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The Half Way Mark

 

We find ourselves nearly mid-way through the calendar and it is only a month until another financial year will draw to a close. 

At Clarke McEwan we are about to embark on our annual round of tax planning, which is also a good time for our clients to do a reality check on how well their businesses are dealing with changed perceptions in the marketplace.

Customers today expect a great experience at all touch points, including awareness on social media, the transaction itself, and afterward. Successful businesses understand that it's more time consuming and costly to attract new clients, than it is to maintain existing ones. Unfortunately, some businesses are simply too large to remember all of their clients by name, and it can be difficult to maintain contact with their client base. However there are many digital platforms to make your own, for the purpose of maintaining awareness with your clients, and the options grow frequently.

While making plans for expenditure in the next financial year, it may be the time to budget for implementation of some of the new methods of providing client service by using some of the technology platforms that have emerged in 2018.

With a plethora of both good and poor quality products out there, it is important to set aside some time to do your research as you would when adopting any new system or technology for your business.  Here are a few ideas of where to begin:

1. Speech self service

We have seen a lot of ads about the latest Google device that responds to your voice commands. Google Home is really making inroads into our domestic situations. It still feels odd to ask the device out loud to turn on the lights and music, but children are already using it for their homework assignments. Clearly they are not shy and in time, neither will we be, as the technology continues to get smarter.

2. Digital Privacy and Safety

Just because many of us share some of our life on social media  doesn't mean we should not be concerned about safety measures online. In fact, quite the opposite is true. The digital rights and governance group at the University of Sydney conducted a survey of 1,600 people and found that even tech-savy people in their 20s and 30s were concerned. Online platforms (like FortKnoxster, a cyber-security company, specialized in developing secure and encrypted communication solutions) are taking advantage of blockchain technology, decentralized storage, and advanced encryption, and creating potential solutions to help protect user safety as it becomes more important.

3. Futuristic Technologies

Some of the very abilities we have only seen up until now on television or in the movies are finally making their appearance. Passwords will become a thing of the past as we start to see voice print as identification and with biometrics embedded into hand held devices, like iris scanning and face recognition. One such company, Prellis Biologics can now print organs on demand with a 3D printer. What was once the realm of sci-fi is now very real.

4. Blockchain

A major mainstream credit card company is already using blockchain, a more secure and transparent method to pay, as it is said to be a more efficient method of paying. It also removes the need to swipe a credit card. MasterCard's blockchain operates independently of a cryptocurrency, and instead accepts payments in local currency.

5. Artificial Intelligence

Artificial Intelligence is becoming more mainstream and businesses are starting to utilise it. A basic chat bot utilising an AI platform can be built in just a week and a half. The great thing is that no longer are large enterprises leading the way – anyone can be involved. Companies are now making their AI tools accessible and easy to use, so we will see more experimentation and innovation from smaller businesses. 

Paradoxically, new technologies can be both a major source of expenses for your business, as well as a method of eradicating your biggest costs.  Focus on the areas where you will see the biggest bang for your technology buck if a new technology succeeds -- but be ready to abandon the cutting edge if it cannot deliver on these promises.

If in doubt about the deductibility or tax treatment of acquiring new software or software enhancements before the end of the financial year, contact us.

 

From a young age we are encouraged to think about plotting a pathway in life that gets us from Point A to Point B in an efficient and expedient manner. If only!

The truth is for most of us, the pathway to where we want to get to is an elaborate and sometimes absurd game of snakes and ladders. Even more so when you throw your hat into the ring as an entrepreneur.

However, once you embrace this idea, you can start to shed your unrealistic and limiting expectations and go with what really works for you. It may not be the path you originally thought you'd take, but it could be the one that takes you to greatness, just as it did for these successful female entrepreneurs.

Sara Blakely

These are some of the things Sara Blakely tried but failed at before becoming the founder of a billion-dollar company: lawyer, stand-up comedian, and Goofy at Disney World. She did, however, sell fax machines for seven years with some success. "It was great life training," Blakely previously told Business Insider.

