What a difference timing makes. A recent case before the Administrative Appeals Tribunal (AAT) is a reminder about the tax impact of the timing of employment income.
In this case, the taxpayer was a non-resident working in Kuwait. As part of his work, he was entitled to a ‘milestone bonus’ but, the employer was not in a position to pay the bonus at the time.
When the job ended, the taxpayer moved to Australia and became a resident. Once in Australia, the former employer honoured the performance bonus and paid it as a series of instalments.
The dispute between the ATO and the taxpayer started when the Commissioner issued amended assessments taxing the bonus payments received.
The dispute focused on when the bonus was derived. Had the bonus been derived while the taxpayer was still a non-resident then it would not have been taxed in Australia. This is because non-residents are normally only taxed in Australia on Australian sourced income. Employment income is typically sourced in the place where the work is performed (although there can be exceptions to this).
Australian tax case law says that employment income is normally derived on receipt. In the taxpayer’s case, this was when he received the payments from his former employer, not when he became entitled to the bonus. Because the taxpayer received the bonus when he was a tax resident of Australia, the bonus was subject to tax.
The difference for the taxpayer was quite dramatic. Had he been paid the bonus when it was due, he would have paid no tax as Kuwait does not impose income tax.
Please call us if you are concerned about tax residency or managing overseas income.
Quote of the month
“Don’t spend time beating on a wall, hoping to transform it into a door.”
Coco Chanel
$1.7 billion paid out in fraudulent refunds, another $2.7bn in fraudulent claims stopped, around 56,000 alleged perpetrators and over 100 arrests to date. How did the TikTok tax scandal get out of control?
It was promoted as a victimless hack that delivered tens of thousands of dollars into your bank account. Like any hack, taking part was as simple as following the instructions. The streamlined process designed to make it easy for a small business to start-up under Australia’s self-assessment system, also made it easy for the ‘TikTok fraud’ to go viral.
“Everyone else got refunds, it’s OK, it’s just a temporary loan [from the ATO].”
TikTok social influencer
How did it happen?
At some point in 2021, videos started to spread that spelt out how to get the Australian Taxation Office (ATO) to deliver money into your account. Not quite a loan but a hack that sometimes saw tens of thousands delivered into accounts, no questions asked. As the message gained traction, and with more and more people validating the hack, facilitators emerged. All you had to do was hand over your personal details to the facilitators and they would take care of the rest.
The fraud saw offenders inventing fake businesses, applying for an Australian Business Number (ABN), many in their own names, then submitting fictitious Business Activity Statements (BAS) to claim GST refunds.
By late 2021, the Banks noticed the uptick in suspicious activity, mostly large refunds that were out of character for those accounts – in some cases, Centrelink recipients receiving large credits from the ATO. The banks froze a number of accounts and reported the suspicious matters as they are required to do under the Anti-Money Laundering & Counter Terrorism legislation, including to the ATO.
In April 2022, the ATO formed Operation Protego to disrupt the rapid increase in GST refund fraud by individuals that were not genuinely in business. By that stage however, the strategy had gone viral.
By May 2022, the average GST refund paid was $20,000, claimed by around 40,000 people. The ATO conceded around $850 million had been paid out in potentially fraudulent claims. By June 2022, that figure had blown out to $1.2bn but the ATO had stemmed the flow, rejecting $1.7bn in fraudulent claims. Search warrants and arrests of scheme promoters followed.
It’s hard to understand how so many people – an estimated 56,000 Australians – made the leap in logic that some sort of hack had been discovered that enabled you to claim thousands of dollars in tax refunds as a ‘loan’ from the ATO. At the best of times the ATO is not known for its sporadic acts of generosity and laissez faire attitude to tax revenue. We know the opposite is true.
And, why so many accepted a view promoted on TikTok – the act of participating in the fraud required falsifying records at several stages and yet, failed to ring alarm bells. Unfortunately, naivety is not a compelling defence against fraud.
“Nobody is giving money away for free or offering loans that don’t need to be paid back.”
ATO Deputy Commissioner and Chief of the Serious Financial Crime Taskforce (SFCT) John Ford.
Late 2021 – Banks freeze suspicious accounts and refer unusual behaviour to ATO.
Apr 2022 – Operation Protego formed
May 2022 – ATO issue a warning on fake businesses, ABN applications and fraudulent business activity statements to generate GST refunds after around $850 million in potentially fraudulent payments made to around 40,000 individuals, with the average amount fraudulently claimed being $20,000.
Jun 2022 – ATO tallies the cost of fraudulent claims at $1.2bn. Between April and June 2022, the ATO rejected $1.7bn in fraudulent claims.
