Budget 2013: Medical expense tax offset to be phased out

The Government intends to phase out the out-of-pocket medical expense tax offset. Currently, a 20% tax offset can be claimed for eligible out-of-pocket medical expenses in excess of $2,060 per annum. For general medical expenses, only taxpayers who claim the offset for the 2013 income year will be eligible to claim in future years.

Individuals who have expenses relating to disability aids, attendant care or aged care will continue to qualify for an offset up to 2019.

Budget 2013: Self-education expenses capped

The Government announced in last night’s Budget its intention to limit the allowable deduction for self-education expenses by individual taxpayers to $2,000 per annum from 1 July 2014.

The limit will apply to all self-education expenses such as tuition, books, courses, computer equipment as well as travel and accommodation relating to seminars, courses etc.  However, the proposal is far reaching and will impact on individuals wanting to improve their professional qualifications. Small businesses can continue to help staff with additional training and skills by offering any courses or tuition as a fringe benefit, which will be exempt from any caps.

Changes to thin capitalisation rules expected in Budget

With the Federal Budget being released next week, many are speculating that the Government will be cracking down on business concessions with thin capitalisation rules being targeted. The rules which affect large, multinational companies may have unintended consequences for small businesses. For example, if a big business is forced to downsize it could hit smaller suppliers in a domino effect, possibly resulting in closures and creating struggling businesses.  There were expectations by the business community that any changes to thin capitalisation would be offset with a company tax cut; however, this has been ruled out by the Treasurer in light of deficit concerns.

Furthermore, the proposition to change thin capitalisation rules hint at an increase in the capital gains tax which would have far reaching consequences for the entire business community.

Inflation remains under control

Official inflation figures released for the March quarter show consumer prices for goods and services remain under control.

The inflation figure from the Bureau of Statistics came in at 0.4 per cent, with the annual rate of consumer price increases at 2.5 per cent, slightly up from the 2.2 per cent level in the previous December quarter. The Consumer Price Index (CPI) was within the Reserve Bank’s forecast of between 2-3 per cent and was below market expectations, leaving some to wonder whether this will give scope for further interest rate cuts.

The figures released showed a 7.6 per cent rise in the average price of pharmaceutical products, a 6.5 per cent increase in tertiary education costs, 3.7 per cent rise in the price of tobacco and a 1.2% increase in the price of fuel.

However, the cost of household goods and services decreased 1.3 per cent, with furniture and textiles falling to 6.8 and 6.7 per cent respectively. Clothing and footwear was also down 3.9 per cent compared to the previous quarter in December.

As a result of the low inflation figures, the Australian dollar is poised to remain around the US $1.05 through to mid next year.

RBA may take measures to deal with high dollar

The Reserve Bank has warned it may have to cut interest rates in order to ‘counterbalance the pressures’ of the strong Australian dollar according to a senior official at the RBA.

However, the RBA shed doubt on whether it would intervene in a ‘somewhat’ overvalued dollar by selling the currency, and would instead look at other responses. The central bank also warned that cutting interest rates too far could also create problems for the economy- forcing up the prices of assets and generating excess credit expansion.

Guy Debelle the RBA’s assistant governor noted that the RBA’s interest rate cuts had less of an impact on mortgage rates over the years, due to higher banking costs such as competitive pressures in the deposit market.

Increase in Australian business fraud

Australian businesses have lost $373 million dollars due to major fraud in the past 2 years, a three-fold increase in the past 15 years, yet are lagging behind addressing fraudulent behaviour as a serious issue.

There has also been an 82% increase in individual cases of fraud exceeding $1 million, with the finance sector hit the worst, according to an Australia wide survey on fraud conducted by KPMG.

Despite evidence of its continuing problem, only 15% saw fraud as a key risk in their business.

Those most likely to commit fraud tend to have been with the company for a long time, with 91% having a known history of fraud and 82% earning close to $100,000.

The survey also addressed the time it takes fraud to be detected, with an average of 665 days passing before an incident is reported or identified by a business.

The most common fraud methods, according to the survey, included false invoicing, theft of cash and fraudulent tendering. But technology is also playing a bigger part in fraud cases as hackers become more adept at cyber attacking company networks.

Financial planning for the festive season

In order to avoid the post festive credit card blues, planning and creating a budget well in advance will mean less debt stress in the New Year.

A few key things to remember:

1. Try making it an all-cash Christmas. It is surprising what a difference a few $20 or $50 notes tucked away here and there can make when it comes to buying Christmas presents.
2. Look through credit card statements to see how much is left to repay. While keeping this in mind, create a spending budget which also includes the potential interest, in order to be better prepared for the repayments.
3. Implement a few tried and tested money saving tips such as doing a secret Santa with a cap on the amount spent, and asking those coming to the Christmas party to bring in a plate of food.

It will also help to squeeze in a few extra repayments to the credit card bill, mortgage or loan before Christmas, so that there will be less to pay off in the New Year, even if the Christmas budget goes off track.

Attract customers with Christmas marketing tips

1. Offer an exact delivery date. This may appear difficult, but with some planning and organisation businesses can guarantee customers an all important delivery date- key to securing pre-Christmas sales.
2. Word emails well: According to the survey, the words “Christmas/New Year” and “sale” had the highest email opening rate, followed by “% off” and “Christmas/New Years”.
3. Consider gift idea campaigns. Not everyone will have the time leading up to Christmas to choose from a full catalogue. It may be a good idea to package and suggest a few key items that will allow customers to cross people off their Christmas wish list.

Implementing a few key strategies can work wonders in increasing Christmas sales and generating business interest in the all important festive season.

Federal Government passes Fair Work Amendment Bill

The Federal Government has finally passed the Fair Work Amendment bill, which includes both minor and major changes to industrial relations law.

Some of the key changes:

– Unfair Dismissal. The big issue for small businesses is that the new legislation has extended the unfair dismissal application to 21 days.

– Fair Work now has more power to strike down applications for award rate changes that have no reasonable prospects for success.

– There are some major changes to the role of unions, with Fair Work ruling that bargaining notices have to be more specific and that union officials can no longer be a bargaining representative for employees that do not belong to that union.

-There are also a few key changes to enterprise agreements, with clauses that allow employees to ‘opt out’ now prohibited. As well the act now bans anyone from making an enterprise agreement with just one employee.

Business Fraud

Last year business fraud over $100,000 hit the courts more than 61 times, totalling more than $131 million.

There are a few ways to minimise the potential of business fraud happening.

–       Start at the recruitment phase. Look for employment gaps in the potential employees history, do an internet search to see whether someone left under improper circumstances.

–       Notice different or anti-social behaviour of employees. Also look for circumstances changing, such as their partner losing their job or an illness in the family. These things happen to everyone, but it can cause a lot of stress and anxiety and may cause them to find risky solutions to their problems.

–       Check on the accounting systems in place. Avoid having all the business asset eggs in one basket. Separate responsibilities for those who record and those who have power to confirm any changes.

– Regularly review bank reconciliations to check for a growing discrepancy between accounting records and actual cash and be aware of who can authorise payments and change accounting records.