What to Consider Before Buying a Business

Have you ever fancied the idea of buying a business and being your own boss? Or perhaps you're already in business and you're considering buying another to add to your existing operation? Listed below are some of the key points we feel you need to consider before taking this step:


1. Be really clear on your understanding of the industry you're getting in to. Consider, do you have any prior knowledge of this industry other through observation? Is it the kind of industry that can be learned about quickly or, is it really "generational"? If you have limited prior knowledge, be prepared for a very steep learning curve and also consider where you'll get your learning from.

2. Also, understand how easy or difficult the industry is for people and other competitors to enter. For example, a lawn mowing business is relatively easy for participants to come and go from because it requires a relatively low amount of capital to get started. On the other hand, farming requires a large amount of investment, which means it may be harder for real competitors to enter.

3. It will pay to be very clear on who your market place (customers) are and then how you intend to reach them. For example, are you a specialty store owner or service provider and who are your customers? Where are you then most likely to get more of those customers?

4. Is the market place you're entering already saturated? Setting up another coffee shop in an area that already has many coffee shops may just be a recipe for disaster unless you have a very significant point of difference that people are willing to pay for.

5. In that vein, does the business you're buying already have a unique proposition? If so, will that unique proposition leave when the previous owner also leaves? Or, is it the staff that really set the business apart and will they stay on when there is a change in ownership?

6. How easy or difficult will it be for you to get finance for the business you'd like to buy? This can depend on your existing level of borrowing as well as on the nature of the business you're buying. For example, if there's a heavy reliance on the goodwill component of the business, a bank may look less favourably on this, when compared to something that can easily be valued such as machinery.

7. Is all the infrastructure of the business already in place or is this something that will need further investment in during the years ahead? In this sense, you'll need to check the length of any leases in place, as well as the age of the machinery that's already there.

8. Finally, we suggest you do a forward projection for 3 years time – one where everything goes to plan and then another that allows for significant contingencies of less growth. How does the business look if there's an economic recession?

If you're weighing up any of these options or if you'd like more of our input on these ideas, support you in working through due diligence or look at a potential opportunity please don't hesitate to contact us.
We're hearing a lot of commentary at the moment about the relative difficulty in getting a loan now that the banks have tightened their lending criteria. However, further discussion needs to be had on lending in general and the role that debt plays in wealth creation, both good and bad.


You may have heard the terms "good debt" and "bad debt" in the past, and they relate to two quite different scenarios. Bad debt is basically when you use a loan to buy something that loses value over time or doesn't offer you any return on the investment - so no way for you to make money on the purchase.

As an example, a loan to buy a new car is considered bad debt, because the car loses value as soon as you purchase it. Added to this is the concept that any type of interest payment you're not able to claim a deduction on is also bad debt, and in this category, we would include your private home loan debt. In this instance, you need to earn an income, pay tax on that income, and then pay off your interest with whatever is left over.

By comparison, Good debt relates to lending you've undertaken that will give you some kind of return in the future and is also taken out on an asset that will increase in value. Further to that, the interest on the loan is tax deductible. An example of good debt is a loan for an investment property where the property is increasing in value and the interest on the loan is tax deductible.

The key to managing debt is to adopt some of the following principles:

1. At all costs, minimise as much as possible your exposure to bad debt. In practice, this means paying off your home loan as quickly as possible, getting rid of credit card debt and using your savings rather than borrowings for things that depreciate – such as car loans or even furniture.

2. Make sure that your cashflow is sufficient to allow you to continue making your repayments, even if interest rates increase. This means that you need to allow a safety buffer with your level of borrowing. Calculate what your repayments would look like if interest rates lift as much as 1 percent over the life of the loan – can you afford the repayments and does it add time to the length of the loan?

3. Always direct the bulk of your debt repayments towards those loans that are costing you the most in interest. This will usually be credit card debt first, followed by personal loans and car loans, then loans attached to property. Student loans are usually the cheapest and can be left until last.

4. Where possible, consolidate your debt into a single manageable amount.

5. Debt consolidation involves rolling all your existing debts into one loan. This may help you to better manage your repayments, but it may also make your situation worse if the interest rate or fees in the new loan are higher than they were with your original debts.

Before you consolidate anything, these are some things you should do before you sign any debt consolidation loan contracts:

1. Compare the interest rate, fees and charges - Make sure you will be paying less for your new loan by comparing the interest rate, including fees and other costs, against your original loan. Some lenders charge penalties if you pay off loans early and some charge application and legal fees, valuation and stamp duty if the new loan is secured against a home or other assets.

2. Check the terms - Beware of longer loan terms. Even if the interest rate is lower on the new loan, paying off a short-term debt (like a credit card or personal loan) over a very long term means you will still pay more in interest and fees.

3. Check the company is licensed - Lenders and brokers that are not licensed are operating illegally. Search ASIC Connect's Professional Registers to check your lender is licensed.

Remember we're only a phone call or email away if you'd like to discuss any of these ideas in more detail.

Top Tips to Minimise Your Tax in 2019

Now that the end of financial year is just around the corner, it's time to put some real focus into your tax minimisation strategies. For many of us, living with the benefits we have in Australia does mean that we have to pay a portion of our earnings in tax, but no one wants to pay more than their fair share. Listed below are some ideas for you to implement, but just make sure you've got them covered before June 30:


1. Mortgage offset account
This is more often viewed as a strategy to cut interest costs and the length of the loan on a ­mortgage. The other side of the equation is a tax saving on money that would otherwise have been parked in a savings account and earning interest, on which you would be taxed at your marginal tax rate. Say you've accumulated some cash or sold some assets and you're not sure what to do with the proceeds. If you've got a home loan, putting this extra cash into an offset account can not only reduce the amount of interest payable on the loan but it will also stop you paying tax on the interest you would otherwise have earned.

2. Discretionary family trust
An effective way to hold investments, a trust is a separate investment structure where assets are controlled by one or more persons (the trustee/s) on behalf of a group of other persons (the beneficiaries).
A discretionary trust allows the trustee to decide who gets the income and capital the trust owns. These can suit someone on higher tax brackets with family members listed as beneficiaries who are on lower rates.
For example, rental income from an investment property owned by the trust could go to members of the trust on lower incomes. The trust does not pay tax, but the beneficiary does, with income and capital gains derived by a trust generally assessed at the tax rates of the beneficiary.

