The ATO recently issued 9 guides on the distinction between employees and contractors (the Guides).

The Guides have some key messages for organisations:

• they help determine if a worker is an employee or a contractor;
• they require organisations to look at the relationship as a whole;
• the ATO may impose penalties if an organisation applies the incorrect treatment.

New ATO Guides, and why they are important

At the end of July, the ATO released 9 guides and facts sheets to help organisations determine whether its workers are employees or contractors.

The distinction between an employee and a contractor is important as an organisation will have different tax and superannuation obligations depending on whether its workers are employees or contractors.

The Guides have been released in addition to the ATO’s Employee/contractor decision tool, which allows organisations to answer a set of questions online to gain further guidance as to whether a worker is an employee or contractor.

You can access the Employee/contractor tool here.

What should an organisation consider when working out if a worker is an employee or contractor?

An organisation must consider the whole of its relationship with the worker when determining whether the worker is an employee or a contractor. The Guides set out a number of considerations.

The table below, adapted from the Guides, sets out 6 key factors that will help an organisation determine whether a worker is an employee or contractor.

Do the Guides provide examples of the distinction?

Yes, the Guides contain a number of scenarios demonstrating the distinction between an employee and a contractor. These scenarios are primarily set out in the following guides:

• ‘How to determine if workers are employees or contractors’; and
• ‘Know the difference between employees and contractors’.

The scenarios cover a broad range of sectors, including domestic painting, cleaning, road transport and information technology.

Myths and reality

Myth: Common misconceptions about contractors

The ATO identifies a number of misconceptions about circumstances that people may consider automatically make a worker a contractor. For example, the Guides point out that even if the following factors are met, the relevant worker could still be an employee:

• the worker has an ABN;
• the worker submits an invoice for their work;
• there is a prevailing industry practice; or
• specialist skills or qualifications may be required.

Myth: Building and Construction

The ATO issued a guide tailored to the building and construction industry. In that guide, the ATO identifies the following further characteristics that, in that sector, do not alone make a worker a contractor. For example, it is not determinative that:

• the work is project based;
• the worker is only required for a defined period of time; or
• the worker has previously worked as a contractor on the same job.

Reality: Common employees

There are also some classes of workers whom the ATO considers will always be defined as employees due to the characteristics of their role. These include apprentices, trades assistants and labourers — regardless of whether they are skilled, unskilled or semi-skilled.

Getting it right

Penalties

The Guides are part of a combined ATO strategy of education and enforcement aimed at preventing organisations from incorrectly treating employees as contractors. As well as providing guidance as to the correct definition of a contractor, the Guides remind organisations of the penalties that apply if an employee is incorrectly treated as a contractor.

These penalties include:

• PAYG withholding penalties of up to 100% of the amount that should have been withheld;
• interest charges; and
• superannuation guarantee charges including superannuation shortfall amounts and applicable interest and administration fees.

Practical tools

The ATO cautions organisations against giving in to a worker who demands to be treated as a contractor. In that case, the ATO encourages organisations to instead refer the worker to the ATO’s Employee/contractor decision tool and the Guides. The ATO also encourages an organisation’s competitors to report concerns about incorrect treatments of workers.

Contracting with an employee or contractor

An organisation should consider the Guides and the ATO’s Employee/contractor decision tool before finalising the terms on which it engages any worker.

An organisation can arrange a contract with the employer or contractor using either the Cleardocs Standard Employment Contract or the Independent Contractor Agreement, whichever is relevant, to set out the terms of the worker’s engagement. Both of these agreements can be extensively tailored to meet the needs of the organisation and the individual worker.

Read more: http://www.cleardocs.com/clearlaw/employment-related/ato-guides-employee-or-contractor.html#ixzz25TrWuKl7

Article by Cara Waters from Smartcompany.com.au

Small and medium-size businesses are most likely to fail because of an inability to manage costs or anticipate rising costs, according to a survey of more than 1000 Australian owners of SMEs.

The survey, published yesterday by accounting software provider CCH and global information services group Wolters Kluwer, revealed SMEs see inexperienced management, a bad business model and lack of access to capital as other key reasons for small business failure.