Blakely's story is the classic case of the accidental entrepreneur. She invented a fashion product but was not a fashion designer and had never been involved in the clothing trade in any way at all. Instead, she applied the old rule of necessity being the mother of invention when she experimented with cutting the foot section off her pantyhose in order to get the benefit of wearing pantyhose without what she saw as the unsightly bit that spoiled wearing open toe shoes.

It was a mundane and almost comical start to what would eventually become Spanx, which is now a women's hosiery and activewear company worth more than $US1 billion. When she shopped her invention around to hosiery mills in the beginning she was roundly shown the door. But her persistence and hustle meant she finally found a partnering manufacturer and distribution through Neiman Marcus.

Today, Blakely is personally worth $US1.1 billion and has business interests in a range of companies.

Sophia Amoruso

By her own admission, Sophia Amoruso was a little lost for direction at one stage in her life. A dumpster diving punk with zero in the way of conventional career ambitions, Amoruso recounts her strange journey from high school dropout to fashion mogul in her book #Girlboss: "Anyone looking for a sure bet, in business or in life, would never have put their money on me. But that didn't dissuade me from betting on myself. In the end I beat the odds".

Starting out as a strictly eBay venture, Amoruso built up Nasty Gal from a scungy lounge room operation into an e-commerce company valued at $300 million at its height. She did this all in the space of about seven frantic years, riding on the thrift store coat-tails of the e-commerce revolution and the retro tastes of her mainly Millennial customers.

More recently, Nasty Gal has hit rockier times, as Amoruso stepped down as chief executive in 2015 and the company filed for bankruptcy late last year. But having defied the odds once already, it would be a brave person who would bet against Amoruso flying high yet again.

Karlie Kloss

Being a supermodel comes with a certain set of expectations and becoming an advocate for coding is probably not one of them. However, a successful and lucrative modelling career has not stopped Karlie Kloss from pursuing her interest in software and web development, and passing on that passion to young women.

Kloss started modelling at the age of 14 and has modelled for some of the biggest names in the fashion game, including her time as a Victoria's Secret Angel from 2011 to 2014. But in recent years it has been her somewhat left-field turn into the world of computer education that has garnered her applause from more than just the fashion crowd.

Kloss says she was always interested in maths and science as a kid, but her modelling career took over and she was unable to really pursue those interest, until 2014 when she enrolled herself in a Ruby on Rails programming course.

Inspired by her first foray into the world of programming, she teamed up with computer education provider Flatiron School to develop her Kode with Klossy program and scholarship. The non-profit now runs coding summer camps, awards career scholarships to young women developers and helps to foster the role of girls and women in tech.

The 3 big challenges facing Australian small to medium businesses

In today's climate, small and medium business owners face a volley of challenges. In this video, Peter Switzer of Switzer TV speaks with Damien Bueno, Vice President of SAP about what they can do to overcome these challenges.

"Smaller business is able to be responsive and agile... and we increasingly see that the younger people, smart millennials are far more attracted to those nimble and agile smaller businesses." Damien Bueno

                                 Click here to access video

 

Why Start From Scratch?

THE BUSINESS BENEFITS OF BUYING AN ESTABLISHED HEALTHCARE PRACTICE

Purchasing an established healthcare practice could help secure a medical practitioner's financial future. It's not uncommon for business-minded practitioners to look at setting up their own practice once they feel they have secured a firm list of clientele. However, few consider the option of buying into an established practice – given the right circumstances, this option can yield the best outcome for the practitioner.

In much the same way that purchasing an established business can help entrepreneurs bypass challenges encountered in the start-up phase, purchasing an established healthcare is advantageous to practitioners. Access to an existing customer-base provides a predictable cash flow from Day One, and everything you need to run the practice will already be in-place including staff who know the business and how to do their job, as well as equipment and premises, which have all been secured for you.

Buying an established practice also eliminates a lot of time and capital that would traditionally be spent on building your business from the ground up and working on an effective business plan, which some practitioners might not want to or can't do. It also eliminates any unforeseen out-of-pocket expenses you might not have calculated for when setting up your own practice.

Below are some tips to keep in mind and consider when looking to purchase an established practice.

