The looming financial new year heralds an unwelcome extra cost for thousands of people who currently have a HECS HELP debt. This is because every unpaid debt is going to automatically increase when it’s indexed on June 1. In previous years, the HECS indexation rate was relatively modest, but thanks to soaring inflation, this year’s indexation rate is set to hit more than 3 million Australians hard. So how do you avoid indexation on HECS?

Here’s what you need to know.

What is indexation?

Indexation means that the price of something is changed in correspondence with an external factor. In this case, the price of something is your student debt and the external factor is the Consumer Price Index (CPI). Each year your student loans increase based off the CPI percentage — which is a set of figures released by the Australian Bureau of Statistics (ABS) every three months to track the cost of living.

How much is my HECS-HELP loan going to go up by?

This year, your HECS HELP debt will increase by 7.1% after indexation. For example, on a $25,000 HECS Debt, your debt will increase by $1,775 to $26,775.

When is HECS HELP indexed?

June 1 — one week from now.

How can I pay off my HECS HELP debt?

There are two ways:

• Voluntary
• Compulsory

Voluntary payment can be made at any time through the MyGov portal.

Compulsory payments are taken from your wages once you earn over the $48,361 threshold. These payments aren’t deducted from your overall debt until after you’ve submitted your tax return.

If I voluntarily pay off my whole loan, do I avoid the indexation?

Only if you pay your entire debt off. Indexation will apply to whatever you’re still owing by June 1.

So, when do I have to pay my HECS back by?

Well, technically the cut-off date for repayments is May 31st.

The Australian Tax Office (ATO) recommended making payments four days before the cut-off date to make sure you avoid extra indexation because of how long it can take for the payment to be processed.

So, if you are making a voluntary payment to avoid indexation – lodge your payment by May 25th. The ATO assured us it’s not expecting a backlog of payments in the lead up to indexation.

However, they expressed the importance of providing the correct Payment Reference Number (PRN) when making the payment, which is visible when viewing your account in ATO Online Services. You can find that by using the ATO portal in your myGov app.

What happens to my compulsory payments if I pay off my whole loan?

Compulsory loan payments are garnished from your salary and held by your employer. When you lodge your tax return, the gathered monies are applied to your loan balance and your debt reduces.

If you are in the fortunate position to make a voluntary payment of the entire balance:

• Previous Payroll Runs – “If an individual pays their loan account in full prior to lodging their tax return, their compulsory repayment will be nil, and as part of the normal Tax Return processes, any balance of PAYG amounts remaining, after applying against the tax and other assessment liabilities, is refunded,” said an ATO spokesperson.  So for the garnishing that has already occurred during the 2023 financial year in previous payroll runs, the refund will occur upon lodgement of the tax return for the year ending 30 June 2023.
• Future Payroll Runs – An updated Tax File Number (TFN) declaration should be provided to your employer to advise you no longer have a HECS-HELP debt. This will mean for future payroll runs your employer will cease having the compulsory repayments garnished from your salary.

What did the budget include for HECS-HELP?

If you’re looking for some future reprieve from high indexation payments in the budget you’re out of luck.

The 23/24 budget papers did outline $87.8 million in funding over the next five years towards the HELP system, but this will be used to improve the administration process and increase data security. Federal Treasurer Jim Chalmers also indicated that there are no plans to alter HELP indexation at a press conference in April.

The Federal Government is investing $14 million in a centre for emerging Australian-made solutions to energy and emissions challenges. The Powering Australia Industry Growth Centre (PAIGC) aims to grow Australia’s renewables technologies industry and establish Australia as a leader in renewable energy. It will achieve this through:

• increasing the development and adoption of renewable technologies and processes across Australian industries and firms
• increasing domestic demand for renewable technologies
• increasing Australia’s competitiveness in international renewable technologies markets
• upskilling workers to service the renewable technologies industry
• uplifting capabilities of businesses to overcome battery regulatory barriers
• developing domestic end-to-end battery and other renewables supply chains.

Supporting locally developed and manufactured technologies, including batteries, that will help transform the nation into a renewable energy superpower, the plan is focused on creating jobs, cutting power bills and reducing emissions.

