ASIC Announces Extension To Reporting Deadlines For Unlisted Entities

The Australian Securities and Investments Commission (ASIC) announced that it will extend the statutory reporting deadlines for unlisted entities reporting at 30 June 2022. 

The media release cites resourcing pressures as the main reason for the extensions. Many companies and audit firms are battling staff shortages due to travel restrictions, resignations, and increasing COVID-19 cases. Furthermore, current world events and changes in economic conditions may mean that pulling financial reports together will require more work, especially when it comes to making judgements around asset values and provisions. More effort may also be needed to ensure financial reports contain high-quality disclosures that address changes and events that had a significant impact on entities during the reporting period.

The one-month extension has the following implications for Chapter 2M lodgement periods of unlisted entities:

Full year financial reports

• unlisted disclosing entities and unlisted registered schemes – extended from three to four months
• all other unlisted entities (non-disclosing public and proprietary companies) – extended from four to five months

Half year financial reports

• unlisted disclosing entities – extended from 75 days to 75 days plus one month

Chapter 7 reporting deadlines have been affected as follows:

• unlisted Australian Financial Services (AFS) licensees that are bodies corporate and are also disclosing entities or registered schemes – extended from three to four months
• unlisted AFS licensees that are body corporates and are not disclosing entities or registered schemes – extended from four to five months
• AFS licensees that are not bodies corporate – extended from two to three months

The reporting relief does not apply to registered foreign companies.

Grandfathered proprietary companies that make use of the deadline extension relief will retain their grandfathered status. However, the directors’ report must disclose the fact that ASIC relief has been applied to report to members no later than one month after the usual reporting deadline.

Entities that are not within the scope of the latest reporting relief granted by ASIC can apply to ASIC individually for a lodgement extension. Such applications should contain sufficient information to allow ASIC to evaluate the impact of current events and conditions on the entity.

ASIC has indicated that there is no intention to grant extensions for balance dates commencing after 1 July 2021, however it will continue to monitor changing market conditions and how these impact entities and audit firms.

For further information, please refer to ASIC’s media announcement.

ATO Focus On Rental Property Income And Deductions

Income And Tax Deductions From Rental Properties Is One Of The Four Key Areas That The ATO Is Focusing On This Tax Time.

The ATO is urging rental property owners to ensure they carefully review their records before declaring income or claiming deductions this Tax Time, and for registered tax agents such as KGBM to ask a few extra questions of our clients who own rental properties.

As your registered tax agent, we can only work with the information we gather from our clients, and we know some clients won’t know everything they need to tell us (which is understandable).

INCLUDE ALL RENTAL INCOME

The ATO receives rental income data from a range of sources including sharing economy platforms, rental bond authorities, property management software providers, and state and territory revenue and land title authorities. The amount of data the ATO accesses grows each year, making it easier and faster for them to spot any rental income that you have charged your tenants, but haven’t declared (even unintentionally). When preparing tax returns, all rental income must be included, such as from short-term rental arrangements, renting part of a home, and other rental-related income like insurance payouts and rental bond money retained.

Further, income and deductions must be in line with a rental property owner’s ownership interest, which should generally mirror the legal documents.

GETTING YOUR EXPENSES RIGHT

Not all expenses are the same – some can be claimed straight away, such as rental management fees, council rates, repairs, interest on loans and insurance premiums. Other expenses such as borrowing expenses and capital works need to be claimed over a number of years. Capital works can include replacing a roof, or a new kitchen renovation. Depreciating assets such as a new dishwasher or new oven costing over $300 are claimed over their effective life.

Refinancing or redrawing on a rental property loan for private expenses such as holidays or a new car, means that the amount of interest relating to the loan for that private expense can’t be claimed as a deduction.

If income from a rental property in a holiday location is earnt, it needs to be included in tax returns.

KEEP GOOD RECORDS TO PROVE IT ALL

Records of rental income and expenses should be kept for five years from the date of tax return lodgments or five years after the disposal of an asset, whichever is longer.

