August 2021

Welcome to August 2021!

This is an exciting time of year for us as we are busy completing tax returns, year end financials & applying for government grants for our clients. It is also a challenging time for many & that’s why we are always here to help. So please reach out, contact us & let us show you how to find the rainbow behind the dark clouds.

With many states currently in Covid lockdown & governments offering financial assistance packages, it has never been a more important time for the client / accountant relationship to be strong. We enjoy working closely with our clients to ensure they receive support, knowledge & guidance.

If you have a business based in NSW you maybe entitled to:
– Covid Business grant: $7,500 to $15,000
– Jobsaver: $1,500 to $10,000 per week per employee or $1,000 per week for non-employing businesses
– Microbusiness grant: $1,500 per fortnight

If you have a business based in VIC you maybe entitled to:
– Small Business Covid Hardship Fund: $5,000
– Business Costs Assistance Program 2: upto $7,000
– Business Continuity Fund: upto $7,000
– Licensed Hospitality Venue Fund: $20,000
– Impacted Public Events Support Program: $25,000

There are a number of other forms of assistance available, including:
– Payroll tax support
– Tourism support package
– Commercial tenants & landlord support
– Disaster payments are also available to individuals in NSW, VIC & SA

Call us now to learn how we can help you identify which grants you maybe eligible for & assistance with applying. We are available to work closely with you through these challenging & potentially opportunistic times.

There are many ways Razorback Consulting can help you & your business. We have a range of services to suit your needs. Contact us to learn how you can benefit from these.

Your post-COVID business repair kit

With June 30 behind us and the economy slowly re-opening, most business owners are thinking about the challenge of repairing and rebuilding their finances after the COVID-19 lockdown.

Over the next few months, key tests will come with the withdrawal of government stimulus measures like JobKeeper and the return of your normal wages, rent and financing expenses.

An end to landlord rent deferrals and business loan repayment holidays, for those who had them, will make cashflow and debtor management increasingly important. Throw in closer scrutiny of on-going business viability by the banks and an end to higher debt amounts before creditors can issue statutory demands or initiate bankruptcy proceedings, and the future looks challenging.

Things to do now

Given the challenge, there are important actions you should consider in order to rebuild your business finances and get your tax affairs in order.

A great place to start is getting your Business Activity Statement (BAS) lodged promptly if you’re eligible for the Boosting Cashflow for Employers scheme.

Qualifying businesses will receive a second boost for the period July to September 2020 after you lodge your BAS. If you want to receive the stimulus you must lodge by the 28 July and 28 October quarterly due dates.

Check your tax compliance

It’s also important to ensure your Single Touch Payroll (STP) data remains correct, as the ATO is using it to actively review business entitlement for government support measures. Remember, the STP data is also likely to be audited in the future, particularly in relation to JobKeeper payments.

If you’re having payment or reporting difficulties, consider contacting the ATO as it’s offering tailored support plans for individual businesses. You may even be able to defer some of your tax obligations until later in the year.

Monitor your financial position

Key activities in the months ahead will be performing a detailed financial health check on your business and ensuring your budget matches current business conditions.

As the insolvency relief measures come to an end, regularly measure your solvency to ensure you do not accidentally trade while insolvent.

If you find yourself in financial difficulty, talk to us early on so we can develop a strategy to work through your problems.

Review your debtor management

You should also regularly check your debt position. Ensure you invoice promptly and follow up old debts.

If debtors have been severely affected by the pandemic, consider writing-off the debts. Debts can be written off against your income in the financial year in which they are written off, regardless of when you invoiced them.

Develop strong liquidity

During a recession, your cashflow and cash reserve positions need to be constantly monitored so you are forewarned of any potential problems.

You may also need to change your accounting processes. For example, changing your GST reporting cycle or moving to accounting for GST on a cash rather than accruals basis means you pay GST to the ATO when you actually collect it – not when you issue your invoice.

Consider asset purchases

If you are lucky enough to still have strong cashflow, you could take advantage of the government’s further extension to 31 December 2020 of the $150,000 instant asset write-off.

We can help you work out if your business has sufficient cashflow to make a purchase and whether it’s best to use the instant asset write-off or normal depreciation rules.

Review your business structure

A new financial year is also a good time to start long-term tax planning.

This could include looking at the appropriateness of your current business structure. The structure you started out with may no longer be the most tax effective if your business has grown, or for surviving a recession.

We can review your current business structure to see if it’s still the best option, or if changing it could help cut your tax bill. Restructuring from a sole trader to a company for example, could reduce your tax rate from 45 per cent to the flat 26 per cent company rate.

Retrain your staff with the tax man’s help

For many business owners, fear of incurring a Fringe Benefits Tax (FBT) bill has kept them from retraining and re-skilling their employees to perform different roles or activities within the business.

But a new exemption announced by the government as part of last year’s Federal Budget is changing all that.

If COVID-19 has meant you need to transform your business and the responsibilities of some of your employees, now could be a great time to consider reskilling your existing staff.

Training and the FBT burden

Traditionally, if you provide training to your employees that is not sufficiently connected to their current role, you could find yourself facing a hefty FBT bill at the end of the year.

Say you have someone currently performing an administrative role, but you decide you want to redeploy them into a sales position; to give them every chance of success they will need to be trained in sales techniques.

As these skills are not required in their current role, the ATO would normally deem this type of training to be a fringe benefit you provided to your employees. This means you will have to pay FBT at the 47 per cent tax rate on the total cost of their training.

