Posted in: Business
When a business cannot deal with the workload in house, a candidate or party outside of the business is often hired to assist in performing those services. This is called outsourcing, and it’s a practice that companies sometimes use to cut costs – especially if it’s easier to do this than to train up another employee.
The best model of outsourcing is one that meets the needs of the business. Clearly identifying those needs is a strategic step to take to ensure that the model chosen is the right one. There are four types of models when it comes to outsourcing.
The freelance model of outsourcing assigns work to a freelance worker, which can be long-term, short-term, part-time or full-time. Jobs can be posted to freelance sites, freelancers can bid on them and you can select who you would like to work with. This model is a quick and easy way to get one-off projects completed that require special skills, or obtain a little extra help during the busy season.
Pros: Cost-effective, quick and the skills needed for the job can be sourced
Cons: Overselling skills, difficult to brief, and jobs can be further outsourced by freelancers.
This model focuses on project-based work, and involves outsourcing entire projects to a specialised outsourcing centre. Essentially all you have to do is provide the centre with the project requirements, and they will carry out the development work, project management and quality control through to the project’s completion.
Pros: Less work to be done by you, cost-effective in money and time, new staff aren’t needed and there is a fixed cost for the project.
Cons: May lack local knowledge if located overseas, time zone and language barriers can be difficult to overcome
Business Process Outsourcing
With the business process outsourcing model, a service provider sets up and operates an offshore office for you that they hand over when it is ready. Essentially, it’s contracting a business or organisation hires another company to perform a process task required by the hirer for the business’ operational success.The provider has the facilities, setup, office environment and management required for global team members to work.
Pros: offers improved productivity, increased capacity, no need to worry about other sectors, inexpensive and an easy way to grow your team.
Cons: Large-scale BPOs can be more expensive to run and can be difficult to communicate needs and wants if the BPO doesn’t understand your industry or business.
This model is the model you want to employ if you’d like to build a separate office outside of your home country with more than 25 staff. To begin with, and much like a BPO, a provider ensures that there is workspace and office equipment, and hires the employees. Rather than have the provider run the business for you, they then transfer the operation back to you.
Pros: Create work culture and environment among global team members, costs are less expensive than a BPO if there are more than 15 employees.
Cons: Can be expensive to set up, operating under foreign work ethics and work cultures can impact team management, and requires time and effort to invest in the business in person.
Always consider what is best suited for your business, and confer with professional advisors before implementing a strategy regarding outsourcing
Posted in: Super
Marriage and de facto relationships come with a number of perks – but did you know that if your partner earns less than you or is not currently working, you could contribute to their super fund savings?
Many households in Australia, either as a result of unemployment, maternity/paternity leave or by choice, have single income households. As a result, the retirement savings held in super for one member of these households may not be increasing as exponentially fast as the working member. The good news is that, when in a relationship, a spouse can boost their non-working partner’s super fund with their own contributions.
The best part? It could be a tax write-off for the working spouse.
Under Australian superannuation law, a spouse can be a legally married partner with whom you live or your de facto partner. That gives additional benefits to those in de facto relationships, who can choose (if one member of the relationship isn’t working or earns less) to boost their partner’s super fund. A spouse must also be younger than their preservation age or between 65 and their preservation age and not retired.
There are two ways that someone can help their partner’s superannuation grow:
- Making a Spouse Contribution to their super account
- Arranging for Contribution Splitting (also known as Super Splitting)
Spouse superannuation contributions can now be made for spouses earning up to $40, 000 per year. If a spouse earns less than $37, 000, the maximum tax offset of $540 can be claimed when contributing a minimum of $3, 000 to their super. Anything contributed that is more than $3, 000 will not receive the spouse contribution tax offset.
This tax offset cannot be claimed if:
- A spouse has exceeded their non-concessional contributions cap for the financial year.
- Their super balance is $1.6 million (for 2020/21) or more on 30 June of the previous financial year in which the contribution was made.
Another way to inject funds into your spouse’s super is to choose to have some of your own super contributions put into their super account. This is fine as long as they have not reached their preservation age yet, or are between their preservation age and 65 years and not retired.
Super contributions can only be split in the financial year immediately after the year in which the contributions were made or in the same financial year as the contributions were made only if your entire benefit is being withdrawn before the end of that financial year as a rollover, transfer, lump sum or benefit.
There are two types of contributions that can be split:
- Employer contributions – the most common form of super contributions to split
- After-tax contributions – money that you voluntarily deposit into your super after tax.
Always discuss starting spousal co-contributions to super with your accountant or financial advisor for help and guidance prior to starting this process.