Adequate records should demonstrate how the expense was incurred for the rental property and the extent to which it relates to producing rental income. Records must include the name of the supplier, amount of the expense, the nature of the goods or services, the date the expense was incurred, and the date of the document.

ATO’s New Crackdown On Discretionary Trusts

T he ATO has just updated its guidance around trust distributions made to adult children, corporate beneficiaries and entities that are carrying losses. Depending on the structure of these arrangements, there is a potential that the ATO may take an unfavourable view on what were previously understood to be legitimate arrangements.

Background

For various reasons, including legal tax minimisation and asset protection, many business owners operate their affairs through a trust structure. While trust structures are legitimate, the ATO has become increasingly sceptical of the motivations behind the use of trusts which it believes in many cases are motivated chiefly by tax minimisation. In February 2022, the ATO updated its guidance directly focusing on how trusts distribute income, and to whom! Consequently practices which may have once been previously accepted may now not be. This may result in  higher taxes for family groups in particular – both going forward, and potentially retrospectively.

Target

The ATO is chiefly targeting arrangements under s100A of the Tax Act, specifically where trust distributions are made to a low rate tax beneficiary but the real benefit of the distribution is transferred or paid to another beneficiary usually with a higher tax rate. In this regard, the ATO’s new Taxpayer Alert (TA 2022/1) illustrates how s100A can apply to the quite common scenario where a parent  benefits from a trust distribution to their adult children.Released at the same time, the ATO’s new draft ruling states that for the new guidance to potentially apply, one or more of the parties to the agreement must have entered into it for a purpose (not necessarily a sole, dominant purpose) of securing a tax benefit. This sets the bar quite low and may capture a number of arrangements.

Assessing The Risk

The ATO released an accompanying guideline providing taxpayers with a risk assessment framework for them to work through with their accountants to assess the level of risk involved in current and past distribution arrangements. In the guideline, the ATO has provided a number of examples of high-risk arrangements that are actually quite common and include:

1. Arrangements where the presently entitled beneficiary lends or gifts some or all of their entitlement to another party and there is a tax benefit obtained under the arrangement
2. Arrangements where trust income is returned to the trust by the corporate beneficiary in the form of assessable income and the trust obtains a tax benefit
3. Arrangements where the presently entitled beneficiary is issued units by the trustee (or related trust) andthe amount owed for the units is set-off against the beneficiary’s entitlement
4. Arrangements where the share of net income includedin a beneficiary’s assessable income is significantly morethan the beneficiary’s entitlement
5. Arrangements where the presently entitled beneficiary has losses.

For arrangements that fall into the high-risk category, the ATO advises that it will conduct further analysis on the facts and circumstances of the arrangement as a matter of priority. If further analysis confirms the facts and circumstances of your arrangement are high risk, they may proceed to audit where appropriate.

What Next?

The ATO’s new ruling and guidelines are still in draft form, and are expected to be finalised soon. Once finalised, they are intended to apply both prospectively and retrospectively. However, for entitlements conferred before 1 July 2022, the ATO has indicated it will stand by any administrative position reflected in its prior website guidance before the new material was released.

If you have any concerns about your trust distributions and exposed risk to Section 100A, you should contact KGBM for a discussion based on your personal circumstances.

How CFOs are grappling with increasing complexity in M&A market

The rapidly shifting economic landscape is driving changing approaches to valuations and deal activity.

Diligent finance leaders are finding new ways to reduce risks in merger and acquisition (M&A) deals and drive long-term value. They’re scrutinising deals in much more detail and finding different valuation metrics, as markets become crowded with hard-to-price startups. This helps finance leaders weigh risks and benefits while moving quickly to avoid missing out in fast-moving markets.

A barrage of factors have increased complexity in M&A markets.

Rocketing prices for technology firms have threatened the validity of traditional valuation techniques as tech companies’ values are often based more on intangible factors and future cash flow potential and less on fundamentals like current cash flow.

Economic and supply chain disruptions caused by the pandemic and the ongoing war in Ukraine have made it harder to identify and quantify risks in acquisition targets. Increasing regulation is adding risk and red tape. The shift to remote working slowed the deal-making process by depriving negotiators of the face-to-face meetings that are often critical to building mutual trust and closing deals.

