News

Why YOU NEED to review your Personal Risk Insurance

Sun, 01 Apr 2012 23:22:00 GMT

If you have insurances in place that are there to protect you and your family, it’s easy to become complacent and let yet another year slide by without reviewing it. So why should you review your Insurances?

The three predominant reasons are:

Increased competition and premium reductions amongst life insurance companies
Constant improvements to life insurance policies
Your ever changing needs and objectives.

The life insurance market place in Australian is constantly changing – now, more than ever, it's an open market with fierce competition between all the players.

One leading Life Insurance Company has recently launched a new range with reduced Income Protection pricing of up to 30% for many occupations and ages. Coupled with the tax deductibility of income protection premiums, the affordability of this insurance makes it a ‘must have’ for many Australians.

In the past ten years circumstances under which a claim can be made on a trauma insurance policy have improved. Previously there were just ten conditions for which a policy holder could be diagnosed in order to claim – now there are almost 90 conditions with some policies.

The same Insurance range has new definitions of commonly used terms such as heart attack, which now includes ‘silent’ (minor heart attack) and they anticipate the successful claims for this condition will now double. And how many of us know someone that has been diagnosed with breast cancer. Claiming for breast cancer in this new range will be far easier regardless of the chosen treatment. The definitions of many trauma insurance policies means that the claim is only valid if the patient has a mastectomy and is not valid if the patient has surgery followed by radio therapy and/or chemotherapy.

Better policies in the life insurance market have a "guaranteed upgrade" clause, which states that all future improvements to the policy will also apply to existing policy holders. If you're looking to the long term when undertaking a policy, it's crucial to ensure that your policy has this clause, and if you are considering a replacement policy, it’s crucial you are not losing a benefit. Therefore, making a decision purely on the cost is not the answer but it's important to ensure that you are getting what you're paying for.

If you're not certain exactly what your policy covers read the product disclosure statement and speak to your insurer asking specific questions. If you need extra peace of mind, speak to us at CMA Financial Services. It's better to be safe now than sorry later.

A Trap That Causes Many Businesses To Go Broke, While They're Making a Profit

Sun, 01 Apr 2012 23:43:00 GMT

There’s a saying in business, “You can go broke making a profit.” And another, “Cash is king. Profit is theory.”

As you know only too well, you don’t pay rent, meet payroll or pay your bills with profit.

You pay them with cash.

A business can make a lot of sales, have a book full of orders, have delighted customers and clients, have a great reputation, be growing, and yet still go broke.

Why? Cash flow.

The business might be profitable on paper, but have no money left in the bank. They become insolvent.

A growing business is often hungry for cash ... hungry for inputs so it can make the business’ outputs, be they physical products, services or a combination of both. The tragedy in this is that cash flow crises can often be averted. They can be predicted, planned for, and then contingency measures put in place.

For example, if a business has seasonal effects where some months are busier than others, or if a business knows it has some jumps in expenses or fixed costs approaching—such as moving to a larger premises or hiring more staff to cope with growth—then these expenses can be planned for and compared with the planned income in those months.

Which would you prefer to do?

(A) Call your bank manager and ask for a short-term loan or increase in overdraft when you are urgently in need of the cash (and therefore stressed, and desperate, and not in a great frame of mind to negotiate good terms), or

(B) Call your bank manager 6 months in advance and meet with him or her to explain the coming cash crunch, the reasons behind it, and plan for the funding in a calm, relaxed, totally-in-control manner?

Not only would you get the loan, you’d impress the bank manager and strengthen the relationship for further funding, should it be needed to support your growth. The bank manager would see you are a professional operator with a planned approach to your business, not a fly-by-the-seat-of-your-pants operator. (They see a lot of those. They don’t like doing business with them.)

Apart from the relationship with your bank, there’s the immediate effect of sleeping better at night. We all seek a level of certainty to comfort us. Knowing what lies ahead in business and planning your cash flow gives you a peace of mind and confidence in your day-to-day work that will rub off on those around you ...

... in your workplace and at home. It’s a good feeling.

This is one of the reasons we are so passionate about helping our clients put together cash flow forecasts, to help them keep their business on track and to avoid any stressful, unpleasant surprises in the coming months. It doesn’t matter whether a business is a one-person hairdressing or lawn mowing business, or a 10 person, 20 or 200+ person business.

Every business needs a cash flow forecast.

Running your business without a cash flow forecast is like driving a car at night along a dark country road with only your normal headlights on. It’s hard to see what lies ahead. A kangaroo or some other wildlife might come right out in front of you, leaving no time for you to react. CRASH!

On the other hand, a cash flow forecast is like driving along that country road with high beam on. You can see so much more. You can drive with much more confidence. Less stress. And avoid the CRASH!

Another thing we often find in helping our clients build realistic cash flow forecasts, is that we can spot problems and make suggestions that help improve the business’ cash cycle. This puts money in your bank account.

