Please read our inaugural issue of ‘On The Money’, a quarterly newsletter with content on hot topics for small business owners including the latest marketing techniques and business automation tools, tax planning ideas, the latest apps for business and wealth creation ideas. Sedley Koschel ‘On The Money’ – October 2018
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Let’s face it, being an entrepreneur is tough. It’s a risky endeavour, but comes with the dream of big rewards. Below are four tips to be a successful entrepreneur. We can’t guarantee your success, but I can help steer you in the right direction. The rest is up to you! Cash Flow Without cash flow, your business will not be successful. Entrepreneurs are known to be big dreamers and fall deeply in love with their product or service. However, if there is no market for what you are selling you will not be able to generate enough cash flow for your business to survive. The crucial step in generating income is to sell a product or service that people actually want. Business Model Can your business make a profit? Will the income you generate from selling your product or service be more than the costs of running a business? When running these projections always overestimate your costs and underestimate your income. Marketing is more important than mastering Often we spend too much time planning and not enough time going out there and marketing our new product or service. You learn more while you are out there trialling your idea and interacting with your clients then spending lots of time trying to become more qualified. Look for ways to keep costs low Now that you have cash coming in don’t forget to keep track of where your money is going. Keep track of what you spend, where you spend it and see if there are ways you can cut back on these costs. The more money that goes out the door means the less in your pocket so keep a close eye on your spending. Measure your results You must measure and track your results in order to see what is and isn’t working. As your business grows you might adapt and change your product line, try a new advertising campaign or add a new department. It is important to note which of these increased profit margins and brought in new customers. Without tracking and measuring the results of these changes you have no idea if these strategies have worked.
Life is unexpected, and being prepared for all aspects of isn’t always possible. Ask yourself, if something were to happen to me or to another trustee within my Self-managed super fund (SMSF), would I have the knowledge or understanding to successfully operate this super fund? Prepare for the Unexpected Whether this be illness, incapacity, death or any other turn of events, being on top of your self managed super fund as trustees, before this happens, is vital. Death As a trustee within a SMSF, a thought into where you want your superannuation to go on your death is an important step to get yourself prepared. As this is a long-term plan consisting of numerous people, you must also consider all members of the fund and their wishes. A lot of careful consideration needs to be given to understanding the member’s wishes to ensure that your funds’ trust deed and broader governing rules are drafted appropriately to achieve these requirements. Legal tools and advice may also aid in this process to help you to direct your superannuation into the right track, by for example, making binding benefit nominations. Diminished capacity If you or another member of your SMSF became unable to act as a trustee, you can appoint an enduring power of attorney to act in the place of the trustee in question. This step should be considered by all members of the fund. Member leaves It is important to understand how your SMSF may be affected if one or more fund members decide to leave the fund. By having this conversation with the other members of the fund, this could alleviate any further stress if this was to become the case later down the track. Stay in the Know Review your insurance As a Trustee of an SMSF, you should regularly review your insurance as a part of your investment strategy. Considering whether or not insurance cover should be held by each SMSF member will aid in preparing for unforeseen events. Administration of your SMSF If an unexpected event does take place and managing the fund become unmanageable, the closure of this fund may need to be considered. Financially, an annual SMSF running costs is generally fixed, however if your superannuation balance falls to a level where it is not cost effective to remain in the fund, the best option may be to transfer out of this plan. Being aware of the financial state of the fund at all times, can combat any financial troubles that you may face if your monetary state was to unexpectedly change. Need further help? If all of this is still feeling out of your reach, or you simply have a question or two about the SMSF strategy, do not hesitate to contact Sedley Koschel on 1300 00 11 08 or head to the ‘get in touch tab’ where you can arrange an obligation free, 30 minute consultation.
