Public Holidays and Penalty Rates

shutterstock_131353031With Easter is just around the corner, Fair Work Australia is urging small business owners to check up on public holiday penalty rates and entitlements that may apply.

The Fair Work website has been updated to ensure that employers and employees can clearly understand their rights and obligations and that they are complied with.

In Queensland, Good Friday (3rd April) and Easter Monday (6th April) are both public holidays. However, may vary in other states.

Breach of workplace laws

shutterstock_161024903A property company in South Australia has been fined $29,790 for breaching workplace laws.

The company had advertised a sales position promoting that the candidate would be paid a potential salary of $120,000 or more, however the successful employee quit after 10 months and earning less than $7,000.

A second person was hired, believing he was able to earn over $70,000 however quit six months later after being paid nothing.

The company admitted to breaching the workplace laws and paying the employees on a commission-only basis between 2011-12 and had now back-paid the employees in full.

EXPENSIVE HOUSING MARKET NEEDS RELIEF

Sydney A major ratings company, Fitch, has recently released a report which confirms what we already know; that housing in Australia is expensive. Very!

According to the Global Housing and Mortgage Outlook report, Australia has the third most expensive property market of the 22 countries surveyed and despite this, the agency forecasts 4% growth this year. The same agency predicts that with record low interest rates and stable unemployment, Australian property prices will remain high and affordability will slightly worsen in the short term.

But when other economists are tipping rising unemployment, lower inflation, turbulent economic conditions and declining growth of our major trading partners, it is hard to see the appetite for investment in property increasing. What is of greatest concern is the trend away from home ownership. Where Australian home ownership rates sat at 70.7% in 2000, they have now fallen to 67.5%. If that continues, it is only likely to increase the number of Australians being subjected to the vagaries and uncertainty of the rental market. But with lower growth, insanely high property taxes (in the form of land tax, stamp duty and then federal taxes if you are lucky enough to make any profit after paying all the State taxes), it is hard to see investors continuing to put their hard earned into residential property. In the past we have seen the significant effect that supply and demand has on rental prices and when that occurs, it will further disadvantage those who are already struggling to keep food on the table and the kids in school.

Surely it’s time we have a re-think of our taxation system and to take a big picture approach? For now at least, it seems, that State Governments are focused on a cash grab to balance budgets because the housing affordability issue considered to be more of a Federal Government concern.

Travis Schultz
Practice Group Leader
Schultz Toomey O’Brien Lawyers, Part of the Slater & Gordon Group
Ph: (07) 5413 8900
Fax: (07) 5413 8958

INSURANCE COMMISSIONS AND FEES – A POTENTIAL FOR CONFLICT

shutterstock_150643835The recent decision by the Australian Securities & Investments Commission (ASIC) to both investigate and regulate the Suncorp owned company Guardian Advice highlights the difficulties faced by the Financial Services sector in ensuring that the interests of advisers are put behind those of their clients.

In what is a rather damning statistic, ASIC described finding an “unacceptable level of failure” by the industry to comply with the laws relating to the appropriateness of advice for clients and in prioritising consumers’ needs.  ASIC found that some 37% of advice given was inappropriate and by any measure, that’s more than an isolated episode of non-compliance!

In the case of Guardian, ASIC has required that they appoint an independent consultant approved by ASIC, to monitor the company over the next two years to ensure that it complies with its statutory obligations.

The industry is one which is already highly regulated but seemingly, not policed. Rules are in place to protect the interests of consumers but if the results of the ASIC investigation are to be believed, compliance by the industry is poor.

And to me a critical issue is that of commissions.  I personally have no difficulty with the concept that brokers should be paid a commission, after all, that’s what brokers do.  But a tension is created when a broker has at their disposal a range of different policies that are generally suitable to the client but which might pay a differing rate of commission from the insurer.  If the policies are identical, then no issue arises if there is a difference in the rate of commission paid from two different insurers.  But where an insurer offers a policy which is, in a client’s individual circumstances, largely suitable but arguably inferior to another one which is available, it must at the very least create the appearance of a potential for a conflict of interest to arise between the interests of the broker and that of their client.