3. Pay and Delay if you can
Now is a perfect opportunity to pre-pay some expenses that you'll likely carry through with you into the next financial year. For example, see if you can pay for subscriptions, the cost of your income protection policy, conferences and membership fees all before June 30. Also, ask your lender if you're able to pre-pay any of your interest for the next financial year. Then if the opportunity arises, see if you can put off receiving income before the June 30 deadline. This might be achieved by holding off on issuing invoices or even reviewing your term deposit maturity dates.

4. Reduce capital gains
If you're sitting on capital losses on some of your smaller share investments and you don't have a long term plan to continue holding these, it may be a good time to sell these shares and use the losses to offset against any gains you've made earlier in the year.

5. Top up your super and salary sacrifice
Topping up your super can be one of the best deductions around, as you're still the holder of the money, minus the 15% contribution tax. This is different from claiming a deduction on paying bank interest as once that expense is paid, the bank has the money rather than you. Concessional contributions are allowed for up to $25,000 per person under 75, so make use of these limits. For a couple, that's up to $50,000 between them that can be set aside to accumulate in a lower tax environment. Don't forget that if your employer is making contributions for you, you're only able to salary sacrifice by the difference to take you up to the $25,000 limit.

6. Small business immediate asset write off, now up to $30,000
If you're a small business, this is definitely something you want to make use of although this allowance has now been extended to 1 July 2020. If you buy an asset and it costs less than $30,000, you can immediately deduct the business portion in your tax return. You are eligible to use simplified depreciation rules and claim the immediate deduction for the business portion of each asset (new or second hand) costing less than $30,000 if:
 - you have a turnover less than $50 million (increased from $10 million), and
 - the asset was first used or installed ready for use in the income year you are claiming it in.

7. Charitable gifts
If you're thinking of making a charitable donation it's best to do so before June 30 as you'll most likely be able to claim the full donation amount. 

Remember not to leave these items to the last minute and also know that we're only an email or phone call away if you would like to seek advice on any of the above.
Well, it's finally out – the 2019 Federal Budget and we've summarised the main financial points that will be relevant for you below. There are benefits for almost all taxpayers, some for small business and also some for retirees:

With effect from 1 July 2019 / Immediate Effect:
The maximum amount of the low and middle-income tax offset will increase from $530 to $1,080 annually for people earning between $48,000 and $90,000 and the base also increases from $200 to $255. The offset then gradually reduces to zero at a taxable income of $126,000. The offset will be available for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. The LMITO will be received after individuals lodge their 2018/19 tax returns and will continue to be provided in addition to the LITO.
The Government is increasing the instant asset write-off threshold from $25,000 ($20,000 up to 28 January, 2019) to $30,000 per asset until 30 June, 2020. The increased threshold and expanded eligibility will apply to eligible assets that are first used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 to 30 June 2020.

Medium sized businesses do not have access to the small business pooling rules and will instead continue to depreciate assets costing $30,000 or more (which cannot be immediately deducted) in accordance with the existing depreciating asset provisions in the tax law i.e. Table A and Table B. Eligibility for the scheme has been expanded from small businesses (up to $10 million in annual turnover) to medium-sized ones (up to $50 million).

1. The company tax rate for small and medium-sized companies with an annual turnover of less than $50 million has been lowered to 27.5 per cent. This rate will be lowered further to 25 per cent by 2021-22. In addition to existing incentives for Identified Skills Shortages, employers will be eligible for a $4,000 incentive payment totalling up to $8,000. Apprentices will be eligible for $2,000, paid at key milestones in the apprenticeship.
2. An income tax exemption will be provided for qualifying grants made to primary producers, small businesses and non-profit organisations affected by the North Queensland floods.
3. Payments to primary producers in the Fassifern Valley, Queensland affected by storm damage in October 2018 will be treated as exempt income.
4. There will be a one-off Energy Assistance Payment (Income Tax Exempt) of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 April 2019 and who are resident in Australia.
5. The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2018/19 income year.
6. The start date of amendments to Div 7A will be delayed by 12 months to 1 July 2020.
7. For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.
8. From 1 July 2019, net income generated from the forced sale of livestock will be exempted from the Farm Household Allowance payment assessment, when that income is invested into a farm management deposit.

With effect from later years:

1. The calculation of exempt current pension income will be simplified for superannuation funds from 1 July 2020, allowing a preferred method of calculation and removal of some actuarial certificates.
2. From 1 July 2020, Australians aged under 67 years will be able to make voluntary contributions without meeting the work test and other age-based rules will be streamlined. The changes to the contribution rules apply to both concessional and non-concessional contributions. The extension of this rule by two years may mean an individual who is 66 at the beginning of 1 July 2020 would be eligible for bring-forward contributions.
3. The restrictions on claiming the spouse contribution tax offset will be eased from 1 July 2020, giving 70 to 74-year-old spouses eligibility.
4. SuperStream will be expanded from 31 March 2021 to include electronic ATO requests for release of superannuation funds and SMSF rollovers.
5. Australian Business Number (ABN) holders will be required to lodge their income tax return from 1 July 2021 and confirm the accuracy of their details on the Australian Business Register annually from 1 July 2022 to retain their ABN status.
6. In 2022-23, the Government will preserve the tax relief provided by the larger low and middle-income tax offset by increasing the top threshold of the 19 per cent tax bracket from $41,000 to $45,000 and increasing the low-income tax offset from $645 to $700.
7. There are tax cuts for middle and high-income earners from 2024 by flattening brackets so those earning between $45,000 and $200,000 all paid a marginal rate of 30%, down from 32.5%. From 1 July 2024, the 37% bracket will also be abolished.

If you have any questions about these budget changes and how they may relate to your situation, please do not hesitate to contact us on 5482 2855.

Industry Super Funds & Fingers in the Pie

Following the recent royal commission into the banking and finance industry, a huge amount of bad press has ensued for retail superannuation funds. Just to be clear, a retail super fund is a super fund where the trustee role is conducted by a third-party provider, for which a fee is paid. These trustees are normally banks or financial companies.

