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.

Cloud-based systems as a post-pandemic strategy

If 2020 imparted a single lesson, it was the importance of digital connectivity. This past year has made a compelling case for shifting towards cloud-based systems that offer access regardless of user location. It’s no longer enough to provide employee access to video-calling and IM applications with a rickety online file-storage solution. The new digital future requires easy access to real-time data for multiple distributed users. Your accounting and bookkeeping functions should be no different.

There are so many options out there for accounting software, and the variance in function, form, and cost is vast. Your system should be simple to use, even simpler to scale, and flexible in offered functions – including automation.

At Halkin Business Partners, we’re big proponents of Xero’s cloud-based accounting system. We’ve assisted many clients in making a seamless transition to this flexible, digitally accessible platform. Here are just a few of the reasons why we recommend Xero:

  1. Connect and reconcile your bank accounts easily with automated transaction recognition
  2. Generate quotes and invoices with customisable templates and easy-to-use tracking and reminders
  3. Enjoy a free Hubdocs subscription, including a bill management system that stores your supplier’s invoices and publishes them directly into Xero. This keeps your business compliant with requirements for 7-year storage of all purchase invoices
  4. Streamline all bills and supplier management through Hubdoc’s and Xero’s connection
  5. Keep track of expenses with mobile app features and employee-friendly interfaces
  6. Give your employees access to MyPayroll, a user-friendly system where they can easily apply for leave or have access to their payslips
  7. Connect to the ATO through Single-Touch-Payroll (STP) and keep your corporate reporting in great shape for tax season
  8. Manage project costs in real-time, so you know where you stand on new offerings
  9. Relax, knowing your business is using an authentically cloud-based software that you can access from any browser – no need to install any software on your computer

Last month, we shared insights on e-invoicing; this is another massive benefit to a cloud-based accounting system. As Australia increasingly shifts to this form of transaction and payment, it will serve your business well to be an early-adopter.

 Xero is a sophisticated and flexible option that affords users ease-of-use, a welcoming interface, and streamlined processes. It’s no surprise to see this platform’s user numbers climbing by the hour.

 How can Halkin Business Partners help?

Our specialists will help your business transition from an existing accounting set-up to the cloud with the absolute minimum of disruption. We’ll ensure your system is customised to your specific needs, trouble-shoot and tweak as required, and be on hand to support you through the process.

Why Income Protection is more important than ever

Over the past 12 months, 2020 brought a raft of unemployment around the world, threatened global markets, and destroyed many small businesses beyond repair. As we move into the new year and the slow roll-out of a COVID-19 vaccine begins, it seems we are shifting into the post-COVID world. But what might this look like? It’s hard to deny the economic damage that has been done to businesses of all sizes.

 Armed with the knowledge that it may yet be months before healthy, working-age individuals receive the vaccine, and that many companies will need to make drastic changes to stay solvent in a post-COVID world, have you considered how to protect your own economic security? If you, or your family members, are unable to work due to illness, injury, or other factors, it’s more important than ever to have a plan.

Income Protection insurance can play an important role in shoring up a strong contingency plan to keep your family’s finances on track. We’re pleased to share further information from an insurance expert: Clive Levinthal from Experien Insurance Services explains how Income Protection insurance can provide the protection you need and whether you should consider this cover within the next 6 months because of big changes coming in 2021. Click here to read more.

A digital step forward: e-invoicing in Australia

Take a moment and think back to the last invoice you sent out from your business. Whether it was a paper copy or a PDF, mailed or emailed by yourself or your finance department, it came with a price tag. In fact, the average invoice will cost a total of between $27-$30 to process and finalize, considering the time spent entering information and processing payment. This year, something new is on the way. E-invoicing is a system where an invoice can be transferred directly from one financial management system (for example, QuickBooks) to another system (say, Xero) immediately.

