Bushfire relief from ATO obligations


The ATO has provided relief from lodgement compliance and payment obligations for those impacted by the bushfires. An automatic two month deferral for activity statements lodgements and payments due has been provided to those in affected postcodes.


Taxpayers can also call the ATO directly to request further assistance, such as requesting extra time to manage tax debt or lodgements, help finding lost documentation such as Tax File Numbers, reconstructing tax documentation, fast tracking refunds, interest free periods, and remittance of penalties or interest charged during the crisis.

If you need our assistance in getting back on track with lodgements or payments contact our office.

The countdown to Christmas is now on and we're in the midst of the headlong rush to get everything done and capitalise on any remaining opportunities before the Christmas lull. Busy period or not, Christmas causes a period of dislocation and volatility for most businesses. This dislocation and volatility mean that it is not 'business as usual' and for many businesses, it is the change that causes the problem.

Most business owners cope well with consistent trading conditions, where trading and business conditions are predictable as are the solutions to issues that arise, but it is a different story during periods of disruption. Here are some things to watch out for:

1. Ho, Ho, No. The trading stock headache.

If business activity spikes over the Christmas period and you sell goods, then there is a temptation to increase stock levels. That makes sense as long as you don't go too far. Too much stock post the Christmas period and you will either be carrying product that is out of season or you will have too much cash tied up in trading stock. Try to work with suppliers who can supply on short notice. Better yet, see if some of your suppliers will supply you on consignment where you only pay them once the stock is sold. It might be better to miss a few sales than carry a trading stock headache into the New Year.

Managing your trading stock is not just about managing cost, consumers will go online if they cannot find what they need in store. Some savvy retailers are capitalising on this with opportunities to purchase online while in-store if stock is not available or providing free shipping codes.

2. The discounting trend

Consumers now expect a bargain and can generally find one. The attraction of the Black Friday sales is that stock is generally available. Those waiting for bargains in the week immediately prior to Christmas, can only choose from what's left.

If you choose to discount stock (or the market forces you to), it's essential to know your profit margins to determine what you can afford to give away. A business with a 30% gross profit margin that offers a 25% discount (certainly nothing unusual about that in today's market) needs a 500% increase in sales volume simply to maintain the same position. The result generally is that often businesses trade below their breakeven point and generate losses. So, think carefully about your strategy and what you can sustain.

3. The Christmas cost hangover

Costs tend to go up over Christmas. More staff, leave costs, downtime from non-trading days, as well as increased promotional costs all mean that the cost of doing business increases. Keep an eye on them. It's great to get into the Christmas spirit as long as you don't end up with a New Year hangover.

Many businesses also bring on casual staff. It's essential that you pay staff at the correct rates and meet your Superannuation Guarantee obligations.  Under the Retail Award, the rate for adult casuals (21 and over) start at $26.76. There is also a 3 hour shift minimum for all casuals regardless of whether you send them home early. Check the pay calculator to find the correct rates.

 4. New Year cash flow crunch

The New Year often leads into a quieter trading and tighter cash flow period. The March quarter tends to be the toughest cash flow quarter of the year. You will need a cash buffer going into the New Year. Don't over commit yourself in the run up to year end and end up in trouble in the New Year.

5. Take a lesson from Scrooge

If you work with account customers, start your debtor follow up now. If your customers are under any cash flow pressures, the Christmas period will only increase that pressure. The creditors who chase hard and early will get paid first. Don't be the last supplier on the list; the bucket may be empty by then.

Christmas is a great time of year. Just don't get caught up in the rush and let things get out of control.

Find My Lost Super

Looking for lost super ? Here's how.

To find any lost or unclaimed super, both AUSfund and the ATO have superannuation search tools. Generally all you need is your Tax File Number (TFN) and, if you want to transfer your unclaimed super to your preferred super fund, your super fund membership number as well.
  • Create a myGov online account and link it to the ATO.
  • View the details of all your super accounts, including any you may have lost track of.
  • Find lost super that you can rollover into a super account you choose.
  • Find any super the ATO is holding on your behalf.
  • Consolidate multiple super accounts into one account.

