http://www.mcgillivray.com.au/news News Feed from McGillivrays en-us copyright 31/31/2010 720 http://www.mcgillivray.com.au/news/news/small_business_assistance_program_extended/27   The Commissioner of Taxation announced in a recent media release that the Tax Office would extend the measures to assist small businesses which were introduced as temporary incentives last year.    Under the current small business assistance package, there are currently almost 100,000 interest free payment arrangements in place worth $1.5 billion and over 6,600 deferrals of activity statement payment due dates have been granted. The package of measures was originally intended to expire on 30 June 2010 but will now run until 30 June 2011. The extension of the Small Business Assistance Package will mean that eligible businesses with a turnover of $2 million or less will continue to have access to: 1) a twelve month general interest charge (GIC) free payment arrangement with the Tax Office, 2) and a deferral of activity statement payment due dates. 22/07/2010 http://www.mcgillivray.com.au/news/news/when_financial_advice_is_not_tax_advice/26   An article in the West Australian recently highlighted how consumers and clients could easily end up much worse off despite believing they are doing the right thing and seeking financial advice. The story concerned the Governments planned financial planning reforms and the effect of a year long deferral of the application of consumer protection laws governing tax agents to financial planners. The deferral means that some financial planners give advice that they may not have the expertise to give. One quote noted that an industry source was "appalled at how several big superannuation firms had taken advantage of financial planners ability to give tax advice." The article also made reference to outsourcing which is where work is typically sent overseas to be done at a cheaper rate than it can be done locally. The fees charged however are still the standard local rates and often consumers are none the wiser. Consumers can find themselves in mess if a financial planner refers tax work overseas to be done but the planner is not involved in confirming the quality of the work. If errors are made how do you deal with a company that is thousands of kilometres away? The reality is that financial planners are not accountants and their ability to give clear and accurate tax advice should be accepted with a good dose of apprehension unless they have the accounting qualifications to back it up. As always our advice is to get the best advice from the most qualified person.  And in the case of tax matters that is a qualified accountant.   22/07/2010 http://www.mcgillivray.com.au/news/news/changes_to_fuel_tax_credit_rates/25   Those of you in the transport industry should be aware that the fuel tax credit rate for heavy vehicles using diesel and petrol and travelling on public roads changed to 15.543 cents per litre on July 1 2010. The rate has progressively decreased from 17.143 cents per litre from January 1 2009 and this change is due to the increase in the road user charge. Heavy vehicles are those with a gross vehicle mass (GVM) greater than 4.5 tonne. Diesel vehicles acquired before July 1 2006 can equal 4.5 tonne. If you have any questions or queries about the fuel tax credit rate and how it could affect your business contact McGillivrays on 6272 6888. 15/07/2010 http://www.mcgillivray.com.au/news/news/henry_review_in_brief/24   There is still a lot of hysteria about the the Henry Review or more to the point the items the Government has chosen to adopt. The review made 138 recommendations but only a handful have been adopted and the rest appear to have been left alone. Although the mining "Super Profit Tax" has captured plenty of attention we should consider what won't be changing. There will be no increase of the rate or broadening of the GST Tax free superannuation payments for people over 60 will stay There will be no removal of the benefits of dividend imputation There will be no reductions to the CGT discount or applying of a discount to negative gearing deductions There will be no changes that negatively impact on the not for profit sector including anything that involves affecting income tax to clubs or changing the benefits of tax concessions. Personal income tax rates will remain as is There will be no changes to stamp duties or payroll tax   For those of you with families There will be no introduction of the family home into any means tests There will be no introduction of a federal land tax for the family home And for those of us who have enjoyed a long and happy life a bequest tax, more commonly called a death tax or duty is not on the agenda.   Of the items that have been adopted, clearly the mining Super Profit Tax (SPT) has generated the most debate. It has been suggested that its introduction is critical to the other adopted recommendations proceeding as it forms the basis of funding for these items. The detail is complicated and many mining organisations are still digesting the ramifications. In a nutshell the tax starts July 1 2012 and is a 40% tax on profits. It is a tax payable on resource extraction activites. SPT paymets will be deductible for income tax purposes but SPT refunds will also be assessable for income tax purposes. Exploration costs will be immediately deductible under the SPT.   