If you’re wondering why you would adopt this practice – especially if your current invoicing system is working well – here are a few things to consider:

  1. E-invoicing is becoming mandatory in Australia.
    Propelled by the goal of preventing tax evasion, mandatory e-invoicing legislation is on the rise globally, driving the transition from paper to electronic invoicing and archiving. Many countries around the globe are considering, or have already determined, that e-invoicing is crucial. In Australia, moving to e-invoicing is no longer an option for businesses, it is becoming an obligation.
  2. By using e-invoicing, you save time and money for your business.
    As mentioned earlier, there is a measurable cost to processing invoices and dealing with additional paperwork at tax time. E-invoicing can mean cost savings – and time savings – for your business.
  3. Adopting e-invoicing allows you to cut down on paper or server storage.
    The ATO has confirmed that an e-invoice is all you’ll be required to retain for tax purposes. Switching over to e-invoicing means you can stop stacking paperwork in boxes, scanning invoices, and e-filing endless folders on your server.
  4. E-invoicing gets you paid faster.
    With an instantaneous transfer, your clients are likely to pay their invoices much faster when it’s so convenient. Also, as part of an incentive to switch to e-invoicing, the Australian Government is now paying any e-invoices within 5 business days, including interest on any late payments.
  1. Security and reliability go through the roof.
    The networks used for e-invoicing are more secure than traditional email channels, meaning safety is assured. In addition, the visibility of the invoice is limited to the issuer and the client, reducing any chance of fraudulent invoices.

 Looking at e-invoicing holistically, the big picture indicates that switching to this system might be the cost-saving, time-saving, streamlined change your business needs for 2021.

 How can Halkin Business Partners help?

With the rollout of E-Invoicing in Australia, our expert tax and financial advisers will guide and assist you with making the switch to e-invoicing smoothly and seamlessly. We are following the legislation closely and will be updating our clients on the necessary information.

Why Single Touch Payroll (STP) means more Superannuation scrutiny

You’re probably well aware of what Single Touch Payroll is, and how it works by now. In summary, using STP means you will electronically report all employee payroll information to the ATO. The reporting is based on your payroll cycle, so whether you pay on a weekly, fortnightly, or monthly basis will dictate how often you report. STP provides greater efficiency to business owners, and to the ATO. Reporting employee salaries or wages, Pay as You Go withholdings, and superannuation is streamlined. If you’re in need of a quick refresher, check out our earlier article here.

The important thing to know today is that STP has now become mandatory for all businesses that have employees being paid wages. This shift means that the ATO is now able to accurately collect real-time data on wages across Australia, and keep track of superannuation payments at the same time.

As a business owner, it’s crucial for your payroll, superannuation, and other accounting paperwork to be in better shape than ever before. Each time your payroll is completed using STP, the ATO also receives details on how much superannuation should be paid to each of your employees at that point in time. If there are any discrepancies between superannuation payments, expect extra scrutiny from the tax office. In 2021 and beyond, we expect to see the ATO targeting late payments of superannuation, including accrued interest.

In addition, you should be aware that any late superannuation payments will require submission of a Superannuation Guarantee Charge (SGC) form to the ATO – whether the payment was 100 days late, or 1 day late. If a business fails to lodge this form, interest will accrue.

A final note to take into consideration: as the ATO continues to collect more information in real-time, the level of business scrutiny is likely to increase. Late superannuation payments may trigger additional interest and an investigation into previous history on superannuation payments. The end result for a business in breach of superannuation legislation may be an investigation or audit, or long-term interest charged on historically unreported late payments, among other consequences.

How can Halkin Business Partners help?

Make sure you have all your ducks in a row. Halkin Business Partners can help you keep your record-keeping, payroll, and tax practices watertight. Speak to one of our advisers today to see how we can streamline your operations.

Why a Business Valuation is important for growth

As a business owner, it’s highly likely that you’re consistently focused on operations and growth; your drivers of strategic success are based on maintaining your market position and leveraging available opportunities for expansion. This is a common, effective, and logical. However, do you currently know what the true value of your business is? Staying aware of this important information may help you in your operational decisions in the near future, and for long-term, blue sky planning.

Having an up-to-date business valuation allows you to better understand your assets, your resale value, and can even provide you with better leverage or negotiating power when entering into any sort of mergers and acquisition talks. The Australian Tax Office (ATO) also requires accurate business valuation information for a number of discrete tax situations, including:

  • changes in capital structure
  • changes of ownership
  • capital gains tax rollovers
  • company divestments
  • company acquisitions
  • formation of, entry to, or exit from a consolidated group

So, it’s clear that business valuation is important, but many business owners don’t know where to start. A valuation can be based on multiple methods, including market-based, income-based, asset-based, or costs-based. If that wasn’t enough, there’s further complexity; once an appropriate method is chosen, you need to then look at factors like comparable transactions and trading, capitalisation of earnings, discounted cash-flow, and net asset calculation.

