Protect your assets with the right corporate structure

Whether you have an existing business or are just looking to set up shop for the very first time, having the right business structure is a crucial part of protecting your assets. Business structures can range from simple to very complex, and each comes with particular benefits and potential drawbacks.

There are four main types of business structure:

1.       Sole trader/sole proprietorship
Operating as a sole trader is the quickest way to get up and running with a new business, and for small solo operations, it’s by far the easiest to manage from a tax and paperwork perspective. There’s very little paperwork required, and as long as you have an ABN, you can generally begin operating right away. However, there are very specific risks that come with this structure. Should you encounter any legal issues, your own personal assets are not protected from any legal settlements. The tax benefits as a sole trader are also minimal.


2.       Partnership
A partnership structure shouldn’t be taken lightly. While sharing ownership can bring your start-up and administrative costs down, you’ll also need to consider sharing the profit and potential liability. As one half of a partnership, you’re responsible for your partner’s actions and vice versa – so trust is paramount, and so is a solid legal agreement between partners. All obligations and responsibilities should be clearly defined in the partnership agreement.

3.       Incorporated Company
Incorporating your business, new or existing, offers you significant protection from liability and protects your assets in the process. Should an issue ever arise, only assets held by the company are at risk. In addition, incorporation opens up the opportunity for future shareholders and has other benefits in being able to apply for certain grants eg R&D and EMDG Schemes. This is a familiar structure in the business community, and is typically the best structure for start-ups and for businesses on a growth and expansion trajectory. It’s strongly recommended to use a professional when setting up an incorporated company.

4.       Trust
Technically, a trust isn’t a true business structure. A trust operates as a tool to manage business assets, and an incorporated company may act as a trustee of the trust. Using this setup provides an additional layer of limited liability. However, be warned – this is definitely a task for a professional.

As you assess (or reassess) the level of risk, liability, and administration that’s right for your business, you should consider whether you have an existing business partner and if opening your business to additional partners or investors is something you hope to do in the future. Gauging your appetite for risk and liability is also important; an overly complicated structure isn’t always the best option – but neither is accidentally leaving your assets unprotected.  

There’s a happy balance between liability, administrative costs, tax efficiency, and ease of operations. The trick is finding the right balance for your business.

 How can Halkin Business Partners help?

Our tax and structure specialists can assess your business plan and recommend a structuring strategy designed to serve your business now and well into the future while protecting your assets. Talk to Halkin Business Partners today to see how we can help.

 

 

How to assess your business in a post-pandemic environment

After the ongoing uncertainty of the COVID-19 pandemic has settled, it’s going to be stock-take time for many business owners. To be best prepared for success as the market begins to open up again, you should fully understand your strategy in a post COVID-19 world, the path to growth, the value of your business and if you are correctly set up both from a corporate structuring and operating model perspective. Having a clear picture of these areas, will help you in making well informed business decisions down the line as the economic climate continues to shift.

 The first area that needs to be critically evaluated is your strategy and operating model. Are you set up for survival, maintenance or growth. Each of these strategies requires a different corporate and organisational set up and changes the decision making process when it comes to scarce resources like your people and your money. Once we have understood this we can begin to look at how the business is structured, how the business is valued and if the business requires funding. 

1.       Strategy and operating model assessment – assessment of your current strategy and the forecasts to ensure that the strategy is fit for purpose and that the financials and forecasts support an organic or acquisitive path if the strategy is one of growth; that the costs are assessed for reductions in the case of a maintenance or survival strategy; that the skills and capacity of the organisation are fit for purpose and set up for the future; that the market, product and channel assessment has been critically evaluated in a post COVID-19 world and that the business is as digitally enabled as it needs to be.

2.       Business structuring – this looks at how the business is structured with a view to gaining comfort around your set up for asset securitisation, commercial securitisation, tax minimisation, fund raising and exit friendliness

3.       Business valuation or tax impact valuations – A reasonable business valuation or tax impact valuation will consider all variables and allocate their relative importance accurately. This could cover everything from historical profit margins to projected revenue, return on investment, assets held, and in some cases, community contributions. A number of different valuation methodologies exist and understanding which is the most applicable is not as easy as it looks. As you can probably appreciate, there’s no perfect one-size-fits-all valuation method for every business. In many situations, a combined approach is the most useful and accurate.

4.       Funding modelling and assessment – Developing financial models for the future to evaluate cash flow and funding requirements takes a certain amount of experience, realism and vision. This then needs to be built into a story and pitch deck that can be sent to a very focused group of funders who will understand and believe in the business   

How can Halkin Business Partners help?