Finding the right practice

It's important to make sure you fully understand what kind of practice you are buying into, before making the big purchase. One way to see if a practice is suitable for you is to try working near the area, or even at the same practice if possible, and potentially even have an arrangement in place where you have the option of buying the practice after 12 months.

Have clear intentions before you begin

Make your intentions clear from the start. It's important to have an agreement in place when you join a practice, otherwise you could end up wasting a lot of time going back and forth on costs and transfers. Make sure you have a specific exit strategy in place for the existing owner as well, to avoid any crossovers that can cause problems.

Purchasing cost

Costs for a medical practice vary widely and can change depending on a number of factors. One of those factors is location. Some practitioners may prefer to work in an urban environment, however due to the convenience of the location, the price of a practice might be much higher than one based in the country. Country practices may cost less to purchase, however it's important to keep in mind that they may also offer a smaller clientele.

Ongoing staff

Starting out with experienced staff is a bonus when purchasing an established practice. To ensure a smooth transition into the business, you should keep in mind how existing staff are used to working and what systems are in place. You might have to factor in potential costs for training.

Existing equipment

Purchasing an existing practice often means you won't need to worry about buying new equipment. However, you will need to consider if the practice wholly owns the equipment, or if they are paying it off or leasing it. This is another factor you need to consider before making your decision to avoid unnecessary costs.

Use a specialist adviser or lender

Having a specialist adviser or lender can make the buying process much more simplified for you. A specialist adviser will show you the ins and outs of the business, keeping the process simple and right from the start. They will also remind you to do your due diligence, to ensure you know exactly what you're buying, including the liabilities. "Clarke McEwan's medical specialist division has been established on the Sunshine Coast for over 20 years.  Sunshine Coast and Brisbane clients all benefit from referrals to a huge range of contacts in the areas of lending, advising, banking, and insurance."

Adequate income protection, accident and life insurance is recommended. As a practitioner, you are the business asset, so if you can't work, you have no income. Make sure you take care of your biggest asset!

"Need assistance in your start up?  Clarke McEwan is also very experienced helping doctors establish themselves in private practice, and transitioning from the public system to private practice ."

Our Services for Medical Practitioners  How to Request an Appointment 

 

Choosing An Accountant

 Looking to Change Accountants ?  It's not just a numbers game.  

Accountants have the power to change the lives of business owners, but most of them aim for average. We're here to change all that.

How many business owners do you know that actually say "I really like working with my accountant!"?  They are out there – but more often than not, their accountant has done a shocking job at serving their customers' actual needs.

It's not a light decision to make the leap to another accountant, but if you've been meaning to change accountants for a while, make it your priority now!

We've put together some important questions that you should ask yourself when evaluating your current accountant, or choosing a new one.

Who does the accountant normally work with? 

This is important to know: Are you a good fit to the accounting firm?  Are they a good fit for you?

It's a two way street, and unfortunately most accounting firms will usually say "Yes"  to anyone – whether they can provide them with value for their money or not.

Be sure you ask for leads within your industry, and even look at their marketing material.  Don't try to be a square peg in a round hole!

What services does the accountant offer?

You need to make sure their experience and skill set matches the service that you're after.

Are you looking for business advice at an accounting firm that just pumps out tax returns? Do you need bookkeeping assistance?

In most cases, if the accounting firm cannot do what you're after, they will most likely work with someone who can.  It's also best that if you need a second adviser, for an international tax matter for instance, that you keep your accountant in the loop, or let them manage the business relationship.

What does the accountant specialise in?

What is the one thing that the accountant would provide you over all other things?

Where is there best value to you as the customer? Look for statements like "we work with you, providing insight into your business and its numbers" rather than "we're really, really good at tax returns". 

After all, any firm can churn out a tax return. Business acumen and advice is another matter. 

How will the accountant charge me?

How do the dollars work?  Do they charge in a way that rewards inefficiency, or do they charge for the value that they provide and the access to knowledge? It's not always what they can do,  but rather what they know.

It's a different conversation and focus for both you and the accountant.  The attention shifts from 'be quick to reduce the fee' to 'let's focus on where the value is'.