ATO launches coordinated action across three days in 12 locations across NSW, Victoria, Tasmania, South Australia, Western Australia, and Queensland, which saw warrants executed against 19 individuals suspected of being involved in GST fraud.
Jul 2022 – ATO executes search warrants for five suspected offenders.
Dec 2022– ATO tallies fraudulent rejected claims at $2.5bn by more than 53,000 individuals.
Feb 2023 – Warrants executed against 10 individuals suspected of promoting the fraud including on social media.
Aug 2023 – ATO tallies fraudulent rejected claims at $2.7bn.
The upshot to date; $2.7bn in fraudulent claims rejected before being paid, $1.7bn fraudulent payments made with around $66m recovered by 30 June 2022. Another $700m in liabilities, including around $300 million in penalties, raised in 2023-24.
Caught in the web?
“The ATO has zero tolerance to any fraudulent or corrupt behaviour that may in any way impact the ATO.”
The TikTok tax fraud is extensive and has several layers of impact across the 56,000 taxpayers caught up in it.
The closest circle are the scheme promoters and facilitators. To date, more than 100 people have been arrested including members of outlaw motorcycle gangs, organised criminal organisations, and youth crime gangs – and more than 10 people have been convicted for their involvement.
The maximum penalty for promoting a tax fraud scheme is 10 years in prison.
The second circle are those actively engaged in the scheme – who declared that they were carrying on a business, established an ABN, and submitted GST refund claims for expenses they did not incur. For those who received fraudulent GST refunds, the money will need to be paid back, penalties are likely to apply, and there is a risk of criminal proceedings. If the ATO have contacted you, engagement will be the key to reducing penalties and preventing an escalation to criminal proceedings. If you were engaged in the GST refund fraud but the ATO has not contacted you yet, it will be important to work with us as soon as possible to declare and manage the issue.
Where to now for identify theft victims?
The third circle is comprised of the unwitting identity theft victims whose details have been used to generate fraudulent GST refunds. The ATO have had reports of people offering to buy and sell myGov details in order to access refunds. The conversation within the accounting community is that the ATO are inundated at present trying to manage the fallout, not just from the TikTok GST refund fraud but identity theft in general. So, keep on top of your myGov account and if you notice any unusual activity, contact us asap.
Entrepreneurship is not for the faint of heart. It can be a very stressful and lonely journey, but the rewards are worth it. Entrepreneurs constantly look for the next big idea, but sometimes it takes time to see the light. A business mentor/coach can be that source of light.
As an entrepreneur and someone that works with businesses on an ongoing basis, I’ve been on both sides of the relationship. I know what works and what doesn’t. I’ve laid awake at night wrestling with a difficult business decision. I’ve sat across from the table from an entrepreneur searching for answers.
I’ve been there. I’ve seen it. And a business coach can make a difference.
This article will look at ways a business mentor/coach can help you achieve your personal and professional goals. Whether it be motivation, knowledge, providing the right contacts, assistance with implementing new technology, an independent sounding board or more.
Do you want to take your business to new heights? Let’s face it we all do.
Are you on the fence about how we can help and is it worth the time and expense? We have worked with many businesses over the years and the answer is a YES.
Here are 5 reasons why having a business coach is worth the investment.
1. Business Mentoring Can Help You Mitigate Risk
Business mentoring/coaching is a way for entrepreneurs to understand their businesses and the reality of their situation. Through deep discussion, accountability, and planning, business mentoring can create a buffer between entrepreneurs and their potential risks. Entrepreneurship can feel like you’re skating on thin ice at times, and it is hard to forecast the impact of a decision.
A key benefit of business mentoring lies in the clarity gained, leading to better decisions and improved performance personally and professionally. Having a sounding board to think through the noise of leading a company builds confidence, develops the skills required to be a successful entrepreneur, and helps to alleviate stress.
A good business mentor will help you see blind spots and guide you to have a strategic plan on how you can navigate through them. Here are ways a business mentor can help mitigate risk:
- You’ll learn things that Google or courses can’t teach you.
- You’re learning through our experience.
- We will help you prevent repetitive mistakes.
- We can work to fill in the knowledge gaps you’re missing.
We can share failures we have seen so you don’t make the same mistakes.
2. A Business Mentor Can Help You Stay On Track
We can help you stay on track and focused on achieving your goals. It will help you to define your strengths and weaknesses and develop a growth plan. Your growth plan can include personal and professional items.
Examples include:
- Creating an effective marketing strategy.
- Creating or revamping your branding.
- Budgeting and finance improvements.
- Minimizing your daily negative stressors.
- Cultivating relationships.
- Improving your or your team’s communication skills.