This compares to an industry super fund where the trustee role is still performed by a third party, but the third party may have close links to a specific industry. For example, the HESTA industry super fund is linked to the health and community services industry. A fee is still paid for trustee duties but the fees are, in many cases, lower than the retail option.
A further comparison is the third option of a Self Managed Super Fund (SMSF) where the trustee role is carried out either by the individual members or a trustee company that is controlled by the individual members.

Industry super funds have historically also been linked to the particular unions in that industry, however, this link was barely discussed in the recent royal commission. An interesting article appeared in the Australian Financial Review on the 15th March 2019 which stated that:

"The Australian Council of Trade Unions has declared that the $1.4 trillion accumulated in industry superannuation funds is workers' money that the union movement will use as an industrial relations weapon to force companies to raise wages and conditions. ACTU president Michele O'Neil told a superannuation conference on Thursday that Australia's business elite was "afraid" working people might realise they had the power, through their super funds, to control decision-making by companies.'"

The article went on further to explain how these super fund investments could potentially be manipulated. For example, if BHP is not providing good enough conditions for its workers, as deemed by the relevant union, the super fund may just reduce its holding in BHP shares – one of the top 5 companies on the Australian stock exchange.

This type of potential market manipulation by industry super funds with vested interests is worrying to say the least, and it also leaves other super fund investors open to investment manipulation from which they stand to receive no apparent benefit. The particular industry super fund in question in this AFR article was Australian Super, which just happens to be the largest industry super fund in Australia and also one that has balances for a huge variety of investors, including many who don't happen to work at BHP.

So where does this leave the average person and their super fund, when the banks can't be trusted and perhaps neither can the industry super funds? Superannuation will end up being most people's number one asset besides their house, which means it is incredibly important to consider what happens with this money. Our suggestions are:

1. Whichever super fund you go with, the fund must adhere to the member's best interests form an investment perspective.

2. Consider the fees you are paying on your super fund and whether you are getting value for these

3. The issue of transparency around the underlying superannuation investments is a big deal – know what you're invested in and seek advice around how these investments may or may not be working for you

In summary, superannuation is a tool to get you where you want to be in retirement, and it's an important tool. If you'd like a second opinion on how your fund is meeting your needs, we're only a phone call or email away.
Single Touch Payroll (STP) commenced on July 1, 2018 for large employers (with 20 or more employees), however, from 1 July 2019 small employers (with less than 20 employees) are required to report details of employees' tax withholding and superannuation information to the Australian Taxation Office (ATO) at the time they process their payroll using Single Touch Payroll (STP) software.



Single Touch Payroll is also called 'real-time payroll reporting' because it means every time a business pays their staff, all the salary information is sent to the ATO. This includes wages, deductions and superannuation information, eliminating the need for Pay As You Go Withholding Activity Statements throughout the year.

Businesses still doing payroll manually will be forced to adopt a digital system over the next 12 months now that employers with fewer than 19 workers are caught under the Single Touch Payroll (STP) reporting regime. It has been described as the 'biggest compliance undertaking since the GST', with more than 700,000 employers technically required to become compliant with the new system by 1 July 2019.

Employers may need to choose new payroll software if their current software does not offer Single Touch Payroll Reporting and the ATO recommends employers speak with their registered Tax Agent or Accountant to establish which software product best suits their needs.

The ATO requested software developers to build a low-cost Single Touch Payroll solution at or below $10 per month for micro employers. A register of more than 30 suppliers of these low-cost STP solutions are on the ATO's website and we understand the Tax Office has been discussing a possible digital banking solution with the major banks over the last 12 months.

Why STP?
Single Touch Payroll is designed to streamline business reporting and help the ATO monitor whether employers are complying with their Superannuation Guarantee and PAYG Withholding obligations. By reporting through Single Touch Payroll, employers need not complete Pay-As-You-Go Withholding Activity Statements throughout the year and Payment Summaries will be available to employees through MyGov.

Implementing Single Touch Payroll and lodging reports may pose some concerns for business owners. The extension of the STP reporting requirements to smaller employers raises the worry that they may not be aware of the changes and micro employers (four or fewer staff) may not have digital payroll software or access to a reliable internet connection. To assist, the ATO will:

1. Offer Micro Employers (with 1 to 4 employees) help to transition to STP and other alternative options (for example, allowing those who rely on a registered Tax Agent or BAS Agent to report quarterly for the first two years, rather than each time payroll is run);

2. Allow small employers to start reporting any time from the 1 July 2019 to 30 September 2019 and granting deferrals to small employers who request additional time to start STP reporting;

3. Not apply penalties for mistakes and missed or late reports for the first year; and

4. Provide exemptions from Single Touch Payroll reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.

If you need any help with your payroll, withholding tax or superannuation obligations, please contact us today.

Ladies, It's Your Time to Invest

Last week was International Women's Day, and it brought to our attention to the idea of women as investors. Thankfully, there's some good news around this, ladies (and gents), as, on many occasions, women make great investors. And while we realise these are some broad generalisations, there are some very real characteristics and data that show why women can make great investors.



These include:
1. Women are better savers. On average, women save an additional 1% of salary compared to men, which adds up over a working life.
2. Women actually log on to their investment accounts 45% less frequently than men, and they change their asset allocation 20% less frequently than men.
3. Generally, women are less erratic than men and they make less rash moves with their investments.
4. Women are not afraid to ask for help or speak up when they don't understand something.

Some downsides for women are:
1. They are often more risk-averse and prefer to invest in lower risk investments such as cash and term deposits
2. Women can often think a property is the only asset class available for investing in over cash and term deposits

For any investor, be they male or female, the biggest regret anyone will ever have is not starting their investment journey sooner.