For more information visit https://www.superguide.com.au/accessing-superannuation/find-lost-super


From 1 January 2020, eligible individuals with multiple employers can apply to opt out of receiving super guarantee ('SG') from some of their employers, to help them avoid unintentionally going over the concessional contributions cap.

If appropriate for them, they should submit the relevant ATO form to apply for an SG employer shortfall exemption certificate, which releases one or more of their employers from their SG obligations for up to four quarters in one financial year.

Note that this measure may not benefit everyone who is eligible, so before lodging the form, it is important to consider the individual's employment arrangements, such as how their pay and other entitlements may change (if at all), and the effect of any relevant award or workplace agreement applicable to them. Editor: We can assist with the analysis of your personal situation and the lodgement of this form.

The measure only became law on 2 October 2019, so to give eligible employees time to make an application, the ATO will accept applications for the 2019/20 financial year as follows:

n       third quarter commencing 1 January 2020 - lodge on or before 18 November 2019; and

n       fourth quarter commencing 1 April 2020 - lodge on or before 31 January 2020.

A separate application is required for each financial year.

#clarkemcewan #optoutsuper #highincomeearners #atosuper #superannuation #superoptout #superopt-out

Whether you use a tax agent or choose to lodge your tax return yourself, it is important for investors to know that anyone who is deriving income from the gig economy without declaring it, the tax office either already knows, or its capability to unearth such hidden income is becoming more sophisticated. This includes rental property advertised on GumTree, AirBnB, Stayz and Booking.com.

Taking cash? You'd better get your ducks lined up. The ATO can go back years if it believes there has been a non-declaration of income in past years.  The ATO knows there is very low compliance in this area and that a lot of people have chosen to ignore the obvious: that is, if they rent out a room or a granny flat for cash, that is assessable income they need to declare.

The flip side of the cash economy is that the cash-based investor is missing out of hundreds of dollars of expenses relating to that rent.  You can avoid these common mistakes and save time and money by addressing the 10 tips below. 

Apportioning expenses and income for co-owned properties

If you own a rental property with someone else, you must declare rental income and claim expenses according to your legal ownership of the property. As joint tenants your legal interest will be an equal split, and as tenants in common you may have different ownership interests.

Make sure your property is genuinely available for rent

Your property must be genuinely available for rent to claim a tax deduction. This means:

•you must be able to show a clear intention to rent the property

•advertising the property so that someone is likely to rent it and set the rent in line with similar properties in the area

•avoiding unreasonable rental conditions.

Getting initial repairs and capital improvements right

Ongoing repairs that relate directly to wear and tear or other damage that happened as a result of you renting out the property can be claimed in full in the same year you incurred the expense. For example, repairing the hot water system or part of a damaged roof can be deducted immediately.

Initial repairs for damage, that existed when the property was purchased, such as replacing broken light fittings and repairing damaged floor boards aren't immediately deductible. Instead these costs are used to work out your capital gain or capital loss when you sell the property.

Replacing an entire structure like a roof when only part of it is damaged or renovating a bathroom is classified as an improvement and not immediately deductible. These are building costs which you can claim at 2.5% each year for 40 years from the date of completion.

If you completely replace a damaged item that is detachable from the house and it costs more than $300 (eg replacing the entire hot water system) the cost must be depreciated over a number of years.

Claiming borrowing expenses

If your borrowing expenses are over $100, the deduction is spread over five years. If they are $100 or less, you can claim the full amount in the same income year you incurred the expense. Borrowing expenses include loan establishment fees, title search fees and costs of preparing and filing mortgage documents.

Claiming purchase costs

You can't claim any deductions for the costs of buying your property. These include conveyancing fees and stamp duty (for properties outside of the ACT). If you sell your property, these costs are then used when working out whether you need to pay capital gains tax.