For example, a combination of negotiating better terms with suppliers, tightening up or at least clarifying and enforcing your business’ own credit terms, and reducing stock holding and waste can have a powerful positive effect on your cash flow.

So, if a cash flow forecast is so crucial, why do many businesses not have one?

Simple. Business owners get busy. Busy pleasing customers or clients. Busy dealing with staff. Busy paying suppliers. Busy generating sales.

Also, it’s easy to get ‘too close’ to your own business. “You can’t see the forest for the trees,” as the saying goes.

Having an independent and fresh pair of eyes come in and look at your business—especially cash flow which is its life blood—allows opportunities for improvements to be identified. Things that are there, but difficult for the business owner to see amidst the ‘busy-ness’ of it all.

So, what should you do about it?

Call us. Take action. A cash flow forecast costs less than you think.

Your next step ... Call us on (07) 5448 8161 or email us on craig@cmaccounting.com.au to make a time to meet and discuss your options. We’ll then outline the costs so you know exactly what lies ahead.

It’s time to turn those high beams on!

Xero Puts you in control of your business

Sun, 01 Apr 2012 23:44:00 GMT

We’ve discovered a whole new way of accounting. In our last Next Wave newsletter we discussed the benefits of Cloud Accounting. Now we’d like to introduce you to the front runner in Cloud Accounting Software.

Xero is an easy to use but powerful online accounting system that’s designed specifically for small to medium business. We believe in offering you solutions that are suitable and cost-effective. Xero is that solution. A few of the major benefits to you:

1. Run your business and access your accounts anywhere, anytime.

Xero is a web-based accounting system which means you can work where you want, when you want with 24/7 access from any internet connection in the world – PC, laptop, Mac and even a smartphone. You can manage your business from work, home or on the go. Xero gives you easy access to your bank transactions, invoices, reports, even your GST.

2. Invite others to view your accounts and provide valuable real-time advice.

With your permission, you the client and we your advisors can collaborate online. No need to send large out-of-date files back and forth, or for either party to upgrade software to be compatible with the other. With Xero you can choose to invite us to work with you online – in real time. No more cumbersome transfer of data that can be corrupted.

3. Your data is completely secure.

Xero is an online accounting system where your important financial data is stored securely in one central place – meaning there is only one version of your data file. This method of storing data means that even if your computer is lost, stolen or corrupted by viruses, your data is safe & secure. There’s no need to recreate your accounting records from scratch as they are still securely sitting in the “cloud”, waiting for you to access.

While the above are important considerations, Xero also offers you more.

No need to buy and install expensive software on your computer – Xero is accessed via internet connection and therefore takes up no space on your hardrive.
No more software upgrades – this is taken care of for you. Upgrades are undertaken overnight so the next time you login the upgrades are ready for you to use.
No more of our time and your money wasted on transferring your accounting software to ours.
24/7 online help and training videos to help you solve issues you may be experiencing.
At a glance, Xero’s dashboard gives you a summary of all your bank accounts’ details and balances; visibility of how much money you have coming in and going out; and the ability to drill down to see transaction details.
Xero’s intuitive invoice entry means you can enter your invoices quickly and efficiently, whether you are creating an invoice for one or many items. You can create a schedule to automatically generate invoices on a regular basis, saving you the time and hassle of entering the invoice manually each month. You can email formatted invoices directly to customers from within Xero and you can choose to email a copy to yourself.
Xero has made bank reconciliation easy and fun. You can automatically import your bank statements into Xero daily, so you don’t waste time downloading and uploading bank files manually. And your financial information is as up-to-date as it gets.
Xero lets you track where your money is going and why. You can see all your outstanding invoices at a glance; set up repeating payables invoices for regular suppliers; approve shared workflows to relieve the business owner; enter receipts for your expense claims as you collect them, or all in one go.

Talk to us about how Xero can help you.

Sam's Chicken Lasagne

Sun, 01 Apr 2012 23:20:00 GMT

Sam has been teasing us for years with the delicious smell of this dish wafting through the office. Now she's been generous enough to share the recipe with all of us. Try it yourself, it's guaranteed to impress!

500 gms chicken mince
1/4 Jap pumpkin
Frozen spinach
Tub of Cottage cheese
Tspn garlic
Squirt Italian herbs
Shake of paprika
Pepper
1 x bottle of spag bol sauce
1 x egg
Handful of grated parmesan cheese
More parmesan/tasty cheese for the top
Lasagne sheets
Lasagne dish (I use the foil BBQ dishes)

Bake Pumpkin until soft and tasty.
Defrost spinach and squeeze excess water out.
Mix cottage cheese with egg and parmesan (a good cheat here is a tub of cream instead).
Fry chicken until crumbly and nearly cooked. Add garlic and herbs to taste.
In lasagne dish start layering:
A dollop of spag bol on the bottom, lasagne sheet, cottage cheese mix, a sprinkle of parmesan if desired, layer of chicken, bol sauce, lasagne sheet, cottage cheese mix (cream), layer the pumpkin, spag bol sauce, more chicken, bol sauce, lasagne sheet, cottage cheese mix, spinach shredded, last of the chicken, some bol sauce then cover in tasty and/or parmesan cheese with a sprinkle of bread crumbs for crunch.
Bake in oven at 180 degrees for 40 mins. Let stand for 5 minutes before serving.