CFOs say these complexities are testing their skills as they strive to ascertain fair prices for companies they are trying to acquire. Deriving long-term value from deals continues to be a challenge, with more than half of all mergers underperforming, according to PwC.

Addressing all these complexities is a critical issue, given that 62% of companies indicated their growth would come primarily from M&A in 2022, according to an outlook report by the US-based Citizens Bank.

Startups and complexity

Las Vegas-based Rodrigo Vicuna, CFO at the financial infrastructure provider Prime Trust, said soaring valuations of financial technology and related companies in 2020 and 2021 sparked impressive growth and spurred more startups to enter the market.

“But with interest rate increases and overall economic growth expected to slow in 2022, valuations are under pressure,” he said. “Emerging and growth-stage companies will consolidate, and companies will turn to M&A to further growth.”

As a result, finance executives will need to be nimble in this complex global market.

“CFOs will need to justify higher multiples,” he said. “The fundamental complexities of valuing a company haven’t necessarily changed, but finding or defining useful comparison has.”

Vicuna added that companies that can stave off competition with unique intellectual property are more valued than those in the industry that can’t offer solutions that are as dynamic. But it may not be fair to compare newer fintechs to older or less innovative companies.

Given that technological adaptation is now a consistent pressure across all industries, this is not just a tech sector issue. The increasing number of startups trying to disrupt many traditional industries can create a complicated picture of fair value, said India-based Anish Ailawadi, senior director at research firm Acuity Knowledge Partners.

“Complexity is higher in a startup ecosystem, where loss-making businesses are valued on future cash flow or uniqueness of business plans,” he said. “As such, firms use those distinctive valuation metrics and KPIs in place of traditional metrics such as profitability or return on investment.”

Adriana Carpenter, CPA, the CFO at the US-based expense management technology platform provider Emburse, encountered many of these issues in two acquisitions her company made last year.

“Valuations are high, with lots of competition for assets,” she said. “‘But there is also more uncertainty, which breeds more risk. For tech targets, we are getting savvier about digging into the type of tech and maturity of its infrastructure.”

Carpenter said she now needs to understand fully the answers to questions such as, how are the company’s operating platforms integrated and can they be transitioned? Do they use open source software? Where does their intellectual property sit, and are there issues with it?

Other factors include which international laws and taxes apply to the target and how they might mesh with local ones, Carpenter said. The proliferation of regulations in different regions — for example, around privacy and security in the EU’s General Data Protection Regulation (GDPR) — also create valuation and integration challenges.

She suggested using a third-party firm familiar with tax laws and other regulations to fully understand any cash, tax, or integration challenges that could arise after a deal is finished.

Not ‘room for forgiveness’

This proliferation of regulations may help explain why interest in international deals declined among both buyers and sellers, according to the Citizens Bank M&A Outlook 2022 survey. It showed middle-market companies’ decreased interest in global M&A for sellers (from 33% in 2021 to 29% in 2022) and buyers (from 47% to 41%).

Citizens also highlighted that explosive growth means companies need to make more and faster returns to make deals work. But this is harder to predict, given the way the COVID-19 pandemic and other economic factors such as labour market challenges and higher commodity prices have hampered operations in many sectors.

As Carpenter put it: “There’s not as much room for forgiveness, and the pandemic made that worse.”

She highlighted that, with a workforce that is increasingly scattered around the globe, buyers must understand exactly where acquired employees are, how they can be integrated into the new company, whether there will be any headcount reduction or merging of teams, and how to communicate that.

“In a technology deal, you also need to know specifically who and where the software developers are, and whether they are outsourced or internal,” she said.

Carpenter said using workers based in other countries is much more prevalent. So a key consideration is how likely it is that individuals in various locations will stay in the transition.

Buyers also have to balance all this detail about workers against the speed of the process and risk of losing out to competition, she said.

Effect of market uncertainty

Adding to these issues is a slew of economic uncertainties, including those linked to Russia’s invasion of Ukraine and to rising inflation and interest rates.