Claiming interest on your loan

You can claim interest as a deduction if you take out a loan for your rental property. If you use some of the loan money for personal use such as buying a boat or going on a holiday, you can't claim the interest on that part of the loan. You can only claim the part of the interest that relates to the rental property.

Getting construction costs right

You can claim certain building costs, including extensions, alterations and structural improvements as capital works deductions. As a general rule, you can claim a capital works deduction at 2.5% of the construction cost for 40 years from the date the construction was completed.

Where your property was owned by someone else previously, and they claimed capital works deductions, ask them to provide you with the details so you can correctly calculate the deduction you're entitled to claim. If you can't obtain those details from the previous owner, you can use the services of a qualified professional who can estimate previous construction costs.

Claiming the right portion of your expenses

If your rental property is rented out to family or friends below market rate, you can only claim a deduction for that period up to the amount of rent you received. You can't claim deductions when your family or friends stay free of charge, or for periods of personal use.

Keeping the right records

You must have evidence of your income and expenses so you can claim everything you are entitled to. Capital gains tax may apply when you sell your rental property. So keep records over the period you own the property and for five years from the date you sell the property.

Getting your capital gains right when selling

When you sell your rental property, you will make either a capital gain or a capital loss. This is the difference between what it cost you to buy and improve the property, and what you receive when you sell it. Your costs must not include amounts already claimed as a deduction against rental income earned from the property, including depreciation and capital works. If you make a capital gain, you will need to include the gain in your tax return for that income year. If you make a capital loss, you can carry the loss forward and deduct it from capital gains in later years.


Why Apartments Trump Houses as Investments

There was a time when investing in apartments was considered to be a far inferior choice to buying a home or duplex.

The value of real estate is in the land, the experts say, so you should plonk your investing dollars in houses where the land value appreciates for many years to come.  However, George Raptis, director of Metropole Sydney says that rule doesn't always apply. 

"Some people have this notion where they think that a house and land is a good concept as far as investment is concerned, because obviously the land appreciates, but the house doesn't," he says.  "But here's the thing: if you go out into the suburbs and buy a house and land package, you might pay $400,000. Of that, $100,000 accounts for the land, and $300,000 is the cost of constructing the property. So the part of the asset that appreciates is only a small portion anyway. 

"If you buy an apartment in a premium land-locked suburb, the land has a higher value. There might be a block of 10 apartments in Bronte, for instance, where the land beneath is worth millions of dollars. Your land-to-asset ratio is a lot higher, and that's really what drives the price up."  In other words, Raptis is saying that it might be better to own a small slice of a highly valuable piece or land, rather than a large slice of a low-value patch of dirt.


To add weight to his argument, Raptis confirms that units have recently outperformed houses as far is growth is concerned. 


"That's not traditionally the norm – usually, it's normal for house values to outperform units," he clarifies.  "But I think apartments will continue to make good investments, because it all comes back to supply and demand."  Raptis points to Australia's changing demographic as the main driver of growth in apartment living.


"Obviously, units are more affordable, and rising property prices mean that more people are looking for units as opposed to houses," he says. "But as well as that, there are more single and two-person households today than there's even been, and they don't want to live in a five bedroom McMansion out in the suburbs. They want to be close to the CBD, close to work and entertainment."


The Australian Bureau of Statistics (ABS) projects that the number of lone-person households will swell significantly in the next decade or two, up from 1.8m in 2001, to between 2.8m and 3.7m by 2026.


"The way that we live is becoming more cosmopolitan, with beaches, cafes, and restaurants creeping higher on the priority list," Raptis adds.  "There's a whole new generation of people leaving home looking at apartment living, and basically, it's not necessary for these types of people to own a house with land."


Top tips for buying an apartment

When choosing a unit, there are specific details that can help you refine your search and improve the desirability of your property.


Bedrooms and floor space

The more bedrooms and the larger the floor space the better. If you're looking for a two bedroom unit, look at buying something above 80m2 and above 110m2 for a three bedroom. More bedrooms means that as an investor you can charge more rent, and your tenants can split the rent further to reduce their costs.