There will be a reduction in the company tax rate to 28%. Businesses classifed as "Small Businesses" (what constitutes a small business is yet to be stated by the government) will have the reduced tax apply from the 2012/13 financial year. Other business will have a reduction to 29% in the 2013/14 year and then 28% in the 2014/15 year. There are ramifications here for Franking Credits, PAYG Installments and Top Up Tax. Small businesses will be able to write off assets costing under $5000 in the year of purchase effective from 1st July 2012. The query again is the definition of "Small Business".  Other areas affected are Depreciation Pools and Division 43 Building Allowances.   There will be changes to superannuation. The biggest is the increase in the Superannuation Guarantee from 9% to 12% on a gradual basis from 2014 to 2020. One of the ramification under current circumstances is that payroll tax and workcover costs would increase as these are calculated on remuneration inclusive of superannuation. Other super changes are an increase from age 70 to 75 for the Super guarantee age limit and the concessional super cap is to continue beyond 2012 for indivuals with a super balance below $500,000   13/05/2010 http://www.mcgillivray.com.au/news/news/smsf_estate_planning/22 A self managed superannuation fund can be a terrific planning tool for individuals and may also allow those individuals flexibility in determining how their superannuation monies are invested. However, it is important to recognise those benefits may not be paid to the chosen beneficiaries without an effective estate planning structure in place.   One court case which confirmed the importance of estate planning was Katz v. Grossman. A brief description of the case was that a couple (father and mother) were trustees of a self managed superannuation fund which held assets in excess of $1,000,000. This couple had two children, a daughter and a son. One of the trustees (the mother) passed away, and the father appointed his daughter to replace his deceased wife as the other trustee of the Fund. When the father passed away, the daughter subsequently appointed her husband in place of her deceased father. The father's will stated his superannuation benefits were to be divided equally between the son and daughter, however as trustee of the self managed superannuation fund, the daughter paid all of her father's death benefits to herself, leaving the son nothing. The son fought the decision in court and lost, as the court found that the trustee had to administer the fund in accordance with the SIS Act, but had no duty to do so in an equitable manner.   The outcome in the above case was different to the wishes of the late father. However, had he used more effective estate planning tools such as binding death benefit nominations, then the payment of his benefits may have then been in accordance with what was stipulated in his will.   A binding death benefit nomination is a document that compels the trustees of the self managed superannuation fund to pay the death benefit in accordance with the deceased persons wishes.   There are two types of binding death benefit nominations: lapsing and non-lapsing. Lapsing binding death benefit nominations last only three years, at which point the nominations cease to be binding. A non-lapsing binding death benefit nomination will remain in place until such time as the nomination is amended or revoked.   Binding Death Benefit Nominations are but one of the planning areas which should be carefully considered. If you would like to discuss estate or other planning matters for your Self Managed Superannuation Fund, please contact one of our experts at McGillivrays   Andrew Hobson     27/04/2010 http://www.mcgillivray.com.au/news/news/why_you_need_succession_planning/21 Are you a baby boomer with your own business and intend to retire within the next 10 years? Then you are not alone but you could also be in a high risk situation. The vast majority of baby boomers in this profile have no exit strategy out of their business either through a sale or transfer to other family members. In fact a 2006 study by RMIT found at that time the average age of business owners in Australia was 55 and 81 percent intended to retire within 10 years but 75 percent had no exit strategy.  Most of these people have their retirement plans tied up in one asset - their business. Therefore it is critical that business owners have a game plan. Added to this are two other twists. First if you are the baby boomer hoping to sell your business will you be selling into a market already saturated with businesses of similar types? Then even more reason to have a plan that takes into account this very situation. With careful planning and a good exit strategy you can make your business more attractive to a purchaser,  giving you the edge in the market place. On the other side of this there could be a real business opportunity. If you are looking to buy or expand your existing business a profitable business with a clean entry and exit point can be a very attractive proposition. Baby boomer business owners should also be careful about "cruising to the line". That is, pulling back from your business in the last few years before retirement by working shorter hours and taking more time off. If you can do that without losing market share and profitability good luck to you but if it means your growth slows or profit goes down then this could seriously affect what you can sell your business for when you finally decide to retire. At McGillivrays we can assist you with business reviews, succession planning and exit strategies for your business. For more information on how we can help you call our office number 08 6272 6888.      