The financial, strategy and transactional specialists at Halkin Business partners can assist you in any of the above steps depending on where you are in your journey – empowering you to make fully informed decisions for your business in the future.

Tax Planning – how to take advantage before the end of the Financial year

You hear about tax planning all the time from the likes of us, but for those small-to-medium business owners, 2021 is the year to make the necessary preparations.  Much has been going on that will impact the amount of money in your pocket, and you can either let 30 June pass or exercise appropriate control.

Here are just a few of the things you need to be thinking about before 30 June 2021:

Business tax considerations

  1. Loss carry back regime:

Eligible corporate entities with less than $5 billion turnover in a relevant loss year can carry back losses made in the 2019–20, 2020–21 and 2021–22 income years to a prior year’s income tax liability in the 2018–19, 2019–20 and 2020–21 income years. The law commences on 1 January 2021. If eligible, corporate entities can claim the tax offset in their tax returns for the 2020–21 and 2021–22 income years

  1. Instant asset write off:

For assets first used or installed ready for use between 12 March 2020 until 30 June 2021, and purchased by 31 December 2020, the instant asset write-off:

  • threshold amount for each asset is $150,000 (up from $30,000)
  • eligibility extends to businesses with an aggregated turnover of less than $500 million (up from $50 million).

From 7.30pm AEDT on 6 October 2020 until 30 June 2022, temporary full expensing allows a deduction for:

  • the business portion of the cost of new eligible depreciating assets for businesses with an aggregated turnover under $5 billion or for corporate tax entities that satisfy the alternative test
  • the business portion of the cost of eligible second-hand assets for businesses with an aggregated turnover under $50 million
  • the balance of a small business pool at the end of each income year in this period for businesses with an aggregated turnover under $10 million.
  1. Pay Superannuation on time & before June 30:

Superannuation contributions need to be received by the fund by the 28th day of the month following the quarter end (with significant penalties for late payment). The June quarter superannuation liability is only due by 28 July and is often not paid before year end. However, by paying the June quarter liability before 30 June the amount is deductible in the year it is paid should the fund receive the amount by 30 June.

  1. Pre Pay annual charges

Review any of your expenditure that is eligible for a discount if paid for the next year. Not only can you take advantage of this saving but depending on the expenditure it can also result in an immediate tax deduction.

  1. Bad debt write-offs
    If you have a non-paying customer and there is a genuine concern regarding recovery of the debt, then some or all of the debt can be deducted in the current tax year provided it is written off before year end and was included as income at an earlier time. It is important to substantiate the reasons behind writing-off the debt prior to year-end.
  2. Revalue Stock

It may be time to review how your business values stock on hand. Perhaps the value of closing stock used for tax purposes is based on your management accounts that uses the higher of net realisable value or cost. The ATO allows a business to value its closing stock at any of these values: Replacement value, Cost, or Market selling value.

  1. Start-up costs
    Did you start your business venture this year? If so, you’re eligible for a range of deductions relating to the cost of setting up your business – covering accounting, legal, and incorporation costs.
  2. Employee bonus approvals
    Has your business agreed on paying out employee bonuses at the end of the year? Finalizing these with appropriate documentation before June 30 will allow you to claim a tax deduction for current-year bonus amounts; beware, though – this only applies if you have confirmed the amounts in writing before the end of the tax year.
  3. Review Your Business Structure
    If your business has expanded or is experiencing growth, it may be an appropriate time to change your business structure. If you choose to do this, be aware that compliance and taxation regulations will change, along with your business structure. Financial and tax advice is important during this process.

Additional Matters:

It’s worth noting most COVID-19 stimulus payments such as JobKeeper are coming to an end, although the JobMaker Hiring Credit is still available for each eligible additional employee aged between 16 and 35 who businesses hire until 6 October 2021.

Corporate tax rate has dropped to 26 per cent for small- to medium-sized businesses for the 2020–21 income year, with the rate dropping further next year to 25 per cent. It’s important to keep in mind that this is not confined to small businesses, but any entity below $50 million that does not have a high proportion of passive income.

Trust distribution – Ensure you speak to your dedicated Halkin Business Partner tax specialist to ensure your trust distribution resolutions are in place by 30 June 2021.

Lastly, the exemption from STP reporting for small employers with closely held payees ends on 30 June 2021. Closely held payees include family members of a family business, directors of a company and shareholders or beneficiaries. The exemption recognised payments to these groups tended to be outside the normal payroll process.


How can Halkin Business Partners help?

Our tax professionals at Halkin Business Partners will work with you to tailor a tax strategy for your specific goals and current circumstances. Professional tax advice is an easy way to alleviate financial stress and give your monetary goals a nudge in the right direction. Reach out to our tax professionals to see how we can help.