Of those surveyed, 61% of SME operators said small businesses failed because of an inability to manage costs, 50% said inexperienced management, 50% said poorly designed business models or no business plan, 49% said insufficient capital, 37% said poor or insufficient marketing, and 35% said insufficient time managing the books.

Respondents were able to pick multiple reasons for failure and only 26% identified failure to seek professional advice as a key reason for failure, while 70% trusted their “gut instinct” over any professional advice.

But the chief executive of Wolters Kluwer Asia-Pacific, Russell Evans, toldSmartCompany the majority of SMEs which shun professional advice were doing so possibly at their peril.

Evans points to a separate CCH survey of more than 210 accountants servicing small businesses which ranked bad business models as the main reason SMEs fail.

This view is backed up by ASIC data on 5600 business failures in 2011-12, which cited poor strategic management as the most common cause of failure, attributed to 19% of SME failures, with another 15% of failures attributed to poor financial control.

“It’s a contrast, as if you look at the reasons why an SME owner feels an SME has failed it is inability to manage costs, while the accountants say it is a poorly designed business model,” Evans says.

“A lot of SME owners are fixated on their craft and what they do and they tend to chase revenue, they may send out lots of invoices and not understand the cost drivers.”

A typical problem for SME owners is buying lots of inventory of the wrong sort of product because they feel revenue means success, according to Evans.

He warns a lot of small businesses are failing to identify they are introducing costs into their businesses which are eroding their margins.

“SME owners are incredibly busy until the day they go broke, but accountants say because they have seen this before they can provide advice not just about revenue drivers but profit drivers,” he says.

Evans says the first couple of years of an SME’s operation is often identified by SME owners as a make or break period.

“If that is the make or break period they should be reaching out to professional advisers for more than just doing tax returns,” he says.

CCH’s survey found SME owners typically open up to the advice of their accountant as their businesses grow.

SME owners with a higher turnover of $1 million plus were more likely to consider their accountant as their most trusted adviser, not only for transactional accounts but for advice on business growth, than owners of businesses with turnover under $1 million.

Peter Strong, executive director of the Council of Small Business Australia, toldSmartCompany relying on gut instinct rather than professional advice is common in small business because it works.

“If you don’t use gut instinct then you become very slow at responding and that is not the nature of small business,” he says.

Strong says there are areas for small business where professional advice is needed.
“I wouldn’t employ gut instinct in filling out a form or around financial management and anything to do with cashflow, marketing and long-term planning, we all need assistance with that,” he says.

But Strong warns the survey results are problematic as they do not split SMEs by industry.

“It’s a continuing problem of putting all SMEs in the same bucket; if you went to different industry sectors you would find some talk a lot to professional advisers, for example, real estate agents use a lot of professional advice,” he says.

Article from Heather Smith of Flying Solo with support of Australian Online Casinos

Apply these five practical tips to your business processes to help with managing cash flow and avoiding cash mismanagement pitfalls.

1. Maintain accurate financial records

You need accurate, timely and readily available financial data to assist you in making business decisions. This is achieved through implementing a good accounting system and setting aside regular time to review the financial information.

This may include outsourcing bookkeeping and accounting duties; however, it is critical to remember that as the business owner or director you are unable to abdicate responsibilities for your financial situation. Your accountant still requires you to sign off on the accuracy of your accounts. Someone else can do the grunt work, but you still need to maintain accurate and timely data.

2. Prepare a cash flow forecast

A cash flow forecast is an analysis of cash coming in and cash going out of the business. Do this on a regular basis so you can identify potential problems before they occur, and are in an informed position to proactively deal with them.

3. Set aside GST Collected

Don’t mistake GST Collected as business money. An easy solution for keeping GST Collected separate from business money is to set up a parallel bank account, and siphon the GST Collected into it, so you are not tempted to use it. When it comes time to pay Business Activity Statements (BAS) you will be prepared for the cash obligation. Many banks will offer this sort of bank account free with your business-banking package. The same can be done with Superannuation and PAYG Withholding liabilities.

