Outsourcing Models – How To Know What’s Right For You

When a business cannot deal with the workload in house, a candidate or party outside of the business is often hired to assist in performing those services. This is called outsourcing, and it’s a practice that companies sometimes use to cut costs – especially if it’s easier to do this than to train up another employee.

The best model of outsourcing is one that meets the needs of the business. Clearly identifying those needs is a strategic step to take to ensure that the model chosen is the right one. There are four types of models when it comes to outsourcing.

Freelance

The freelance model of outsourcing assigns work to a freelance worker, which can be long-term, short-term, part-time or full-time. Jobs can be posted to freelance sites, freelancers can bid on them and you can select who you would like to work with. This model is a quick and easy way to get one-off projects completed that require special skills or obtain a little extra help during the busy season.

Pros: Cost-effective, quick and the skills needed for the job can be sourced

Cons: Overselling skills, difficult to brief, and jobs can be further outsourced by freelancers.

Project-Style Work

This model focuses on project-based work and involves outsourcing entire projects to a specialised outsourcing centre. Essentially all you have to do is provide the centre with the project requirements, and they will carry out the development work, project management and quality control through to the project’s completion.

Pros: Less work to be done by you, cost-effective in money and time, new staff aren’t needed and there is a fixed cost for the project.

Cons: May lack local knowledge if located overseas, time zone and language barriers can be difficult to overcome

Business Process Outsourcing

With the business process outsourcing model, a service provider sets up and operates an offshore office for you that they hand over when it is ready. Essentially, it’s contracting a business or organisation that hires another company to perform a process task required by the hirer for the business’ operational success. The provider has the facilities, setup, office environment and management required for global team members to work.

Pros: offers improved productivity, increased capacity, no need to worry about other sectors, inexpensive and an easy way to grow your team.

Cons: Large-scale BPOs can be more expensive to run and can be difficult to communicate needs and wants if the BPO doesn’t understand your industry or business.

Build-Operate-Transfer Model

This model is the model you want to employ if you’d like to build a separate office outside of your home country with more than 25 staff. To begin with, and much like a BPO, a provider ensures that there is a workspace and office equipment, and hires the employees. Rather than have the provider run the business for you, they then transfer the operation back to you.

Pros: Create work culture and environment among global team members, costs are less expensive than a BPO if there are more than 15 employees.

Cons: Can be expensive to set up, operating under foreign work ethics and work cultures can impact team management and requires time and effort to invest in the business in person.

Always consider what is best suited for your business, and confer with professional advisors before implementing a strategy regarding outsourcing

Options to consider before declaring bankruptcy

Businesses struggling with debt may feel like declaring bankruptcy is their only option. Premature bankruptcy is an unfortunately common scenario but there are ways businesses can deal with unmanageable debt before declaring bankruptcy.

Temporary Debt Protection (TDP)

Businesses with debt they can’t pay or are being taken action against by unsecured creditors can apply for TDP. TDP provides a six-month protection period where unsecured creditors can’t take enforcement action to recover the money businesses owe them. Businesses are encouraged to use this time to seek advice from the Government’s free financial counsellors, negotiate payment plans with creditors and consider other formal insolvency options which may work better for them.

Declaration of intention (DOI)

A DOI is a short-term option similar to TDP and protects businesses for 21 days from unsecured creditors. During this time, creditors can’t take further action to recover their debts.

Debt agreement

A debt agreement details how businesses will settle their debt and is a flexible way to help businesses come into an arrangement without becoming bankrupt. A debt agreement means either paying a lump sum that may be less than the original amount owed, or repaying debt in instalments. Businesses can apply for a debt agreement if they:

  • Are unable to pay debts when they are due.
  • Have not been bankrupt, had a debt agreement or personal insolvency agreement in the last 10 years.
  • Have unsecured debts and assets less than the set amount.
  • Estimate their after-tax income for the next 12 months to be less than the set amount.

Debt agreements can go for up to three years.

Personal insolvency agreement (PIA)

A PIA lets businesses pay off their debt in a way that suits their financial situation. It is similar to a debt agreement but a business’ debt, income and assets do not have to be under a certain limit.

Keep in mind that while these methods are effective in helping businesses avoid bankruptcy, there are still consequences. While usually producing positive results, be sure to weigh up these options and consider whether the long-term effects of implementing them are worth avoiding bankruptcy.

Optimising budget for digital marketing campaigns

Maximising returns on investments is the primary goal for every business owner who invests in a marketing campaign for their brand. Learning how to properly test and troubleshoot your budget according to your business needs can help you save a failing campaign from costing you money.