- Increasing productivity.
Your business mentor is your compass, ensuring that your objectives, goals, and day-to-day tasks are met and that you and your company are heading in the right direction toward maximum results. The feedback and criticisms we will give you will be unbiased and come from a professional point of view.
A great business mentor will push you past your comfort level and unlock your untapped potential as an entrepreneur. You will feel supported in your journey, especially when encountering roadblocks in your business. Most importantly, a mentor/coach is there to listen and help you identify the right solution.
3. A Business Mentor Can Help You Build a Sustainable Business
An experienced business mentor can help you build a sustainable business. As an entrepreneur, you have a lot on your plate, and it can be challenging to balance it all. You might need help prioritizing what you should focus on and what you should delegate. And that’s where a business mentor comes in to help. They can help you clear your head, keep you on track and help you to focus your time on the right things. When you have a strong business mentor, you set yourself up for success.
Like Steve Jobs said, “We hire smart people so they can tell us what to do.” A good business coach helps you improve your skills and strengthen the weak spots that could help you become a better entrepreneur.
To maximize the results be prepared with your topic of focus, questions, and any helpful material that will guide the discussion. Be receptive to recommendations as they are provided from a bird’s eye view of the situation. Like in sports, your coach on the sidelines has a different perspective and can see things that help you solve problems that you’re too engaged in the game to realize.
4. A Business Mentor Will Help You Be a Better Leader
Many business coaches have a unique ability to identify areas of improvement and make your business stronger.
The saying goes, “The best in business do not ride solo .”You need a business coach to help you prevent stagnation and take you and your business to the next level without wasting so much time and resources doing it all by yourself.
A recent study of Fortune 500 businesses found that hiring a business mentor/coach can yield returns of up to 529%. The return on every dollar spent on coaching was $7.90, or a return of 690%. The numbers do not lie. Business coaching works.
5. A Business Mentor Will Help You Achieve Personal and Professional Goals
A business coach can help you reach your goals by providing advice, support, and insight into your personal and professional life. A great business coach isn’t there to be your friend. Your ideas will be challenged, solutions will be offered, and a success plan will be in motion.
The work is ultimately yours to complete, but a business coach will hold you accountable.
Coaches leverage proven frameworks and methodologies to keep you on track, driven, and clear on what needs to be done to achieve your goals.
A Business Mentor Will Level Up Your Business
You’ve already invested so much in your business, so why not increase your chances of succeeding by having an expert business coach beside you to guide you every step? Your business coach will help you recognize what you and your business need and what it will take to succeed.
Contact us to find out more on how we can add value and help you get to where you want to get to.
You want to keep winning, right? Then it’s time for you to take action. Remember, “The best in business do not ride solo.”
Meet the business behind the name.
You’ve probably read one of Simon Sinek’s LinkedIn posts or watched his countless talks online.
But who’s the real Simon Sinek?
In our modern world of personal brand empires, what’s the difference between a seven-figure machine and a single person with the same thoughts, feelings, pressures, and pains you have?
“I don’t really have a job, do I?” Sinek says.
He admits that his career was an accident. Sixteen years ago, the speaker, best-selling author, and founder of The Optimism Company stood on a stage in a Puget Sound conference room and set a trajectory for his life he never intended.
In 2010, Sinek gave a TED Talk that has since become one of the most-watched talks of all time on TED.com, with 60 million-plus views. His talk spurred NY Times best-selling books, speaking engagements, consulting gigs with globally-recognized brands, a podcast, a publishing arm, and viral quotes shared across social media.
And it all started with a question: Why?
Why Why?
Sinek grew up with his sister and parents trotting the globe, including Johannesburg, London, and Hong Kong. Because of the ever-changing nature of his childhood, his nuclear family, especially his sister, became his closest confidants.
“It taught me to be comfortable in the uncomfortable,” Sinek says about his international upbringing, which can be detected in his New Jersey accent with a dash of a UK twang. “It taught me that when I don’t know or don’t understand, to figure it out.”
But most importantly, his family taught him about relationships.
“It’s too difficult to do difficult things alone. We’re just not that good,” Sinek says. “And starting a business is exactly the same.”
The biggest lesson he’s learned as an entrepreneur is that he doesn’t have all the answers and doesn’t need to pretend to. Sinek learned that lesson when he seemingly had everything.
“I was living the entrepreneurial dream, we had amazing clients, and we did really good work,” Sinek says about his first business, a marketing consulting firm. “And yet, four years into that adventure, I fell out of love with it.”
Sinek was embarrassed to say that he didn’t want to do his work anymore because it all seemed so perfect externally.