Cloud Accounting: What's all the hype about?

Fri, 03 Feb 2012 05:08:00 GMT

Mostly about saving money and time. The pros of Cloud Commerce far outweigh the cons. Imagine being able to check your financial information while shopping or even fishing.

The ‘Cloud’ is a term for describing software delivery and data housing over the internet. Until recent years most business owners have used software and kept data on their computer hard disk. Software updates had to be downloaded and data had to be backed up and a copy kept offsite for security purposes. Data had to be transferred between bookkeepers, businesses and accountants.

So how can Cloud technology impact your business? Quite simply, it's a good way to reduce costs, and speed up access to your information. Traditionally, bookkeeping has been a very paper intensive practice but with Cloud and Smartphone technology, bookkeeping can now be managed far more efficiently and with far less reliance on paper.

Probably the biggest benefit of Cloud Commerce is the ability of business owners and advisors to work on live data anywhere, anytime. Staff can work from home at midnight if it suits them; advisers can fix up issues that business raise without having to travel to get the ‘true’ data and reduce the risks associated with loss of access to files and apps. Most of us have been banking in the Cloud for many years now and Cloud Commerce is the next step. This even means accessing your accounting data via your smart phone such as iPhone or Blackberry.

Once... the bookkeeper had to enter all transactions and had to perform bank reconciliations, check each bank transaction from bank statements against the accounting system and tick them off.
Now... pretty much all of the Cloud Accounting systems have bank feeds which means they are linked to the bank account and entries are automatically fed into the system. The system recognises the amount of the bank transaction and matches up with its own transactions.

Some people worry about the security of their data and about the internet going down. Having data on computer hard disks is probably more dangerous than having it in the Cloud. Most Cloud Commerce organisations use extremely reputable and secure servers for housing systems and data. In most regions the internet goes down rarely, and if it does it’s generally for hours rather than days. We are on a path to greater internet speed every day.

Many people believe that 'cloud accounting' will entirely replace locally installed copies of accounting software in the not too distant future.

It is always important to remember if you are thinking of choosing accounting software applications what the level of data security is, how easily can you export your data to another platform and of course always consider price and ease of use as factors in making your decision.

We can help you with your computerised accounting requirements be they in the cloud or installed locally.

Business Owners: Are you putting your family home at risk?

Fri, 03 Feb 2012 05:06:00 GMT

As a business owner, there are plenty of things you need to manage, and two of the most important of these are risk and assets.

In other words, building your wealth and protecting your wealth.

There’s no point building a lot of wealth if the way you have things structured behind the scenes means that someone could take your assets away from you. Sadly, many business owners are in precisely this predicament ...

... without knowing it!

Following are some crucial concepts that, if you as a business owner don’t understand them and put protective measures in place, your family home (and all personal assets of you and your family) are at risk of being lost if someone decided to take legal action against your business.

Consider these facts ...

• Your business faces unpredictable risks through interaction with employees, customers/clients and creditors.

• This means there is potential to be sued by a variety of parties. Where there are agreements in place, sometimes disagreements later result. This is life. It makes sense to accept that, and plan and protect yourself, rather than hope it never happens.

• Litigation, sadly, is increasing each year, largely driven by lawyers offering ‘no win, no fee’ services.

• This encourages people to ‘have a go at you’ through legal action. They have nothing to lose, after all.

• This means you need to ‘build a wall’ between your business risks and your personal assets otherwise you risk losing it all.

• This ‘wall’ protects you and your family from losing assets such as your house or personal investments, if your business was to be sued.

• The wall is created by clever use of companies, trusts and also deciding who, within a married couple, for example, should and should not be a Director of each company. This is a key point. One seemingly simple mistake in this area can cost a family their house.

• The standard type of will puts your family’s assets at risk, because if the person who dies holds the family’s personal assets in their name, ownership of these assets will revert to the person who through their Directorships in the business, is at a much higher risk of being sued.

Scary stuff.

So what can you do about it?

If you haven’t looked at your asset protection structure in the past 12 months, you need to make that a priority.

Then this should be reviewed annually.

Why?

As your life changes, your asset protection strategies—your ‘wall’—needs to be checked that it is still appropriate. As part of this process we also ensure your wills and estate planning are in order. Remember, the standard type of will can bring down your wall.

In addition to wills, there are other important documents to have in order such as an enduring power of attorney. This is a legal document that can give someone else—the person you choose—the power to make personal or financial decisions on your behalf.

