Issue 107 - June 2016
The power of the time value of money in wealth accumulation and growth is not fully appreciated by all investors. The principle is that a dollar today is worth more than the same amount in the future. Our financial advisory team have modelled this into a real life situation to represent how this can impact on a portfolio balance.
In this example there are two brothers, William and James. From the age of 20 William decides to invest $4,000 annually into an investment portfolio and does so for 20 years. James on the other hand decided to start his investment portfolio at the age of 40 and contributes $4,000 annually until he turns 60. Therefore, both brothers contribute $80,000 into their respective portfolios and receive 7 percent return on investment over time.
Once the brothers reach 65 years of age they decide to compare balances. William's investment portfolio increases to $952,301. James' investment portfolio only increases to $246,093 - a difference of $706,208. This variation is directly attributable to the timing of contributions as both brothers invest the same amount and earn equal rates of return on investment. However, William's portfolio benefits from an additional 20 years of compound growth.
Starting a wealth plan early is critical to achieving your financial goals as you cannot underestimate the value of compound growth in your wealth strategy plan.
The South Australian Government recently announced the establishment of a Small Business Development Fund (SBDF). The fund is a $10 million initiative which will assist small businesses in northern Adelaide to create jobs and expand. Eligible businesses must be located and carry on majority of their trading activity in the local government areas of City of Playford, City of Salisbury or City of Port Adelaide Enfield.
The grants are available on a competitive basis and are up to $20,000 each for start-up businesses and between $10,000 and $100,000 for business expansion grants for small businesses employing less than 20 staff (FTE).
The grants are only available to an applicant once, even if they run multiple businesses that meet the criteria. The grants are available to sole traders, partnerships, companies and trusts.
Funding for the SBDF commences on 1 July 2016, however applicants should be aware that even if they meet all the criteria there is no guarantee that they will be offered grant.
Applications are available on the Department of State Development website at www.statedevelopment.sa.gov.au
Earlier this year, the Government amended the Competition and Consumer Act to ban excessive payment surcharges by merchants who charge customers for using a credit or debit card.
Merchants will still be allowed to have a surcharge, however will not be allowed to surcharge above the average cost of acceptance for that card type. Basically merchants will be able to on-charge the amounts they pay (e.g. merchant service fees, terminal fees etc.).
The ban will be enforced on large merchants from 1 September 2016.
A large merchants is one with two or more of the following:
- Assets of $12.5 million or more
- Revenue of $25 million or more
For all other merchants, the ban will be enforced from 1 September 2017.
Taxpayers who seek to make a return in holding and selling shares need to be aware of the difference between being a share trader or share investor.
In most cases, taxpayers who hold shares as a passive investment over a period time would be classed as share Investors – with the eventual selling of shares as a capital transaction. The sale would result in either a capital gain, which may be eligible for the 50% CGT discount if held for longer than 12 months, or a capital loss which may need to be carried if it cannot be offset against a gain.
On the other hand, it may be possible to be classed as a share trader if you're in the business of trading shares for the purpose of earning income from the buying and selling shares. The tax advantage is that if losses are made, they may be classed as a business loss and offset against other taxable income. The CGT discount however is not available.
In a recent tax case, the AAT passed judgement on a taxpayer claiming to be a share trader who had made 71 share purchases totalling $379,630 and 37 sales totalling $215,019 during an income year.
The Tribunal decided the taxpayer was not a share trader because - the share transactions were not regularly and systematically carried out throughout the year (there were only 10 transactions in the second half of the year), the activities lacked sophistication to constitute a share trading business, there was little documentation and the taxpayer had no skills or previous experience in shares.
The Tribunal did note the turnover was substantial and the taxpayer maintained a home office to manage the activity, however this was not enough to be classed as a share trader.
If you are unsure whether your share activities constitute a business, please contact our office.
On Thursday the 7th of April, Brentnalls SA held a Race Around the Bay team building activity at Glenelg, run by Traction Team Building.
Experiential learning was the theme of the day, each team streamed from the foreshore equipped with a scoresheet, pens, team bandanas and clues to their first destination. Each clue led to the next activity, where once completed, a member of the Traction team provided the clue to the next destination. The objectives of the day were explained by our Traction leader Tom, these included learning how teams work together in a foreign environment, testing our limits, demonstrating ingenuity and developing problem solving skills.
There were a broad range of activities that improved our skills in working together to achieve the best outcomes, some of these included:
- The 'Tour de Glenelg' was a list of questions that led all around Glenelg
- Shooting hoops in the Beach House
- Rescuing the Golden Treasure involved using ropes to pick up an object
- Sorting Puzzle was a practical puzzle that needed to be solved
- Helium Stick was trying to lower a dowel levelled on the team's fingers (much harder than it sounds!)
- Building Tents and Searching through Sand blindfolded while other team members directed
- Magic Carpets that were used to get the team across a chasm
We then gathered with the Traction Team for a final review of the day, the teams were given the opportunity to reflect and comment on what lessons had been taught, how the team had responded and how to apply these lessons back into the workplace.
The benefits of planning, communicating, leadership, recognising strengths and weaknesses and adjusting to them, and even getting to know and work with people from different areas of the office were impressed on us by the great day.
Do you own or are you looking to buy Australian property with a market value greater than $2 million?