"The more bedrooms, the better it is in terms of affordability. Two bedroom units are in high demand, but I always think the larger the unit the better because construction costs are going up," says Rich Harvey, managing director with Propertybuyer.com.au.



The position of the unit in the building is the next element you need to look at. If your unit is in a quiet suburb, your tenants or buyers will probably be young families or empty nesters. These types of tenants or buyers will be looking for an easily accessible but safe, smaller apartment block with a unit on the first two floors.  Renting families are likely to expect that the apartment has its own garage or allocated parking spot. They may also pay more for a home with a good view of the city, water or surrounding suburbs.


If you are looking to buy in an active inner city apartment block, you will most probably be renting your unit to young professionals. In the upper end markets these tenants will pay for good views, but in the general tenant market, any level of the building would suffice.


Peter Koulizos, author of Top Australian Suburbs believes that no matter who your market is, the ground floor of a unit complex is by far the best decision for an investor. 

"Some people would argue with me but I would say ground floor is best from a landlord's perspective because you don't eliminate any of your market. If you go above ground floor you eliminate the older generation who don't want to go up the stairs or people with young kids," he says.


Property experts agree that an apartment facing towards the north and away from the road, would make a highly desirable unit in the right area. This type of unit would receive good air flow and minimal noise from the traffic.  A unit which is newer or has been renovated to incorporate modern open plan living will also be attractive to tenants and owner occupiers. Look for an apartment which provides a plenty of natural light and areas which can be used to entertain and relax.  


 Investors should be looking to buy established dwellings with character details as these properties will return higher capital growth due to their individual designs says Koulizos.    "I am talking about anything up until art deco or World War 2, before then is classified as 'character'. They were built with higher ceilings and more solidly, and they look nicer than the new high rise apartments," he explains.  As an owner occupier, you may be better off buying a newer apartment as it is less likely to have major problems and there is generally less maintenance involved.  

Buying process

The legalities of buying a house and a unit should be the same for each purchase. However, there are some key points of difference to keep in mind when purchasing a unit (over a house). 

  1. Get a copy of the strata report and get a strata search – the person who does the strata search will explain to you in plain English what has occurred in the strata report.
  2. Ask the professional doing the search whether the building is adequately insured (and if there is proof of how much the insurance covers). Go to http://www.strataman.com.au/insure.html  for an example.
  3. Ask yourself whether you can afford the quarterly levies.
  4. Know how much you may have left to pay on the quarterly council, water or electricity rates.
  5. Make sure you have done your due diligence before bidding at auction – this includes your strata search.
  6. Keep in mind the individual unit, common areas and entire building when bidding at the auction – keep your emotions out of the purchase if you're an investor

It pays to do your sums before taking the leap into property investment.  For advice about deposits, your borrowing capacity, financing a loan and other property purchase related matters contact us. We can refer you to a wide range of contacts in the financial and banking sectors once your initial figures are in order.



We are all aware of the pressures that small business owners face on a daily basis and recent research has shown that owners who regularly visit their accountants tend to have lower rates of anxiety.

According to Andrew Conway, the chief executive of the Institute of Public Accountants (IPA) "mental health issues for small business as an issue has almost reached epidemic proportions".

However the IPA's research has shown that more than 90 per cent of small and medium sized enterprises report that engaging with their accountant significantly lowers their anxiety.  

Which makes sense because if anyone knows what it is like to be going through a rough patch your accountant is the one person who will have heard it before. Accountants nationwide are increasingly becoming a sounding board for the mental stresses facing business owners, alongside their financial concerns.

"There won't be an accountant in the country that would not be prepared to have a conversation with the person who walks in their door saying, "I'm in trouble, I've got an issue here." Conway said. 

And who better to dispel the small business owner's misconceptions of legislation or explain what might happen if the ATO comes knocking.  Nine times out of ten there is a solution before the matter gets out of hand and communication is the start of it.

Our experience at Clarke McEwan has found the ATO to be very obliging if it knows what is going on, and the same can be said of financial institutions and creditors.  