“All my energy went into pretending that I was happier, more successful, and more in control than I actually felt, which is frankly a very dark place. It’s also a lonely place.”
Fortunately, one of Sinek’s friends saw through the facade and confronted him. Sinek came clean.
“It was like a huge weight off my shoulders that I could open up to somebody about what I was going through,” Sinek says. “It turns out I was surrounded by people that wanted to help me. They just didn’t think I needed it because I wasn’t admitting it.”
After his epiphany, he shifted the energy from pretending to finding a solution to how he felt.
The solution was his why.
“I knew what I did, I knew how I did it, but I realized I didn’t know why I was doing it, and that was the reason for my malaise,” Sinek says.
Sinek’s why is to inspire people to do the things that inspire them so that together, each of us can change our world for the better. He says that, like watching a good movie or reading a page-turning book, when he discovered his why, he had to tell people about it.
“It comes from that part of the brain that doesn’t control language, and so when it’s put into words, it’s awesomely powerful,” Sinek says.
Soon friends and friends of friends began searching for their whys and inviting Sinek to their living rooms to give raw versions of what would eventually become his TED Talk.
“I would help people find their why for a hundred dollars on the side,” Sinek says. “It was never supposed to be a career.”
Sinek’s “golden circle,” which he explains on a rudimentary paper easel with permanent markers in his TED Talk, is a visual of three enveloped circles representing why, how, and what. The principle of the theory is that most businesses work backward from the outside circle of what to the inner circle of why. Sinek argues that by starting with your why, individuals and organizations will know their purpose in business and, therefore, attract better talent, build better leaders, and do more innovative work.
His concept was radically simple yet universally applicable from startup founders to Fortune 500 CEOs. But it also lined up with Sinek’s purpose. So every invite he received following the TED Talk, which connected to his why, was a “yes.”
“It was the most inspiring thing I’ve ever done,” Sinek says.
Book deals and speaking engagements followed. He transformed his persona and ideas into a business—was it an entrepreneurial dream he’d have to fake?
No.
But it wasn’t enough—not infinitely enough.
Simon Sinek on the cover of Foundr Magazine issue 119.
The Infinite Ball Game
Sinek’s vision of why was inspired by Dr. James Carse’s 1986 book Finite and Infinite Games.
“It was the most powerful thing I’d ever found,” Sinek says.
He discovered Carse’s philosophy while searching for a solution but didn’t know how to implement it. Carse breaks business (and life) into two games—finite and infinite.
Finite games have known players, fixed rules, and an agreed-upon objective.
Infinite games have uncapped players, adaptable rules, and an objective not to win but to keep the game going.
For example, a Major League Baseball game has a set number of players, nine innings, and the goal to score more runs than the other team—it’s finite.
Compare that to the 1993 film The Sandlot, where a group of neighborhood friends partakes in a never-ending game of baseball in which the players come and go, the rules change constantly, and the goal is to play all summer long—infinite.
“No one will ever be declared the winner of a career. Certainly, there’s no such thing as winning business,” Sinek says. “Business is an infinite game.”
Sinek says that it’s reasonable to have clear goals and objectives for your business but not for the sake of sacrificing ethical practices and leadership traits.
“Where companies make mistakes is that they make visions about themselves,” Sinek says. “[Infinite thinking] is where organizations are significantly able to change the course of business or the world based on the things they invent, which is they weren’t trying to be billionaires; they were trying to invent something that they thought would significantly benefit the world—that’s what drove them.”
It was in his study of infinite thinking that Sinek discovered the simple practice of finding his why.
“Everybody said, ‘Simon, you have no focus,’ but they couldn’t see that I had more focus than everybody else, just my aperture was much wider,” Sinek says. “I’m interested in the kinds of businesses that have an impact and make people feel like work has a higher value than simply the money.”
The Thing
Each book, talk, and approach Sinek has developed in his career comes from personal experience.
“All of the work is semi-autobiographical,” Sinek says. “Every now and then, I find a solution to one of my challenges that turns out has value in other people’s lives as well.”
When Sinek started scaling his personal-branded business and leading a team, he began to have trust issues. It inspired him to seek out leaders in the military, where in his purview, people willingly gave up their lives for others they didn’t know.
“In business, we don’t even like to give up credit for things,” Sinek says.
“I think this is the mistake we make as entrepreneurs, which is we think it’s about us. In reality, it’s the people around us.”
His learnings from military leaders inspired his book Leaders Eat Last. Of all the successful leaders he’s worked with over his career, their universal trait is courage.
He explains that after talking with former Navy SEALs, he noticed that even when they are physically and emotionally exhausted, they somehow find the courage and energy to help the person next to them.
