Reasons to make a valid Will

Without an up-to-date and valid Will, you are missing out on a critical opportunity to make proper arrangements for your family’s future.

For a Will to be considered valid:
– it must be in writing
– the will-maker must have the mental capacity
– it must be voluntarily signed by the will-maker or by some other person in the presence of and at the direction of the will-maker
– the will-maker’s signature must be made or acknowledged in front of two or more witnesses, present at the same time
– must be signed, dated and witnessed by two other parties
– the signature of the will-maker or person signing at the direction of, and in presence of the will-maker must be made with the intention of executing the Will.

Here are five reasons why you should make a valid Will:

Provide for the people you care about
If you don’t have a Will it is unlikely that what you want to happen will happen. Instead, your estate will be governed by the laws of intestacy under the Succession Act 2006 and the people that you would like to see benefit from your estate may not.

Leave particular gifts or items for friends or relatives
If you have particular gifts or items that you would like to see passed to particular friends or relatives this isn’t possible unless you have a Will which states your wishes.

Appoint someone you trust to be your executor
When you make a Will you have the choice of appointing your executor; this is the person who will administer your estate and distribute your assets in accordance with your wishes.

Leave particular instructions
If you have pets that you would like a friend or relative to look after or you have particular burial wishes, these can be included in your Will.

Appoint a guardian for your children
You cannot appoint a guardian for your minor children without a Will. If both parents of the children died, guardianship of your minor children would likely pass to the grandparents, and it may be necessary for the Court to decide which grandparents.

Negotiating price with your customers

Successful negotiation with your customers is key to maintaining strong and mutually beneficial relationships.

Even if you have mastered your sales approach, it is likely you will come across customers hunting for a better deal. Here are three ways to negotiate with your customers for a win-win solution:

Ask questions
Asking the customer questions shows your interest in understanding, and most importantly, addressing their needs and concerns. It also demonstrates that you are willing to come to a compromise. When trying to uncover the customer’s problems, spend time asking questions but let them do most of the talking.

Build rapport
Showing a level of respect and care for the customer is a critical factor in effective negotiation. Try to establish a good relationship before entering the negotiation and remain calm during the negotiation process. Be sure to emphasise how much you value your relationship with the customer and follow-up after the negotiation.

Make reasonable concessions
Before entering the negotiation, think about concessions which wouldn’t cost you much but would bring a lot of value to your customer. Going into the negotiation with a clear idea of how much you are willing to negotiate helps to avoid making unnecessary concessions at the last-minute.

Understanding financial ratios

Financial ratios are useful tools for business owners to monitor, analyse and improve their business performance.

A financial ratio contains one or more financial figures and is expressed as a ratio, rate or percentage. Financial ratios are used to measure profitability, cash flow and liquidity, risk and return, and stock turnover and sales.

Here are some common financial ratios used in business to:

– Measure profitability
Gross profit margin is a percentage of gross profit on sales.
To work out: (Gross profit x 100) divided by sales.

Net profit margin is a percentage of net profit on sales.
Method: (Net profit before tax x 100) divided by sales.

– Monitor cash and liquidity
Working capital ratio measures the liquidity of a business (i.e. how much money is available to meet creditors’ demands).
To determine this ratio: Working capital = current assets divided by current liabilities.

Quick assets ratio measures the solvency of your business, or its ability to meet its immediate commitments.
Method: Current assets (minus stock) divided by current liabilities.

– Measure turnover and sales
Stock turnover ratio measures the number of times stock turns over.
Method: Cost of goods sold divided by (0.5 x opening + closing stock)

Material to sales ratio measures the percentage of sales dollars spent on materials.
To determine this ratio: (Direct materials x 100) divided by sales.

Acting on customer feedback

Customer feedback is a great learning source for any business looking to improve their competitive edge. But actually acting upon this feedback is the most important, an often neglected next step.

Feedback from customers is a valuable asset for many businesses. It provides them with customer insights which can assist in improving services, products and overall customer experience. Feedback has also been shown to improve a business’s customer retention rates.