Objectives
The first step to budget optimisation is being clear with the goals you are trying to achieve through this campaign. These can include generating qualified leads, driving content downloads or building awareness of your brand. Understanding your objectives can help you decide what aspect of your campaign needs more finances.

Testing
Deciding how to set a maximum and minimum spend per day on your campaign can be challenging. A two to four week testing period can help in narrowing down the range that works best to deliver the results set in your objective phase. A common strategy is to start with a mix of ad formats including sponsored content, text and message advertisements. This testing method can help in identifying the types of ads and content that provides optimal results for your brand.

Adapting your budget
Budgeting for marketing campaigns may present a range of issues even after the testing phase. It should be noted that constantly changing and adapting parts of your campaign to run smoothly is a part of digital marketing. It may help to start with a daily budget that is higher at the start of the campaign, and use these insights to then optimise your campaign and lower daily limits if required.

If your campaign is exhausting its budget too quickly, consider lowering your daily limit. If your campaign is not spending its budget, then you may need to automate your bidding option or set more competitive bids. Automated bidding aims to deliver the most results while spending your daily budget in full. This can also help to provide fast results, which can be useful if your marketing content is time-sensitive. However, this will also lead to faster spending of your budget.

Non-compliant payments to workers no longer tax deductible

Businesses can no longer claim deductions for payments to workers if they have not met their pay as you go (PAYG) withholding obligations. This applies to income tax returns lodged for the 2020 income year onwards. Any payments made to a worker where PAYG amounts haven’t been withheld or reported are called non-compliant payments.

If PAYG withholding rules require an amount to be withheld, businesses will need to:

  • Withhold the amount from the payment before they pay their worker.
  • Report that amount to the ATO.

Businesses will not lose their deduction if they:

  • Withhold an incorrect amount by mistake. To minimise penalties businesses can correct the mistake by lodging a voluntary disclosure form.
  • Withhold the correct amount but make a mistake when reporting, though mistakes should be corrected as soon as possible.
  • Fail to report payments on a Taxable payments annual report (TPAR) or a payment summary annual report (PSAR).

Businesses will only lose their deduction if no amount is withheld or reported to the ATO unless voluntarily disclosed before the ATO examine their affairs.

This measure aims to create honest businesses and owners doing the right thing by their employees. This is part of the government’s response to recommendations from the Black Economy Taskforce.

Businesses that don’t comply with PAYG withholding and reporting obligations may lose the deduction for that payment and face penalties that apply for failure to withhold and report amounts under the PAYG withholding system.

No More Shortcuts: The Methods You Can Use To Claim WFH Expenses

Ensure you’re up to date on how to claim your working-from-home expenses!

As the business landscape shifts back and forth between office, hybrid and home-based work opportunities, it’s important to remember what methods are available to you when it comes to claiming. If part of your role allows you to work from home, you may be able to claim certain expenses on your tax return this year using one of the following methods.

The Revised Fixed Rate Method:

Under the revised fixed rate method, individuals can claim 67 cents per hour worked from home during the relevant income year. This rate includes additional running expenses, such as home and mobile internet or data, phone usage, and electricity and gas for heating, cooling, and lighting. Importantly, using this method, you cannot claim separate deductions for these expenses.

To use this method, taxpayers must maintain records of the total number of hours worked from home and the expenses incurred while working at home. Additionally, they must keep records of expenses not covered by the fixed rate per work hour, demonstrating the work-related portion of those expenses.

What Records Do You Need?

Previously, taxpayers required a dedicated workspace at home. From 1st March 2023 onwards, the record-keeping requirement has shifted again, necessitating the recording of all hours worked from home as they occur.

How Does The Fixed Rate Method Work?

To utilise the revised fixed rate method:

  • Additional running expenses are incurred due to working from home.
  • Keep records of total work-from-home hours and incurred expenses.
  • Maintain records for expenses not covered by the fixed rate.

The Actual Cost Method:

Alternatively, taxpayers can opt for the actual cost method, where deductions are calculated based on actual additional expenses incurred while working from home. This includes expenses for depreciating assets, energy expenses, phone and internet, stationery, computer consumables, and cleaning dedicated home offices.

What Records Do You Need?

To claim work-from-home expenses using actual costs, you must maintain records showing:

  • The actual hours worked from home during the entire income year or a continuous 4-week period represents your usual working pattern at home.
  • Additional running expenses incurred while working from home.
  • How you calculated the deduction amount.
How Does The Actual Cost Method Work?

To claim actual expenses:

  • Incur additional running expenses due to working from home.
  • Keep records showing expenses incurred and the work-related portion of those expenses.

Australians need to understand their entitlements and tax deductions while working remotely.

Consulting with a tax advisor can provide valuable insights into available concessions, deductions, and offsets for your tax return.