If you’re thinking about selling your business, seeking further investment for growth, or entering into a merger or acquisition, make sure your business is appropriately and accurately valued. If you’re dealing with personal issues such as a divorce, the death or disability of a business partner, or even just starting to think about retirement and succession planning, a valuation is also an important piece of information to inform your decisions.

Having a financial specialist facilitate your valuation is recommended to ensure your business’s specific individualities are accounted for correctly. At Halkin Business Partners, we understand that each of our clients is unique, with their own financial circumstances, individual needs and goals. Understanding your business in this way allows us to tailor appropriate wealth strategies and services.

How can Halkin Business Partners help?

Talk to our financial specialists to see how we can assist in valuing your business, and grow your wealth. Our expertise in managing wealth creation and transfer, retirement, debt and risk management/mitigation services allows us to optimise your circumstances for financial success.

NSW Budget Announcement

The NSW Government will continue to support local businesses impacted by COVID-19 with policies to make business management easier. This will allow impacted businesses the opportunity to re-build, attract investment and create jobs for the future. The Government has endeavored to turn around a historic $16b budget deficit bought on by the COVID-19 pandemic by undertaking a major reform of its tax system.

We have directed our attention to the following updates:

  • Payroll Tax
  • Land Tax
  • Stamp Duty
  • Out and About Scheme

Payroll tax further cuts

In May 2020, the NSW Government brought forward by one year, the increase in payroll tax threshold to $1 million.

This Budget announces:

  • a further permanent increase in the payroll tax-free threshold from $1 million to $1.2 million from 1 July 2020.
  • A cut to the payroll tax rate from 5.45% to 4.85% from 1 July 2020 for two years.

 Land tax relief extension

The Budget extends the land tax COVID-19 relief for landowners to 28 March 2021 in modified form. To be eligible for relief from 1 January 2021 to 28 March 2021:

  • the lease must be a retail lease;
  • the annual turnover of the tenant must be less than $5 million;
  • the tenant needs to re-establish eligibility by demonstrating a 30%  decline in turnover (15% for non-profits) for the December quarter 2020.

 Stamp Duty for future homebuyers

Home buyers in the lower price range could be big winners under a major overhaul of the state’s stamp duty tax. The new take on stamp duty will give house hunters the choice of paying stamp duty upfront or opting for a smaller annual property tax.

The Government will seek community feedback on the proposed model, which it says will inject more than $11 billion into the NSW economy in the first four years.

Out and About program

The NSW Government will inject up to half a billion in the Out and About program to stimulate spending in the local economy, including restaurants, visitor sites and cultural attractions.

Every adult in NSW will get four $25 digital vouchers to spend separately on dining and entertainment. Two vouchers can be used for eating in venues and two can be used for entertainment and recreation –cinemas, amusement parks, performing arts and art galleries. The program will be trialed in Sydney’s CBD in December 2020 and rolled out across the rest of the state next year.

As your trusted advisor we understand the necessity to be proactive and channel Government information to all our clients and friends when available. At Halkin Business Partners, our stimulus team is dedicated to assisting you with any queries you may have regarding the State budgets announcement. Please contact us at stimuluspackage@halkinbp.com.au and a consultant will revert back with urgency.

Illegal Phoenix Activity: are you liable?

Illegal Phoenix Activity refers to a company being purposely liquidated or otherwise closed for the sole goal of avoiding creditors. This is an illegal way in which some businesses avoid paying creditors and other liabilities, including taxes and funds owing to employees. Once the business has been shut-down, a new entity often pops up in a similar name, holding the previous company’s assets.

 Recently, the ATO has improved laws prohibiting illegal phoenix activity, making directors accountable for this offence. Before we get into these new changes, let’s learn more about how illegal phoenix activity is defined. The repercussions and impact of this offence can cast a wide net and may include avoidance of paying wages, superannuation, various staff benefits, supplier invoices and more. It can also include avoiding regulatory and other compliance obligations, or pending investigations for non-compliance, and can give an unethical advantage over competitors who are following industry rules.

 According to the ATO, many industries see illegal phoenix activity – everything from transport, mining, and agriculture to construction, labour-hire, and payroll services. It’s a serious issue, and this is why the ATO participates in the Phoenix Taskforce. This taskforce is highly specialised, designed to track down incidences of illegal phoenix activity, and made up of 38 separate federal, state, and territory government agencies.