The new PAIGC will:

• support businesses looking to locally manufacture renewable technologies and commercialise local ideas
• encourage connection between critical minerals producers and renewables manufacturers
• facilitate partnerships between governments, research institutions, and industry to drive the development and adoption of renewable technologies in Australia
• support businesses in navigating battery regulatory barriers, and
• support First Nations businesses to contribute to the development of renewable technologies through engagement of a First Nations Business Advisor.

The program will run for 4 years until the 2026-27 financial year and Australian industry organisations, research institutions and partnerships with expertise in renewable technology are encouraged to apply for support.

The closing date for grant applications is June 19th 2023 at 5 pm AEST.

More details, including eligibility criteria, can be found on the Powering Australia Industry Growth Centre website.

Please contact the team at MGI if you have any questions or require further information.

The ATO has issued PCG (Practical Compliance Guideline) 2023/1 in relation to deductions for working from home related expenses. The PCG is applicable from 1 July 2022.

Prior to 1 July 2022, a client had the choice of using either the shortcut method, fixed-rate method or actual expenses incurred for working from home expenses. From 1 July 2022, a client can continue to claim actual expenses or a ‘revised fixed-rate method’ at 67 cents. Broadly, in order to claim the revised rate, the following criteria must be satisfied:

• Working-from-home requirement
• Incurring deductible additional running expenses
• Keeping and retaining additional records

The work has to be substantive and directly related to income-producing activities. The PCG states that “minimal tasks, such as occasionally checking emails or taking phone calls while at home will not qualify”.

The PCG will only apply to ‘additional running expenses’ defined as energy expenses, internet expenses, mobile and home phone expenses and stationery and computer consumables.

In relation to the record keeping criterion, clients will need to keep:

• records showing total number of hours spent working-from-home during the year; and
• one document (such as an invoice, bill or credit card statement) for each type of additional running expense that was incurred in the income year.

The full record keeping requirement commenced from 1 March 2023.

The PCG clarifies that a record of the total number of hours worked can take any form, provided it is kept contemporaneously. Examples include timesheets, rosters, logs of time spent accessing employer systems or online business systems, time-tracking apps, or a diary or other documents kept contemporaneously. Alternatively, we’ve put together a working from home diary template to help you record your hours for the July 2023 – June 2024 period.

In many instances, clients may choose to claim actual costs incurred over the revised fixed rate method if this results in a higher claim.

If you have any queries in relation to tax compliance and claiming working from home expenses, please contact the team at MGI for assistance.

If you’re a business owner, now is the time to start considering effective tax strategies. Tax planning is more than just putting your tax return together. It’s about making sure that your business is structured in a way that will allow you to grow and expand, while minimising the amount of income tax payable. Take a read of our 2023 tax planning guide for the most effective tax minimisation strategies you should consider.

Imagine what you could do with tax saved? You could:

• Reduce your home loan
• Top up your super
• Save for a holiday (when we can travel again!)
• Deposit for an Investment Property
• Pay for your children’s education
• Upgrade your Car

Here’s a guide to the tax minimisation strategies you can use to reduce your business tax.

Is your business a small business entity?

Small businesses can access a range of tax concessions from the ATO. To qualify as a “Small Business Entity”, the business must have an aggregated turnover (your annual turnover plus the annual turnover of any business connected / affiliated with you) of less than $10 million and be operating a business for all or part of the 2023 year.

LOWER COMPANY TAX RATES

The 2023 company tax rate for businesses with less than $50 million turnover is 25%, if 80% or less of a company’s assessable income is “passive income” (such as interest dividends, rent, royalties, and net capital gains).

If you use a Trust structure, one strategy is to allocate profits to a “Bucket Company” and cap your tax at 25% for the 2023 year. Note that this company must qualify as a “base rate” entity to be eligible for the lower 25% company tax rate. Please discuss with us whether your company will qualify.

TEMPORARY FULL EXPENSING FOR ASSET PURCHASES

Businesses with an aggregated turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciating assets.

For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.

Temporary full expensing is ending on 30 June 2023. You should buy these assets and use them or have them ready for use before 30 June 2023 to qualify for a 2023 tax deduction.

