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Category: Management Rights

Why Choosing The Right Business Accountant Is Important For Your Success

Posted on by Carolina Jaramillo

The Right Accountant

Will become a trusted colleague you can depend on, someone who offers advice and guidance and adds value to your business right from the start. And if you expect your company to grow, it’s a good idea to hire a professional accountant at the beginning rather than later on. It’s even better if they’ve worked extensively in same industry as yours as that helps them understand the unique needs of your business.

Having started in Noosa in 1996 – in the foothills of management rights – McAdamSiemon are recognised as management rights and motel industry specialists, and have been entrusted by hundreds of clients to handle their business advisory, taxation, accounting and financial goals for more than 20 years.

The growing team understand the complexities of the management rights and community titles sector, and in addition to offering a broad range of general accounting services including business structuring for asset protection and tax, they understand the minutiae of the rules and regulations and are able to look at things differently.  As one of the original partners, and with over 28 years in public practice, Rob McAdam said:

“One of the biggest challenges facing businesses now is the pace of change and the introduction of technology that business owners must embrace to stay competitive. The need for real time information so that the right decisions can be made in time is critical.  At McAdam Siemon we place emphasis on simplicity, continuity and personal attention by combining the experience and proficiency of a large organisation with the accessibility of a personal advisor.

 

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    Looking To Buy?

    Thinking about entering the world of Hotel/Motel ownership then the people with the most connections in Australia and New Zealand are Resort Brokers.  They are a family run business with over 30 years experience, with the next generation of the family who are successfully taking the reins.

    Selling your management rights business? Six quick tips for successful letting appointments

    Posted on by Carolina Jaramillo

    Looking to put your management rights business on the market?

    This is rarely a straightforward process. So, in the interests of a smooth, incident-free transition, it’s important to ensure your business is in the right condition for sale.

    Letting appointments with the unit owners are a particular area of preparation that I see being regularly overlooked by the business owner.

    The importance of letting appointments

    The letting appointments documents are extremely important to any management rights business as they are essentially the only vehicle by which a property manager can derive income from a unit owner.

    These forms appoint the manager as an agent of the owner; they lay out a variety of services with the set fees that will apply.

    Letting appointments can be entered into for a specific one-off period or on an ongoing basis.

    Note that there are important differences between old legislation forms (PAMD 20a) and new legislation forms (Form 6).

    The main six areas to focus on with letting appointments

    I recommend to managers and clients who are looking to sell their businesses to conduct an ‘audit’ of their letting appointments.

    The proposed purchaser of your business will ensure that their own specialist accountant reviews all letting appointment forms as part of the verification process. So why not get them right from the start?

    Focus your audit on ensuring that the following is in order:

    1. The property owners’ details are correct and current.

    2. Your licence details are correct for all forms you have prepared.

    3. The agreement is a continuing agreement or, if a single appointment, the term has not expired.

    4. The agreement is assignable. In the case of the new forms, they are automatically assignable, whereas one of the old forms needs to contain a correctly executed assignment clause.

    5. The agreement is signed and dated by the property owner and manager.

    6. The fees and charges detailed in the agreement are consistent with what is currently being charged in your system.

     

    Need assistance with your letting appointment audit?

    The above details can all impact the income of your business – and therefore its sale value. Yet they are all-too-common oversights from managers looking to sell their management rights businesses.

    If you need assistance with an audit of your letting appointments, we can help – please contact our office.

     

    Purchasing management rights or an accommodation business? Are multipliers worth the fuss?

    Posted on by Carolina Jaramillo

    People are, of course, always looking to get the best deal when purchasing management rights or accommodation businesses.

    I often get asked, “Is the multiple correct and am I paying too much?”

    Multipliers are used in conjunction with net profit to determine the value of a management rights business.

    But how much attention should you be paying to multipliers when purchasing management rights? Should you focus on other aspects that are more in your control?

    Purchasing management rights? The market dictates the multiple…

    My view has always been that the market will dictate the multiple. I am not a valuer and, as such, multiples are not my area of expertise, so I have no view on whether the multiple is correct or not.

    My advice when purchasing management rights is to look at it from many angles to work out if it is a good deal or not. Each case is unique and should be treated as such, on a case-by-case basis.

    From a financial perspective, even prior to looking at complexes, you need to ascertain how much money you are willing to spend.

    Consider the following two questions, in particular:

    • How much cash/equity do you currently owe/control?
    • How much money are you willing to borrow?

    You should speak to your specialist MR business banker or broker for details on lending capacities.  But notice I use the phrase ‘willing to borrow’ not ‘able to borrow’. These are two distinctly different things and being able to borrow the money does not necessarily mean you should do it.