14/04/2010 http://www.mcgillivray.com.au/news/news/high_court_hands_down_bamford_decision_but_the_questions_remain/20 The High Court has handed down it's decision in the case of Bamford vs ATO but the result is more questions exist now than ever before. The High Court agreed with the ruling of the lower courts in that a Trust Deed can determine how income is treated. This is a win for taxpayers that have  trusts and who wished to treat capital gains as income and a loss for the ATO who contended capital gains could not be considered anything else but captial gains. On the down side for the taxpayer they lost a complicated argument about the interpretation of how beneficiaries "shared" income.  The taxpayers case was that a share of income was a fixed sum that could not be altered (often called the quantum approach) while the courts determined that the term "share" is a proportion or percentage (known as the proportionate approach). The ramifications for both sides are still being assessed but everyone agrees the decision has left the situation more complicated than ever and that the government needs to step in to put clearer legislation in place so all parties can operate with greater ertainty. There will be more discussion of this case when the full impact of the High Court ruling is analysed further.      1/04/2010 http://www.mcgillivray.com.au/news/news/investment_allowance-does_your_finance_contract_make_your_purchase_ineligible_for_the_concession/19 The Small Business and General Business Tax Break was a measure implemented by the government to help stimulate new capital investment by Australian businesses to help boost the economy through the "GFC". The tax break is available for eligible assets where an ‘investment commitment” was made between 13 December 2008 and 31 December 2009(eligible period). The thresholds and deduction rates vary depending on size of business, the date of purchase and when the asset is installed ready for use. The ATO Guide to the Small Business and General Business Tax Break (which represents the ATO's interpretation of the legislation) identifies that there "may be an issue in claiming a deduction on an eligible asset depending on the type of finance used to acquire the asset.” This is a technical issue which has only recently surfaced and relates to the wording used on some finance contracts. In particular, this issue is important in situations where a large eligible asset was ordered before 31 December 2009 but delivered after that date- the type of finance used is crucial in identifying whether a deduction for the investment allowance is available. If you are about to receive the delivery of an eligible asset and sign the finance contract, we recommend you contact McGillivrays urgently so we can assist in reviewing the contract and ensure that your business remains eligible for the Investment Allowance. 29/03/2010 http://www.mcgillivray.com.au/news/case_studies/case_study_-_wa_company_is_front_page_news/6 Innovative Western Australian company that made front page news. This company had outgrown its original structure and needed asset protection. TLC Unlimbited operates a prosthetics business based in Belmont, Western Australia. As a leader in the field who manufacturers and distributes prosthetic devices, they made headlines in mid 2009 when a prosthetic finger designed in the United States was fitted to a local Perth patient. TLC Unlimbited negotiated to become sole distributers of the “bionic finger” technology in Australia. The finger can move and operate like a normal finger but requires no batteries or power source. McGillivrays are proud to support this innovative, family business. Asset protection is critical in any business but never more so when you have worked so hard for so long to get your business recognised as a leader in your chosen field. When McGillivrays took on TLC as a client we realised from our first review of their business structure they were dangerously exposed. All of the assets of the business and the property they owned and operated from were in the same company name. We identified two main issues needing immediate attention. Our primary concern was one of asset protection but in this case holding land in a corporate entity was not very tax effective and would be costly in the long run. In a world where litigation is becoming increasingly common TLC had all their assets exposed to unnecessary risk. McGillivrays immediately recommended a restructuring of the business. The transfer of assets into an appropriate trust structure offered much better protection and a more flexible tax vehicle. TLC will enjoy considerable savings in tax both on a business and personal level. We also assisted TLC establish a Self Managed Superannuation Fund, creating immediate tax relief and a means of taking control of their future Wealth Creation strategy. The benefits to the business and the business owners have been enormous and typical of what we do for our clients. The saying “You don’t know, what you don’t know” sounds cliché but it has never been more relevant in today’s world. There are simply too many options for people in business to choose from. Simply too much to know. The best option is to choose a trusted advisor who knows about business. McGillivrays knows about business; that is what we are good at. Ask us and you can find out just what we can do for you. 21/09/2009 http://www.mcgillivray.com.au/news/case_studies/case_study_-_rapid_growth_for_family_business/4 