The reserve bank decided to keep rates on hold at 4.75 per cent despite recent news that inflation was running higher than expected.

It’s good the Reserve Bank have decided to wait and see if the higher inflation is temporary thanks to recent disasters and seasonal factors, rather than attack it with another interest rate rise.

Households are already facing increased living costs and will be grateful they don’t have to dig deeper into their pockets for at least another month.

The official interest rate is now 4.75 per cent and mortgage holders on variable interest rates are being charged a standard variable rate of about 7.83 per cent by their lenders.

Mortgage holders should always try to pay extra off their loan to give themselves a buffer in case rates do rise. 17 months can be wiped off the average new mortgage and save $30,085 in interest by paying an extra $60 per month or about the equivalent of a 0.25 per cent rate rise.

Considering taxation in the early stages of a start-up is important to long-term success. Generally, when starting up a business, the most immediate concern to new entrepreneurs is profitability, with taxation somewhat near the bottom of the priorities list.

Financial and tax advisors recommend incorporating taxation issues into start-up thinking, especially into the company structure, systems and procedures that are put in place in order to ensure smooth business flow and keep open options for the future. It is important to build some flexibility into your plans and take a long-term view as much as you can.

Here are the top tips for entrepreneurs:

1. Structure the business appropriately from the outset. A lot of Clients trade using company structure for a few years and then decide to sell the business. Problem: They don’t have a great tax structure or that, if they want to change it, it will cost them a lot of money, because if it is put into a new entity it is likely to incur costs such as stamp duty and capital gains tax.

2. Remember you are building a capital appreciating asset that may require disposal in the future. Make sure if the asset is to be disposed of in the future then the business is established from the outset in a structure through which you will be able to get capital gains tax concessions. This will more than likely mean having another entity where the individuals are able to get access to capital gains tax concessions such as a unit trust or family trust which can, for example, own the intellectual capital of the business and obtain any goodwill asset at concessional rates.

3. Research and take advantage of available concessions for small businesses. There are many types of opportunities depending on the business size and industry. Examples include grants, research and development concessions and export assistance. 

4. Are you eligible to defer your GST obligations for 12 months? The GFC affected many new and existing businesses which are now struggling to maintain a steady cash flow. In recognition of this, the Federal Government has a program for eligible applicants to defer their tax payment obligations and general interest charges for 12 months. This program began on 1 June 2009 and has been extended until 30 June 2011.

To be eligible your business must have:

• An annual turnover of less than $2 million
• Activity statement debt
• A mutually acceptable and sustainable payment arrangement with the ATO

5. Another ATO initiative is the Entrepreneurs Tax Offset. It is a tax offset equal to 25% of the income tax payable on your business income if you have an aggregated turnover of $50,000 or less. Once your turnover reaches $75,000, the Offset phases out. This is suitable for someone in their first year of business which allows them a discount on the income tax payable. It applies to a sole trader, a partner in a small business or a beneficiary of a trust which is connected to the business.

6. Let good business and investment decisions, not taxation, drive expenditure. Many business owners buy the latest and greatest version of machinery or technology in order to obtain large depreciation expenditures to keep tax bills down. Ultimately, their tax bills may be lowered but they don’t have any cash because they’re minimising their profitability. Let sensible and good business decisions drive investment, not tax. Tax should be a secondary concern to building a long-term, sustainable business.

7. It’s important to understand the benefits of management accounting information. It is about creating focus for the people who are running the business about where they need to direct their attention and their efforts. The reporting needs to be simple and understandable.  Choose accounting software that enables you to achieve basic outcomes such as meeting compliance obligations like quarterly GST payments. Many small businesses are run very successfully by using off the shelf accounting software such as that supplied by MYOB and Quicken.

8. Don’t over complicate reporting systems, or you may have trouble identifying the drivers of your profitability. Be disciplined about maintaining up-to-date data and using good accounting software. This will keep the relevant numbers fresh and ready for analysis at any time. Quarterly GST reporting also helps keep this information current.

Q: I have great sympathy for the businesses which were battered by the floods, fires and cyclones in Australia this year. These things can happen to anyone, any time. What should I do to make my business disaster-proof?