    The business cash flow needs to be able to support the borrowings as well as your return on equity and wages. If this is not possible, then you have either borrowed too much money or paid too much for the complex.

    Other steps to ensure your management rights purchase is successful

    Prepare cash flow projections for the first few years, based on the profit and loss reports provided by the vendors and any other information they are willing to provide (your accountant can assist at this stage).

    From an environmental point of view, look at the complex surrounds and common areas you will be responsible for. Discuss the hours of work required to manage this.

    Some managers will enjoy larger grounds and physical work but others may not. Higher prices may be paid for easier-to-manage properties and vice versa.

    Make sure your own efforts are factored back into the finances, so that you are adequately compensated for your time. Also ensure the body corporate salary is adequate for the tasks required.

    Investigate the rental pool to ascertain the ownership and potential in the complex. A complex with a greater potential for growth in the rental pool may attract higher prices from astute purchasers but beware and do your homework.

    From a business point of view, purchasing management rights in a complex of owner-occupied properties can be difficult to change, even for the most experienced managers.

    Don’t get too hung up on multipliers: do your homework to get a management rights deal that works…

    As you can see, there are many factors that determine if you’re “getting a good deal” when purchasing management rights.

    I have only mentioned a few above and it’s not always all about the financials. You need to think beyond multipliers and consider the purchase from all angles.

    Purchasers may be willing to pay premiums for prestige, potential, or ease of living. It is up to you to determine what you’re willing to pay for and what is the appropriate return on your investment.

    When financial verification doesn’t stack up: Your 3 options

    Posted on by Carolina Jaramillo

    You’ve spent so much time and effort tracking down the perfect business and the ideal location for you to get started… so what happens when you get hit by the hammer-blow: the financial verification side of things doesn’t stack up?

    This can be so frustrating. You’ve ticked off all the following from the must-do list:

    • Arranged finance from a specialist management rights finance broker/banker
    • Engaged a specialist management rights solicitor to aid in the purchase process
    • Engaged a specialist management rights accountant (me, of course J)
    • Established business structures and signed contracts

    Then your specialist management rights accountant undertakes the financial verification process and the profit is less than the agreed profit stipulated in the contract for sale.

    You’ve spent considerable money on all these specialists and the business profit is less than expected. So what now??

    Three options when financial verification fails

    It’s a surprisingly common situation for a purchaser to find themselves in.

    There are many reasons for the profit not being as high as expected – and they’re not all as sinister as you might first think.

    For instance, there are different periods of review, non-specialist accountants preparing sales figures, vendors preparing sales figures, poor record-keeping, letting pool numbers, and others.

    You essentially have three options in this situation:

    1. Proceed with the contract/purchase

    If there is only a small difference and you assess that you’re still happy with the return for the money you’re investing, you might proceed as per the contract terms.

    You will need to discuss this with your specialist finance broker/banker to ensure that you still have the capacity to borrow the same amount of money for the purchase. But there should be no reason why you cannot proceed with the contract unchanged.

    2. Negotiation

    This is the most common path of action. Say the profit comes in at $10,000 under; you can request a reduction of $10,000 using the originally agreed profit multiplier.

    The vendor and the purchaser will negotiate and generally meet somewhere in the middle. The purchase price is altered and the purchase process moves on.

    3. Contract termination

    If the profit is significantly less than the contracted figure, you may want to terminate the contract.  Generally, negotiation will be pursued prior to this, to see if you can agree contract alterations with the vendor. If there is no agreement, termination will ensue.

    This is the least favourable outcome for both parties as everyone has invested significant time and resources in getting a deal to this stage.

     

    If you find yourself in this situation as a purchaser, remember you have options and assess the situation in your best interests. Take into consideration all the time and effort it took to get to this stage and the reasons you signed the contract in the first place.

    Preparing your Management Rights for Sale

    Posted on by Carolina Jaramillo

              

    Preparing your Management Rights for Sale

    This week the RAAS group held a conference in order to educate all those interested in preparing their business for sale.  A range of speakers from different specialties, [Accounting, Legal & Banking], were invited to speak to the group at the Maroochydore Surf Club.  Peter O’Rielley from our firm was invited to provide that specialist advice.  From all reports the conference was well attended and participants took the opportunity to educate themselves on some of the issues that need to be considered when preparing for sale.  If you were unable to make the conference but would like to hear more about how McAdam Siemon can assist in this area, then please give Peter a call.

