be informed - summer edition 2014
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CHARTERED ACCOUNTANTS & ADVISORSwilliambuck.com
Newsletter, January 2014A William Buck Publication
Be InformedSTRATEGIC THINKING | TAILORED ADVICE | INTEGRATED SOLUTIONS
— Encouraging a positive lifestyle — The income dilemma — Would you expect to pay tax on the sale of your family home?— Payroll tax: Understanding grouping rules— William Buck Risk Advisors named best in business— Guest columnist: The number one reason why businesses lose data— Considering an IPO: What you need to know— 5mins with… Aquaint Capital— $2.4 billion of Labor tax measures to be discarded
The summer
edition
PAGE 2 _THE WILLIAM BUCK NEWSLETTER
We are delighted to share with you that we recently joined forces with our friends at Souths Cares to proudly sponsor Green Square School’s Healthy Eating Breakfast/Lunch program. The program has been designed to encourage healthy eating in the school’s population and in turn encourage a positive lifestyle.
Green Square School aims to integrate students experiencing challenges with their behaviour successfully back into a mainstream school, or develop skills that will enhance their ability with their education to positively engage in the wider community.
Souths Cares General Manager, Shannon Donato, said that each week the school diligently prepares more than 430 meals as part of their healthy breakfast program, which also includes recess and lunch. “Having the sponsorship of companies such as William Buck goes a long way to making these programs not only possible but sustainable. The financial support Souths Cares receives from William Buck will ensure that each Green Square student has access to at least two healthy meals each day”, said Mr Donato.
Patrick Faucher, Assistant Principal at the school has reported the initial signs of the program have been very encouraging. He recently said “we are one and a half weeks into our healthy eating program and not a single student has left school grounds to go to McDonalds. Those staff working here for up to 8 years
01 —A message from our Managing Director
02 — Encouraging a positive lifestyle
now cannot remember a time when this has happened”.
Although it is early days, this is a very encouraging indicator for the initial stages of the program.
Mr Faucher also said “another key indicator as to the initial benefits of this program – instead of splintering out into different parts of the school or out into the streets, all students crowd around the eating table together and share a healthy recess and lunch. Together they are socialising happily amongst each other. Improving the social skills for all of our students is such a crucial aspect of their success both in this program and in returning back to their mainstream schools”.
Happy New Year and welcome to the first edition of Be Informed for 2014. I trust you’re rested and looking forward to a successful year ahead.
2013 was a year in which we saw many changes at a state, national and global level. The change of Federal Government following the election of the Abbott government has resulted in numerous changes along with reforms pre and post the election period. In this newsletter we feature an article of one such example where $2.4 billion of Labor tax measures are to be discarded.
I would like to take this opportunity to congratulate the team at Aquaint Capital who recently listed on the ASX with the assistance of our NSW Corporate Advisory team. In this edition, we spend 5 minutes with Group CEO, Yang Po Tan to learn more about the successes of this Singaporean based asset management and property investment firm.
Also, congratulations to Sam Kitchen, NSW Senior Financial Advisor who took out the Association of Financial Adviser’s (AFA) 2013 Excellence in Education Award in the New South Wales category. This is a fantastic honour given the esteemed field Sam was up against.
In this edition we are pleased to share with you the details of the Green Square School’s Healthy Eating Breakfast/Lunch program that we are proudly sponsoring through our friends at Souths Cares. The early program results are very encouraging and we anticipate this initiative will greatly assist the students in their development and well-being.
We hope you enjoy this edition of the newsletter. As always, I appreciate your thoughts, if you have any feedback about this newsletter or any of our services, please contact me directly at [email protected]. Whilst we always ensure that our information is accurate and well researched, advice tailored to your own situation should be obtained. Please contact your client Director of choice to discuss your specific circumstances.
We look forward to working with you throughout 2014.
Best Wishes,
N.T. Hatzistergos Managing Director
Pictured above: Nikolas Hatzistergos, Managing Director
We are one and a half weeks into our healthy eating program and not a single student has left school grounds to go to McDonalds.
We look forward to following and sharing the progress of the students and how the breakfast/lunch program will assist their development throughout 2014.