“It’s service. Service is the thing,” Sinek says. “It’s that relationship that gives us the most remarkable courage.”
When Sinek works with startups and entrepreneurs, he repeatedly gets asked what it takes to overcome obstacles. He says there are scenarios when businesses wait too long to quit or quit too soon, but nobody has the correct answer.
“When you’re a startup, you have to have the ability to have people do something that is—let’s be honest—stupid,” Sinek says. “If you can articulate something that’s so compelling that your friends are willing to quit their jobs to come to support you to do that—you’re onto something.”
There are an awesome number of tips in this article. Read and re-read it and the gems will fall out. Speak to us about how we can work with you in this area.
A consultation paper released by Treasury has sparked a national debate about the role, purpose and access to superannuation ahead of the 2023-24 Federal Budget.
What is the purpose of superannuation? At first glance, the consultation released by Treasury in February titled Legislating the objective of Superannuation sounds innocuous enough. The consultation seeks to anchor future policies relating to superannuation to a legislated objective:
The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside Government support, in an equitable and sustainable way.
But what seems self-evident has opened a Pandora’s Box of what superannuation is not. If superannuation is to “preserve savings”, that is, restricting access to superannuation savings to retirement only, by default it is not a means of accumulating wealth in a concessionally taxed environment. It is not a strategy to manage intergenerational wealth. The definition would also prevent initiatives such as the COVID-19 early access scheme used widely during the pandemic to give those in financial distress access to quick cash (over 3 million people withdrew $37.8 billion from their superannuation funds). And, it is not a method of purchasing a home sooner.
Future earnings for super balances above $3M taxed at 30% from 2025-26
The Government has announced that from 2025‑26, the 15% concessional tax rate applied to future earnings for superannuation balances above $3 million will increase to 30%.
The concessional tax rate on earnings from superannuation in the accumulation phase will remain at 15% up to $3m. From $3m onwards, the rate will increase to 30%. The amendment applies to future earnings; it is not retrospective.
80,000 people are expected to be impacted by the measure.
The announcement doesn’t propose any changes to the transfer balance cap or the amount that a member can have in the tax-free retirement phase.
As an aside, the Treasurer points out that the average super balance in Australia is $150,000 – taking account of all those with a super balance including new entrants into the workforce. For those 65 and over, the average balance is around $400,000 across all income brackets.
Superannuation and national building
The second component of the Treasury consultation is nation building. At a recent speech, the Treasurer stated, “to my mind, defining super’s task as delivering income for retirement isn’t to narrow super’s role in our economy…it’s to elevate it, and broaden it.” The consultation states:
“There is a significant opportunity for Australia to leverage greater superannuation investment in areas where there is alignment between the best financial interests of members and national economic priorities, particularly given the long‑term investment horizon of superannuation funds.”
The compulsory superannuation guarantee (SG) was introduced in 1992 at a rate of 3% and will rise to 12% from 1 July 2025. Australia’s superannuation pool has grown from around $148 billion in 1992 to over $3.3 trillion. It now represents 139.6% of gross domestic product (GDP) and is projected to grow to around 244% of GDP by 30 June 2061. Australia’s pool of pension assets is now one of the largest in the world, and the fourth largest in the OECD.
The consultation does not define how “leveraging greater superannuation investment” would be achieved.
*The Treasurer has ruled out changes to the existing early access hardship provisions for super.
1 July 2023 Super Balance Increase but no Change for Contributions
The general transfer balance cap (TBC) – the amount of money you can potentially hold in a tax-free retirement account, will increase by $200,000 on 1 July 2023 to $1.9 million. The TBC is indexed to the consumer price index each December.
The TBC applies individually. If your transfer balance account reached $1.7m or more at any point before 1 July 2023, your TBC after 1 July 2023 will remain at $1.7m. If the highest amount in your account was between $1 and $1.7m, then your cap is proportionally indexed based on the highest ever balance your transfer balance account reached.
That is, the ATO will look at the highest amount your transfer balance account has ever been, then apply indexation to the unused cap amount.
For example, if you started a retirement income stream valued at $1,275,000 on 1 October 2022 and this was the highest point your account reached before 1 July 2023, then your unused cap is $425,000 ($1.7m-$1.275m). This unused cap amount is used to work out your unused cap percentage ($425k/$1.7m=25%). The unused cap percentage is then applied to the indexation increase ($200k*25%=$50k) to create your new TBC of $1,750,000.
But don’t worry, you don’t have to calculate this yourself, you can see your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov.
The caps on the contributions you can make into super however, will remain the same. That is, $27,500 for concessional contributions and $110,00 for non-concessional contributions. The contribution caps are linked to December’s average weekly ordinary time earnings (AWOTE) figures.
