Avoiding SMSF disputes

By 10 September 2020 Super
Avoiding SMSF disputes

One of the benefits of SMSFs is the amount of control you have from managing it yourself. However, self-management can leave room for disputes among related parties, especially when family members are involved.

SMSF disputes can be caused by a number of factors, such as relationship breakdowns, (common in funds where parents and siblings are in a member and trustee relationship) and fundamental differences in opinions. Other common triggers for SMSF disputes include:

  • investment strategy disagreements,
  • differences in opinions over the payment of benefits, especially in SMSFs involving both parents and their children,
  • payment of death benefit disputes, and
  • disagreements on the distribution of SMSF death benefit payments between surviving members.

Consider the following methods to avoid SMSF disputes.

Clear decision-making procedures

Disagreements are bound to occur when it comes to money, so it is important to include concise decision-making provisions to keep things fair for all parties involved. For example, trustee decisions can be made by a simple majority rather than unanimously, and a particular trustee may be provided a casting vote in the case that a deadlock occurs. Provisions could also include voting rights that are based on the value of a member’s account balance within the SMSF to avoid situations where a member with minority interest out-votes a member with a large fund account balance.

Updating your SMSF regularly

A SMSF trust deed will provide provisions which determine the trustees’ rights, obligations and options. It is important to keep your SMSF and trustee information up to date to prevent any unwanted beneficiaries and claims. For example, in the case of an unfinalized divorce or legally unchanged relationship status, a former spouse can claim the others’ superannuation death benefits. To prevent such situations and avoid disputes, be sure to update your super fund regularly.

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The critical steps to a successful partnership

By 10 September 2020 Business
The critical steps to a successful partnership

It is a tall order to ask for a business owner to manage everything alone, much less lead their business into success. This is why many successful businesses are born from partnerships.

Partnerships can be advantageous to business owners looking to balance their complementary talents and personalities. Sharing the experience of running a business can make the whole process more enjoyable, especially with a partner who is liked and respected.

However, partnerships are not without their disadvantages. Disagreements are bound to happen over time so it is important to formally structure the relationship. To ensure business success and the longevity of your relationship, there are a few important steps to take when laying out the groundwork for your partnership.

Sort out the basics with your partner first
Be sure to cover issues such as:

  • Business ownership division. Who owns what percent?
  • Decision-making processes. How are business decisions made? Who has final authority? How are disagreements settled?
  • Partnership responsibilities. What are each partner’s responsibilities? How much time and money will each partner contribute? Can partners work in other positions at the same time?
  • Partnership breakdowns. What happens when a partner wants to sell? What happens when a partner dies or becomes disabled? What happens if you want to bring on an additional partner?

Draw up a written partnership agreement
Solidify all the key issues that you have discussed in a legally binding contract. This is to ensure that parties involved are held accountable to the agreed-upon terms of your partnership. Also make sure that contract is drafted with professional legal advice and assistance.

Choose an appropriate business structure
Discuss with an accountant what legal form your partnership should take. This is important to determine your level of involvement in a partnership. For example, a simple partnership does not provide protection for any party’s personal assets.

Consider a buy-sell agreement
A buy-sell agreement acts as an insurance policy for partnerships in the event that a partner dies or becomes disabled, wants to sell their share of the business, or leaves the business. Buy-sell agreements can resolve disputes or differing goals by transferring business ownership and reducing the risk of business failure after a partner leaves. Always seek professional advice before drafting a buy-sell agreement to ensure all situations are covered and the contract is neither too advantageous or disadvantageous for one party.

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Readapting to working from the office

By 10 September 2020 People
Readapting to working from the office

As businesses are looking to bring their employees back into work, it is important to ensure that your workstyle practices allow you to seamlessly integrate into working from the office. Try adopting these changes to make your transition into the office space easier.

Structure your daily routine
Working in an office space structures your day, and this is an important feature to bring into your work day even when you’re working from home. Create a work-based routine that will work for you at home and at the office. For example, you may find that using the first hour of the day to respond to emails and enquiries, and using the later part of the day for meetings works best for you. It is important to stick to that routine as best as you can to then provide yourself some structure when you go back into the office.