Our tips for success include:
1. Set yourself some financial goals –Be bold in what you set and be accountable and reward yourself when you achieve little milestones.
2. Have a plan –Having a strategy provides direction and helps set up some discipline around achieving what you want and how you are going to get there.
3. Take a risk –Whether it is starting a business or taking a chance on something you have wanted to develop. From day one, consider how you can turn your business into an asset to use as a cash cow or for future sale.
4. Earn more and save more –Invest pay rises and windfalls, instead of spending them and increasing your cost of living. If you put these amounts away, you will be surprised how much they amount to. If you don't, your cost of living will increase with your pay.
5. Structure –Having the right structure can certainly save you big dollars so think about in whose name you should hold particular investments and businesses as this can save you tens of thousands of dollars down the track.
6. Take on debt and pay it off smartly –Using the bank's money to make you money is a great way to get ahead as it magnifies your gains… but don't forget it also magnifies your losses if things go wrong.
7. Have buffers –Always have an emergency fund or back-up plan for contingencies such as being out of work, time off work for children or health, business is slow, an investment property being vacant for six months and the list goes on. Ensure you have between three to six months' worth of your expenses and commitments in an emergency fund or accessible if needed.
8. Don't forget about super –Putting a little extra into super or salary sacrifice pays off in the long run and helps minimise tax. Putting a little away now will mean a big difference at retirement.
9. Get great advice –Seek the advice of a reputable professional who understands your goals and explains things in easy-to-understand language. They will be able to provide you with the knowledge, figures and most importantly will give you options around your plans and keep you accountable for your goals.

As a woman in today's modern society, it is important to understand your options and take action to secure your own future. If you need any advice or general information on the options, the team at Schuh Group would love to help. Call us anytime for an obligation-free appointment on 5482 2855.

If we only did your tax we would be failing you...
Over the years we have learned that for us to serve our clients best it is important that we support and challenge them. Like anything in life, the path to business and financial wealth will present you with opportunities that will force you to make a choice. Sometimes these opportunities will require you to grow and change. They can be daunting and at times very exciting and sometimes the right decision is right outside your comfort zone.

We believe that money and business are a path to living a great life filled with the experiences you want. It is not just about having money, it is about having the freedom that money can provide.

As accountants and wealth advisers it is our job to challenge you, coach you and guide you in your opportunities. Yes, we are here to help with the paperwork and ensure that the taxes are in order and your financial house is organised, however beyond this and perhaps, more importantly, we are here to provide you with the knowledge, opportunity, and support to do more. Life is short and it should be spent doing things that bring you joy with the people you love without the worry and stress of financial strain and confusion. We are proud that we are able to provide our clients with this opportunity and today are grateful to share the story of one of our clients and how working together we have been able to continue to help them grow and prosper.

If you would like to discuss your unique situation or want to understand how the Schuh Group can further support you, we are always just an email or phone call away.

How to Know a Good Time to Invest

With some things in life, a good start is everything. Take the 100-meter sprint, the whole race is over in 10 seconds or less. The importance of getting out of the blocks quickly to ensure success can't be understated. In the 100-metre sprint's extended athletic cousin, the marathon, a bad start, while annoying, must be put in perspective. There are two plus hours ahead and ample time for them to regroup and overcome.
When investing, the thought of a bad start can be a psychological hurdle. A common question an investor will ask their adviser will be a variant of "is this a good time to invest?" Concerns come with that initial investment commitment. In contrast to dollar cost averaging, where the entry is incremental and ongoing, a large sum in one hit can provoke more hesitation and second-guessing. It's a bigger unknown. It's not that the investor doesn't want to invest, but it's the fear of making a mistake – is it the right time?

This occurs because we understand investment markets are volatile. They react to news and can quickly move in one direction or the other. This can make us feel either foolish for not waiting, or smugly satisfied for buying when we did. Overall, it's those feelings of foolishness and believing that we should have timed a better entry that we're most trying to avoid.

Since 1980 the ASX has finished 36% of months in negative territory. So historically, the odds have been in an investor's favour, but no one wants to start their investment journey in those 36% of red months, but does it really matter?

Whether a decline month happens in the first month or the tenth month, there's no avoiding your portfolio going down at some stage – unless it's exceptionally conservative. The concern with the first month is the psychology of immediately giving up some of your capital.
To illustrate the futility of focusing on a poor start, we've looked at the worst month to invest during each year in the 1990s on the ASX.

Using $1000, we've tracked market performance for a full decade. With a 10-year time hold, it's long enough to put a frustrating beginning back into perspective. There are no additional contributions, it's just tracking that initial $1000 for the next 120 months or ten years.

Examples of market returns are often done on a calendar basis, but rarely does an investor enter the market on the first day of a particular year. They are more likely to commit to a strategy sometime throughout the year. While this experiment doesn't take into account individual days, it would be indicative of an investment experience.
To lessen chart clutter, we've split the returns across two charts. 1990-1994 and 1995-1999.

1990-1994

As shown by the chart above there were varying outcomes in each of the five years.
The best result of the bad bunch began in June 1992. $1000 invested would be in the red for the first 11 months, but across the full ten years, patience was rewarded. If an investor set aside their bad start, an average annual return of 10.76% was their reward.

The worst result of the bad bunch began in November 1993. $1000 invested recovered quickly from its initial bad start, before encountering an ongoing rough patch that kept it mostly in negative territory until the 18-month mark. End result? An average annual return of 8.5%.

A good return, but 2.26% lower than the leader. Yet there's no argument that the start made a difference. At varying points, it was neck and neck with the others, that time frame just had a poor finish in this experiment.
While not part of this experiment, if both starting points extended to 25-year periods the difference between the two narrows to 0.76%. You never want to leave three-quarters of a percent on the table, but it highlights with time, things begin to even up.

1995-1999

The returns in the second half of the 1990s had an even wider variance over their ten-year periods, but again, their outcomes had very little to do with any poor beginning.

The worst time to start in 1995 was January, which wasn't that bad. One negative month before delivering a 20.73% return for the calendar year. Across the ten years, the return for the ASX was 12.07%.
Yet it didn't compare with October 1997 as a start month. In contrast to the charmed first 12 months of January 1995, an investment beginning in October 1997 was still under water 12 months later. However, the poor start meant nothing to its return over the decade, delivering an annualised return of 13.46%.

The worst start month in the whole experiment was May 1999. The tail end of the ten-year period took in the full financial crisis along with the beginning of the recovery. This severely impacts the annualised return. Respectable at 6.29%, but anaemic in comparison to the other returns.

