|INTEREST RATES UNCHANGED|
The RBA met this morning and decided that its present interest rate target of 3.5% is appropriate for the moment.
That rate is below neutral and there are indications that it is having the desired effect on the domestic economy. There have been numerous examples of positive economic news of late with retail trade improving, house prices rising and new home approvals on the increase. Our actual GDP growth rate is over 4% which is a 5-year high.
The downside of our relative economic prosperity is the consistently high value of the dollar which appears to have stabilised somewhat at around $US1.05. There are inflationary impacts imbedded in having the dollar that high and if it begins to move even higher, the Bank may be forced to move to reduce rates before the end of the year.
|DIRECTOR PENALTIES FOR UNPAID PAYG AND SUPER|
Legislation introduced on 29 June has empowered the Tax Commissioner to make directors personally liable for PAYG and super contributions if they are unpaid or unreported for 3 months.
It ensures that where directors do not report their tax obligations for PAYG or superannuation guarantee within the prescribed reporting timetables, they will be personally liable for the debts if they remain unpaid and unreported for more than 3 months.
The intention of the new law is to collect more from corporate taxpayers and provide an incentive for directors to prepare BAS and other tax returns on a more regular basis.
One of the uncomfortable outcomes for directors is that the change means that any company that had not reported its PAYG liability or superannuation by 29 June will be liable as of 29 June, if the debt was more than 3 months old.
|ETP'S AND REDUNDANCY - THE RULES HAVE CHANGED|
The 2012 Budget proposed reforms to the way Employment Termination Payments (ETP's) would be taxed after 1 July 2012. The legislation to give effect to these reforms has now been passed.
An ETP is a payment made in consequence of termination of employment and includes golden handshakes, payments in lieu of notice and, depending on the amount, genuine redundancy payments. Under the old rules, all ETP's were aggregated and taxed at concessional rates which were capped and detemined by the age of the employee.
From 1 July 2012, however, there is a cap (ETP cap) on the amount which can be taxed concessionally. For 2012/13 the cap has been set at $175,000. In order to achieve the desired outcome a second cap known as "whole of income" (WOI) has also been introduced. The two caps will work together and may, in effect, reduce the amount subject to more generous tax treatment. There is a twist however, and that is payments made as a result of a genuine redundancy are not subject to the new rules, but remain taxed as they were under the old rules. For these, the WOI cap is irrelevant and the standard cap will always apply - they are referred to as excepted ETP's. It is therefore now necessary to identify which payments forming part of an ETP are excepted ETP's.
Not everyone will be worse off under the new rules. Those who are disadvantaged will be those who are unable to use the full amount of the standard cap that would have been available under the old rules.
While little can be done where an individual resigns from their employment, the timing of redundancy can have significant impact. Deferring redundancy to the next financial year may be of particular benefit if other income is likely to be significantly lower. This may allow for a greater amount of the ETP to be taxed at the more concessional tax rate.
Employees using their own digital devices, such as smartphones and tablets, at work can pose significant risks to your business.
While bring-your-own-devices (BYOD's) can deliver cost benefits, including employee satisfaction, the downside is that they may harbour potentially unsafe applications downloaded from app stores, jeopardising the security of company data such as email lists and personally identifiable information.
If such information is lost or stolen it can have significant impacts on your business. Measures which may be adopted to mitigate the damage include:
* Introduce and enforce a simple BYOD policy. For example, are specific devices permitted to the exclusion of others? Who will own and pay for the devices and plans? What apps are allowed and what are banned? What kind of IT support is to be provided if devices break down? Will loan devices be available?
* Clearly establish who owns what apps and data. If you wipe a lost or stolen phone, will you replace personal music or apps if these too are erased?
* Ensure that each device is protected with a strong, lengthy alphanumeric password and set up each device to wipe out after a limited number of incorrect password attempts.
* Consider adopting technology such as mobile device management, which can segregate personal and corporate data and provide stronger controls over corporate data.
* Establish an employee exit procedure. Consider the steps for when employees with devices on your BYOD platform leave your business. For example, how will you enforce the wiping of access tokens, email access, etc.
|BUSINESS SUCCESSION PLANNING|
Small businesses frequently reach a stage in their life cycle wher the founding owners need or want to issue equity in the business to key employees or family members. WHen this occurs a number of questions need to be considered:
* What is the business structure?
* Is it intended that the employee or family member pays for the equity? If so, how is that to be funded?
* What are the intended objectives of the equity participation?
* Is it intended that the participant receives a regular income stream such as a dividend on their equity. If so, how is the amount to be determined?
* What is the intended exit process?
The answers to these questions not only drives the commercial outcome but also the tax consequences. The myriad of tax issues to consider include matters such as capital gains tax (CGT) on exit, CGT value shifting, company and trust loss provisions, fringe benefits tax (FBT) Division 7A and many others.
In many cases clients say they want to issue equity in their business which is possible for those being operated in a company or trust structure, but not if it's a discretionary trust.
In situations where there is equity, the next question is whether or not the principals transfer some of their equity. Generally the principals are content that the employees or family members be permitted to acquire equity, but do not wish this to give rise to any CGT consequences for themselves. This often means an issue of new equity is required. The issue of new equity brings with it a range of other matters that need to be considered such as CGT and prior year losses. Where shares or units are acquired at a discount, there are tax implications for the acquirer.
Where the business owner provides a loan to fund the equity acquisition, consideration should be given to the FBT and Division 7A implications.
Beyond the tax issues, principals need to give some thought to commercial and legal ramifications including:
* To what extent will new shareholders be involved in decision-making?
* To what extent will confidential business or financial information be divulged to new shareholders?
* What restrictions, if any, will be placed on transfers oif the equity?
Many of these issues should be dealt with in a shareholder's agreement, but if not, then all stakeholders need to be clear about expectations and the influence they will or will not have on the business as a consequence of owning equity.
All of these matters need to be considered and communicated at the outset to ensure that incoming shareholder expectations align with principal expectations.