Powerline - Winter 2020

Who would have thought that in such a short period of time, Australia and the world would face a pandemic which has basically shut down the world economies and reset how we look at the future in all manner of living.

Firstly I must give a huge shout out and thank you to all our emergency and health workers in Australia. We have experienced an unprecedented period of time with bushfires and then COVID-19. Our essential workers have not missed a beat and our leaders across all levels of Government have shown what true leadership and bipartisanship is all about.

They say we are the “lucky country” but it is forged on all citizens trusting our leaders and working as one to overcome adversity, so congratulations to everyone!

The future is still very uncertain, however Australia has to date fared very well in comparison to other countries.

All levels of government, lenders and property owners have been very forthcoming with assistance to small business so I would hope you have all availed yourself of the accessible assistance. The measures announced were put in place to ensure small businesses would survive and come out stronger to face the new business and economic landscape.

Scott Morrison has set the scene for change to ensure we as a country come out both stronger and more agile. But as a business, how can we prepare and respond to this situation to ensure we achieve this strength and resilience?

Firstly, review where you are, map a plan for how you can move forward, and put the plan in place for the future. When doing this, you need to look at your business as a whole, and also look at your business drivers:

  1. Systems and Processes
  2. People
  3. Customers and Markets
  4. Products and Services
  5. Risk
  6. Your Business Value

All of these drivers have been affected by COVID-19, and how they operate will be different going forward.

It is a time for real improvement and we have shown we are agile and can pivot to ensure survival, so let’s harness this “can do” attitude in your business when doing your review and setting future plans.

At Power Tynan, we have performed this review and it has shown that it is not a set and forget plan, but constant monitoring and reassessing to ensure we and our customers get maximum benefit.

If you are not sure how to approach this, please do not hesitate to contact your adviser so we can guide you through this process.

Many people have suffered greatly over the past six months. Please be kind to one another, look out for your neighbours, employees and fellow workers to ensure they are coping. If you need to talk to someone, Power Tynan has an Employee Assistance Program that is currently available to our clients as well (details are below).

Until next time, keep well and stay safe.

 

Did you know our dedicated Finance & Leasing team are available to assist with any end of financial year equipment/asset finance needs?

Take advantage of the instant asset write off before June 30 - from $30K to $150K, effective immediately.

Rates and policy vary greatly between lenders, however we have access to over ten different lenders, so let us do the running around for you.

We are ready to assist you with any of your finance needs, and our quotes are obligation-free.

Please note due to COVID-19, bank policy and processes have changed dramatically, and lenders are struggling to cope with demand – some applications are taking up to 2-3 weeks to settle.

We recommend speaking to us sooner rather than later - don't leave it until the last minute!

 

Dan Cuthbert                             

MB: 0419 784 727                      

dc@powertyan.com.au              

 

Kylie Charles

MB: 0448 230 314

kc@powertynan.com.au

  • Company tax rate reduces to 26% for base rate entities
  • Cents per km rate for work-related car expenses increases to 72 cents
  • Expected reforms to allow 66 and 67 years olds to make voluntary superannuation contributions without satisfying the work test.
  • Age limit for making superannuation contributions to your spouse increases from 69-74. This reform is not yet law.
  • For those 67 and under, reforms will enable you to use the ‘bring forward rule’ to make up to three years of non-concessional contributions. That is, you can make non-concessional contributions of up to $300,000 from the 2020-21 financial year. Please contact your adviser for limits that may apply to your particular circumstances.

 

The Federal Government recently announced the HomeBuilder Scheme, a time-limited program to help the residential construction market bounce back from the Coronavirus crisis.

HomeBuilder provides eligible owner-occupiers, including first home buyers, with a grant of $25,000 to build a new home or substantially renovate an existing home.

Key Points

  • You must meet one of the following two income caps:
    • $125,000 per annum for an individual applicant based on your 2018-19 tax return or later; or
    • $200,000 per annum for a couple based on both 2018-19 tax returns or later
  • Renovation contracts must be between $150,000 and $750,000
  • Renovations do not include landscaping or pools
  • Owner builders are ineligible
  • Cannot be used for investment properties
  • Contracts must be signed between 4th June 2020 and 31st December 2020
  • Construction must commence within three months of the contract date
  • HomeBuilder will complement existing State and Territory First Home Owner Grant programs, stamp duty concessions and other grant schemes, as well as the Commonwealth’s First Home Loan Deposit Scheme and First Home Super Saver Scheme (please note you may be entitled to the First Home Loan Deposit Scheme when places become available again on 1st July 2020).