THE WILLIAM BUCK NEWSLETTER_ PAGE 3
A dilemma for self-funded retirees that’s been brought about by falling term deposit rates is; where will their income come from?
One of the few positives to result from the Global Financial Crisis (GFC) was the high term deposit rates on offer. During 2008, rates averaged about 6.5% and while steadily declining, they still averaged 5.5% through 2011. Today, term deposit rates are as low as 3.7% and falling1.
For many self-funded retirees this could represent a fall in income of over 30%. This can have a real impact on retirees who are also balancing increased living costs such as food and utilities.
While the GFC was known as a capital crisis, the drop in term deposit rates is creating an income crisis. Put simply, retirees have less money in their pockets.
For individuals in this position there are three possible options:
— Spend less— Use capital— Find other income sources
Having worked their whole lives to fund their retirement, there are not many retirees that would want to start spending less, nor would they wish to diminish the investments already made, thus ruling out options one and two.
Therefore, with term deposits down, it has become necessary to search for other income sources. The solution is to diversify income sources, which could include:
— Increase share market exposure: The industrial sector is currently providing 6-8% income return on average and some selected resource stocks are providing higher income returns. By way of comparison many of the banks are providing income returns of 7-9% when including franking credits.
— Increasing property exposure: Listed property trusts seem to have learnt from the lessons of the GFC. There are more ‘rent and manage’ property trusts rather than development trusts and the yields on these tend to be between 6-8%.
It is important to exercise caution with the strategies above, they ought to be implemented with due consideration to your appetite for risk. There is no point in achieving a 7% income return if you lose capital.
— Change banks: Banks have been searching for capital post GFC, a trend that is likely to increase with upcoming changes to global regulations under the guise of the Basel III standards.
— Other fixed income areas: Other fixed income areas such as ‘hybrid’ raisings from banks and large corporates are becoming more prevalent. An example being the CBA Perls VI and Woolworths Notes. These carry longer terms than term deposits, with some containing equity conversions. As you are lending your money to the institution, the terms need to be carefully examined, including the institution’s ability
to repay. These quite often pay an extra 3-4% more than term deposits and while carrying extra risk they could be considered.
— Direct corporate bonds: With the health of Australian corporate balance sheets, direct corporate bonds should be considered. This is lending with defined maturity terms to large corporates and quite often the rates can be 1.5-2.5% more than term deposits. The most important factor here is assessing the ability of the Corporate to repay the debt and interest within the term of the loan.
— Be aware of guaranteed returns: Lastly, we caution investors in relation to many schemes and operations that provide ‘guaranteed’ returns. A large financial group in Melbourne, ‘Banksia’, recently failed leaving $660 million in debentures unlikely to be paid to investors.
1 Reserve Bank of Australia. Based on Retail Bank term deposits of $10,000 over a 1 year term.
If you have not reviewed your investment portfolio recently, please contact your local William Buck Wealth Advisor to discuss.
03 — The income dilemma
Source: FIIG Securities Limited
Risk
5%
Government Bonds
Bank Deposits
Senior Secured Debt
Senior Debt
Subordinated Debt
Property Trusts
Australian Equities
Hybrids
6% 7% 8% 9%
Return
10%+
PAGE 4 _THE WILLIAM BUCK NEWSLETTER
04 — Would you expect to pay tax on the sale of your family home?
Most homeowners would be aware that the main residence exemption allows the capital gains or losses arising from the sale of a property to be exempt from tax, provided that you are an individual and the property was your main residence throughout your ownership period.
Few people, however, are aware of the documentation required to ensure that they meet the exemption requirements.
The Australian Taxation Office (ATO) has started to request significant evidence from taxpayers to prove that a property was their main residence throughout the ownership period. As is the case for tax matters generally, the burden of proof rests with the taxpayer. Thus, if the matter is disputed by the ATO, it will be necessary to prove that you have lived in a property to which the main residence exemption is being applied for the duration of the ownership period. This can prove challenging, especially when that period stretches for 10 years or more.