MAXIMISE DEDUCTIBLE SUPER CONTRIBUTIONS

The concessional superannuation cap for 2023 is $27,500 for all individuals. Do not go over this limit or you will pay more tax. Note that employer super guarantee contributions are included in these caps. Where a concessional contribution is made that exceeds these limits, the excess is included in your assessable income and taxed at your marginal rate, plus an excess concessional contributions charge. For the contribution to be counted towards the employee’s 2023 contribution cap, it must be received by the fund by 30 June 2023.

TOOLS OF TRADE / FBT EXEMPT ITEMS

The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit. Items that can be packaged include handheld/portable tools of trade, computer software, notebook computers, personal electronic organisers, digital cameras, briefcases, protective clothing, and mobile phones.

If structured correctly, the employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased. You should buy these items before 30 June 2023.

REPAIRS & MAINTENANCE

Make payments for repairs and maintenance (business, rental property, employment) BEFORE 30 June 2023.

PAY EMPLOYEE SUPERANNUATION NOW

To claim a tax deduction in the 2023 financial year, you need to ensure that your employee superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2023.

You should avoid making last minute superannuation payments as processing delays may cause them to be received after year-end. If for any reasons you end up having to make last minute payments and you would like to claim them as deductions for the current year, contact us before you make any payments for possible resolutions.

DEFER INCOME

If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2023.  This strategy pushes tax payable to future years.

BRING FORWARD EXPENSES

Other effective tax minimisation strategies include bringing forward expenses. Purchase consumable items BEFORE 30 June 2023. These include marketing materials, consumables, stationery, printing, office and computer supplies. Spend the money now and get the deduction this year.

DEFER INVESTMENT INCOME & CAPITAL GAINS

If possible, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2023.

The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!

MOTOR VEHICLE LOGBOOK

Ensure that you have kept an accurate and complete Motor Vehicle Logbook for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2023. You should make a record of your odometer reading as at 30 June 2023 and keep all receipts/invoices for motor vehicle expenses.

An alternative (with no logbook needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.

INVESTMENT PROPERTY DEPRECIATION

If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.

PRIVATE COMPANY(“DIV 7A”) LOANS

Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2023. Current year loans must be either paid back in full or have a loan agreement entered in before the due date of lodgement for the company return, or risk having it counted as an unfranked dividend in the return of the individual.

YEAR-END STOCKTAKE / WORK IN PROGRESS

If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2023. Review your listing and write-off any obsolete or worthless stock items.

Talk to us about your different options for valuing Stock, and how they affect your tax payable.

WRITE-OFF BAD DEBTS

Review your Trade Debtors listing and write-off all bad debts BEFORE 30 June 2023. Prepare a management meeting document listing each bad debt, as evidence that these amounts were written off prior to year-end and enter these into your accounting system before 30 June 2023.

SMALL BUSINESS CONCESSIONS – PREPAYMENTS

“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. loan interest, rent, subscriptions) BEFORE 30 June 2023 and obtain a full tax deduction in the 2023 financial year.

TRUSTEE RESOLUTIONS

Ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2023 for all Discretionary (“Family”) Trusts. The ATO have recently released a number of Tax Rulings that may affect trust distributions to adult children, so Tax Planning for 2023 will be vital for anyone using a Family Trust.

PLEASE NOTE: This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from MGI.

Talk to us TODAY before the 30 June 2023 deadline for assistance in developing the most effective tax minimisation strategies for your business! You may also like our guide on how to reduce taxable income and minimising your personal tax.

Tax time is just around the corner once again but there is still time to implement some effective tax strategies. When looking at how to reduce your taxable income there’s more to consider than just the available tax concessions. Effective tax planning should be part of your longer term wealth management strategy. Here’s our 2023 tax planning guide to help you minimise your personal tax.

With tax savings, you could:

• Reduce your home loan
• Top up your super
• Save for a holiday (when we can travel again)
• Deposit for an Investment Property
• Pay for your children’s education
• Upgrade your car

The most important thing to remember is that there is no point in spending money to get a tax deduction unless it’s going to result in something useful for you.