But while feedback does create a competitive advantage for businesses, that advantage doesn’t just come from collecting the feedback. It is how a business chooses to act based on this feedback that makes all the difference.

Businesses may like to treat the challenges that come to light through customer feedback as projects with defined deadlines and expected outcomes. Details such as how long it will take to address a challenge, what strategies should be used or what actions need to be taken, should be taken into consideration when
developing the projects.

An action log can help to maintain the momentum and focus of these projects, and after a reasonable period of time, may serve to give businesses a good understanding of whether goals and targets were achieved in an adequate space of time.

Communicating results with customers is the next important stage. When businesses make any changes that are customer-based, it is important to keep customers who were part of the feedback process updated. This encourages customers to continue giving their input if they know they are being heard and are responsible for any positive changes.

A business may want to conduct follow-up feedback once customers have experienced the improvements. Customer feedback, after all, can be the reason for short-term programs as well as entire company transformations.

When collecting feedback, the overall task isn’t in the listening, but the actual implementation and follow-up. The more businesses can get their customers to participate in these kinds of projects, the more likely a business is to grow.

Understanding death benefits under the new transfer balance cap

The introduction of a $1.6 million transfer balance cap for superannuation will take effect from 1 July 2017 which is likely to impact fund members who collectively with their spouse exceed $1.6 million in super.

When an individual with a super account dies, the trustee of the super fund will generally pay the deceased’s remaining super interests (accumulation and retirement phase) as a death benefit lump sum to a beneficiary.

Superannuation death benefits can be cashed:
– to a beneficiary or beneficiaries as superannuation lump sums that are paid out of the super system, or
– to a dependant beneficiary or beneficiaries as superannuation income streams that are retained in the super system, or
– to a dependant beneficiary or beneficiaries using a combination of the two.

A dependant is a person who is either a spouse of the deceased, a child of the deceased (less than 18 years old, financially dependent under 25 years old or has a disability) or a person who was in an interdependency relationship with the deceased.

When a death benefit income stream is paid to a dependant beneficiary, a credit arises in the beneficiaries transfer balance account. This may result in the dependant exceeding their transfer balance cap.

In this case, the beneficiary can choose to reduce their transfer balance account by commuting the death benefit income stream fully or partially. When this occurs, the commuted amount will need to be cashed out as a lump sum and paid to the individual – rather than being kept in an accumulation account, as this contravenes the regulatory requirement to cash the benefit out of the super system as soon as practicable.

Reversionary super income streams
A death benefit can be either reversionary or non-reversionary.

Reversionary death benefit income streams are super income streams that revert to a reversionary beneficiary automatically upon the member’s death. A non-reversionary death benefit income stream is a super income stream created and paid to the dependant beneficiary or beneficiaries.

If an individual receives a reversionary super income stream, the value of the entire supporting super interest at the time it becomes payable to the beneficiary counts towards their transfer balance cap.

If you are the recipient of a reversionary pension, the income stream will not count as a credit in your transfer balance account until 12 months after the death of the member, giving you time to adjust your affairs and reduce any amount that may cause you to exceed your transfer balance cap.

Preparing for contribution cap changes

From 1 July 2017, many of the 2016 Federal Budget super reforms will take place, including the reduction of both the annual concessional and non-concessional contribution caps.

Concessional contributions
Concessional contributions include employer contributions and salary sacrifice amounts. Personal contributions claimed as a personal super contribution deduction also count as concessional contributions.

The concessional (pre-tax) contributions cap will be lowered to $25,000 for everyone. Previously, those aged 50 years and older could contribute up to $30,000 and $35,000 for everyone else.

Individuals who wish to make extra concessional contributions before 1 July will need to check what concessional contributions have been made to all their super funds from 1 July 2016 and arrange for the additional concessional contributions (up to their age cap) to be paid to their super before 30 June 2017.

A new super rule will be introduced effective from 1 July 2018 which will allow individuals with a total super balance of less than $500,000 at the end of 30 June of the previous year to ‘carry-forward’ their unused concessional contributions cap. This allows individuals to access their unused cap space on a rolling basis for five years.