Recent cases illustrate that the Commissioner of Taxation can, and will, deny the main residence exemption where people cannot provide
sufficient evidence to show that they lived in their home for the entire period claimed.
For many homeowners this could result in a significant and unexpected tax liability.
ExampleIn a recent case1, a taxpayer (Mr Keep) had his claim for the main residence exemption disallowed because he could not prove that a property was his main residence for the stated period of time.
Before the Administrative Appeals Tribunal, Mr Keep submitted a number of forms of evidence in an attempt to demonstrate that he had lived in the property. However, the Tribunal was not satisfied that the evidence proved that the property had been his main residence.
As a result of not being able to access the main residence exemption, Mr Keep was assessed on an additional $66,271 of taxable income.
ATO reviewing property salesThe ATO has developed data-matching capabilities specifically targeting property sales.
A number of recent cases have brought into question the ability to qualify for the capital gains tax main residence exemption.
THE WILLIAM BUCK NEWSLETTER_ PAGE 5
It has access to a range of data held by other government organisations, which are sufficient to match property sales data to government held residential address information.
Where a gain is treated as being exempt under the main residence exemption and government address data is incomplete, inconsistent or suggests that a person may have lived at another property, the ATO may begin investigative action.
William Buck has been engaged by various taxpayers to assist with a number of ATO audits and reviews where the Commissioner has requested proof of eligibility for the main residence exemption. In some cases, supporting documentation for occupancy of a property has been requested going back as far as the 1990’s.
What records should you holdTo reduce the chances of triggering an ATO review, the easiest thing to do is to ensure that government data for your home address is up to date and consistent, particularly when you have just moved into a property. This data includes address changes for drivers licences,
motor vehicle registration, electoral roll, as well as for other government contacts such as Medicare and the ATO.
If you are looking to utilise the main residence exemption, you should also consider retaining additional documents to support your claim.
Such documents could include a combination of:
— sample of utilities bills (e.g. a couple of examples from each year) such as:
• electricity • water • gas • telephone • internet
— change of electoral roll details to the address of the property
— change of drivers licence address to the property
— motor vehicle insurance indicating that a vehicle registered in your name is parked at the property
— personal mail addressed to the property.
Where your intended application of the main residence exemption is more complex and/or the amount of the gain is large, the level of ATO interest is likely to increase. In these circumstances you should consider holding a higher level of documentation to prove the period of time you occupied your home.
1 Keep and Commissioner of Taxation [2013] AATA 709
If you have any queries about the main residence exemption, please contact your local William Buck advisor.
PAGE 6 _THE WILLIAM BUCK NEWSLETTER
05 — Payroll tax: Understanding grouping rules
The grouping of entities for payroll tax purposes is one of the least understood areas of Australian tax law, yet its implications can be significant. Failing to adequately understand the legislation in your jurisdiction can result in the denial of payroll tax thresholds for some entities and the imposition of penalties where the grouping rules have been incorrectly applied.
What is payroll tax grouping?Payroll tax grouping laws seek to combine multiple entities for the purpose of determining their payroll tax liability. Where two or more entities are grouped, their wages are aggregated in order to determine whether a liability exists. Each employer in the group remains primarily responsible for the payment of payroll tax on its own wages. However, all group members are jointly and severally liable for payroll tax debts.
The grouping provisions ensure that employers do not ‘artificially’ maintain their wages bill below the payroll tax threshold by splitting their businesses into separate employing entities.
Each state of Australia has its own similar grouping rules and advice should be sought from your William Buck advisor in relation to the provisions in your jurisdiction. This article focuses on NSW law as an example.
How is a group determined? A group can be formed under NSW payroll tax laws in any one of five ways:
— Related companies (as defined under the Corporations Act)
— Common control (generally a greater than 50% interest in different entities)
— Tracing of interests in corporations
— Subsuming rules (larger groups formed out of smaller groups)
— Use of common employees
The broadness of the payroll tax grouping provisions has been highlighted in a number of recent cases where the Commissioner has been successful in grouping entities via the common employee provision.
One alarming aspect of the common employee provisions is that there is no minimum level of ownership or control required in order to form a group, consequently two arm’s length parties could be grouped under this provision.