For contracts entered into on or after 1 July 2016, purchasers of Australian property will be required to withhold and remit 10% of the purchase price on payments made to foreign residents that dispose of Australian property with a market value greater than $2 million. The law applies to require the withholding on all such sales unless the vendor has a clearance certificate to confirm their Australian residency.
Vendors must apply for clearance certificates from the ATO to verify their residency status. Where a clearance certificate is provided, there is no requirement to withhold an amount from the purchase price. Clearance certificates can be provided to purchasers on or before the settlement transaction.
Vendors may apply for clearance certificates at any time they are considering the disposal of a property. However, the certificates are only valid for 12 months and the certificate must be valid on settlement day.
These provisions also apply to:
- Mining, quarrying or prospecting rights
- Interests in Australian entities whose majority assets consist of the assets listed above
- Options or rights to acquire the assets listed above
To apply for a clearance certificate, or to notify the ATO that you have withheld an amount under these provisions, please contact the ATO on 13 28 66.
For assistance with any of the above, please contact your Brentnalls SA team member.
As we know, collecting money from customers is one of the hardest tasks any business owner needs to do. We all like to be paid quicker but making that awkward phone call can sometimes be difficult.
While some accounting programs have basic functions regarding invoice reminders, there are now a range of add-on programs, which provide additional functions and features to assist in your collections process:
Debtor Daddy sets up automatic email reminders to customers at predetermined time frames to follow up on collections. All reminders are customisable to show specific details and can be tailored for individual customers.
The program uses "collectors" to build a set of reminders which can be friendly, firm or even funny to your customers.
Being linked to your accounting program, it will automatically update your debtors ledger for those customers that have paid. You can then use the Debtor Daddy ledger to instantly action certain debts without leaving the screen i.e. sending another reminder, try a different "collector" on the debt.
Debtor Daddy currently integrates with MYOB AccountRight Live, Intuit Quickbooks Online and Xero.
The price for this software ranges from $8-$29 per month depending on your needs, and the option of a dedicated credit control team for $500 per month.
Ezy Collect provides assistance on collections, reminders and reporting. The program can send reminders grouped for a customer rather than multiple individual reminders.
It provides a tailored approach for follow up of each debtor. Every reminder includes the original invoice.
Integrated payment software built into the Ezy Collect reminders allows your customers to pay outstanding amounts quickly and easily. The software has a built in credit check software so you can research a customer's credit history prior to doing business with them. If you need to contact a customer, the program will provide you with the contact details. It will also send a thank you message once amounts are paid.
Currently, Ezy Collect integrates with MYOB AccountRight Live, Premier and Exo versions, as well as Xero.
Pricing varies depending on software, but can range from $35-$85 per month.
If you have any queries regarding these programs or debt collection processes in general please contact your Brentnalls SA team member.
When using hybrid cloud software it is important that you still take regular backups. Hybrid cloud software means that you have the software installed on your computer but the data is stored in the cloud by the software company. Examples of this are MYOB AccountRIght Live, Phoenix Live and Reckon Hosted.
Even though your file is stored in the cloud you should still take regular backups so that you can access old data and have the ability to work offline if you have an issue with the internet. Backups of data should also still be taken prior to year end rollovers and payroll rollovers.
Most software has an automatic prompt for backing up when you close the program, ensure this is turned on so that you don't risk losing your work.
Please contact Brentnalls SA if you need any assistance with software backups or a backup solution for your data.
A timely reminder to constantly be on the wary of phone scams with fraudsters intimidating people into paying fake debts over the phone.
If you receive any type of correspondence that you are concerned about please contact your Brentnalls SA team member.
This month we are proud to be supporting Sids and Kids, an organisation dedicated to saving the lives of babies and children during pregnancy, birth, infancy and childhood, and supporting bereaved families.
Congratulations to our clients Kym & Judy Knight and Michael Palamountain on achieving 10 years of their business-Tree Environs. Tree Environs provides consultancy advice on managing trees in the urban landscape. http://tree-environs.com/
Congratulations to Grant Trotter who was recently awarded for 50 years service with the Country Fire Service. His wife Marilyn was also recognised for her service of over 18 years.
Brentnalls SA sponsors Van D'am Racing Cycling Team and we congratulate Rhys Gillet on winning the Mount Baw Baw Classic.
We welcome Kiara Cannizzaro who has joined us in the role of communications and engagement coordinator.
We farewell Gypsy-Jade Hancl and Cameron Mitsos and take this opportunity to say thank you both for all your good work.
We are pleased to announce that Linda Fidge has been appointed as an Associate from 1 July 2016. We look forward to her leadership and continued contribution into the future.
We are pleased to announce our support of the Flinders University Surgical Society (FUSS) in becoming one of their new sponsors.
Representatives from our Medical and Allied Health Services team will be attending their upcoming events, Women in Surgery and Surgical Careers Night, providing presentations about financial well-being and detailing key information in keeping abreast of superannuation changes.
My name is Jane Richards and you would know me as the voice welcoming you to Brentnalls SA. I have been with Brentnalls SA for 5 years now and find my daily duties very rewarding.
When not at work, I enjoy spending time with my extended family and volunteering at Mary Potter Hospice, visiting the patients, with my shih tzu Elli. I love to travel and my next trips are to Hawaii in June 2016 and New Zealand early next year and in late 2017 a 7 day trek in Tasmania, Cradle Mountain to St Clair.