Carpenter said: “We are watching the Ukraine situation closely. Any buyer needs to do a lot of due diligence into the target company’s exposure, including any Russia-related revenue, operations, and potential effect from sanctions.”

Vicuna said that with rising interest rates and organic growth forecast to slow, it is difficult to predict the trajectory of stock prices. In this situation, it is best to focus on fundamentals such as how fast and consistent the target company is growing, its debt level, and its competitive advantage.

“With capital tightening, companies that relied on short-term growth might have weaker positioning,” Vicuna said. “Those with better fundamentals, such as strong balance sheets, will be better positioned in a changing market and benefit from acquisitions. Capital tightening means fintech companies will increasingly have to rely on investor capital, M&A, or organic growth, which could make it easier for acquirers.”

Despite all these headwinds, PWC’s 2022 outlook on global M&A industry trends predicts intense competition between corporates, private equity, and special-purpose acquisition companies for deals will continue. The strategic shift to digital, disruptive business models is not going away and should continue to drive M&A decisions. As these factors push up multiples and return expectations, it heightens the need to bring deeper operational expertise and puts sharper focus on value creation than ever before, PwC found.

How to weight ESG risks

Companies will also have to intensify their focus on environmental, social, and governance (ESG) factors, due to increased interest in sustainability issues amongst investors and consumers, according to PwC.

Buyers are increasingly accounting for ESG-related risks and opportunities in M&A decisions. For example, in PwC’s 2021 survey on global private equity responsible investments, more than half of respondents either refused to enter an agreement with a partner or turned down a potential investment on ESG grounds.

Ailawadi said to expect more focus on sustainability as time goes on.

“We expect the increased focus on ESG metrics in deal-making and valuations to be more pronounced in 2022 and beyond,” he said. “Valuations are expected to remain high for sustainable businesses.”

Capability plays

PwC’s report on doing the right deals shows 53% of acquirers underperformed their industry peers over the 24 months following completion of their last deal. This was based on analysis of 800 deals between 2010 and 2018.

The best way to avoid this is to base deals on capabilities, the report said. The analysis showed “capability access” deals — those that aim to capture value-creating strengths — were the only type that delivered above stated aims, across all sectors. Deals aiming to diversify strategy delivered as expected, while those looking to consolidate or increase product, category, or geographical adjacency all underdelivered.

PwC attributed the success of capability strategies to companies acquiring new strengths enabling them to thrive in a changing competitive landscape.

Carpenter explained how this kind of strategy has worked at Emburse.

“Take our acquisition of the Roadmap app last year,” she said. “Many mobile apps will connect you to a travel platform, but our acquisition went way beyond that — integrating manual task automation with a suite of information that increases traveller happiness at their destination. It aligns with our strategic vision to humanise work.”

She added that buying pre-revenue companies can be a drag on revenue growth. But it might be worth it if you can, for example, acquire synergistic technology. Start some integration before closing the deal or it could impair your ability to execute that vision.

You also can’t miss a beat in making acquired employees feel welcomed and integrated, Carpenter said. As there is so much competition, the stakes are higher.

Despite the reduced interest in international deals, buying foreign companies is still a way to address complexity by widening your search into areas where there may be less competition or regulation, she said.

Are You Ready for the New Director IDs?

Who?
All directors of a company registered Australian body, a registered foreign company or Aboriginal and Torres Strait Islander corporation will need a director identification number (director ID).

What?
A director ID is a unique identifier you need to apply for once and will keep forever, regardless of whether you change companies.

Why?
It will help prevent the use of false or fraudulent director identities and identify and eliminate director involvement in unlawful activity, such as illegal phoenix activity. Thank goodness!

When?

• If you were already an existing director under the Corporations Act on or before 31 October 2021, you must apply for your director ID by 30 November 2022.
• If you become a director between 1 November 2021 and 4 April 2022 you must apply within 28 days of appointment.
• If you become a director from 5 April 2022 you must apply before appointment.

