With the end of the financial year upon us there is, as always, a scramble to secure a favourable taxation position to take advantage of concessions, cuts and other opportunities. However this year, in line with our comprehensive financial service offerings, we are seeing individuals and businesses take a broader approach to their wealth creation and management policies.

As such, in this edition of PULSE we explore the core financial strategies that provide the framework for an effective business plan. We then investigate the current taxation landscape and update you on recent adjustments and changes that may impact your bottom line. Finally, we take a look at the Single Touch Payroll system launch and how it will work for businesses and individuals.

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Financial Strategies within a Business Plan

Regardless of the marketplace or industry, every business should have a plan if they are going to be competitive. While there is a lot to consider, one of the key components of any sound business plan is its financial section. This generally consists of elements such as an income statement, cash flow statement and balance sheet among others.

To help ensure you have a comprehensive strategy integrated into your business plan, here are some principles and initiatives that will help strengthen your organisation:

Cash flow management

• Balance sheets can appear robust on paper, but if cash is not managed appropriately it can be enough to sink a small business.
• It is important to have transparency on how cash will be used in the business and to maintain an adequate amount of working capital. This will safeguard against any unforeseen costs that arise, or help when trying to secure new business projects in which quick access to cash is required (this is where a line of credit can also come in handy!).
• Having a healthy cash flow also negates the issue of a liquidity crisis and insolvency.

Planning purchases

• Having a procurement policy in place will help leverage positive debtor/creditor cycles.
• For example, if a supplier offers 60 day terms, many businesses will wait until the end of that period to make a payment. This allows an opportunity to generate and bring in the funds required to pay the supplier, creating what is known as ‘positive cycle’.
• It helps to periodically take a step back and consider how often you are collecting payments compared to paying creditors. Having a collections policy in place for outstanding invoices will assist in this area.
• Another tactic to think about is bringing forward planned purchases to take advantage of caps and tax concessions – but always make sure you have a plan around how you pay (cash, line of credit or credit card).

Growth strategies

• Most businesses have a vision to grow in size and scale to enhance financial outcomes. But if wages and general overheads take up most of an organisation’s finances and there are no cash reserves, the prospect of any expansion disappears.
• For those companies that have investors; implementing a buy-back reserve could provide an exit route for the existing shareholders, help achieve optimum capital position and provide shareholders with special dividends in the form of surplus cash.
• If a business is seeking to make long-term investments, outlining approval procedures for making changes to or liquidating some of the existing assets of the company is an important step in ensuring growth objectives are achieved and to avoid losing ground or even downsizing.

Budgeting requirements

• Having a comprehensive budget that has taken into consideration such elements as previous results, market conditions and any known requirements for capital expenditure is central to the financial health of a business.
• Identifying targets, how to achieve them and how to measure them are essential steps in the process. It is also important to review and track progress against targets at regular intervals. It’s not out of the ordinary to need to revise some targets, however if you are constantly shifting the goalposts it is an indicator that the budget was off from the beginning.

Flexibility in operational plans

• The financial strategy of a business plan, while detailed, is still a general guide. Even with specifics, such as approval processes for procurement, it is difficult to account for every potential situation that may arise for a business.
• Having a strategy that is fluid and accommodating – not rigid and fixed – will help an organisation to adapt to changing conditions and in turn find ways to not just survive, but to thrive.

Feedback mechanisims

• Creating procedures that provide feedback on the effectiveness of current organisational processes that are relevant to achievement of targets and objectives go a long way to ensuring the financial well-being of a business. It will help avoid nasty surprises that tend to become prominent towards the end of a financial year.
• This comes down to the quality of reporting measures implemented. Regular, thorough assessment of the accuracy and utility of financial reports should be conducted to make sure there are no holes in the bucket and you have clarity across all areas of your financial strategy.

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Post-Election Tax Update

The fallout from the recent Federal election has, of course, had implications for the economy. For most Australian families and businesses, changes to the tax system will be the most direct way they will be affected.