Hear more insights from Andrew Conway on mental health and how to better engage with your accountant and important accounting matters on the My Business Podcast.

Legislation that passed through Parliament last month prevents taxpayers from claiming a deduction for expenses incurred for holding vacant land. The amendments are not only retrospective but go beyond purely vacant land.

Previously, if you bought vacant land with the intent to build a rental property on it, you may have been able to claim tax deductions for expenses incurred in holding the land such as loan interest, council rates and other ongoing holding costs.

The new laws, aimed predominantly at "Mum & Dads" (individuals, closely held trusts and SMSFs), prevent these deductions from being claimed. Since the new laws apply retrospectively to losses or outgoings incurred on or after 1 July 2019 regardless of whether the land was first held prior to this date, and with no grandfathering in place, the amendments will not only impact those intending to develop vacant land but those who have already acquired land to develop. This is the same target as previous tax changes that denied travel claims to visit residential rental properties and depreciation claims on plant and equipment in some residential rental properties.

The changes however, go beyond purely vacant land for residential purposes. Deductions could also be denied for land with a building on it, if that building is not 'substantial'. The only problem is, the legislation does not clearly define what 'substantial' means. The Bill suggests that a silo or shearing shed would be substantial but a residential garage for example, would not meet the test.

If the new measures prevent holding costs from being claimed as a deduction, then they will generally be added to the cost base of the asset for capital gains tax (CGT) purposes. This means that they can potentially reduce any capital gain made when you dispose of the property in the future. However, holding costs for CGT assets acquired before 21 August 1991 cannot be added to the cost base and these costs cannot increase or create a capital loss on sale of a property.

On the positive side, vacant land leased to third parties under an arm's-length arrangement may continue to be eligible for deductions for holding costs after 1 July 2019 if the land is used in a business activity. Also, land used in a primary production business will generally be excluded from the new rules. However, deductions could still potentially be lost (at least to some extent) if there are residential premises on the land or that are being constructed on the land.

There are also carve outs for land which has become vacant or which cannot be used to produce income for a period of time due to structures being impacted by natural disasters or other events beyond the owner's control. The amendments do not apply if you (or certain related parties) carry on a business on the land or where the land is owned by companies, superannuation funds (other than SMSFs), managed investment trusts or certain public trusts.

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Would you be willing to spend 10 to 15 years working two jobs, living in rented student-style digs and saving and investing every possible dollar, if it meant you could retire in your 30s? A growing number of millennials think FIRE is worth the sacrifice.

How does a 20-something rebel against the system in 2019? For a growing number of millennials, the answer is simple: by saving money. More specifically, they are radically reducing spending to stash away at least 50 per cent of their income and retire in their 30s or 40s.

FIRE (financial independence, retire early) is an international movement of people who seek financial control and flexibility by strict budgeting and frugal living. They have an aversion to debt and work extra jobs to boost their income early in life, then rely on low-cost growth investments such as exchange-traded funds (ETFs) to both build capital and draw from in early retirement.

It's about having the freedom to pursue your dreams and ambitions (no matter what your age), says Deacon Hayes, author of You Can Retire Early! Everything You Need to Achieve Financial Independence When You Want It. When your net worth is 25 times your annual expenses, you're considered financially independent.

FIRE was born in 1992 out of the best-selling book Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez. In the book, the authors correlated expenses and time spent at work to hours of your life.

The movement first gained popularity in the US, spread through a 1990s newsletter called The Complete Tightwad Gazette. Today, the FIRE message is shared through blogs and podcasts, with one – FIRE Drill – downloaded 7000 times per episode, securing it a spot in the top 100 investing podcasts on Apple's US charts.

You'll find other specialist forums on Reddit devoted to the FIRE movement in Australia, the UK, Europe, Canada and Asia.

Rich dad, poor dad, retired millennial

FIRE is one of those radical ideas that divides people because it involves some of the most personal things human beings deal with – money, relationships and self-worth.

