The 2013 Federal Budget has been framed around the much publicised reduction in revenue and ‘soft’ economic conditions, but after releasing most of the big changes in the past few weeks, the Treasurer didn’t have much left to announce in his Budget speech to the Parliament.
Wayne Swan delivered a ‘sober’ budget in the face of an expected revenue shortfall of $60 billion over the four years to 2015-16 and at the same time having to fund billions on the Gillard Government's spending commitments such as the National Disability Insurance Scheme ($14.9 billion over seven years) and the Gonski school reforms ($9.8 billion over six years).
The Budget outlines some measures to address structural issues in the economy, focussing largely on the revenue side, including:
An increase in the Medicare Levy from 1.5% to 2% to help fund the National Disability Insurance Scheme
Abolition of the Baby Bonus and introduction of new family payment arrangements
Deferral of the planned 2015-16 income tax cuts indefinitely
Measures designed to prevent multinational companies from shifting profits out of Australia
Closing corporate tax loopholes and concessions
Withholding tax introduced for capital gains made by foreign residents
It is important to note that given that there are very few Parliamentary sitting weeks until the September 14 election date, it is unlikely that many of the budget measures will be legislated (with the exception of the increase in the Medicare Levy).
Reneging on last year’s promise to return the budget to surplus, Mr Swan announced a deficit of $18 billion in 2013-14 although he ‘charted a pathway to surplus’ over the forward estimates predicting a return to a small surplus of $800 million in 2015-16.
The Government has revised down growth in the Australian economy from 3% in 2013-14 to 2.75% and 3% in 2104-15. Unemployment is expected to rise to around 5.75% by mid-2014 and inflation is forecast to remain well within the Reserve Bank of Australia’s 2-3% target band over the forward estimate period.
Many economists are predicting another 25 basis points rate cut, and possibly even another cut this year, if there is further deterioration in labour market conditions. Market reaction to the Budget was negative with the Australian dollar quickly falling ½ cent to under $0.9950 mostly due to the forecast string of deficits.
Download the full BOYCE 2013 BUDGET WRAP PDF here which includes all the details in regard to:
Personal Income Tax & Family Benefits
Business Tax & Compliance
Boyce is celebrating not one, but two milestone anniversaries this year. It is 40 years since the firm was first established in 1973 by the legendary Michael Boyce and ten years since it ‘set up shop’ in Wagga Wagga.
The firm’s proud history of rural practice began in the Monaro region of New South Wales with the establishment of an office in Cooma in July 1973. Today Boyce has five offices located in major regional centres across NSW and a staff of more than 140 – making it the largest independent accounting practice in regional Australia.
The Wagga Wagga branch of the firm was opened on 31 March 2003 under the leadership of director Simon Sellars.
“We leased the historic ANZ bank building on the corner of Fitzmaurice and Johnston Streets and opened for business in a city which we believed offered fantastic opportunities for us to meet the region’s growing need for management accounting services,” Simon said.
He admits that the timing may not have been ideal as much of the State was in the middle of one of the longest droughts in more than 100 years.
“We accepted the challenge though, and looking back it seems to have paid dividends as the farmers and local businesses really needed the type of accounting services we were offering to help them remain viable and come through what were for many, desperate times.”
The type of services Simon is referring to are more than just the normal compliance accounting services. Boyce specialises in providing management accounting and business advisory services to assist clients to closely monitor the performance of their business and understand their true financial position.
“Our approach ensures that our clients know at any time how their business is travelling and can make strategic and insightful business decisions around this information.”
Initially many of the firm’s clients were farmers and agribusinesses, but over the past ten years this has expanded to now include retail and wholesale businesses, professional firms, construction and medical services. In pure numbers the business has achieved a compounded growth rate of 10% per annum since 1 July 2004. Gradual consistent growth is important as it allows the firm to develop its most important asset - its people - whilst delivering first class service to its existing and new clients.
Soon after establishment of the Wagga Wagga office, Simon was joined by former Moree colleague Linda Mackellar. Linda quickly became an integral part of the Boyce Wagga Wagga leadership team and was appointed as a director of the firm in July 2007 at the age of just 28 years.
In October 2008, signalling a firm commitment to the city and to the Riverina, Boyce purchased the graceful 120 year old building from which it operates in Wagga Wagga.
“It is part of the culture and philosophy of the firm that we invest in the towns in which we do business,” explained Linda.
“We are very proud to own such a significant building and it is our intention to continue to respect the integrity of the structure and ensure that it is well maintained so that it can serve as an office building for another 120 years at least.”
