Keeping your business in tip-top financial shape

Make sure any new financial year resolutions made to keep your business financially healthy don’t fall off the bandwagon now. Here are four tips to keeping it in tip-top financial shape.

1. Know your tax deductions
Keep an eye out when lodging tax returns, so you don’t pay too much. If you work from home, you may be able to claim home office costs such as repairs or cleaning expenses. If you use your personal mobile phone to contact customers or your staff, you could also claim for those calls.

2. Stay cash-focused
It is important for a business to stay focused on keeping the cash generation rate above the cash burn rate. Try implementing business models that enable you to collect most of your payments upfront. Invoicing your customers on time, or sending timely reminders a couple days ahead of time can also help ensure a business can generate cash flow every month.

3. Hire the right people
Time is money, and hiring the wrong people can set you back quite a while after taking into account missed sales opportunities or strained customer relations. Make sure you hire people that are competent, have a proven work ethic, and the right attitude to work for you.

4. Get social
If you have a limited budget when it comes to spending on marketing or advertising, make the most of free social media pages to grow your brand and attract online prospects and customers.

Five steps to writing a business blog post – fast!

Successful blogs are those that are regularly updated with fresh and relevant content. These blogs require time and dedication; two characteristics a business can often struggle to find.

Below are five simple steps that can help make writing a blog post a speedy and easy task.

1. Make a list of the five biggest problems your clients have. Pick one.

2. It is likely that the problem chosen is quite broad. To write a tight and focused blog post, you will need to hone in on that problem. A good way of doing this is to think of questions related to that problem. Once you decide on a question, think of three key points that could answer that question.

3. Pretend someone has asked you this question to your face. Write down exactly how you would answer them. Don’t edit what you write (yet!) just write.

4. Once you’re finished, read it a few times to see if any parts need to be edited, or if any points need to be explained more clearly.

5. Upload to your blog and hit publish!

Don’t let your personal finances affect your business

A contributing factor to a business’s success is the owner’s personal financial stability.

Business owners who carry personal financial troubles into their business risk being distracted by their personal situation, which can affect concentration levels and decision-making processes. Rather than thinking of how to keep improving a business, time may be spent instead thinking about how to earn any much-needed money.

Owners should also keep their personal financial situation completely separate from their business in terms of money. Borrowing any money from the business to pay personal bills can very quickly lead to a disaster.

One way business owners can avoid this kind of predicament is to clarify and track their business goals, as well as face up to dealing with the obstacles that will come with running a business. There will always be rough patches that can set a business back a few steps, but that doesn’t mean that the business is a failure. Setting a series of small goals, which are specific, actionable and measureable, can help make seemingly unattainable goals come into focus

Motivating the unmotivated

Whether you want your employees to work more efficiently or need them to engage more on team projects, motivating apathetic workers can be a difficult task.

Assuming that the unmotivated employees are reasonably valuable and do have the skills needed to perform the job they’re in, below are two simple ideas that can help motivate the unmotivated:

• Make it achievable

The harder the job, the greater the motivation required to complete it. Simplified jobs require less motivation and are harder for people to avoid doing. An example of implementing this ideal in the workplace could be asking an employee to break a large and complicated project into smaller, simplified daily jobs.

• Change the environment

Making small changes to the workplace environment can shape a person’s behaviour without them even thinking about it. Some examples of simple environmental changes to increase motivation include keeping phones/phone chargers in a separate room or encouraging staff to stand up and stretch every hour.

Avoiding SMSF death benefit disputes

Recent family disputes over superannuation death benefits carry an important warning to current SMSF trustees.

The disputes have highlighted the need for trustees to have appropriate and binding death-benefit directions planned while members are still alive, in order to reduce the risk of a dispute arising. When there are clear death-benefit directions, surviving trustees have no choice but to comply with them.

Small business owners who use a self-managed super fund can be particularly vulnerable to these types of disputes, especially those involved in a family business. This is because many small business owners hold their family business premises in their family self-managed fund, and any dispute over death benefits can lead to the forced sale of the small business premise.

To avoid the possibility of disputes arising over superannuation death-benefits in a small businesses, owners should nominate a successor trustee or successor director. This can help assure the right ownership and control of their assets is passed on to their intended superannuation beneficiaries.

Owners should also openly discuss with their family what they intend to do with their super death benefits. Establishing strong personal relationships within the family is one of the best ways to avoid a family dispute in the future.

Changes to the taxation of employee share schemes

Changes to the tax treatment of employee share schemes, which took effect on 1 July 2015, means employees can now share in and gain from the future growth and success of a business.

The changes allow employees, who are issued with share options, to defer paying tax until they are able to grasp a benefit from the options. The new 15-year tax deferral period gives employees enough time to cash in their shares and options while removing the risk of paying an unfunded tax liability. This was a reoccurring issue when the maximum period of tax deferral was seven years.