Due to the passions stirred by the FIRE movement and his job in the public sector, the millennial behind the blog www.aussiefirebug.com prefers not to disclose his full name. "Matt" says he was always good at saving and being frugal, and discovered the FIRE movement online in 2014.

"FIRE is basically like financial independence [FI] on steroids," he says. "I knew FI was possible, but the people who had achieved it were all much older than me, so I assumed it must take decades of saving and investing."

Matt's investigation of FIRE strategies convinced him that FI as early as your 30s was possible, and the hundreds of people who comment on his website seem to agree.

"Careful spending in the consumer system we live in is also probably a positive, as is the willingness to be flexible about how you can earn a living in response to the way the world is developing." Dominic McCormick, Investment Consultant

One writes: "You merely need 10 years of pure sacrifice. I started late in my career, first decent job at age 30 and little money. Rented a small room, paying little and close to work. Worked hard, overtime etc. Scrooge for first five years. I took every dollar as gold because I understood the power of compounding.

Post five years, started to go easier on finances. Invested from day one. Fortunately it was 2008/2009 onwards. Bought a mixture of shares and Aussie properties. Had a like-minded partner, so it was a breeze. Retired age 38. Partner works one to two times a week. Two kids. Net worth A$2 million including super."

Matt says Australian FIRE chasers focus on investing in shares via ETFs and listed investment companies and believe there's a good chance they will be able to live off 4 per cent of dividends from their portfolio forever, which also factors in inflation. (This includes cashing in some of the shares over time.)

This investment strategy is common to FIRE groups in other countries, although some include other sources of investment such as rental property.

Financial independence, retire when?

Sydney-based investment consultant Dominic McCormick believes that, on the one hand, a rebellion against materialism is long overdue. "Careful spending in the consumer system we live in is also probably a positive, as is the willingness to be flexible about how you earn a living in response to the way the world is developing," he says.

Psychologist Jane Enter, of Cape Byron Medical Centre, agrees. "Millennials are extremely smart and they have looked at the way that boomers consumed and worked, and said they want greater balance and to do life differently."

The FIRE movement is also characterised by a desire to avoid reliance on government handouts.

However, the investment strategies used for FIRE by many millennials may be overly optimistic, McCormick believes.

"There seems to be excessive reliance on the rule that you can withdraw 4 per cent of the portfolio each year, and the growth as well as the income will reliably replace this."

What would happen in a deep or extended bear market, he asks. Even those who are older may face problems, "and we're talking about millennials who are looking at at least 50 years of retirement".

That said, many FIRE followers, including Matt, say they never plan to retire, they just want to be financially comfortable enough to do work they love. Others start later in life and don't have such an enormous portfolio to build.

Financial consultant Ivan Guan, author of FIRE Your Retirement: 3 Simple Steps to Financial Independence and Retire Early and founder of www.sgmoneymatters.com, says: "FIRE is a widely discussed subject among the online community in Singapore.

"Typically, FIRE becomes a topic when people reach their 40s. It is probably because they are sick of their corporate jobs and want to make some changes. At the same time, they have more financial resources [such as savings] and time [as their children have grown up] to devote to FIRE."

FIRE-proofing life

McCormick says that, theoretically, the FIRE model could work, if millennials save and invest enough money to not only account for long retirement, but also inflation and unexpected life events such as illness.

"Over a longer time period, it is more likely that some form of disaster may hit. If you are retiring on a very frugal budget, you need everything to go right, including in life and the assets market. Often, FIRE followers just look back at how equities have done recently and assume high single-digit or double-digit returns.

"At the same time, younger people who follow FIRE need to be willing to give up on eating out a lot or going on expensive holidays, and a lot of millennials are about experiencing life as well." 

"I don't think of FIRE as restricting my spending," says Matt. "I think about it as a shift in mindset and identifying what truly makes me happy.

"I'm human. I buy stuff I don't need all the time, but I know that spending money on something I don't need will mean I'm delaying my [progress] towards freedom."

He and his partner don't buy the latest smartphones, and they rent a small unit instead of buying a house.

