Issue 100 – June 2019

RESEARCH AND DEVELOPMENT – OVERSEAS WORK

If you wish to claim overseas expenditure relative to a Research and Development Tax Incentive Claim you must submit an application for an “Advance/Overseas Finding” before the end of the income year in which the activity was conducted. There is no provision under the legislation for accepting late Applications relative to overseas expenditure relative to research and development.

Submitting an Overseas Finding is not the same as lodging the Registration Application for the Research and Development Tax Incentive.

An Overseas Finding is a finding by the Industry Research and Development Board about whether certain activities conducted outside of Australia, as part of an Australian Research and Development project, are eligible expenditure for the Research and Development Tax Incentive.

Care should be taken in undertaking any research and development activities outside of Australia. There are a number of eligibility conditions to be able to claim overseas expenditure for the Research and Development Rebate including:

One or more specified eligible “core R&D” activities undertaken solely in Australia cannot be completed without the overseas activity.
The overseas activity cannot be undertaken solely in Australia or the external territories for one of the following reasons:

Conducting the activity requires access to a facility, expertise or equipment not available in Australia.
Conducting the activity in Australia would contravene a law relating to quarantine.
Conducting the activity requires access to a population (of living things) not available in Australia.
Conducting the activity requires access to a geographical or geological feature not available in Australia.

If you are undertaking a research and development project and you were considering incurring overseas expenditure and you would like to have a discussion with us about this please do not hesitate to contact the accountant in our organisation who you normally see.

RAISED CAPITAL AS AN EARLY STAGE INNOVATION COMPANY?

If you have raised capital as an Early Stage Innovation Company during the year ended 30 June 2019 you need to complete an Early Stage Innovation Company Report if your company has issued new shares to one or more investors during the financial year that could lead to an investor being entitled to access the Early Stage Investor Tax Incentives.

The incentives are that a retail investor is entitled to a tax rebate of 20% of the value of their investment up to the maximum investment that a retail investor can make of $50,000 i.e. $10,000.

If your investor is a sophisticated investor the potential incentive is 20% of the investment up to a maximum of $1 million meaning that the maximum incentive for a sophisticated investor is $200,000.

The report has to be lodged by 31 July for capital raised during 2018/2019.

If you have any questions on the operation of an Early Stage Innovation Company, please do not hesitate to contact us.

SURELY, I CAN’T GET TAKEN TO FAIR WORK FOR TERMINATING AN EMPLOYEE FOR THAT?

By Jordan Lowry, Director – Blackstone Business Group

I want you to imagine the following scenario happened in your own business. And as you read, I want you to consider how you would react in these circumstances? Would you be justified in terminating the offending employee however you saw fit?

Scenario: Due to significant reductions in cash sales since moving an employee to the front counter you have had suspicions that someone may be stealing from the till. You decide to investigate this further and review CCTV / camera footage that is in clear view of the till. Upon reviewing the footage, it is evident that the employee has been pocketing the money from cash sales rather than putting them through the till. Further investigation shows that the employee has printed dummy receipts for the affected customers via the ‘test’ function on the till/program.

How do you proceed from here? Do you feel like confronting the employee and escorting him/her from the site immediately?

This scenario is a real example that one of my now current clients was faced with. Unfortunately, this situation happens quite regularly. Employers that find themselves in this situation or one quite similar feel that they have every right to terminate the offending employee on the spot. I have on numerous occasions heard employers say ‘There is absolutely no way that Fair Work wouldn’t see their side of things and that they would be protected.’

Unfortunately, this thinking is flawed as it does not align with the requirements outlined in the Fair Work Act.

To emphasise the importance of following proper due process, I regularly use this analogy. Imagine that you a member of a jury, and at the start of a trial the police present evidence that the accused was caught standing over the body with the murder weapon in hand. The initial evidence produced does not look good for the accused, however, during the trial it is revealed that the police mishandled the evidence and broke the chain of custody. Does the case still look as promising for the prosecution? Unfortunately, in most cases such a mistake can be enough to allow the accused to walk free. This means that even with conclusive evidence, a small technicality can bring down the whole case.

The same is true in relation to the correct disciplinary process. No matter the circumstances surrounding gross / serious misconduct all employers are bound to follow the correct due process. Some things for employers to remember are as follows:

The employer must give adequate notice to a disciplinary meeting to address the allegations (to avoid further losses, reputation or brand damage an employer may choose to stand the employee down with full pay pending an investigation).
At the disciplinary meeting the employer must table the allegations and allow the employee the chance to respond to the allegations.
Following the employee’s response, the employer should allow the employee to leave the room so that consideration can be shown to the evidence and response/s provided. Once this has been reviewed the employee may be brought back into the room and the final decision can be delivered.
A termination letter may then be issued. Please note that to go into the meeting with a termination letter already compiled may be perceived as a preconceived judgment towards the allegations.

