with your colleagues through a number of effective methods, including:

  • Staying at home if you feel unwell or are sick
  • Implementing work-from-home measures wherever possible
  • Dividing in-office work hours between employees to reduce the number of people in an indoor space at any given time
  • Stopping handshaking as a greeting – emerging alternatives include the “elbow bump” or a pat on the back
  • Moving office meetings to online video or phone calls
  • Limiting food handling and sharing of food in the workplace
  • Having employees take lunch at their desk rather than in a communal lunchroom
  • Cancelling non-essential business travels
  • Promoting good hygiene practice such as coughing/sneezing into elbows
  • Providing disinfectants and hand sanitisers for all staff to use during working hours
  • Opening windows and adjusting air conditioning for better ventilation

As COVID-19 grows in severity, consider how you can enforce any of the above social distancing measures in your workplace and how you can encourage others to do the same.

COVID-19: cybersecurity considerations when working from home

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With COVID-19 motivating many businesses to have employees work from home, the change may be difficult for some teams, especially if they haven’t worked remotely before. The focus is often on your team’s productivity, communication, equipment and ability, however, cybersecurity is a crucial element that should not be overlooked.

Most home networks are not secure. Employees working from home may unintentionally put business assets at risk when they access work related files on their personal devices and through personal wifi connections. Employers should inform workers that their personal devices probably don’t have the security systems that workplace devices have in place, such as anti-virus software, secure network connections and automatic online backup systems. They should therefore avoid downloading business materials onto their personal devices, hard drives, desktops or their own cloud system.

Here are some measures you can consider to strengthen your cybersecurity:

  • Use a virtual private network (VPN).
  • Make sure home routers are secured by changing passwords, installing firmware updates, restricting inbound and outbound traffic, using a high level of encryption and switching off WPS.
  • Don’t use public wifi, such as libraries or shopping centres.
  • Equip employees with up to date security software and manufacturer software updates.
  • Setting up multi factor authentication.
  • Prohibit employees from working in public spaces where others can see their screen.
  • Use encrypted communications.
  • Backup data regularly.

Business loan vs business credit card

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Business loans and business credit cards are the most popular financing options, but there are key differences between the two that you should consider to help you make the right choice for your business.

Business loan:
A business loan is a lump sum of money that you borrow. They can be a good option for your business if you require funding for a larger one-off purchase, such as buying new equipment or machinery, real estate, business acquisition, capital investment or refinancing existing debts.

Business loans typically range from $5,000 to $50,000 and can be paid as a lump sum or through multiple set payments. Depending on your bank, you can generally make repayments in monthly or quarterly instalments that are tailored to you and your cash flow.

To get your business loan approved, there is usually a strict approval process you must pass, which can include details such as your business’s financial position and a financial spending plan.

In terms of extra costs, a business loan generally comes with signup fees and late repayment fees. The interest rate for a loan is often lower than a credit card and can be a monthly or annual rate, which typically ranges between 3-10% p.a for secured loans.

Business credit card:
A business credit card is a suitable option if you want funds for short-term needs. Business credit cards are also generally more flexible than a business loan. They usually allow for a limit of up to $50,000 and are often used for working capital, emergency money and smaller ongoing expenses.

In terms of fees, business credit cards typically have a higher interest rate than personal credit cards, however, you only need to pay interest on each month’s expenses. The interest rates are higher than a business loan and can vary between 10-20% p.a. Fees such as annual fees and late repayment fees will apply to business credit cards.

A business credit card also comes with bonus features, such as bonus points for spending, free deliveries, frequent flyer points, complimentary insurance and a reputable company credit score with good use.

Business credit cards can be beneficial in the sense that it offers flexible funding and continuously available money, however business owners should be confident that they will be able to manage the minimum monthly repayments to avoid overdue fees.

What to consider before taking out a business bank loan

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Many businesses, whether they are only just starting up or have been in the market for a number of years, will need a bank loan at one time or another. However, before you apply for a bank loan, it is important to think things through to ensure that you know if you should get one, if you are getting it at the right time and how you can make the most out of a loan.

Here are some questions business owners should ask themselves before beginning their bank loan application:

How likely is it that I qualify for the loan?

If you believe that your business won’t qualify for a bank loan, then you will only hurt your credit rating if you apply for a loan you won’t get. Being rejected for a loan can also make it more difficult for a business to borrow in the future.

Will the loan help the business grow?

Instead of using the loan for aspects like routine operating expenses that don’t generate much revenue, owners should consider putting the borrowed money into parts of the business that will generate more revenue and help reduce future borrowing needs.

How much do I need?

Before making requests of the bank, try to make an accurate estimate of how much cash you’ll really need. You can do this by creating a cash flow forecast with projections of your monthly income and expenses.

Are my personal finances in order?

Until a business reaches a substantial size, many banks will rely heavily on the owner’s personal financial statements and credit scores to determine the business’s creditworthiness. This may involve bankers looking at your personal information like student loans, personal credit card debt and mortgage payments.

Do I have adequate documentation for the loan?

When applying for a business loan, you will need a lot of documentation. Requesting a loan when an owner is not fully prepared makes the business look unprofessional.

Do I have adequate cash flow to repay the loan?

When a business owner applies for a loan, their banker will require the owner’s estimated financial projections for the business. It is important for owners to include their debt repayment plan in those projections.