Following are some of the key points that it pays to be across as you prepare for the end of financial year:

Employee Share Schemes (ESS):

• Businesses with ESS need to start preparing statements as deadlines are fast approaching.
• ESS statements need to be provided to employees by 14 July 2019, and the onus will then be on the employers to provide details of all taxing events for each employee to the ATO by 14 August 2019.

Taxable Payments Reporting System (TPRS):

• Showcasing why it is imperative to be across all reporting requirements for your business, TPRS summaries are now to be provided to the ATO for all contractors employed in industries such as information technology, building and construction.
• For sectors like IT this is the first time the summaries have been required, so it may well be unfamiliar territory for many businesses. This highlights the importance of being prepared, and we strongly suggest contacting us if you are unsure of the requirements or how to go about meeting these corporate responsibilities.

Superannuation Guarantee Amnesty (SGA):

• If you’ve missed a payment or haven’t paid an employee’s super on time, you are required to lodge a Super guarantee charge statement and pay the super guarantee (SG) charge. This includes the application of the mandatory administration component of $20 per employee per period to SG charge statements lodged. The legislation to give effect to the proposed amnesty was introduced into Parliament on 24 May 2018. However, the legislation was not enacted and did not become law when Parliament concluded on 3 April 2019.

Superannuation Contributions:

• In order to provide greater flexibility for people approaching retirement, the government has announced changes to the superannuation contribution rules which are yet to take effect.
• Primarily, from 1 July 2019, individuals aged over 65 will be able to make voluntary superannuation contributions (both concessional and non-concessional) without having to meet the ‘work-test’ requirements. However it should be noted that the caps for voluntary contributions remain unchanged.

Planning opportunity:

• Individuals – Consider topping up your concessional contributions to maximise your savings and reduce your tax exposure.
• Businesses – Consider paying super contributions for employees before 30 June 2019.

Tax cuts and concessions:

In the 2019-20 Federal Budget unveiled on 2 April 2019, the Government announced a range of personal income tax relief measures for low and middle income earners. This relief, which has not yet been enacted, proposes to be provided by way of:

• • A significant increase in the Low and Middle Income Tax Offset (LMITO) from 1 July 2018 until 30 June 2022.

• An increase in both the top threshold of the 19% personal income tax bracket and an increase to the Low Income Tax Offset (LITO) from 1 July 2022.
• A reduction in the 32.5% marginal tax rate to 30% from 1 July 2024.

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Single Touch Payroll 101:  What you Need to Know

A new system is being rolled out in which businesses are required to submit employee payroll information to the ATO each and every time pay is processed. This initiative was given the moniker “Single Touch Payroll” (STP) and has been in place over the last year for businesses with 20 or more staff.

Most commonly used cloud accounting software systems (e.g. MYOB, Quickbooks and Xero) have already been updated to include step-by-step guides, what numbers to call for assistance and functionality for real-time interaction with the ATO.

Some of the key advantages of moving to STP include:

• It eliminates the need to create payment summaries at the end of every financial year.
• Statements including PAYG, super and group certificates will be generated automatically as the system is designed to pre-fill necessary information based off the data it collects throughout the financial year.
• The vast majority of statements and information will be available online, essentially doing away with paper-based communication from the ATO. You will be able to access all statements, including wage and superannuation information, directly via your myGov account.
• Instances of fraud, tax evasion and hiding data will be more easily identified with the ability to verify reported data against various sources to ensure accuracy.

If you feel overwhelmed or have any concerns regarding the new system – whether from a business or personal standpoint – please feel free to contact Chetan and the team on (02) 9997 4647 for assistance.

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Thank You!

To all our clients, thank you for another great financial year! We pride ourselves on delivering first class support, advice, strategy and management across the comprehensive breadth of our services, and deeply value our relationship with you.

We’re here for you, so should you require any assistance heading into tax time, please reach out!