Can you afford to sell your business?

rdl-businessA ‘Business Value Gap’ is the difference between the value of your business today and what you need it to be at time of sale. A shortfall can have a significant impact on your retirement plans and may force you to reassess your desired standard of living in retirement. Worse case – it may mean you can’t afford to sell.

Retirement should be the best years of your life – the time for you to reap the rewards your
labour. As you approach retirement you need to determine your business value gap.

Business value gap analysis

Do you know?

  • What your business value needs to be at time
    of sale?
  • How many years it is until you can afford to
    sell?
  • A future profit target that provides you a
    higher business value and a desired standard
    of living?

Business value gap analysis is a simple process of determining your retirement income and assets, business value (current and future) and strategies to improve business profit and wealth.

Grow before you go

If your business value gap analysis reveals a shortfall in business value then you will need to implement business strategies to improve your profit before you sell. For example, improving your average sale per customer will increase sales, gross margin and net profit. Knowing what your business value needs to be means you can calculate your future profit, gross margin and sales targets.

Value gap analysis provides business owners and managers with peace of mind from understanding the direct connection between business value and a future standard of living at retirement.

Interested in how we can assist you to maximise your business value? Contact Nigel Mason of our office – (03) 9878 1477 .

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Moving overseas? Don’t forget the ATO

passportNew laws commencing from 1st July 2017, will require those who are living abroad, and who have Higher Education Loan Program (HELP) or Trade Support Loans (TSL) debts to make repayments based on their worldwide income. This is a change from past practice which based repayments solely on Australian sourced income, and often meant that moving overseas could get you out of a study debt.

Under the new rules Australians who plan to relocate overseas for longer than six months will be required to provide the ATO with overseas contact details within seven days of leaving the country, and to keep these details up to date, using their myGov account. Travelers should be wary, however, as although the new rules don’t come in until 1st July
2017, the requirement to notify the ATO of contact details came into effect on 1st January 2016. Those already residing overseas will have until 1st July 2017 to advise the ATO of their contact details.

So, when you’re saying your farewells to family and friends for that secondment trip overseas, don’t forget the taxman.

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Capital Gains Tax and property – the sleeping giant

tax-propertyFrom time to time we get questions relating to Capital Gains Tax (CGT) and property. Here is an example of a common situation:

I bought my house in 2008 and expected to move in straight away, but there were tenants in the property and their lease still had 8 months to go. I waited for the lease to expire and then moved in. I have lived there ever since and plan to sell later this year. Will I qualify for a full CGT exemption?

This is a very common situation but it is probably overlooked much of the time. Unfortunately, you would not qualify for a full exemption in this case.
The main residence rules allow you to treat a property as if it has been your main residence since settlement date as long as you actually move into the property as soon as practicable after settlement. This is intended to cover situations where there is some delay in moving into the property due to illness or some other “reasonable cause”. The ATO’s view is that this rule cannot apply if you are waiting for existing tenants to vacate the property.

This means that some of the growth in value of the property will be subject to tax. It will be important in this case to gather as much evidence as possible of non-deductible costs that you have paid in relation to the property such as stamp duty, legal fees, commission paid to real estate agents, interest, rates, insurance, etc. This will help to reduce the amount of the gain that is subject to tax.

For further information regarding Capital Gains Tax and property, please send us an enquiry or call us on (03) 9878 1477 today.

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Survey provides a snapshot of Not-for-profits

IMG_3889_blogThe Institute of Community Directors recently released its findings from a survey of 845 Not-forprofit organisations. The survey was designed to obtain insights into financial management within the sector including funding, banking, risk management and governance.

The findings highlighted the difficulty faced by the sector in obtaining and retaining financial expertise at Board level, concluding that:

  • 53% of organisations noted difficulty recruiting suitably qualified treasurers
  • Most treasurers had been in the position for less than two years, indicating a high turnover

Of particular concern were the following findings in relation to fraud:

  • 6% of organisations had suffered from fraud within the last three years (estimated to cost the sector up to $38 million per year
  • 60% of frauds were not reported to the police.
  • The average loss from fraud was nearly $34,000
  • 79% of fraud was perpetrated by trusted insiders
  • 31% of organisations felt their employees and
    volunteers were trustworthy so no formal risk
    management process was necessary to protect
    from fraud.

Clearly there is a high degree of trust placed on employees and volunteers, sometimes to the detriment of the organisation. In this regard organisations need to consider whether they have become too reliant on the personal integrity of employees and volunteers. A good start in addressing this is the ACNC Protect Your Charity from Fraud Guide. Then come and talk to us about how we can help you design tighter financial procedures.

If you would like ,any further information, please send us an enquiry or call us on (03) 9878 1477 today

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Investing in a low rate environment

graph-image“Lower for longer” has been a common theme running through interest rate markets for the past few years. So how should investors be positioning their portfolios in this environment?

Official interest rates in the US have been at zero for more than nine years now and Australian official rates have remained at historically low levels for the past eight years, as you can see from the chart below. And many market observers believe interest rates will remain at very low levels around the world for some time to come.

 

So should you be adjusting your portfolio to a low rate environment?

BT Technical Services Manager Bryan Ashenden cautions against investors making significant changes.

“Provided you already have a well-diversified portfolio that is appropriate for your attitude to risk, then your best policy is to stick to your long-term strategy,” he says.

However, Mr Ashenden recommends investors discuss the issue with their financial adviser and ask whether a tilt to certain assets in their portfolio may be appropriate.

Low interest rates tend to be supportive of growth assets such as shares and property, as interest expenses often make up a significant portion of costs borne by businesses and investors. So, investors with a longer-term horizon may consider increasing allocations to shares and property to take advantage of higher income and greater potential for long-term capital growth.