Investing in shares vs property in SMSFs

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Shares and property are two popular investment options for those with a self-managed super fund (SMSF). However, they both have very different attributes and choosing the one that will achieve the best outcome for an SMSF depends on your personal goals and situation.

While the price of shares can vary drastically, property is a relatively stable asset, making it appealing to those who want more security and predictability. Property prices are also negotiable unlike shares, and you can generally borrow money at a lower rate for property purchases.

It may seem hard to find the perfect investment property, but older and undercapitalised properties can be renovated for profit. However, returns from property rentals can be dented due to factors such as land tax, utilities and rates, maintenance and tenancy vacancies.

Shares are more dynamic and volatile than property. One advantage is the accessibility of investing in shares, as you can enter the share market with a few thousand dollars – much less than what you need to invest in a property.

Maintaining a portfolio of quality shares that pay tax-effective dividends may be a good way to fund retirement. With the right portfolio allocation, shares also have the potential to provide a better, stronger income than property rentals, as long as that income is sustainable and increasing.

Property can generally be used as a wealth-creation tool, while shares can create a reliable retirement income. For those who can afford to put more money into investments, it may be a good idea to consider investing and diversifying in both. If you’re unsure about which investment option is right for you, seeking financial advice may be the best option.

CGT exemptions have been scrapped. What does that mean for you?

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Are you an Australian living or working overseas with a family home in Australia? Or you know someone who is? If so, be sure to consider the impacts of the capital gains tax (CGT) on you from 30 June 2020.

Since 1985, the exemption of Australian expatriates from the CGT tax has been available for homes which have never been rented out for more than six years at a time. However, following the scrapping of the CGT exemption under the A$581m federal government plan, Australians working overseas will have to sell their property before the 30th of June 2020 to avoid CGT and still be eligible for CGT main residence exemption.

With the removal of CGT exemption past June 2020, Australian expats who own property in Australia will be required to pay CGT dating all the way back to when they first bought the property. That is, if an ex-pat was to have bought their property in 1985, they would have to pay an accumulation of their tax owing in CGT from 1985 to 2020. The only way to avoid such hefty tax payments would be to sell your property on or before the 30th of June or to re-establish Australian residency before selling the property.

Understandably, the new change will impose a sizable cost on Australian expats and has come as a result of the influx of speculative foreign investors as well.

As every situation is unique, taxation planning customised to every taxpayers specific circumstances are advised. In order to avoid the accumulated CGT payments, Australian expats need to be aware of their financial standings and be ready to make a quick decision regarding the selling or keeping of their Australian property.

Seeking out tax advice from knowledgeable tax specialists, employing organised bookkeeping services and detailed financial statements written up by accountants in preparation for making such an important decision regarding your Australian property is heavily recommended to ensure the new CGT laws don’t cause you financial problems.

What deductions can you claim on your website?

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Most businesses nowadays have some sort of website, but designing, creating and maintaining a website for your business can be complicated. Many businesses use website services to develop and design their website for them if they don’t have the expertise or time to do it themselves.

Often, this can be an expensive venture. Not only is there a fee to create the website, but there are often the continual costs of tweaks, maintenance and upgrades after the website are already up and running. small businesses can claim deductions for website development costs.

Businesses that incur the cost of developing a website before they begin running their business can typically claim 20% of the cost each year over five years upon starting up.

Businesses that are already up and running with an aggregated turnover of less than $2 million can use the simplified depreciation rules:

  • If the cost of the website development is less than the instant asset write-off threshold of $20,000, you can claim a deduction for the full expense amount in the income year they acquire the expense.
  • If the website costs are equal to or more than the instant asset write-off threshold, owners can allocate it to a general small business pool for accelerated depreciation deductions.

However, it should be noted that you cannot use the simplified depreciation rules if you choose to allocate expenditure on the software to a software development pool.

You can also claim an outright deduction for specific running and maintenance costs, such as server hosting fees, domain name and registration fees in the same income year the expenses are incurred.

What does the coronavirus stimulus package mean for businesses?

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Amidst the chaos of the COVID-19, better known as the coronavirus, and concerns for Australia’s weakening economy, the Morrison government most recently released a “coronavirus stimulus package” largely targeted at stimulating the Australian economy through cash payments and tax relief for small to medium-sized businesses.

Worth more than $17 billion, the stimulus package is planned to be spread across this financial year as well as the next, with half of the package scheduled for release into the economy before June 30th. In order for an immediate boosting effect on the economy, some changes have already been implemented and here’s a breakdown for you below:

  • Businesses can access an expanded instant asset write-off, from $30 000 to $150 000. This is to encourage immediate spending by businesses to improve cash flow.
  • Small businesses with an annual turnover of less than $50 million can claim tax deductions. Such tax deductions can go up to $30 000 for company vehicles, tools, office equipment and the like.
  • Small to medium businesses will receive cash payments between $2000 and $25 000 to help pay wages and increase the ability to employ extra staff. 700 000 small businesses will be given these cash payments, making up a significant portion of the package.
  • Businesses hiring apprentices will also benefit from the support package – with $1.3 billion in support payments aimed to keep hundreds of thousands of apprentices employed.
  • Larger businesses can also claim tax deductions. Up to $150 000 can be tax deducted for businesses with an annual turnover rate of up to $500 million.
  • Cash payments of up to $500 will also be paid to welfare recipients and pensioners to encourage more spending.