EDITION 3/2015

Positive financial solutions...for positive financial outcomes

Sydney + Melbourne + Brisbane + Perth + Adelaide + Hobart + AucklandChartered Accountants + Business Advisors

Inside this issueBig Brother is watching The tax office is collecting information to check if you’re cheating

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If you haven’t declared income in your tax return and think you got away with it – think again. The ATO’s increasingly sophisticated systems mean ‘big brother’ has an eye on you.

Recent job cuts at the Australian Taxation Office (ATO) may have people thinking they can get away with lodging incorrect tax returns. However, a very powerful computer system used for data-matching gives the ATO a significant amount of information from other sources. This information is cross-referenced to information in tax returns to catch any discrepancies.

Most taxpayers who use a tax agent to lodge their tax return already understand this to some extent. Tax agents can access interest income, dividend income, PAYG payment summaries and private health insurance details. However the information the ATO receives and its data matching ability go way beyond these relatively simple sources.

The ATO data matching system has the power to compare lifestyle to declared income. For example, information received on boats and cars is compared to declared income to see if lifestyle is comparable to the income included in a tax return.

Below is just some of the information that the ATO is using to cross-check against declared income.

+ Credit and debit cards – data is received from all four major banks, the smaller banks, American Express and Diners Club. This data identifies credit and debit-card sales made by Australian businesses to ensure all income has been declared.

+ Specialised payment systems – data is collected from electronic payments made to Australian businesses through payment systems such as Ezidebit, EzyPay, PayPal Australia and BPay. This data is analysed in conjunction with the information collected from credit and debit card matching.

+ Online selling – transaction data is obtained from Australian online selling sites (including eBay and Gumtree). The ATO targets registered sellers whose trading activity exceeds $10,000 annually, as this may indicate an online business is occurring.

+ Share registries and land registries (state and territory based) – data on ownership change is collected from both registries. This information is then matched to capital gains events declared in tax returns.

+ Contractor payments – data is collected from payments made to contractors by businesses.

This information is used to identify taxpayers who may not be registered correctly and/or not declaring all their income.

+ Motor vehicle registries – data is obtained from all state and territory motor vehicle registering bodies to identify all motor vehicles sold, transferred or newly registered with transfer and/or market value exceeding $10,000. This may have implications for GST, fringe benefits tax and claiming fuel tax credits.

+ Overseas income and assets – this has been in the news recently following the ATO’s ‘Project DO IT’ last year. There are now data-sharing treaties with many countries around the world including Britain, most of Europe, Asia and the USA. This information is used to identify undeclared income and overseas assets.

There are many other sources of information used by the ATO for data matching in addition to those mentioned above. More than ever, it pays to be honest and upfront. Penalties for undeclared income can be as high as 75% of income omitted, as well as interest charges on the outstanding tax liability.

Please contact your local Accru advisor if you have any questions about how this issue may apply to you.

BY MARTIN RUSH, ACCRU PAGE KIRK JENNINGS, PERTH

Big Brother is watching

APLUS EDITION 3/2015

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Budgeting for small businessMany business owners go through life without exploiting the power of budgeting in their business. Simon Hilton explains why it’s worth taking the time to prepare a budget and the many advantages it has.

A budget, or forecast, is a forward looking document. It reflects the financial agenda and desired outcomes for your business into the future. ‘Budget’ can sometimes be a dirty word to small business owners yet it serves many useful purposes – six are outlined below.

The advantages of budgeting 1 It’s easy for business owners to get

caught up in the day-to-day grind and neglect the sort of planning needed for the business to prosper and achieve its goals. The budget preparation process will force you to think about where the business is heading and to commit to it in numbers.

2 The formulation of a budget will enhance your understanding of what drives your business. It will focus you on profitable activities and make you think to the future. A proactive business will prepare a detailed annual budget and cash flow forecast, but will also set a longer term, high level forecast that demonstrates what the business is aiming to achieve financially. A document such as this is essential for succession planning and exit strategies.

3 Budgeting provides an accountability framework if administered properly. This doesn’t simply mean expense management. A good budget will make everyone in the business, from Sales and Procurement to Human Resources, accountable for their commitment to the future.

4 When properly converted to a three way forecast, a budget will forecast cash requirements over a longer period and assist in proactive cash flow management. It should be seen as a management tool, not a bank requirement.

5 The use of forecasting can demonstrate the impact of cash flow management strategies, such as better debt collection or improving the stock ordering process, which in turn creates well aligned actions for the business.

6 A budget commits the business owner to a plan. Too many businesses have good intentions but don’t achieve them because they are time poor and constantly fighting fires. A written financial commitment in the form of a budget, together with regular review of achievement to date, can sharpen the focus of the business owners and management team.

Where to start?

Budgeting doesn’t have to be a time consuming process. Simple budgets can be done in a matter of minutes. However, once business owners implement the process, inevitably they spend more time on the formulation as they understand the powerful difference it can make to their business.