Further information is available on the Australian Government Treasury website.

Should you have any further questions, or require any assistance with your finance or grant applications, please do not hesitate to contact us!

The world remains in the grip of an enormous health and economic crisis. In acting to restrain the spread of COVID-19, countries across the world have enacted measures aimed at reducing infection rates and this resulted in the deepest downturn in economic activity since the Great Depression. 

With interest rates cut aggressively and with government fiscal stimulus in the order of 10% of GDP in many countries, the consensus view is that growth will stabilise in the September quarter on the basis that businesses re-open.

Markets have rallied in recent weeks in response to signs of a peak in new cases of the virus. Investment markets continue to react to the likely impact on company profitability and ongoing government restrictions to contain the virus.

Share markets have rallied strongly in past weeks on expectation that corporate profits will rebound quickly next year.  There is however the possibility that current share prices may be overly optimistic.

In uncertain times, it is important to focus on the longer term objectives of investments, rather than the short term fluctuations.

If there have been changes to your objectives, or you have concerns, please contact our team at Magnify Wealth.

News headlines recently stated that casual workers have won the right to paid leave following a decision in the Federal Court. As usual, the devil is in the detail.

At present, there is no global change granting Australian casual workers paid leave. The case, however, highlights the long running problem of determining over time, who is a permanent staff member and entitled to paid leave and other benefits, and who is a casual worker entitled to a casual loading.

In the WorkPac v Rossato case, WorkPac, a specialist mining and engineering labour hire company, employed Mr Rossato as a casual worker across six consecutive employment contracts for a continuous period of approximately three and a half years. Over that time, Mr Rossato was paid a casual loading of 25% of the minimum rate of pay payable under the Enterprise Agreement, which was in part, paid in lieu of leave.

Mr Rossato worked every shift he was rostered for except where he was given approval to take rest and recreation, and when his partner was airlifted to hospital.

In its decision, the Federal Court found that Mr Rossato was a permanent full-time employee across each of his contracts and entitled to his accrued leave entitlements and payment for the public holidays where he was rostered off work. WorkPac was unable to reduce the liability owing to Mr Rossato by the casual loading paid to him over the course of his contracts, with the court noting, “There is a superficial attraction to the notion that something given in substitution of an entitlement has an equivalent value to the entitlement itself and is therefore of the same character.”

Each of the contracts signed by Mr Rossato contained a declaration headed “Casual or Maximum Term Employee.” However, the court reiterated the observation that, “agreements by which people are engaged to work are typically partly written, partly oral and “partly left to evolve by conduct” as time goes on.” That is, what the employee signs up to does not necessarily define what the employment relationship becomes.

The WorkPac v Rossato case does not generally award casual employees paid leave entitlements but it does highlight the problem that can occur over time where the nature of the employment arrangement changes from casual to a more permanent arrangement.

Recognition of this pathway from casual to permanent employment is now a part of many Modern Awards. The Fair Work Commission’s updates to Modern Awards rolled out across this year include a Right to request a casual conversion clause that enables a long-term casual worker to request permanent employment. The employer can refuse that request but only on “…reasonable grounds and after there has been consultation with the employee.”

The pathway also has political impetus with the Prime Minister’s recent ‘JobMaker’ speech at the National Press Club nominating the issue as one of the five working groups for negotiation.