Some questions to pose might be:

  • What does the project or subscription include?
  • Do they price each job before they start, so you can both agree to the scope and terms?
  • Do they allow you to pay by the month to spread out the burden on cash flow?

Be sure to get a good understanding of the charges and how they work – it avoids unwanted surprises and you have clarity before moving forward.

What is the response time to my questions?

How quickly will you expect to hear back from your accountant, and who will answer that query?  We regularly hear from new clients that a former accountant takes weeks to get back to them, or doesn't respond at all!

Response time is key number that we focus on – and we measure it in hours, live on our website or by return phone call the same day.

Make sure you ask for a clear understanding of how and how quickly your accountant will return your call or email.

How long does it take to get your work done?

"Turn-around time" is a common complaint heard when businesses are talking about their existing accountants.

If, after an honest look at how you provided information and followed up their queries, your accountant still takes months to finish your work without a valid reason, maybe it's time that you moved on.

What would your standards be if you ran a business that took that long?

This is one of the key numbers that we measure as the Clarke McEwan team – one that we see is important in the eyes of our clients. 

What technology does the accountant use?

It's important to know how you'll be interacting with your accountant on a regular basis.  It's all very well to throw ideas around on a whiteboard in the boardroom, but what about for the "in-between" times?

Do they use the internet, a website and technology to communicate with you or enhance web meetings to describe concepts and run scenarios? 

Be sure that the technology they use makes sense to you.

How often does the accountant talk to you each year?

At Clarke McEwan, what we really love about working with our clients is that we get to learn about their business and their lives.  Accountants can't do that if they only speak to you once or twice a year. 

This is how an accountant will be able to provide you with real insights into your business. It's important that you understand how often you'll be in touch with your accountant, and that you're comfortable with this.

Is the accountant a member of an association?

It's best to choose an accountant that is part of an association.  The three main associations in Australia are:

  • CPA Australia
  • Institute of Public Accountants Australia
  • The Institute of Chartered Accountants

All three have different levels of requirements to join, different membership levels – but all have a set of standards that members must adhere to.  If you've got a problem with an accountant, you can usually take it to their association.

Can you have a coffee or a beer with them?

It's important that you can hold a conversation with your accountant, outside of your business.  Ask whether they will meet you for a coffee to get acquainted.

By the way, John likes his coffee with a dash of milk.

How to kick-start your motivation

 

Even the most committed professionals can suffer from lapses in motivation or the strength to stay focused on monotonous but essential tasks. 

This easy five-step checklist will help boost your motivation and bring your team along with you.

1-Identify your personal motivators

Examine those factors that stimulate the desire in you to continually be interested and committed to a goal or desired outcome. Sometimes this will be a combination of both conscious and unconscious factors. It is reasonable to say that motivated people usually act in a way that goes beyond what a reasonable person would do.

So for you personally, what are your true, sustained and most powerful personal motivators? Is it achievement, recognition, competition, variation, winning or proving others wrong that fuels your desire?

2-Identify your underlying goals

Behind every motivational impulse lies a contributory factor. You may feel a great urge to do, or not to do, a particular behaviour and you continue to act this way despite the obvious disadvantages.

So why are you reluctant in these situations when it is a genuine opportunity to position yourself ? Do you, for example, have an underlying fear of not knowing what you need to know, or a fear of providing feedback that may be inaccurate? Or perhaps you are uncomfortable with sharing an opinion that is unpopular and which goes against the grain of what is considered conventional wisdom? 

3-Address the gaps between your current and ideal motivational mix

Now that you have identified what may be stopping you, this new awareness is the basis for change and will provide you with the insight to understand what adjustments you need to make.  

These gaps can occur for several reasons and over a lengthy period, but once the issue is identified and appropriate is action taken, the solution to bridging this gap can occur quickly and successfully.

4-Identify the valued alternative outcomes that these missing motivators will bring you

Start to envisage the alternative outcome that a behavioural change will provide over time, and how these new outcomes will benefit and drive greater achievement and success for you and your team.

Once it becomes apparent that the processes being followed are the right ones to gain future success regardless of what they might be, you can move to the final step.

