How Protected Are You?

The Importance of protecting your assets and your family

Contributed by Ken Hows, Principal | Howes Accounting Services | howas.com.au

I recently had a new client contact me seeking advice on the protection of his family assets. With my client’s permission, I tell his story…

He has a reasonably new business having traded for only three years but had been employing up to 45 tradesmen on several different construction sites.

His company had accumulated super profits after tax of over $400,000 and enjoyed a respected status within the industry for on-time professional work.

Turnover was over $1M a month. Trade Debtors $1.4M, Supplier creditors $600,000 and other creditors, Super, GST, PAYGW were another $180,000.

Plant and Vehicles costing $200,000 were written down to $160,000 with $105,000 owing on finance contracts.

A family man, he and his wife had just acquired a family home and was doing the Australian thing of raising his young family.

The head contractor defaulted on a payment totalling $1.3M and the initial report is to expect a liquidator’s dividend of nothing.

His immediate questions were:

What do I do?

The advice was he couldn’t continue to trade in the existing company as that company was now insolvent.

What are his personal liabilities and other exposure as part of a domino effect on the head contractor’s default?   

As his company’s sole director, is he liable for any unpaid employee superannuation and unpaid taxation liabilities?

He is responsible for any personal guarantees he has given his company’s creditors.

Any plant or vehicles that are subject to finance, risk a ‘fire sale’ and again he has personally guaranteed the contracts.

Any company bank overdraft is personally guaranteed, and the same bank holds a mortgage over the family home.

The lease on commercial premises may contain a personal guarantee.

Unpaid unrelated staff benefits can be covered by a Government grant established to assist employees who are left without employment.

No debtor insurance was in place.

Who owns the plant and materials on the abandoned building site?

Could the plant have been owned by another entity?

What can be done now and what could have been done to lessen the client’s family exposure?

Could the family home not be owned by a director?

Could the company bankers be a different bank to the family home mortgage creditor?

Could a super fund have owned the commercial premises?

Is a company the correct vehicle to trade in?

Can anything be recovered from the ‘no longer’ trading company?

Can the director continue to trade if he is declared bankrupt and can he still hold his necessary licences?

How can he continue to support his family and pay his home mortgage?

How does he travel to work?  How do his wife and children travel?

But more importantly, how would you cope given the same circumstances.

What can you do to protect yourself and your family?

Action Plan

• Review your present business structure and consider the need for a change and the cost of any change.

• It is not unreasonable to start a new company for each major project.

• Reduce your spouse /child’s liability by excluding them from being a director.

• Do not give personal guarantees unless necessary.

• Take out Debtor Protection Insurance before starting a job and add the cost to the contract.

• Speak to your solicitor to ensure your contract and invoices have retention of ownership until paid clause.     

• Consider the transfer of tangible assets to a separately owned structure.

• Hold family assets away from yourself.  Consider a spouse or superannuation fund ownership.

• Ensure you know your profitability and cash flow position so you can budget the payment of your creditors and taxation commitments.

• Monitor your personal living expenses.

• Speak to your solicitor to ensure you and your spouse have appropriate wills and the enduring power of attorney documents.

• Consider the creation of a testamentary trust under your will.

Talk to a professional advisor to ensure you are protected.

For more information, contact Ken Howes on k**@**was.com.au

Welsh Group to deliver Armstrong Creek Town Centre in Geelong

Melbourne developer Welsh Group has secured the purchase of an additional site in the rapidly growing Victorian suburb of Armstrong Creek in the Geelong region. The acquisition of 500-540 Surf Coast Highway completes the Welsh Group ownership of the major mixed-use Armstrong Creek Town Centre, resulting in over 40ha of landholdings for Welsh Group. Construction of the site is due to commence in the coming weeks.

The Welsh Group has a strong investment within the Geelong region through its residential homes division, Welsh Homes.

Andrew Welsh, Managing Director, said. “The Armstrong Creek Town Centre will be the first major commercial project in this region delivered by Welsh Group, and will include a range of retail, leisure and entertainment, residential and community facilities; bringing an array of services and employment opportunities to the growing community.”