In brief: types of employment

  • Permanent employees – full-time or part-time. Benefits include paid leave, notification on termination, redundancy where applicable, and on 12 months’ continuous service, parental leave, right to request flexibility, and access to unfair dismissal.
  • Casual - has no guaranteed hours of work or commitment of work in advance, does not have to accept work on offer, usually works irregular hours, doesn't get paid sick or annual leave, can end employment without notice (unless notice is required by a registered agreement, award or employment contract). Is entitled to a casual loading, and unpaid carer’s and family and domestic violence leave.
  • Long-term casuals - a casual employee employed by the business on a regular and systematic basis. There is a commitment to ongoing work (the employer has not made it clear that they should not have an expectation of ongoing work). Long-term casuals have the same entitlements as casual workers except they are also entitled to take parental leave, request flexible working arrangements, and access to unfair dismissal.
  • Shift workers - an employee who works shifts and gets an extra payment for working shift hours. Generally, Awards or agreements have a specific definition of what a shift worker is and the conditions that apply. Refer to the relevant Award for the definition of full time, part time or casual employees.
  • Fixed term contract – same entitlements as permanent employees but the employment relationship is for a fixed period. Where the contract is continually renewed, disputes may arise as to whether the employee is a permanent employee.
  • Independent contractor – generally, contracted to the business to produce a specific result for the business (as opposed to hours worked).  Operates autonomously to the business, is generally financially self-reliant, and chases profit (that is a return on risk) rather than simply a payment for the time, skill and effort provided.

Refer to the Fair Work Ombudsman for clarification of your specific scenario.

Both Paul Hobbs and Caitlin Ruthenberg have recently celebrated five years with the firm.

 

Paul Hobbs

Education

I went to James Nash High School in Gympie, then attended the University of the Sunshine Coast where I completed a Bachelor of Commerce (major in Accounting and minor in Business Law) and Bachelor of Business (major in Financial Planning and minor in Human Resources). I have also completed my CPA.

Hobbies and Interests

Camping, spending time with friends.

When you were a kid, what did you want to be when you grow up?

A professional rugby league player or a carpenter/electrician - all very different to accounting!

Why did you apply for the job at PT?

I was moving to the region with my now wife who was posted here with her job.

What do you love about working at PT?

The people, helping clients and training team members.

What is one thing most people wouldn’t know about you?

That I like everything to be very neat.

 

 

Caitlin Ruthenberg

Education

  • Primary School – Gatton State School
  • High School – Lockyer District High School
  • USQ – Bachelor of Commerce majoring in Accounting & Business Law

Hobbies and Interests

International travel, spending time with friends and family, yoga, gardening/outdoor activities and bushwalks.

When you were a kid, what did you want to be when you grow up?

In my early years I wanted to be a teacher like my Mum. Once I started studying business in junior high school I knew that was what I loved and wanted to be involved with. As I progressed through senior high school I always loved accounting but also had a very strong passion for law. Hence, I completed my law major as part of my degree.

Why did you apply for the job at PT?

I applied for the job at Power Tynan via the scholarship program when I was in Year 12. I knew it was a once in a lifetime opportunity that allowed me to get exposure to the real world of accounting whilst also getting my degree at uni.

What do you love about working at PT?

Having the opportunity to work with such a variety of clients is something I never had thought about when I wanted to be an accountant. Whether I’m dealing with clients from the medical, agricultural or earthmoving industry, every day brings a new challenge. There is something very satisfying about helping people in their businesses. Whether it be cashflow, structure, bookkeeping or compliance advice, I enjoy solving problems for my clients. Power Tynan also would not be the place it is without the team. Working with people who are your friends makes every day an enjoyable one. Being at PT is like having another family.

What is one thing most people wouldn’t know about you?

I enjoy going for a hit of golf on a Sunday afternoon with my fiancé.

 

 

Despite the current economic environment, the company tax rate will reduce to 26% for small and medium businesses from 1 July 2020.

The change is part of a larger progressive plan to reduce the company tax rate to 25% from 1 July 2021 and applies to base rate entities (BRE) - companies, corporate unit trusts, and public trading trusts -  with an aggregated turnover of less than $50 million where 80% or less of the entity’s turnover for the year is classified as base rate entity passive income. Larger companies will continue to pay the 30% rate.

 

2018-19 and 2019-20

2020-21

2021-22

Base rate entities*

27.5%

26%

25%

Other corporate tax entities

30%

30%

30%

*aggregated turnover less than $50m and no more than 80% of the company’s assessable income is base rate entity passive income.

The reduction in the company tax rate will also change the maximum franking rate that applies to dividends paid by some base rate entities. The way the rules normally work is that if the company was classified as a base rate entity and was taxed at the lower corporate tax rate in the previous year then a lower maximum franking rate will apply to dividends paid in the current year. For example, a company that was classified as a BRE in the 2019 income year will generally be subject to a maximum franking rate of 27.5% on franked dividends paid in the 2020 income year. However, the maximum franking rate will normally be 26% for dividends paid in the 2021 income year if the company was a BRE in the 2020 income year.