You see, it is far more common for someone to become incapacitated through accident or trauma such as stroke, than it is to suddenly die. If this happens to you, you may not be able to communicate your wishes and make decisions when you need to.

The consequences of this are dire and tragic.

Why?

It’s all about choices and about ensuring you protect your family and your assets. Without sound asset protection, effective wills and estate planning in place, the legacy you have been working so hard to build, may not end up in the hands of the people you intend.

The potential tragic nature of this type of scenario is why we feel so passionate about asset protection and estate planning ... because it’s all about protecting the families we serve, like yours.

Your next step ... Call us on 07 5448 8161 or email us on craig@cmaccounting.com.au to make a time to meet and discuss your options.

We’ll then outline the costs so you know exactly what lies ahead. If you’re anything like our many other clients who have these structures in place, we think you’ll find the costs of ‘building these walls’, so to speak, relatively minor compared to the protection they give you and your family.

Positions Vacant: Receptionist/Practice Administrator

Fri, 03 Feb 2012 05:02:00 GMT

Unfortunately, we will soon be losing our wonderful front office person, Mrs Carole McGibbon. Carole will be leaving in around six months time with her husband to travel Australia and we wish them both very happy travels. It will mean, however we are now searching for a suitable replacement and if you know anyone who may be willing to fill some very large receptionist shoes we would love to hear from them.

CMA are going Bananas!!

Fri, 03 Feb 2012 05:03:00 GMT

If you are finding your bananas are ripening faster than you can eat them this time of year, then this easy to make recipe is ripe for you. Moist and delicious it can be served toasted to the kids after school or fresh as a lunch box treat.

Serving size: Makes 10-12 slices

Extra info: Nut free. Recipe can be transformed into a gluten-free recipe by substituting the flour and baking powder for a gluten-free variety.

Ingredients:

2 cups plain flour

2 teaspoons baking powder

1 teaspoon ground cinnamon

½ cup caster sugar

½ cup brown sugar

2 eggs, lightly beaten

1/3 cup (80ml) veggie oil

1 teaspoon vanilla extract

4 ripe bananas, mashed

Butter and honey, to serve

Method:

Preheat the oven to 180oC. Grease and line the base of a loaf pan (mine is 11cm x 21cm).

Sift the flour, baking powder and cinnamon into a large bowl. Stir in the sugars. In a separate bowl, combine the eggs, oil and vanilla. Add to the dry ingredients with mashed banana and fold until just combined – do not over mix.

Place in the loaf pan and bake for 50 minutes or until a skewer inserted into the middle of the loaf comes out clean. Allow to cool for 10 minutes, then remove to a wire rack and slice thickly.

Serve spread with butter and drizzled with honey.

What do 1/3 of women and 1/4 of men have in common?

Fri, 03 Feb 2012 05:05:00 GMT

Most of us do not hesitate to insure our car, house and other possessions; however, we often neglect to insure the most valuable asset, ourselves and our partners. Around 6.3 million Australians are protected by life insurance policies, with claims in excess of $1 billion being paid by life insurers annually. **

There are compelling reasons to cover ourselves, since the one thing we can guarantee in life is injury, illness or mortality.

Facts and stats:

50,000 Australians have heart attacks every year
One third of women and a quarter of all men will suffer cancer at some stage in their lifetime – over 60% of whom will live for longer than five years after diagnosis
43,000 people died from cancer in 2010
70% of small business people are doing business without income protection (even though it’s tax deductible)
Over 1600 people die on Australian roads every year, the majority of whom are aged between 26 - 59 years
There is a one in three chance you will need to be off work for three months due to illness or injury before you turn 65

How would your life change if you had a sporting or work injury or if you were diagnosed with cancer? How you would pay your medical costs or keep up with day to day bills? Not having insurance would erode your savings or worse, result in a financial crisis.

Generally, there are two types of life insurance products: lump sum payments and monthly income streams.

Lump sum:

Term Life Cover: can provide a lump sum payment in the event of death or terminal illness
Total and Permanent Disability cover: can provide a lump sum payment if sickness or injury leaves you totally and permanently disabled
Trauma cover: can provide you with a lump sum payment in the event you suffer a serious medical condition (such as cancer, stroke or heart attack)

Monthly income steam:

Income Protection cover: can provide a monthly income stream to help you meet your financial commitments if you are unable to work due to sickness or injury

Life insurance can be the safety-net to your financial well-being. In times of need, life insurance can assist with your day to day financial commitments (mortgage repayments and living expenses), which will give you time for your emotional and physical recovery and most importantly, enable you to spend time with your loved ones.

For further information on these products, please contact CMA Financial Services.