Linda likened this guardianship attitude to the building to the general philosophy of the firm, a philosophy that is very much focussed toward care for clients. In their ten years in the region, the Boyce team has built an enduring reputation for combining knowledge, insight and experience with personalised country service.
Boyce was ranked in the Top 40 of the BRW 2012 Survey of Accounting Firms and is recognised as offering a level of professionalism that many would expect to find only in the larger metropolitan-based firms.
“As directors we, and our team, live and work in the region, so we are very intent on ensuring we help to keep the local business community strong,” Linda said.
“We are also very aware of our role in the general community so as a firm and individually we are involved in many different aspects of life in Wagga Wagga and the surrounding areas.”
Due to its scale, Boyce offers specialist divisions of knowledge to assist and advise clients in areas such as family reorganisations, benchmarking, business planning, superannuation strategy advice and compliance, estate planning and complex tax advice.
In 2008 the firm established a financial advisory division, the head-office of which is located in Wagga Wagga.
Director of Boyce Financial Services, Lindsay Garnock, admitted that again the timing was not great as the global financial crisis hit at precisely the time this new business was launched
Despite this Lindsay says the business has gone from strength to strength. He attributes this to a business model that from the very start offered clients “fee for service” rather than the commission based models used by many in the industry at that time.
“We were at the forefront in terms of reforms being implemented in the industry – the requirement to act inherently in the best interest of the client is a value that underpins our business.”
The Boyce directors are rightly proud of a firm with such a long history, and extraordinarily pleased with the growth and development of the Wagga Wagga branch.
“We have a great team of people, we work with some of the best businesses in the country, we live in one of the most beautiful inland cities in Australia in a diverse and thriving region,” said Simon.
Those with more than around $2 million in superannuation will lose some tax concessions under changes to the superannuation system announced today by Treasurer Wayne Swan.
Included in a raft of measures detailed by the Treasurer, a tax exemption on superannuation earnings supporting pensions and annuities will be capped at $100,000, and anything above that level taxed at a rate of 15 per cent.
Reforming the tax exemption for earnings on superannuation assets supporting income streams
Under current arrangements, all earnings on assets supporting income streams (superannuation pensions and annuities) are tax-free, in contrast to earnings in the accumulation phase of superannuation, which are taxed at 15 per cent.
From 1 July 2014 earnings (such as dividends and interest) on assets supporting income streams will be tax free up to $100,000 a year. Earnings above $100,000 will be taxed at the same concessional rate of 15 per cent that applies to earnings in the accumulation phase.
The $100,000 threshold will be indexed to the Consumer Price Index (CPI), and will increase in $10,000 increments. Assuming a conservative estimated rate of return of 5 per cent, earnings of $100,000 would be derived from individuals with around $2 million in superannuation.
Special arrangements will apply for capital gains on assets purchased before 1 July 2014:
For assets that were purchased before 5 April 2013, the reform will only apply to capital gains that accrue after 1 July 2024;
For assets that are purchased from 5 April 2013 to 30 June 2014, individuals will have the choice of applying the reform to the entire capital gain, or only that part that accrues after 1 July 2014; and
For assets that are purchased from 1 July 2014, the reform will apply to the entire capital gain.
The transitional arrangements mean people who have already purchased superannuation assets will have ten years to decide whether they want to restructure their superannuation holdings, before their capital gains start to be affected.
This reform will not affect the tax treatment of withdrawals. Withdrawals will continue to remain tax-free for those aged 60 and over, and face the existing tax rates for those aged under 60.
Members of defined benefit funds, including federal politicians, will be impacted by this reform in the same way as members of defined contribution funds (i.e. that there will be a corresponding decrease in concessions in the retirement phase).
Increase to the concessional contributions cap
The Government will increase the concessional cap to $35,000 for anyone who meets certain age requirements.
The start date for the new higher cap will be 1 July 2013 for people aged 60 and over. Individuals aged 50 and over will be able to access the higher cap from the current planned start date of 1 July 2014.
The Government has decided not to limit the new higher cap to individuals with superannuation balances below $500,000 in light of feedback from the superannuation sector that this requirement would be difficult to administer.
Reforming the treatment of concessional contributions in excess of the annual cap
Under the current arrangements, concessional contributions that are in excess of the annual cap are effectively taxed at the top marginal tax rate (46.5 per cent) rather than the normal rate of 15 per cent. This outcome is achieved through the imposition of Excess Contributions Tax. This is a severe penalty for individuals with income below the top marginal tax rate.