Not surprisingly, this has been a major disincentive for most employers to retraining or upskilling their workforce into new roles.

Budget announcement

All this changed in the October 2020 Budget, when the government announced it was exempting employer-provided retraining activities from FBT to encourage employers to re-skill their existing staff for new roles within the business. Or even outside the business if the pandemic meant they were to be made redundant.

With the impact of COVID-19 forcing many small businesses to continue reshaping their business to cope with a rapidly changing market, FBT-free training could be a valuable way to retain your staff within the organisation, or to help them transition to new opportunities outside.

The government believes the new incentive will encourage more Australian business owners to retrain and redeploy their existing workers into new roles within their company.

Limits on the exemption

As always, the devil is in the detail.

The new FBT exemption does not extend to retraining acquired by way of a salary packaging arrangement, or training provided through Commonwealth supported places at universities, as this already receives a benefit.

It also does not cover repayments towards Commonwealth student loans.

Where the new exemption does apply, it can be claimed for training costs incurred from 2 October 2020.

This is how it works.

Case study

Jane owns two small specialist record and DVD stores in Melbourne. Due to the pandemic and subsequent lock-down, she decided to close her physical stores and make her three sales assistants redundant.

Despite this, Jane is keen to help her employees find new employment and offers them $2,000 each in retraining assistance. During the pandemic Jane’s online sales grew substantially and she now needs three new staff for web design roles.

She has decided to take advantage of her existing employees’ specialist knowledge of her business and is providing them with training in web design so they can take up these new roles.

Previously, if it cost $2,000 each to retrain her three employees, she would have been liable for 47 per cent FBT on the $6,000 cost to her for the training. With the new exemption, she will be able to retrain her staff without incurring any FBT liability.

Personal training deductibility proposal

As part of its statement on the FBT exemption, the government also announced it was planning to consult on a potential reform for individuals who undertake training at their own expense.

The government is considering allowing individuals undertaking training that relates to their future employment to deduct the cost from their income.

This would represent a major change, as the current tax rules limit deductions for personal training to training related to your current employment – not future employment.

Consultation on this reform is yet to be carried out but, if implemented it will provide a great opportunity for employees at all levels to undertake tax-deductible training.

If you have any questions about fringe benefit tax liabilities when retraining your staff or more broadly in your business, please don’t hesitate to give us a call.

Achieving success through habits

The new financial year offers an opportunity for taking an ‘out with the old, in the new’ approach, making a fresh start in relation to your financial affairs, it’s also a good opportunity to re-examine other aspects of your life.

This is a particularly good idea if the New Year’s resolutions you made in January have fallen by the wayside over the past few months. If that’s the case, you’re certainly not alone. In fact research by the Journal of Clinical Psychology reported that around 54% of people who resolved to change their ways, failed to make the transformation last beyond six months.ⁱ

Imagine if you could change your habits, so you did not have to rely on willpower alone ever again?

Willpower is not enough

We all tend to think that willpower is the key to achieving success, that sheer determination will get us to our goals. Certainly the will to succeed is a critical component, but research has shown us that people who score high on self-control are successful, not because of their superior willpower, but because they have better systems in place for forming new habits to meet their goals.ⁱⁱ

Start small

So how do you get started? Why not start with an incredibly small habit and build from there. Set your timer to 15 minutes and spend the time on a task you have been putting off. Why just 15 minutes? It’s too small a goal to fail at. It may take a few days to complete the task but you will get there eventually and have the satisfaction of ticking off that annoying task that’s been on your ‘do list’ for ages.

Do it… again and again and again

New habits take time to form. The most common timeframe is 21 days to make a new habit, and the key to forming a habit is repeating the action, over and over again until it becomes increasingly effortless. To that end, it’s important to allocate the necessary time to support your new habit.

Another good tip to help you commit to the new habit is to “anchor” the habit to your existing routine in some way. Make those sales calls, or do some other task that takes a bit of effort, straight after your morning coffee every day and you won’t be tempted to put it on the back burner.

Aim for incremental improvement

While it is certainly important to ‘dream big’, it is equally important to have a series of milestones in place when it comes to those lofty goals.

If you are aiming for a certain figure in terms of your businesses revenue, make sure to have some incremental steps in place in the form of monthly sales targets and a solid sales and marketing plan to help you get there.

Put some processes in place

It’s helpful to think about implementing processes to support the habits and behaviours you want to put into place. These processes can provide a solid foundation, enabling you to progress towards your end goal.

If you are wanting to change your saving and spending behaviour to work towards a longer term retirement savings goal, you may wish to consider setting up a salary sacrificing arrangement, in order to build your nest egg while you go about your day-to-day.

Breaking bad habits

It’s not just establishing good habits that you need to focus on, we often have a few bad habits preventing us from reaching our end goal. The key to breaking bad habits is replacing them with good ones.

If you are prone to procrastination and it’s interfering with your productivity, get into the habit of scheduling time for those things you tend to put off and setting alarms or prompts to give you that extra push you need to get you started.

Speaking of pushes, here is your prompt to have a think right now about what you need to put into place to foster good habits and set yourself up for success this financial year.

i https://pubmed.ncbi.nlm.nih.gov/11920693/

ii https://behavioralscientist.org/good-habits-bad-habits-a-conversation-with-wendy-wood/

Important dates August 2021

Business

Company Tax Rate

1 July: Decreased to 25% for base rate entities from 26%

Liability limited by a scheme approved under Professional Standards Legislation. This advice may not be suitable to you because contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.