Why you should let your systems guide your business decisions

As a business owner, you know the value of solid instincts. You’re constantly under pressure to make myriad decisions on a daily basis, with impacts that can potentially be felt for years to come. If you didn’t have a strong sense of what your customers need and want, you’d be in real trouble.

But have you been relying on your instincts too much? Your business data is holding a wealth of information that can be used to build a roadmap to success. If you’re still using outdated systems (or paper-based systems), then that data is going to waste.

Implementing strong systems to manage your daily operations doesn’t have to be complicated or intimidating, and the benefits are far-reaching. Leveraging your business data is a valuable way to guide your operations into the future, and accessing real-time information is part of this.

If you’re a goods-based business, being able to see how your inventory is shifting on a daily basis is so important for identifying trends and patterns that may need addressing. By accessing this real-time data, you can see if a particular product is flying off the shelves in response to a new marketing campaign – or if something is being returned in record numbers, indicating a product issue that needs immediate remediation.

If you’re a service-based business, there’s still a practical application here; keeping close track of what services you provide can help you identify lucrative customer niches and areas that may need adjustment if you want to grow a service area further. With fully integrated systems, you can also track employee performance and hours, watch for emerging patterns in overtime to adjust your workforce on a seasonal or event-based timeframe, and forecast workforce growth.

Taking it all a step further, your systems begin to build a picture. With the ability to forecast ups and downs in overall sales, critical timeframes for particular product sales, precise staffing needs, and year-on-year patterns, you can make decisions secure in knowing that you are operating with all available information.

How can Halkin Business Partners help?

If you’re ready to take the next step in systems integration, the specialists at Halkin Business Partners can help with planning, implementation, maintenance, and insights. Speak to one of our specialists today to see how we can boost your business decisions and grow your operations to new heights.

Take your operations online and pandemic-proof your business

As the vaccine roll-out continues, an unanswered question is looming above the heads of business owners worldwide: has COVID-19 changed consumer behaviour forever?

The pandemic saw some unexpected business winners emerge – online stores and delivery services, including food delivery, have become essential to our current way of life. But, as lockdowns lessen, borders open, and consumers emerge from their homes, we don’t yet know if they’ll be willing to shop as they once did.

If your business isn’t yet fully online, now is the time to make the shift. What we do know is that consumers have become accustomed to options. It’s no longer acceptable to offer in-store only shopping, and any business lacking in online availability is likely to lose customers whether our brick-and-mortar shops are open for business or not.

However, there are some considerations as a business owner, and one is the intricacies of operating a mixed-model business with outdated systems. When you need to cater to the customer who may be shopping in-store or online, your systems need to be responsive and fully up-to-date at all times. Knowing where your support staff are scheduled at a glance and being able to compare that to your busy hours last week with a click can be the difference between an overwhelmed phone queue of unhappy customers or a glowing Google review.

Our specialists have extensive experience in setting up fully integrated systems as a business solution. If you need to ensure your Point-of-Sale (POS) system communicates with your e-commerce set-up and inventory management, then systems integration is the way to go. It’s possible to take things a step further and add in CRM integrations, connect a cloud accounting solution, and so much more.

An online, connected systems integration will streamline your processes, reduce the time burden of manual data entry, and free up valuable resourcing time for your employees. You’ll be able to track the reduction of operating costs and the value of increased efficiency as the systems scale with your business growth. At Halkin Business Partners, we provide an end-to-end solution, from the discovery phase straight through to implementation, training, and ongoing support.

How can Halkin Business Partners help?

With 20 years of experience working with clients on their business needs, including sales, operations, accounting, and technology, Halkin Business Partners can provide a holistic solution tailored to your business. Speak to one of our specialists for guidance on a scalable, best-in-market systems solution to help you make more efficient decisions for your operations.

Why you need a Power of Attorney as a Company Director

As a company director, you’re already well versed in juggling many corporate and legislative responsibilities. However, there’s one thing you may have overlooked that could end up causing your business partners or your family a lot of heartache should something happen to you. Being the sole director of a company comes with particular risks.

As part of any estate planning you’ve completed, you likely set up a power of attorney (POA) to ensure your wishes are carried out if you lose the capacity for decision making. You may have designated your lawyer or a loved one as your personal representative. You should be aware that any existing power of attorney does not cover your company.

If you’re the sole director of a company, you’ll need to set-up a separate corporate power of attorney to ensure the daily operations of your business can continue in your absence. Without a corporate power of attorney, your family or your lawyer cannot make any decisions for the business, meaning all operations might grind to a halt – harming the company in the process.