¹ Heart Foundation, Australian Facts 2004: Heart, Strokes and Vascular diseases 2004
² Cancer Council: (www.cancer.org.au), Cancer in Australia: an overview, 2008 Australian Institute of Health and Welfare (published December 2008)

³ The Cancer Council Australia, www.cancer.org.au, April 2009

⁴ IFSA media release, Consumer guide to smarter insurance, 3 November 2006

⁵ Australian Government, Road Deaths Australia 2007

⁶ Institute of Actuaries of Australia, 2000: Interim Report of Disability Committee

Don't Lose Control On Your Christmas Break

Wed, 30 Nov 2011 06:02:00 GMT

Would you like to be able to access your work or business computer while you are sitting on a beach taking a well deserved sip of festive spirit?

Have you ever left a quote or important document back at the office and wished you could access it?

Well now you can using...

With LogMeIn Pro for remote access you can access your files and applications on a remote computer (PCs or Macs) by using a web browser on any smart phone, iPad, laptop or other internet enabled device.

Importantly, you can work as securely as if you were sitting in front of the remote computer.

Increase your Flexibility: Access your work computer whenever you need to from wherever you are.
Simplify your Life: No need to take your files with you, with LogMeIn you always have your work computer at your finger tips.
Increase your mobility: Travel when you want to, knowing you can easily connect to your information and applications.
Increase productivity: Manage your time better by accessing your work PC or Mac when you need to without being tied to the office.

Want to check it out for yourself? click here https://secure.logmein.com/

Taking Your Employees For A Christmas Drink??

Wed, 14 Dec 2011 23:16:00 GMT

Don't Get Caught Out.

With the ATO now on the war path searching for anything to catch you out, your Christmas cheer could be the red flag they are waiting for.

To help you understand some of the problem areas, we have reproduced the article "Dealing with Christmas parties, end of financial year functions and similar social functions", from National Tax and Accountants' Association (NTAA).

Dealing with Christmas parties, end of financial year functions and similar social functions

Most employers will incur expenditure in connection with an annual Christmas party, end of financial year function or similar function. A Christmas party will normally be attended by different people such as employees, associates, clients, suppliers and/or contractors and the functions may be held at various locations (e.g., on business premises or at a restaurant).

At a minimum, a Christmas party/function will involve an employer paying for the cost of food and drink. However, for more elaborate Christmas functions, an employer will often also pay for:

the cost of an entertainer (e.g., a comedian, a clown, a band or a DJ); and/or

the cost of premises or facilities within which the function will take place (e.g., a function centre or even a boat for a river cruise).

Checklist of function-related costs incurred by employers

An employer can incur a wide range of function-related costs in relation to a Christmas party, end of financial year function or a similar function. The following checklist outlines the more common categories of expenditure that an employer can incur in connection with such a function, and whether the expenditure has the character of meal entertainment or recreation.

Type of expenditure	Meal entertainment	Recreation
Food and drink	X¹
Waiters and waitresses	X¹
Travel (e.g., taxi travel and airfares)	X¹	X²
Accommodation costs	X¹	X²
Venue hire (e.g., a reception centre or a boat)		X³
Entertainers (e.g., a clown, comedian, band or DJ)		X³
Non-entertainment gifts (e.g., hamper, bottle of wine) ⁴	Not entertainment	Not entertainment
Entertainment gifts (e.g., tickets to sport event, movies) ⁴		X

¹ These meal entertainment costs are dealt with according to which valuation method is used by the employer (e.g., actual method or 50/50 split method). If the actual method is used, an exemption from FBT may apply, for example, the minor benefit exemption under S.58P.

² The travel and accommodation costs may be meal entertainment or recreation depending on whether the costs relate to the provision of meal entertainment or recreation. For example, if an employer provides taxi travel to a sporting event then the taxi travel will be recreation, however, if the taxi travel is to a restaurant then it will be meal entertainment. In any case, consider whether an FBT exemption applies (e.g., the taxi travel exemption in S.58Z).

³ These recreation costs are generally dealt with under the actual method. However, any recreation that qualifies as an Entertainment Facility Leasing Expense (‘EFLE”) can be dealt with under the 50/50 split method. The venue hire will represent an EFLE where the employer has exclusive possession of the venue or premises to the exclusion of others. Any costs associated with entertainers will also represent an EFLE where the entertainer costs were included as part of hiring the venue or facility (i.e., the entertainer is not separately engaged by the employer).

⁴ Reference should also be made to TD 94/55. Consider whether an FBT exemption applies (e.g., the minor benefit exemption in S.58P).

Meal entertainment at a Christmas party (or similar function) for employers using the actual method

Food and drink provided (or paid for) by an employer at a Christmas party (or similar function) will have the character of meal entertainment. As a result, the FBT (and other tax) consequences for an employer will basically depend on the following:

Whether the function is held ‘on-site’ (i.e., on the employer’s business premises)or ‘off-site’ (e.g., at a restaurant or similar venue); and
Who attended the function (i.e., employers, associates, clients, contractors, etc.).

The following table summarises the general FBT (and other tax) consequences of provided food and drink (i.e., meal entertainment) at a Christmas party (or other similar function) for the 2011 FBT year under the actual method.