5-Establish your new behaviours

Behavioural science has clearly demonstrated repeatedly that around three to four weeks of continuous focus on a new behaviour will lead to it becoming ingrained as new habits that delete and replace earlier, unwanted habits, be they professionally based or otherwise. Therefore, as you establish your new behaviour sets to these revised motivations, and focus on the value that those alternative outcomes will provide you over time, your motivations become a self-perpetuating process.

It is important to always remember that people are different and will have different types of motivation and to different degrees. There should be no judgement made here as there is no right or wrong, however you can make simple observations of those outcomes and a logical analysis made of how well, or otherwise they align to your stated goals.

 

5 Tips to get ahead in the new financial year

Proactive ways to get your new Financial Year strategy into shape

All around Australia, business owners and leadership teams are meeting with their accountants to plan for 30 June. But beyond tax planning and compliance, could those conversations add more value to your business?

Dean Love, Director of  an accounting and advisory firm says his clients often want to know what's next, rather than what has happened in the past.

"There's always a role for historic data, you can certainly learn from it. But you can't change it," he explains. "We also make it a priority to talk with our clients about the decisions they're making for the year ahead – and three years beyond that too."

He shares five ways to make sure you're proactively planning beyond your tax return.

1. There's more to end of year reporting than the P&L

Love says companies should pay more attention to their cash flow statements.

"This cuts through the accounting 'smoke and mirrors', because cash determines the health of your business. Whether you're accounting on an accrual or cash basis, you need to know where that cash has gone – and how that impacts your ability to fund your business plans or dividends."

Looking at a cash flow statement for the past 12 months can help you see patterns in spending, and also forecast the year ahead.

Also recommended is an aged debtors report to check whether working capital is tied up in receivables.

"We suggest clients push their '90 day plus' debtors to collect, as once you get beyond 90 days it can be quite risky and difficult. Often they're still doing business with those clients – not realising they're effectively financing that client's business. If you have an overdraft, those debtors are costing you in real terms."

For businesses with stock, an inventory aging report can help identify any obsolete or slow-moving products, which should be cleared pre-June 30 through promotions to make room for new inventory.

2. Benchmark your key performance metrics

What performance measures really matter to your business – and how do you compare with competitors and the industry average? It's an important question to ask at this time of year.

"Key performance indicators are not 'one size fits all', but most businesses – whether product or service – should be looking at their gross profit margin," suggests Love. "If it's positive, that's a good sign you are at least covering your overheads. If it is dropping off, it can be a warning sign and you need to look for the cause."

Then you can make an informed decision to correct it – before it starts to impact your cash flow.

Love says it's very easy to fall into the trap of working harder to generate sales, only to find you're focusing your energy on less profitable service lines. The additional investment in time or money may not prove worthwhile – or sustainable.

He also recommends looking at working capital ratio to check the liquidity of your business. "This is a forward-looking measure of how easily you can meet your debts over the next 12 months. If it's high, that may also be a red flag you're holding too much in inventory, or receivables."

 3. Take time out of the business before June 30

Even though it may feel even harder to take time out of the day-to-day operations at this time of year, it's essential to re-set your strategy before you discuss options with your accountant or financial adviser.

"If you only do one thing before June 30, do this," says Love. "It's an opportunity to get a helicopter view of your business, so you can focus on where you want it to go. If you're too close to the detail, you'll miss the bigger picture."

He suggests taking an afternoon with your leadership team to set your strategic plan and direction for the next financial year – and then discussing financial models with your accountant to understand the potential impact.

 4. The forward-thinking 3-way model

Love says developing a three-way financial model is a key part of their end of financial year discussions.

"This is how we tease out the forward thinking, and help clients plan for the year ahead. We can look at a certain scenario, and model the impact on the profit and loss, balance sheet and cash flow."

As an example, one of Love's clients was able to assess and plan for the impact of proposed development works on their trading activity. "It gave them a clear understanding of the consequences, and ensured everyone was on board."

Sometimes this model highlights assumptions that may need to be challenged, or lets you avoid a costly mistake – because the numbers simply don't stack up.