As part of the improvements, eligible start-up businesses will also be offered a tax discount on employee options and share schemes. However, the start-up business, the scheme and employee must meet specific conditions to be eligible for the start-up concession.

The start-up business:
– must not be listed on the stock exchange.
– have an aggregated annual turnover of no more than $50 million.
– must be an Australian resident business.
– must have been incorporated for less than ten years before the share or option is granted.

The scheme:
– a share must be issued at a discount of 15 per cent of the market price or less.
– options must have an exercise price that reflects the current market value of a share or a greater value.

The employee:
–  must hold employee share scheme interests for at least three years.

Employees who acquire shares and held them for at least 12 months will benefit from the 50 per cent Capital Gains Tax discount when they sell their shares, including employees who acquire options that qualify for the start-up concession.

Securing the future of your business

It is inevitable that one day a business owner will have to leave their business. Whether they sell, retire or leave due to health reasons, it is important for business owners to plan what will happen to the business when that day eventually arrives.

Creating and implementing a succession plan can provide valuable benefits for a business. Succession plans can enable smooth transitions and decrease the likelihood of disruptions. Early succession planning can also maximise a business’s value to help it meet future needs.

A good succession plan will ensure the business continues to run smoothly when something unexpected happens to the owner that prevents them from working. No business should be dependent on one person for survival. Owners need to have a sound plan in place so that the business can run efficiently and grow without their sole management.

Small business CGT concession common errors

The ATO recently reported that small business owners were repeatedly making common mistakes when applying for capital gains tax (CGT) concessions eligibility tests.

A taxpayer may qualify for the CGT concessions if they:

– own a business with an annual aggregated turnover of less than $2 million;

– are involved in a partnership that owns a CGT asset;

– own active business assets that are used by an associated small business;

– satisfy the maximum $6 million net asset value test;

– satisfy the active asset test. This test requires the asset to be active for seven and a half years if owned for more than 15 years, or half the period of the ownership if owned for 15 years or less.

Business owners were recording the settlement date of the CGT event, instead of the contract date. As a result of this error, the asset may not be active for the required period or the 15-year exemption concession may not be applied correctly.

Many businesses struggled with the maximum net asset value test, where a business cannot own more than $6 million at the time the CGT event occurs. The net value is the total market value of a business’s assets and any entities and affiliates connected to those assets. The ATO revealed a prevailing error was the failure to identify liabilities related to the asset. In addition, business owners were also:

– not including the calculation of the CGT asset sold

– valuing assets at historical cost instead of market value, and

– not including calculations for goodwill assets.

Refund of excess non-concessional contributions

The Government recently made changes to excess non-concessional contributions, bringing the treatment of excess non-concessional contributions into line with the treatment of excess concessional contributions.

The changes eliminate double taxation, where individuals were being taxed at the top marginal tax rate even though they paid income tax on contributions prior to making contributions to their fund.

Members aged under 65 are allowed to contribute up to $180,000 each year to their super fund using after-tax funds known as non-concessional contributions. In addition, they can bring forward two years’ worth of contributions. However, they must not exceed a maximum of $540,000 worth of contributions over a three-year period.

Under the old rules, non-concessional contributions that exceeded those caps were taxed at the top marginal rate.

The new rules provide members, who exceed the non-concessional caps on or after 1 July 2013, with the option to release the excess plus 85 per cent of the associated earnings amount. This is the amount the super fund includes on the investments made with the excess contributions.

By making the election, members can avoid paying excess non-concessional contributions tax. The individual’s assessable income will include the associated earnings amount with a 15 per cent non-refundable tax offset. Members that choose to keep the excess contributions in their fund are taxed at the top marginal rate.

Where a member’s fund modifies their contribution information, or a member changes their deduction for personal super contributions, the ATO may amend their excess non-concessional contributions tax assessment and refund their excess contributions.

Developing talent within a business

Developing talent in the workplace can be cost-effective and save a business time in the long-term.

However, many employers tend to neglect this aspect of business improvement. They may not have time to implement development programs or they may only be focusing on what is needed now, instead of in the future.

But dedicating a few hours each week to develop, improve and extend the knowledge and skills of junior staff members can deliver significant benefits to both the employees and the business. Below are three simple ways employers can begin developing talent within their business.

1. Maintain the value of learning

Encourage employees to go further than just focusing on achieving business goals. Ensure they acknowledge both the outcome and the learning that occurred in the process of completing their project. Then discuss how they can apply their new knowledge to future business projects. Leaders should also be honest about their need to learn, and share how with their employees.

2. Create systems to support development

Assign employees, such as managers, to coach and develop other employees in different areas. It is important for employees to be self-aware and know their weaknesses so that they can track their progress.

3. Reinforce business values

Employees should be able to link their everyday tasks and responsibilities to the values in the business. Those who lack an understanding of their job role will struggle to find the motivation and dedication to complete tasks.