By staying informed and adhering to ATO guidelines, taxpayers can ensure compliance and make the most of available deductions in the evolving landscape of remote work. Why not start a conversation with us today?

New Work From Home Rules For Claiming Tax Deductions

With a new norm surrounding how Australians work (hybrid, remote or office-based), there has been a change in how work-related expenses will be claimed this year during tax season.

Where once the expenses and claims that needed to be made during tax return season could be more clearly defined in terms of business or pleasure, work-related expenses or personal expenditure, remote working and work-from-home employees need to keep careful records of what they can and cannot claim as “home office expenses”.

Previously, this could be claimed through the COVID-simplified 80 cents per hour, work-from-home method (known as the shortcut method and no longer available for the 2022-23 financial year), the ‘fixed method’ (previously 52 cents per hour, now 67 cents per hour) and the ‘actual method’.

With new changes to the methods in place from 1 July 2022, it’s essential that work tax deductions are correctly calculated and claimed and the process is duly followed.

Shortcut Method Is No Longer Available

The shortcut method introduced to simplify the process of claiming work-from-home expenses during the pandemic is no longer available.

Through this method, individuals could claim a fixed rate of $0.80 per hour worked from home, with the aforementioned shortcut method covering expenses such as phone, internet, and depreciation on furniture & equipment. If this shortcut method was employed, no other costs could be claimed for working from home.

Remember that for the 2022-23 financial year, you must claim any work expenses through the fixed rate or actual methods, not the shortcut method.

Revised Fixed Rate Method

The fixed method will increase from 52 cents per hour to 67 cents per hour. The ‘actual method’ can also still be used. You no longer need a dedicated workspace at home, but you must have a representative four-week diary of the hours worked from home between 1 July 2022 to 28 February 2023.

Many taxpayers will already have kept records, but if you haven’t, one way to do this would be to look back over your diaries for the past four weeks.

You may also be able to use other similar records you already have as evidence as long as they represent the hours they worked from home during those eight months.

From 1 March 2023, the record-keeping requirement has changed again, and you will be required to record all your hours worked from home in a diary or some other format as they occur. This can be in the form of timesheets, diaries, time recording apps, or any other similar document, provided it is kept as they occur.

How Does The Fixed Rate Method Work? 

To use the revised fixed rate method, you must:

  • incur additional running expenses as a result of working from home
  • have a record of the total number of hours you work from home and the expenses you incur while working at home
  • have records for expenses the fixed rate per work hour doesn’t cover and show the work-related portion of those expenses.

You can claim 67 cents per hour you work from home during the relevant income year. The rate includes the additional running expenses you incur for:

  • home and mobile internet or data expenses
  • mobile and home phone usage expenses
  • electricity and gas (energy expenses) for heating, cooling and lighting
  • stationery and computer consumables, such as printer ink and paper.

The rate per work hour (67 cents) includes the total deductible expenses for the above additional running expenses. You can’t claim an additional separate deduction for these expenses using this method.

Australians must know their entitlements and tax deductions when working from home/remotely.

Speak with us to ensure you comply with your tax return obligations when claiming or for assistance with your tax return this financial year.

New tax toolkit for rental property owners

The ATO has developed a new rental property owners toolkit for property investors to ensure that mistakes are avoided in their tax returns.

Each year, the tax office identifies fairly common mistakes being made with tax claims made in regard to investment properties. In a recent review of individual tax returns, nine out of 10 taxpayers with a rental property were found to have made a mistake in their tax return.

The newly developed toolkit focuses on areas were mistakes are most commonly being made. These include:

  • Renting out a room, a unit, or a whole house on an occasional basis through the sharing economy (such as Airbnb).
  • Repairs, maintenance and capital expenditure.
  • Any borrowing expenses incurred when taking out a rental property loan.
  • Interest on a loan that is taken out to purchase a rental property.

One of the six fact sheets identifies the most common tax mistakes that will cost you time and money, and how you can avoid them. Some of the tips outlined in the toolkit include:

  • Keeping the right records.
  • Getting your capital gains right when selling.
  • Getting construction costs right.
  • Getting initial repairs and capital improvements right.
  • Apportioning expenses and income for co-owned properties.

Each fact sheet within the toolkit is also available to be downloaded individually. The toolkit is designed to assist rental property owners to get the information they need in order to lodge correctly and to avoid any lodgement mistakes in the future.

New SMSF alert system

The ATO has introduced a new method of updating SMSF trustees of changes to their fund. From 3 February 2020, email and/or text message alert will be sent out when there are changes in the SMSF, such as;

  • Financial institution account details.
  • Electronic service address (ESA).
  • Authorised contact.
  • Members.