"If you've acquired a business, you can also use this to see what the next 12 months look like – and then hold management accountable to achieving their goals. It becomes a measuring stick for performance, and makes sure the business plan plays out from a financial perspective."

 5. Set up a sound governance structure

Love believes businesses of any size can benefit from a structured advisory model – and this is a good time of year to establish that framework.

"If you're still in a start-up phase, you may just need access to a business mentor to provide guidance on an as-needs basis. But as you grow, it's a good idea to appoint a panel of advisers, who can add value in areas beyond your core business expertise – such as financial services, HR, marketing or legal advice."

Clarke McEwan can assist to put together your advisory team through our network of contacts  and then once all this is in place, your business will be set for a more proactive approach to the financial year ahead. And while it's obviously important to ensure reports are in place for the tax office, and make sure you're being as tax effective as possible, it's also worth taking the time to get more strategic value from your data.

Drones highlight benefits of disruptive technology

 

 

Drones highlight benefits of disruptive technology - by My Business

Many business owners worry about the impacts of technological change. Yet drones (or UAVs) are a prime example of the benefits available to businesses regardless of size or industry.

Speaking before the Bankwest-sponsored seminar "2040 Farming – The Next Generation", David Kerr, CEO of Interspacial Systems/3D Aerial, said that a diverse range of industries are increasingly recognising the potential of drones.

"Unmanned aerial vehicles or drones have many uses in society. They can be used for things like security, real estate photography, mining [and] agriculture," he said.

Other uses include surf lifesaving and reconnaissance by emergency services.

In agriculture alone, David says the uses of this technology are far-reaching, enabling farmers and primary producers to achieve a new level of efficiency as well as removing the risk of injury and death due to accidents.

"If you're a water bomber or a crop sprayer, you have a one in six chance of having an accident," he said, noting that tests are already underway in Queensland with unmanned water bombers and crop dusters.

David said drones also offer farmers more efficient means of herding and mustering livestock, as well as surveying paddocks and using thermal imagery and other types of specialist photography to determine things such as soil temperature and saturation levels.

SME owners have previously outlined to My Business how they are embracing technology to transform both how they engage with their customers and how they operate behind the scenes.

 

To discuss the impact of technology changes on your business talk to us today. Arrange an appointment at http://www.clarkemcewan.com.au/contact_us/request_an_appointment or email us at info@clarkemcewan.com.au Sunshine Coast and Brisbane Offices

When is it worth starting a family trust

With proposed cuts to superannuation tax concessions and contribution limits, there is renewed interest in family trusts.

 

When is it worth starting a family trust ?

If family trusts are the new black, who do they best suit and do you need big assets upfront to make them worthwhile? Absolutely not, say advisers.

It's all about what your assets are likely to grow to and the tax rates of trust members years down the track when you sell investments and incur capital gains tax (CGT), says Andrew Simpson, partner with accounting firm Gunderson Briggs.

That's because capital gains can be distributed among family members to make use of all their income tax-free thresholds.

Thanks to the proposed cuts to superannuation tax concessions and contribution limits, there is renewed interest in family trusts.

Jonathan Philpot, partner in wealth management at HLB Mann Judd, says if you've got your mortgage out of the way and you've got monthly savings of about $5000 to invest, it's worth starting one. That's on top of maximising your super contributions.

$200,000 savings

"This would be with the aim of building up a family trust to at least $200,000 over the next few years," he says. "If, however, there was a lump sum of $50,000 and no further investments were likely, it would not be as cost-effective."

If yours is a household where you're pay-as-you-go employees and your savings are mostly in super, a family trust will not be as attractive. 

Anne Graham, managing director of McPhail Financial Planning, says: "There is generally no benefit in a PAYG employee having their salary paid to a trust – there are look-through tests re taxation of income and therefore this is not effective. So trusts don't work for PAYG employee income, regardless of the level of income earned. 

"They do work well for investment portfolios, income splitting, ownership of businesses etc."

Let's look at how a family business could make the most of a family trust structure.

Graham cites the case of Claire* and David* who are self-employed by their IT business, C&D Partners, drawing a nominal salary of $50,000 a year each.