 On February 5th, 2020, the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 was passed by parliament. This amendment to the Corporations Act (2001) holds directors accountable for illegal phoenix activity.

 Directors should be aware that, according to the ATO, “If a company does not meet its pay as you go (PAYG) withholding, goods and services tax (GST) or super guarantee charge (SGC) obligations, we may recover these amounts from you personally as a director of the company.

 ATO and the Australian Securities and Investments Commission (ASIC) can now pursue new civil and criminal offences for those who promote or engage in illegal phoenix activity. ASIC and liquidators will have additional powers aimed at recovering assets for the benefit of employees and other creditors.

The new laws will also allow [the ATO] to:

  • estimate and recover the anticipated GST,luxury car tax (LCT), and wine equalisation tax (WET) liabilities for businesses that aren’t meeting their lodgement obligations
  • make directors personally liable for their company’s unpaid GST, LCT and WET liabilities
  • retain a tax refund where a taxpayer has failed to provide a notification to us which affects, or may affect, the amount of the refund.”

In addition to these changes, it’s important to be aware that the Federal Government has extended the existing 6-month stay on insolvent trading liability to December 31, 2020. If you’re a business owner or company director, we recommend you ensure you understand the implications of this change.

 As defined by the ATO, the package includes:

·         ‘A temporary increase in the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive;

·         A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings, an increase in the time period for debtors to respond to a bankruptcy notice, and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition;

·         Temporary relief for directors from any personal liability for trading while insolvent; and

·         Providing temporary flexibility in the Corporations Act 2001 to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.’

If you’re a COVID-impacted business owner or company director, the ATO is available to assess individual circumstances and tailor solutions accordingly. This may take the form of payment deferrals, temporary payment reductions, or in certain circumstances, ‘withholding enforcement actions including Director Penalty Notices and wind-ups’.

How can Halkin Business Partners help?

 Speak to our financial specialists today to ensure you fully understand your obligations and liabilities as a Director, and to see how Halkin Business Partners can help you with your financial needs. 

Is Systems Integration the key to Inventory Management Success?

When you think of inventory management, what comes to mind? A stock-take day used to be a tedious and manual process, hours upon hours of reconciling data and physically counting items. These days, we rely on technology to keep business inventory levels up to date. But is your system as efficient and synchronized as it could be?

Inventory for things like software licences, access points to key systems, and user accounts on paid services you use to run your business can be difficult to manage, especially across remote teams. Using a cloud-based inventory system offers a cost and time-saving solution. Having a proper management system means that you always have the right level of stock – whether that’s a real-world product or a software licence for a new employee – at the right time; when you or the customer needs it.

This is where cloud integration might be the tool you didn’t know you needed. Ensuring that all of your systems and processes are able to speak to one another in the cloud and that all of your employees have immediate access to real-time information is a potentially game-changing way to uplift your business. Nothing is more important than knowing your data is reflecting the state of your business accurately, in real-time.

Using a cloud-based system offers your business the flexibility to adapt and adjust to the changing business landscape quickly. With the current market conditions, adaptability to rapid change is valuable. In addition, you’re able to bring down your IT overheads, both in terms of required resources and staff.

At Halkin Business Partners, our cloud integration specialists are able to look at your business holistically to prescribe best-fit applications that will enhance efficiency and productivity, and provide you with real-time access to information and transparency into your business.

Some of the solutions our specialists are able to help you with include:

·         Point-of-sale

·         E-Commerce

·         Inventory Management

·         Cloud Accounting

·         Payroll & Rostering

·         Workflow and Job Management

·         CRM Solutions

If you’d like to reduce manual data entry, increase staff productivity, and streamline your business processes, then the automation that systems integration brings may be an ideal solution for your business. Our solutions at Halkin are proposed with scalability in mind, making sure your operating costs can be reduced well into the future.

How can Halkin Business Partners help?

At Halkin, our consultants have 20 years of experience working with SME clients. We are able to provide tailored advice on sales, operations, accounting and technology. With a deep understanding of business needs, we can offer the unique ability to view your business holistically and advise on the best in market, scalable technology solutions. See how we can help you create efficiencies so you can make better, more informed business decisions.