If you don’t meet your obligations, you may be issued with an infringement notice or there may be civil or criminal penalties.

How?
The fastest way to do this is to apply online.
You will need:

• Your tax file number
• Residential address held by the ATO
• Two documents to verify your identity

Once you have done this, you can login and apply for your director ID. The application process should take less than 5 minutes.

https://www.abrs.gov.au/director-identification-number/apply-director-identification-number

New whole-of-government business registry platform announced

The Federal Government has announced that it will establish a whole-of-government registry platform as part of its Modernising Business Registers (MBR) program.

The Australian Business Registry Services (ABRS) once fully established, will bring together ASIC’s 31 business registers and the Australian Business Register onto a new modern system at the ATO.

The ABRS will progressively establish between 2021 and 2024.

The new ABRS will mean for each new registration, business owners will have a single entrypoint through the ATO to establish their business. For registered companies on the Australian Company Register, these reforms will streamline their annual business registry engagement with the Government.

Director identification numbers (director ID) will be the first new function of the ABRS to be delivered later this year and is a new requirement for all company directors. Director ID will be a unique identifier that a director will keep forever and is intended to help improve data integrity and asssist regulators to detect and deal with illegal phoenixing activities. The Registrar will notify company directors of their obligations under the new director ID regime.

View the media release here

Learn more on the ATO website here

NSW Small Business Rebate Scheme now open

Small business in NSW are encouraged to sign up for a new $1500 rebate scheme to help cover the cost of NSW and local government fees and charges, including but not limited to: food authority licences; liquor licences; tradesperson licences; event fees; and council rates.

To be eligible for the scheme, small businesses must have total wages below the new 2020-21 $1.2 million payroll tax threshold, and have a turnover of at least $75,000 per year.

The rebate can only be used for eligible fees and charges due and paid from 1 March 2021 and will be available until 30 June 2022.

View the media release here. Find out more about accessing the scheme at https://www.service.nsw.gov.au/small-business-fees-and-charges-rebate

NSW moves to increase wage theft penalties

The NSW Government is looking to increase penalties for wage theft, with changes expected to be introduced to the State Parliament in May. Under the changes, maximum penalties would be increased from $10,000 to $110,000 per breach for offenders who lie to tax inspectors or make false records to conceal tax evasion. Read the SMH article here.

Businesses need innovation now more than ever – How CFOs can enable innovation

Organisations in every corner of the economy are focusing with renewed intensity on innovating to anticipate and meet new customer expectations accelerated by and arising from the pandemic. We are not going back to the way things were pre-2020. The pressure is on to transform business models from top to bottom and acknowledge that innovation, far from being “cool stuff” or an off-to-the-side, not-always-measurable set of activities, is core to any business’s strategy in this rapidly changing, uncertain, and unpredictable world.

CFOs, by virtue of their role in an organisation, their platform, and their relationship to the board, the CEO, and their C-suite colleagues, are uniquely positioned to enable an organisation’s innovation results. Their ability to exercise innovation leadership at this moment may be vital to their business’s future. This article presents recommendations on what they can do to enable the innovation agenda and how to ensure their actions translate into results. (For a look at whether an organisation could benefit from devoting one executive to the innovation function, see the sidebar “The Pros and Cons of Appointing a Chief Innovation Officer”.)

Defining ‘innovation’ — a word that sparks admiration and controversy

The word “innovation” itself can be polarising. It conjures up coolness and threat, inevitability and unpredictability, attraction and avoidance. Few will debate that innovation is essential — yet it fails more often than it succeeds and can be easily derailed by the forces of the status quo.

Innovations are viable new offerings that solve people’s real problems; ie, they:

• Can be executed and delivered — technically, legally, ethically, financially, operationally, etc.
• May be new to a segment, geography, industry sector, or even to the world.
• May be incremental — enhancing an existing business, product, service, experience, etc. — or disruptive and completely game-changing.
• Address actual needs of the people a business wants to serve, whether the business has a business-to-business or business-to-consumer focus.
• Exist in many forms as illustrated by the Ten Types of Innovation model created by The Doblin Group. In its research, Doblin has found that innovations tend to be least effective when focused solely on product, and most effective when combining five or more of the ten types. For example, consider how Ikea has combined innovating the brand, customer experience, product, business model, and processes, or how Zappos innovates the brand, customer experience, channel, product assortment, and business model — in both cases creating unique positions in the market and in the minds of their customers.