When it comes to financial advice and insurance, consumers will rarely take the time to independently read, review and compare lengthy policy wordings but instead, tend to rely on the advice from their broker.

There is no easy answer to the dilemma but a good starting point would be to arm the Regulator with powers and fund the necessary resources, to ensure that consumers’ interests are protected.

Travis Schultz
Practice Group Leader
Schultz Toomey O’Brien Lawyers, Part of the Slater & Gordon Group
Ph: (07) 5413 8900
Fax: (07) 5413 8958

Stop using unfair business tactics

Business It is illegal to persuade or to use unfair business tactics to force a customer into signing an unreasonable contract.

It is important that when you are dealing with customers that could possibly be vulnerable*, that you must ensure that you don’t use their vulnerability as an advantage to your business and always act professionally and with a good conscience**.

*Vulnerable referring to:

  1. Those whom may have a disability;
  2. Don’t speak English well or English is their second language; or
  3. Are classed as low-income earners.

**Good conscience referring to:

  1. Giving customers enough time to read a contract
  2.  Providing questions and answers
  3. Providing advice
  4. Not pressuring the customer in to a contract or agreement
  5. Providing all the correct terms & conditions of the contract/agreement

A Silver Lining For Business

A Silver Lining for BusinessIn what may be an ironic twist of fate, the waning of the mining boom may actually be good for Australian Business. Before you start calling me crazy and threat to look me up, have a think about this. If recent data shows that wages are falling in real terms due to inflation out stripping wage rises, then that can only mean margin expansion for business as their prices remain aligned with the CPI but the cost of their labour actually reduces. This certainly is not good for the consumer nor is it good for workers, but the end of the mining boom has certainly assisted many businesses to constrain pay rises however, it has not necessarily prevented them from increasing their prices in line with inflation.

And my argument is probably supported by the “sentiment” surveys done by most of major banks. Where consumer confidence is falling and the purse strings are tightening, the graph for business confidence is heading in the opposite direction with many businesses actually planning on hiring more staff and expanding.

I am not going to suggest that it is necessarily the best thing for the Australian economy as a whole, but at least from the perspective of small business, if you do not directly engage with the mining sector, the end of the mining boom could be a blessing in disguise.

Travis Schultz
Managing Partner
Schultz Toomey O’Brien
Ph: (07) 5413 8900
Fax: (07) 5413 8955

Directors duties to be taken seriously

Directors duties to be taken seriouslyWith the changes to our tax system that are anticipated in the Federal Budget which will see higher personal rates of tax for high income earners and lower company taxes, it stands to reason that use of corporate vehicles to conduct businesses is likely to proliferate. After all, if corporate structures can be used validly to reduce a tax liability and provide a measure of asset protection, it would be sound financial and accountancy practice to use corporate vehicles to conduct business operations as often as possible. But what is often forgotten by those who set up companies to run their enterprise, is the duties that the directors become subject to under the Federal Corporations Act.

Quite apart from using care and diligence in managing the companies affairs, any director has an obligation to act in good faith and to act in the interest of the company (even of their own personal interests), to avoid conflicts of interest between their own and the company’s interests, to act honestly and to use the company’s intellectual property and confidential information for the benefit of the company and not themselves.

Whilst these obligations might seem to simply accord with common sense, they often become of greater importance when the company goes into liquidation or receivership. It is at that point in time that the action of the directors of the failed company become very closely scrutinised and if there has been any breach of duty, a director can be pursued personally.

Where a director of a company has known or ought to have known that the company was in financial difficulties and unable to pay its debts as they fell due, then under the provisions of the Corporations Act, a director can become personally liable for the debts incurred during the period that the company traded whilst is was insolvent.

So while the use of a corporate vehicle makes a lot of financial sense when running a business, it is critically important that directions appreciate and remain competent of the duties that they owe and seek professional advice if concerns arise about the performance of the business or potential conflicts of interest.

Travis Schultz
Managing Partner
Schultz Toomey O’Brien
Ph: (07) 5413 8900
Fax: (07) 5413 8958

Thinking of buying a business?