For example, in 2018-19, Tom makes $10,000 in concessional contributions, leaving an unused amount of concessional contribution cap of $15,000. Tom can carry forward for up to five years to increase his concessional contribution cap. In 2019-20, in addition to his normal $25,000 concessional cap, Tom can use the $15,000 of unused cap from the previous year. This means Tom’s total concessional cap for 2019-20 is $40,000.

Non-concessional contributions
Non-concessional contributions include personal contributions for which you do not claim as a tax deduction. All non-concessional contributions made to all your super funds are added together and count towards the cap.

The annual non-concessional (after-tax) contribution cap will be reduced from $180,000 to $100,000. Those aged between 65 and 74 years old can still access this cap, provided they satisfy the work test.

Individuals who make non-concessional contributions with a total super balance greater or equal to the general transfer balance cap for the year ($1.6 million for the 2017-18 financial year) at the end of 30 June of the previous financial year will give rise to excess contributions.

For those under 65 years, you can still bring forward three years worth of non-concessional contributions. However, as the non-concessional cap has lowered to $100,000, you will only be able to bring forward $300,000 in a single year from 1 July 2017 onwards.

To access the non-concessional bring forward arrangement for 2017-18, you must be under 65 years for one day during the first year and you must have a total super balance less than $1.5 million.

The remaining cap amount for years two or three of a bring-forward arrangement is reduced to nil for a financial year if your total super balance is greater than or equal to the general transfer cap at the end of 30 June of the previous financial year.

Transitional arrangements will apply to those individuals who have triggered the bring-forward period in the 2015-16 or 2016-17 financial years but have not fully used their bring-forward before 1 July 2017.

Understanding cloud storage

Cloud-based storage is becoming increasingly advanced with age. The service’s easy access, tight security, and flexibility are attracting both big and small business owners.

Cloud storage refers to an online space that is used for the storage of data. It allows its users to backup data to a network of servers that are hosted by a cloud service provider. This data is then available through any Internet-connected device.

The main advantage of cloud storage is the flexibility of anywhere access. The data stored in the cloud can be accessed through any Internet-connected device, such as an iPhone or laptop at any location.

Cloud storage is cost-effective when compared to traditional security measures for protecting data. Traditionally, businesses had to pay for equipment, software, and personnel to ensure the security of their private data. The cost of data security in cloud storage is generally covered through a subscription cost.

Another advantage of cloud storage is the ability for businesses to easily scale up or down and only pay for what they actually use. Business owners have been wary of storing private information in the cloud due to the threat of data hacking and privacy concerns. However, cloud security is far stronger than any security devices a company can offer.

Current cloud providers are highly concerned with the security of their systems. They will often utilisecutting-edge data encryption and other security tools to protect data from being hacked. Some of the advanced cloud providers can include advanced intrusion detection, allowing security teams to fend off hackers even before they attack.

Also, physical data storage, such as an external hard drive, can easily be damaged or lost. Data that exists in the cloud is not physical and, therefore, cannot be fractured in the same way an external hard drive can.

There are a lot of benefits to making the switch to cloud storage. The software is provided immediately, and there is no wait on what the business has paid for. Working on the cloud allows businesses to be nimble, efficient and cost-effective.

When considering making the switch to cloud-based storage it is necessary to do some competitive shopping first. Business should consider the following:

• how much they are willing to pay, or whether a free account is the best idea

• their need for customer management, help and guidance

• the licensing arrangements of each service provider

• the capacity constraints of each provider

• whether the provider can still benefit the business in the future

Insurance through super: is it right for you?

Taking out insurance through a super fund can be a great option for some members, but it does also come with some pitfalls.

Most super funds provide their members with insurance options and an option to increase, decrease or cancel your default insurance cover. There are many benefits of taking out insurance through super, which include:
– the ability to purchase policies in bulk
– not having to pay for premiums with your take-home income
– the convenience of having your policy managed for you
– most policies in super tend to be pre-approved, meaning there is no need for interviews or medical check-ups
– life insurance inside super is deductible to the fund at 15 per cent annually; whereas life insurance premiums held outside of super are not tax deductible.