Please contact our financial planning team if you feel you need further advice in this area.
The ATO has released its final position on how it will apply some integrity rules dealing with trust distributions – changing the goal posts for trusts distributing to adult children, corporate beneficiaries, and entities with losses. As a result, many family groups will pay higher taxes because of the ATO’s more aggressive approach.
Section 100A
The tax legislation contains an integrity rule, section 100A, which is aimed at situations where income of a trust is appointed in favour of a beneficiary, but the economic benefit of the distribution is provided to another individual or entity. For section 100A to apply, there needs to be a ‘reimbursement agreement’ in place at or before the time the income is appointed to the beneficiary. Distributions to minor beneficiaries and other beneficiaries who are under a legal disability are not impacted by these rules.
If trust distributions are caught by section 100A, this generally results in the trustee being taxed on the income at penalty rates rather than the beneficiary being taxed at their own marginal tax rates.
While section 100A has been around since 1979, until recently there has been relatively little guidance on how the ATO approaches section 100A. This is no longer the case and the ATO’s recent guidance indicates that a number of scenarios involving trust distributions could be at risk.
For section 100A to apply:
- The present entitlement (a person or an entity is or becomes entitled to income from the trust) must relate to a reimbursement agreement;
- The agreement must provide for a benefit to be provided to a person other than the beneficiary who is presently entitled to the trust income; and
- A purpose of one or more of the parties to the agreement must be that a person would be liable to pay less income tax for a year of income.
High risk areas
Until recently many people have relied on the exclusions to section 100A which prevent the rules applying when the distribution is to a beneficiary who is under a legal disability (e.g., a minor) or where the arrangement is part of an ordinary family or commercial dealing (the ‘ordinary dealing’ exception). It is the ordinary dealing exception that is currently in the spotlight.
For example, let’s assume that a university student who is over 18 and has no other sources of income is made presently entitled to $100,000 of trust income. The student agrees to pay the funds (less tax they need to pay to the ATO) to their parents to reimburse them for costs that were incurred when the student was a minor. This situation is likely to be considered high risk if the student is on a lower marginal tax rate than the parents because the parents are receiving the real benefit of the income.
The ATO is also concerned with scenarios involving circular distributions. For example, this could occur when a trust distributes income to a company that is owned by the trust. The company then pays dividends back to the trust, which distributes some or all of the dividends back to the company. And so on. The ATO views these arrangements as high risk from a section 100A perspective
Where to from here?
If you have a discretionary trust, it will be important to ensure that all trust distribution arrangements are reviewed in light of the ATO’s guidance to determine the level of risk associated with the arrangements. It is also vital to ensure that appropriate documentation is in place to demonstrate how funds relating to trust distributions are being used or applied for the benefit of the beneficiaries.
The ATO’s new approach applies to entitlements before and after the publication of the new guidance but for entitlements arising before 1 July 2022, the ATO will not generally pursue these if they are either low risk under the new guidance, or if they comply with the ATO’s previous guidance on trust reimbursement agreements.
In a volatile market, keeping to a strategy is critical. But, let’s face it creating one, can be tough.
The downside of not taking time out for your strategy is that there is a tendency to keep a short-term focus at an operational level to try and pick quick wins to generate financial returns. Sometimes in the process, this short-term focus undermines longer term value and returns.
Here are our ‘must dos’:
Know what your position is.
A business health check is an analysis of the current state of your business. It is an analytical review of its operation with view to providing a broad overview of operating performance and identifying potential issues. Understanding your position will reveal your risks and capacity to develop.
Know what to look for.
Once you know your position, the next question is what are the measures that are going to give you the best insight into business performance. In a volatile market, this information will give you what you need to make informed decisions at any one point in time.
Be prepared to make quick decisions.
If you know your position and have the data you need, be prepared to make quick decisions and take the first mover advantage. If you have the two elements above, you have your radar for identifying opportunities and mitigating risk. Most businesses are simply a replication of what they see. While the pandemic and market instability is difficult, we have also seen a wave of innovation as people adapt to find solutions.
Don’t bank on a single opportunity.
If COVID has taught us anything it is that things change, and we need to adapt and change with the circumstances. While one single opportunity might make all the difference, an overreliance on one product, service, or methodology of delivering those products and services, exposes you to risk.
Understand your end game.
What are you aiming for? Family empire? Fast growth and sale? Sustainable growth and sale as a retirement plan? Public listing? Even if you plan on simply running and growing your business for decades to come, that is a decision. Your end game and your progress towards that end game impacts your structure, focus, and decision making.
Document your strategy.
