April 2023 Newsletter
Welcome to our April newsletter and, as the days are getting shorter, there’s definitely a bit of a nip in the air.
Share markets in Australia and overseas have rallied to end the month in a better position as the global banking system steadies itself and there are expectations of a tempering in rate rises. The ASX200 finished the month at about the same point it started after suffering a slump mid-month. In Australia, the gains have come largely from the mining sector and the strength of US markets.
Employment remains the economy’s good news story with the jobless rate still at a low 3.5% in February and job vacancies almost double what they were three years ago before the start of the pandemic.
Inflation is slowly coming down from its peak of 8.4% in December 22. The consumer price index (CPI) recorded a fall to 7.4% in January then 6.8% in February. The most significant contributors to rising prices remain housing, food and non-alcoholic beverages and fuel prices.
Buoyed by the CPI figures, the Australian dollar consolidated at near 67 cents against the US dollar after falls of 7% since February.
Falling residential property prices have caused a drop in household wealth, which decreased for the third consecutive quarter. Household wealth is now $14.4 trillion, as at the December quarter 2022, that’s 3% lower than a year ago.
King & Whittle wishes all our clients and their families a lovely Easter. May you have the happiest Easter holiday filled with joy, peace, and so many Easter eggs! And for those who celebrate Passover, we wish you peace and blessings. Thinking of you during this time of reflection and renewal.
11 tips for reducing costs in small business
Small businesses across the country will be looking for ways to reduce costs amid cost of living and rising price pressures.
Economic challenges are expected to continue into the 2024 financial year, from inflation and supply chain lags to higher interest rates and reduced consumer spending.
Businesses will need to keep a close eye on their income and expenses to maintain positive cashflow, Small Business Loans Australia founder, Alon Rajic says.
“As Australian businesses continue to face the repercussions of the last two years, a significant proportion will have challenges, particularly without a savings buffer or strategy to help meet their expenses,” said Rajic.
Small Business Loans Australia research set out to find out if fast-rising interest rates and inflation would impact small business’ ability and motivation to invest in themselves. Specifically, more than a quarter (29 percent) of respondents had not planned to invest in their business at all this financial year.
Three quarters of respondents (76 percent) admit their cashflow will be impacted by interest rate rises and inflation over the next year, it also found.
Specifically, 30 percent believe their cashflow will be impacted because it will be harder to collect customer payments, while 26 percent say it will be harder to attract sales. A further 20 percent say both issues will impact cashflow.
But before you take any extreme actions like reducing staff hours or letting workers go, here are 11 straightforward tips to begin minimising business costs today.
1. Take a systematic approach
The best starting place is to consider your key cost centres, such as purchasing, sales, finance, and administration, for example.
Go over your profit and loss statement for the past 12 months and rank your expenses from highest to lowest and comb through each one in search of cost saving potential.
Make sure you go back and look over your budgets and forecasts and see how you’re tracking.
Also, benchmark your business against industry standards. For example, your waste levels could be higher than the industry average, or others in your industry could be introducing sustainable business measures, which could be bringing them savings.
2. Uncover hidden costs
Costs aren’t always easy to spot in business, but they can add up quickly.
Hidden costs could be the rising cost of insurance policies, unused subscriptions, permits and industry memberships you pay each month even though you never enjoy any of the perks they offer.
Sit down and go through your bank account and track the expenses to see where you can make savings or do without.
Also, be sure to double check supplier invoices for any overcharging, double billing or discounts that haven’t been applied.
3. Sell off unwanted equipment
If you’re no longer using tools and equipment, don’t let them sit in the garage or stockroom gathering dust. Conduct an audit and convert what you can back into cash wherever appropriate.
Selling used or unwanted items brings in some extra cash, you’ll be able to put that money back into keeping the business running.
4. Negotiate with suppliers
Taking half a day out to shop around for lower prices could end up making you more money than you realise.
Call your bank and see if they will offer you a better deal on your business loans, and shop around energy providers to see how you might reduce your utilities overheads.
Start with your biggest expenses and work your way down the list.
5. Separate personal and business expenses
Put simply: don’t make personal purchases from the business credit card.
Separating out your expenses will mean you can account for them easily and it’s a great way to make sure you don’t miss out on tax deductions.
It can also make sure you aren’t mistakenly claiming for personal expenses, which will be frowned upon by the Australian Taxation Office.
6. Reduce spending
After all, a penny saved is a penny earned.
And that means it’s much easier to hold onto the cash you already have.