Where is the CFO’s leverage to enable innovation?

The CFO can accelerate innovation progress, energise the organisation, and signal culture change by taking action in three areas:

Ensure resources are adequately allocated to innovation

Innovations don’t generally happen within the confines of the annual planning cycle. The reality is that innovation can feel messy relative to the structures most businesses follow around budgeting, forecasting, and planning. It’s driven by the marketplace, by customers’ expectations, and, as the world has experienced this year, by events beyond our control.

Consider good practices for resourcing innovation that create flexibility and support financial management requirements. For example:

• Challenge teams coming forward with innovation proposals to see themselves as founders, who self-fund the very first steps before seeking outside capital. Good founders gather qualitative, directionally meaningful customer feedback, and develop rough prototypes for proof-of-concept purposes on shoestring budgets.
• Borrow from the startup playbook by funding early-stage concept development in incremental tranches, investing relatively small amounts of capital as milestones are met. Plan a research and development line into the budget so that these investments are accounted for; and anticipate larger investments when it is time to scale.
• Value and consider each innovation initiative as an item in the investment portfolio the business is creating to assure the company’s future. Each investment will have a different degree of risk and reward, and likelihood of success, and will pay off at a different point in time. We know that a balanced portfolio mitigates risk and also bakes in the reality that not all portfolio items will succeed or succeed to the same degree or at the same time. Expect that many projects will yield learning and fail to reach commercial success but create value insofar as they can inform future efforts or may be “version 1.0” renditions that require further iteration or time, so should not be discarded. Mapping the portfolio initiatives on a matrix will help confirm whether the mix is right, too aggressive, or too conservative relative to the company’s strategy and goals.

Develop policies and processes that facilitate innovation

Some years back my team wanted to run a test in partnership with a startup company whose advanced technology could enable exceptional delivery of critical elements of the customer experience, overcoming a significant barrier that business-as-usual solutions had not addressed.

The project manager set off through the standard approval process, starting with contacting the procurement team. I received a call one day from the procurement specialist who told me, “We cannot work with this vendor because, according to their [Dun & Bradstreet] report, they lose money.”

No kidding. This was an early-stage startup (which, incidentally, ended up with a $100 million-plus exit a few years later that we never could have foreseen). As is typical of early-stage businesses, this startup was losing money at that point — capital had been invested in building a world-class platform, and the sales pipeline was not close to maturing.

By the standards of a scale business operating in a highly regulated sector, integrating a capability from a P&L-negative provider would not be acceptable. But in the case of a low-volume test of a new capability whose functionality is not core to the safety and soundness of the enterprise, the risks are different and so are the mitigation strategies. In this case, we articulated upfront a clear exit plan, including what we would communicate to customers involved in the pilot; acknowledged that the pilot investment would be written off; and had a clear plan to account for a write-off in our financials.

Applying policies and processes that work well for a scale operation can be overkill for a nascent concept. Innovation requires a different approach with rigour appropriate to the task, risk, and capital involved.

What can the CFO do to cultivate innovation-appropriate policies and processes?

• Help C-suite colleagues and the finance team focus on asking the question “What is the problem we are trying to solve?” in assessing next steps for a new concept.
• Ensure relevant processes are in place to assess and approve innovation vendors and other strategic decisions that both enable experimentation and address the need to protect the enterprise.

Adopt relevant metrics

The CFO can lead the adoption of common-sense approaches to ensure discipline — the right kind of discipline — for evaluating and monitoring emerging business models.

When measuring innovation effectiveness, what is most important is to ask the right questions, be confident in relying on judgement where facts simply do not exist, seek metaphors from other sectors or markets, and accept good enough data that can be refined along the way.