The availability of cloud accounting software, with its advantages of real time data and accessibility, means that implementing effective budgeting and reporting, including interaction with management and advisors, is now easier than ever.

Whilst many business owners don’t have the time or expertise to prepare a budget, they should look to initiate the budgeting process in their business and embrace its benefits.

Your local Accru office can assist with all aspects of budgeting from formulation, forecasting and building accountability to management and KPI reporting to measure progress to your plan.

BY SIMON HILTON, ACCRU MELBOURNE

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The weakest link – underperforming workersThe frustration of an underperforming member of the team makes work life difficult, and resolving things can challenge even more experienced business leaders. Here are some practical tips from the front line.

Nobody really wants their gravestone to read: “I worked for fifty years, achieved nothing and got away with it.” Most people come to work wanting to perform well, and as leaders we should try to make that as easy as possible.

Underperformance at work can arise for many reasons. For example:+ Misunderstanding about

expectations of the role and its contribution to the firm

+ Not understanding team priorities and goals

+ Not being clear about required behaviour

+ Lack of awareness of their poor performance or behaviour (with no objective feedback)

+ Inadequate skills or knowledge

+ Insufficient confidence about applying good skills in the work place.

I often see workers with the necessary skills and knowledge perform below their capability – because they can’t apply their skills. Such lack of confidence can be debilitating to the individual and the performance of the team and business.

One sure way to undermine a worker’s confidence is to directly criticise their performance in personal terms, in front of others, and with a tone or body language that is annoyed or threatening.

Lifting productivity and performance is as much about confidence as skills. Feedback to underperforming workers is still important, so that they can improve performance by understanding expectations, but how this is delivered is critical.

Top tips:+ Use a rule called ‘two to twenty

four’. Provide feedback not earlier than two hours after an incident, and no longer than twenty four hours. Feedback is then recent and relevant. Allowing two hours after seeing poor performance makes it less likely you will exhibit unhelpful body language or a negative tone.

+ After talking, a worker ideally owns the solution rather than feeling responsible for the problem. ‘People taking responsibility for their own actions’ may be a useful life philosophy, but it can prove costly in the workplace.

+ Use de-personalised language. Try to talk about the event or work, rather than using the word ‘you’ and don’t get caught in the blame game. Blame and guilt can corrupt team culture like a bushfire in a drought.

+ Ask questions rather than statements when providing feedback. This enables people to own the solution and to feel they have been a successful contributor by resolving a problem which they were a part of.

+ Be clear about what steps can be taken to improve the performance. This can be very simple (from them being aware of behaviour of an improvement required, through to training or on the job support).

+ Ensure there is a time planned for follow up so that the support and follow-through is given.

There is no need to wait until underperformance is serious to provide this feedback. The more frequently feedback about underperformance is provided, and the less serious the issue, the lower the risk that serious poor performance will occur.

BY STEVE NAYDA, ACCRU HARRIS ORCHARD, ADELAIDE

Industrial Fittings Sales Bucking the trend in Australian manufacturingBY MARK MACKIE, MANAGING DIRECTOR, INDUSTRIAL FITTINGS SALES PTY LTD

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IFS are manufacturers and wholesalers of brass fittings and other components used in the engineering industry. Starting in 1989, we have grown to be Australia’s largest wholesaler/manufacturer of this product and sell through a network of resellers throughout Queensland and West Australia.

State-of-the-art manufacturing

When the business started, we were using subcontractors in Melbourne to make our core products. After three years, we realised that we needed to manufacture our own product to ensure its quality, and started manufacturing using extremely old capstan and indexing style lathes.

Since then, we’ve come a long way. Our machine shop is now a modern, automated, repetition workshop using robot technology and CNC machines to manufacture the majority of our core product.

Expanding into gas components

Some of our brass fittings are used in the domestic, commercial and industrial gas industry. As a result of this, we were always getting asked for other gas products by the gas fitters who dealt with us. So in 1999, we started Gas Components Australia as a division of IFS Pty Ltd. This has now grown to be an integral part of our operations, accounting for around one third of our turnover. We have increased the product range to encompass a huge variety of products needed in the installation of gas services.

Continuous improvement

In 2011, we achieved accreditation to ISO9001 by Standards Australia, recognising our efforts to achieve consistent, high quality operations and products. This, along with other continual improvements, has ensured that IFS has

remained competitive in our changing market, one which has seen the GFC and is currently experiencing the mining industry slowdown.

Key strengths

Our major strength is our people, with over 15 staff having been with us for 10 years or more. We value our employees and try to be an employer of choice, where each staff member is not just another number.

Our second major strength is our financial planning and reporting. We were lucky to have great accountants to start with who gave us a strong foundation and taught us the value of good accounting and reporting from the very first days. Unfortunately after 15 years, our accountant became ill and couldn’t continue his practice. For the next eight years, we tried different accountants who didn’t meet our high expectations.