Some companies may have franking account balances that have accumulated over time and will reflect prior company tax rates. It is important to consider how these credits can be utilised in an efficient manner. One strategy could be to bring forward the payment of dividends to utilise the current 27.5% franking rate before the company tax rate reduces to 26% if the cashflow of the company allows for it.

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.

 

 

As the end of the financial year is approaching, we believe it is an appropriate time of the year to offer you an opportunity to participate in our Audit Shield service.

If a data matching check escalates to an official enquiry, investigation, review or audit, our costs in defending your position can accumulate quickly, regardless of whether any adjustments are made to your returns or not. Our Audit Shield service covers those costs (up to predetermined limits).

Audit Shield is not just for business owners and SMSFs. The Australian Taxation Office has also identified individual taxpayers who have rental properties and those with excessive work-related deductions for special scrutiny.

Our Audit Shield service now also covers JobKeeper payment audits and reviews. The ATO reportedly received 2,609 tip-offs about businesses accessing JobKeeper payments by 20 May 2020, and is investigating some of those cases, therefore it is crucial for businesses to keep evidence of their eligibility for the JobKeeper scheme now, to be ready for any review activity.

What you should know about this new inclusion:

  • It only covers JobKeeper payments. All audits and reviews of other COVID-19 support packages are not covered unless they form part of an audit of a lodged return (ie. BAS audit, Payroll Tax audit etc.)
  • It only covers post-payment audits and reviews, so any issues or queries with the JobKeeper payment application process are not covered.
  • If you already have Audit Shield, you do not need to do anything to have this included in your policy - this is being added at no additional cost to you.

If you would like to know more about our Audit Shield service, please contact our office.

There’s no doubt that the COVID-19 pandemic has caused great upheaval to our businesses, the economy and life as we once knew it. We are beginning to emerge out the other side, with States and Territories relaxing restrictions in a staged approach. As our lives start returning to some type of ‘new normal’, it’s important to realise that many things won’t be exactly the same as they were before. For those people who have a Self-Managed Superannuation Fund (SMSF), depending on the fund circumstances this may extend to the annual audit. In this article, we look at one of the changes coming out of COVID-19 – related party commercial property tenancies.

The Federal Government’s recommendation for tenancies impacted by COVID-19 was for the parties to mutually address the issue. The “Mandatory Code of Conduct for SME Commercial Leasing Principles During COVID-19” was intended as both a safety net and a starting point for those discussions. The Code applies to commercial tenancies that are eligible for the JobKeeper program. In the SMSF environment, this relates to small businesses that experienced a reduction in turnover of at least 30 per cent due to COVID-19. The principles of the Code are requirements for any SMSF related-party tenant that qualifies for the JobKeeper program. For these severely impacted businesses, the code is a mandatory standard of arm’s-length dealing.

Golden rules for the SMSF landlord

  1. Reduction in rent must be proportionate to the negative impact of COVID-19 upon the business, and may take the form of a rent waiver.
  2. A freeze upon all rent increases may apply until the economic situation improves.
  3. Where possible, reduce any unnecessary burden for the tenant.

Golden rule for the related party commercial tenant – there is only one!

  1. Stick to the lease terms, including any specific amendments relating to COVID-19. If the tenant fails the lease conditions, the arrangement may be considered to be not at arm’s length (this is a problem for a fund’s compliance with the superannuation laws).

What is the ATO’s approach going to be?

This is an interesting one, and you would be forgiven for being a bit confused by what you might have seen reported in the media. In the SMSF space, while the ATO have said that they will not “devote compliance resources” to this area for the 2020 and 2021 financial years, it does NOT mean that there is an open book for related party tenants to do whatever takes their fancy.  A lesser-known fact is that the ATO has made it clear to SMSF auditors that there is still an obligation to report breaches of the laws. What this means in practice is that the audit reporting procedures basically won’t change – so depending on the circumstances, audit reports on compliance with the superannuation laws could still be “qualified” where problems are identified. Auditor reporting directly to the ATO (via auditors’ contravention reports) might also be required, depending on the existing reporting thresholds set by the regulator.