Person attending function

Location of the function

On-site functions

(i.e., on employer’s business premises)

Off-site functions

(e.g., restaurant or similar venue)

Employees

FBT exempt and non-deductible (i.e., where the property benefit exemption in S.41 applies).

As a result, GST input tax credits cannot be claimed.

Subject to FBT and deductible. ¹

As a result, GST input tax credits can generally be claimed.

However, if the ‘per head’ cost of food and drink at the function is less than $300, the minor benefits exemption may apply. If the exemption applies, no deduction or GST input tax credits can be claimed.

Associates

(e.g., family members)

Subject to FBT and deductible. ¹

As a result, GST input tax credits can generally be claimed.

However, if the ‘per head’ cost of food and drink at the function is less than $300, the minor benefits exemption may apply for the associate. If the exemption applies, no deduction or GST input tax credits can be claimed.

Non-employees

(e.g., clients, suppliers, contractors)

Not subject to FBT and no deduction can be claimed.

As a result, GST input tax credits cannot be claimed.

Not subject to FBT and no deduction can be claimed.

As a result, GST input tax credits cannot be claimed.

¹ No deduction is allowed for any GST input tax credit entitlement. Refer to S.27-5 of the ITAA 1997.

Example – Comparing ‘on-site’ and ‘off-site’ Christmas party

Festive Pty Ltd (“Festive”) arranged a Christmas party for 30 people (comprised of 15 employees and 15 partners or associates) in December 2010. It is Festive’s general policy to provide one main social function for the year for employees and their partners.

The total bill (i.e., the GST-inclusive cost of food and drink) was $13,200, including $1,200 GST, and no other benefits were provided in connection with the function. This equates to a ‘per head’ cost (in relation to food and drink) of $440 (i.e., $13,200/30 people).

What are the FBT (and other tax) consequences for Festive if the party was held at a restaurant (i.e., ‘off-site’)?

Based on the ATO’s guidelines in TR 2007/12, the minor benefit exemption will not apply to the meal entertainment benefit (i.e., food and drink) provided to each employee (and their partner) because the ‘per head’ cost of food and drink (i.e., meal entertainment) was $300 or more.

For FBT purposes, the taxable of the meal entertainment is $13,200 under the actual method (i.e., $440 x 30 employees and partners = $13,200). For GST purposes, input tax credits can be claimed for the $1,200 GST paid (i.e., $13,200 x 1/11). For income tax purposes, a $12,000 deduction is available (i.e., $13,200 - $1,200 input tax credit).

What are the FBT (and other tax) consequences for Festive if the party is held on the Festive’s business premises (i.e., ‘on-site’)?

In these circumstances, the $13,200 meal entertainment would be treated as follows:

(a) Employees – The $6,600 portion of the meal entertainment that relates to employees is exempt from FBT under the property benefit exemption contained in S.41 (i.e., for food and drink consumed by a current employee on business premises during a working day) and is not deductible for income tax purposes. Furthermore, no GST input tax credit can be claimed for the $600 GST paid (i.e., $6600 x 1/11).

(b) Partners – The $6,600 portion of meal entertainment that relates to partners is subject to FBT and is deductible for income tax purposes. Note that the property benefit exemption under S.41 does not apply to associates of an employee. For GST purposes, input tax credits can be claimed for the $600 GST paid).

Meal entertainment at a Christmas party (or similar function) for employers using the 50/50 split method

Under the 50/50 split method, meal entertainment provided in connection with a Christmas party, end of financial year function, or similar function will be dealt with in the same way, regardless of the location of the party (i.e., on-site or off-site) and who attends (i.e., employees, associates, clients, suppliers, etc.).

That is, only 50% of the employer’s meal entertainment expenditure will be:

(a) subject to FBT;

(b) generally eligible for GST input tax credits for any GST paid (i.e., provided either a special GST election or FBT election is in force); and

Therefore, under the 50/50 split method, there is no requirement for an employer to dissect their Christmas party meal entertainment between employees and non-employees. The employer’s total meal entertainment expenditure is aggregated, and only half of the expenditure is subject to FBT and deductible (excluding any input tax credit entitlement). Refer to S.37BA, S.51AEA of ITAA 1936, S.69-5(3A)(a) and S.69-25 of GST Act.

It is important to note that, where meal entertainment provided in connection with a Christmas function is valued under the 50/50 split method, the property benefit exemption under S.41, the minor benefit exemption under S.58P and the taxi travel exemption under S.58Z cannot apply.

Example – Christmas party under the 50/50 split method

Luda Pty Ltd (“Luda”) arranged a Christmas party at a local restaurant. Of the 50 people who attended, 35 were employees and associates, and 15 were clients and contractors. The total restaurant bill was $11,000 (including $1,000 GST). On this basis, the total ‘per head’ cost of the function was $220 (i.e., $11,000/50 people).