If you receive an alert and are not aware of changes being made to your SMSF, you should contact the other trustees or directors of the corporate trustee of your SMSF and any other representatives authorised to make changes to your SMSF, such as your tax agent.

The ATO messages will never ask you to reply by text or email or to provide personal information, such as your tax file number (TFN), your personal bank account number or BSB.

The system was expected to start back in November 2019 but was delayed due to technical difficulties. The process has now been confirmed to be working as intended.

Trustee’s wishing to make changes to their SMSF can do so through;

  • The Australian Business Register online, trustee’s will need an AUSkey or have an ABN linked to their myGov account.
  • A registered agent.
  • Phoning the ATO, the authorised contact for the SMSF must be the one to call.
  • Lodging the paper form Change of details for superannuation entities (NAT 3036)

Trustees cannot use the SMSF annual return to inform the ATO of a change in the structure of the SMSF.

New Kids On The SMSF Block: Millennials & Gen Y Shaping Their Futures

Individuals may be looking to opt for an SMSF because these provide entire control over where the money is invested. While this may have traditionally been the domain of middle-aged, experienced investors with higher fund balances, a new breed of investors is arising.

Millennials and Gen Y represent the fastest-growing segment of newly created SMSF account holders, with this group accounting for 10 per cent of all those opened in the past two years – double the rates seen in 2016-2019.

Thanks to technology and a wealth of complex financial information available online, this new breed of investors is making decisions about sharemarkets traditionally reserved for institutional investors.

While this sounds enticing, the downside is that an SMSF involves a lot more time and effort as all investment is managed by the members/trustees.

Firstly, SMSFs require a lot of ongoing investment of time:

  • Aside from the initial setup, members need to continually research potential investments.
  • It is important to create and follow an investment strategy that will help manage the SMSF – but this will need to be updated regularly depending on the performance of the SMSF.
  • The accounting, record keeping and arranging of audits throughout the year and every year also need to be conducted up to par.

Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs. This adds up to more than 100 hours per year and demonstrates that running an SMSF is a lot more time-occupying compared to other superannuation methods.

Secondly, there are set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor. These costs are difficult to avoid if you want the best out of your SMSF. A statistical review has shown that, on average, the operating cost of an SMSF is $6,152. This data is inclusive of deductible and non-deductible expenses such as auditor fees, management and administration expenses etc., but not inclusive of costs such as investment and insurance expenses.

Thirdly, investing in an SMSF requires financial and legal knowledge and skill. Trustees should understand the investment market to build and manage a diversified portfolio. Further, when creating an investment strategy, it is important to assess the risk and plan ahead for retirement, which can be difficult if one is not equipped with the necessary knowledge. In terms of legal knowledge, complying with tax, super, and other relevant regulations requires a basic level of understanding at the very least. Finally, insurance for fund members also needs to be organised, which can be difficult without additional knowledge.

Although SMSFs have the advantage of autonomy when investing, this comes at a price. Members/trustees need to invest time and money into managing the fund and, on top of this, have some financial and legal knowledge to successfully manage the fund.

Before investing your time and money into establishing an SMSF, consider your long-term financial goals and determine if an SMSF is right for you. Consult with a professional regarding your options for further information.

New JobKeeper payments for employers

The Federal Government introduced a third COVID-19 support package of $130 billion on 30 March 2020. The package includes additional support for businesses, including a new JobKeeper payment to help businesses retain employees.

Businesses who have been affected by COVID-19 may be able to receive a Government subsidy to help them continue to pay their employees. To be eligible, employers must:

  • Have more than a 30% reduction in their turnover for at least a month compared to last year if the business has an overall turnover of less than $1 billion.
  • Have more than a 50% reduction in their turnover for at least a month compared to last year if the business has an overall turnover of $1 billion or higher.
  • Not be subject to the Major Bank Levy.
  • Have been in an employment relationship with eligible employees as at 1 March 2020.

JobKeeper payments must only be made to eligible employees, which are employees who:

  • Are under current employment with the employer.
  • Were already employed by the employer on 1 March 2020.
  • Are employed on a full-time or part-time basis, or are a long-term casual who has been employed on a regular basis for over 12 months as at 1 March 2020.
  • Are at least 16 years old.
  • Have an Australian citizenship or are an eligible visa holder.
  • Are not also receiving a JobKeeper payment from another employer.

To receive the JobKeeper payment, employers need to:

  • Go onto the ATO website and register an intention to apply with an assessment stating they have or will experience the 30% turnover reduction.
  • Provide the ATO with eligible employee information, including how many employees had been engaged as at 1 March 2020. This can be done using Single Touch Payroll data.
  • Confirm that eligible employees each receive at least $1,500 per fortnight before tax.
  • Notify eligible employees about receiving the Jobkeeper payment.