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Welcome to the August newsletter.
This month's quote is
“To improve is to change; to be perfect is to change often”
Business Plan vs. Strategic Plan
“I don’t have time for a business plan” said a client recently.
How true and in fact, how appropriate – with business changing so quickly, a Strategic Plan is more valuable and practical than a Business Plan. A strategic planning session with us can produce a simple plan that can take you from just “going where you are going” to “ going where you want to go”.
Simple short term goals help everyone in the business feel that achievements are being made. Ask us how.
Anniversary of the Personal Computer – August 12
August 12 marked the 25th anniversary of the launch of the first personal computer. The IBM 5050 sold for US$1,500 and came with a 4.77 megahertz processor; 16 KB compared to today’s entry standard of 512 MB of RAM and used floppy disks capable of storing 160 KB of data.
Today, the PC sells for around half that price (around one-eighth of the price in current dollar terms) has 1,000 times the speed, 50,000 times the memory and 6 million times the storage!
What a change! What plans does your business have for its evolution over the next 5 (let alone 25) years?”
ATO Information on Travel Allowances and PAYG Withholding
The ATO has released the publication Travel Allowances and PAYG Withholding . This document summarises the PAYG withholding implications for employers paying travel allowances to employees.
If a travel allowance is paid at the same rate or below the reasonable travel allowance rate and the allowance is separately accounted for in the payer’s records, no PAYG withholding is necessary. In addition, the travel allowance does not need to be shown on the payee’s payment summary.
If the travel allowance is paid above the reasonable travel allowance rate (in total), payers are required to withhold PAYG from the amount over the reasonable allowances amount. The total amount of the allowance should be included on the payee’s payment summary in the allowance box.
Maximising the Value of Franked Dividends
With superannuation becoming so attractive in recent months, we have calculated the effect of investing in shares paying franked dividends via your self managed superannuation fund (“SMSF”) compared to ownership in the personal name of a tax payer paying the highest marginal rate of tax. Using assumptions of a 5% franked return, an investment of $100,000 and reinvestment of the after tax dividend at the same 5% fully franked rate, we found that the SMSF achieved a return over 10 years of $80,295 compared to the individual taxpayer of $45,502, some $34,793 or 76% better than the individual investor. And that is before any other tax savings such as CGT are included. If this interests you, please let us know.
Has Your Trust “Expired?”
There is a rule in trust law that a trust cannot be in existence for more than 80 years and as a consequence, trusts have a finite existence. This is referred to as the perpetuity period and the period of time that the trust can exist is known as the perpetuity period. Many trust beneficiaries may have been, or will be, faced with a capital gains tax liability on the increased value of the trust’s underlying assets upon vesting at the expiration of their perpetuity periods. There is currently no roll-over relief to defer this taxation liability. If your trust has been in existence for a long time or is in the second generation of your family, this may be an important issue and we therefore suggest you seek advice if this is a possible issue for you.
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Rising Fuel Prices Impact all Industries
Most clients would be aware of the latest interest rate rise and its link to rising fuel prices. Fuel prices are felt in many more places than at the fuel pump when filling up the family car. Have you reviewed the cost of operating your business to reflect the impact of rising costs in transport, raw materials, contractors and other suppliers to ensure the margin in your business is not being eroded? With a headline CPI of 4%, a net profit margin of 16% could be falling by 25% if prices of your product and the cost of your business inputs have not been reviewed. With the financial year just finished, now is a great time for us to review this very important area with you.
GST Changes Affect Sales of Property
The government has enacted changes to the margin scheme and the imposition of GST on residential premises and so called “commercial residential premises”. Please contact us whenever you are selling assets but particularly property so we can advise you on GST and capital gains tax implications of such transactions. If you are contemplating the sale of residential property or have substantial interests in residential property, this may impact you.
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