Firm Journal

25 February 2021

Signs of unauthorised and mistaken transactions

When checking through your transactions, you might come across a transaction that doesn’t look right. If this is the case, you should get into contact with your bank as soon as possible. 

An unauthorised transaction: Money transferred from your account without your permission

A mistaken transaction: Paying the wrong person by using the wrong details

Here are the signs to look out for to identify unauthorised or mistaken transactions:

• Persons or companies whose names you do not know
• Cash withdrawal from a place you have never been 
• Transaction date you don’t recognise
• Payment that has doubled up

But keep in mind:

• Transactions can take days to show up – they are not always immediate
• Name of a shop or restaurant might not match the bank statement (they may have a different trading name which you can verify online)

What to do before you buy a business

Buying an existing business can be a great entryway into being a business owner – but it does come with challenges. Following these steps might make it easier for you to make sure that the business you buy is right for you.

1. Understanding if you are ready for business: This doesn’t just involve the financial aspect of things, but also management more generally. Even though there are procedures in place, you still need to develop management skills to oversee those processes. You will need to be disciplined when it comes to day-to-day operations, especially at the start before you become more familiar with everything. Reflect on your current situation and ensure that you can handle the responsibilities that come with owning a business.
2. Decide whether you want to buy an independently owned business or a franchise: You will be able to make a lot more decisions and changes if you buy an independent business – but you will also need to come up with a lot more ideas, and conduct marketing and safety strategies by yourself. Franchises on the other hand provide a lot of support when it comes to routine business processes, but there is a lot more rigidity when it comes to handling the business.
3. Research the business: Look into all the costs involved in buying the business and potential ongoing expenses that you will incur. Make sure you get an insight into the business’ strengths and weaknesses and how it is likely to perform against competitors. 
4. Carry out due diligence: Examine a business in detail before you sign a legally binding document. This includes various financial aspects such as income statements, tax returns, etc. You should also review the legal aspect of the business such as intellectual property, registered patents, etc.
5. Value the business: Calculate the net worth of your business by taking the assets and liabilities into consideration. Also calculate the value of the business based on future earnings – what you can gain from the business. 

Pros and cons of home reversion

Super (AU): Pros and cons of home reversion

Home reversion is when you sell a share of the future value of your home whilst still living there. You receive a lump sum payment and continue to own the remaining share of your home equity. 

Pros

• You are able to continue living in your home after you sell the share
• You can conduct renovations or maintenance that your home may need with the lump sum payment you receive
• You can use the lump sum for any urgent needs such as medical treatments
• The lump sum could help you secure accommodation till your home sells

Cons

• You will own the lower share of the equity in your home
• Transactions and costs can get complicated and it may be hard to navigate that
• Your eligibility for Age Pension might also be influenced
• Your ability to afford aged care could be affected
• You might end up eating into money that you need for the future – such as for medicare
• You might be locked into fewer options if your circumstances change
• If you are the sole owner and someone else lives with you, they may no longer be able to live in the house if you move out or pass away

What you need to know about luxury car tax

Luxury car tax or LCT is a 33% tax on cars that have a value (including GST) above the set threshold. However, the tax is only on the value which is above the threshold. 

Businesses and individuals that sell or import luxury cars are required to pay LCT.

You can make LCT payments in instalments or annually. If you choose to report your payments in instalments, they will be included in your GST instalments. If you choose to pay GST annually, then you don’t need to worry about reporting monthly or your quarterly BAS.

You may be able to defer paying LCT by quoting your ABN. You are able to do this if you are only going to be using your car to:

• Hold it for trading stock (doesn’t include holding it for hire or lease)
• Carry out research and development for the car’s manufacturer
• Export it GST-free

If and once you stop using your car for the above purposes, then you will need to start paying LCT. 

18 February 2021

Repairing errors in your credit score

Your credit score can affect loans and credit you apply for. You are able to have errors on your credit report fixed for free. 

The following are typical errors in credit reports, that you are able to get fixed for free.

Errors by the credit reporting agency – there may be instances where the agency that reports your information has done so incorrectly. This can lead to errors about:

• Your name, date of birth or address
• Debt listed twice
• Amount of debt

This type of error can be fixed by contacting the agency directly.

Errors by the credit providers – there may be instances where the credit provider incorrectly reports information. This can lead to errors about:

• How long your credit is overdue
• Whether you were notified about an unpaid debt
• If your debt was defaulted as overdue when it is in dispute
• Changes in your payment plan that were not appropriately represented 
• Accounts that were created as a result of credit fraud

These types of errors can be corrected by contacting the credit providers. If they agree that there has been a mistake, then the agency will adjust the details. If there is disagreement, then contact the Australian Financial Complaints Authority (AFCA) to file a complaint and receive a resolution. 