A: Identify which data and applications are critical to your business, then ensure you have them backed up off-site. Cloud-based storage facilities are ideal as they are stored securely on the internet. Always keep your back up data off-site so if something does happen to your business, you can retrieve the information after the incident.

Develop a workplace continuity plan. After a natural disaster your employees may not be able to make it to work for days or even weeks. Consider what your employees require to do their job from another location. Access to company information, data and an e-mail system may be required. Again, cloud-based systems may be the best solution for easy access.

Prepare a disaster response strategy. Work with your team to develop an evacuation procedure, develop a plan to save any key assets and securing the worksite against any damage. This type of plan will have a huge impact on the personal safety of your staff and the survival of your business.

Q: My business partner is not pulling his weight. I do all the work while he takes 50 per cent. What should I do?

A: Have a robust conversation about the business, the businesses performance and the performance of each partner. Be specific. This conversation is a great opportunity to agree to responsibilities, roles and deliverables for each of you. In many business partnerships, one person will do a lot of the revenue generation, while the other takes on more of the operational role. More often than not the one putting in long hours to fulfill customer expectations will begin to resent the colleague who appears to have the less stressful or demanding role. Although it may not seem the case, this person is also fulfilling an equally important function of the business. Be sure to clarify and quantify how you each add value to the business.

Measure each other’s contributions by value, not by hours worked.  To get the partnership back on track, you need to communicate frequently. Hold regular partner meetings.

Seek professional advice about protecting yourself, the partnership and the business. Having the right structures in place will help if there is ever a serious conflict.

Q: Some of my staff are happy to be paid overtime, but others prefer time off in lieu. What are the rules around this?

A: Firstly, check the conditions of employment in the relevant award or enterprise agreement. If there is nothing in there in relation to how overtime is to be handled, you should go by the default position of the National Employment Standards. This states that all employees must be paid for their overtime. Remember it is you or your manager’s responsibility to approve all overtime before it is worked.

Generally, employees covered by the same employment instrument (an award or an enterprise agreement) should be treated the same way: either they all get paid overtime or they all get access to time in lieu. Obviously what works for one employee may not work for another. You can offer both options to your employees. Just remember you will need to keep separate records for those who are paid overtime and those who receive time in lieu. So only do this if you are prepared to do so.

Time off in lieu is calculated at the ordinary time rate. For example, an hour of overtime equals to an hour off work. However, some of the modernised awards, employees are to be given up to two hours of time off for each hour of overtime worked. To look up the detail of the award covering your employees, for to www.fwa.gov.au which is the website of Fair Work Australia, the national workplace relations tribunal.

Doing the job is one thing. Getting paid is another. Here is what you can do to make sure your business is getting what it’s due, when it’s due.

Good News! You’ve just secured your business a big client. The bad news is firms with 500 or more employees are the worst offenders when it comes to paying their bills. So what can you do to make sure you get paid and fast?

1. Invoice Early, Then Follow Up

All businesses would like to get paid as soon as the job is finished. In reality, the bigger companies often have their own standard terms, and they may not match yours. Invoice as soon as you can and keep your payment terms as short as possible. Make sure all your invoices include all the relevant and correct information, including purchase order numbers, billing addresses and contacts because often it’s an administrative issue that prevents the invoice from being paid in good time.

Try exploring the early bird discounts. It may be better to offer 10% discount for payment made within seven days rather than wait more than 2 months for the money to arrive. The success of the early bird discount comes down to how it’s worked into your overall pricing. Rather than skimming off the top, you could charge late clients and extra 10%, while rebating those who pay on time.

2. Spell Out Your Terms

If you don’t detail your credit terms, customers will make up their own. And they will always pay their suppliers who put their credit terms on their invoices before their suppliers who don’t. Try giving a “terms of trade” document to every new client when going through the sale process. This will give them a clear idea of what, when and how they should pay you. Implement a solid credit risk process as this may prevent  you from taking on a customer with a history of paying late. Always get a credit check before extending them credit no matter how big your customer may be.

3. Make It Easy For Your Customers To Pay

Electronic payment can help get cash into your bank account faster. You’ll bear a small cost for the processing of payments, but your funds will be credited into your nominated account overnight. Many banks and business lenders offer 24/7 automated phone bill payment facilities which allow for credit card payments to be authorised over the phone. This makes it easy for your customer and efficient for your company.