In general, the aim of lowering interest rates by banks is to encourage individuals and businesses to invest and spend and therefore increase economic growth. The prospects of growth in the economy is ultimately what drives sharemarkets. So, if central banks are successful in their attempts to increase spending and investment, it is generally good news for the sharemarket.

But Mr Ashenden cautions that the direction of interest rates rather than their absolute value can have a more significant bearing on growth assets.

“Rising interest rates can have a detrimental effect on shares and property as businesses and investors adjust to higher costs of doing business,” he says.

To ensure your investments are working hard for you during this low-interest rate period, please send us an enquiry or call us on (03) 9878 1477 today.

 

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Daydreaming about your next holiday?

saving-for-holidayTravel has evolved significantly over the past 20 years, with many travellers looking for something with more adventure such as walking treks in New Zealand, cooking experiences in Tuscany, cruising on the Mekong River, or travelling through Australia’s beautiful outback.

With all this extra adventure, the need to prepare financially has become even more important. The last thing you want when you come home from a life-changing trip is to have a large debt hanging over your head. And you certainly don’t want to be worried about money while you are away from home.

Here are 5 ideas on how to make savings part of your journey.

 

1. Start up a dream list or spreadsheet

While you are daydreaming about your trip and imagining your travel experiences, jot each of them down and add your estimation of the cost next to each dream item. Keep adding to this list as your planning evolves,  making sure you add in big ticket items such as flights, tours, petrol, eating out, accommodation and shopping. If you find your expenses are getting out of your reach, divide them into “needs” and “wants”.

 

2. Set up a dedicated savings account

Look for a savings account that is easy to use and has a competitive interest rate and conditions that suit you. Adding money to this account as often as you can will make you feel more positive about preparation for the trip and reduce financial anxieties.

 

3. Consider a garage sale

Garage sales are a great way to pare down possessions, create space in your home and add to your travel adventure fund. Selling unwanted items on eBay or Gumtree can be equally effective. Any extra income you can earn may mean you can make a special purchase on your trip or perhaps fund an accommodation upgrade or a side tour for your efforts.

 

4. Prepay as much as possible

Pay for accommodation and day tours before you go. You’ll have more time to scout for the best deals before you leave and then have more time to focus on enjoying yourself while you’re away. Use rewards program points to pay for flights or accommodation.

 

5. Consider swapping your credit card for a debit card

Credit cards can carry additional expenses and provide a temptation you don’t need. Debit cards remove that temptation as you can only spend what you have. Another alternative is a specialist travel card which allows you to purchase spending money in different currencies before you leave. If you need help getting your finances organised for your trip, please, send us an enquiry or call us on (03) 9878 1477 today.

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ACNC extends transitional reporting

When the ACNC was introduced, transitional arrangements were put in place to allow the ACNC to accept reports prepared for the state regulators for two years. This allowed charities that were also preparing financial accounts for Consumer Affairs, for instance, to lodge exactly the same set of accounts for the ACNC, even though the requirements are different.

That two year period was due to expire 30 June 2016, but has recently been extended for another year.

Now that its future is secure, it is expected that the ACNC will have more success working with state regulators to reduce duplication in the longer term.

Read the Commissioner’s announcement here.

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ACNC here to stay

A little more certainty has been provided to the charities today with the announcement that the Government will retain the Australian Charities and Not-for-profit Commission (ACNC).   A recently released report commissioned by the ACNC indicates that cutting unnecessary or inefficient regulation could save charities up to $29 million.  With its future now secure, the ACNC is now in a better place to champion red-tape reduction for the sector.

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Survey provides a snapshot of Not-For-Profits

The Institute of Community Directors recently released its findings from a survey of 845 not-for-profit organisations. The survey was designed to obtain insights into financial management within the sector including funding, banking, risk management and governance. The full report is available here.
The findings highlighted the difficulty faced by the sector in obtaining and retaining financial expertise at Board level, concluding that:
• 53% of organisations noted difficulty recruiting suitably qualified treasurers
• Most treasurers had been in the position for less than two years, indicating a high turnover
Of particular concern were the following findings in relation to fraud:
• 6% of organisations had suffered from fraud within the last three years (estimated to cost the sector up to $38 million per year)
• 60% of frauds were not reported to the police.
• The average loss from fraud was nearly $34,000.
• 79% of fraud was perpetrated by trusted insiders.
• 31% of organisations felt their employees and volunteers were trustworthy so no formal risk management process was necessary to protect from fraud.
Clearly there is a high degree of trust placed on employees and volunteers, sometimes to the detriment of the organisation. In this regard organisations need to consider whether they have become too reliant on the personal integrity of employees and volunteers. A good start in addressing this is the ACNC Protect Your Charity from Fraud Guide which is available here. Then come and talk to us about how we can help you design tighter financial procedures.

By Claire Harris

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On the ATO’s radar: Trusts distributing to tax exempt beneficiaries

The Australian Taxation Office has advised of its intention to conduct a review to assess whether trusts are compliant with the anti-avoidance rules when distributing trust income to tax exempt beneficiaries. These rules aim at preventing trustees from using tax-exempt bodies to sradar-screenhelter income.

The ATO will be targeting situations  where the ‘pay or notify rule’ and the ‘benchmark percentage rule’ apply. The first rule relates to situations where a tax exempt entity is entitled to income of the trust estate but has not been paid nor notified of the entitlement within two months of the end of the financial year. In such instances, the ATO will disregard the beneficiary’s entitlement to the trust’s income. The second rule applies when the tax exempt entity’s share of the trust’s net income exceeds a benchmark percentage. In the ATO’s view, the tax exempt entity will not be entitled to that proportion of the income.

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