Thinking of Buying a Business?Due Diligence

It is important to ensure due diligence is carried out before purchasing a business so you know exactly what it is you are buying. This helps with eliminating any risks that maybe associated with the business.

With the due diligence process it is best to look at a number of different aspects of the business including how it is operated, financial performance, legal and tax compliance, customer contracts, intellectual property, assets and other details. This process is normally carried out once you have made a deal with the seller but before you have signed any contracts.

Be mindful that all this information is highly confidential and the seller may want you to sign a “non-disclosure” agreement before they provide you access to this information.

 Legal and Tax

There are a number of legal and tax questions you will need to consider when buying a business. Areas you may need assistance with include:

Legal

  1. Terms and conditions of the agreement and your rights and obligations
  2. Property search regarding health, water and sewerage
  3. Pending legal proceedings against the business or seller
  4. Best ways to handle the finances, purchase and business structure

Tax

  1. Capital gains tax
  2. Stamp duty implications
  3. GST or other stamp duty implications
  4. How to value your assets for best tax advantage

Finance and Sale

It is important to review the business’s sales performance and financial data so best to consult a professional to help you. Below are a few examples of what they could assist you with.

Financial Records

  1. Financial records for the past 3 years, including balance sheets, profit and loss statements, tax returns, purchases and sales records and bank statements
  2. Assess whether there is potential growth and if the business is profitable

Sales

  1. Reliability of Sales
  2. Seasonal patterns
  3. Are more resources required?
  4. What are the salespeople like in regards to the success of the business?
  5. What is unique about the product or service?

Business Operations and Industry

By carrying out a detailed review of the business’s operations and industry environment can help to determine the seller’s reasons behind selling the business. Here are some items you might want to assess:

The Business

  1. Is the business suitable for what you want to do/achieve?
  2. Restrictions such as franchise as to how the business must operate
  3. Permission for the business to actually be running the way it currently is
  4. Procedure manuals
  5. Business Licenses / equipment licenses etc

The Seller

  1. Reason for the sale
  2. Will there be training from the seller after you buy the business?
  3. Is there a trial period to work in the business before buying?

The Industry

  1. Is the business in a high growth industry?
  2. Is their possibilities that competition could increase and impact on the business further?
  3. Should the same suppliers be used?
  4. What are the supplier’s business credit ratings?
  5. Are the suppliers in any type of contract with the business?

Location

  1. Is the location of the business good or poor?
  2. Are there any changes to the local area that may affect the business?

Lease

  1. Is there a lease in place and can you continue under that same lease or does a new one need to be drawn up?
  2. What are the terms & conditions regarding the lease agreement?
  3. Who is the landlord and what are their rights and responsibilities?

Staff     

  1. Are all staff on contracts? Who is permanent/casual etc?
  2. What are the staff wages and salary packages and are what award are they under?
  3. Do staffs require any specific licences/ ongoing training?

Business Assets

You should assess the business you are going to buy and ensure you know what the tangible and intangible assets are. It is a good idea to know exactly what you are buying with the business and what may not be included in the sale.

Assets

  1. Is there a checklist of assets and have you check them out?
  2.  Book value, market value and replacement value of the assets.
  3. If inventory is involved, what inventory is included in the sale?
  4. Intangible items can include mailing lists, business name, database, leases.

Stock

  1. Find out what the turnover of stock is.
  2. Has the stock been correctly valued?

Equipment         

  1. Is it in good shape? Does it need repairing? Is it a hazard?
  2. Is it expensive to repair? Are parts easily available?
  3. Is any equipment leased? What are the terms and conditions?
  4. What happens when the lease for the equipment expires?

Expenses and Debts

To ensure you are getting the most for your money, make sure you completely understand what the ongoing costs are to the business and if the business has any debts. If you have a comprehensive understanding before going into the business you shouldn’t receive any surprises once you have purchased it. Some areas to look out for or to ask yourself include:

Expenses            

  1. Are you aware of all the expenses? Will you incur all of these same expenses when you purchase the business?
  2. Could there be some expenses missing?
  3. Are the expenses being paid through another business?
  4. What expenses do other similar businesses have?
  5. Are there body corporate expenses?
  6. Advertising agreements that need to be honoured?