Smart questions answered in fast test-and-learn cycles can help a team to derive the relevant metrics and keep innovation projects moving closer to success, or to the set-aside pile.

There is comfort in hard data. It is reassuring to see numbers in organised columns and rows with optimistic trends demonstrating success. But innovation is messy, and it’s vital to explore, listen, and dig into qualitative insights that could be important signals that are just too raw to quantify. (See the sidebar “What to Ask First”.)

What can the CFO do to succeed as an innovation enabler?

The CFO role is evolving, and for people pursuing careers that include even a stint in the finance function, this is an exciting time to make an expanded contribution to their company, leveraging the unique positioning and attributes of their roles. Address these four priorities to support this evolution:

• Step up to the broader role, acknowledging the opportunities beyond traditional reporting, budgeting, and forecasting responsibilities and how critical this scope is to the business’s future.
• Update the talent strategy for the finance function, in particular by recruiting diverse team members and encouraging the strengthening of skills in customer insight, data analytics, and trend analysis that will enable them to be productive and highly valued thought partners to colleagues working on innovation initiatives.
• Assess and augment the capabilities the function needs to perform effectively now, particularly technology capabilities that allow ready access to useable data and support the team’s ability to get from data to insight to action.
• Find the right balance between shareholder requirements and those of the other stakeholders to the business — customers, vendors, partners, employees, regulators, and the broader community.

CFOs must embrace the reality that to be an innovation enabler, many of the decisions they will be asked to make will be “and” decisions, not “either/or” choices. They will be faced with polarities. To identify, shape, test, launch, and scale innovations requires financial management approaches that may feel at odds with traditional ways of operating. But the adoption of fit-for-innovation methods is essential to nurturing new ideas and allowing them to grow into commercial successes.

The pros and cons of appointing a chief innovation officer

As a two-time former corporate chief innovation officer, I am often asked, “Is it a good idea to have a chief innovation officer?” Here’s the not-so-simple answer:

• Innovation happens with skills, leadership, and a mindset that are quite different from those that drive a mature business at scale. The benefits of a C-suite innovation executive with the authority to hire and lead a small team are that this team, properly built, can seed those complementary skills and capabilities, and the role can be a powerful signal to the organisation that innovation is a priority.
• The downside is that innovation does not happen in a silo and will benefit from the capabilities and institutional knowledge of the organisation at large. A separate team can send a false signal to the rest of the organisation that the accountability rests in the team, when in fact everyone should feel they have skin in the innovation game.

The CFO is well positioned to advocate for innovation governance that engages the entire C-suite and:

• Holds business unit heads and functional experts accountable for contributing to the innovation team’s success;
• Encourages collaboration and pooling of expertise needed to advance concepts before they warrant dedicated staffing; and
• Helps ensure that innovation priorities and corporate strategy are connected.

What to ask first

Top questions for establishing innovation metrics for early-stage concepts include:

• How big is the addressable market?
• What would you have to believe for this to be a concept worth pursuing? In the absence of a rear-view mirror’s worth of history, it’s better to look forward and envision market, customer, operational, and other basics that would need to exist for a concept to appear reasonable.
• What appear to be the likely key drivers of revenue, expenses, and the balance sheet?
• What is the unit profit model, and what is the potential to scale?

Trust Set Up: Frequently Asked Questions

What is the difference between a Family Trust and a Unit Trust?

A Family trust, also known as a Discretionary Trust, give the trustee the discretion to decide who recieves distrubitons, how much and how often payouts occur. They tend to also include clauses that allow distribution to extend to family members of the Specified Beneficiaries.

A Unit Trust (also known as a Fixed Trust) differs from a Family Trust in that the trustee generally does not hold discretion over the distribution of assets to beneficiaries.
These structure divide the trust property into units, similar to shares of stock. Each beneficiary (known as a “unit holder”) owns a given number of those units, and at the end of each year, he or she receives a distribution from the trust, based on the number of units held. Ideal when multiple families are involved, Unit Trusts operate somewhat like a company.

What is the role of a Settlor?