It is worth noting, after four years the May 1999 start was the worst of the five scenarios, yet after eight years it was the strongest performer. Share markets have a way of rearranging perspectives like that.

Many of these returns are quite strong, which sets aside any argument a poor start will define an investment journey. There's no curse or damnation involved if someone invests and the market moves down on them. It happens. Sometimes the rewards aren't initially forthcoming. They may prove elusive for some time, but there are never mistakes with timing. There is no possible way of getting an entry absolutely right unless it involves sheer luck.

The other thing to remember, one person's investment experience isn't going to be someone else's investment experience, unless they're beginning on the same day. The challenges they encounter will be unique to them because of their time spent in the market and how their capital has grown or not grown to that point in time.

Agonising over the right time to invest becomes thought and energy down the drain on something that can't be forecast. Even the best of starts will encounter turbulent markets at some point and the worst of starts can go onto flourish. Investors are better off just starting. There is no right or wrong entry point and this is a marathon, not a sprint.


 

As we edge closer to the Federal Election, both major parties are starting to show their cards on tax policy. What most people aren't realising though, is that nearly everyone will end up paying more of their hard-earned dollars in tax under a Labor Government. We've summarised some of the key differences between the parties in the table below and while we will refrain from political commentary, we do believe it's important for people to be informed before placing their vote.



Our thoughts on this are that the main areas our clients would suffer under these changes would be in relation to the capital gains tax changes, the superannuation changes, and the franking credit alterations and also the strain on small business by increasing the Super Guarantee rate immediately to 12%.
If you'd like more information on any of these proposed changes and how they may impact you, please don't hesitate to contact us.

 

Are You Structured Best for You?

One question we often get asked by our clients is what structure they should be operating out of, whether this is for business or investment purposes. This week we'll look at what the main structures are and the pros and cons of each.



Company
What is it? A company is a popular structure for business operations and it stands as its own separate entity.
Pros:

1. The company tax rate is what applies to this entity rather than an individual tax rate which may be higher. The current company tax rate is 27.5% for small businesses and this may reduce further in the years ahead, depending on government legislation.
2. A company offers a layer of protection for assets.
3. Lenders like dealing with companies as they generally find them simple and easy to understand.
4. The shares in a company can be bequeathed in a Will as part of your estate planning, giving the structure longevity through generations. 

Cons:

1.There is no capital gains tax discount in a company if assets are sold in this structure.
2. Companies can be difficult to take money out of without triggering excessive tax consequences.

Trust
What is it? Trusts are widely used for investment and business purposes. A trust is really an obligation imposed on a person or another entity to hold assets for the benefit of beneficiaries.
Pros:

1. The nominated beneficiaries of a trust can be quite wide-reaching or also quite narrow, giving a lot of flexibility for trustees.
2. As with a company, a trust will allow a good level of asset protection
3. Estate planning can be factored into the longevity of a trust and multiple generations involved.

Cons:

1. All income a trust makes must be paid out (distributed) to the beneficiaries each year.
2. These are less attractive structures for a lender
3. Money cannot be borrowed from a trust without it needing to be paid back at some stage.
4. Significant changes need to align with the governing document of the trust, known as the trust deed.

In some cases, clients will have the "best of both worlds" where they will use a company structure with a separate trust as the shareholder in the company. That way any income earned in the trust can be paid out to beneficiaries as a distribution. The bottom line though is that the structures you apply need to be the right ones for you, and if you're seeking any advice in this area, please don't hesitate to contact us.
The long-awaited final report on the banking royal commission was released yesterday. The aim of the Royal Commission - which is the highest form of inquiry into matters of public importance - was to expose wrong-doing and dodgy practices in banks, and insurance and superannuation companies.


And it delivered. From Day one, the commission heard gut-wrenching stories of people who'd lost their homes and their livelihoods due to misconduct, bad management or straight-out illegal behaviour. All up, Commissioner Kenneth Hayne made 76 recommendations. The Federal Government said it would act on all of them. We've summarised a number of them below that we think will have the biggest impact on our client's day to day lives.


1. Buying a house or property:
The Royal Commission spent a long time looking at the issue of responsible lending. That is, that financial institutions and advisers should have the best interests of their clients in mind when they recommend products that would part them with their hard-earned cash. At the moment, if you're thinking of buying a property and you enlist the help of a mortgage broker to find the best loan, there are no rules which state that the broker has to act in your best interest. Commissioner Hayne wants to change that. He's recommended that mortgage brokers have to work in the best interest of their clients. If they're found not to do that, they could face civil (i.e. not criminal) charges. But that change may come with a cost attached. The consequence of removing those incentives from lenders means that we'll move away from a lender-pays system (where banks and other institutions pay a broker to pass on a deal) to a borrower pays system. In other words, if you want a mortgage broker to find you the best deal, you'll likely be the one paying for it.

2. Owning a Farm:
The natural and man-made cycles of flood and drought in Australia mean people who work in the agricultural sector have special financial needs. They may have a fantastic year one year, followed by years of drought which yield next to nothing. Commissioner Hayne wants those special requirements acknowledged through legislation. He's recommended that default interest is waived on loans in areas affected by drought and natural disaster. This would only apply to areas that have been formally declared as in drought, or as a natural disaster zone. He's also recommended that the value of a farm or agricultural holding be assessed by someone other than the bank that has the outstanding loan. That would mean that the value of the land isn't determined by who ends up with it if the owner can no longer pay their loan.

Commissioner Hayne also wants a national farm debt mediation scheme. That means financial advisers with special knowledge of the agricultural sector would sit down with farmers in debt to help work out a repayment scheme that lets them keep a roof over their heads. Mediation exists now, but it's usually a last-ditch measure. This recommendation wants to increase the mediation so it gives farmers and their families more of a fighting chance.