What DOES change is that where the breaches are a result of COVID-19, the ATO will not take the matter any further for audits relating to these two financial years.

So what are SMSF auditors required to do for 2020 and 2021 audits?

  1. Form an opinion as to the commerciality of a post-COVID-19-related tenancy – noting that per the Code, the goal posts of commerciality have shifted.
  2. Request sufficient appropriate audit evidence from SMSF trustees to support this opinion. This may include:
    • evidence of tenant eligibility for JobKeeper;
    • evidence of decline in projected turnover;
    • written correspondence between tenant and landlord with requests for proportionate reduction in rent;
    • changes to lease terms compliant with the principles of the Mandatory Code; and
    • evidence that there is a trigger point for a return to ‘normal’ commercial dealings.
  3. If the tenancy is not conducted on commercial terms, recognise a contravention of the arm’s length dealing rules and communicate this to the trustees in the audit management letter.
  4. If the contravention of the arm’s length rule is considered material, qualify the compliance audit report (this formally identifies the non-compliance).
  5. If the contravention is reportable under the regulator’s reporting criteria, report the contravention (and any other contraventions) as usual to the ATO.

This sounds complex!

Yes it is (well, possibly). So how did we get here? The circumstances that have arisen in 2020 were unforeseen. The superannuation laws were enacted in 1993, and were not drafted to work in the current environment.  An unfortunate outcome is that SMSF trustees may find themselves in a situation where there have been unavoidable breaches of other superannuation rules. For example, extending rent relief to a related-party tenant may also be considered to break the rule that prohibits fund trustees from providing indirect financial assistance to members or their relatives. 

So all things considered, it seems that the ATO is making an effort to adopt a common-sense approach, within the guidance of a broader framework. The collateral damage includes the time and effort in gathering the appropriate evidence to make the SMSF audit process as smooth as possible.

Importantly, it’s always worth raising questions with your adviser if you have any doubts.

Each quarter we interview one of our clients to get an insight into their business. This issue we spoke to John from Better Movement Clinic.

When did your business commence? 

Better Movement Clinic started in 2013 as a sole trader Exercise Physiologist, progressed to a company in 2017 and now services both Toowoomba and Dalby.

What does your business do? What makes your business successful? 

Better Movement Clinic is an interdisciplinary allied health clinic based in Toowoomba and Dalby, and we are passionate about movement, pain and food. Our vision is to create equality in access to health care no matter the geographic location, culture, or perceived barrier. We have several Physiotherapists, Exercise Physiologists, Dietitians, Remedial Massage Therapists and Exercise Scientists.

At Better Movement Clinic we create access to high quality, evidence based, innovative programs, techniques, and equipment to improve a client’s pain, health, and wellbeing. An example of this is our ICARE Rehabilitation. This enables access to robotic equipment allowing stroke, neurological and disability clients the capacity to learn to walk again or improve their gait.

What has been your biggest achievement to date? 

The team at Better Movement Clinic is its greatest achievement. We have been able to build a culture of creating access to health care no matter the barrier. The team at Better Movement Clinic live and breath to make movement medicine.

My personal greatest achievement is watching brand new team members being paid enough in their first job out of university to buy their first car and their first house.

What is one piece of advice you would give to someone starting up a business? 

Pay yourself on day one. One of my greatest inspirations is Simon Sinek and we all know “Leaders Eat Last” but it doesn’t have to literally mean eating nothing because you can’t afford anything other than lentils on toast. Your time and expertise is worth money, as much as your team members and contractors. Pay yourself something, it can be even the smallest token amount. It takes too long to break the habit, because you as the leader can always find a “better” place to reinvest the money. You built this business from passion, but you still need to eat and be comfortable.

How do you relax from the pressures of being in business?

Run and run and run, and then find something heavy to pick up and put back down again. Physical activity in any form is needed to keep mental health, stressors, and pressures in check. A bottle of wine at the end of a hard or bad day with my partner also helps.

The biggest problem as a business owner in today’s market is knowing what every aspect of your business is doing at all times. You know what products you are selling, you know your costs, you know there is more that can be done, but it can be difficult to know where to start!

The solution? Data discovery!