Under the 50/50 split method, the $11,000 meal entertainment would be treated as follows:

FBT – 50% of the expenditure is subject to FBT. Therefore, the taxable value is $5,500 (i.e., 50% x $11,000). The minor benefit exemption would not be available.
GST input tax credit – Luda has a GST input tax credit entitlement in respect of 50% of the expenditure. Therefore, Luda’s input tax credit entitlement is $500 (i.e., 50% x $11,000 x 1/11).
Income tax deduction – 50% of the expenditure is deductible (excluding any GST input tax credit entitlement). Therefore, Luda’s tax deduction is $5,000 (i.e., $11,000 x 50% - $500 GST input tax credit entitlement).

What if the function was held on the employer’s business premises?

In these circumstances, the same FBT (and other tax) consequences as noted above would arise under the 50/50 split method. That is, Luda would not be able to take advantage of the property benefit exemption under S.41 (nor the minor benefit exemption under S.58P).

Nana's Famous Christmas Cake

Wed, 14 Dec 2011 23:30:00 GMT

The secret is out!

For one of the tastiest and moistest Christmas cakes you have ever had, give this recipe a try.

750 ml red wine (I use Merlot but any decent red wine)
500gm raisins
500gm sultanas
500gm currants
250gm butter
250gm dark muscovado sugar (or dark soft brown sugar if you can't find muscovado)
4 eggs
90gm glace cherries
90gm mixed peel
finely grated zest 1 lemon
finely grated zest 1 orange
70gm sliced almonds
1/2 teasp each mixed spice, nutmeg, cinnamon
250gm plain flour plus extra 1/2 cup

Place red wine, raisins, sultanas and currants in a glass or ceramic bowl. Set aside for 5 days stirring daily. Drain fruit and press to remove excess liquid, mix in the half cup flour into fruit.
Cream butter and sugar, add eggs one at a time beating after each then add all the remaining ingredients. Mix well.
Bake 3 hours in a 23cm cake tin lined with 3 layers of baking paper at 145 deg.

Enjoy!

CMA and The BankLink Service - Helping You Save Your Time and Your Money

Mon, 05 Sep 2011 06:07:00 GMT

The BankLink Service collects an electronic copy of your statement information, directly from your financial institution and delivers it straight to (us / your Accountant). This enables your Accountant to complete your bookwork more efficiently and accurately...

At CMA Accounting and Taxation Services, to serve our clients better, we have recently implemented The BankLink Service. This will enable us to work more efficiently and accurately with you.

Once you have signed the below authority form, The BankLink Service will enable us to receive an electronic copy of your statement information, directly from your financial institution and integrate it straight into our accounting system.

Your statement information is totally secure, as The BankLink Service complies with the stringent international security requirements of all the major banks and financial institutions. The BankLink Service is a totally separate system from internet banking and it does not allow any transactional capabilities on your accounts. You will continue to receive paper bank statements and our practice will simply receive an additional copy.

Benefits to you:

Saves YOU time – dramatically reduces the amount of time you have to spend manually doing your books;
Simplifies YOUR accounting process – you no longer have to send paper statements to us;
Dramatically reduces the burden of manual data entry and inaccurate data; and
Saves YOUR money – Banklink software, registration and updates are free

For transactions where additional information is required, we will request this directly from you using the client tool BankLink (Coding Report/Notes/Books).

To find out all about The Banklink Service click on the Link below to view a short animated presentation.

BankLink Demonstration

If you would like to get started, please print off and sign the Banklink Client Authority Form.

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It is important that you send the authority form to us for processing and NOT to your financial institution or direct to Banklink.

Please post to:
CMA Accounting and Taxation Services
PO Box 9124,
Pacific Paradise, QLD, 4564.

Once you have returned your signed authority form to us we will send you your Banklink software and instructions.

Budget Snapshot - Individuals

Mon, 05 Sep 2011 06:07:00 GMT

Proposals from our Federal Government Budget for Individuals...

Personal Tax and the Flood Levy

As expected, the Government did not make any changes to tax rates, despite calls for a reduction in personal tax rates. The Government has declined to change to the three rates of 15%, 30% and 40%, which it has previously supported. Instead, the budget has kept tax rates the same for this and subsequent years, with one exception. For the 2011-12 financial year individual taxpayers – both resident and non-resident – who have a taxable income over $50,000 will have to pay the flood levy, varying from 0.5% to 1% depending on the income threshold. Exemptions may apply to those personally affected by the disasters.

Low Income Tax Offset Charges

From 1 July 2011, the proportion of the low income tax offset (LITO) that is delivered through week-to-week pay packets will be increased by the Government from 50% to 70%. What this means is that instead of getting a refund after putting in a tax return at the end of the year, lower income earners will be taxed less during the year. The remaining 30% of the tax offset will be paid as a lump sump upon income tax return assessment. The Government has not implemented the Henry Review recommendation which was to remove the offset and incorporate it into personal income tax rates.