4. Avoid Cash-Flow Woes

If your cash flow is under pressure, you’re probably familiar with the practice of using credit cards to fund the shortfall, but there is another way – invoice discounting. This is where another business or lender offers to fund your business by purchasing your invoices (minus a previously agreed fee). You will have the cash flow to keep afloat between payments.  The amount you’re advanced usually depends on the length of time that the invoice is outstanding and from whom you’re borrowing. Take the time to compare the services offered by the different financiers; minimise amounts and fees.

5. Call In The Experts

A letter of demand will usually prompt your customers to pay you. The threat of legal action is often enough to convince them to part with their money. If not, it’s time to call in the experts. Professional debt collectors aren’t just for the big firms. Many small businesses don’t have a dedicated team to manage their credit risk so passing overdue debts to the experts can be the best option. Debt collectors are usually paid on commission  and is generally around one-third of the collection amount, though rates vary. You can also charge your customers this cost if you have included it in your “terms of trade”.

More Time…That’s what we all long for.

The biggest challenge for small business owners is finding enough time to achieve everything they want. Denis Healy, executive director of global productivity productivity specialists PEPworldwide, observed time pressures are not only stressful for individuals, they can also have a negative impact on the business.

There are many ways to find more time in your day. Rachel Clements, Centre for Corporate Health organisational psychologist says “working smarter can deliver a big saving in time”.

1. Take Stock Of Your Goals

Write down your goals for your business and list the steps required to realise them. Take into account how much time you spend every week on surprises, ad hoc events and well known appointments such as meetings and then you will know how much time you have available to achieve your goals.

2. Forget Being Efficient – Aim To Be Effective

Derek Stockley has observed many small businesses work hard at being efficient (“doing the job right”) rather than being effective (“doing the right job”). You get so caught up running your business day by day you forget the most important things, like expanding your business or planning for the future. Be sure to stop every so often and make time for the things that really matter.

3. Be Realistic Not Reactive

If your work involves much contact with customers or clients, avoid letting responses to queries and demands take up all of your time. Many small businesses feel their relationships with their clients is the most important thing so they operate in a very reactive way. Complete tasks in a logical order and be realistic about what you can achieve for each client. Deliver a realistic amount of work on a given day rather than promise a quick turnaround and fail to meet the deadline.

4. Prioritise Tasks As Soon As They Come In

Divide tasks into three categories:

• What must be done
• What should be done
• What could be done

Always start the tasks in the first category. These tasks should be your imperative tasks. If you have time left over in the day then begin those in the second category, these tasks are your important tasks. Only when they’re finished should you consider doing the third group.

5. Don’t Overload Yourself

Many of us spend a lot of time repeatedly juggling and sifting through all the things we have to do. This means we often feel overwhelmed, stressed and helpless with the amount of work we have ahead of us. Clear your desk and make a short, realistic list of things you can achieve in the next day, week, month or year.

6. Designate a “Power Hour”

Try to allocate an hour a day in which no-one is allowed to interrupt you. Don’t take any calls and don’t check your emails. You will be surprised at how much you can achieve when you are not interrupted.

7. Be Fully Equipped

You don’t want to waste any time looking for things on your desk or in your office space. Make sure you have a clean and well organised area each day. Try cleaning your office space each night before you leave. If it’s not needed…throw it away!

8. Protect Your Interests

Unless your issue is more important than what you are doing, don’t allow interruptions by colleagues, clients or friends. If someone drops by your office and asks you if you have a minute, be polite, but firm and say “No, I don’t. I’m working on a deadline,” then offer to schedule a meeting for another time.

9. Control Your Entries and Exits

It can be quite awkward drawing a meeting to a close when it is being held in your office and your colleagues are in the mood for a chat. If possible, try and hold the meeting in a meeting or conference room or in another colleague’s office. This way you have control of coming and going and not having to ask others to leave.

10. Streamline Meetings

For each meeting, create an agenda and allocate time for each item listed. Invite your colleagues only for the items that are relevant to them. That way, your colleagues will spend a limited, but productive time in the meeting.