The Government will allow all individuals to withdraw any excess concessional contributions made from 1 July 2013 from their superannuation fund. In addition, the Government will tax excess concessional contributions at the individual’s marginal tax rate, plus an interest charge to recognise that the tax on excess contributions is collected later than normal income tax.
These rules will ensure that individuals are taxed on excess concessional contributions in the same way as if they had received that money as salary or wages and had chosen to make a non-concessional contribution.
Further changes announced today, include:
Extending the normal deeming rules for government pensions to superannuation account-based income streams;
Extending concessional tax treatment to deferred lifetime annuities; and
Further reform to the arrangements for lost superannuation.
Mr Swan did not commit to legislate all of the changes announced today by the time the Parliament rises ahead of the September 14 election.
For more information please contact your local Boyce Director or our Specialist Superannuation Strategist, Elizabeth Timmins on 6452 3344 or email email@example.com.
TAP INTO TECHNOLOGY TO GROW YOUR BUSINESS
Rapid advancements in technology and communications, combined with time-poor consumers and the shift to a global market place are challenging the traditional business model. Business practices and the methods employed to interact with customers and with other businesses are rapidly evolving.
Change, although challenging, brings opportunities. Here we look at five innovative ideas for your business to consider in 2012.
1. EXPLOIT THE DEMAND FOR NICHE PRODUCTS ONLINE
Consumers are becoming more aware of where the food they eat is grown and where the products they buy are made. Demand for fresh, locally produced food is growing, as is the demand for high-quality Australian made product. Exploit opportunities offered via the Internet to market a niche product.
Consider collaborating with other producers to set up a niche online site to market a range of products and to provide a richer experience. Etsy, a craft and vintage products online retail site, has proved to be a successful alternative to large, generic sites such as eBay – consumers browsing this site know they will find the one-off designs and individually crafted products they are seeking.
2. TECHNOLOGY SOLUTIONS TO INCREASE SALES
If you have a mobile sales team, consider how you can use technology to enable your team to close the deal on the spot, rather than having to return to the office to complete the paperwork. Research technology such as tablet computers and integrated software to find solutions that work for your business.
Consider developing an “app” (mobile application) that links to some aspect of your business so that your customers can place orders via their mobile phones or tablet computers. Customers love “apps” and will feel closer to your business by using them.
3. INFRASTRUCTURE AND SOFTWARE ALTERNATIVES
An increase in productivity is the goal of most businesses, but how can a business achieve this when capital is constrained?
Computer software is one area where businesses can save dollars. Research options for software programs where you don’t have to pay expensive per user licences such as Gmail or CutePDF. There are myriad opportunities to access low-cost and even free(ish) cloud-based software programs.
Every business has assets they don’t use all the time – increasingly businesses are looking to connect with others that might. “Hiring out” equipment or infrastructure that is not required all year round can result in additional income for your business, or alternatively there may be a business that has equipment you can “swap” for a period of time, saving you the cost of capital investment. You may even consider setting up an online “community marketplace” to connect businesses with each other as a potential side-line to your main business.
4. A FLEXIBLE AND ADAPTABLE WORK ENVIRONMENT
Whether the economy is in boom or bust mode, attracting and retaining skilled staff is always challenging. Businesses that understand the importance of meeting the needs of employees and can adapt to the evolving nature of work are likely to attract and retain talented employees.
The talent pool is large as ageing baby boomers seek to decrease hours as they ease into retirement, mothers re-entering the workforce but seeking flexibility to meet the demands of family, Gen Ys who want the challenge of interesting work but like to take time off to explore other things and now Gen Z employees (those born post 1990) who have had life-long use of media and communications technology and expect their workplace to embrace this.
Employers that offer more of the same are not going to attract or retain the skilled employees they need to ensure their businesses prosper. Seek professional assistance to understand the needs of your employees and how to best connect with a skilled talent pool.
5. THE POWER OF SOCIAL MEDIA
For many of us understanding how social media works let alone how it impacts our business is challenging. Social networking sites such as Facebook, Twitter, Linked-In and Google+ are actively pushing into the business sphere and enabling tech savvy businesses to market their products or services more broadly and cost effectively than through traditional media.
Many retailers who use Facebook to post new stock updates are reporting increased sales as their products are marketed not to just their Facebook “friends”, but to the friends of their friends. Linked-In is doing something similar for those offering professional services or seeking to recruit skilled staff.
Social media is not just the domain of the young, it can potentially offer real benefits to the right businesses that explore the options and understand how to utilise these sites as part of their marketing activities.
Talk to your Boyce Accountant to find out more.
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