Inheritance investment

The shares in the company are owned by their family trust – C&D Family Trust – and they are trustees. The beneficiaries of the trust are Claire and David, their children (students Natasha, 18, and Nathan, 21) and various other family members. The company makes a annual profit of $150,000, which is paid as a franked dividend to the shareholder which is the family trust.

"The income of the trust needs to be distributed otherwise it is taxed at penalty rates," explains Graham. "As the children have little or no income, we can elect to distribute income of say $60,000 each and Claire and David receive $15,000 each. All distributions carry franking credits."

Because the income is split, the overall tax payable is about $20,000 less than if Claire and David received salaries of, say, $125,000 each.

What about using a family trust to invest an inheritance?

Angela* and Fred*, 40, earn $180,000 and $40,000 respectively and have two children, 13 and 8. They've inherited $500,000, have no mortgage and want to invest the sum to spend the investment earnings on lifestyle expenses.

Lower tax

If they invested it in Fred's name, says Philpot, the annual income of $25,000 (assuming 5 per cent earnings) would be taxed at $8,62 (including the Medicare levy).

By investing the money through a family trust, the overall tax result for the first five years would be the same. But after that, says Philpot, their oldest child will be 18 and can become the main beneficiary, meaning tax would be $1,347 (including the low income rebate). 

"A further five years on and perhaps the eldest child is now working but the second child could then be a beneficiary," says Philpot. "Finally when they both retire, they can split the income between them."


 

The Economy in 2026 - What it might look like

The economy in 2026 – 6 possible transformations for Australia

By imagining for a few minutes that the year is 2026, we can get a better idea of how the Australian economy might evolve. Here six economists speculate on how the economy might change in the decade after 2016.

INTHEBLACK asked six leading economists to exercise their imaginations and invent a story of what Australia's economic evolution might look like by 2026. They invented economic environments with elements that we can already see, but with huge changes to jobs, businesses, cities and international relations.

Here, then, are six thought-provoking visions of possible economic changes ahead, each addressing a different element of the economy.

Automation, looking back from 2026 – Shane Oliver

In the past decade hundreds of thousands of jobs have disappeared in transport, professional services, manufacturing, government and other sectors as machines have taken over repetitive tasks.

In the past, such transformations occurred over decades, giving displaced businesses and workers time to adjust, and the technologies that have driven the process have given rise to new industries.

 

Shane Oliver

Shane Oliver

However, AMP Capital Investors chief economist Shane Oliver says the decade to 2026 has been different. The rapid speed of change has been traumatic for many – old jobs have been destroyed at a much faster pace than new ones have been created.

 

This has caused a growing gulf between those in well-paid jobs, immune to automation, and the rest.

With less disposable income around, economic growth has slowed and social tensions are increasing. There are growing demands for the government to use the tax and welfare systems to even the spread of income, and people are loudly advocating a shift to a four-day week to share jobs.

All is not gloom, however. Cafes, tourism operators, gyms, gene therapy clinics and other personal service providers are prospering, and new jobs and businesses are appearing all the time. Despite this, the period of dislocation has been painful for many.

The workplace, looking back from 2026 – Deborah Cobb-Clark

The plunge in office rents and property prices that began in 2021 shows little sign of letting up as the days of the corporate head office appear increasingly numbered.

 

Deborah Cobb-Clark

Deborah Cobb-Clark

While a core of employees continue to work in the same physical space, for years now a growing proportion has been taking advantage of advances in communications technology to work from remote locations – homes, shared office spaces and even cafes with dedicated work areas.

 

University of Sydney professor of economics Deborah Cobb-Clark, who anticipated this development a decade ago in 2016, says this, combined with the increasing automation of many jobs, is transforming the way we live and work.

People have more leisure time as their workload shrinks and an increasing number are freed from having to undertake the daily commute.

The new model of work is changing the structure and purpose of cities. Increasingly, the CBD as a work destination is a relic of the past and the "peak hour" pressure on transport networks is receding. People still flock to cities, but mostly for their amenity and social life rather than work.

Population ageing, looking back from 2026 – Stephen Koukoulas

Having already helped to usher in land taxes in the states, the Federal Government is now facing an even tougher political fight over plans to increase the retirement age to 70 years, introduce death duties and establish a HECS-style scheme for the aged pension. 