So, what is a corporate power of attorney? This document sets out the ability for someone else (nominated by you) to make business decisions on behalf of the company and otherwise maintain operations and control of the company. This is, of course, only activated if you are incapacitated. It’s so important to have this in place to ensure the company’s ongoing operation and the appointment of a new director, should you pass away. Section 201F(2) of the Corporations Act 2001 allows your nominated representative to appoint a new director with a corporate power of attorney in place. Without the POA, your company could potentially be frozen for a lengthy period, harming revenues and diminishing the company’s value for your heirs.

Like any legal document, your corporate power of attorney should be customized to meet your company’s needs. You might wish to restrict the scope of decision making, limit spending capacity, or otherwise constrain activities to maintaining business operations. Generally speaking, a corporate power of attorney would cover company transactions, including purchase, sale, lease and mortgaging of property, account reconciliations and payments, and employment where needed.

How can UX Law help?

As this document can be complex and has wide-ranging consequences if set-up incorrectly, it’s always a good idea to have a legal professional draw-up and execute a corporate power of attorney. The UX Law team is well-versed in corporate and start-up legal needs; speak to a specialist about keeping your company running smoothly in unfortunate circumstances.

Contact UX Law

Post Pandemic Planning: Why Cash Flow Forecasts Are Crucial

Business owners around the world have weathered an incredible storm over the past year – the pandemic has interrupted global supply chains, bankrupted corporations, and changed the way customers behave for the foreseeable future. The gradual rollout of multiple vaccines is currently providing a glimmer of hope for a return to normalcy in the future, but there’s no question that it will be a slow trek back to that point.

This is a perfect time to start business planning for the next phase of the pandemic. Starting to think about recovery, re-scaling operations, and permanent changes to your set-up will leave you well prepared for whatever is coming next. Building an accurate cash-flow forecast is one of the best ways to plan for the future.

We’ve said it before, and it bears repeating. First and foremost: take direct action to safeguard the health of your employees and customers. Without appropriate measures in place to establish trust, business recovery will be difficult. Done? Good!

Building a cash flow forecast can be tricky, and there are more unknowns than usual. It’s difficult to know how the vaccine rollout will impact consumer behaviour and at what speed. Having a 6-month cash flow forecast for more than one scenario will help your business in this situation. Think about:

  1. Worst-case scenario
    If you made it through 2020, you probably already know what this looks like. Assume your lowest revenues will continue, your costs will either maintain or rise, and supplier relationships with increased prices.
  2. Best-case scenario
    Consider what things would look like with pre-pandemic or better revenue, operating costs streamlined for cost-savings, and a boost in sales.

  3. Most likely scenario
    This one is probably going to fall somewhere in-between the best and worst scenarios. Assess your business trends over the past 12 months and be realistic.

This might feel like a painful exercise, but an accurate forecast is a vital tool for smaller businesses that may not have access to cash reserves. Knowing where you stand also builds business continuity and increased security for your employees. A path to recovery, and even growth, is beginning to appear. Having the right tools will set you on that path as fast as possible.

How can Halkin Business Partners help?

Our experienced CFO’s can help you build a realistic forecast, refine existing budgets, and get you on the road to post-pandemic success. Speak to a specialist at Halkin Business Partners to see how you can plan for a still-unknown future.

How Cloud Integration Can Benefit Small Business

If you’re a small business owner, you know the feeling of wearing many hats – owner, customer service, HR, payroll, accounting and more. Whether you’ve recently expanded your team or are still focused on how to do it all, you’re probably on the lookout for ways to save time and streamline operations. Cloud integration is one way to bring time- and cost-saving benefits to your business.

Let’s take a step back, though. First of all, what is cloud integration? It’s very likely you already use several cloud-based services in your personal life. Applications and services like Google Drive, Spotify, and Microsoft 365 all fall into the cloud-based category. Fundamentally, using the cloud is about bringing your most important data together in one location, accessible in real-time, to whoever needs that access – from wherever they are.

Whether or not you had to rapidly shift to an online model when the pandemic hit, it’s become apparent how important it is for businesses to provide access to core systems and services in an integrated, accessible manner. Cloud integration can help you give that access while benefiting your operations. Here are just a few of the perks:

  1. Keep things running from anywhere in the world
    Working from the cloud means your servers, systems, and data are always online and always available – all you need is a laptop and a stable WiFi connection for easy remote work solutions.
  2. Increase efficiency and save on IT costs
    Many cloud services will cover updates, upgrades, patches and user support as part of your membership or subscription fee. In addition, systems integration increases productivity through automation, and leaves room to scale quickly for future needs.
  3. Rely on solid security
    Cloud solutions generally use well-protected, secure servers. The latest high-end security solutions will protect your data at no extra cost to your business.
  4. Scale up or down with agility
    Is your business growing, in-flux, or changing daily based on the pandemic? Cloud-based systems are flexible, and subscriptions can generally be adjusted quickly for changing business needs.
  5. Enjoy the benefits of transparency
    A well-done integration means you have access to real-time information. This level of transparency in your reporting and data access means you’ll have the capacity to identify operational issues immediately. Increased transparency leads to better business decisions.