What are the common employee grouping rules?While the specific wording can vary across different states, grouping of two entities under the common employee rules can broadly apply in the following circumstances:
— If an employee performs duties for (or in connection with) a business carried on by their employer and another party, the employer and the other party will constitute a group.
— If an employee of one entity is employed solely or mainly to perform duties for (or in connection with) a business carried on by another party, the employer and the other party will be grouped.
— If an employee of one business performs duties for (or in connection with) a different entity under an arrangement for the provision of services, the employer and the other entity will be grouped.
The last of the situations outlined above is extremely broad and can catch not only formal, written arrangements but also unwritten, informal or implied arrangements.
The significance of the third situation outlined above is often misunderstood. Because the provision is to be interpreted so broadly, the default position will often be that two or more unrelated entities end up being grouped for payroll tax purposes. It is then up to the respective entity to provide evidence that the grouping provisions do not apply.
ExclusionsWhere two or more entities would ordinarily be grouped, the Chief Commissioner has the power to exclude one (or more) of the entities from a particular group.
While a number of conditions will need to be met in order for the exclusion to be granted, a key aspect is the entity's ability to prove that it is being carried on independently of, and not in connection with, any other members of the group. There are a number of factors considered in determining the independence of a business. The burden of proof is on the taxpayer to prove that they satisfy the independent business requirements. Should independence be in question, the entity should seek professional advice from their William Buck advisor.
The grouping provisions ensure that employers do not ‘artificially’ maintain their wages bill below the payroll tax threshold.
Beware the contractor rulesEven if it is possible to demonstrate that an entity carries on its business independently of other group members, it is still possible that the contractor provisions can apply to include any inter-entity transactions for payroll tax purposes. Separate contractor related rules and exemptions are available which would need to be considered on an entity by entity basis.
Should you require further information in relation to payroll tax matters, please contact your local William Buck advisor.
THE WILLIAM BUCK NEWSLETTER_ PAGE 7
Pictured above: Karyn Hilton Head of Risk Insurance Division, Adelaide
Pictured above: Sam Kitchen Senior Financial Advisor, Sydney
06 — William Buck Risk Advisors named best in business
We’re delighted to congratulate both Karyn Hilton and Sam Kitchen who have received honours in financial services.
Karyn Hilton, Head of the Risk Insurance division in Adelaide was named the inaugural Money Management Life Insurance Executive of the Year, receiving the national financial services award in Sydney on 20 November.
“ I was up against some tough competition and it is wonderful to be acknowledged in this way.” Karyn said.
“ Having worked for over a decade as a registered nurse before joining William Buck, I have a genuine first-hand understanding of the practical and emotional issues surrounding risk insurance. I know all too well the impact of sickness, injury and death on a family, medically and financially.”
The Money Management Women in Financial Services Awards acknowledge women whose achievements are inspiring and ground breaking and is a celebration of their dedication to their profession.
Colleague Sam Kitchen, a Senior Financial Advisor with William Buck Sydney was also awarded recently, taking out the Association of Financial Advisers (AFA) 2013 Excellence in Education Award in the New South Wales category.
These individual accolades add to what has been a very successful year for William Buck in the financial services industry. The Wealth Advisory division recently received the prestigious Licensee Select NSW Practice of the Year Award.
Nominees are required to submit an application that demonstrates practical knowledge in their chosen field, including a list of recent achievements and testimonials from clients, peers and industry state managers.
07 — Guest columnist: Jamie Warner The number one reason why businesses lose data
Imagine the impact on your business’s sales and profitability should it lose all of its critical data.
Despite all of the advancements in technology and the tools available, small to medium businesses (SMEs) continue to treat data loss as an ‘insurance’ type event which doesn’t happen often. As a result, they seldom put much energy into preventative measures. The reality is businesses do lose data and the first step is to acknowledge this very real business continuity threat.
The facts In a recent study conducted by the Ponemon Institute, it was found that Australia has the greatest volume of compromised data records globally. These compromised data records cost Australian businesses an average of $133 per record in 2012.
