November 2022

1 month before Christmas, how are you & your business tracking towards achieving your financial goals?

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Taking your business to the next level

Growth is important when it comes to business. To remain viable most companies need to keep evolving, staying ahead of their competitors and innovating to meet the needs of a continually changing marketplace. It’s also personally gratifying to feel a sense of progression and be rewarded for the hard work that is part of running a successful business. There are some considerations, however when it comes to achieving growth as not all growth is created equal.

Business growth can be measured in a variety of ways. While there is inevitably a focus on turnover and revenue other metrics can be used to measure, manage, and communicate results. Alternative financial metrics that can be used to track growth include sales and earnings growth figures, while non-financial indicators can also be effective measures of growth such as market share, customer loyalty and product quality or range. It’s important to reflect on what growth means to you and what measures of growth apply to your business objectives.

Decoupling scale and growth

It can be common to think of growth in terms of size – larger premises, increased number of personnel or greater manufacturing capacity – but it’s important to recognise that bigger does not necessarily mean more profitable. Bridgestone is the largest tyre manufacturer in the world according to market share and manufacturing figures. However, German manufacturer Continental records profits that are triple that of Bridgestone. What it lacks in scale, it makes up for in lower manufacturing costs, standardised processes, and more lucrative customers.

These companies have both pursued different growth strategies and while there are certainly benefits associated with increased scale of operations, it is possible to focus on growing revenue without scaling up much or even at all, by implementing efficiencies to reduce overheads.

There are also some advantages associated with being smaller. It can be easier to maintain a strong customer service focus and you tend to have greater autonomy and control, for example being able to be discerning about what projects you take on and make decisions without being answerable to a board or shareholders. One additional compelling advantage in today’s economic climate is being able to respond quickly to pivot and adapt to changing market conditions, something the big players can struggle with.

Many paths lead to growth

There are almost as many schools of thought as to the best ways to achieve business growth as there are businesses and it can be quite overwhelming trying to decide what’s right for you.

The primary types of growth a business can experience include:

Organic – focussing on increased products and services.

Strategic – looking at various measures to achieve longer term growth.

Internal – involving using currently available resources in a better way.

Partnership/ merger/ acquisition – can help businesses to enter, sustain and grow in a new market.

Considerations when pursuing growth

Growth that is not carefully managed can lead to resources being spread too thin, impacting staff morale, leading to customers feeling neglected and, in some cases, lower profits.

Pursuing growth can require investments in people, equipment, space, and suppliers. As these outlays occur before any potential increase in revenue, many businesses find themselves under pressure financially. On that note it’s important to manage your cashflow carefully. Effective credit management and tight control of overdue debts are essential.

Finally, one of the most powerful things you can do when aiming to grow your business is put your plan for growth down on paper. That takes business growth from being something that’s trickling away in the background to something you are actively and strategically pursuing.

Onwards and upwards!

Digital and skills tax incentives return

The Government has opened submissions for a 120 percent deduction for tech and training investment, bringing previous Federal Budget announcements one step closer to becoming reality.

Business leaders have applauded the move to legislate two measures that will allow organisations with turnover under $50 million to claim spending on digital solutions and training backdated to March.

The measures, dubbed the Small Business Technology Investment Boost and the Small Business Skills and Training Boost were announced as initiatives by the previous Government in its March Federal Budget and have now been released as draft legislation for introduction into Parliament later this year.

In a joint announcement by Treasurer Jim Chalmers, Small Business Minister Julie Collins and Assistant Treasurer Stephen Jones, the tax incentives were described as a way to ease the burden of upskilling for small businesses.

“The Government recognises that training employees is expensive and takes time, both of which are at a premium when employers are trying to run a small business,” the ministers said.

“These measures will make it easier for small businesses and help them recoup some of the costs of the investments they make in their employees and digital operations.”

The Small Business Technology Investment Boost

Under the proposed legislation, the boost offers a bonus 20 percent deduction on business expenditure relating to support digital operations.

What can a small business deduct?

At this stage the scope for claiming the digital boost is broad, covering anything that supports the digitisation of operations as well as ongoing investments of a digital nature, such as software licenses, subscriptions and related hardware.

However, the digital tax boost only applies on expenditure up to $100,000 in total, making the maximum deduction available to small businesses $20,000.

When does it apply?

Currently, the digital boost applies to expenses incurred from 7.30pm on 29 March 2022 through to 30 June 2023.

What isn’t included?