1) They adopt a proactive strategy Communication is key, good financial advisers will keep you updated on current financial opportunities and potential problems. Advisers should always help you understand complicated financial concepts by explaining them to you in a way that makes them easy to understand. Beware of advisers that can’t be bothered to spend their time explaining their recommendations or advisers that withhold information. They are unworthy of your valuable time and money. 2) They have a positive reputation Finding the right financial adviser isn’t very easy. If a family member or friend recommends a financial adviser, this could be a great place to start your research. The reputation and background of the adviser’s company should be carefully considered. Does the company have a proven record for success? Is the company local? Like most things in life, if they seem too good to be true, they generally are. 3) They convey confidence and trust You should have trust and confidence in the recommendations given by your financial adviser. Discussions with your adviser that leave you feeling fearful, stressed or nervous are a massive red flag. Go with your instincts and put an end to the relationship. 4) They don’t panic For your financial success, finding a patient and calm adviser is key. Your planner should always keep what is best for you in mind and evaluate the relevant options. However, they should do this without straying from a well calculated strategic plan. Another major red flag is if your adviser is constantly recommending the latest popular stock pick with urgency. This is a sign that they may not have what’s best for you in mind. Investment that leads to long-term growth should not have any sense of urgency attached. 5) They view your finances with a holistic attitude The types of asset classes you choose to invest in or your income level should not be the basis for the quality of your financial advice. Financial advisers that place great emphasis on learning about your financial situation and investigating your banking, credit, investment and insurance needs, are exactly who you should be looking for. In order for a financial adviser to develop a worthwhile and accurate strategy, they should understand your life goals, spending habits and debt obligations. 6) They have plenty of experience as a financial professional Industry-recognised certification or significant experience in the financial services industry are general indicators of a legitimate financial adviser. The Certified Financial Planner (CFP) certificate, awarded in Australia by the Financial Planning Association of Australia, is highly regarded. In order to hold the certification, CFP professionals must completed 30 hours of ongoing education each year and meet certain standards for ethics and experience to maintain the accreditation. There are also a few other certifications available to financial professionals in Australia. Checking you advisers experience and credentials is important. Although it can seem like an unwanted chore, it’s your best chance at making sure you’re dealing with a reputable adviser. 7) They have a clear strategy You should never try to shape your financial future without a solid direction. Your adviser should be ready to take any life circumstance changes into consideration and help you amend your financial plan. 8) They have a support team An adviser with a strong team behind them will ensure your financial needs are not only met but exceeded. Your specific needs should be cared for by your financial planner who should have access to a variety of experts. Good advice on wealth management, debt management objectives, insurance and specialised investment will come from a good financial planner with a professional support team. 9) They put your best interests first A good professional adviser will shape your plan to meet your goals. Making a large commission or meeting quota by pushing products on you is another red flag. Your adviser shouldn’t be restricted to proprietary solutions their company sells, they should have access to a wide range of product and service options. 10) They work with you Regular meetings with you – and your significant others – are a good sign of a financial adviser that genuinely cares for your needs. Having one meeting to meet with an adviser and develop a plan before reverting to statements in the mail is a red flag. Financial advisers should maintain regular contact with you through every year of the relationship. If you’re looking for a good financial adviser, Sedley Koschel Financial Group is happy to help. httpss://www.blueshorefinancial.com/ToolsAdvice/Articles/FinancialPlanning/TenTraitsOfSuccessfulFinancialAdvisors/ This post was written by Erin Semmler
We’re witnessing the rise of the smartphone entrepreneur. When asked what the most important tool for running a business would be in the future young entrepreneurs’ said, smartphones. A stagging 70% of internet traffic now comes from mobile devices. We check our phones about 85 times a day. You’re probably reading this on one right now and it won’t be long before you check it again. This ‘addiction’ gets a lot of bad press but for small business owners, the smartphone is now their secret weapon. It’s the key system for your life, from keeping in touch with people to answering any question instantly, to managing projects, teams, tasks and expenses from anywhere. Here are two great apps for entrepreneurs to manage a business on the go: Trello App – Simple task management app Apps such as Slack and Asana are great for growing teams – but if you need a simple, quick, shareable dashboard for managing projects, Trello is fantastic. It allows you to create a board, invite team members and start collaborating within minutes. Curve App – For simpler business spending Curve makes it easier for you to manage business spend and automate expenses. It simplifies the way you spend, cuts out FX fees on business trips and allows you to automate expenses. It is one card that curates all accounts together and works with one app to manage them. Being an entrepreneur is a risky endeavour and in order to succeed you need be sure of a few things first. Credit: https://cpainerie.com/top-7-tips-to-be-a-successful-entrepreneur/ httpss://www.xero.com/blog/2017/12/game-phones-5-great-apps-entrepreneurs/
