BeLLCORP BLOG

What Is Benchmarking?

The definition provided by E Demming of benchmarking is “the practice of being humble enough to admit that someone else is better at something…and wise enough to try and learn how to match and even surpass them at it.” In essence, benchmarking is a standard of performance (best practice) against which others aim for. It is an item of comparison and the starting point for improvement by learning from others and then applying that learning to your own situation. The steps of benchmarking look like this: In other words, you are constantly reviewing the process and making refinements in order to keep improving. Important questions to ask are: PROFIT: How can I improve profitability? PRODUCTIVITY: Are my people productive and efficient? CASH FLOW: What areas of cash flow can I work on to improve the cash cycle? FINANCIAL STRENGTH: Can my business withstand a downturn? Remember, the key to benchmarking is to compare like against like. Identify a leader in your field, in the same region and operating the same size of business to compare against.
Read More »

Substantiation – It’s all about record keeping

In a world of electronic communication and the paperless society, it’s important to remember that in order to meet your tax obligations, you must hold certain records. Thanks to digitalisation, you no longer need to keep a shoe box full of receipts – rather, you can use an app to track tax receipts. Thanks to MyGov, you likely won’t have received a paper PAYG Payment Summary (now called an Income Statement) either. It’s really important to keep all your tax records, both electronic and paper, to support the contents of your tax return. The guidance from the ATO is that you must keep your tax records for 5 years from when you lodge your tax return, just in case the ATO audit you. The ATO advises that the records you need to keep include: payment summaries, including your employer and the Department of Human Services statements from your bank and other financial institution showing the interest you’ve earned dividend statements summaries from managed investment funds receipts or invoices for equipment or asset purchases and sales receipts or invoices for expense claims and repairs contracts tenant and rental records. If your total claim for work-related expenses is more than $300, you must have written evidence to prove your claims. If you acquire a capital asset (property, shares) you are advised to collate records from the outset because if you sell the asset in the future, capital gains may apply. As your accountant, we may need you to share your records with us from time to time. We’ll let you know when and what is required in advance.
Read More »

The Importance of Key Performance Indicators

Key Performance Indicators (KPIs) are a set of critical measures that an organisation uses to gauge its progress towards an intended result. What’s so important about the concept of KPIs? As management “guru” Peter F. Drucker famously said, “what gets measured, gets done.” KPIs generally sit within a broader performance measurement system which enables managers to define and track performance of strategic objectives and make more informed decisions. In order to maximise the impact of a performance measurement system, consider the following: Engage key stakeholders in the determination of KPIs eg employees Clearly define the KPIs and set achievable milestone dates to meet them Set an appropriate accountability and rewards system which is then communicated across the business Find balance between lagging (historical) and leading (future focus) indicators Regularly report on the progress against KPIs Continually review and adjust where required To expand on the concept of lagging and leading KPIs, here are some examples of each: Lagging: gross margin, EBITDA, consumer confidence Leading: customer satisfaction, % growth in new markets, number of website views As your trusted advisor, we can help you implement a KPI framework and work with you to help ensure success in meeting your business goals.
Read More »

Q: Why can’t I access your pricing structure from your website?

A: BeLLCORP Accountants are not a “chain store accountant,” in fact, we’re nothing like those shop-front companies. We’re here for the individual client and their particular needs. We’re not here to churn through tax returns at lightning speed because we’d never gain the valuable insights into who you are and what your goals are, both personally and professionally. All new client inquiries are handled on the phone initially and then in person, preferably. We don’t hide behind computers at BeLLCORP – we encourage you to come in, meet with us and start a long-term relationship with us as your trusted advisor. To us, that’s what brilliant client relationship management is all about – embracing the human in all of us.
Read More »

Q: I have work-related deductions in my personal tax return, what should I watch out for?

A: The ATO suggests there are 3 Golden Rules of work-related deductions: 1) You must have spent the money yourself and not been reimbursed 2) The expense must be directly related to earning income 3) You must have a record to prove it. The ATO is cracking down on substantiation – if you don’t have a physical document to support the claim, you must be able to demonstrate how you calculated the deduction and how it relates to your work. The message is simple – claim what you are entitled to claim, nothing more.
Read More »

Q: Have I priced my product “right”?