3. If you've suffered from dodgy financial practices:
Given the Royal Commission had more than 10,000 public submissions, and a further 12,800 calls and emails while the hearings were being held, we can quite accurately say that a lot of people have felt wronged by financial institutions. Commissioner Hayne wants to make it easier to get justice in this area. He's recommended a last-resort compensation scheme that's funded by the industry itself. Say for example you do everything right and a regulator or court finds that a financial institution has gone belly-up, meaning you get nothing. In the future, the compensation scheme may be able to help you out. The Federal Government will also fork out $30 million to 300 individuals and small businesses who've been found owing from previous cases. The Federal Government has also announced it will expand the role of the Federal Court (which currently only sees civil cases) to start hearing white-collar criminal cases. They say the expansion will ease a backlog in criminal cases that have emerged from the Royal Commission.


We hope this summary gives you an outline of the main changes we're expecting to see from the Royal Commission. If more detail emerges that may impact you, we'll certainly keep you informed.

Holidays Are Over & Now We Are in Election Mode!

Nearly everyone is back from holidays now and as expected, that means Australia is basically in election mode. And while more details will no doubt emerge over the coming months, there are a few issues that are becoming increasingly clear from both major parties:



1. Housing will likely play a big role in the final election promises of both parties. Housing prices in most capital cities have been declining for over 15 months now, and the tightening credit may see the fall continue. For years, as housing prices boomed, our politicians were wringing their hands over what to do about housing affordability. With little room to push borrowing costs lower, the only way to truly make housing more affordable is to make it cheaper. As prices fall, it's likely to spur demand from first home buyers who have been locked out of the market for years. Ultimately, that will put a floor under the market. If the housing prices continue to drop it may also mean the Labor thinks twice about its planned changes to negative gearing, as this investment strategy would naturally become less attractive if property values are not growing.

2. Possible Negative Gearing changes.
This proposed policy was announced some time ago by Labor apparently in an attempt to slow down the property market – something the banking credit slowdown has probably already achieved. Labor's proposed policy is to limit negative gearing to new homes and to also cut the capital gains tax discount from 50 per cent to 25 per cent. Suffice to say, the building industry is not in favour of this proposed policy.

3. Franking credits.
We've previously spent some time discussing the possible changes here, but this will certainly impact the self-funded retiree population more severely, and even more so those with high exposure to Australian shares. With certain sectors of the population, this proposed policy is widely unpopular, but it appears as though little would be changed to the policy if Labor is elected.

4. Wages.

Up to now, wages growth may have been the slowest on record but unemployment is low, inflation is barely registering and the economy has been growing at an impressive clip. That's not all. Despite coming through the financial crisis in better shape than any other developed nation, we've been clocking up budget deficits ever since. That, however, is about to change as we do legitimately appear to be getting closer to a budget surplus. If the superannuation guarantee is immediately lifted to 12 per cent, as proposed under Labor, this may increase pressure on small businesses quite quickly, and actually, mean wage growth stays low for a much longer time to come.


The next few months will be an interesting time ahead for Australia, but no doubt the fundamentals of wealth creation remain as strong as ever: Spend less than what you earn, try to minimize your tax where possible, and invest what's left over for the long term.

This week's topic is an often overlooked component of any small business, but it can sometimes be the difference between success and failure. Bookkeeping refers to the keeping of records of the financial affairs of a business but it is also a legal requirement for businesses to have records that are up to date.



Below are some of the reasons why good bookkeeping is essential for running a good business:

1. Tax obligations can be fulfilled - When tax time approaches, accurate and up to date bookkeeping allows you to easily meet your tax obligations and report accurately.

2. Improved financial management and analysis - Even though you are busy and hardly have enough time, it is important you focus on managing the cash flow of the business. In a situation where invoices are delayed, customers are allowed to delay payments because if there is no follow-up then the business could fail. With good bookkeeping, all these can be taken care of as it helps to create an organised system that can easily be followed and ensures that the business runs smoothly. In short, you can keep better track of your inflows and outflows.

3. Better business planning - With proper bookkeeping, you are able to know how much progress the business has made over time. This goes a long way in making it much easier to plan for the future of the business. You can compare previous years and months to the current period of business, know the areas of the business that are making a profit and decide on areas to cut back on or invest in.

4. DIY Bookkeeping versus Outsourcing - There are lots of great electronic platforms these days that help make bookkeeping easier, but when it comes to outsourcing, we'd suggest taking this option if you're time poor or if you don't have the right skill set. At the end of the day, everyone will have their own favourite electronic platform for bookkeeping, but as long as you're comfortable using it and the information is delivered accurately and in a timely manner, we'd suggest you use what's best for you and your particular business.

Number One Bookkeeping Rule

If you take nothing else from this article, we'd suggest you always try to keep your bookkeeping up to date and don't let it get on top of you. Catching up over a number of months becomes too difficult to complete in one go, so stay on top of this job. If you'd like to discuss how your bookkeeping can be improved for your business, just remember we're only a phone call or email away.

This week we'd like to give you a brief update on the markets, as there has been a considerable amount of "noise" on this topic in the recent news media.


What's happened in recent times?

The benchmark S&P/ASX200 index was down 20.7 points, or 0.36 per cent, to close at 5774.6 at 1615 on Friday. That's still a gain of 2.8 per cent for the week and 6.8 per cent since the index's Christmas Eve low. The Australian dollar spiked above 72 US cents on the release of better-than-expected November retail trade data, trading at 72.16 cents on Friday. Australians spent $26.12 billion on retail sales in November, according to the Australian Bureau of Statistics data. Property in Melbourne and Sydney has dropped significantly since their higher levels this time last year, and the Brisbane market is holding steady for now.

What This Means For You:

Markets currently have some uncertainty to deal with, and the "elephant in the room" for Australian markets is the upcoming federal election to be called later this year. If Labor is elected, we may yet see a further drop in the price of bank shares if Bill Shorten is able to pass his unpopular franking credit changes. Bank shares, in particular, have arguably been favoured by investors for some years due to the added benefits of franked dividend income. The fallout of the Banking Royal Commission may also impact the bank share prices, though some are suggesting this has already been priced into the current value of these companies.

The markets are now down around 13% lower than they were a few months ago, and despite the current levels of uncertainty, we're reminded that markets have a correction on average of at least once per year. 2018 saw two of those corrections, but the 2017 year was smooth sailing in an upwards direction.

Our reminder to investors early in the year is to hold tight during a correction and to try and view this as an opportunity to invest at a lower price than you would have otherwise. Market swings are a regular occurrence, and the only certain thing is continued uncertainty. Take a long term view and invest accordingly.