Document your strategy – knowing it in your head is not enough. This does not have to be an onerous War & Peace approach. It is understanding what you are aiming for, and breaking that down into measurable objectives, then into measurable outcomes and timeframes (preferably actionable against rolling 90 day plans). This approach also makes management meetings a lot more meaningful.
We have done plenty of this type of work with businesses and this is vital to the longevity of your business. Contact us to find out how we can work with you on this.
Putting a price on a business can be challenging – whether you’re the buyer or the owner who’s looking to sell. Here, we reveal some essential tips and methods for assessing business value.
How to value a business
Thinking of buying a business – or selling your own? Pricing a business for sale can be tricky.
What you think a business is worth and what the other party thinks it’s worth are usually two different figures.
For a buyer, the worth of a business hinges on how much profit it will make, balanced by the risks involved. However, historic cash flow, profitability and asset values are only the starting points. It’s often the hard-to-measure factors such as key business relationships and goodwill that provide the most value.
What affects business viability?
There are three things to consider:
- circumstances of the sale
- tangible versus intangible assets
- years of operation.
Circumstances of the sale
The reasons for selling a business can affect its value. A forced sale is likely to drive down the value. For example, an owner in poor health may accept the first offer they receive, while an owner who goes through lengthy negotiations may get a higher price.
Tangible versus intangible assets
A business that owns property, machinery or stock-in-hand has tangible assets. These will have some resale value, making the business easier to value (including business asset valuation).
Many businesses have almost no tangible assets beyond office equipment. However, their intangible assets may have significant value, such as a well-respected brand, customer goodwill, intellectual property and potential for growth.
These intangibles can be harder to value, so ask your accountant for guidance if necessary.
Years of operation
The longer the business has been operating, the better the track record, cash flow and loyal customers who provide repeat business.
Be wary of businesses for sale that have only been trading between one and two years, such as bars or cafes. Such companies may be experiencing current popularity but the market may be about to turn away.
Business valuation methods
Remember, the true value of a business is always what someone is willing to pay for it. To arrive at a figure, buyers use various valuation methods. This is usually just to give a sense of reassurance that they’re not paying too much.
Here is a list of ways to value a business – profit based valuation, asset based valuation, rule of thumb, comparable sales method, capitalisation of future maintainable earnings, discounted cash flow etc.
As you can see there are a number of ways to value a business and we can discuss those with you when you need to find out more.
Other issues
The key source of business value may be something that can’t easily be measured. Putting a value on intangible assets isn’t easy because that value can vary depending on the nature of the assets and the industry.
See the following examples.
Strong relationships with key customers or suppliers
For example, if a business holds a licence or distributor rights across Australia for a product expected to be successful, the business’s value will increase accordingly.
Management stability
If the owner-manager or other key people are going to leave, the business may be worth far less. For example, the profitability of an advertising agency may collapse if a key creative person leaves.
Similarly, if key salespeople leave, they may take important customers with them. Any written agreements or incentives to retain key employees could add value, but they could also damage the business value if a potential buyer intends to bring in a new team.
Intellectual property ownership
If the business owns the rights to patents, copyrights or trademarks, these will add value to the purchase price of a business. For example, if you’re selling a patented invention, you can value your business higher than a similar business selling an unprotected product.
In some industry sectors, buying and selling businesses is common. This has led to industry-wide ‘rules of thumb’, which are dependent on factors other than profit.
Buyers will work out what the business is worth to them. Take the example of a computer maintenance business with 10,000 contracts but no profits. To one buyer, the business may be worth comparatively little. However, a larger competitor may pay $100 per contract to buy the business because it could merge the two businesses and make larger profits.
Contact us to find out more about valuing your business.
Source: Tony Robbins
Goal setting can look different depending on an individual’s lifestyle, values and definition of success. Your goals are unique to you and don’t need to look like anyone else’s.
The classic goal-setting definition boils down to the process of identifying something you want to accomplish and establishing measurable objectives and timeframes to help you achieve it. Goal setting can help you in any area of your life, from achieving financial freedom to adopting a healthy diet. When you learn how to set goals in one area of your life, it becomes easier to set them in other areas.
Setting progressive goals that allow small wins helps you move on to larger achievements. These small goals lead to progress.
Why is goal setting important?
Goal setting is the fundamental key to success. Whether it’s building your business, learning a new skill or creating wealth via an avenue you really love. Setting goals lets us create our future. It also helps us grow and expand, pushing ourselves to transform in ways that we never imagined. In order to feel fulfilled, we need to know and feel like we’re working to achieve something. Tony Robbins says, “Progress equals happiness,” and setting goals gets us there.