Families – Cuts and Increases

Minors will no longer be entitled to low income tax offsets on unearned income. The reasoning behind this, says the Government, is to discourage income splitting between adults and children. In other words, taxpayers will not be able to reduce their tax by allocating some of their income to their children. With respect to the Medicare levy, from the 2010-11 income year the low-income thresholds will be increased for singles to $18,839 and for members of a family up to $31,789. The Government has also announced that it will phase out the tax offset for dependent spouses below 40 years of age from this July, with the stated aim of encouraging more Australians into paid employment. In other family news, the Family Tax Benefit for 16-19 year olds will be increased with a new maximum rate of $214.06 per fortnight (up from $52.64) to a total of around $4200 per year. For 18-19 year olds in school this rate will be $3,741. Maximum age of eligibility for the FTB Part A will be lowered to 21 years of age. Families will also be able to advance a maximum of 7.5% of their FTB payment from July.

HECS

The Government has said that it will reduce the discounts students receive on paying particular up-front and voluntary payments towards their student contribution and/or HECS debt from 1 July 2012. Originally, students who elected to pay up-front received a 20% discount on their contribution. However, the budget has reduced this discount to 10%. Voluntary payments of $500 or more to the tax office to repay a HECS debt will now only receive a 5% bonus instead of the previous 10%.

Superannuation Excess Contribution and the Over 50s

The Government has announced that individuals aged 50 and over with total superannuation balances below $500,000, will be able to contribute an extra $25,000 above the general concessional cap. This means that those eligible over 50 years of age will be able to make up to $50,000 in total concessional contributions per annum from July next year. Unfortunately, the Government did not heed calls for contribution caps to be restored to their previous levels, so while some older Australians will benefit from this measure, many others with low superannuation levels (for example, mothers who have taken time away from the workplace to raise children) may end up with insufficient retirement savings.

The above Information kindly provided by the Institute of Public Accountants

Budget Snapshot - Small Business

Mon, 05 Sep 2011 06:07:00 GMT

Proposals from our Federal Government Budget for Small Businesses...

Changes to FBT

The statutory formula 4 percentage rate scale method for valuing car fringe benefits is to be replaced with a single statutory rate of 20% regardless of kilometres travelled. The flat 20% rate will benefit those who drive less than 15,000 kilometres. Those who use their vehicles for a significant amount of work-related travel or travel more than 25,000 kilometres might find the alternative operating cost method (or “log book”) method more beneficial. The single 20% rate will simplify the statutory method of valuation and remove the incentive to drive more kilometres to achieve lower a FBT amount. This change can have some flow-on effects as cars are included in the reportable fringe benefits amount that is shown on an employee’s payment summary which could affect eligibility for certain tax concessions.

Upfront Tax Deductions and Write-Offs

Small businesses will be eligible for an instant tax write-off of the first $5,000 of any motor vehicle purchased from 2012-2013. This will effectively replace the Entrepreneurs Tax Offset (ETO) which will be abolished with effect from the 2012-2013 income year. This was another of the Henry Review recommendations, as the ETO proved to be a disincentive to businesses due to high compliance costs and poor targeting. This reform and other tax reforms for small business will be available to small businesses, sole traders and businesses operating through trusts, partnerships and companies. The Government has also announced other tax reforms including an immediate write-off of all assets valued at under $5,000 (up from the current $1,000) and a write-off of all other assets (except buildings) in a single depreciation pool at a rate of 30%.

Reduction in Company Tax Rates

A reduction in the company tax rate to 29% for small businesses will be included as one of the Government’s tax reforms to be introduced in 2012-13. These reforms were previously announced as part of the Government’s response to the Henry Tax Review, however there has been no legislation introduced to implement them so far. Details have yet to be determined as to which small businesses will qualify.

Reduced PAYG uplift

Tax instalments paid under PAYG will be reduced using the GDP adjustment method for one year. Instalments in 2011-12 will be set at 4% above a small business’ taxable income for the previous year, half the statutory rate that would have previously applied. Taxpayers may still vary their quarterly tax instalments if they believe their income is going to be lower or higher than the amount determined by this method, which bases calculations on the previous year’s taxable income, uplifted by a GDP adjustment factor. From 2012-2013, normal statutory rates will once again apply.

Independent Contractors

The Government will require certain businesses to report annually on payments made to contractors in the building and construction industry. This is information that businesses should already be collecting under existing tax arrangements. The measure also includes an increase in funding to the ATO of $46.4m to allow undertaking of data matching and audits, as well as the reviewing of contractors’ tax liabilities. Funding will also go towards assistance and education for the industry. The Government plans to consult with the public on options to introduce similar reporting regimes for payments to contractors in the commercial cleaning industry. There has been general speculation that these measures could be extended to other industries.

The above Information kindly provided by the Institute of Public Accountants