The settlor must hand over the settled sum to the trustee to be held on the terms of the trust for the benefit of the beneficiaries.
The settlor does not have to reside in Australia, however they must be present when the trust deed is settled because he/she is responsible for the trust asset becoming vested in the trustee.
Once they sign the deed, therefore putting the trustee in charge of the trust assets, the  settlor then steps out of the picture.
It is advisable to limit the settlor’s role in a trust to the initial establishment of the trust and payment of the settled sum.
To avoid the perception that the settlor’s declaration of trust is revocable, the settlor should be unrelated to the trustee and the beneficiaries of the trust.

Should I have a Individual or Corporate Trustee?

It is a common practice to have corporate trustees for family trusts for asset protection. This ensures the limitation of the trustees’ liability to the corporate asset.

Generally, corporate trustees are shell corporations with no, or minimal, assets. The trustee is personally liable for the trust’s liabilities. Therefore, it is common for trusts to have corporate trustees to limit the trustees’ liabilities to the assets of the corporation.

Advantages of switching/implementing a corporate trustee structure include:

• they can exist indefinitely, unlike an individual trustee;
• you do not have to change the legal ownership of the trust’s assets when the directors or shareholders of the corporate trustee change. In contrast, you have to change the legal ownership of the trust’s assets when an individual trustee changes;
• the shareholders of the corporate trustee can effectively control the trust by appointing the directors of the corporate trustee;
• asset protection; and
• limited liability.

Therefore, corporate trustee can be very beneficial and allow the trust further longevity.

You can set up a company to act as corporate trustee here.

If you have already set up a trust with an individual trustee and wish to switch, you can have a Deed of Variation drafted here.

How to Set Up a Trust?

The process required is simply please email us on info@kgbm.com.au we will get back to with the details need to set up.

If needed, we also provide advice as to what structure is best for your needs and your trust, so feel free to contact us at 1300 998 248 .

After receiving the deed and relevant structures, certain states in Australia require the payment of stamp duty.

Stamping can be arranged either directly through the relevant revenue authority in your state or territory us.

NOTE : The above information is intended to be general in nature and should not substitute professional tax advice. We encourage that you contact one of our Tax Specialists to discuss your personal circumstances

Boosting cash flow for employers – Additional Information from ATO

Eligibility

You will be eligible to receive the cash flow boost if you are a small or medium business entity, including not-for-profit organisations, sole traders, partnership, company or trust that:

• held an ABN on 12 March 2020 and continues to be active
• has an aggregated annual turnover under $50 million (generally based on prior year turnover)
• made eligible payments you are required to withhold from (even if the amount you need to withhold is zero).

Eligible payments include:

• salary and wages
• director fees
• eligible retirement or termination payments
• compensation payments
• voluntary withholding from payments to contractors.

In addition, you must also have either:

• derived business income in the 2018–19 income year and lodged your 2019 tax return on or before 12 March 2020
• made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.

We will generally determine whether you are a small or medium business entity based on your most recent income tax assessment for a prior year. However, where you do not have any income tax assessments for prior years, you may still be eligible if we are satisfied, based on other information we hold, that you are in business and would have an aggregated annual turnover under $50 million.

We may also give you further time to provide us notice that business income or supplies were made. This will generally be the case where you have a lodgment deferral in place. If you did not have a lodgment deferral in place, you will not become eligible if you lodge or amend returns for those periods now.

Schemes

You will not be eligible for cash flow boosts if you (or a representative) have entered into or carried out a scheme for the purpose of:

• becoming entitled to cash flow boosts when you would otherwise not be entitled, or
• increasing the amount of the cash flow boosts.

This may include restructuring your business or the way you usually pay your workers to fall within the eligibility criteria, as well as increasing wages paid in a particular month to maximise the cash flow boost amount.

Any sudden changes to the characterisation of payments made may cause us to investigate whether the payments are in fact wages. If the payments are wages, we may consider the characterisation of past payments, including whether they should have been subject to PAYGW and whether super guarantee contributions should have been made. You may also have FBT obligations that have not yet been met.

please read the full statement below link

https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-employers/