For a SME, these costs can quickly add up. The total cost of data loss depends on the impact it has on your business to continue providing its services. Should you need to replace IT infrastructure, the cost to replace faulty servers or hardware can be anywhere from $5,000 to over $100,000, depending on the amount and type of infrastructure being replaced.
Beyond the hard costs, there is the resulting impact on business continuity to consider; decreased competitive advantage, litigation and damage to reputation are all potential fallouts from data loss.
The reason The primary reason businesses lose data is because they haven’t developed an adequate Disaster Recovery Plan (DRP) or Business Continuity Plan (BCP).
A DRP is a plan which focusses on Backup and Disaster Recovery of your data. Data can be lost in any number of ways including user errors and deletion, theft, server infrastructure failure and technical or natural disasters. The floods of Queensland and Bushfires in Victoria and New South Wales are all too fresh in our minds.
A DRP ensures that should one of these events occur, your data is safe and retrievable.
A BCP is focused on the overall ability of your business to continue operating in the event that a disaster strikes. Let’s say your building has a fire and your staff can’t get into the office, how will they continue to work, where will the phone calls go and how will you service your clients?
These days we have amazing technologies and services to provide solutions to your data backup and disaster recovery requirements, you just have to make it a priority for your business.
Disaster recovery software If you haven’t heard about Disaster Recovery Imaging Software such as StorageCraft (Shadow Protect) or Symantec, then you need to ask your IT Consultant. This software is the single most important piece of software to use for Backup and Disaster Recovery. It takes a full ‘image’ of your servers and updates the image incrementally, as often as every 15 minutes. You can recover files within that period and save entire systems without having to reload servers and software in the event of disaster.
Review your disaster recovery plan It is highly recommended that you speak with your IT Provider or IT Consultant about your DRP or BCP to confirm you have the right solution or process in place.
It is vitally important that the business owner or directors take an active interest in the development of these plans, in particular the BCP. The BCP strategy and subsequent investment must align with your business objectives and budget. Some businesses, for example, have a higher tolerance for downtime, while others will need to aim for maximum uptime as it relates to your Recovery Time Objective (RTO). Understanding your requirements will help guide your IT partner to develop the correct solution for your business.
Jamie Warner is CEO of eNerds, a business IT Services provider based in Sydney. eNerds has a proven track record in providing services to the small to medium businesses with 20-500 staff. If you have a unique IT challenge to resolve, Jamie’s team is available to discuss your requirements further on 1300 888 100 or www.enerds.com.au.
PAGE 8 _THE WILLIAM BUCK NEWSLETTER
08 — Considering an IPO: What you need to know
2013 ended with a flurry of Initial Public Offerings (IPO) as a number of companies floated on the Australian Stock Exchange (ASX). This heightened activity together with the success of popular floats such as freelancer.com may lead many private businesses to consider listing via an IPO.
Certainly, market sentiment is improving. However, it is important for business owners and directors to be aware of both the advantages and disadvantages of listing and to understand the steps involved in preparing to float before making any decisions.
The decision to float The decision to list on the ASX will be determined by a number of considerations including industry specific factors, competitors’ behaviours and market sentiment.
However, perhaps the most influential consideration will be your personal and corporate goals. Are you looking to raise extra capital, to boost the company’s profile or to achieve an exit for existing shareholders?
Having identified your primary goals, it is important to look at the IPO process objectively, including its advantages and disadvantages, and to assess whether an IPO will deliver on these objectives or if another strategy may be more appropriate.
The table on the right outlines some of the advantages and disadvantages of listing on the ASX.
Advantages Disadvantages
Access to capital Listing will give your company the opportunity to raise capital to fund acquisitions and/or organic growth and to pay down debt. It may also mean that your company will find it easier to attract institutional and professional investors.
Increased costs The costs do not end once the IPO completes. Ongoing costs include annual listing fees, shareholder meeting costs, director fees and audit costs.
Higher public and investor profile Listing generally raises an organisation’s public profile with customers, suppliers, investors and the media.
Increased Scrutiny Both the company and directors will be subject to much greater disclosure and reporting requirements both during the IPO process and subsequently as a listed company.