HOME OFFICE EXPENSES

If you have been working from home, you may have expenses you can claim a tax deduction for. The ATO allows you to claim using a “Revised Fixed Rate Method” an amount of $0.67 per work hour for the 2023 year. This amount covers most expenses from working from home, and you need to keep a detailed record of how you calculated the number of hours you are claiming. You can also claim expenses using an “Actual Cost” method – so please keep all invoice and receipts during the entire year to prove all claims.

SUPERANNUATION CONTRIBUTIONS

While you might not be flush with cash now and able to put large amounts into superannuation, it’s important that you are aware of what is possible to maximise your super balance and possibly reduce your tax at the same time.

DEDUCTIBLE SUPER CAP OF $27,500 FOR EVERYONE

The tax-deductible super contribution limit (or “cap”) is $27,500 for all individuals under age 75. Individuals need to pass a work test if over age 67.

To save tax, consider making the maximum tax-deductible super contribution this year before 30 June 2023. The advantage of this strategy is that superannuation contributions are taxed at between 15% to 30% compared to typical personal income tax rates of between 34.5% and 47%.

CARRIED FORWARD CONTRIBUTIONS

Carry-forward contributions are not a new type of contribution, they are simply new rules that allow super fund members to use any of their unused concessional contributions cap on a rolling basis for five years.

This means if you don’t use the full amount of your concessional contribution cap ($25,000 from 2019 to 2021, and $27,500 for 2021 and 2022), you may qualify to carry-forward the unused amount and take advantage of it up to five years later.

Carry-forward contributions are calculated on a rolling basis over five years, but any amount not used after five years expires. These carry-forward rules only relate to concessional contributions into super, not non-concessional contributions, as they have different caps.

SPOUSE SUPER CONTRIBUTIONS

You can make super contributions on behalf of your spouse (married or de facto), provided you meet eligibility criteria, and your super fund allows it. This is known as contribution splitting.

Doing this not only helps to boost your spouse’s retirement savings, but it can also help you save tax if your spouse has limited income.

You may be eligible for a tax offset of up to $540 on super contributions of up to $3,000 that you make on behalf of your spouse if your spouse’s income is $37,000 p.a. or less.

The offset gradually reduces for income above $37,000 p.a. and completely phases out at $40,000 p.a. and above.

ADDITIONAL TAX ON SUPER CONTRIBUTIONS BY HIGH INCOME EARNERS

The income threshold at which the additional 15% (‘Division 293’) tax is payable on super $250,000 p.a. Where you are required to pay this additional tax, making super contributions within the cap is still a tax effective strategy.

With super contributions taxed at a maximum of 30% and investment earnings in super taxed at a maximum of 15%, both these tax points are more favourable when compared to the highest marginal tax rate of 47% (including the Medicare levy).

GOVERNMENT CO-CONTRIBUTION TO YOUR SUPER

If you are on a lower income and earn at least 10% of your income from employment or carrying on a business and make a “non-concessional contribution” to super, you may be eligible for a Government co-contribution of up to $500.

In 2023, the maximum co-contribution is available if you contribute $1,000 and earn $42,016 or less. A lower amount may be received if you contribute less than $1,000 and/or earn between $42,016 and $57,016.

OWNERSHIP OF INVESTMENTS

When looking at how to reduce taxable income, a longer-term tax planning strategy can be reviewing the ownership of your investments. Any change of ownership needs to be carefully planned due to capital gains tax and stamp duty implications. Please seek advice from your Accountant prior to making any changes.

Investments may be owned by a Family Trust, which has the key advantage of providing flexibility in distributing income on an annual basis and an ability for up to $416 per year to be distributed to children or grandchildren tax-free.

PROPERTY DEPRECIATION REPORT

If you have an investment property, a Property Depreciation Report (prepared by a Quantity Surveyor) will allow you to claim depreciation and capital works deductions on capital items within the property and on the property itself.

The cost of this report is generally recouped several times over by the tax savings in the first year of property ownership.

MOTOR VEHICLE LOGBOOK

Ensure that you have kept an accurate and complete Motor Vehicle Logbook for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2023. You should make a record of your odometer reading as at 30 June 2023 and keep all receipts/invoices for your motor vehicle expenses. Once prepared, a logbook can generally be used for a 5-year period.