Set a budget, and follow it, and analyse where your money is being spent and where you can cut costs.
Even simple things like packing your lunch and purchasing a coffee
machine for the office can add up over time — that five dollars a day for takeaway coffee will wind up being around $1,300 over the course of a whole year.
7. Conduct a tech audit
Technology costs can add up, but if you’ve implemented tech a year ago that you’re no longer using, it can be a huge waste.
Go through your licenses and subscriptions that you don’t need or use to see what you can be culled.
It may be that you’re also hemorrhaging money due to inefficiencies in your systems — for example, if you’re wasting time and resources on manual data transfers between multiple software solutions.
A business management platform should include a broad variety of built-in features, allowing you and your staff to accomplish all your core business processes, such as accounting, payroll, inventory management and more.
9. Improve staff productivity
Employees not pulling their weight in the business can reduce efficiency and become a costly liability.
Assessing and improving staff performance can be a great way to reduce costs before resorting to reducing staff hours.
Set ambitious but achievable goals your staff can get behind and consider what business management tools you might need to help track productivity and performance.
9. Realign marketing budgets with performance
The sole purpose of marketing is to drive interest in your business’ products and services.
When times are tough, taking a close look at your marketing performance should be a regular occurrence to determine whether you’re getting value for money.
For instance, doubling down on your customer service may drive word of mouth outcomes that effectively boost the effectiveness of other marketing activities, or a targeted letter could deliver a new favourite customer.
Whether your analysis results in less spend or more, auditing your marketing budgets will help you gain a better understanding of where and when sales are coming in, and where your money is spent.
10. Reduce your space
Do you really need that shopfront or office space anymore?
We all learnt the virtues of running a virtual business over the past few years, so if you’re still leasing an office space, now could be the time to consider whether there are more cost-effective alternatives.
11. Seek out an expert
If you’re finding it challenging to cut costs, consider hiring an expert to suggest other cost reduction strategies.
The right advisor can help you audit your existing systems and processes, business and sales strategies, and make suggestions on how to sustain and grow your operations.
Don’t leave the hard decisions until too late. If you’re facing challenges as a result of the current high-cost environment, now’s the time to get active.
Source: MYOB November 2022
Reproduced with the permission of MYOB. This article by Nina Hendy was originally published at myob.com
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.
Illegal early SMSF access on ATO's radar
Since the Albanese Government announced its intention to double the tax on investment earnings for super account balances over $3 million, there has been lots of talk about taking money out of self managed superannuation funds (SMSFs) to avoid the tax hikes.
As SMSF trustees have more control of their super assets compared to those invested in a large superannuation fund, accessing your money, and moving it out of the super system can sound like an attractive idea.
But as good as it might sound, gaining early access to your super savings is illegal and it is an activity the Australian Taxation Office is increasingly keen to stamp out.
Trustee disqualifications rise
According to ATO assistant commissioner Justin Micale, nearly 300 SMSF trustees have been disqualified for illegally accessing their retirement savings in the first half of 2022-23, more than in the entire 2021-22 financial year. The ATO crackdown has seen $2 million in administrative penalties issued and an additional $4 million in tax collected.i
Illegal early release is one of the major areas of focus for the ATO’s SMSF enforcement team. “We are seeing an increasing number of trustees taking advantage of their direct access to their superannuation bank account and they are using these savings to pay for items such as business debts, holidays, renovations and new cars,” Micale told an SMSF industry conference.ii
In an attempt to stamp out early access, the ATO is checking funds that fail to lodge annual returns, while SMSF auditors are being encouraged to report SMSF loans or breaches of the payment standards – even if the money is repaid to the fund.
Legally accessing your retirement savings
The ATO scrutiny is part of a broader campaign to remind SMSF trustees of their responsibility to ensure if they access their super early, they do it within the super laws.
Generally, you can only access your super when you reach your preservation age and retire, or turn 65 even if you are still working. For anyone born after 30 June 1964, the preservation age is age 60.
To access your super legally, you must satisfy a condition of release. There are only very limited circumstances where you can legally access your super early and the eligibility requirements often relate to specific expenses or terminal illness.
It is illegal to access your super for any reason other than when it is allowed by the superannuation law.
Illegal early access schemes
Currently, a spate of illegal early access schemes are encouraging trustees to withdraw their super early to pay for personal expenses such as credit card debt, holidays, or buying property.