However, there are some pitfalls of holding insurance through your super, including:
– there is generally a limit on the payout that can be received from an insurance policy purchased by a super fund. In public funds, it is usually between $100,000 and $200,000. For some people, this amount may be more than enough. However, if you have dependents and a mortgage, it may be insufficient to look after your loved ones should something happen to you.
– the types of insurance and levels of cover are limited
– typically insurance cover rises after reaching 50 years – taking a large chunk of contributions
– life insurance coverage ends when you reach a certain age (usually 65 or 70); policies outside of super may cover you for longer

Anyone using a super fund to provide insurance should ensure that they have an appropriate death benefit nomination in place that specifies who their super will go to in the event of their death. If you nominate a non-tax dependent as the beneficiary then they might end up with a hefty tax bill in the event of a lump sum payout (whereas, life insurance payouts outside of super tend to be tax-free).

Are your website costs tax deductible?

The ATO has provided business owners with further guidance on the deductibility of website costs in a recent Taxation Ruling.

The Tax Office considers a commercial website as a website which is used in the course of a business, irrespective of whether it is used directly to produce income. This does not include software provided on the website for installation on the user’s device.

Hardware, the right to use the domain name and content available on or incorporated into a website that has independent value to the business are considered separate from a commercial website.

The tax deductibility of a website depends on whether the expenditure on a commercial website is revenue or capital in nature under section 8-1.

Examples of expenditure which are tax deductible in the year incurred include:
– Periodic operating, registration and licensing fees
– Expenditure incurred in maintaining a website
– Modifications to a website that add minor functionality or make minor enhancements to existing functionality
– Domain name registration fees and server hosting costs
– Maintaining a social media presence and updating content mainly for marketing purposes
– ‘Off-the-shelf’ software that is licensed periodically

Costs that are ‘capital’ in nature are generally claimable over a number of years. Examples of capital expenditure include:
– Labour costs that are directly referable to the enhancement of the profit-yielding structure of the business
– ‘Off-the-shelf’ software products where the product provides an enhancement of the profit yielding structure of the business
– Acquiring or developing a commercial website for a new or existing business
– Modifications resulting in structural advantage
– Extended or new functionality

In-house software
Expenditure that is not deductible under section 8-1 may be ‘in-house software’ and deductible under the capital allowances regime. The expenditure may be deducted over 5 years from the time the in-house software is first used or installed ready for use.

If the expenditure on in-house software is incurred through developing computer software, the expenditure may alternatively be allocated to a software development pool and deducted in accordance with the pool rules.

For small business entities that choose to use the simplified depreciation rules and do not allocate the expenditure to a software development pool, the expenditure is deductible:
– immediately where the asset costs less than the instant asset write-off threshold, and
– otherwise, in accordance with the general small business pool rules.

Finding the right cultural fit

Cultural fit should be considered just as important as competency when making recruitment decisions to benefit your long-term business.

Failing to consider cultural fit can lead to plummeting business productivity, poor performance, lost opportunities, poor public relations and high staff turnover. Successful recruitment judges applicants on more than qualifications and experience alone – it extends to assess cultural fit through personality traits and values.

To best assess whether a candidate will fit into your business’s culture you must understand your business’s culture in terms of values and expectations towards teamwork, communication, customer focus, integrity, respect and so forth. Knowing your business’s vision and values will help set a precedent when making hiring decisions.

Culture can be communicated at the beginning of the hiring process through criteria in the job advertisement, for example, working well under pressure may be a necessity. However, the interview often enables the interviewer to best assess the potential cultural fit, as their CV may not accurately reflect the candidate.

When interviewing applicants, use behavioural style questions to gauge cultural attributes. Behavioural questions, such as “Give me some examples of how you resolved conflict at work,” or “Describe a work environment where you had the most success,” are often a good way of ensuring behaviour is congruent with the style used in your business.

An interview is also a good time to communicate your business’s culture and to identify whether the applicant is motivated to match your culture. Explaining the culture of your business helps the applicant to further assess their own suitability, providing them with the opportunity to opt out if their values do not align.

Ideally, employers should equally consider whether the candidate is qualified to do the job and whether there is a cultural fit for the best hire.