 

Stephen Koukoulas

Stephen Koukoulas

Stephen Koukoulas of Market Economics says there is little choice. "It is a matter of dollars and cents," he says. "Community expectations are that the provision of services be held to a high level, and that is very expensive."

 

The nation's swelling ranks of retirees are driving ever-increasing demands for health care, community services and income support. The burden of this cost is falling on a shrinking share of working-age Australians.

The situation has called for radical solutions, and the government is now contemplating measures that 10 years ago would have been considered unthinkable – including a progressive scale of death duties and a "reverse-HECS" for pensions, under which a means-tested proportion of the welfare payments claimed by recipients are reimbursed to the government from their estate when they die.

"People want a decent level of government-provided services," Koukoulas says, "but without some serious action, there is a real risk of it becoming unaffordable."

Productivity, looking back from 2026 – Mardi Dungey

Australia's biggest economic achievement of the past decade has been to solve the conundrum of chronically low productivity.

 

Mardi Dungey

Mardi Dungey

By breaking down rigidities in the way work is conceived and structured, University of Tasmania professor of economics and finance Mardi Dungey says the nation has tapped into a rich pool of labour and expertise among those who in the past have been systematically excluded from the workforce, such as those with disabilities and chronic medical conditions.

 

By relaxing time constraints and instead conceiving jobs in terms of outcomes, the nation has opened up a swathe of opportunities for those who might take longer to complete a task, but can deliver results at least the equal of able-bodied workers.

Innovations like e-lancing and a more sophisticated approach to measuring production, particularly in the services, have helped drive the transformation.

Deflation, looking back from 2026 – Nicholas Gruen

Almost 20 years on from the global financial crisis, the Australian economy, like that of much of the developed world, continues to struggle to get out of second gear.

While Australia's record of 35 years of unbroken growth is remarkable, Lateral Economics principal Nicholas Gruen says there is little to celebrate from the last 10 years. The dark cloud of economic stagnation that settled over Europe in the wake of the GFC has spread Down Under.

 

Nicholas Gruen

Nicholas Gruen

The tough medicine policies forced on Europe's debtor nations (Italy, Spain, Greece) by Germany stoked deflationary forces that quelled growth there, and a similar dynamic has gripped Australia. Central banks around the world, including in Australia, have struggled in vain to lift the inflation rate.

 

Most workers have not had a real pay rise in years, and housing costs are claiming an increasing share of income, leaving fewer dollars left over for shopping and personal services. In turn, soft turnover has given firms little reason to hire more staff or make substantial investments.

In the past decade, annual growth has averaged 2.5 to 3 per cent, rather than 3 to 3.75 per cent. The result, says Gruen, has been to make the country 5 per cent poorer than it would otherwise have been. 

Instead of acting to break out of this rut, successive governments have been complacent. "Now our unemployment rate is higher than the United Kingdom and the US, and there is no sense of urgency, or that something is seriously wrong," says Gruen. "It is a story of the great Australian complacency."

China's hard landing, looking back from 2026 – Saul Eslake

In the decade since 2016 the country has endured slowing population growth, a continued decline in the terms of trade and productivity, and an end to booming house prices. Yet the biggest shock has come from the liquidity crisis that crippled China's financial system.

 

Saul Eslake

Saul Eslake

The warning signs were already appearing in the middle of the last decade, says independent economist Saul Eslake, when the country's banking system developed some of the worrying characteristics of the American banking system before the global financial crisis hit.

 

"The GFC was not primarily caused by a huge increase in bad mortgage loans, but by a wholesale run on funds tied up in securities," Eslake said at the time.

"China's banking system has taken on some of that character. China's banking system has become much more dependent on the types of funding [securities] that brought down the Western banking system [in the GFC]," he adds.

The Asian country's massive foreign exchange reserves, worth around US$3 trillion, were of little help in what became a solvency crisis. For Australia, whose trade dependency on one nation was greater than at any time since the 1950s, the economic consequences have been severe.


Contact Clarke McEwan