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  • Writer's pictureSkyward Financial

Business Finance Update - Jan 23

I hope your business is making a strong start to the year. There’s a fair bit of interesting news floating around right now, including these finance, tax and workplace relations stories. Here is a test to see how resilient your business is. Run a cash flow forecast where expenses increase by 30%, revenue goes down by 30% and 30% of your customers pay late. What does your cash flow position look like? Worse, yes I know, but if that would be a paralyzing or potentially worse death knell situation for your business it might be time to consider your core working capital position. Especially given the potential recession that might appear in the middle or late this year. That might seem like you have time, but last minute money is expensive money, planning ahead is strategic and cost effective. A good target for core working capital is having 3-6 months in capital to cover all costs in the business. That is to say if you didn't get any income for 3-6 months you could still keep the lights on and wages being paid. That core amount could be cash or core debt. It is a target to aim for to increase the resilience in your business, and have money to capitalise on opportunities i.e. buying market share or competitors businesses (or their clients), hiring, or getting new income generating assets. If you want help setting the target or running a forecast let's talk. Here are four stories that you might be interested in.

  • Free support for small biz owners

  • ATO releases trust guidance

  • Payment times back on the agenda

  • Govt rolls out workplace reforms

Read more below.

The federal government is delivering more funding to allow small businesses to access free mental health and financial counselling support in 2023. That includes support for two programs:

  • NewAccess for Small Business Owners, delivered by Beyond Blue, which is a guided self-help mental health coaching program

  • The Small Business Debt Helpline, delivered by Financial Counselling Australia, which is a free service for small business owners in financial difficulty

Government funding was previously due to expire on 31 December 2022. "I understand that many small businesses are doing it tough, and I want them to know that support is available," Minister for Small Business Julie Collins said. "I would urge small businesses to access these free government‑funded programs that provide confidential support from coaches and counsellors who understand how small businesses work."

The Australian Taxation Office has finalised its guidance on trust reimbursement agreements, which it said would affect a small minority of small businesses. The ATO guidance relates to reimbursement agreements where section 100A of the Income Tax Assessment Act 1936 may apply. ATO deputy commissioner Louise Clarke said trustees and their advisers had been requesting clearer guidance to help them manage their tax obligations. "Section 100A is an anti-avoidance rule, so our guidance is firstly about ensuring that those structuring their affairs to avoid their tax obligations are held to account, as the community would expect," she said. "But it also provides confidence and guidance to those who legitimately use trusts in their financial affairs, but are concerned that they might inadvertently trigger Section 100A. "Specifically, it addresses 'reimbursement agreements' where, for a purpose of avoiding tax, an entity is provided a trust distribution but someone else actually benefits from that distribution." If you believe the ATO’s guidance may apply to your affairs, the ATO has suggested you consult a registered tax professional for advice or apply to the ATO for a private ruling.

Payment times are back on the agenda, after the federal government launched an independent review of the operation of the Payment Times Reporting Act 2020. The review, which will be completed in the first half of this year, will focus on how to improve payment times to Australia’s 2.5 million small businesses. Minister for Small Business Julie Collins said payment times had a big impact on cashflow and business planning. "While increased transparency has helped to shine a light on this issue, our government is committed to investigating the issues around late payment times to small business,” she said. The small business ombudsman, Bruce Billson, welcomed the review. According to the ombudsman's analysis of payment times data, only 31% of big businesses paid small business customers within 30 days while 23% took 120 days to pay their bills. "A vast number of big businesses just aren't meeting the mark, and it's causing needless harm and cashflow challenges for small and family businesses who are waiting too long to have their invoices paid," he said.

A range of new workplace laws have come into effect, after the federal government passed legislation last month to amend the Fair Work Act. As of 7 December 2022, the objectives of the Fair Work Act were changed to promote job security and gender equality. Breastfeeding, gender identity and intersex status became new protected attributes under the Fair Work Act. Also, pay secrecy became prohibited. As of 7 January 2023, job ads can no longer include pay rates that would breach the Fair Work Act, an award or an enterprise agreement. On 6 March, workplace sexual harassment will be prohibited, while the Fair Work Commission will create two expert panels to focus on pay equity and the care and community sector. On 6 June, workers will gain increased access to multi-employer bargaining and more employees will be able to access flexible working arrangements. There will also be changes to extending unpaid parental leave. On 1 July, there will be an increase in the monetary cap for recovering unpaid entitlements via the small claims process. On 6 December, limits will be placed on the length of fixed-term contracts.


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