An alternative (with no logbook needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.

SACRIFICE YOUR SALARY TO SUPER

If your annual income is $45,000 or more, salary sacrifice can be a great way to boost your superannuation and reduce your taxable income. By putting pre-tax salary into super rather than having it taxed as normal income at your marginal rate you may save tax. This can be especially beneficial for employees nearing their retirement age.

PREPAY EXPENSES AND INTEREST

Expenses relating to investment activities can be prepaid before 30 June 2023. You can prepay up to 12 months of interest before 30 June on a loan for a property or share investment and claim a tax deduction this financial year. Also, other expenses in relation to your investments can be prepaid before 30 June, including rental property repairs, memberships, subscriptions, and journals.

INSURANCE PREMIUMS

Possibly your greatest financial asset is your ability to earn an income. Income Protection Insurance generally replaces up to 75% of your salary if you are unable to work due to sickness or an accident. The insurance premium is normally tax deductible, plus you get the benefit of protecting your family’s lifestyle if you cannot work due to sickness or an accident. It’s a small price to pay for peace of mind. Like rental property interest, income protection premiums can also be pre-paid for 12 months to increase your deductions and further reduce your taxable income.

WORK RELATED EXPENSES

Don’t forget to keep any receipts for work-related expenses such as uniforms, training courses and learning materials, as these may be tax-deductible.

REALISE CAPITAL LOSSES

Tax is normally payable on any capital gains. You should consider selling any non-performing investments you hold before 30 June 2023 to crystallise a capital loss and reduce or even eliminate any potential capital gains tax liability. Unused capital losses can be carried forward to offset future capital gains.

DEFER INVESTMENT INCOME & CAPITAL GAINS

If practical, arrange for the receipt of Investment Income (eg. interest on term deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2023.

The Contract Date (not the Settlement Date) is generally the key date for working out when a sale or purchase occurred.

PLEASE NOTE: This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances and seek advice from MGI.

Talk to us TODAY before the 30 June 2023 deadline for assistance in how reduce your taxable income! You might also be interested in our post on tax minimisation strategies for businesses.

Cyber security is the practice of protecting computer systems, networks, and sensitive information from unauthorized access, theft, damage, or disruption.

The Financial Review recently published an article outlining that the recent Latitude breach was one of the biggest in Australia’s history even eclipsing the Medibank Private breach in October 2022. The cyber attack on Latitude Financial breached 7.9 million licenses from Australia and NZ. This includes some but not all of names, addresses, dates of birth and telephone numbers. The breach also affected 53,000 passport numbers. The breach began when staff logins were used to access two third party service providers.

Here are some reasons why cyber security is important:

1. Protecting sensitive information: Cybersecurity helps protect this information from unauthorized access, ensuring that it remains safe and secure.
2. Preventing cyber attacks: such as malware, phishing, and ransomware, are becoming more common and sophisticated. Effective cybersecurity measures can help prevent these attacks, reducing the risk of data breaches and financial losses.
3. Ensuring business continuity: Cyber attacks can disrupt business operations, leading to financial losses and reputational damage. Cybersecurity measures help ensure business continuity by protecting critical systems and data.
4. Meeting legal and regulatory requirements: In Australia, we have the privacy act, the security of critical infrastructure act & the crimes act which cover laws and regulations relating to cyber security. The ACSC have guidelines to provide practical guidance on how to protect systems and data from cyber threats.

There are several measures that individuals and organizations can take to safeguard themselves from cyber threats:

1. Use strong passwords: Ensure that you use strong passwords that are difficult to guess or crack. Also, avoid using the same password for multiple accounts.
2. Keep your software up to date: Make sure that you regularly update your software, operating system, and applications to ensure that any known security vulnerabilities are patched.
3. Use antivirus software: Install and regularly update antivirus software on all devices, including computers, smartphones, and tablets.
4. Be cautious of phishing scams: Be wary of emails or messages that ask you to click on links or download attachments. Avoid clicking on suspicious links or entering personal information on untrusted websites.
5. Regularly back up important data to an external hard drive or cloud-based service to ensure that you can recover your data in case of a cyber attack.
6. Use two-factor authentication: Enable two-factor authentication for all online accounts that support it. This adds an extra layer of security.
7. Educate yourself and your employees on cyber threats and best practices for online safety. This can include training on identifying phishing scams, safe password practices, and how to respond to a cyber attack.

