December 2009
Client Profile
Sarina Beach Motel
Client profile
Pg 1
Estate Planning
Pg 2
Tips for Retailers
Pg 2
ATO Compliance
Issues
Pg 3
FTB Changes
Pg 3
Home & Investment
Loans
Pg 3
Staff Announcements
Pg 3
What’s you most
valuable asset?
Pg 4
Darren and Meaghan Thompson relocated from the Sunshine Coast to Sarina Beach in
November 2008 to embark on an exciting new journey by purchasing the Sarina Beach
Motel. Located at the end of Owen Jenkins Drive and overlooking the unspoilt beach,
Darren and Meaghan could immediately see the potential in the business.
Sarina Beach Motel offers a whole host of facilities for their guests including a fully licensed
restaurant, which is also open to the public. Recognising the importance of timely financial
management, especially in the early stages of business ownership, Darren and Meaghan
engaged the services of Brown & Bird to fulfil this need. With monthly profitability reviews,
Brown & Bird has been able to compare the operating performance of the motel and
restaurant to industry benchmarks to identify any potential areas of concern. This process
has also given Darren and Meaghan an understanding of the cost-drivers in their business
as well as the effect of increased or decreased sales to the bottom line.
With plans for further room renovations during the current financial year to provide guests
with modern conveniences and décor, the Thompsons have again turned to Brown & Bird
to formulate a cash flow budget which has then allowed them to allocate funds for capital
renovations. By mapping the capital expenditure into the operational cash flow budget
we have been able to determine the most appropriate months to undertake capital works
without over-committing funds that will be required for tax and operational needs.
We wish all our
clients and their
families a happy
and safe Christmas
Brown & Bird congratulates Darren and Meaghan on their success to date and look forward
to working with them to achieve their goals into the future.
Brown & Bird will be closed
from 5.00pm Wednesday
23/12/2009 and will
re-open at 8.00am on
Monday 11/01/2010
Central & North Qld office:
First Floor, 224 Victoria Street
Mackay Qld 4740
PO Box 6, Mackay Qld 4740
P: (07) 4968 3166
F: (07) 4968 3154
South East Qld office:
Suite 28, 14 Argyle Street
Breakfast Creek Qld 4010
PO Box 402, Albion Qld 4010
P: (07) 3262 8700
F: (07) 3262 8166
W: www.brownbird.com.au
E: [email protected]
43 years Supporting Local Business
Page 1
What happens to your family if you aren’t here to provide for them?
This may seem like an unusual question to ask, but have you considered the affect that your death would have on your family, friends and
business associates? Please answer the questions below to see if you really are prepared.
Wills
•
Is your will up to date? Where is it?
•
Who are the executors – do they need to be changed – have they seen or reviewed your will?
•
Do you have documented instructions in case you become mentally incapacitated?
Superannuation
•
Are you sure your superannuation will be paid the way you intend?
•
Are you aware of the strategies available to minimise tax on payments to beneficiaries on your death?
Insurances for Family Protection
•
Do you have adequate life and disability insurance to financially protect your family if you were to die or become disabled?
•
Do you have income protection and sickness & accident insurance to financially protect your family if you were unable to work because of
a serious illness or injury?
Business Owners
•
Do you have systems and procedures in place so that your business would carry on without you?
•
What would happen to your business if you were suddenly unable to run it? Could it be easily sold if you weren’t there?
•
Do you have agreements in place with your business partners?
If you answered ‘no’ or ‘I don’t know’ to any of these questions, perhaps you should spend time on your estate plan. Please come in and talk
to us about your estate planning and we will assist you in conjunction with your solicitor, financial planner and other advisors to organise your
affairs before it is too late.
Tips for Retailers
Some Facts about Discounting
Discounting your goods or services to entice customers to purchase will erode your profits. Of course some discounting can be beneficial,
however it is important that you understand the impact discounting will have on your profits before you decide to offer discounts. Alternatives
such as add-on products or services may deliver more dollars or gross profit to the business and should be considered before deciding to offer
discounts.
Effectively, when you are discounting, you are offering your goods or services at a reduced selling price. When discounts are offered you will
need to sell more goods in order to achieve your gross margin.
As an example, Marty (Marty’s Tyre Shop) needs to maintain his gross profit at the same dollar value to ensure that he reaches his profit goal.
So if he decides to discount his tyres by 5%, the table below shows that he will need to increase his sales volume by 20%. If we put some
numbers to this using Marty’s example, let’s see the results:
Marty’s Tyre Shop
Marty wants to discount his tyres by 5%. To maintain the same
gross margin, he will need to increase sales units by 20%.
Marty is currently selling 52 tyres
Increase volume by 20% = 52 + (52 x 0.20) = 10.4 tyres
To maintain gross margin (and achieve target profit), Marty will
need to sell 62.4 tyres if he sells at 5% discount.