4. Monitor your spending habits

When it comes to spending money, I have seen new business owners maintain spending habits they developed when they had a corporate job and someone else was footing the bill; or they justify their spending as a tax deduction and rationalise that it only costs half what they are paying for it. This is a spending trap that should be avoided. Be thrifty, and budget for business spending.

5. Get paid on time

Focus on actively collecting outstanding accounts receivables. Ensure you have a thorough process in place to make sure invoices are paid in a timely manner.

If you do find yourself experiencing cash flow issues, review your business processes and actively communicate with the Australian Taxation Office, your bank, and your accountant to understand the options available to you, and the solutions that can be implemented.

Do not hesitate to contact Jaguar if you require any assistance with managing your cash flow or implementing any of these valuable tips.

Article from Brad Callaughan of Flying Solo

Do not hesitate to contact Jaguar if you require any assistance with managing your cash flow or implementing any of these valuable tips.

5 ways to make happy customers or clients

Article courtesy of AccountingWEB UK.

1. LEARN FROM YOUR CUSTOMERS

• Be a good listener
• Most important is to identify what your customers love the most, and in order to do this you need to listen to what your customers are communicating to you.
• But really listen
• Understand what they are saying and clarify anything that might be ambiguous. What you think they mean might be different to what they actually mean.

TIP: Listen to what their needs are, and then offer your suggestion on the best way to go about fulfilling their needs. Your customers will know you care about them.

2. BE AVAILABLE

• Make yourself accessible
• The longer it takes for a customer to find a way to get in touch with you, the higher the likelihood is that they will report a negative experience. And in today’s web-enabled world this might mean a public complaint on social media platforms like Twitter.
• ALWAYS BE THERE
• If a customer wants to get in touch with you to provide feedback or make a complaint, particularly the latter, it’s paramount that you give a clear channel for them to communicate with you
• The longer it takes for a customer to find a way to get in touch with you, the higher the likelihood is that they will report a negative experience. And in today’s web-enabled world this might mean a public complaint on social media platforms like Twitter.

TIP: Have a clear process so customers can tell you how they feel privately. This way you can minimise the risks of them going public with something they feel strongly about, before addressing it with you.

• Be proactive
• Social media empowers you to be more active in your customer care – use it to your own advantage.
• Avoid a break up
• Sometimes relationships don’t work as we expect them to, be it due to ourselves or other factors. When you can’t stop a customer falling out of love with you, encourage them to talk to you directly. However, this is not always possible, so don’t just stand back and let your customers tell you how they feel.

TIP: Ensure that you constantly listen to online conversations about you, your products and services, so you can identify and respond to both positive and negative feedback as quickly as possible.

4. VALUE YOUR CUSTOMERS

• Treat them like they are your first
• One’s first love is never forgotten, and the same should apply to every customer, whether they are regular, a one-off, spend a little or a lot.
• You’ll have an image in your mind of what your ideal customer looks like – someone who returns regularly and is highly profitable, perhaps.
• Work on the principle that every customer is of high-value, as every single one has the potential to become your ideal customer, returning to you again and again and becoming highly profitable.

IP: Make every single customer feel special, as you will want to find your perfect match. After all, we are all someone’s ideal customer and you don’t want to miss the opportunity to find yours!

5. STRIVE FOR MOMENTS OF BRILLIANCE

• Become unforgettable
• What is a moment of brilliance? It’s when a customer has an experience that exceeds their expectations.
• We all remember those special moments in a relationship when something that made us very happy unexpectedly happened.
• By translating this to your business, you can ensure that your customers will always remember you for going the extra mile to please them.

TIP: Whether it’s a discount voucher, a gift or further information on how to use a product or just needs to understand the current position, find out what your customers like and appreciate the most, so these moments of awesome are meaningful to them.

APPLY THESE FIVE SIMPLE RULES CONSISTENTLY AND YOU WILL BE WELL ON YOUR WAY TO GETTING TO KNOW YOUR CUSTOMERS CLOSELY, GETTING ESSENTIAL CUSTOMER INSIGHT AND ULTIMATELY FALLING IN LOVE WITH YOUR CUSTOMERS – AND THEM FALLING IN LOVE WITH YOU!