Prepare for distractions
Without the common distractions that an office space comes with, employees may find that they are more productive at home. Consider incorporating collaboration meetings and calls into your work day when working from home. Brainstorming sessions and daily stand-ins can be great ways to reintroduce socialisation with your colleagues to make social interactions productive and less distracting. Consider setting boundaries if you feel that you need to reserve portions of your day for important tasks, and let your colleagues know so they don’t distract you.

Maintain stability
Working from home has left employees with a lot more free time during the day, allowing them to pick up new hobbies and interests. These are activities that may have been a source of relaxation when working from home so try to continue indulging in these activities once you transition back into working from office. Upskilling for personal fulfilment can be rewarding and even contribute to better mental health and wellbeing.

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Division 7A and private loans

By 10 September 2020 Tax
Division A and private loans

It is not uncommon for businesses to provide loans to shareholders or associates of a company. However, business owners should know the conditions that their loan must satisfy under Division 7A, to avoid the amount being deemed a dividend.

Written agreement
Division 7A loan agreements need to be made under a written agreement before the private company’s lodgement date. As a minimum, the written agreement should:

  • identify the parties,
  • set out the essential terms of the loans (e.g. the amount and term of the loan, the interest rate payable under the loan), and
  • be signed and dated by all parties involved.

Minimum interest rate
Loans must have an interest rate greater than or equal to the annual benchmark interest rate outlined in Division 7A. The benchmark interest rate for 2020 is 5.37% and will be 4.52% in 2021. This interest rate needs to be applied for each year after the year in which the loan was made.

Maximum term
The maximum term for a loan agreement is seven years. If the loan is secured by a registered mortgage over real property, the maximum term is 25 years. For this maximum term, the market value of the property (not including any other liabilities for securing the property prior to the loan) must also be at least 110% of the amount of the lo

Refinancing loans
From the 2007 income year onwards, loans that can be refinanced without resulting in a deemed dividend include:

  • An unsecured loan which is converted to a loan secured by a registered mortgage over real property can have the loan term extended (with relative terms).
  • A secured loan which is converted to an unsecured loan with a corresponding reduction in the loan term.
  • A loan which becomes subordinated to another loan from another entity due to circumstances beyond the control of the original entity.

If these loan conditions are not met, Division 7A of the Income Assessment Act 1936 applies and the loan is deemed a dividend. This dividend is treated as taxable income and the company receives no tax deductions for its loan to you or your shareholders.

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FBT exemption for businesses with emergency assistance

By 3 September 2020 Tax
FBT exemption for businesses with emergency assistance

Businesses that provide benefits to employees during an emergency situation are likely to have assistance costs be exempt from fringe benefits tax (FBT).

It is worthwhile to know what kinds of benefits you as a business owner can provide for different emergencies that will be excluded from FBT. Exemptions will apply to benefits you provide to employees who are being impacted by or will be potentially impacted by:

  • A natural disaster, such as a bushfire, flood or cyclone.
  • An accident, such as a car accident.
  • A serious illness, such as cancer.
  • An armed conflict, such as a war.
  • A civil disturbance, such as a riot.

The types of benefits you provide to your employees that can be exempt from FBT include health care, temporary repairs or emergency needs such as food supplies, clothing, accommodation, transport or household goods.

Short-term benefits you provide to an employee such as temporary repairs to damaged property due to a natural disaster are exempt from FBT. However, long-term benefits provided to employees after an emergency event will not be exempt, such as a replacement car, new house or ongoing renovations.

When providing health care, there are certain requirements that must be followed. FBT exemptions only apply to health care provided:

  • For an employee of yours or from a related company.
  • On your premises or the premises of a related company.
  • By a company doctor at an accident site.
  • At or near an employee’s worksite.

If you decide to pay for your employee’s ongoing medical or hospital bills, then the FBT exemption will not apply.

The costs of benefits would be deductible to the employer but not assessable to the employee and will not appear as part of their salary and wages on their payment summary.

