The new financial year has begun, bringing with it an array of opportunities for small businesses to audit their internal systems. This guest post by Anthony Lieu of LegalVision outlines some of the upcoming changes affecting businesses and key measures businesses can take to effectively forward plan.
1. Legislation changes to superannuation
There has been a marginal increase in the maximum concessional contribution limit over the last two-quarters of the financial year, with an increase from $25,000 to $30,000.
Small business owners can and should take advantage of the substantial tax benefits that can be gained from making early super contributions. This is primarily because regardless of the tax bracket an owner may fall into, super is taxed at a constant 15 per cent.
Moreover, if you have a self-managed super fund, the maximum amount an individual alone can contribute will now be $180,000.
2. Ensuring the suitability of your business structure and company tax rates
The new financial year is also a time to reflect on business growth, something which may necessitate the restructure of the business. If you are currently operating as a sole trader and looking to expand, you might want to consider moving into a partnership arrangement or registering a company, whereby it will be easier to grow, and hire employees. If you are looking to raise capital, operating as a partnership or company will enable you to issue shareholder agreements, allowing investors to purchase a stake of your business.
Personal liability as a sole trader is also a concern which can be addressed by registering as a company. The reason for this is directors are protected from creditors if they go into debt, provided they do not continue to trade while insolvent.
In regards to the administrative process, you will have to apply for a new ABN, complete the relevant legal documents and register the new details with the Australian Business Register.
Additionally, tax is an important consideration in business restructuring, and as an ever-changing area of legislation. The major tax reform of 2016 is the cut to corporate tax rates, with legislation passing for a 1.5% tax reduction for incorporated SMEs and 5% tax discount for non-incorporated small business. This is especially beneficial for companies that don’t have a fixed period in which to report income, meaning that sales income can be brought forward if more advantageous under the new more favourable rates.
3. Employee agreements and changes to the minimum wage
With the changes to the minimum wage in 2016, small businesses should review their employment agreements. Corresponding to the 2.6% wage increase, employers should ensure that they are paying their employees a minimum $17.70 an hour, amounting to an additional $15.80 per week.
In addition to wage requirements, other areas of employment agreements to update include company policies and termination provisions.
Regarding company policies, it is important to make clear how the policies operate in all contexts. Courts have previously held that even where the policy is not available to employees, any violation can still be held to be a breach of contract.
In terms of termination provisions, remember to include explicit reference to the circumstances which constitute dismissal and how proper notice will be given. This is to ensure these provisions cannot be as easily contested in court in the event the grounds for dismissal are legally disputed.
With a new year ahead, an audit of business processes and policies is important. Business owners should look to reviewing the latest changes in legislation to minimise potential hassles, risk and workload later down the track. Questions? Call LegalVision on 1300 544 755.
Guest post by Anthony Lieu, Lawyer and Strategist at LegalVision. He has a keen interest in startup law, IT law and scaling fast-growing businesses. He has a strong understanding in how startups operate at all stages and navigating the myriad of legal issues surrounding online businesses including registering a company. He has worked in the public and private legal sector, specialising in disputes and litigation, corporate advisory and tax controversy.