    Updated Form  6 from 1 August 2016

    Posted on by Carolina Jaramillo

     

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    Updated Form  6 from 1 August 2016
    Version Number will change to Form 5

    The Office of Fair Trading (OFT) has released another version of the Owners Agreements [Form 6] commencing 1 August and replaces the previous version.

    The previous version lasted only 1 month, so please take note, it will be superseded when issuing new owner agreements from 1 August.

    All previous PAMDA 20A’s and Form 6’s that have been issued prior to this date of course remain in effect and can continue to be relied upon.

    Therefore, any new agreement you enter with new owners, the Form 6 that you are required to complete from 1 August 2016, must be on the latest “Form 6 V5 1 August 2016” in order to be valid.

    Click here to access this form

    Employer Alert

    Posted on by Carolina Jaramillo

     

    Empolyer Alert 

    The end of the financial year is only days away

    Employer Alert

    As an employer you need to:

    1. Provide PAYG Payment Summaries to your employees by the 14th July 2016.
    2. Please ensure you send the ATO, your PAYG withholding payment summary annual report by the 14th August 2016.
    1. Use the latest tax rates to calculate employee withholding tax from 1st July 2016. While there have been no changes to tax rates for 2016/17, to check the latest rates, go to ato.gov.au/taxtables
    1. Ensure your accounting software payroll rates are updated from the 1st July 2016 and the file is ready for the first pay run of the 2017 year.
    1. All employee Superannuation Guarantee Charges have been met for the 2015/16 financial year. Please note the June Quarter SGC is due by the 28th July 2016.

     

    If you have any questions on your EOFY obligations to the ATO, please do not hesitate to contact us.

    Warning on Bank advice to business owners

    Posted on by Carolina Jaramillo

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    Warning on Bank advice to business owners

    Some banks are advising customers with business accounts to transfer excess cash to pay down the business owner’s home loan.  While it might sound like common sense to use the excess cash in your business, there are significant potential problems for business owners who do this.
    Money in your business account is the money of the business, not your personal cash.  You can’t just take it out and move it around at will, even if it is your business.

    If you run a company, there are a set of tax rules called Division 7A that apply.  Division 7A is a particularly tricky piece of tax law designed to prevent business owners accessing funds that have not been taxed at their individual tax rate – only the corporate rate.  While these amounts are often debited to the shareholder’s loan account in the financial statements, Division 7A ensures that any payments, loans, or forgiven debts are treated as if they were dividends for tax purposes unless there is a valid shareholder loan agreement in place.

    So, if you take money out of your company bank account to pay down your personal home loan, this amount might be treated as a deemed dividend.  That is, you need to declare this amount in your personal income tax return and the dividend is not frankable. This means that even though the company might have already paid tax on this amount, you will be taxed on it again without the ability to claim a credit for the tax already paid by the company (basically leading to double taxation).

     

    If you have taken money out of the company account for personal purposes you can either pay back the amount or put a complying loan agreement in place before the earlier of the due date and actual lodgement date of the company’s tax return for that year.  To be a complying loan agreement the agreement requires minimum repayments to be made over a set period of time and the minimum benchmark interest rate to apply – currently 5.45%. The rules are also very strict when it comes to loan repayments because these can actually be ignored if it looks like you are planning to borrow a similar or larger amount again from the company.

    A similar issue can also arise if you transfer funds from a trust bank account, especially where that trust already owes amounts to a related company in the form of unpaid distributions.

    The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, Please do not hesitate to give us a call.

    (Courtesy: The Knowledge Shop)

    GOLFING GREATNESS

    Posted on by Carolina Jaramillo

     

    Golfing greatness….
    We all strive for it don’t we?

    Well I do anyway!  That perfect round where everything drops and you split the fairway every time.  I have been trying for close to 17 years for that one round and it still eludes me; not from lack of trying I might add, probably more so the lack of ability hinders me.

    I love golf. I’m a golf tragic and happy to admit it! I would probably prefer to talk about golf with someone than pretty much anything I can think of.

    So when the opportunity came about to become involved with the Australian PGA; its members and the golfing industry; I jumped at the chance.

    Last year PGA Australia undertook a program on behalf of its members to offer a network of preferred service providers to the industry.  I was part of an intense two – day program exploring the golfing industry as a whole and how it could be better serviced.

    The main focus was on PGA Australia members, which include, touring (playing) pros, coaching pros, pro shop owners, and general golfing retailers and support sectors.  This was a valuable process and built on the knowledge of the industry I had already accumulated.  Further work with PGA Australia followed and has resulted in McAdam Siemon Pty Ltd becoming a registered preferred supplier to the golf industry.