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Why excess super contributions can be expensive

By 3 September 2020 Super
Why excess super contributions can be expensive

A great way to grow your retirement savings is by making regular contributions to your super fund. However, there are limits to extra contributions which when exceeded, may be subject to additional tax liabilities.

Concessional contributions

There are two kinds of contributions, concessional and non-concessional, which have different contribution caps. Concessional contributions are payments made before your income tax is deducted, and can include super from your employer and salary sacrificed contributions.

When these contributions are made to your super fund, they are taxed at 15%. This tax rate is increased to 30% if your relevant income is over $250,000.

Total super balance of less than $500,000 on 30 June of the previous financial year may permit you to carry forward unused concessional contributions under your cap on a rolling basis for up to five years. Members may also be subject to a Division 293 tax if their combined income and contributions are greater than the Division 293 threshold.

Excess contributions made over this cap are included in their assessable income and will be taxed at a marginal rate. Members are also entitled to a rebate equal to 15% of the excess contributions to account for the tax paid in the super fund. To offset any benefit received from making excess concessional contributions, an excess concessional contributions charge (ECCC) applies.

If members have been advised that they have exceeded their concessional contributions cap by the ATO, the member can choose to release 85% of the excess contributions from their super within 60 days of receiving the notice, which will then be used to pay the additional tax.

Alternatively, the member may also choose to not release excess funds and leave the contributions in their super funds.

These excess contributions that are released are non-assessable non-exempt income.

Non-concessional contributions

Non-concessional contributions are payments made after income tax has been paid, and includes all after-tax contributions and spousal contributions. Not unlike concessional contributions, non-concessional contributions are subject to an interest penalty to offset the investment returns from the concessionally taxed environment.

A concessional contribution cap that the member has chosen not to release will be treated as a non-concessional contribution cap. In this case, the member will receive an excess tax assessment and the excess contribution is taxed at 47%.

To mitigate penalties from breaching their caps, it is advised that members complete their tax returns at the earliest, which can bring down the period over which the interest is calculated. Adding back excess concessional contributions in assessable income may affect personal income tax and affect tax rebates like medicare levy surcharge and division 293 tax among others.

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Tips to reduce churn for your business

By 3 September 2020 Business
Tips to reduce churn for your business

Acquiring new customers can often be simpler than retaining existing customers. However, loyal customers give your business a higher chance of succeeding.

Unhappy customers stop doing business with you, negatively affecting your business’ growth. The rate at which your business is losing customers is called churn rate. It can be crucial to address this churn rate to keep it from lowering your revenue and profits.

Consider using the following strategies to reduce churn and improve your customer loyalty.

Analyse churn causes

This is a simple but important step in understanding why your customers are leaving your business. A high churn rate can be explained by a variety of causes including being offered better value elsewhere or simply low levels of connection to your brand. Consider talking to customers who have not returned to understand why they cut ties. This can act as a double-whammy from not only finding out the reason, but also in then showing customers that your business cares about losing them. This can be through phone calls, emails, website and live chat interactions or even social media.

Accessible information

You may find that your customers are having trouble with the functionality of your website or your product. Consider providing free information, training, video tutorials and product demos that are easily accessible to your customer. This can make your product more user-friendly and help customers feel more comfortable – which can be the key to retaining them.

Categorise your customers

Some customers are more likely to leave than others, and need to be categorised into an “at-risk” segment. These are the customers who may have asked for a quote or more information, and were not given direct answers. These can prompt customers to lose interest in the business, so proactive communication with the ‘at-risk’ segment is crucial in retaining them.

Improve customer engagement

Customers wanting to contact you should have minimal trouble accessing your website or contact details. It can be beneficial to ensure that there are no broken links within your website, and that your address and contact information is updated. You may also want to consider setting up a live chat or a mobile app for your business to improve response rate with your customers. This makes it easier for customers to interact with your brand and purchase your products – which can give you the competitive edge.

Having exclusive promotions and offers can help inspire customers to purchase your products, but consistent communication efforts and implementing changes that address the root causes for leaving is key to keeping your new customers happy and onboard longer.