11. Start The Stopwatch

Activities such as returning phone calls and checking e-mails can clutter up your whole day. Try making a list of tasks that would each take up around 5-10 minutes. Then challenge yourself to get them completed within an hour. This will give you a great sense of accomplishment when you succeed.

12. Plot Your Phone Calls

Write down the key points of each phone call you are going to make and think about what you are going to say before you make the call. Also return calls in order of priority, not in the order you received them.

13. Learn To Delegate

Many people in small businesses believe  it would take too long to teach someone to perform a task which they themselves could complete in half the time. This is known as a “short-term fix”. Spend the time to teach your staff. Well-trained staff members who get job satisfaction from being trusted to work without constant supervision are a valuable resource to have in your company. Also, once they are competent in the task, they could save you from having to do it in the future giving you more time to concentrate on your urgent tasks.

14. Quit Procrastinating

If you are procrastinating over something, do that task first. Sometimes procrastination can lead to lost business opportunities and can also have a damaging psychological impact. Generally, procrastination is about fear of failure and can lead to self-sabotage. Nine times out of 10 you will feel a sense of confidence and accomplishment once the task has been completed.

15. Get Subscription-Savvy

Rather than spending time every day roaming through newspapers or searching the internet for work related news, try subscribing to industry newsletters which include valuable information to your business. You don’t have to do any of the work and the news is there for you.

16. Set Up Your Google Alert Feature

Google Alert is an internet monitoring service which delivers any new items relating to your preferred topics directly to your inbox. For example, particular industries, markets or even developments in your local community. This is a great way to always be informed without having to go out and find the news.

17. Take Control Of Your Inbox

If you receive thousands of e-mails in a day, try dividing them into folders in your inbox. Deal with the most important e-mails first or if possible, deal with the e-mails with similar subjects at the same time. File the less important e-mails into a “read later” folder. Try switching off your e-mails at a certain time of the day to prevent being distracted.

18. Colour Code Your Emails

Set up your inbox so that e-mails from certain contacts appear coloured. For example, organsie your system so e-mail from staff appear red, e-mails from collegues appear blue and those from friends appear green. This will enable you to see an overview of your inbox and you can deal with the important e-mails first.

19. Dodge The Spam

Research shows there is an estimated 294 billion spam e-mails travelling around the world and somehow manage to find your inbox. If eliminating spam e-mails takes time, try investing in an effective spam-filtering software for your computer so you don’t need to deal with the issues that come with them.

20. Outsource Your IT Support

Avoid using internal personnel for IT support within your company. There can be a lot of issues with allocating your staff to IT support such as unavailability and not to mention the costs. IT specialists generally have around 10 or more staff who will be available to deal with your urgent requests. They can put their heads together to come up with solutions for your IT issues leaving you and your staff free from software maintenance duties and more time to concentrate on the more important things.

21. Catch Up With Mobile Technology

Experts are encouraging small businesses to invest in smartphones (like iPhones and Blackberrys) so key staff members can work on the move. The software on the devices allow you to synchronise with your information on your office computer so you are always up to date and have access to your information such as e-mails and calendars when you are not there.

22. Know Your Patterns

Think about when your most productive part of your day is. Are you a morning person or an afternoon person? Schedule your most mentally challenging work for that time of the day. Most of us slow down after lunch. If this is the case for you, try and do your less important tasks then.

23. Be Easy On Yourself

Don’t bully yourself too much when you haven’t achieved everything you had hoped. Punishing yourself is only going to make you more stressed and less effective. Try setting yourself a new deadline that may be a little more realistic. Once you achieve this deadline it will give you that sense of accomplishment back and start again.

24. Look On The Bright Side

Avoid sharing your problems with the rest of the workforce. Negativity is contagious and most peope don’t like to hear other peoples problems as it brings them down. Try focusing on what you’ve achieved and where the business is heading. It will make you and your staff motivated and more productive in the long run.

25. Say “NO”

Many small business owners have a habit of taking on too much work (generally things that don’t contribute to their company’s goals). You need to take the time for yourself to rest and revive so be firm and realistic about how much free time you have available.

Three men were today sentenced to over eleven years combined jail time for their involvement in tax fraud worth more $4.5 million.