No matter the circumstances and how emotional you may feel, always take the time to make sure that you have the correct due process mapped out or alternatively call your HR provider to assist you with this.

If you are currently having any HR issues or if you have a question in relation to employee management, please feel free to contact one of the Blackstone team on 07 3392 6145 for a complimentary and confidential discussion.

DO SOMETHING DIFFERENT!

As a business operator, you need to be continually thinking about new marketing techniques.

How do you get your foot in the door?
How do you get someone’s attention?

The key is to do something different that adds value to the relationship. You need to develop a strategy that would get you through the door and add value and sustain the connection with the person you have targeted.

One way that is becoming popular is to revert back to “snail mail”. Seems a bit strange, however, it differentiates what you are sending to your target from what they are currently receiving, which is probably hundreds of emails a day and communications via webinar and Skype.

Some people suggest that a handwritten note to your target, using a pen or a texta, that is not black or blue, is a great way to get someone’s attention.

Another way is to send a handwritten card with a special message in it, targeted at the person to whom you want to pitch a proposal.

The key to open up the communication channel is to find out what your target is interested in and, if you can, find out what is “bugging” them. Then you can write the relevant message in your letter or card to show them that you understand and to give them a brief overview of what you might be able to do for them.

There are many other different ideas that you could try, in an attempt to gain someone’s attention. The only way you will know that works is to test the different strategies, record the results, identify what works for you and the prospects you are targeting.

Good luck with doing something different.

EVERYONE HAS RISKS

Businesses need to be very conscious of developing strategies for handling risks.

The key requirement is to identify the risks and the potential risk exposure to the business and then determine a risk mitigation strategy. Some examples of risk management strategies that business could look at include:

Risk: Cashflow

Risk Exposure: The liquidity exposure caused the increasing business activities, thus leading to increased debtors and increased operating expenses, particularly wages.

Risk Mitigation Strategy

Investigate cashflow facilities, including review of benefits from introducing a debtors’ financing facility and reviewing the effectiveness of the business’ debtors’ management system.

Risk: Poaching of Skilled Staff

Risk Exposure: Offering higher wages and conditions.

Risk Mitigation Strategy

Development of incentive packages and continuous development of “team” approach, which will make the business an employer of choice, including daily and weekly team meetings.
Real commitment to staff training.
Continuous expansion of the business.

Risk: Management Skills

Risk Exposure: Lack of skilled management team members to enable the business to grow and expand.

Risk Mitigation Strategy

Ongoing recruitment of capable team members who can be trained as managers.
Implementation of management team culture.
Daily team meetings.
Weekly overview meetings.
Monthly management team meetings.
6 monthly retreat planning meetings with the Board of Directors/Board of Advice
Incentivises for management team members to undertake further management training (e.g. Australian Institute of Company Director’ diploma course, public speaking training, project management, lean management training).
Allocation of portfolio responsibility to broaden management team members’ appreciation of the “total business environment”.

Risk: Occupational Health and Care

Risk Exposure: The business has a duty of care to a range of stakeholders, including team members, clients, suppliers, contractors, members of the public visiting the business’ premises and team members visiting other business’ premises.

Risk Mitigation Strategy

Management will identify particular OH&S issues that could relate to team members engaged by the business, to ensure appropriate strategies have been determined to deal with all OH&S issues affecting the business.

EVERYONE HAS 1,440 MINUTES A DAY

Time is one of those things which cannot be expanded, however, it can be better managed. Every one of us has 24 hours or 1,440 minutes per day. Some business people are better managers of their time than others. Business people need to allocate the number of hours per day that they are prepared to spend at work and then prioritise how they are going to spend that time.

Managers need to consider a lot of things then allocate time covering:

Technical Issues:
- Sales
- Client/customer work
Management Issues:
- Planning
- Team Leadership
- Conferences
- Controlling operations
- Development new products and services
- Administration
- Training and development

How do you better manage your time? Here are some suggestions:

Establish daily and weekly priority goals/”to do” lists. Mark off the task when it is completed and periodically prepare a log sheet of the amount of time you spent on various tasks.
Control the telephone. Do not allow the telephone to control you. Perhaps you could have messages taken during the day and then have very specific tine allocations to return telephone calls (e.g. one in the morning, the other in the afternoon). Have a “quiet period” each day so you can use the “quality time” to plan your daily activities and business strategies.
Consider and analyse those persons or tasks that cause you to waste time. Can you change your management style to overcome these time wasters (e.g. it might be better if you visited others in their offices or business premises rather than meeting in your office?) The visitor can close the meeting and basically leave.
All meetings should have an Agenda and should start and finish on time. At meetings, ensure that Minutes are taken and distributed and follow these up at the next meeting. If this type of activity continues at all meetings it will speed up the process
Is there anything currently on your desk or work area that could be delegated to someone else in the organisation?

Management of time is essential if you wish to be successful in business. Effective management involves planning, delegation and eliminating bad time wasting practices. Remember, everyone is allocated the same amount of time each day. How you effectively spend it will have significant impact on how you perform as a business person.