The Power of Proactive Planning

Hopefully, you've managed to carve out some time over the Festive Season to reflect on your 2018 year that was and to plan for the next 12 months ahead. We find that this time of year presents a perfect opportunity for good planning to occur, and hopefully, this will set you up for a great year ahead.
In terms of setting money goals, we know that around 80% of New Year resolutions have failed by mid-February. So to avoid this while still taking stock of your finances, aim for some resolutions that will be realistic for your situation, as well as sustainable.


One way of taking stock for the year ahead is to ask yourself the questions below:

1. Am I happy with the amount of money I've saved or accumulated in the last 12 months?
2. What needs to have happened in my financial life over the next three years, for me to feel I've made good progress?
3. What are the obstacles getting in my way and slowing my progress down?
4. Will there be family life events in the future that I need to be planning for now?
5. What are some of the financial things I've been meaning to get to but haven't yet?
6. What is one positive move I can make for myself or my business that will set me up well for the year ahead?

Asking yourself either some or all of these questions will hopefully help organise your thinking while also highlighting the areas you can improve on.
Other important points to note are:
If you haven't got your tax work into us yet, please feel free to do so. A nice tax refund is always welcome early in the New Year!
Plan now for the planning you may need to do prior to June 30. If you think you'll need some interim work done after March we'd be happy to help with this.
The halfway point is a good time to check how much has been contributed to your super fund so far and to make any top-up payments needed in the second half of the financial year.

We're looking forward to the year ahead and we hope you are too. Please feel free to contact us if you have any queries or need any assistance with your finances - business or personal! We look forward to seeing you soon!

Thank You For Giving Us a Why

Another year is nearly over and as we begin to wind down for 2018, we are already looking towards a new year in anticipation of what is possible.

It is about this time of year that we at the Schuh Group (just like you), take a moment to stop and rewind on the year that was. This year, like many, has been a big year of growth and reward for the entire Schuh Group team and clients. It is also the year that we decided to document some of our history.

Having grown from humble beginnings that saw a young and enthusiastic Cos blaze his own path in the Accounting sector, Schuh Group is now a family business built on a brand of trust and loyalty.

With Dominique joining the fold over the years, Schuh Group offers clients a full-service offering that includes Business Consulting, Wealth Advisory, Accounting, Property Advice, and Estate Planning. Our evolution has come with our goal to ensure that our clients have access to the most objective and beneficial information for long-term wealth building and financial security.

We believe that money is important and when looked after correctly it can give you freedom of choice - it is a resource that can allow you the opportunity to focus on what is important to you - like being able to spend time with the people you love, doing the things that make you happy because you have enough money to comfortably meet your obligations.

This is our goal. This is our passion. This is why we do what we do.

Today we would like to share something new with you – the story of where we started, how we have evolved and why every day we continue with the desire and purpose of serving you.

Thank you for your custom, we look forward to continuing to serve you into the future.

As we head towards the end of the calendar year, the break over Christmas sometimes provides an opportunity for us to take stock. For some of us, that may mean a reflection on our plans for retirement. It is important to note, however, that retirement is about more than just having enough money to live on, it's also about having something to live for.


Here are a few statistics: in Australia, the cohort with the highest divorce rate is between the ages of 55-64-year-olds, while the average age of women first becoming widows is 59. These figures perhaps tell the tale of men who "laid it all on the field" during their careers and then moved to the next stage of life without being prepared for it.

Studies show that those people who enjoy the most satisfying retirement are those who follow the steps below:

1. Having a positive attitude. This enables people to roll with the punches better during the retirement years and adapt to the whole gambit of changes the occur, both physically and mentally.

2. Having a clear vision of the kind of life you'd like. Far too many pre-retirees make the mistake of thinking that the financial plan and the retirement plan are the same thing–that the life part will take care of itself. This stage of your life deserves a more holistic look and plan than simply assuming that you are beginning a thirty-year-long weekend. What do you actually want your life to look like?

3. An active social network. As you get older, your social support network becomes increasingly important. You draw your social support network from a much broader social network. Successful retirees generally have robust social networks that provide them with friendship, fulfilling activities and life structure.

4. A balanced approach to leisure. Leisure is a fundamental human need. We use it to recharge our batteries, to act as a diversion in our lives, to create excitement, anticipation or simply to rest and contemplate. Things change, however, when leisure becomes the central focus of our lives. Leisure, by its very nature, loses its luster when it is the norm in our life rather than the diversion. For many retirees, the idea of leisure is associated with "not having to do anything". In the end, a lack of stimulation affects our mental and emotional state and then ultimately our physical well being. Successful retirees balance their leisure over many different activities and take the opportunity to do new things and not get into a rut.

5. Maintaining financial comfort. Some retirees feel that a happy retirement is guaranteed by financial security. However, there is no price tag on successful retirement. As someone once said, "having a million dollars is NOT a retirement plan!" Financial comfort refers to being able to manage your life in a satisfying and fulfilling way using the financial resources that you have. It's important to note that money in retirement is only an enabler, and for most of us, the things that are really important generally involve other people.

We hope these points have given you some food for thought as we head towards the end of the year. And if you'd like to talk to us more about any of these ideas, we're only an email or a phone call away.

Why You Need a Will

As another year rolls into the last months and we embark on a new year to come, it can be a time of reflection for many people. Taking stock of the year and your life may include everything and anything from business and career to family and health. And one of the best ways to reflect on what is important and organise yourself is to review, update or create your Will.



Wills aren't just for people who own property or have lots of money. Making a Will is a positive step you can take to:
1. Provide for the people you care about
2. Leave particular items to certain people
3. Appoint a person you trust to carry out the instructions in your will (your executor)
4. Leave any other instructions you may have (for example, about your funeral arrangements)
5. Make a gift to charity, if you wish.

