Superannuation

Superannuation – 3 Helpful Facts for Your Retirement Fund

How much should I be contributing?

Superannuation, money saved away during your working life to fund your retirement. Sure it can be hard to care about superannuation as a business owner when you’re at least 30-40 years away from accessing it but what if the ATO helped you save for your retirement? Many business owners do not consider the great tax incentives superannuation can offer.


3 Little-known Facts

Now I have covered the importance of super let’s dive into 3 little-known facts about super relevant to you!

It might sound simple enough but do you know your superannuation obligations as an employer? Generally, if you pay an employee more than $450 (before tax) in a calendar month you have to pay super on top of their wages (ordinary earnings). The current superannuation rate is 9.5% and it must be paid quarterly into the employee superannuation fund by the 28th of the following month. A recent change also requires that you pay and report super electronically in a standard format (Superstream compliant).

“It might sound simple enough but do you know your superannuation obligations as an employer?”

A couple items to note about your obligations, Ordinary earnings can exclude payment for overtime, allowances, bonuses, etc – a full list can be found here.

Just because a worker might be considered a contractor (on an ABN) you can still be liable for superannuation particularly in the contract is wholly or principally for that person’s labour.

Have you ever paid your employees superannuation late? That super you have paid isn’t tax deductible and a superannuation guarantee charge statement must be prepared (interest and administrative charges apply too). A disastrous result for something that can be easily overlooked. Best practice is to prepare the payment on the 20th are quarters end to allow enough time for the contributions to hit the employees fund by the 28th cut-off.

“Have you ever paid your employees superannuation late?”

Lastly, concessional contributions have a cap each year, currently $25,000. This means employer contributions, salary sacrifice and personal contributions (you wish to claim a deduction for) are taxed at 15% up to the $25,000 cap. If you go over your cap you will be taxed at your marginal income tax rate. Contributions towards the cap are added up when that are received in your super fund, not the period the super relates to. Let me give you an example, the June 2018 Super is due of the 28th of July 2018. Let’s say you want to salary sacrifice another $5,000 for the June quarter to be included in your 2018 Financial Year cap. The $5,000 will actually be paid on the 28th of July and count towards your 2019 Financial Year cap. This has caught out a few business owners I know; thus, if in doubt speak to your superannuation fund and/or your accountant.


What to do next

Superannuation sounds easy enough but there are a few pitfalls that catch many business owners off guard. If you can avoid these pitfalls, superannuation can be used as an effective method to boost your funds for retirement and save on tax. Who wouldn’t like to pay less money to the ATO and keep more money in their pocket (when you retire)?

If you have any queries about your retirement fund or simply want to know what you can do in order to ensure you’re making the most of your superannuation do not hesitate to contact our team at Accodex.


Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your trusted Accodex Accountant for help.


Written By: Joshua Gloede

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

Extremely dedicated to making sure his clients understand the significance of budgeting and planning, Josh has often emphasized the importance of understanding and respecting your cash flow, – or as he likes to refer it – the lifeblood of your business.


Cash flow

Cashflow, a problem of when not if…

Recapping the cashflow situation

Did you know that in December only 56% of Australian small businesses were cashflow positive?1 If you aren’t actively managing your cashflow you will be having problems in the future. That’s the realisation I made after my cashflow workshop with Master Builders Association of South Australia. When business is good your bank account is healthy, suppliers and employees are happy and life is good. When it’s bad you having nothing in your bank account, employees and subbies are pissed, suppliers are calling and you’re too stressed to sleep. It’s alarming how quickly it can all unravel.

 

Once you are in the middle of a cashflow crisis, it’s too late…

 

How quickly it can all slip up…

Construction accounts for 8% of Australia’s GDP,2 yet this sector alone accounts for 21% of Australia’s insolvencies.3 Given that on average, it typically takes 45-60 days to get paid, is it really any surprise? Chances are your clients are going through cashflow issues themselves and if you’re not careful you will be caught up in the vicious circle. Your clients pay you late, you pay your suppliers late and it goes on and on all of a sudden the healthy cash balance you once had has been eaten away operating costs of your business and replaced with a larger debtors balance (money owed to you).

 

 

 

Construction Accounts for 8% of Australia’s GDP, yet this sector alone accounts for 21% of insolvencies.

 

Act while business is good…

The key is to address cashflow problems while your business can still absorb any issues that might pop up. Once you are in the middle of a cashflow crisis it’s too late… you have to work that much hard to dig yourself and you won’t have a healthy bank account balance to bail you out. However, if you had identified some issues and implemented some policy updates you stand a much better chance of riding out the storm.

 

 

…on average, it typically takes 45-60 days to get paid…

 

There is a reason cashflow is one of the most common issues on the business owners mind,you have had to tackle the problem time and time again and you will need to again in the future. So what can you do? Arm yourself with the right tools to reduce the number of issues on the horizon and have plans in place to proactively manage cashflow and you will also sleep better at night too. Life is too short to worry about paying others after all who is up all night worrying about paying you?

 

 


 

Written By: Joshua Gloede

The Financial Foreman

 


 

References

  1. Xero website, Home – Small Business Insights (Available at: https://www.xero.com/small-business-insights, Last accessed 27th February 2018)
  2. Australian Department of Industry, Innovation and Science website, Australian Industry Report 2016 (Available at: https://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/AustralianIndustryReport/assets/Australian-Industry-Report-2016-Chapter-2.pdf, Last accessed 27th February 2018)
  3. HuffPost website, Don’t Let Your Small Business Become An Insolvency Statistic (Available at: http://www.huffingtonpost.com.au/2015/12/10/business-fail-avoid_n_8679352.html, Last accessed 27th February 2018)

 


 

Technology

The Cost of Remaining Technologically Illiterate

How Time is Being Wasted

In the 8 years I have been working as an Accountant for the Construction and Trades industry; I have noticed a recurring theme amongst businesses operating within this particular sector. Business owners often took time off the jobsite or worked long hours in the home office in their ‘downtime’ to catch up on quoting, invoicing, organising future jobs or answering emails and telephone enquiries. This got me thinking how much time are business owners wasting on admin tasks?