HOW WELL DO YOU KNOW YOUR BUSINESS?

It is a good idea to periodically review key aspects of the individual components of your business.

Customers

Who are your customers?
How well do you know their preferences?
Do you know your “A-grade” customers?
Are you solving your customers’ problems with your products/services?

Marketing

Is your website user-friendly?
Have you asked your customers whether they obtain the information they are seeking from your website?
Do your team members understand your growth strategy and your plan for positioning the business?

Performance Management

Have you identified Key Performance Indicators (KPIs) that apply to your business?
Do you share that KPI information with your team?

Cashflow

Are credit terms clearly explained in writing to new customers?
Are tax invoices prepared and dispatched promptly to your customers?
Do you continually analyse your cashflow position?
Have you calculated the “cashflow shortage” due to debtors not paying on time?

Team Members

Have you identified team members’ strengths and weaknesses?
Have you identified special training for development that individual team members may require?
Are all your team members on the “same page” of the “same book” when it comes to understanding what business you are in, who your customers are and the products/services you real want to sell?

If you wish, we can assist you with a review of your business. Please do not hesitate to contact us to do so.

ALLOCATION OF LIABILITIES IS IMPORTANT

Directors need to note the decision that was made by the Federal Court in the CENTRO Properties’ case. In this case, the court held that the directors were responsible for ensuring that there had been correct treatment of items within the Balance Sheet. The case arose over a challenge as to the treatment of some liabilities, which the court has decided should have been treated as “current liabilities” (i.e. could be repayable in the next 12 months), rather than long-term liabilities (i.e. liabilities that, in the normal course of business, do not have to be repaid until 12 months’ time).

The court found that the “directors failed to take all reasonable steps required of them and acted in the performance in their duties as directors, without exercising the degree of care and diligence the law requires of them”.

Even though this case involved a major public company, decisions made in cases such as this, relate to all companies. Therefore, this judgement needs to be reviewed by all company directors, as it emphasises a very important aspect of a company director’s duties that they need to be aware before the directors sign off on the financial accounts. Furthermore, company directors need to have satisfied themselves that the financial accounts have been correctly prepared and that a correct calculation has been made of liabilities the Corporation Code deems to be “current liabilities”.

If you have any concerns relative to the treatment of any item within your financial accounts, please do not hesitate to contact us for a discussion.

REDUCING WASTAGE

The “5 S” system (a structure, systematic approach to housekeeping and a cornerstone of any world-class manufacturing) can assist a wide range of businesses, not just in manufacturing.

“5 S” involves creating an organised workplace, incorporating the following:

SORT – sorting and removing unnecessary items
SET IN ORDER – a place for everything and everything in its place
SHINE – cleaning the work area
STANDARDS – establishing the rules and standards for the business
SUSTAIN - maintaining the standards in a disciplined way.

The “5 S” system can assist businesses to improve efficiency, which should then flow through the profitability.

If your business operates in one of the Australian government’s “priority industries”, your business could be eligible for a Business Growth Grant, which should assist in the implementation of the “5 S” system to improve efficiencies within your business.

ELIMINATION OF WASTE IS A KEY MANAGEMENT CHALLENGE

Waste is defined as anything within the process, people or structure that is wasteful, including space, time, parts, people’s potential and more. Management needs to observe what is happening on the workshop floor, shop floor, office, hospital, surgery, etc., to get a full understanding of the potential for waste reduction. There is no use worrying about tomorrow when you cannot identify today’s waste. Customers ultimately won’t pay for waste. The business strategy should be to eliminate waste, improve customer satisfaction and improve profitability. It is generally accepted that there are seven major waster areas. These are:

Over Production

Over production is caused by producing goods over and above the amount required by the market. Getting ahead of demand results in extra raw materials, labour and storage being utilised. This is a greater change of damage, deterioration or obsolescence.

Waiting (Delays)

Such as”

Operator waiting for components or materials;
Waiting for set-ups or changeovers of production flow;
Waiting for breakdowns to be fixed;
Waiting for instructions; and
Parts queuing, waiting to be processed.

Transport

Management should ensure that when allocating where a job is to be set up, consideration has been given to the next job at that location, particularly if the location allocation is going to involve excessive movement around the workshop.

Extra Processing

Inappropriate or excessive processing, which does not add value to the customers. Performing work that provides no additional value to the customer.

Inventory

Excess inventory increases costs. For example, cost of capital tied up in material, extra handling, consumes materials that could be used for customer’s orders.

Unnecessary Motion

Any movement that is not adding value includes the movement of parts and operators walking from one station to another to find material or tools and equipment.

Defects

Costs involved in rejects or reworks, downgraded products and refurbished items. Can the work process be changed to reduce defects to nil? Management should be closely examining the quantity of defects each day and mentoring the team members on how to reduce the quantity of defects being produced.