    In order to build on this foundation, it was necessary to get the word out on the street, to promote the services to the industry.  What better way to do it than through a PGA member.

    We chose to sponsor Matthew Field, who has been a PGA member for a number of year now and is searching for his break on tour.  Matt has played in a number of events around Australia and internationally.  Matt is also a key member of the Golf Queensland team and organises many of the events for amateur golf around the state.  We welcome Matt to the McAdam Siemon Team and wish him all the best for the coming year. We hope it is a successful one for him!!

    If you would like to read more about Matt and his adventures visit his website at mattfieldgolf.weebly.com.

    I have already had the pleasure of working with a number of PGA members so far and the experience has been fantastic.
    The industry seems to be growing to high levels and it takes professional members with great knowledge, skill and attitude to succeed.

    I hope to offer valuable ongoing support to the industry and its members for years to come, and maybe sneak a few extra rounds in here and there!

    If you ever want to chat about Golf, drop me a line.

    Happy Golfing

    Jordan Spieth World #1 (Left)  Matthew Field (Right)

    GST Ruling on Reimbursements

    Posted on by Carolina Jaramillo

     

    McAdam Siemon Business Accountants Upper Mt Gravatt, Noosa Heads & Maroochydore. Specialising in Accounting, Taxation, Management Rights, SMSF Administration, Business Advisory, Business Valuations , Management Rights specialist accountants.

     

    GST Ruling on Reimbursements

    A decision has recently been handed down by the Administrative Appeals tribunal (AAT) regarding the claiming of tax credits where a property manager was acting on behalf of a property owner.
    The agent in the case had been claiming GST credits on expenses they had paid on behalf of the property owner that were related to the maintenance and care of the owner’s property.

    The AAT has stated as there is an agency relationship’ between the real estate manager and the owner of the property, any expenses paid to 3rd parties on behalf of the owner of the property could not be claimed as credit on the activity statement (BAS).
    These GST credits (GST on purchases) were not allowed to be claimed for these transactions by the agent. The owner would be allowed to claim the GST credit – if the owner of the property was registered for GST. If they are not – the GST credit is lost, and increases the expense claimed on the tax return.

    By way of example – the manager of a resort hires a contactor to make repairs to a unit of $1100.00 inclusive $100 GST. This $100 is not allowed to be claimed by the manager of the resort on their BAS. This is to be put into trust accounting software as a GST free purchase. Correspondingly, any reimbursement made to the manager by the owner of the unit must be treated as GST free sale.
    By treating this transaction as a GST free purchase in the trust accounting software, it will be then entered into the Managers MYOB/Xero program without GST, insuring that there is no GST being claimed when the BAS is being prepared!

    If you would like to discuss your current treatment of reimbursable expenses please don’t hesitate to contact our office for assistance.

    Random ATO Audits 2016

    Posted on by Carolina Jaramillo

     

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    Random ATO Audits  2016

    The ATO has decided not to reduce their random audits in 2016. They have now confirmed that random audits will recommence.
    The compliance program will be physically audited, targeting 600 individuals and small businesses and focusing on underreporting and tax evasion.

    There is good news for some though.

    The ATO has contacted 500,000 taxpayers advising that their tax returns will not be subject to further review. This ATO project is aimed at taxpayers with straight – forward affairs and a taxable income of less than $180,000.
    The ‘certainty letter’ is an assurance that the ATO will not review the return unless they find evidence of deliberate avoidance or fraud.

    What is a ‘certainty letter’?

    This year the ATO is sending letters to some taxpayers as part of a trial to confirm their 2014-15 tax return is finalised.

    Thinking about investing?

    Posted on by Carolina Jaramillo

    McAdam Siemon Business Accountants Upper Mt Gravatt, Noosa Heads & Maroochydore. Specialising in Accounting, Taxation, Management Rights, SMSF Administration, Business Advisory, Business Valuations and more.

    Thinking about investing, but worried about market conditions? 

    Daniel Green may have the solution.

    Whilst it’s true that interest rates for investment loans are generally higher, there are very competitive loan options still available to you. By setting up a Principal and Interest (P&I) loan for your investment, you can enjoy similar low rates to those normally offered to an owner occupier.

    Many investment loans are interest only, meaning over the period of the loan, the amount owing to your lender will remain the same. With a P&I loan your repayments are calculated on the total loan amount and interest, meaning when you are ready to sell or reinvest, the value of your loan will have decreased.

    This could mean increased buying power for your next investment, and more cash available when you sell.

    Any taxation matters regarding your investment property should be discussed with a tax professional.