According to the ATO, promoters of these schemes usually charge high fees and commissions and request identity documents. This often leads to identity theft (which involves using your personal details to commit fraud or other crimes) and can take years to clear up. Your super savings could even be stolen.
The best way to protect yourself from illegal access schemes is to halt any involvement with a scheme or the person approaching you. Do not sign any documents or provide your personal details and contact the ATO immediately.
Protecting your SMSF
Keeping your fund details updated with the ATO is one of the best ways to help reduce the risk of fraud and illegal access to your SMSF.
Trustees should ensure their SMSF’s membership details are recorded correctly and the ATO is notified of any changes. This includes details such as the fund's bank account, electronic service address, trustees, members and contact details.
Regular updates ensure that, when someone initiates a rollover request from an SMSF the ATO’s SMSF Verification System (SVS) can verify the fund and member details. If the receiving SMSF does not have a 'registered' or 'complying' status, it won’t be able to receive the rollover.
To further reduce the risk of fraud, the ATO sends trustees emails and text alerts when changes are supplied about key details relating to a fund.
If you need help understanding the super and tax rules governing your SMSF, call our office today.
i https://www.afr.com/policy/tax-and-super/ato-disqualifies-hundreds-over-self-managed-super-scams-20230113-p5ccd4
ii https://www.ato.gov.au/Media-centre/Speeches/Other/SMSF-compliance---What-s-on-the-Regulator-s-radar-/
Stay safe from scams
Scams are not new, however scammers are becoming increasingly sophisticated, and it can be challenging not to be taken in, so it pays to be aware of the tricks scammers are using to hoodwink small business and individuals alike.
Unfortunately scams are not going away any time soon, with over 216,000 scams reported to Scamwatch during 2020, resulting in total financial losses of around $1.75 million dollars.i
Here are some recent scams to be aware of:
COVID-19 phishing
With increased communications being sent out due to the COVID-19 pandemic, this has also created ample opportunity for scammers. By pretending to be from official organisations, scammers aim to find out your personal information (such as your usernames, passwords, bank details, etc.) – this is known as phishing.
There have been emails and SMS messages impersonating the Department of Health and the ATO, providing links to what are purported to be information pages. One example is an SMS which says that you are due to receive a support payment and asks for your bank details.
To know what is real and what’s fake, don’t click on links in messages – instead visit the organisation’s website directly, or call them if in doubt.
Verifying your myGov details
Another common example of a phishing scam is receiving an email or SMS asking you to verify your myGov details. Often the message will have time pressure, saying that your account will be locked if you don’t do so within 24 hours.
You will get email or SMS notifications from myGov whenever there are new messages in your myGov inbox, however these messages will never include a link to log into your myGov account.
Automated calls regarding a suspended TFN
Your tax file number (TFN) is important for both you and/or your business’ tax and superannuation purposes, which is why hearing it has been suspended can be alarming. Linked to your name and date of birth, this piece of personal information should generally only be shared with the ATO, banks, your superannuation fund, the Department of Human Services and your employer.
Under law, any individual, organisation or agency that is allowed to ask for your TFN information must not record, collect, use or pass on your TFN (unless allowed under taxation, personal assistance or superannuation law).ii
A common scam involves an automated phone message advising you that your TFN has been suspended. The purpose of this is to convince you to pay a fine or transfer money to reactivate it.
The ATO do not suspend TFNs or need you to pay for reactivation, nor will they send unsolicited pre-recorded messages to your phone. So if you hear this scam message, hang up.
Tax debt
Another worrying message to receive is that you have tax debt that needs to be paid off. This scam is often done through SMS, voicemail and direct calls, whereby the scammer pretends to be from the ATO. They then will ask you for payment, which is often through methods such as cryptocurrency or gift cards.
Suffice to say this isn’t regular procedure from the ATO, so if you receive a call or message like this, ignore or hang up.
Scams are ever-evolving but are often based on similar concepts, as shown above. A helpful resource to keep up-to-date with current scams is the Scam Alerts page on the ATO website.
While scammers can be conniving and convincing, it’s important to err on the side of caution whenever you receive an unexpected message or call, or whenever your personal details are requested. Never give out any personal information unless you can independently verify the identity of the person or organisation you are providing it to.
Should you ever be unsure whether someone requesting your financial details is a trusted source, don’t hesitate to get in touch for our advice.
i https://www.scamwatch.gov.au/scam-statistics?scamid=all&date=2020
ii https://www.oaic.gov.au/privacy/your-privacy-rights/your-personal-information/your-tax-file-number/