The effect of discounting
If you
cut
your
price
by…
5%
6%
8%
10%
12%
15%
20%
and your present Gross Profit Margin (%) is…
10%
15%
20%
25%
30%
35%
40%
100.0%
150.0%
400.0%
50.0%
66.7%
114.3%
200.0%
33.3%
42.9%
66.7%
100.0%
150.0%
300.0%
25.0%
31.6%
47.1%
66.7%
92.3%
150.0%
400.0%
20.0%
25.0%
36.4%
50.0%
66.7%
100.0%
200.0%
16.7%
20.7%
29.6%
40.0%
52.2%
75.0%
133.3%
14.3%
17.6%
25.0%
33.3%
42.9%
60.0%
100.0%
this is the % increase in sales volume to achieve the same $ of
Gross Profit:
Have you got the right amount of Stock?
•
For fast moving stock, negotiate with suppliers for delivery when required – called ‘Just in Time’ (JIT), eliminating the need to hold large
stores of stock to meet customer demand.
•
For aged and excess stock, either sell at whatever price to move it, or use as a donation to a charity or community group – don’t forget
to advertise that you have made a donation!
•
Keep accurate stock records and match the records to a physical count regularly – at least once a year, however if there are large
variances between the records and physical count, do the count more regularly until the issues of inaccurate records are identified and
corrected.
•
Understand your stock - which ones move quickly and which ones are seasonal etc. This will help you know how much of each line of
stock to keep on hand and when re-order is required.
•
Use your financial system to track stock items. This will help with both:
Automating re-order requirements
Matching different stock items to sales and identifying high margin sales easily.
Keeping good control over your stock holdings will ensure that you keep aged and excess stocks to a minimum and reduce the risk of theft,
whilst still having adequate stock levels to meet your customer needs.
Source: CPA Australia Financial Survival Guide
Page 2
43 years Supporting Local Business
ATO Compliance
Issues for 2009/2010
financial year
Each year the Australian Taxation
Office (ATO) focuses on key areas
of interest regarding compliance and
lodgement of income tax returns. For
the 2009/2010 financial year, the ATO
has advised that they will be focusing
on the following areas:
• Data matching processes - the
ATO now has good access to
dividends, interest earned and PAYG
Summary details. Clients who leave
out or forget information will be
penalised. The ATO has stated they
will be focussing on the following
industries for 2009/2010:
É Truck drivers
É Sales & Marketing managers
É Sales representatives
É Electricians
These occupations have been
identified as having a pattern of large
or increasing deductions claimed and
a large number of errors revealed by
previous audit activities.
• Testing of Self Managed
Super Fund compliance with
various superannuation
legislation - trustees of selfmanaged superannuation funds
need to be aware of their roles and
responsibilities to comply with the
superannuation legislation. Trustees
of funds that breach legislation may
be convicted and fined. The fund
may also be made non-compliant and
instead of being taxed at 15%, it will
then be taxed at the top marginal rate
(46.5%).
• Refund fraud - taxpayers who try to
boost refunds by claiming expenses
that have not been incurred or made
fraudulent claims or have stolen
taxpayer identities (identity theft) may
be fined or jailed depending upon the
severity of their crime.
Changes to Claiming Family Tax Benefit (FTB)
From 1 July 2009, claims for family tax benefit, including previous year claims, can no longer be
accepted by the Australian Tax Office. To claim the Family Tax Benefit, you need to apply to the
Family Assistance Office (FAO) by lodging online at www.familyassist.gov.au or by submitting a
paper copy (for the Annual Lump Sum Payment) at any FAO office, which are located in Medicare
and Centrelink offices. For any queries regarding your claim, contact the FAO on 136 150 (between
8.00am and 8.00pm Monday to Friday).
It is important to note that if you are claiming the Annual Lump Sum Payment, you need to complete
your income tax return (for the year you are claiming) and have received back your ATO Notice of
Assessment prior to lodging your claim (you will need details from your Notice of Assessment).
Back to Basics - Home & Investment Loans
Brown and Bird Finance helps make sense of the home loan puzzle.....
finance
With so many different lenders and home loan products in the marketplace today, making a decision
on the loan that best suits your individual needs can be a challenging task. Listed below is an
explanation of the various loan types that may help make sense of the home loan puzzle.
Basic Variable Rate Loans
Basic variable rate loans are extremely popular due to their low interest rates. The trade-off with
these types of products is that they are limited on features.
Standard Variable Rate Loans
Standard variable rate loans are known for their flexibility and features. Partly fixing, loan splits,
offset, additional repayments and redraw are usually standard with this type of product.
Fixed Rate Loans
Fixed rate loans protect borrowers against interest rate rises for a given period of time although
work against borrowers when rates fall. Fixed rate loans are popular amongst investors and home
owners that require a level of security when forward planning their repayments.
Combination or Blended Loans
Combination or blended loans allow borrowers to split their home loan into partly fixed and variable
portions. This provides borrowers with the flexibility of a variable rate product and added certainty
of a fixed rate loan.
Equity Loans or Lines of Credit
Equity loans or lines of credit allow borrowers to unlock the equity in their properties for any
worthwhile purpose such as renovating, investing, motor vehicles, children’s education, etc. These
types of products provide a low cost option to other forms of personal lending with the flexibility of
allowing interest to capitalise.