Business management styles you should avoid

The business management style you adopt will depend on the needs of your business, what motivates your employees, and your style of work. Therefore, you do have some flexibility when it comes to the choices you make and how you manage your business. However, there are some which you should always avoid due to the relationship they foster between employers and employees. 

Autocratic

This style of top-down management leaves all decision-making to managers and expects full cooperation from employees. Any sort of criticism from employees will be received with public disapproval. This management style relies on fear and guilt and seeks to micromanage employees rather than allowing flexibility. 

This sort of strategy limits innovation and inhibits employees’ loyalty and personal motivation to progress as employees do not share the company vision. 

Servant

This type of management values people first and tasks second. Overvaluing emotions and wanting to avoid conflict at all costs is detrimental to effectively completing work. 

This sort of strategy places no focus on success and goal completion. It can damage the business if performance is not to par and employees are not encouraged to do their best at the tasks assigned to them. 

These two management strategies sit on opposite ends of the spectrum when it comes to valuing employees. You should regularly make an effort to interact with employees and ask them for suggestions to improve company performance as collaboration can be extremely valuable. However, don’t get carried away in developing personal relationships with employees that can be detrimental to business success. 

What is the transfer balance cap?

The transfer cap refers to the amount of money that can be transferred from your superannuation account to your tax-free ‘retirement phase’ account.  

At the moment, the transfer balance cap is $1.6 million and all individuals have a personal transfer balance cap of $1.6 million. 

Exceeding the personal transfer balance cap means that you have to:

• Commute the excess from one or more retirement phase income streams. 
• Pay tax on the notional earnings related to that excess

The amount in your retirement phase account may grow over time, due to investment earnings. Although this may grow beyond the personal transfer cap, you will not exceed the cap. However, if you have already used all your personal cap, and then your retirement phase account goes down, you cannot ‘top it up’. 

The rules applied to capped defined benefit income streams are different from other income streams – this is because you can’t usually transfer or commute excess amounts from other streams. 

Records you need to keep on rental properties

When you own a rental property, keeping records is important. These will help you meet tax obligations. Generally, only individuals with their name on the title deed declare income and claim expenses. 

Remember that the records must be kept in English or should be easily translatable into English, and kept for a minimum period of 5 years. 

The records you need to keep include: 

• Dates and costs of buying the property: These will help work out any capital gain or loss when the property is disposed of – the date entered into the contact is the purchase date, not the settlement date. 
• Any rent and rent-related income: This will be required to report tax return.
• Expenses associated with the property: These are important to claim deductions you may be entitled to. These records should include the name of the supplier, the amount of the expense, nature of the goods or services, the date the expense was incurred, date of the document
• Significant changes: These include repairs or improvements or partial or all sale of the property – the cost of repairs and improvements should be kept separate from depreciation costs so that deductions and capital gains and losses can be calculated correctly.
• Costs of selling or disposing of property: To be able to work out any capital gain or loss

15 February 2021

The types of benefits businesses should consider for their employees

n Australia-wide survey asked employees what benefits they would most want from their employers. 

The following are the top 10 benefits:

• Flexible working
• Discounts on electricity, gas and water
• Continued education options
• Petrol discounts
• Free meals
• Supermarket discounts
• Mental wellness initiatives
• Subsidised massages, yoga, and gym memberships
• Special company deals on loans, mortgages, health insurance
• Discounts on mobile phones and data services

Many of these benefits are difficult to arrange and may be costly. However, the top benefit desired by employees is flexible working, which small businesses can also adopt easily. 

Further, due to COVID-19, there are many more resources available to facilitate flexible working and it has become more normalised than ever. 

Offering flexible working will make your workplace more attractive to potential employees and increase the loyalty of current employees as they can work according to times that suit them.

Employers should also consider providing other benefits that are accessible to them – this will improve employee satisfaction and inevitably contribute to productivity in the workplace.

Choosing investment options in your super

Many Australians ignore the decision of choosing investments for their super and often end up in the ‘default’ option as they make no effort to choose otherwise. 

Default options that aim for ‘balanced’ or ‘growth’ investments tend to have 60-80% of funds invested in shares and property. This approach for investment is based on the best-suited strategy for a large number of members across the years they will be investing. 

However, the default options may not be the best for your financial circumstances and risk profile. Understanding different investment options and how risk assessments work will help you choose better investment options. 

Further, aim to change investment options over time rather than sticking to the same one. For example, you could consider changing options once you begin receiving a pension.