Several types of expenditure aren’t covered by the boost, such as:

• Salary and wages
• Capital works that can be deducted under Division 43 of ITAA 1997
• Financing
• Training and education (however, these may be covered by the skills and training boost)
• Spending associated with the trading of stock

For further information, you can find the draft legislation and explanatory materials for the Technology Investment Boost on the Treasury website.

The Small Business Skills Investment Boost

Similar to the tech boost, the Skills Investment Boost enables an additional 20 percent deduction on small business spending on external training and education of staff.

What can a small business deduct?

According to the draft legislation, the incentive applies to any training for employees conducted in Australia or online, however the expenditure must be charged by a Registered Training Organisation.

The training must also be already deductible under tax law and can’t be offered by the business (or an associate of the business) that is claiming the deduction.

When does it apply?

The skills boost will also be backdated to March, applying from 7.30pm 29 March 2022 and is set to continue to 30 June 2024.

For more details on the Skills Investment Boost, you can find the draft legislation as well as explanatory materials on the Treasury website.

Budgetary win for business

With the new Government set to hand down a second Federal Budget in October, the announcement of these initiatives is being seen as a positive move by business leaders around the country.

And, with MYOB modelling suggesting that nearly half a million Australian small businesses have little to no engagement with digital tools, both initiatives are likely to have a big impact.

“Businesses with meaningful engagement with digital are 50 percent more likely to grow revenue,” said MYOB CEO Greg Ellis.

“They’re eight times more likely to create jobs. They are 14 times more likely to come up with new products or services.

“Productivity is what Australia needs; making sure every business is a digital business needs to be one of our top priorities,” he said.

The sentiment was echoed in a statement from Council of Small Business Organisations Australia CEO Alexi Boyd.

“It is essential to incentivise digitisation to make our small businesses stronger, more productive, and more resilient to future economic shocks.”

Meanwhile, Australian Small Business and Family Enterprise Ombudsman Bruce Billson pointed to more specific benefits.

“The digital tax break will allow [businesses] to invest in items such as cyber security systems, cloud-based services, accounting or eInvoicing software, hardware such as laptops and portable payment devices.

“For a small business, the cost of training staff can be quite significant, and this deduction will support owners to make an investment in upskilling staff to drive productivity and competitiveness.”

The draft legislation for both initiatives is open for consultation until 19 September.

Source: MYOB August 2022

Reproduced with the permission of MYOB. This article by Campbell Phillips was originally published at https://www.myob.com/au/blog/digital-and-training-tax-incentives-return/

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

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Federal Budget 2022-23: From a tax perspective

Quiet on the tax front, for now

For once, tax measures took a back seat in a Federal Budget, with the second version for this year being billed as a “solid and sensible Budget suited to the times”.

The October 2022 Budget resisted the recent trend to continually tinker with our tax system, but it seems likely this steady-as-she-goes approach won’t last long, with the new Treasurer, Jim Chalmers, repeatedly referring to the need for tax reform in the days prior to delivering his first Budget.

Tax was not entirely forgotten, however, with the ATO to extend many of its tax compliance programs, a new focus on multinational corporate tax and higher fines for tax breaches.

ATO compliance focus

The ATO was a big winner in the Budget, receiving extra funding to help it achieve higher levels of tax compliance.

The tax regulator will receive $80.3 million to extend its current Personal Income Tax Compliance Program for two years from 1 July 2023. This program will focus on overclaiming tax deductions and incorrect reporting of income.

The ATO also received additional funding for its Shadow Economy Program and Tax Avoidance Taskforce, with additional compliance activities in these areas expected to raise $3.7 billion over four years.

Tax penalty increases

Fines for breaches of the tax and financial laws will rise from 1 January 2023.

The current fine of $222 per penalty unit will rise to $275 per penalty unit, with fines to be indexed in line with the CPI again from 1 July 2023. This increase is expected to raise an additional $31.6 million over four years.

Multinational tax measures

The Budget included measures designed to close tax loopholes and ensure multinationals pay their fair share of tax in Australia. The multinational tax integrity package is expected to raise around $1 billion over 4 years.

The government also intends to focus on working with other countries to reform the international corporate tax system to “better address the challenges arising from digitalisation and globalisation”.

Electric vehicle buyers

More small businesses may be tempted to go electric with their vehicles, with the $345 million Electric Car Discount to exempt eligible electric vehicles from fringe benefits tax (FBT) and the 5 per cent import tariff.