    So give Daniel a call today, to discuss making your finance and investment goals a reality.

    (O7) 3899 2866

    http://www.greenfinancegroup.com.au/

    Trust account operations in management rights.

    Posted on by Carolina Jaramillo

     

    Trust account operations in management rights.

     

    Real Estate Trust Account Licensees not only handle money on behalf of property owners but also need to remain compliant under the Act on daily basis.
    The Property Occupations Act commenced in December 2014, since then we have observed a number of common contraventions licensees have trouble with. This month we cover some of these areas and provide some tips for you to avoid potential contravention and penalties.

    • Licensee owning a property in the complex and running it through the trust account
    • Correct details not on the trust account receipts
    • Finalising end of month before the actual end of month

     

    Licensee owning a property in the complex and running it through the trust account
    When a licensee owns a property in the complex they manage and rent it out, some of the time the manager will utilise the trust account and software package to manage rent receipts for their unit.  This practice is prohibited under the Act.
    Licensee’s Trust accounts should only contain transactions on behalf of an owner with a signed appointment. The transactions of the licensee owned unit is considered non-trust money. To avoid contraventions the licensee should operate all transactions for their unit through an account other than your trust account and remove this ledger from your software package operation.
    Act Reference – Section 18 of the Agents Financial Administration Act 2014 – full Act: https://www.legislation.qld.gov.au/LEGISLTN/ACTS/2014/14AC018.pdf

    Correct details not on the trust account receipts
    The Trust Account Receipt form must be used when receipting trust money.  With the new legislation there have been some additions to these forms licensees should be aware of.  Any system auto-generated forms should be reviewed to ensure correct details are on the receipt form.  Older versions of trust account software will not have these changes and in most cases an update to your software will be required.
    Regulation 9 of the Agents Financial Administration Regulation 2014 listed out the requirements in the trust account receipt form. You can follow this link for full Act: https://www.legislation.qld.gov.au/LEGISLTN/SLS/2014/14SL246.pdf

    Below are some mistakes we commonly observed:

    • Agent’s licence number not correctly shown;
    • The date –
      • the trust money was received not shown; and
      • the process date of the receipt not shown;
    • The name of the person completing the receipt form not shown.

    Finalising end of month before the actual end of month
    When it comes to end of month, licensees should always include all transactions on the last day of the calendar month, then perform the EOM procedure within the first five days of the following calendar month.
    Even if the last date of month falls on a public holiday or non-business day, and it is unlikely there will be further transactions in the trust account, licensees must still perform the EOM within five days after the end of the month.
    Act Reference – Regulation 17 of the Agents Financial Administration Regulation 2014 – full Act: https://www.legislation.qld.gov.au/LEGISLTN/SLS/2014/14SL246.pdf

    To find out more, please contact our office or your audit team member.

    CLIENT FOCUS – Beach Road Holiday Homes

    Posted on by Carolina Jaramillo

    CLIENT FOCUS – Beach Road Holiday Homes

    Stunning architecturally designed, eco friendly holiday homes in an idyllic bush setting.

    Take the road less travelled, leave the hustle and bustle of Hastings Street behind, take the ferry and come over the river to the Noosa North Shore and explore the natural side of Noosa at Beach Road Holiday Homes

    Fringed by native bushland, unspoilt beaches and pristine waterways and situated at the gateway of the Cooloola-Great Sandy National Park,  Beach Road  Holiday Homes allow you to get back to nature without sacrificing 5 star accommodation.   Our luxury, architect designed and eco inspired  homes, sleeping from 2 to10 guests, offer an unparalleled opportunity to relax, rejuvenate and enjoy in an idyllic setting.

    Reconnect with family or friends to enjoy good food and wine, spend time with the kids;explore the surrounding bushland; or for the more energetic, enjoy a game of tennis. Beach Road Holiday Homes is the perfect family and friends reunion venue, with all the facilities to make it a memorable occasion.


    Book now for the festive season.

    Staff Training

    Posted on by Carolina Jaramillo

    Are you doing enough staff training?

    Staff Training McAdam Siemon

    Source: Kate Groom, Smart Franchise

    Staff training is the responsibility of every business owner. But many people we meet don’t seem that interested in it. And their business pays the price!

    As a business owner or manager, you’re responsible for your staff doing things the way you want them to. If you’re not happy with what they’re doing it’s up to you to change it.

    Better skilled and trained people are more productive. They are more efficient in their tasks and capable of dealing with more complex issues.

    If you have any questions, comments, suggestions, please don’t hesitate to contact us at any time. We look forward to hearing from you.