MGI can assist your business to implement cyber security safeguards and reduce the risk of your systems being breached. Contact the MGI IT team for more information.

The application process has now opened for the Federal Governments scheme to support small and medium businesses deal with rising power bills. The first round of the Energy Efficiency Grants for Small and Medium Sized Enterprises (EEGSME) scheme opened on Monday 6th March and closes on Wednesday 19th April at 5 pm (AEST).

Up to $25000 is available for eligible businesses to upgrade or replace existing equipment to improve energy efficiency and reduce costs and there is a total $16 million on the table for this grant opportunity.

The objectives of the program are to:

• improve energy efficiency practices and increase the uptake of energy efficient technologies
• assist small and medium businesses to manage their energy usage and costs
• reduce greenhouse gas emissions.

To apply, businesses must have a headcount of 199 people or fewer and plan energy-focused expenditure of $10,000 or more. Grant funding will be distributed between states and territories and on a first come first served basis until funding is exhausted in each jurisdiction.

Eligibility for Energy Efficiency Grants

You can apply for Energy Efficiency Grants if you are an entity incorporated in Australia, a partnership or a sole trader and you must:

• have an Australian business number (ABN)
• be a small or medium sized business with an employee headcount from 1 to 199 employees averaged over any consecutive 12-month period since 1 July 2019
• have consent from the owner of the project location to undertake the project, if the entity is not the owner of the project location.

Eligible projects may include:

• an energy audit of your site or part of your site
• purchase or hire of equipment to measure, monitor and record energy use or to monitor a process, where this facilitates optimisation or energy management
• purchase of equipment to replace existing equipment, where the new equipment is higher energy efficiency
• costs to decommission, remove and dispose of the old equipment that is replaced
• purchase of equipment or components to help an existing system run more efficiently in regard to energy
• design, and reasonable installation costs of eligible equipment, including any necessary wiring or other electrical work required to enable the project
• building permits or approval costs to install equipment, where required
• the cost of suppliers, consultants and contracted labour undertaking eligible project activities.

Examples of projects that are eligible for energy efficiency grants include installation of LED lighting, new energy-efficient refrigerators and air conditioners, water boiler replacements, insulation around ovens and pipework, and double-glazed windows.

You can apply for the Energy Efficiency Grant here.

Please reach out to the team at MGI, if you need support in preparing your application.

 

If you haven’t yet applied for a Director ID Number (DIN) now is the time to do it or risk a civil penalty of up to $1.1 million.

The Australian Taxation Office (ATO) has started the process of chasing some 500,000 company directors who have not yet registered. Despite the official deadline of 30 November 2022, the ATO has said that penalties won’t apply to anyone who registered for their Director ID before 14 December 2022.

It is estimated that there are 2.5 million directors in Australia and only 2 million have so far registered, according to a statement made by the ATO to InnovationAus.

The system was launched by the ATO and Australian Business Registry Services (ABRS) in 2021 and is designed to help prevent illegal ‘phoenixing’. Phoenixing is the process by which a new company is established to continue the operations of a business that has been liquidated to avoid paying debts, employees and creditors.

What is a Director ID?

The Director ID is a 15-digit director identification number that is unique to each individual director who has verified their identity with the Australian Business Registry Services (ABRS).

If the director changes companies, stops being a director, changes their name or moves interstate or overseas, the unique identifier will remain with them forever.

Every director is required to apply for a DIN under the Corporations Act 2001 and you will need to have a myGovID to apply for the director ID,

MGI first alerted our clients of the need to apply for the Director ID back in October 2021 and provided a further reminder of how to apply for a Director ID in September 2022.

If you have yet to apply for a DIN, we urge you to start the process now as the ATO has indicated that it will take a light touch with directors who are merely lagging behind.

“The ATO has now commenced contacting directors who have not met their obligations to apply for a director ID. In the first instance, directors will be provided with guidance on how to apply.”