Improved valuation Being listed generates an independent valuation of your organisation by the market; it may also improve your company’s valuation.
Exposure to market sentiment Listed companies are generally more affected by market conditions and sentiment. A poorly performing market can influence the valuation of your business regardless of how well it is actually performing.
A market for your company’s shares Trading of your shares on a stock exchange improves the liquidity of company shares and gives current shareholders the opportunity to realise some of the value of their holdings.
Loss of control The current owners will relinquish some control and there will be greater accountability to shareholders.
Listed companies may also be the target of a hostile takeover which may see your control of the company lost.
Alignment of employee / management interests The process of remunerating your employees, executives and directors with shares is simplified, making it easier to align the interests of your employees with the goals of your company.
Distracted Management Team During the IPO process a substantial amount of your management team’s time will be taken away from day to day task of running the business and will be focussed on the IPO.
Management may also be focused on short term gains through share price movements which may encourage decision making that is not in the best interests of the company in the long term.
THE WILLIAM BUCK NEWSLETTER_ PAGE 9
Name: Gil AbrasPosition: DirectorDivision: Business AdvisoryYears at William Buck: 1
What do you love most about your job? I love coming to work every day and constantly being inspired by everyone in the William Buck team and by the clients that I connect with. Nothing is more rewarding than seeing your clients prosper and seeing them achieve their goals and know that you played a part in them reaching that goal.
What was your first job? Did you learn anything that you still use in business today? I had a summer job flipping burgers at a fast food chain in Israel so I could buy an electric guitar. I learnt that no matter what you do, whether it be flipping burgers or working on multi-million dollar deals, if you work as a team and treat everyone with respect you will achieve your goal.
You have 2 children, how do you balance work and family life? I wouldn’t be able to do it without my wife to whom I have been married for 10 years. I continually work on the balancing act by ensuring that when I am at work I provide 100% and when I am at home I give my undivided attention to my children and wife. There is a time for work and a time for family and it is my role as a father to ensure that I set the best example for my children.
09 — Director profile Gil Abras
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Am I eligible to list?In order to be eligible for listing on the ASX, a company must meet the following size criteria:
Measure Requirement
Net Profit The company needs to have generated a minimum of $1 million in net profit over the past three years and a minimum of $400,000 in net profit over the past 12 months; or
Net Tangible Assets The company must hold a minimum of $3 million in net tangible assets; or
Market Capitalisation The company must have a minimum market capitalisation of $10 million.
While the above are the minimum requirements, the net profit, and particularly the anticipated growth in net profit, need to be intertwined with a compelling purpose for a listing to make sense.Once listed the company must also comply with rules relating to the size and structure of the shareholder base.
— Structuring: Initiatives (e.g. acquisitions, restructures etc), that need to be completed before listing including determining what assets are to be included in the listing and how assets will be dealt with that will not be included.
— Tax: The tax issues that may need to be resolved including consideration of tax consequences of any restructuring of the assets of the company prior to listing.
— Investor expectations: What will investors’ expectations be in terms of profitability and dividends after listing and how does that fit with your business ethos.
Once these issues have been dealt with, the process of taking your business public can begin.
IPO process The IPO process can be summarised in seven steps as set out below:
1 Appointment of advisors: Appointing experienced advisors is essential to the success of an IPO.
2 Preparing the prospectus and due diligence: Running concurrently, the due diligence process seeks to ensure the information contained in the prospectus meets legal requirements and provides a potential user with information that they can rely on to make their investment decision.
3 Institutional marketing program commences: Certain marketing activities can be undertaken to institutional investors, including IPO roadshows, to generate interest in the offer.
4 Lodge prospectus with ASIC: Prospectus is subject to a public exposure period and ASIC has the power to stop the offer if it requires changes to disclosures in the prospectus.
5 Lodge listing application with ASX: Review process typically takes six weeks.
6 Marketing and offer period: Offer to retail investors starts after the exposure period and is usually open for three to four weeks.
7 Offer closes, shares allocated and trading commences.
The IPO process will typically take at least five to six months to complete, but this will be heavily dependent upon on how ready your business is prior to commencing the process.