A: This is always the trickiest of conundrums! Recently we had a client with a business in the hospitality sector who was concerned about their pricing of their catered platters. The key recommendation we provided is never skimp on the “winning products” that is, the important stuff that people value most. Look to make savings where you can source the less important products, for less. Also look for competitive wholesale pricing – it pays to shop around. Furthermore, there’s no harm in trialling a 5% price increase and testing the reaction of the market.  If you don’t hear any complaints, or notice any drop in inquiries or sales, then you know you are on the right path. There’s much value to be leveraged in your customer service and brand presence too. Competition isn’t solely about price. Consider sourcing client testimonials in order to instill confidence in your product, regardless of the price.  The customers you want to attract are the ones who are happy to pay for quality, so make sure they know you have a quality product available to them.  Aim to build a presence around your quality of product and outstanding customer service, and no one will even care if you are $20-$30 dearer than a competitor. 
Read More »

The Great Productivity Challenge

Productivity gains in knowledge and service work have long been harder to achieve than productivity gains for the production of goods. The term work smarter, not harder is particularly relevant in addressing productivity in knowledge and service work. But how do we work smarter? Back in 1881 Frederick W. Taylor kicked off a productivity revolution, the underlying principles of which, are still relevant today. They are as follows: – Define the task – What is the task? What are we trying to accomplish? Must we do it at all? There is great productive value in eliminating that which does not need to be done at all. – Concentrate on the task – An important question to ask when trying to focus the allocation of effort is “what value is this job supposed to add?” – Define performance in qualitative and/or quantitative terms. – Engage the people who do the work and ask how they think productivity could be improved. This creates a sense of ownership in achieving productivity outcomes. – Commit to continuous learning and improvement by training staff and then encouraging good performers to teach other staff. By following these principles, productivity gains are accessible to all businesses.
Read More »

How to use your tax to grow your property portfolio

There are plenty of misconceptions when it comes to “negative gearing” and the effect it has on your tax situation. How is it that people can quickly go from one investment property, to four or more in such a short time?! Negative gearing refers to the strategy whereby the costs of owning & maintaining an investment property are greater than the income it generates (often due to interest on the mortgage). This is great for people on middle-incomes who want to try and bring themselves down a tax bracket, usually below the $90,000 bracket. The investor is also banking on growth in the price of the investment property over the medium-long term, to offset the income losses. The biggest drawback of this strategy is that it reduces your borrowing power, as your income is reduced. As a result, lending institutions won’t lend you as much. So if negative gearing makes it harder to borrow, how do you structure your investment to borrow more? The answer seems simple in theory, but sometimes more difficult in practice; and that is to positively gear your property. If negative gearing is when expenses are greater than income, then positive gearing is the opposite. When it comes to your tax, making a positive return on your property means your income is higher, and you are less likely to get a refund when lodging your tax return, however, it enhances your borrowing power. How can you use this to grow your portfolio quickly? Once you have one positively geared investment property, using this to grow your portfolio is far easier than getting that first investment. After 12-24 months of holding your first investment, discuss with your broker about getting the loan refinanced, particularly if there has been significant property price growth in that suburb. This means the lender will re-value the property, and potentially lend you more based on the value of that property, which, when combined with your higher income as a result of being positively geared, can help you get that second property. From here you simply repeat this process. Beware of the traps! Don’t over-extend yourself. A decrease in house prices can blow your strategy wide-open and leave you struggling to pick up the pieces. If you can’t do the research yourself, or don’t know enough about property, talk to a buyers agent who can do all the hard work for you. Don’t sell more than one investment property in a single financial year without talking to your accountant first, or you could find yourself with a very large and unpleasant tax bill. Your accountant can assist you in putting together a strategy to sell down your investment properties while also minimising your tax; but they can’t do this retrospectively! Only the interest portion of your mortgage repayments is tax deductible. Always consider the cash flow implications of any mortgage against an investment property. Your tax return may suggest you have a high income, but the reality is you’re struggling to make ends meet as a result of having less cash in your pocket. Your accountant or financial advisor can help you structure appropriately and minimise known risks.
Read More »

Q: Is HECS debt tax deductible if the study relates to your job?

A: Unfortunately not is the short answer. Per the Australian Tax Office (ATO) website, specific expenses that you cannot claim include “tuition fees paid to an education provider by you or the Australian Government under HECS-HELP” and “repayments you make (whether compulsory or voluntary) on debts you may have under HECS-HELP, FEE-HELP, OS-HELP, SA-HELP and VET Student Loan” to name but a few. The ATO website has specific examples of what you can and cannot claim under Education and Study and can be accessed here: www.ato.gov.au/individuals/income-and-deductions/in-detail/education-and-study
Read More »

Q: Are there any particular items the ATO are targeting for tax year 2019?

A: The ATO has advised they are devoting more attention to the following: – personal use proportion of expenses like phones, Internet, iPads and home office costs like electricity. – rental income from accommodation sharing and holiday rentals. The ATO are able to extract data from sites like AirBnB so be sure to include such rental income as assessable income. – interest claimed for loans on rental properties. If you redraw on an investment loan and use the redrawn funds for a personal purpose, this interest is not an allowable deduction against the rental income. – standard deductions such as $150 for clothing & laundry and 5000kms for work related travel. The ATO’s data analytics are getting stronger each year and they are developing occupation-specific benchmarks for allowable deductions. Our advice: claim what you are entitled to claim, nothing more and nothing less, and ensure you can validate all your deductions.
Read More »