On an electric car valued at about $50,000, the new FBT exemption will save an employer up to $9,000 a year. For individuals using a salary sacrifice arrangement, the saving could be up to $4,700 a year. As an additional sweetener, customs duties of up to $2,500 are also being removed if the vehicle was previously subject to an import tariff.

Supporting small business well-being

Small businesses have not been forgotten entirely, with the Budget providing $15.1 million in additional funding to extend the small business mental health and financial counselling programs, NewAccess for Small Business Owners and the Small Business Debt Helpline.

Almost $63 million in new grants will also be available to small and medium-sized businesses so they can improve their energy efficiency and reduce their energy usage by investing in energy efficient upgrades.

Lower eligibility age for downsizer contributions

The super system was given a break from its endless reforms, with only a minor tweak to the existing rules.

The Budget included a measure to allow more people to make downsizer contributions into their super accounts by reducing the minimum eligibility age from the current 60 to 55 years of age. Older Australians will also be encouraged to downsize by exempting their home sale proceeds from pension asset testing from the current 12 months to 24 months.

End of tax offsets and low-income payments

A noticeable absence from the Budget was new tax offsets and payments to lower-income earners.

There was no extension of the previous Low and Middle Income Tax Offset (LMITO), which means eligible taxpayers will no longer receive the offset when lodging their annual tax return. The Coalition’s one-off $420 cost-of-living offset was also not renewed.

Take the lead – learning from the greats

The importance of strong leadership to foster success cannot be under-estimated. Fortunately, the behaviours that effective leaders demonstrate can be emulated and learned.

Whether you are looking to hone your skills as a leader in your business or if you want to assist someone to take a lead role, here are some characteristics of effective leaders that have helped them take their businesses to the next level.

Seeing the big picture

It can be easy for a small business owner to get lost in the minutia of the day-to-day and quite hard to achieve the right headspace to maintain a broad perspective of the industry you work in and keep a high-level focus on your company direction.

Those who are successful in this cite learning to delegate as a critical tool. Jessica Jackley, co-founder of Kiva and ProFounder, which provide micro-loans to entrepreneurs throughout the world, states “Deciding what not to do is as important as deciding what to do.”

Forward thinking and planning

Once you are across the big picture it’s easier to think about how to grow your business into the future. Of course, part of forward thinking is translating your goals for the company into a concrete plan. As said by Benjamin Franklin, “If you fail to plan, you are planning to fail.”

An effective leader tends to make short and long-term goals and include their team members in setting these goals, asking for their input as to how these goals can be achieved which helps to increase their sense of accountability and engagement.

Getting the best from others

Great leaders understand that motivating others is an important aspect of leadership.

The late Queen Elizabeth II understood this, famously noting, “Some attributes of leadership are universal and are often about finding ways of encouraging people to combine their efforts, their talents, their insights, their enthusiasm and their inspiration, to work together.”

In small business getting the best from people is about sharing a vision for the future of the business and empowering your staff to feel as though they are essential in your business’s pathway to success.

Setting the tone

A leader sets the tone for the organisation. It’s important to set the bar high, setting a positive example for everyone else in the company in terms of professionalism, drive, and enthusiasm.

Airbnb CEO Brian Chesky believes so strongly in modelling his passion and belief in their product he left his apartment in 2010 and has been staying in Airbnb accommodation ever since. Brian has been quoted as stating he believes in “living the core values all the time; when you hire; when you write an email; when you are working on a project; when you are walking in the hall.”

Showing gratitude

The ability to motivate your team to strive to do their best is critical to small business success. A motivated team is happy to go the extra mile for you and your business. Acknowledging individuals for a job well done and expressing gratitude keeps employees engaged and motivated.

Richard Bransen, the flashy Virgin Group founder, is renowned for the way he celebrates the achievements of his employees. According to Branson, “When someone on your team has a big success, celebrate it and tell others. Success breeds success.”

Learn from mistakes

It is impossible for a business or a person to not make a mistake. Every great leader understands and acknowledges the fact that a mistake is an opportunity to do better next time. Failure equals success – if you learn from it! Encourage others to also not be afraid to make mistakes but to learn from them.

Elon Musk has led multiple innovative organisations, including PayPal, Neuralink, SpaceX, and Tesla – and had more than his share of failures. Musk says that the key to bouncing back from failure is to “fail intelligently.” The lesson from Musk is that failure is fine if you’re always learning, and the attempt is worth the risk.

Effective leadership is not something you can master overnight but these are skills worth fostering to support your business growth and success.