Making a Will removes the doubts and difficulties that can arise when there is no evidence of the deceased person's wishes. After your death, your property and belongings are referred to as your estate. If you'd like your estate assets to be directed to specific people or charities after you're gone, then a Will is undoubtedly the best way to ensure that this happens. These are a few of our most frequently asked questions to support you when compiling your Will:

When considering your Will/estate, what are the top 5 most important things to focus on?
1. What people would you like to provide for from your estate? Who are your beneficiaries?
2. Who would you like to administer (be responsible for) your estate on your behalf? i.e. your Executor
3. If you have children under the age of 18, whom would you like to nominate as their guardians?
4. Are you likely to have tax payable on your estate and have you ensured that this is minimised?
5. Is there a chance that you've left someone out of your Will who may be entitled to something? Do you feel this person may contest your Will?

What is the process to make a Will legal?
You must be over age 18, of sound mind and you need to nominate in writing where you'd like your assets to go after you pass away.

Are the Self-Will kits at the post office ok to use?
We always recommend getting a Will done through a Solicitor in order to make sure nothing is missed.

I don't have a lot of assets is it really important for me to have a Will?
If you want to make sure the assets you do have (even sentimental items such as jewellery or antiques) are directed where you'd like them to end up after you pass away, it's still important for you to outline your wishes in a Will document. Even if you don't have a large estate, the best way to be directive about what you do have is through a Will.

If I don't have a Will, what happens?
If you don't have a Will and you pass away, you're deemed to have died "intestate". When this happens, the Public Trustee will step in and decide where your assets will be directed, regardless of what your true wishes may have been. The Public Trustee will take into account your family relationships and blood relative relationships and direct your estate towards those who have a legal claim on it. This can differ slightly from one State to another.

Who should I share the details of my Will with?

Your solicitor will be aware of them if they've helped you compile your Will, but it's also a good idea to run the contents past your accountant and financial planner in case there are any tax consequences that need to be factored into their planning for you. You should also inform your Executor of what your wishes are.

How do I choose the right Executor of my Will?

Consider someone who will act in your best interests while also being capable of fulfilling the role. You should ideally discuss your Will with your executor first to ensure they're aware of their responsibilities and what's involved. Someone with some financial and administrative experience is an advantage.

If you would like to take advantage of an obligation-free review of your current Estate Plan or would like support in compiling your Will contact us today on 5482 2855.
How far do we get without commitment and perseverance? Any task we begin in life is going to require some commitment and perseverance if we wish to pursue it thoroughly. That commitment may begin early in life. As children, we may show an interest to pursue a particular sport or hobby, alternatively, our parents may force us into various activities they think we should pursue!

How long any of these endeavours will last, largely depends on whether we find them fulfilling in some way or how much persistence we have. As children, we can be fickle. Toys can fly out of the cot over the slightest thing. We lack any real experience. Our inability to rationalise time or where resources come from, allow us to get away with being fickle. As a child, we may well give something up at a moment's notice or not find ourselves sufficiently motivated.

That luxury of having support provided for by parents instead of having to sweep chimneys for our keep is particularly valuable before we're in the real world. It provides a platform to determine what we'd like to dedicate our time to. Hopefully a task rewarding enough in some way to remain motivated for. The older we get, the less fickle we can afford to be. Commitment and perseverance become more important in achieving goals – as long as we're actually on the right path. In the 2016 book, Grit: The Power of Passion and Perseverance, author Angela Duckworth challenges the idea that it's talent that propels us towards success in life. Instead of talent, it's grit that's the most reliable predictor of success.

Duckworth developed her own questionnaire that measured this intangible thing called grit. Her questionnaire reliably predicted things such as who might graduate from West Point military academy, or which competitors would get the furthest during the US National Spelling Bee.

What exactly was grit?

First, these exemplars were unusually resilient and hardworking. Second, they knew in a very, very deep way what it was they wanted. They not only had determination, they had direction. And skipping around from one kind of pursuit to another-from one skill set to an entirely different one-that's not what gritty people do.

When we're investing, it's no different. The primary hurdle is settling on an investment philosophy. Importantly, one that works and has evidence behind it. The second thing is sticking with it. Investing has nothing to do with talent, nor are gains just handed out for making an appearance on the first day. You also don't get the choice of when you show up to collect the gains before leaving again. If only it was that easy. No one can predict when they'll appear – so it's important that an investor be prepared to commit to a long-term endeavour and have the persistence to ride out all types of markets.

Often some of the best gains will come in short spurts, as the following chart shows. Take away the best day on the ASX 300 between 2001-2017 and the average annual return over that timeframe falls 0.35%. Take away the best five days between 2001-2017 and the average annual return falls 1.61%.

As the chart shows, if an investor starts with $1,000 in 2001, by 2017 they've left behind over $800 if they missed those best five days. That doesn't seem a huge amount, but start with $100,000 and then it's over $80,000 left on the plate. The ability to commit to the process and persevere provides rewards, you just don't know when they'll appear – that's why perseverance is required.

When we look at returns on a monthly basis over the same time frame, we find that the majority of months are positive. Over 63% of the time, but there are some concerning outliers to the left.

As you might expect, those three worst months came during the financial crisis. It's never pleasant to see those sorts of declines are possible and it's even less pleasant to experience them, but it's important to acknowledge and understand they happen. It's doubly important to understand they're not fatal. The investors who doubted there would ever be a recovery after 2008 eventually lost their nerve and crystallised their loss at the worst possible time. When an investor encounters these periods, it is beneficial they have the grit required to emerge out the other side. It's also important they understand their portfolio isn't just their local equity index, holding a diversified portfolio means these months are never that extreme.

Is there anything else to be learned from the distributions of monthly returns? Well, some of the worst losses tend to cluster. There are sixteen instances of two or more consecutive negative months and six instances of three or more consecutive negative months. Is this an indicator of anything? Can you turn your mind to predicting the bad stretches, extending perseverance and grit to figuring out when to get out of the market ahead of the declines?

It would be folly to try. The last month of 2002 and the first two months of 2003 were all negative, surely that was the beginning of something bad? No, over the next 23 months, only three were negative. Or there were the last two months of 2011 which were negative. Maybe that would be the start of a bad run? Wrong again. There was only one negative month in the next fourteen.

As the old saying goes, "it's time in the market, not timing the market that counts". The gains are there, but it takes grit and perseverance to endure the declines, the volatility and the months of mundane sideways movement that will test an investor's resolve.

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