Blog Page 216

The importance of keeping track

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Make sure you don’t ever have the wool pulled over your eyes by staying organised, up-to-date, and keeping track of all your paperwork.

As some small businesses may have experienced, it can be easy to fall victim to scams and dangers when the business paperwork is out of order. For example, some businesses last year received threats over not paying for advertising that didn’t exist. Having no time to check their records, many businesses fell for the scam and paid these non-existent bills before realising exactly what had happened.

This is why small business owners should make the seemingly laborious task of filing and organising the paperwork a top priority in the office to avoid these kind of scams. Here are some ways to make organising and keeping track of your paperwork as simple and easy as possible:

Add some colour
Try adding some colour to your filing system. By using different colours, tabs or labels to distinguish between the subjects and topics, it is more appealing on the eye, and can make it a lot quicker and easier to find what you’re after.

Use more than one basket
The saying ‘never put all your eggs in the one basket’ can apply to your paperwork too. Having all of your documents in the one place is likely to create disorder and clutter. Alternatively, try having four separate sections; a to-do basket, to-pay basket, to-file basket and a to-read basket.

Make it a habit
If you make filing the paperwork a weekly habit, it will soon become just that, and no longer an avoided or hated task. The more you do it, the less time it should take as well; around 15 – 20 minutes per day should do the trick.

The advantages and disadvantages of family SMSFs

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Many small business owners who run a family business and are nearing retirement face the significant decision of whether to include their adult children in their self-managed super fund (SMSF) as part of their personal and business succession planning.

Including children in a family SMSF can have a critical impact on family relationships and finances, especially if parents and adult children work together and share ownership of a family business.

While potential benefits exist through well-planned intergenerational SMSFs, it is crucial for owners to compare the possible advantages and disadvantages of intergenerational SMSFs.

Potential advantages

  • Estate planning and business succession

A popular strategy among family business owners is to hold their business premises in a family SMSF indefinitely so the ownership and management of the business can pass to the next generation. This strategy can also help build-up enough assets in the SMSF to be used to pay out the parents’ retirement and death benefits if necessary.

  • Cost minimisation

Having two generations of a family in the same SMSF means a fund’s fixed costs are shared over a greater number of members.

  • Assistance in running the fund

Including adult children in ageing parents’ SMSF can help when making administrative and investment decisions for the fund. For example, parents can grant their children the authority to become their enduring power of attorney to make any financial decisions should the parents lose their mental capacity.

Potential disadvantages

  • Family conflicts

Family conflicts can include disagreements over investment choices or family business decisions, break-up of parents’ or adult children’s marriages or even personality clashes. Family conflicts can also trigger the division of fund assets and, sometimes, the forced sale of fund assets.

  • Different investment goals and ideas

Differences in investment goals and ideas can make running an intergenerational SMSF quite difficult. While it is possible to run different investment segments for different members depending upon a fund’s trust deed, this can add further costs and complications.

  • Limit on SMSF membership

The four-member limit on SMSF membership can be quite an obstacle for families with three or more adult children. A way of dealing with this limit is to have multiple intergenerational SMSFs within the same family, which are called “parallel” funds.

Under such an arrangement, parents are usually members of all the family’s SMSFs. The funds typically have a share in the same assets such as business premises.

Preparing for the FBT year-end

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With the end of the fringe benefits tax (FBT) year fast approaching, business owners need to be aware of the FBT and gross up rates when preparing for their FBT return.

The FBT rate increased from 47 per cent to 49 per cent from 1 April 2015. The rate increase was due to the introduction of the Temporary Budget Repair Levy imposed on individuals for a two year period (1 April 2015 to 31 March 2017).

Consequently, the gross up rates were increased from 1 April 2015 to 2.1463 for Type 1 benefits (GST-creditable benefits), and 1.9608 for Type 2 benefits (no entitlements to a GST credit).

The FBT rate will return to 47 per cent from 1 April 2017, as a result of the discontinuation of the Temporary Budget Repair Levy. The gross up rates from 1 April 2017 will be 2.0802 for Type 1 benefits and 1.8868 for Type 2 benefits.

Whether the benefits provided to the employee are type 1 or type 2, only the lower gross-up rate is used for reporting on employees’ payment summaries.

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