Stage 1 of the development, which has now received Planning Approval, comprises of a Coles supermarket along with supporting specialty retail. Welsh Group has an additional permit pending approval for fast food and bulky goods along the Surf Coast Highway.

 

 

 

 

 

 

“Stage 1 will initially service approximately 58,000 people, and provide in excess of 1,100 ongoing jobs, with the suburb set to rapidly increase to over 110,000 residents by 2036,” Welsh said.

Stage 1 of the Town Centre is scheduled to open in 2020. Welsh Group have appointed Colliers International as exclusive leasing agents across the town centre and freestanding pad sites along the Surf Coast Highway, ensuring a seamless and suitably master planned offering that will benefit the wider region.

Colliers International’s Mike Crittenden and Adam Lester will manage the leasing campaign. “The initial off market campaign in securing the anchors has already generated significant local and national retail interest for the soon to be launched specialty tenancies”, Crittenden said.

 

Source: Shopping Centre News

Single Touch Payroll Is Here – Are You Ready?

Single Touch Payroll (STP) is an ATO compliance regulation that requires employers to send employee payroll information including salary, wages, PAYG withholding and superannuation to the Australian Tax Office (ATO) at the same time as their standard pay run.

This is a significant change, for small business in particular, that will require many employers to upgrade or replace their payroll system in order to meet their reporting obligations.

Last month, the Australian Government officially passed legislation to expand Single Touch payroll to all employers. This is being done in two phases:

  • Phase 1: Single Touch Payroll became mandatory on 1 July 2018 for all employers with 20 or more employees,
  • Phase 2: Single Touch Payroll will become mandatory for employers with 19 or less employees from 1 July 2019.

 

The ATO has announced special rules for STP micro employers (1-4 employees), to help them transition more easily into the new regime. Micro employers who engage a registered tax or BAS agent will be able to report quarterly for the first two years, rather than each time payroll is run.

Small employers can start reporting any time from the 1 July start date up to 30 September 2019. The ATO will also grant deferrals to any small employer who requests additional time to start reporting.

So how will it be different?

Previously, small businesses finalised their payroll records at the end of the financial year and produced a payment summary annual report for the ATO, outlining how much had been paid in salary or wages, the PAYG withheld, and any superannuation contributions they’d made along with a payment summary for each employee.

With Single Touch Payroll, the payment summary annual report and the payment summary will no longer exist. You will no longer need to send the ATO your annual report; simply advise them when you’ve made your last pay run of the financial year.

Similarly, you will no longer need to provide your employees with payment summaries. The STP will now be used by the ATO as the sole record of salary/wages, taxed and superannuation. Employees will be able to see their payment summary, which will now be called an ‘income statement’ by logging on to the myGov website.

When you start reporting

You will need to report your employees’ tax and super information, on or before each pay day, using your STP-enabled payroll software.

You will need to do a finalisation declaration at the end of the financial year. The information you report through STP will not be tax-ready for your employees or their registered tax agent until you make this declaration.

Superannuation will change as well. As an employer, you will now report your employees’ super liability information through STP. Super funds will then report to us once you have paid the super amount to your employees’ chosen fund.

It is your obligation as an employer to make sure employees know they will be reporting through STP. The ATO has issued a fact sheet for employees that you might want to share with your staff.

But I don’t use payroll software.

With many small businesses and other small employers not using commercial payroll software, the ATO has also advised they will not be required to purchase such software to report under STP. A list of software providers who have developed low and no-cost reporting solutions including simple payroll solutions, portals and mobile apps has been published at ato.gov.au/stpsolutions.

There will be no penalties for mistakes, missed or late reports for the first year, and the ATO will allow exemptions from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.

How can I get ready for the change?

  • Make sure you can submit compliant reports every payday.
  • If you use online payroll software, it should be able to manage STP – check it can produce ATO-compliant reports?
  • If you use desktop payroll software, you’ll need to look around for a service that can upload your payroll reports, convert them into the ATO’s required format and submit them on your behalf.
  • If you use spreadsheets or pen and paper, you’ll need to engage a service that will convert the data into a compliant digital report format and submit it on your behalf.

For more information about STP on 13 28 61 or at ato.gov.au/stp.