For further information on the process involved with conducting an IPO or for advice on whether your business would be suited for an IPO, please contact your local William Buck Corporate Advisory specialist.
It is important for business owners and directors to understand the steps involved in preparing to float before making any decisions.
Preparing for an IPO Preparation is the key to any successful IPO. In order to prepare your company for listing, various issues will need to be considered. These include, but are not limited to:
— Timing: When is the most appropriate timing for the listing in terms of both the business and market conditions?
— Funding: The amount of funding required by the company to finance the growth of the business, and the strategy and timing behind that growth and how much equity will need to be given up to secure this required level of funding.
— Skill gaps: Skill gaps at the senior management and board level will need to be resolved in a listed environment.
— Information systems: A review of your company’s operational, financial and management information systems to ensure that they are sufficiently robust for a listed organisation.
— Continuous disclosure: Is your company prepared for the greater disclosure, accountability and transparency that will be required after listing including compliance with corporate governance best practice?
PAGE 10 _THE WILLIAM BUCK NEWSLETTER
10 — 5mins with...Aquaint Capital
Aquaint Capital is a Singaporean based asset management and property investment firm that recently listed on the ASX with the help of William Buck.
We caught up with Group CEO Yang Po Tan to find out what it takes to list a business across borders and how Aquaint maintains an engaged multi-national team.
Aquaint has a unique structure. Why did you start the business and how has it evolved? Today the company has three distinct business areas; education, asset management and investment.
This three pronged approach has been our goal since the outset. However, when we started out in 2009, we provided only education. We ran seminars focussed on property investment and asset management. Over time we found that many of our seminar attendees were looking to us for specific investment advice and as a result the other two areas of the business grew organically.
For me, education is still the most critical part of the business. It is important that investors are well informed and are aware of the risks. Throughout my career, I have seen too many people get hurt.
We see trends where property gets really ‘hot’, all too often uneducated investors get into the market when it’s at its peak and then get burnt. We teach people to spot investments before they become saturated and to review opportunities objectively.
You recently listed on the ASX. Why did you choose to list in Australia rather than your native, Singapore? Aquaint has three distinct business arms, which is a foreign concept in Singapore. In Asia, most companies have only one business nature. We wanted to list in a country where both the regulators and the investors understood how our business operates.
Did you face any challenges listing your company overseas? We were very comfortable with the process. Due to its position, culture and economy, multinational business is very common in Singapore.
With that said, there were some challenges. I would advise anyone listing overseas to seek the advice of professionals on the ground. When hiccups arise (which they always do) you need a local team that can adapt quickly and keep the process moving.
For Aquaint, engaging William Buck was invaluable. They understand how the local regulators and Australian markets work and are on top of any changes in legislation as they happen.
What would your advice be for other mid-market businesses planning to conduct an IPO? Hang in there! There are times when it will get tough and you may want to give up. The level of detail required is astonishing and it can really drag you down. Being prepared for this and planning in advance will help a lot. You need to be on top of everything. Your team and advisors will need to be precise and accurate, but also fast.
A business is not one person. To me, the team is everything. We’re a family.
THE WILLIAM BUCK NEWSLETTER_ PAGE 11
The Government expects that the fiscal impact of the majority of the remaining 67 measures will be minimal.
11 — $2.4 billion of Labor tax measures to be discarded
The Government expects that the fiscal impact of the majority of the remaining 67 measures will be minimal. A large number of these announced but unlegislated tax measures, however, are likely to impact small to medium businesses and privately held businesses. These issues may not make the headlines, but they impact significantly on the functioning of a key sector of the economy.
Announced but unlegislated tax measures create confusion and complexity for private businesses. They inject considerable uncertainty into longer term investment and decision making and are an impediment to what is one of the drivers of the Australian economy.
William Buck would support a review of the remaining measures.
On 6 November 2013, the Treasurer Joe Hockey announced how the Federal Government will deal with 25 of these changes. Seven of the changes will not proceed and 18 will proceed, three of which will be significantly amended.