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Managing work-based anxiety

By 3 September 2020 People
Managing work based anxiety

Studies have shown that while only 9% of individuals have a diagnosed anxiety disorder, 40% experience ongoing stress or anxiety in their daily lives. For many, work can be the source of constant stress.

Signs that you may be feeling anxious at work include excessive or irrational worrying, sweating, increased heart rate, feeling jittery, or tiredness and fatigue.These symptoms can not only make it difficult to focus and excel at work, but can also reduce job satisfaction, affect your relationship with coworkers and managers, and lead you to turn down work opportunities. This is why it is important to make the effort to manage work-based anxiety so that you can get the most out of your experience at work.

The first step is to acknowledge your work-based anxiety. If you have been feeling anxious at work for months or years, it may almost seem like it is a part of the job. However, this is often not the case. Talking to your coworkers or supervisors about how you’re feeling can be helpful to clarify how others in similar roles are managing their stresses and to identify whether you might be putting unnecessary pressure on yourself. Being mindful of your work anxiety instead of ignoring it can also help you identify what is causing it. From there, you can prioritise tasks or situations that might reduce your anxiety.

Overworking and overthinking is a common source of work-based anxiety. Taking breaks when you feel too busy can seem counterintuitive, however, working for long stretches of time without a break can decrease your ability to properly focus. Allowing yourself to take a break and eat adequate meals throughout the day can refresh your mind and make it easier to concentrate when you return to work.

Another factor that can worsen work anxiety is feeling tired and fatigued. Poor quality sleep can also significantly impact your ability to perform well and make you more susceptible to stress and moodiness, which can contribute to feelings of anxiousness at work.

Individuals who feel like their work stress is no longer manageable should consider working together with coworkers and managers to develop strategies to tackle this stress.

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Improving cyber security for your business

By 3 September 2020 Business
Improving cyber security for your business

COVID has prompted businesses to go digital, making cyberattacks an easy job for scammers. Small businesses are especially at risk because of the lack of resources to purchase high security tools and software. Consider using the following strategies to avoid each type of risk to give your business the extra protection it needs.

Avoiding Phishing

Employees may receive emails that invite users to click on links attached to them. These emails can often mimic a casual interaction with a client or business partner, or even your electricity or telephone company. The most effective way to prevent phishing is to be more vigilant with responding to emails. Most organisations do not require personal information like bank details or date of birth over an email, and requests for these should raise a red flag. Checking email addresses for subtle misspells, pop-up messages and invoices for products you never purchased are common tactics to get you to interact with the link.

Anti-virus software

A traditional antivirus software can fail to pick up on newer forms of malicious codes that are used to steal passwords and your personal account information. Consider regularly updating your antivirus software to ensure that all firewalls are up (across all the computers used in your business). It can also be crucial to update your operating system and continually back up your folders and drives to make sure that you are able to access your information in case of data loss.

Securing your network

An unsecure network can cause a variety of security issues, including essentially granting access to anyone who wishes to join your network. Setting up a wireless network usually comes with a default password, and it is important to ensure that this password is changed. For heightened security, consider using multiple networks that separate guests, staff and contractors, for example, to complicate security breaches for hackers. It can be a great idea to use tools that generate random passwords to improve encryption across all your networks.

Multi/two-factor authentication

A growingly popular method of improving security is to use two different sources to identify the user trying to log into their accounts. This typically involves a combination of two types of verification like pins, passwords, fingerprints or a card. While criminals may have stolen one of these proofs, it can be harder to obtain your second proof of identity when being prompted to verify.

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What to do before consolidating your super

By 28 August 2020 Super
What to do before consolidating your super

The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds’ policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
  • Insurance policies
  • Investment options
  • Ongoing service fees
  • Performance of the funds

Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
When consolidating your super, you will need to have the following details ready:

  • Your tax file number.
  • Proof of identity. This could include your driver’s license, birth certificate or passport.
  • Your fund’s superannuation product identification number (SPIN).
  • Your fund’s unique superannuation identifier (USI).
  • Details of your previous fund.

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