What matters most in business is your ability to adapt to the changing world around you. However, many businesses continue to use outdated technologies that are not fit in today’s digital economy. With 55% still using fax machines, and 56% are still using flash drives. There are far too many businesses still relying on spreadsheets (83%) when there are more convenient ways to report, track and plan for success. Of those businesses that use spreadsheets, 68% use them for accounting purposes, 56% use them for office management, and 49% use them for financial planning. These figures are very high. Spreadsheets require manual input, a substantial time investment, and reliable accuracy. There’s no reason to cling on to them besides habit. Technological tools can automate much of the data entry process and provide fewer errors. The most alarming fact is that if businesses can’t keep up with change, they will be outrun by it. Looking into the future, consider the time and money you will save in the long-term by adapting to the right tools. If you are consumed by inefficient processes, you won’t be able to properly serve your customers or pursue new prospects. Both will expect you to be tech savvy, and if you are not, they will turn to your competitors. However, not all businesses are stuck in the dark ages. Over half are running their businesses from their smartphones. Hardware is only one component of mobile business. Cloud technology is becoming increasingly essential for businesses allowing staff to efficiently work from anywhere, and at any time. Almost 70% are already using the cloud and believed it will save them time, money and improve efficiency. The modern office environment demands modern technology. It is crucial that small businesses embrace the latest tools available in order to succeed and keep up with competitors. Here’s a few of our picks for today’s digital ecomony: Dropbox.com – What is Dropbox? Dropbox is a home for all your photos, documents, videos, and other files. Dropbox lets you access your stuff from anywhere and makes it easy to share with others. Info pulled from: httpss://www.xero.com/blog/2018/02/82408/
If you’re chasing invoices around from this financial year now is the time to enlist some help from an accountant. Consider whether your accounting software can take the hassle out of chasing payments, sending online invoices or automated reminders so you get paid on time. Pay your debts Make sure all your bills are accounted for, and that your payments are up to date. You may need to chase you some paperwork from contractors or small businesses that are slow to invoice. Keep an eye on compliance Keep an eye out for any tax or legislative changes that will come into effect at the start of the new financial year. Make sure you talk to your financial adviser or accountant; they will be able to put you in the right position to capitalise on a positive change. Review your goals Did you achieve everything you intended to last year? If not, try to find out why and how you can achieve them this year. Review your goals regularly to keep you motivated and on track as your business grows. Your adviser should be able to help with this, so make sure you’re getting the right support from your accountant or bookkeeper. Organise with new technology If you’re still using spreadsheets then it might be time to consider how technology can help your business and organise your accounts. Using a cloud based accounting software makes your data more accessible, and keeps you up to date, which can help you reach your goals more efficiently. httpss://www.xero.com/blog/2018/03/last-minutes-tips-eofy/
What is a Self-Managed Superannuation Fund? One of the best means for saving for retirement is a Self-Managed Superannuation Fund (SMSF). A SMSF allows you to guide your own investment strategy, minimize administration costs and reduce tax while obtaining tax benefits. A Self-Managed Super Fund is different to other types of funds in that the members of a SMSF are also the trustees. This means that members can run it for their own benefit. SMSF’s are now one of the most popular choices within the Superannuation Industry in Australia as they have far better performance results than retail and industry funds. Benefits There are many great benefits to switching to a SMSF. A major factor for people looking to start a SMSF is the ability to control their superannuation interests. SMSF’s offer a range of additional investment opportunities such as direct shares, high-yielding cash accounts, term deposits and income investments. SFSM members will have greater flexibility of their investments and can decide when to acquire or sell them. Funds within a SFSM can also be pooled with up to 3 other family members, which unlocks new investment opportunities and provides flexibility when going into retirement. Furthermore, having control and flexibility over your investment decisions provides you with various tax advantages, meaning you can minimize a capital gains tax liability. In many cases, there is a real possibility of lower running costs and greater risk management. Setting up a fund When setting up a SMSF you need ensure it is eligible for tax concessions and easy to manage. To do this, you’ll need to find a SMSF expert that is a member of the SMSF Association Australia to help with the initial set up and to walk you through the ATO requirements. The team at Sedley Koschel Superannuation have years of experience with the set up and ongoing management of SMSFs. Our superannuation admin team will be able to assist with all your paperwork and setup your SMSF quickly and easily. We will guide you through the entire process and continue to provide ongoing support and assistance.