The ABRS has now also published a video guiding company directors through the process.

How to apply

The fastest way to apply for a DIN is by using the myGovID app to log in to ABRS online and verify your identity with information the ABRS has on record. You can check if your business is registered as a company with the Australian Securities and Investments Commission at ASIC Connect. Details of how to apply can be found here on the ABRS website.

Once you have received your DIN please forward this to our team to insert into our Corporate Secretarial software.

If you have any questions, please contact the team at MGI on

asic@mgisq.com.au

Performance Based Rewards: The Way To Win The Salary War!

Are you losing staff due to higher alternative salary rates on offer in the market? Then offering performance based rewards will assist you to retain staff and improve your bottom line!

Research indicates Generation Y has high earnings expectations and wants rewards based on performance. To implement an effective performance based rewards program, your staff needs to have input and agree to what is expected of them (“deliverables”).

Establish the deliverables for both individuals and team positions. These can include a range of quantitative (objective) and qualitative (subjective) assessment criteria. Once the deliverables are agreed, you will apply a weighting to each criteria. This will depend on the strategic and operational objectives of your business (grow sales, new customers, better productivity etc). A staff member’s result determines the amount of their performance bonus. The more they deliver the higher their rewards. It’s a win for both owners and their staff.

Case Study

David needs to grow sales and improve profitability. David’s concern is his staff costs are increasing and profits are declining. He has now implemented the Staff Value Program and agreed to pay Tom, a key staff member, a maximum bonus of $20,000. The payment of the bonus is conditional upon Tom meeting specific performance targets. Below is his bonus score card.

The qualitative assessment process allows business owners to assess the achievements of their staff and the criteria are measurable by observation. It provides a proactive approach for addressing subjective performance matters that are otherwise usually left unresolved.

Once the Staff Value Program is implemented by your business, you then need to ensure you have the systems and procedures in place to measure your staff’s performance on a timely basis. As performance bonuses are paid as a result of exceeding budgeted profits, business owners are beginning to realise they can compete with apparently higher alternative salary rates on offer in the market and retain their staff by paying a sufficient bonus based on performance.

The business advisory team at MGI have specialists who have helped businesses like yours develop a performance based reward program. A business coach from MGI can help you to implement a similar scheme and help improve your staff retention. We always have a clear focus on managing costs and improving profitability. We offer expert business growth support and can also assist with business benchmarking and analysis to ensure your business remains competitive.

You’ve grown your business gradually and now your minds turn to collecting your reward from your investment capital, know-how, and years of effort. Achieving the most for your business requires the same diligence it took grow it. This is where having a business succession plan becomes vital.

So how can you ensure you receive a return for your efforts?

Developing a effective plan for business succession is the key protecting, growing and realising the maximum value for your business. It is a strategic process that allows you to smoothly transition the ownership and/or management for your business.

Research shows that business value can be impacted by a  number of issues including:

• Complacency of business owners in addressing succession
• Business owners often being unaware of all their succession options
• Generation Y lacking the aspirations to be a business owner
• Increased house prices restricting the funding options for successors

Why is business succession a key issue now?

Times change, markets change, and so does the business environment. Not long ago, business entry costs and competitive forces were lower and business growth could be funded by borrowing against increasing house prices.

Business success demands focus by you on the operation, but ultimately, issues of success and retirement will creep up. By then, getting the price you need could be elusive.

The next generation of business owners, Generation Y, face a completely different business environment. Start-up and acquisition costs are higher, regulatory barriers are higher, and competition has increased. Business funding opportunities are also more limited in comparison.

You’re a business owner and you understand the driving forces behind competition, supply and demand.

So when do you need to start developing a plan for business succession?

• More business are for sale – lower prices result
• With fewer qualified buyers – it becomes a Buyer’s market
• In a Buyer’s market – they can be selective and value driven

Thus, it is important for you to start planning your succession now. Talk to the business advisory team at MGI about our succession planning services and let us help you start the process.  We can help you benchmark your business against others in the market, strategic planning planning, wealth management and business valuations.

You might also be interested in our previous blog about business exit strategy.