Debts

  1. Are there any debts associated with the assets? What are the repayment terms?
  2. Will the cash flow of the business cover any debts?

(Source: Queensland Government, Business & Industry Portal, Revised 16th may 2014,  http://www.business.qld.gov.au/business/starting/business-startup-options/due-diligence-checklist/)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

If you are thinking of buying or selling a business, contact our team today and they will be able to assist you with all aspects 1300 STOLAW or http://www.stolaw.com.au/contact

Get Prepared for New Privacy Laws

Privacy LawsRecent amendments to Australia’s privacy laws take effect on 12 March 2014 and will have a significant impact on any business which has an annual turnover of greater than $3m.  The changes that were implemented by the Privacy Amendment (Enhancing Privacy Protection) Act 2012 were intended to expand the protection of privacy that Australian consumers enjoy and to deal with community concerns regarding the handling of personal information by businesses – and especially those who do so in an e-commerce environment.

The changes consolidate and harmonise the existing National Privacy Principles and implement a new credit reporting regime and give the Office of the Australian Information Commissioner much wider powers.

In order to comply with the legislation, affected businesses will have to have a privacy policy and be able to demonstrate that they have taken reasonable steps to implement practices and procedures that comply with the new legislation.  Any unsolicited information that could not have otherwise have been collected must be deidentified and destroyed and where businesses engage in direct marketing, they must ensure that all individuals are given an “opt-out” mechanism.  The principles also require that organisations must inform individuals of the affect or consequence of offshore disclosure of their personal information.

Businesses won’t really be able to take chances with non-compliance given that the legislation also ramps up penalties for non-compliance as fines of up to $1.7m can be imposed on agencies and companies and up to $340,000.00 for individuals.

If your business is going to be caught by the new regulations, there is a helpful fact sheet online on the website of the Office of the Australian Information Commissioner which can easily be found by searching “Fact Sheet 17: Privacy – Australian Privacy Principles”.

Travis Schultz
Managing Partner
Schultz Toomey O’Brien
Ph: (07) 5413 8900
Fax: (07) 5413 8955

Are office supplies a legal entitlement?

Office SuppliesOkay, so it may be a rather trivial issue, but I was bemused to receive an enquiry from a client recently as to whether it was “legal” for their employer to remove the chocolate biscuits, coffee and tea bags from the kitchen in a cost cutting drive designed to respond to challenging economic conditions.  While I had to hide my mirth at the scenario, the obvious answer was that, no, Tim Tams and Moccona are not something that an employer is legally obliged to supply in the staff room, even though it has become somewhat of an Australian tradition.

But such is the state of the economy and the parlous state of finance for many employers, that what were once sacrosanct “perks” provided to employees, have become casualties of the budget balancing exercise in tough economic conditions.  It was bemusing to read an online article recently, where some workers reported that their employers were even requiring employees to bring their own pens to work and to recycle paperclips that arrived with incoming mail, rather than buying their own.  Similarly, the practice of “hot desking” (where employees don’t have a designated desk and have to take whatever is available when they turn up for work, even if it is the kitchen), is becoming part of the drive to achieve cost efficiencies that will restore profitability to many businesses. One wonders whether the growing practice of allowing “work from home” arrangements is not as much about transferring infrastructure costs to employees as it is about providing work/life balance.

While all of these cost saving measures will undoubtedly save a few dollars and make a small difference to the bottom line numbers, there must surely be a more significant cost to employee morale that, whilst difficult to measure, is as intrinsically valuable as the Tim Tams in the staff room fridge. But the answer to the question is no; the provision of these staff amenities is not a legal requirement however, the Health Department might have something to say if an employer removes the toilet paper and paper towel from the office bathrooms!

Travis Schultz
Managing Partner
Schultz Toomey O’Brien Lawyers
Ph: (07) 5413 8900
Fax: (07) 5413 8958