Key points Despite a lengthy list of worries including Brexit, Trump and messy Australian growth, the past financial year saw strong returns for diversified investors as shares recovered from a rough time in 2015-16. Key lessons for investors from the last financial year include: turn down the noise around financial markets, maintain a well-diversified portfolio; be cautious of the crowd; and cash continues to be a poor generator of returns. Returns are likely to slow this financial year but remain solid. Global growth is good, this should underpin profit growth, there are minimal signs of broad-based economic excess that point to a peak in the global growth cycle, global monetary policy is likely to remain relatively easy despite a gradual tightening and share valuations are not excessive. Introduction The past financial year turned out far better for investors than had been feared a year ago. This was despite a lengthy list of things to worry about: starting with the Brexit vote and a messy election outcome in Australia both just before the financial year started; concerns about global growth, profits and deflation a year ago; Donald Trump being elected President in the US with some predicting a debilitating global trade war as a result; various elections across Europe feared to see populists gain power; the US Federal Reserve resuming interest rate hikes; North Korea stepping up its missile tests; China moving to put the brakes on its economy amidst ever present concern about its debt levels; and messy growth in Australia along with perennial fears of a property crash and banking crisis. Predictions of some sort of global financial crisis in 2016 were all the rage. But the last financial year provided a classic reminder to investors to turn down the noise on all the events swirling around investment markets and associated predictions of disaster, and how, when the crowd is negative, things can surprise for the better. But will returns remain reasonable? After reviewing the returns of the last financial year, this note looks at the investment outlook for the 2017-18 financial year. A good year for diversified investors The 2016-17 financial year provided strong returns for diversified investors. Of course cash and bank term deposits continued to provide poor returns and a backup in bond yields, as deflation and global growth fears faded, resulted in poor returns from bonds and investments that are sensitive to rising bond yields such as real estate investment trusts. But improving global growth and profits along with still easy monetary policy buoyed share markets with global shares continuing to outperform Australian shares. And real assets like unlisted (or direct) commercial property, infrastructure and Australian residential property continued to perform well, although there was a huge range across Australia in terms of the latter with Perth depressed and Sydney and Melbourne still booming. Source: Thomson Reuters, AMP Capital As a result, balanced growth superannuation funds returned around 10% after fees and taxes over 2016-17, in contrast to depressed returns of around 2% in 2015-16. Interestingly, such funds returned around 10% pa over the last five years as well reflecting favourable asset class returns partly in response to a recovery from the 2010-12 Eurozone sovereign debt crisis. Key lessons for investors from the last financial year These include: Turn down the noise – despite lots of worries and predictions of disaster shares did well. Maintain a well-diversified portfolio – despite previous strongly-performing asset classes like bonds real estate investment trusts having a tougher time, a well-diversified portfolio benefitted from a rebound in share markets. Be cautious of the crowd – a year ago the crowd was pretty negative and as is often the case it turned out to be wrong. Cash is not king – while cash and bank deposits provided safe steady returns, they were also very low returns. Five reasons why returns are likely to remain solid Of course, there will be the usual corrections and bumps along the way. However, there are five reasons to be upbeat about the overall return outlook for the year ahead. First, global growth is solid. Business conditions indicators – such as surveys of purchasing managers (Purchasing Managers Indexes or PMIs) – are strong and at levels consistent with good global growth. Source: Bloomberg, AMP Capital In Australia, growth is unlikely to be fantastic as housing slows and the consumer is constrained but it should still be okay as the big drag from falling mining investment is abating and the contribution to growth from trade is set to remain solid as resources projects complete. Second, solid global growth should continue to underpin a recovery in corporate profits after a weak patch into 2016. Third, there are minimal signs globally of the broad-based excess – in terms of capacity utilisation, growth in debt, investment, wages growth and inflation or asset prices – that normally presage a peak in the growth cycle. Sure, there have been pockets of excess – corporate debt growth has been arguably too strong in the US and China, and the Sydney and Melbourne property markets have been too hot – but they have not been broad based, unlike the share boom and tech related investment into say 2000. Fourth, because of low inflationary pressures, global monetary tightening will likely remain very gradual and monetary policy will likely remain easy for some time to come. There is a risk that the next Fed rate hike won’t occur until 2018, the ECB’s exit from ultra easy monetary policy will likely be very slow, the RBA is still some time away from tightening and Bank of Japan tightening is likely years away. Finally, share valuations are not excessive. While price to earnings ratios are a bit above long-term averages, this is not unusual for a low inflationary environment. Valuation measures that allow for low interest rates and bond yields show shares to no longer be as cheap as a year ago but they are still not expensive, particularly outside of the US. What about the return outlook? After the strong overall investment returns seen over […]