On this, Guan, himself a millennial, concurs: "There is nothing wrong with buying a house if you can afford it. However, tying down your financial resources to a property [especially in Singapore] creates a huge future liability and opportunity cost. If you have a mortgage to pay, you simply can't quit being a slave of your work."

Matt and his partner also focus on the small stuff that adds up. "We make little smart decisions like always packing lunch for work, using credit card rewards for cheap flights and insurance, trying not to buy any clothes at full price, and stocking up on specials at the supermarket [we average A$600 a month at the supermarket, which is quite expensive and something we could really tighten up if needed].

"In a normal year we save 60 to 65 per cent of our income. We still go out for drinks once a week and get a Friday night takeaway. But if we haven't retired within five years – when I am 34 and my partner is 32 – something has gone drastically wrong."

Of course, you could argue that someone in a First World country or a higher-paid career has a better chance of building a bulletproof portfolio. For many people, FIRE is outside of the realm of their day-to-day life because they don't make a living wage, says Elizabeth Willard Thames, author of Meet the Frugalwoods: Achieving Financial Independence Through Simple Living.

"Achieving FIRE in Singapore is exceptionally challenging, considering the high cost of living in one of the world's most expensive cities," says Guan.

However, he believes the FIRE movement awakens a person's desire to achieve more in their lives, not only limited to financial success, but other aspects in life. 

"It also helps bring up the society's standard of financial literacy. The bad thing about the FIRE movement is that, if you're not careful, you may end up sacrificing other important things in your life."

Matt agrees a potential disadvantage is alienating yourself from friends or family because they live a vastly different lifestyle than you. The advantage, he says, is peace of mind, options and being able to prioritise what's important.

The value of work

Work is not just about paying the bills. It can be meaningful if it gives you purpose, development opportunities and recognition. "People need meaning and connection, a reason to get up each day. For many, a job can provide that, as well as structure, and connection with colleagues," says Enter.

On the other hand, if you have a job you hate, or you just don't believe in the capitalist/consumerist world most of us live in, then the idea of giving up 40 hours a week of your life to work may rankle a little.

It is believed to be Confucius who said: "Choose a job you love, and you will never have to work a day in your life."

"When you work for your passion instead of survival, the whole dynamic changes," says Guan, "but I must admit it is not easy to achieve."

The answer for many may indeed be FIRE; in other words a focus on becoming financially independent as soon as possible.

It seems life after work, and a big life, is possible, no matter whether you're 30 or 65. According to Guan, "the difference between a dream and reality is action."

Editor's Disclaimer:  the above article is intended for insight only and is not advised as an alternative to conventional investment planning

Coming to grips with succession planning

With around 70 per cent of all Australian businesses being family-owned and operated, and an estimated $4.3 trillion of wealth locked up in these firms, having a succession plan to capitalise on this value when choosing to exit the business is crucial.

What exactly does 'succession planning' mean?

Business succession describes the process of a business owner transitioning out of the business. There are many different ways this can be achieved, which is why having a plan is essential to ensure the right option is chosen and that the relevant steps are taken to achieve a desirable outcome.

Why is it relevant to you as a business owner?

Building and running a business is hard work. So, it makes sense that when it comes time to exit, you would want to receive the best possible value for your efforts, and the best outcome for the business you have put your blood, sweat and tears into. For this reason, having a succession plan is so important for every business owner.

A succession plan allows a business owner to identify their company's opportunities for improvement and to scale, but also its impediments to growth, which might turn off prospective new owners and/or diminish the value of the business.

Additionally, developing and following a plan will allow you to minimise tax liabilities, plan ahead for life after the business (whatever that may entail) and ensure the transition – for yourself, your staff, your customers and the business itself – runs as smoothly as possible.

What are the different options for exiting a business?