Finding Accru

Around two years ago, we were introduced to Accru and our account manager, Brendan Watson, who made

a very good impression on the Directors. It’s taken a couple of years for Brendan to fully understand how we operate and want to operate. Now with Accru and Brendan, we are getting ready for the next 25 years.

Celebrating success and looking to the future

In 2014, we celebrated 25 years in business with a golf day and dinner dance for over 100 customers and staff. It was a great day with several start up customers present to help us celebrate the success of our company.

The future will be challenging, with the current Directors planning succession via an Employee Share scheme which Accru will be very closely involved with implementing. Also a national company is in the pipeline which will take considerable planning and implementation.

New products, growth and planning will help make us viable for the next 25 years. We need to ensure we are always evolving, and this makes for exciting times.

Manufacturing in Australia is a shrinking part of Australia’s industrial landscape - its contribution to total GDP is half what it was 30 years ago. Yet in the same time period, Industrial Fittings Sales (IFS) has grown exponentially - from just two staff to over 50. Mark Mackie shares his company’s story.

APLUS EDITION 3/2015

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Auckland

Accru Smith Chilcott Level 5 57 Fort Street Auckland, 1010 PO Box 5545, Wellesley Street, Auckland, 1141 New Zealand

Tel + 64 9 379 8035 Fax + 64 9 307 8892

Brisbane

Rawsons 160 Wharf Street Brisbane, 4001 GPO Box 2773, Brisbane, 4001 QLD, Australia

Tel +61 7 3839 3666 Fax +61 7 3839 3599

Sydney

Felsers Level 6 1 Chifley Square Sydney, 2000 NSW, Australia

Tel +61 2 8226 1655 Fax +61 2 8226 1616

Melbourne

Accru Melbourne 1st Floor 123 Camberwell Road Hawthorn East, 3123 PO Box 268 Camberwell, 3124 VIC, Australia

Tel +61 3 9835 8200 Fax +61 3 9882 1932

Perth

Page Kirk & Jennings Level 2 52 Kings Park Road West Perth, 6005 PO Box 790 West Perth, 6872 WA, Australia

Tel +61 8 9424 5700 Fax +61 8 9481 0609

Adelaide

Harris Orchard 172 Fullarton Road Dulwich, 5065 PO Box 2268, Kent Town, 5071 SA, Australia

Tel +61 8 8431 1488 Fax +61 8 8431 1441

Hobart

Accru Hobart Level 1 18 Ross Avenue Rosny Park, 7018 PO Box 28, Rosny Park, 7018 TAS, Australia

Tel +61 3 6244 5044 Fax +61 3 6244 7319

PRIVACY STATEMENT: If you prefer not to receive this publication please call us on the number shown.DISCLAIMER: This publication is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific professional advice. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted. All firms in the Accru network are autonomous and separately accountable members of Accru and CPA Associates International Inc. Liability limited by a scheme approved under Professional Standards Legislation © 2015 Accru. All rights reserved.

A QR Code is a type of barcode that is used to store useful information, like web URLs and contact details, and transfer it to your smart phone.

To use a QR code, you’ll need to download a QR code reader app to your phone. Two free ones are TapMedia’s QR Reader for iPhones and Google Goggles for Androids. Once you have the app, use it to take a picture of a QR code. It will automatically perform the action the QR code asks you to.

QR codes are a quick, easy way to access changing content. The code can take you direct to an up-to-date website or LinkedIn page, unlike print material which goes out

of date quickly. QR Codes are also a great way to avoid typing in long URLs.

They can be useful on:+ Business cards - scan a business

card and easily add a person to your phone contacts or Outlook

+ Print advertising - go direct to product videos or promotions, or to social media pages

+ Product packaging - access useful resources, like customer service phone numbers and user manuals

+ Event tickets - link to a Google map, RSVP page, or materials that attendees need to bring.

Despite the advantages, QR codes have been slow to catch on, perhaps because businesses need a mobile optimised website to use them, the codes can take up a lot of space on print items, and there is as yet no standardised reader for users.

See what you think…

Scan the QR code above to go direct to Accru’s news blog for more news stories.

QR Codes explained

Have you seen those bar codes in magazines or posters and wondered what they are all about? Here’s a quick explanation.

Accru Tax Guide 2015/16 app now available!

You don’t have to be an accountant to like this app. The latest update tells you key tax rates, calculates your income tax and tracks mileage – and it’s still free.

The app features

+ Quick tax guide – 2015/16 rates & rules for personal tax, superannuation, company tax, FBT, CGT

+ Calculator to work out bring home pay and tax payable

+ Motor vehicle log book tool to keep a running total of mileage. Over 5000 downloads to date!

Get it from Apple iTunes or Google Play