A new financial year and a new set of changes.
And what a start to the new financial year it has been!
Increased numbers in reported COVID cases, mixed messages about the vaccine roll out, further lockdowns, not to mention the ongoing economic and climate challenges.
Whilst there is a high degree of uncertainty, one thing is certain. The need to be resilient and adaptive to change which is reinforced by the following quote from Charles Darwin.
It’s not the strongest of the species that survives, nor the most intelligent. It’s the one that is most adaptable to change.
Superannuation guarantee (SG)
Employers are required to pay eligible employees the SG at the rate of 10% of their ordinary time earnings. Employment contracts may need to be reviewed to work out whether the increase in the rate from 9.5% is inclusive or exclusive of the employee’s current salary package.
Company tax rate
The tax rate for eligible companies carrying on a business will reduce from 26% to 25% in the 2022 financial year and future years. The rate for all other companies remains at 30%. The reduction in the tax rate should be considered in the dividend policy for the 2021 financial year.
Superannuation contributions
Retired persons over 65 but under 67 can now make non-concessional contributions of $110,000 per annum or use the bring forward rule and contribute up to $330,000 subject to the member balance cap of $1.7M, without the need to meet the work test.
The annual cap for concessional superannuation contributions has been increased to $27,500.
Give your business every financial advantage
With a changing economic landscape, coupled with the effects of the COVID pandemic, business owners need to keep their eye on the game. The start of a new financial year provides a perfect opportunity to consider the opportunities and challenges facing your business.
We are confident that the following suggestions will prove to be helpful and give your business every financial advantage:
• Prepare a budget for the next 12 months and stress test the potential outcomes under a range of scenarios.
• Monitor actual trading results on a monthly or quarterly basis, revise the budget as required and extend the budget period to maintain a 12-month forecast period.
• Consider non-financial drivers that are critical to the success of the business.
• Undertake a SWOT analysis (strengths, weaknesses, opportunities and threats).
• Maintain regular communication with staff, suppliers and customers.
• Be nimble and create a culture that is adaptable to change and improvements.
• Create an awareness of any forces driving change in your industry.
• Have a succession plan and/or exit strategy.
Most importantly, we encourage business owners to make time on a regular basis to think about their business and not be totally consumed with the day-to-day activities. This may be easier said than done. Nevertheless, this is the first and most critical step in the process of creating a financial advantage.
If you have any question, or would like to know more about the above, please contact John or Renee. We are here to help.