Effective goal setting lets you measure progress, overcome procrastination and visualize your dreams. If you don’t know what you want to accomplish, you can’t create a plan to get there. Setting goals is the vehicle that will drive you to your desired destination.
Goal setting also keeps you accountable. Whether you’re learning how to set goals at work or in your personal life, telling others about your goals makes you more likely to establish the patterns that will accomplish them.
Here we’ll cover how to set goals to ensure you achieve them. You’ll learn what makes a compelling goal as well as the steps you need to take to see them through.
How to set goals
What is goal setting to you? When you set goals, are you used to seeing them disappear in the rearview mirror? We’re willing to bet if you’re reading this page, you’ve set a goal or two in your life. But did you see them through?
You’re much more likely to put time and energy into something that excites you, so your goals must reflect that same level of momentum. Think of a goal as a dream with a deadline. Now all we have to do is create a blueprint to achieve them.
1. PERFORM A BRAINSTORMING SESSION
Give yourself 1 hour to brainstorm a list of anything you’d like to achieve, create, do, have, give and/or experience in the next 20 years. Write as many items down as fast as you can in this time. Use the rocking chair test to come up with ideas: Picture yourself in retirement, thinking back on your life from your rocking chair. What accomplishments will you be most proud of? What will you most regret? These are your most important answers to the question, “Why is goal setting important?”
We can help you do all of this. We specialize in helping people set goals and achieving them.
2. REFINE YOUR GOALS
Setting deadlines is crucial to goal setting.
Go back through your list and write one, three, five, 10 or 20 years next to each goal to indicate how long it will take to achieve them.
Some goals take a lifetime to achieve, but make sure you are pushing yourself toward both professional and personal growth. If you don’t know how long a goal will take, write down how long you would like it to take. Tony says: “Goals are like magnets. They’ll attract the things that make them come true.”
3.CONNECT YOUR GOALS TO YOUR PURPOSE
Go over what you’ve written. Choose your top four one-year goals.
These are goals that excite you because they are most connected to your purpose in life. Write a paragraph for each goal explaining why you will achieve this goal within the next 12 months. This isn’t a to-do list.
This is creating a vison for your life. When you have a powerful reason “why,” you’ll more easily discover the “how.”
4.CREATE SMART GOALS
Now it’s time to take those big goals and break them down into smaller SMART goals.
Are your goals specific? Measurable? Achievable? Realistic?
Do they have a specific timeframe?
These are the components of a SMART goal. Breaking down your goals in this way sets a strong purpose and intention, making them more concrete and easier to achieve. You’ll also be able to better track your progress and celebrate your successes – two keys to achieving goals we’ll talk about next.
HOW TO ACHIEVE YOUR GOALS
Learning how to set goals is worthless if you don’t learn how to achieve Set yourself up for success by following these tips.
1.VISUALIZE YOUR GOALS
Where focus goes, energy flows, so it’s critical to focus on your goals. Visualization is one powerful way to do this. When you visualize your goals on a daily basis as if you’ve already achieved them, you align your purpose and values with your actions. Everyone from star athletes to entrepreneurs uses visualization as well as practices like vision boards to help with goal setting. You can even tape images of your goals on the mirror in your bathroom or pin them to the wall next to your computer.
2.KEEP YOURSELF ACCOUNTABLE
Find a friend, family member or another person you trust and share your list of goals with them. You can share the list with us, as mentioned above we specialize in this space. We have many clients we work with to help them achieve their goals. Sharing your list will make you more accountable and give you a partner who will work with you through frustrations or roadblocks. The right partner can help you transform obstacles into opportunities and stay on track.
3.TRACK YOUR PROGRESS
Have a set schedule to review both short- and long-term goal setting. This helps you track progress as well as determine what activities are helping you and which are hindering you. It’s important to know when you need to make alterations to your course. As Tony says, “Stay committed to your decisions, but stay flexible in your approach.” Don’t lose sight of your ultimate goal, but remember that life is happening for you, not to you.
4.CELEBRATE YOUR SUCCESSES
Goal setting doesn’t have to be a boring set of tasks to check off. When you’re planning your goals, include ways to celebrate your successes. If you’re working toward financial freedom, set aside a budget for a nice dinner when you reach a certain goal. Celebrate relationship milestones. Got that promotion? Share it with the world and celebrate. It will help you stay focused – while also being present in the moment.
Why is goal setting important? Imagine yourself older and looking back. What’s the pain from not achieving, and what is the pleasure from having achieved your goals? Effective goal setting helps you stay focused, keeps you accountable and is the single most important aspect of reaching your dreams.
We can help you set your goals, document them and help you achieve them over time.
Contact us to find out how we do that
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