Ian Henke, Robin Huston and Brian Fox were each charged with conspiracy to defraud the Commonwealth for their role as promoters of an asset-stripping scheme which mirrored elements of the infamous ‘bottom of the harbour’ schemes of the 1970s and 80s.

Through use of an intricate arrangement the Vanuatu based asset-stripping scheme was designed to leave Australian companies in a position where they were unable to pay their tax liabilities. Almost 70 companies in Australia participated in the arrangement.

“Australia will not stand for these types of illegal scheme arrangements,” Tax Commissioner Michael D’Ascenzo said after the hearing today.

“This finding shows scheme promoters that regardless of the type of scheme they use, it will be exposed and justice will be served.

“Those who participate and promote these schemes burden the majority of Australian taxpayers who do the right thing. Tax funds vital community and government programs that the community relies upon.

“If you are participating in an illegal scheme, particularly those using overseas tax secrecy jurisdictions, it is only a matter of time before we find you. This is the same clear message that we are sending to the community through Project Wickenby.”

Reduced penalties can apply for those who come forward to the ATO. To discuss your situation or to make an offshore voluntary disclosure, contact the ATO on 1300 132 346.

Ian Henke was sentenced to four and a half years jail with a non-parole period of 12 months, Robin Huston was sentenced to four years jail with a non-parole period of ten months and Brian Fox was sentenced to three years and nine months jail with a non-parole period of nine months.

Further information about offshore schemes and ATO compliance processes including Project Wickenby can be found at www.ato.gov.au.

“Trying to stop thinking in the negative or towards the risks, is like telling someone to stop thinking about a green horse. The more they try to stop thinking about a green horse the more they think about it. The best approach is not to fight thoughts, but to acknowledge them.”

 So let’s look at a few investments before tax, fees and inflation:

1. THE STOCKMARKET

Expected return of 12.01% (All Ords accumulation index compound return since 1979). Risk four out of 10.

2. BONDS

10 year return of 5.5%. Risk zero

3. PAYING OFF THE MORTGAGE

Pretax return of 7.81% (Standard variable rate) which grosses up to 10.6% pretax. Risk zero

4. LOTTO

Expected return of one million percent. Risk of 100% loss is 9.99999999999 out of 10.

5. MARRIAGE

Expected average return of one extra income, zero to four kids, two possible inheritances, a free life coach even if you don’t need one, onerous school fees and a dog. Risk = long term love, fulfillment and satisfaction.

6. DIVORCE

Expected return of minus 50%. Risks unknown.

Lawyer

Length of time the flood levy will be in place

The Government will apply a flood levy to help fund reconstruction in flood affected areas. The flood levy will apply to individual’s taxable income only in the 2011-12 financial year.  

Amount of the flood levy

A levy of 0.5 per cent will be applied on that part of an individual’s income between $50,001 and $100,000 and a levy of 1.0 per cent will be applied on that part of the taxpayer’s taxable income above $100,000. No levy is payable where the person has income of $50,000 or less.

For example, for someone who has an income of $80,000 this means the cost of the levy to them will be $2.88 per week.

Exemption from the flood levy

Where the person has received an Australian Government Disaster Recovery Payment in relation to a flood event in 2010?11 they will be exempt from the levy.  

Payment of the flood levy

Taxpayers will not have to do anything extra to pay the levy. People will make their levy payments through the tax taken out of their regular pay in the same way that people pay the Medicare levy. This will help prevent taxpayers from receiving a tax bill at the end of the financial year.

Pay As You Go (PAYG) Instalment taxpayers will have the levy charged in their PAYG instalments. People who received an Australian Government Disaster Recovery Payment can seek a variation to their instalment payment so that they don’t have to pay the levy. The ATO is also investigating the possibility of automating
PAYG Instalment amounts so that people who don’t have to pay the levy are not charged an amount in their PAYG instalments.

Employees who are exempt from the levy ask their employer to not have the levy withheld from their regular pay with other tax withheld. Alternatively, at the end of the year the ATO will assess taxpayers’ tax liability taking into account the exemption from the levy. 

Impact on businesses

Businesses will need to apply a new withholding schedule to their employees to withhold levy payments. 

Businesses will not be required to pay the levy. The levy will be applied to individual taxpayers.