If you want to give your small business an easy boost, cloud integration and the subsequent automation that comes hand-in-hand might be a quick win to benefit your business.

How can Halkin Business Partners help?

It’s essential to do thorough due diligence on any business change, so make sure you choose the best combination of solutions to fit your business in terms of security, ease of use, cost-effectiveness, and scalability. The cloud integration specialists at Halkin Business Partners can take a big picture look at your business to help you choose the right application. We’ll help you compare, plan, and implement the right cloud solution for increased efficiency, transparency and productivity – in real-time.

Insolvency reforms in place for small business as of January 1, 2021

If you’re a small business owner, you should be aware that the Australian Government has changed its insolvency framework, effective as of January 1, 2021. These reforms were brought in as a response to COVID-19 and the economic effects of the pandemic.

In order to assist small businesses in their survival through this challenging economic time, the changes allow small business owners to restructure more effectively. If a restructure is not possible, the reformed framework also allows the business to ‘wind up’ their operations quickly, which, in turn, means better returns are possible for staff and suppliers owed by the company.

The newly updated insolvency framework includes two new processes, which the ATO defines as a “simplified liquidation framework” and a “small business restructuring plan.” Both of these new processes are available to any incorporated Australian business with liabilities of under $1 million. Also important to note is the business’s requirement to pay all due entitlements to staff, including superannuation. Tax filings must also be current and updated with the ATO.

There’s no denying the profound impact that COVID-19 has inflicted on the economic landscape, and small business owners have borne a large portion of this weight through 2020. If your business is facing insolvency, these new reforms may prove beneficial for your financial resolution.

Of course, insolvency proceedings are both a complex and emotionally charged situation for any business owner. It may be advantageous to consult a professional for advice or guidance through this transition.

How can Halkin Business Partners help?

Our business consultants work closely with third party practitioners who can manage the process from start to end. At Halkin Business Partners we stand with you throughout the process and help guide you with the necessary support. Reach out for a consultation on how best to approach this process.

Cryptocurrency and your taxes: what you need to know

Cryptocurrency used to be part of the wild west – a far-off gold rush on the internet’s frontier. Those days are long gone. Cryptocurrency is well known, and so is mining for crypto. It’s become so well known that regulatory authorities are starting to catch-up in a big way; here in Australia, that’s certainly true.

For many investors, cryptocurrency still feels different -forward-thinking, cutting edge, and the future of finance. But even the future of finance is subject to tax law. Did you know that disposing of your cryptocurrency (whether you’re gifting it, selling it, or using it to buy new, different cryptocurrency) is subject to a Capital Gains Tax? The Australian Tax Office (ATO) specifically states:

“A capital gains tax (CGT) event occurs when you dispose of your cryptocurrency. A disposal can occur when you:

  • sell or gift cryptocurrency
  • trade or exchange cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency)
  • convert cryptocurrency to fiat currency (a currency established by government regulation or law), such as Australian dollars, or
  • use cryptocurrency to obtain goods or services.”

In April 2019, the ATO launched an initiative aimed at better understanding cryptocurrency transactions and the activity of Australians. Earlier this year, many Australians may have received a letter advising them of their obligations under Australian Tax law. Now, if you’re new to the crypto game, hey, no worries – but make sure you understand your obligations from this point forward. If you’re a seasoned cryptocurrency user, you may need to assess whether your past tax returns now require amendment.

In most circumstances, cryptocurrency is subject to Capital Gains Tax. However, there are limited circumstances where this does not apply. One such situation falls under the Personal Use Asset designation, where an individual may buy or hold cryptocurrency for a short period in order to purchase other goods or services with the currency. However, if the individual is using only a small portion of their held cryptocurrency, this is no longer considered personal use.

The regulations are complex, and each circumstance is likely to have a degree of subjectivity baked in – so it’s worth it to consult a professional to ensure you’re on the right side of tax law as cryptocurrency evolves in legislation worldwide.

 How can Halkin Business Partners help?

Our expert tax advisers can help you understand your obligations in reporting cryptocurrency activity on your tax returns and assist in building a solid financial strategy that maximizes your cryptocurrency investments.