On average Australian small business owners spend one third of their time on administration tasks. Now I know what you are all thinking this is what’s expected of a business, this makes sense if you are working with the Amish, without the use of the internet, tablets, automated procedures and cloud solutions. Why on earth would a business willingly spend 83 days1 a year on admin tasks? I’m disgusted by these numbers, technology is so easy to use and implement why cart office supplies up the stairs when you can use the elevator? Time is money and every hour spent on administrative tasks is an hour taken away from your family or from the business hindering the business’s ability to grow. In order to put a value on the hours spent on administration tasks we needed to assign a value to that time, the average tradie earns $60 per hour2. On a basis of 83 days a year at 8 hours per day that’s 664 hours a year on admin tasks equating to a recurring cost of $40,000 every year.

“On average, Australian Small business owners spend one third of their time on administration tasks.”

There is fear of change; then there is Submission to the Familiar

I know technology is often thrown around as the silver bullet that will save the construction industry, we have been hearing it year after year for decades. All business like to say they have embraced technology and innovation, they even have those words plastered on posters around the office to show how innovative they are. It’s not technology or innovation that will save your company, it’s how you integrate them into your business processes.

Let me provide an example for you. There’s a celebrity, we shall call her ‘K’ nobody quite knows what she is famous for but she makes the most of her limited skills and more power to her. K was in the city for a fashion show with a lot of expensive jewellery, so she made sure to book into a prestigious and secure hotel equivalent to her celebrity status. Unfortunately for K she was robbed by 5 men that were able to walk off the street into the hotel, is the security technology to blame? No, it is how the technology was implemented that caused the lapse. That is the key, you must be able to measure the benefit implementing the technology. Otherwise you are throwing darts at a dartboard with blindfold on, sure you might get lucky but why take that risk?

Why take my word for it? IBM conducted their own research into the benefits of cloud computing. I summarised some key improvements from real implementations below: 

IBM Findings

Capability

Are of Saving

Hardware

Utilizing resources by using virtual serves

System Administration

Reduced system administration and operating costs in cloud infrastructure

Processing Efficiencies

Labour savings from request management, automation and standardisation

Improving Productivity

Reduced Idle, waiting time and increase flexibility

The same report found that cloud technology can decrease operating and labour costs by 50% through automated provisioning and standardisation; reducing admin costs to 16.5% for Australian Small Businesses (previously 33.33%), that is a saving of $20,000 by implementing cloud technology. By implementing cloud technology you haven’t just saved money you have created more time 41 days3 to be precise.

“…cloud techonlogy can decrease operating and labour costs by 50% through automated provisioning and standardisation.”

Now what have we learnt from K? That we should keep valuables off social media? No, that if we are going to be implementing new technology we must be able to measure the benefit to the business. How do we achieve that by implementing a technology infrastructure that is built for scale and will evolve as your business grows. Resulting in streamlined processes, workflows and timely data that will leverage your business for growth and save you money. A fully integrated tech deployment will cost around $15,000 to implement, that’s a return of investment of less than one year. The savings are compounded and the return on investments increase with each year.

To sum it all up, Cloud Technology and its integration into today’s businesses operations is – and should always be considered – an investment. Like any other investment, when we start to notice it being successfully leveraged by other businesses and competitors, we do not sit idly by as we watch others succeed. Cloud Technology is no different. The question we must ask ourselves is no longer ‘Whether we will Adopt the Cloud,” but rather, “When do we start; and are we too late?”

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One Final Note from Josh

If you are toiling away year after year striving to grow your business but not getting anywhere are you suffering from the Taylor Swift effect? No Taylor, you can’t make them stay but repeating the same process over and over will lead to the same effect, a change is needed. I practice what I preach, I have implemented this process with my clients and I actively work with them to grow their business. With the right accountant you will know the difference between and expense and an investment. The norm right now might not be the norm in the future, complacency can kill a career just ask Seann William Scott.

Joshua Gloede
Accounting Partner


Written By: Joshua Gloede


References

    1. Melanie Burgess. (2016). Plumbers, electricians Australia’s richest tradies, charging more than the average lawyer. Available: http://www.news.com.au/finance/work/careers/plumbers-electricians-australias-richest-tradies-charging-more-than-the-average-lawyer/news-story/4fee7c5920ff4624e53c5ca20f99e3cb. Last accessed 27/10/2016.
    1. Mike Ebbers. (2009). Cloud Computing: Save Time, Money, and Resources with a Private Test Cloud . Available: http://www.redbooks.ibm.com/redpapers/pdfs/redp4553.pdf. Last accessed 27/10/2016.
  1. Yolanda Redrup. (2013). Small business owners wasting time on administrative tasks, research finds. Available: http://www.smartcompany.com.au/business-advice/strategy/32187-small-business-owners-wasting-time-on-administrative-tasks-research-finds/. Last accessed 27/10/2016.

Calculations

    1. 5(days) x 52(weeks) = 260(Trading days), – 10(Public Holidays) = 250(days working per year), x 33% = 83(Working days lost from admin).
    1. 83(Lost days) x 8(hours in standard trading day) x 60($ per hour wage) = $39,840(Lost per year).
  1. 5(days) x 52(weeks) = 260(Trading days), – 10(Public Holidays) = 250(days working per year), x 16.5% = 41(Working days lost from admin after cloud integration).
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