First Home Buyers
For first home buyers entering into contracts on or after 1 October 2009
and on or before 31 December 2009, the boost will be $3,500 for
established homes and $7,000 for new homes. In combination with
the existing $7,000 first home owner grant, this will bring the grant to
$10,500 for established homes and $14,000 for new homes. After
1 January 2010 the grant will be $7,000 for established homes and new
homes, with no boost available.
For information or to discuss your next loan, please contact Bianca Dodd
on 4968 3100 or email [email protected] for assistance. We
invite you to visit our website www.brownbird.com.au.
Staff Announcements
Bodie Scott Vella arrived on
25 August 2009, weighing
in at 8 lb 3 oz. Bodie is the
first child for
Anna Van Iersel and
Scott Vella.
Congratulations to Melanie
and Dean Murry who
welcomed into the world
a new little boy, Hayden
Michael Murry (7 lb, 2 oz) on
30 October 2009 (three weeks
early). Hayden is a little
brother for Claire.
43 years Supporting Local Business
Page 3
What’s your most valuable asset?
Is it your home, your super, or even your car? You may be surprised to learn that your most valuable
asset is probably you! A 35 year old who receives an average salary of $50,000 each year over their
working life would need a lump sum of around $1 million(1) to replace that income.
What will happen to you or your family if you’re no longer around, or can’t work? Can you replace
your lost earnings? Will the mortgage be paid? It’s not a pleasant thought that your family would have
to sell their home if they couldn’t make ends meet. Unfortunately, while most of us will happily insure
our car and home, we seem less than happy to insure that very valuable asset, ourselves. Just 55%
of Australians have life insurance and 31% have income protection insurance.(2)
financial planning
Even if you do have insurance, you may well be underinsured. Average group life cover falls about
$165,000 short of the amount of the average new mortgage.(3)
It’s probably no surprise then, that studies(4) have found that 60% of Australian families with dependent
children will not be able to support the family on their insurance payout for more than one year.
Can I arrange my insurance through my super?
If you’ve got some cover through your employer super fund, you’re off to a great start. This can be
a cost-effective way to arrange your insurance. This cover is often a fixed amount, so you’ll need to
check how much you’ve got and whether you can increase it. You should also check what happens
when you leave your employer, as you may lose your cover.
You can also take out your own cover, through a policy in your personal super fund. This is a
good option if you’re self-employed, can’t increase your cover in your employer’s fund or need more
flexibility. You can take this cover with you from job to job.
Some other advantages of taking out insurance in your personal super fund include:
• you can pay for the premiums out of your super benefits rather than from your after
tax income, and
• your personal deductible contributions or salary sacrifice contributions can be a tax-effective way
of affording insurance premiums.
How can I change my cover?
By discussing your insurance needs with your financial planner, you may need to increase your
cover or apply for a new policy by completing an insurance application form and questionnaire from
a current Product Disclosure Statement. Once you have completed this information, you will be
contacted if further medical evidence is required to complete your insurance application.
Speak to our financial planning team today for more information, as our experience counts.
How much insurance cover do I need?
How much cover you need depends on your
own situation. Think about:
• Paying off your mortgage and other debts
• Providing your family with an income to
replace lost earnings
• Allowing for large expenses such as a
child’s education
• Whether your super, investments or other
insurance can help.
Some experts recommend you’ll need
cover of around ten to thirteen times your
taxable earnings if you’re in your mid thirties
with young children. If you’re in your mid
forties with older children, you’ll need cover
of around six to nine times your taxable
earnings.
What kind of insurance is available in
super?
• Death cover leaves your beneficiaries with
a lump sum to help cater for their financial
wellbeing in the event of your death.
• Terminal illness benefits are a prepayment
of your death benefit if you have a
terminal illness.
• Total and permanent disablement (TPD)
cover pays you a lump sum if you are
totally and permanently disabled through
illness or injury.
Present value of $50,000 annual income from age 35
to 65, at a discount rate of 3% pa
2
TNS/IFSA, Investigating Income Protection Insurance
in Australia (July 2006)
3
IFSA Life Insurance Headland Statement (July 2007)
4
Underinsurance Key Facts, IFSA (August 2005)
Source: Colonial First State
The above information is of a general advice only and is not intended as a personal advice. It does not take into account
the particular investment objectives, financial situation and needs of a particular investor. Before making an investment
decision you should assess whether the advice is appropriate to your individual investment objectives, financial situation
and particular needs. We recommend you consult a professional financial advisor who will assist you.
Page 4
43 years Supporting Local Business
BBFP Pty Ltd
T/A Brown & Bird Financial Planning
is an Authorised Representative
of Lonsdale Financial Group Limited
ABN 76 006 637 225
Australian Financial Services
Licensee, No. 246934
• Salary continuance/income protection
cover can provide you with a financial
safety net of up to 85% of your salary if
you are disabled due to illness or injury.
Footnotes
1
Level 41, 120 Collins Street,
Melbourne Vic 3000
Contact our financial
planners James Harris or
Mike Browne to discuss
your long-term investment
strategy
“Our experience counts”
W:
www.brownbird.com.au
E:
[email protected]
[email protected]