In a recent example, a multi-office project management firm knew they had issues - they knew it was a timesheet issue, but they didn’t know where or how it was happening, let alone how to get it under control.

We got access to the systems and started analysing what the data was telling us to see if it correlated to what the owners were feeling. The data was telling us the first issue was a disconnect between payroll and project time - the time getting captured in payroll systems was not linking through to other systems accurately. Next we had to quantify the impact, we identified over $100,000 of time had not even hit the timesheet clock over a six month period. Let me say that again - there was $100,000 of time just missing, never captured, never assessed, in just a six month period.

This data discovery, which identified this issue (and quite a few others) took only a couple of days to analyse and quantify.

Now that we had discovered the problem, we had to get a process in place to fix, monitor and maintain.

We developed an automatic reporting package analysed daily across the entire team (and across multiple systems):

  • Where time leakage was happening between projects and payroll
  • Which division, team and team member were having issues
  • What the leakage was costing the team and business for that period

But we didn’t stop there! We then started analysing and reporting in real-time:

  • Efficiencies between divisions and teams - where time was all being captured but the productivity was outside of norms
  • Where individual tasks were taking longer than expected, leading to write-offs
  • Where tasks were being completed too quickly and could lead to quality issues (and would actually let the quality team know before projects were completed)

A business does not need a $100,000 hole burning in its pocket to reap the rewards of data discovery review.

Another example is a business that avoided this sort of scenario with some vigorous reporting, which required exporting several reports from the business’ software and consolidating them. This took a day out of an owner’s time each month. From the data discovery we found that we could automate that report, so the owner could do something more productive on the first Monday of every month – like work on a client or play 18 holes of golf.

The Return on Investment (ROI) on these projects were all less than six months (and some mere weeks), meaning the businesses improved their profitability quickly and enjoyed the benefits into the future.

Could you benefit from a data discovery? Let me ask you a couple of questions:

  • Does your gut tell you something is wrong, but you can’t put your finger on it?
  • Does finding out take too much time?
  • Do want to fix it, rather than just ignore it?
  • Do you want to improve profitability now, rather than wait until you have time?

If you answered YES to one or more of these questions, please reach out to us!

Wedding Bells

Congratulations to Lauren Guymer (or as many people know her, LG) and her partner Joe, who tied the knot in a beautiful ceremony at Sunshine Beach at the end of February – just before COVID-19 hit!

We wish them a lifetime of love and happiness as they start their next chapter together as Mr and Mrs Lucas.

 

Graduations

Congratulations to both Sarah Tansky and Dan Beck, our most recent graduates!

Sarah has completed a Bachelor of Commerce majoring in Accounting through the Power Tynan Scholarship Program, and Dan Beck has completed an MBA – Masters of Business Administration.

 

 

 

 

 

 

 

 

 

 

 

Lifeline Share the Warmth Appeal

When faced with unexpected circumstances and uncertain times, many people across the South West turn to Lifeline Darling Downs and South West Queensland.

Winter is traditionally a challenging time. The colder weather is usually accompanied by increased requests for support from struggling families and individuals. The need in our community has never been greater, with one in six children in Australia living in poverty and a 22% increase in the number of people seeking food support from a charity in the last 12 months.

Sadly, these statistics will continue to rise, as will the need for mental health services, as the rate of unemployment increases and social isolation grows due to COVID-19.

To do our part, the PT Team participated in Lifeline’s Share the Warmth Week, which was held from 18th – 22nd May.

Share the Warmth Week challenged participants to:

  1. CONNECT (virtually) with your team, your friends or family
  2. SHOW how you’re keeping warm this winter, dress up in your best winter outfits, make your favourite winter drink or share your hot tips on staying warm
  3. SHARE the Warmth by making a donation to the appeal and posting photos of your crew on social media (Instagram, Facebook, Twitter or LinkedIn).

Lifeline Darling Downs and South West Queensland had set a fundraising target of $5,000, and the total came in at $5,722!

While Share the Warmth Week may be over, Lifeline is still running their winter appeal. If you are in a position to donate, please know it will make the world of difference to a person who is really struggling. You'll not only be keeping people warm, but filling hungry bellies and connecting people with professional counselling and material support.

To make a donation, please visit https://www.lifelinedarlingdowns.org.au/