There are a number of different paths owners can choose from when it comes time to exit their business. The most common ones are:

  1. Sell the business: This is probably the most recognised form of exiting a business, allowing the owner to receive a lump sum payment for the asset they have built up.
  2. Business merger: Similar to a sale, merging with a competitor can allow for one owner to hand over the reins to another, while simultaneously offering additional value to employees and customers.
  3. Pass the business down (to children or other relatives): Many businesses retain family ownership over a number of generations, allowing owners to bring in new ideas and enthusiasm for younger generations without losing the family's connection to the business through a sale.
  4. Employee or management buyout: It is possible for a buyer or group of buyers to come from within the business itself. This may involve a single or group of employees coming together to take over, or other directors, managers and board members buying out the share held by a co-owner.
  5. Stock market listing: Many start-ups choose to embark on an IPO to take the business into public ownership once it reaches a certain size.
  6.  Shut the business down: The simplest and most final way of exiting a business is to simply shut the doors and cease trading.

What should business owners know about succession planning?

Many business owners – especially those without a succession plan in place – are often shocked at how long it can take to exit a business, and exactly what is involved.

For instance, business advisers generally suggest that it takes between 18 months to 2 years to properly prepare a business for sale.

This is primarily because of the amount of behind-the-scenes work required. New owners, whether buyers, merger prospects or buyout parties, will want to see evidence of the company's performance, levels of debt, revenue structure, productivity, staffing levels and turnover rates, supply agreements, customer contracts and more.

In addition, they want the business owner to effectively provide a "brain dump" of everything they know about the business to ensure a smooth transition into operating under new management. This includes operational procedures and process, passwords, relevant contact lists as well as ideas and opportunities to further scale and grow the business.

Having this process clearly documented will substantially increase the level of interest from prospective buyers, and how much they are ultimately willing to pay for the business.

It is also important for suppliers and customers to have confidence in any change in management or ownership. The sudden and seemingly unplanned exit of a business owner can lead both suppliers and customers to question the viability of the business, taking their custom elsewhere.

Business owners should also be aware that their company may hold more assets or value than they realise. For instance, some services firms wrongly believe that without the owner, there is no business. However, their customer base, for example, could be of substantial monetary value to competitors or other parties.

Finally, it is important to note that a business owner will generally be required to continue working within the business for a period of time (generally six to 12 months) to ensure a smooth transition to the new owners. A portion of the sale price is sometimes tied to this requirement being met.

What happens if there is no plan in place?

After spending years or even decades building up a successful business, no one wants to go out on a sour note. While the lack of a succession plan doesn't guarantee failure, there are some definite risks that a company without a plan may face, such as:

-  Accepting a lower offer for the business and/or its assets than what they are really worth.
-  Limiting the number of interested parties that the business may otherwise have attracted.
-  Scaring off a key customer who gets spooked by the unknown implications of the transition, in turn destroying cash flow and goodwill.
-  Discovering that the preferred exit option is unavailable. Sadly, this a growing problem for many business owners who aspire to pass it onto their children, only to discover the next generation either can't afford or have no desire to take
    over the business.
-  Being forced to delay retirement in order to generate the desired returns from the business.

Case study: Tom and Mary

Tom and Mary have run a successful printing supplies business for over 20 years and are now approaching retirement. They worked hard to build up the business from scratch and built a highly loyal customer base.

As such, Mary and Tom want to see these customers continue to receive the trusted service to which they are accustomed, and for the business to continue growing once it moves to new management. They would have liked their dedicated employees to take over and continue running the business, rather than sell out to an unknown party, but were concerned about the financial and logistical viability of this option.

In a bid to explore their options in more detail and receive bespoke advice on how best to manage their eventual exit from the business, Tom and Mary decided to work with an external consultant familiar with succession planning.

Using the advice of their business consultant, Mary and Tom have been able to overcome their initial fears and begin the process of transferring ownership of the business to their staff. Consultations have determined which employees will be involved in the buyout and how much each will contribute, allowing each member of staff to begin exploring their own options to finance the purchase.

Major customers have been thrilled with the news they will continue to be dealing with the same people they know and trust, and Tom and Mary are now at ease that their legacy and customers will continue to operate in good hands.

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