How they benefitted from the introduction of cashflow and key performance monitoring systems plus succession planning. Established for over 35 years in Perth our client is a leading player in the corporate audio visual field. They hire and install audio visual equipment, staging equipment, and provide event support delivering technical services to hotels and venues staging high profile events and functions. Like many of our clients, this is a family business and after years of hard work has grown to employ a team of 45 people. One of the issues with family businesses is they can often experience periods of rapid growth that is very hard to control. One of the challenges is to manage this growth in a practical way. Sometimes businesses can expand too quickly with increasing debt and overheads running ahead of cash flows. Our client experienced just this sort of rapid growth when they almost doubled their turnover in the three years between 2005 and 2008. Our answer? Accurate cashflow forecasting and Key Performance Indicator monitoring systems are vital tools for growing businesses. These were introduced for our client to help control costs and improve their bottom line. Working in partnership with our clients is a key issue for us. It means we can form a working relationship enabling us to become almost like a Chief Financial Officer for them. A Chief Financial Officer who is on tap whenever you need them. It’s a great resource for our clients to have. Like so many family businesses, succession planning and exit strategies for the owners are crucial. The original founder of the business now has family members heavily involved in the running of the operation. Over time this will ensure a smooth transition from a passionate business entrepreneur to motivated family members who have the structure and management tools in place enabling them to take the business to new heights. McGillivrays have a number of ideas we are exploring with our clients to ensure they can achieve the best result. We regard this kind of work for our clients very highly. It isn’t always about the money we can save but about the peace of mind we know it gives our clients. Life is for living! Do you run a family business? Wouldn’t mind having your own Chief Financial Officer on call? Call McGillivrays. We know we can add Fresh Expert ideas to your business. 18/09/2009 http://www.mcgillivray.com.au/news/case_studies/case_study_-_small_business_needs_help/3 We assist a small manufacturing company negotiate a series of problems too big for them to handle alone. Successful negotiations with the ATO and a new structure using a SMSF gave this business new life. Our client operates a cabinet manufacturing business in the eastern suburbs of Perth. When the clients approached McGillivrays they had a number of issues to deal with including a tax debt with the ATO of almost $1.5 million, a number of outstanding tax returns from prior years and a business structure that needed review. The problems were too big for the owners to tackle on their own. McGillivrays first addressed the tax debt. There were extenuating circumstances and this combined with our knowledge and understanding of Taxation Administration Act saw us sit down with the ATO and negotiate a settlement. The result? A reduction in the outstanding debt to under $300,000. An amazing outcome which relieved a major burden for the owners who could then more clearly focus on the rest of the issues. Next we sat down with our client and worked though all outstanding tax returns bringing them up to date. Then, after listening to some of the issues our client was experiencing we reviewed the structure of their business. Unfortunately many businesses either outgrow their structure as they expand or have had the wrong legal entity from the beginning. Either way, talking to your accountant on a regular basis should help identify some of these issues before they become problems. After careful analysis it was clear the business owners had not been able to make use of the tax saving and Wealth Creation opportunities superannuation could provide. McGillivrays decided to recommend a new structure to our client based around their self managed super fund (SMSF) and the recent changes to the rules that apply to SMSF’s. In the past a SMSF was limited in its ability to purchase assets with the rules relating to borrowing funds being particularly restrictive. Recent changes however now permit a SMSF to borrow in particular circumstances. So working within the new rules, McGillivrays formulated a structure that allowed our client to transfer commercial properties into their SMSF. This will achieve large ongoing income tax savings on rental income and will produce significant capital gains tax savings in the long term. It is also a terrific opportunity for the business owners to build a significant asset for their retirement and retain control over their financial future. Control is a significant factor in many people choosing to operate a Self Managed Superannuation Fund. This case study highlights a number of areas McGillivrays target as high priorities. Our ability to listen to our client and understand their business. Our emphasis on always being up to date with the latest changes in the world of constantly changing taxation law and making the most of our experience to benefit our clients. So what can McGillivrays do for you? Do some of these circumstances apply to you? If this situation sounds familiar to you perhaps you should ask us how we can help. 18/09/2009