Do you know the tax deductions and offsets for which you might be eligible? The following tips may help you to legitimately reduce your tax liability in your 2016-17 return. Claim work-related deductions Claiming all work-related deduction entitlements may save considerable tax. Typical work-related expenses include employment-related telephone, mobile phone, internet usage, computer repairs, union fees and professional subscriptions. Note that the Australian Taxation Office (ATO) will again check claims made in real time. Claim only what you are legally entitled to and be sure to have all necessary receipts or credit card statements to support them. Claim home office expenses When part of your home has been set aside primarily or exclusively for the purpose of work, a home office deduction may be allowable. Typical home office costs include heating, cooling, lighting and even office equipment depreciation. To claim the deduction, you must have kept a diary of the hours you worked at home for at least four weeks. Claim self-education expenses Self-education expenses can be claimed provided the study is directly related to either maintaining or improving current occupational skills or is likely to increase income from your current employment. If you obtain new qualifications in a different field through study, the expenses incurred are not tax deductible. Typical self-education expenses include course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers, tablets and printers. Higher Education Loan Program (HELP) repayments are not deductible. You must also disallow $250 of self-education expenses, which can include non-deductible amounts such as childcare costs. Claim depreciation Immediate deductions can be claimed for assets that cost under $300 to the extent the asset is used to generate income. Such assets may include tools for tradespeople, calculators, briefcases, computer equipment and technical books purchased by an employee, or minor items of plant purchased by a landlord. Assets costing $300 or more that are used for an income producing purpose can be written off over a period of time as a tax deduction. The amount of the deduction is generally determined by the asset’s value, its effective life and the extent to which you use it for income-producing purposes. Maximise motor vehicle deductions If you use your motor vehicle for work-related travel, there are only two choices for how you can claim. If the annual travel claim does not exceed 5000 kilometres, you can claim a deduction for your vehicle expenses on the cents-per-kilometre basis. The allowable rate for such claims changes annually, so it is important to obtain this year’s rate from the ATO or your CPA Australia-registered tax agent. Such claims must be based on reasonable estimates. If your business travel exceeds 5000 kilometres, however, the log book method is required to claim a deduction for total car-running expenses. Contact me to clarify what constitutes work-related travel and which of the two allowable methods can be applied to optimise your tax position. Rental property deductions Owners of rental properties that are rented or are ready and available for rent can claim immediate deductions for a range of expenses, such as: interest on investment loans land tax council and water rates body corporate charges insurance repairs and maintenance agents’ commission gardening pest control leases (preparation, registration and stamp duty) advertising for tenants reasonable travel to inspect properties. Landlords may also be entitled to annual deductions for the declining value of depreciable assets (such as stoves, carpets and hot water systems), and capital works deductions spread over a number of years for structural improvements like remodelling a bathroom. It’s worth noting that the government has proposed that it will change the law to no longer allow travel deductions relating to inspecting, maintaining, or collecting rent for a rental property from 1 July 2017. This is an integrity measure to address concerns that such deductions are being abused. Further, the government announced that from 1 July 2017 plant and equipment depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties. Plant and equipment forming part of residential investment properties as of 9 May 2017 will continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life. Contact me to clarify if expenditure relates to repairs and maintenance that can be claimed immediately, or improvements which need be claimed over time. Residential property and non-residents The government announced that from 9 May 2017, Australia’s foreign resident capital gains tax regime will be extended to deny foreign and temporary tax residents access to the main residence exemption. Properties held prior to this date will be grandfathered until 30 June 2019. Maximise tax offsets Tax offsets directly reduce tax payable and can add up to a sizeable amount. Eligibility generally depends on your income, family circumstances and conditions for particular offsets. You should check whether you qualify for tax offsets which, among others, include the low-income tax offset, senior Australians and pensioners offset and the offset for superannuation contributions on behalf of a low-income spouse. Bring forward deductions and delay income for higher income earners The effective highest marginal tax rate will decrease from 49 per cent in the 2016-17 year to 47 per cent in 2017-18, given the removal of the two per cent temporary budget repair levy, which applies to individuals deriving taxable income over $180,000. Individual taxpayers in the highest tax bracket may wish to consider delaying income into the 2017-18 year, as it would be taxed at a lower rate. Conversely, such taxpayers may consider bringing deductions forward into 2016-17, as such amounts will be deducted at the higher effective tax rate of 49 per cent. Care should be taken to ensure any action does not breach general anti-avoidance provisions or any specific provisions that could curtail activities such as the prepayment rules. If you are proposing to either defer deductions or bring forward income, please contact me. Superannuation The changes to superannuation in the last 12 […]