This announcement was part of the Coalition’s pledge to ‘provide a stable and predictable Government’ which should also provide ‘certainty to business and significantly reduce red tape and associated costs’.
We have reviewed the seven changes that have been discarded, and consider the three most significant changes for our clients to be:
1 Self-Education Expenses cap: The Government will not proceed with Labor’s announcement to put a $2,000 cap on the amount people can deduct as Self-education expenses, including training and educational courses, textbooks and other accreditation expenses. Advice to the Government was that there was ‘no credible evidence of substantial abuse of this deduction’.
2 Fringe Benefits Tax (FBT) changes to car fringe benefits: The Government will not proceed with Labor’s July 2013 announcement to abolish the ‘statutory method’ for determining FBT liabilities for car fringe benefits.
3 Tax on superannuation pensions: The Government will not proceed with Labor’s announcement which would have taxed people’s superannuation pension earnings above $100,000 in pension phase.
There are currently 92 unlegislated and unresolved tax and superannuation changes which were announced by the former Labor Government.
You brought your whole team to Australia to celebrate your listing, why was this important to you? I wanted them to know that their effort is recognised, a business is not one person. To me, the team is everything. We’re a family.
We teach our staff that the growth of our company is only limited by the growth of its people. We encourage each individual to strive for growth professionally and personally. With each employee working towards growth anything is possible.
Our people work exceptionally hard and when you work hard, you get tired. We try to ensure that we have fun at work – when you have fun, you feel re-energised. We play pranks on each other, and make sure all the small wins are celebrated.
How do you maintain this positive culture across your remote offices? I don’t call them ‘remote’ offices. Our overseas employees are as important to the business as those in Singapore. When we opened our offices in Taiwan and Malaysia it was important to ensure that our values were at their foundations. We sent senior staff to open these offices as we believe that a positive attitude comes from the top.
Twice a year we hold a retreat for all of our staff globally – one at the beginning of the year to set goals, realign thinking and establish strategy, and one at the end of the year to evaluate our actions and celebrate our success as a team.
williambuck.com CHARTERED ACCOUNTANTS & ADVISORS
12 — Board talkKey issues affecting corporate boards, family boards and the boards of not for profits
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Should directors have more ‘skin in the game’? Companies whose directors are substantial shareholders outperform the market. That’s the finding of a recent report Board Matters released by Macquarie Equities. The report found that return on equity was 13.7 percentage points higher and that relative share price performance was 8% higher where directors held shares.
These findings coincide with an announcement made by Suncorp that directors must own at least $200,000 of share stock. The theory is that directors with skin in the game are more motivated to improve company performance.
However, the Macquarie Equities report has led some commentators to question where this motivation may lead. Where employees or directors are remunerated predominately based on performance there is a risk that they may resort to unethical behavior. It could be argued that a material conflict of interest arises where an individual who holds a large package of shares is also responsible for signing off on financial statements and making strategic and transactional decisions. Should unethical behavior arise, it is all the key stakeholders that lose out.
What are your thoughts? When it comes to a director’s shareholding in listed companies how much is too much?
Australia’s employment rate second highest globally In its most recent Employment Outlook the Organisation for Economic Co-operation and Development (OECD) has found that when compared to the larger OECD economies, Australia’s employment rate is second only to Germany.
Additionally, Australia has successfully minimised the number of citizens receiving benefits. Today, 400,000 fewer Australians receive benefits than in 2000. One of the key reasons cited is the Job Network program introduced in 1998 and its successor Job Services Australia.
It is not, however, all smooth sailing. Australia’s workforce is characterised by high job instability as more businesses choose to employ on a contract or part-time basis. The ‘underemployment’ rate in Australia is remarkably high at 5.8%, down from the record high of 9% in 2009.
It seems that with a high minimum wage employers are still keen to economise by cutting hours.
Historical trend in employment rates in Australia and selected OECD countries, 1970-2012.
Percentage of the working-age population
76%
72%
68%
64%
60%
56%
Source: OECD Labour Force Statistics Database
1970 1975 1980 1985 1990 1995 2000 2005 2010
Australia
United States
G7
Japan
European Union (15)
OECD