Posted in: Tax
It’s a simple, step-by-step process used by many Australians to increase their income. Borrow money from a financial institution, invest in a second property and pay off the loan with the profit accrued from the investment property (ie. rent from tenants).
But did you know that the interest on a home loan for the purchase of an investment property can be claimed as tax-deductible?
To clarify – claiming a tax deduction on the interest of a loan can only be used on the loan that was used to purchase the investment property. It also must be used to earn income, because a property that is solely residential isn’t eligible for any tax deductions (except in certain situations where the residence may be used to produce income, like home business or office).
Here are a few examples of when tax deduction claims on your property are not allowed:
- If the secured property is being used for living as a primary residence, and no income is made from it.
- Refinancing your investment loan for some other purpose (like buying another property).
- Using the loan for a private purchase, other than the purchase of a home.
- If the investment property is a holiday home that is not rented out, then deductions cannot be claimed as it doesn’t generate rental income.
As an example, if borrowing against your main residence for the purpose of purchasing an investment property, then the interest on that loan is tax-deductible. Conversely, if the loan was against the investment property to buy a car for your personal use, then the interest from that loan will not be tax-deductible.
The only way that a tax deduction on a home loan’s interest is possible, is if there is a direct, unbroken relationship between the money borrowed and the purpose the money was used for. Any money that resulted from a home loan, for instance, should have been invested into a property.
If you happen to redraw (make extra repayments into your loan that reduce the loan balance) against an investment loan for personal use, the tax-deductible interest is watered down. This is because the new drawdown (transfer of money from a lending institution to a borrower) is deemed to not be for investment purposes.
It is important that any investment loans are quarantined from your personal funds to maximise tax deductions on interest. Though it may be tempting to pull additional funds from the loan for additional finances, it’s also shooting yourself in the foot.
A better strategy (if there is only investment debt that has been incurred, and you wish to pay it off), is to place funds in an offset account (a bank account that is linked to your home loan) and then redraw those funds for your personal use. It’s also important to ensure that the offset account is a proper offset – a redraw that is disguised as an offset account can be a major drawback for investors looking to capitalise on their tax threshold.
If you or someone you know has recently purchased an investment property with a home loan, speak to your accountant or financial advisor to see how your tax return can benefit from it.
Posted in: Money
There are a lot of options when it comes to investing, but often people are daunted by the prospect. A lack of accessible information, misconceptions about investment opportunities and fear of losing money are often reasons people opt out of investing.
Investing can be as easy as a savings account separate from the account that is used for spending, in which a percentage of monthly income can go into. If there are adequate funds, consider investing in real estate for passive income. With real estate values growing over time, on top of earning rental income during ownership, there will be an opportunity to sell later on at a higher price.
Diversifying investment portfolios can seem overwhelming, but all that it takes is putting money into multiple investment avenues. This can be in shares or managed funds with a financial advisor, investments with different rates of return, or in startups or cryptocurrency.
These avenues of investment can still be a lot to take in for individuals, so financial advisors are always a good option for those looking for a little more of an expert opinion on the issue.
Posted in: Business
Business ethics are the system of moral and ethical beliefs that guides the values, behaviours and decisions of a business organisation and the individuals involved within that business. These ethics are important to business as many of them are tied directly into the law, and breaches of these can be punishable as an offence
. Though this varies by industry, a business’ ethics can have a significant impact on how a business may operate on a day to day business.
Business ethics can often be seen in the code of conduct that businesses and their employees follow.
Here are some of the benefits of a business taking ethics into consideration
- Consistent ethical behaviour leads to a positive public image
- Building a business’ foundation of ethical behavior helps create long-lasting effects for the business
- Employee ethics are influenced by business ethics, leading to better perceived employees.
- Ethical practice leads to profitability
In essence, profitability and business ethics are linked. Companies that are perceived to have better ethical responsibility and operate in such a way may have a better reputation overall. With investors leaning more towards socially responsible and ethically responsible companies to invest, companies need to align themselves with appropriate ethics moving forward.
Posted in: Super
After COVID 19’s impact on the world, an influx of employees who had lost their jobs fell into the job market. Many of these came from companies that couldn’t afford to continue their employment. As a result, many individuals had to seek alternative employment, or draw from their super. Some individuals took on multiple jobs to pay bills, and others drew from the super that they had accumulated in the government’s early release scheme specifically for coronavirus related income loss.
Super is held by superannuation funds, and accumulates as a result of how much super an employer pays to the employees’ funds. Many Australians may find that they actually possess multiple super accounts as a result of having “lost” their super accounts during changeovers. It can also happen as a result of changing names, moving addresses, living overseas or changing jobs.
