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Business Bulletin | Spring 2014

Posted on Sep 19, 2014 in Blog, Business Bulletin

Business Bulletin | Spring 2014

SPRING BUSINESS BULLETIN Finances—Fixed or Variable?  With the Reserve Bank of Australia (RBA) cash rate at record lows, a number of banks have entered into the fixed rate battle with some very attractive loan packages.  Borrowers can now lock in a rate as low as 4.99% over a 5 year term; comfortable in the knowledge that their repayments will not increase over this quite lengthy period. In deciding whether to lock in your interest rate, the following factors need to be weighed: Whether variable rates are likely to fall further (and therefore put you at a disadvantage if you have chosen to fix your rate). On this question, with the RBA rate already at just 2.5%, many commentators believe there is little scope for rates to fall much further, while they may increase if the economy improves or inflation picks up. Fixed rates give you the ability to plan ahead with certainty. Variable rate loans are often more feature-rich. For instance most fixed rate loans do not offer an offset facility whereby you can place your income into an account and the balance of that account is offset against your loan balance resulting in a reduction of interest costs. If you pay out a fixed rate loan early (either by selling the property or refinancing) you may incur break costs. Depending on the amount of the loan, these charges can be significant. Of course, the choice is not necessarily either/or – many choose to fix just a portion of their loan, and on the remaining balance enjoy the flexibility and benefits of a variable product. In deciding which option is best for you, consult with your financial advisor. Tax Talk: Top 5 Audit Triggers!  ATO audits are something that every taxpayer and every business dreads. While you or your business can be selected at random by the ATO, often your conduct is the trigger for an audit. What are some common audit triggers?  Unpaid Superannuation Not paying superannuation on time and in full for your employees is a sure-fire way to attract ATO attention and potentially trigger a wider review into your affairs. Inconsistency Between BAS and Tax Return The income declared on your or your business’s year-end tax return should broadly align with the amount of income you have recorded throughout the year on your BASs. Large discrepancies invite and often result in ATO scrutiny. Falling Outside the ATO Small Business Benchmarks If your business falls outside the ATO’s Small Business Benchmarks (www.ato.gov.au/Business/Small-business-benchmarks) this will most likely lead to further ATO enquiry, and possibly an audit. In simple terms, the benchmarks are industry-specific financial ratios that the ATO has developed to assist in comparing your business against others in the same industry. If your business falls outside the benchmarks, the ATO will likely make contact and give you the opportunity to explain why. For instance, it may be that you have higher costs or lower selling prices than other similar businesses of the same size within your industry. Whatever the reason, it is important that you communicate it to the ATO if they ask. If the ATO is satisfied with your explanation, this may be the end of the matter…and a review or audit may be averted. Compliance History If you have outstanding debts or outstanding returns/BAS (or are consistently late in these areas) you are much more likely to be audited than businesses with a good compliance history. Company Car But No FBT If your business has purchased a motor vehicle but has not lodged an FBT return or at least included in its income tax return...

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