Australians can use the ATO’s online tools to:
- View details of all of their super accounts, including lost or unclaimed amounts
- Consolidate eligible multiple accounts (including any super held by the ATO)
- Withdraw your super held by the ATO when certain conditions are met.
As superannuation funds often have fees associated with their upkeep, as well as insurances that may be tied into it (such as life, total and permanent disability and income protection), it’s important to consult with providers before accounts are consolidated.
Posted in: Tax
As an employee in a business, often there are perks that can come with the job. A company car, fuel money, perhaps some technology to help make things easier. Small business owners however have to be a lot more mindful of how they use the money from their business.
Any money or assets that a business has earned or possesses, is solely the property of that business. That means that there are numerous issues that can arise from dipping into these company funds.
As a business owner, it’s important to keep records and correctly report transactions if using company money or assets (e.g, company car). These can include instances such as
- taking money out of your company for yourself or your family
- receiving money from it (for example, as a director, shareholder or an associate)
- using your company’s assets for private purposes.
For small businesses, this can be easily done through:
- Salary, wages or director’s fees
- Repayments of a loan you have previously made to the company
- A fringe benefit, such as an employee using a company car
- Dividends (formal distribution of the profits)
- A loan from the company
If a business does not report correctly or keep appropriate records for transactions, an unfranked deemed dividend could be included in their assessable income (this is a bad thing) during tax time.
Here are some easy ways to avoid being put into this situation:
- Always ensure that any company money issued is accounted for as per the previous categories.
- Have a separate bank account for the company to pay for company expenses (not private ones!)
- Keep proper records of all company transactions
- Repay any loans from the company before the tax return date to avoid unwanted income tax
Posted in: Money
When checking through your transactions, you might come across a transaction that doesn’t look right. If this is the case, you should get into contact with your bank as soon as possible.
An unauthorised transaction: Money transferred from your account without your permission
A mistaken transaction: Paying the wrong person by using the wrong details
Here are the signs to look out for to identify unauthorised or mistaken transactions:
- Persons or companies whose names you do not know
- Cash withdrawal from a place you have never been
- Transaction date you don’t recognise
- Payment that has doubled up
But keep in mind:
- Transactions can take days to show up – they are not always immediate
- Name of a shop or restaurant might not match the bank statement (they may have a different trading name which you can verify online)
Posted in: Business
Buying an existing business can be a great entryway into being a business owner – but it does come with challenges. Following these steps might make it easier for you to make sure that the business you buy is right for you.
- Understanding if you are ready for business: This doesn’t just involve the financial aspect of things, but also management more generally. Even though there are procedures in place, you still need to develop management skills to oversee those processes. You will need to be disciplined when it comes to day-to-day operations, especially at the start before you become more familiar with everything. Reflect on your current situation and ensure that you can handle the responsibilities that come with owning a business.
- Decide whether you want to buy an independently owned business or a franchise: You will be able to make a lot more decisions and changes if you buy an independent business – but you will also need to come up with a lot more ideas, and conduct marketing and safety strategies by yourself. Franchises on the other hand provide a lot of support when it comes to routine business processes, but there is a lot more rigidity when it comes to handling the business.
- Research the business: Look into all the costs involved in buying the business and potential ongoing expenses that you will incur. Make sure you get an insight into the business’ strengths and weaknesses and how it is likely to perform against competitors.
- Carry out due diligence: Examine a business in detail before you sign a legally binding document. This includes various financial aspects such as income statements, tax returns, etc. You should also review the legal aspect of the business such as intellectual property, registered patents, etc.
- Value the business: Calculate the net worth of your business by taking the assets and liabilities into consideration. Also calculate the value of the business based on future earnings – what you can gain from the business.
Posted in: Super
Super (AU): Pros and cons of home reversion
Home reversion is when you sell a share of the future value of your home whilst still living there. You receive a lump sum payment and continue to own the remaining share of your home equity.
- You are able to continue living in your home after you sell the share
- You can conduct renovations or maintenance that your home may need with the lump sum payment you receive
- You can use the lump sum for any urgent needs such as medical treatments
- The lump sum could help you secure accommodation till your home sells
- You will own the lower share of the equity in your home
- Transactions and costs can get complicated and it may be hard to navigate that
- Your eligibility for Age Pension might also be influenced
- Your ability to afford aged care could be affected
- You might end up eating into money that you need for the future – such as for medicare
- You might be locked into fewer options if your circumstances change
- If you are the sole owner and someone else lives with you, they may no longer be able to live in the house if you move out or pass away