Automotive AccountantsNetwork Forum
Meeting 1
The Manningham 12th April 2011
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This presentation has been prepared by Colledge’s for the general information of its clients and forum attendees. While the information herein has been prepared with all reasonable care and derived from sources believed to be accurate, no responsibility or liability is accepted by Colledge’s or any of its affiliations, for any errors or omissions, including liability to any person of negligence or otherwise.
Recommendations may not be appropriate in all circumstances and clients must consider their own personal objectives and financial advice before acting on recommendations in this presentation.
Colledge’s (ABN 52 439 950 641)
For more information, contact Angelo Sirianni on 03 9851 6500 or email [email protected]
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Feel free to ask questions
Show respect for presenters and colleagues
One discussion at a time
Please switch phones to “silent”
Enjoy the forum!
For more information, contact Angelo Sirianni on 03 9851 6500 or email [email protected]
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House Rules
Quote for the day...
“It is no profit to have learned well, if you neglect to do well”
Publilius Syrus (~100 BC)(Writer of moral maxims (sayings)/Mime Actor)
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Agenda
Introduction
- Whiteboard Items
FBT Update
ACCC – Care in Advertising
Cash Management
Whiteboard Items
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Introduction
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Whiteboard Items
1. Vehicle preparation/yard staff measurement of cleaners to retail units
2. Forum Members responses to Veda Auto Does presentation
3. Unions
- Have any dealers been contacted recently?
4. Advertising
- What is the most effective medium for your dealership?
- Where do you currently spend most of your advertising budget?
5. After market commissions
6. AMEX merchant fees follow up
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2011 FBT Update
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Key Changes for 2011
Benchmarking
FBT Review
Key FBT Rates
2011 FBT Update
Key changes for 2011
- Continued Compliance Program for 2011
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2010/11 Compliance Program Statistics
No. Of Reviews (Audits/Desk Reviews)• Businesses up to $250M annual turnover
27,845
Revenue Raised $659,000,000
Average Audit Adjustment $25,000
2011 FBT Update
Benchmarking
- ATO creating benchmarks
- Use with data matching
- To identify possible employer audit targets
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2011 FBT Update
Benchmarking
- Current Industry Benchmarks already assessed
• Building & Construction
• Real Estate
• Financial Services
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FBT Update
FBT Review
Meal Entertainment
This is an area of much complexity and confusion
relates to meal entertainment and event-based
expenditure.
To put this group of activities into FBT categories,
the following groups require special consideration:
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FBT Update
FBT Review
(a) Food, drink and accommodation generally into the sub-categories of:
- meal entertainment, and
- not meal entertainment
(and thus deductible under the normal concepts of s 8.1 of the Tax Act).
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2011 FBT Update
FBT Review
(b) Recreation expenditure:
- expenditure on a social function, game of golf, movie ticket etc.
(c) Corporate sponsorships
(d) Seminar expenses
(e) Promotional expenses
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FBT Update
FBT Review
What qualifies for FBT according to ATO?
- This is on a case by case basis
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FBT Update
FBT Review
- On a case by case basis
- Influenced by answers to the following:
• Why – purpose test
• What – more elaborate
• When – during work hours or not
• Where – In-house vs restaurant etc.
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2011 FBT Update
FBT Review
Reportable Employer Super Contributions (RESC)
- The ATO have highlighted that this area was misinterpreted on the 2009/10 employee PAYG summaries, and that penalties are available to them.
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2011 FBT Update
FBT Review
- The purpose of this disclosure is to ‘add back’
this amount (normally extra contributions
above 9% SGC) to the PAYG salary for various
income-tested liabilities.
Note: it is not taxable income to the employees
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2011 FBT Update
FBT Review
Motor vehicles
- The following points are confirmed in respect to
pooled motor vehicle usage:
• MT2023 is an ATO ruling which has been
relied on by Accountants to adopt the
averaging provisions for determination of
the cost base and this ruling still applies.
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2011 FBT Update
FBT Review
- The FBT cost of pooled motor vehicles can be
further reduced by privately paid car expenses,
including:
• petrol
• parking fees
• car washes
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2011 FBT Update
FBT Review
- Usage days can only be reduced where the
employee does not have access to a vehicle.
Note: the fact that they are on leave, and the pool
car is in the garage at home, does NOT QUALIFY for a
reduction of usage days.
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2011 FBT Update
FBT Review
- Directors/Owners and associated persons are all liable for FBT on motor vehicle usage.
- The FBT charge on pooled vehicles is NOT a reportable fringe benefit. However if the vehicle is specifically allocated to an employee/owner that vehicle’s FBT cost is reportable.
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2011 FBT Update
FBT Review
- The ATO’s computerised approach, including
benchmarking, means that considerable care
needs to be exercised in the analysis of
transaction data
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2011 FBT Update
Key FBT Rates for 2011 FBT Year
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FBT Rate for 2011 FBT Year 46.5%
Gross Up Rates
• Type 1 2.0647
• Type 2 1.8692
2011 FBT Update
Key FBT Rates for 2011 FBT Year
- Type 1: where the employer is entitled to claim any input tax credit in respect to the acquisition of the benefit
- Type 2: benefits that are not Type 1.
→ i.e. benefits for which the provider is not entitled to claim any input tax credit
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ACCC – Care in Advertising(Section 53 of Trade Practices Act 1974)
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Advertisement
Infringement Notices
ACCC – Care In Advertising
Advertisement
“Free extended lifetime mechanical warranty on new and used cars”
('Lifetime Mechanical Warranty‘)
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ACCC – Care In Advertising
Advertisement
- The fine print on the advertisement identified
(amongst other conditions) that the 'Lifetime
Mechanical Warranty' was limited to 175,000
kilometres and that claim limits applied. The claim
limit referred to is a total of $3,000 worth of claims
for the life of the contract the value of which was
not disclosed in the fine print.
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ACCC – Care In Advertising
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ACCC considered the conduct was in contravention of Section 53(g) of the Trade Practices Act 1974
- The advertisement states that the vehicle
would be supported with a lifetime warranty
- In fact, it was subject to limitations:
• kilometres travelled
• total value of claims limit
ACCC – Care In Advertising
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ACCC imposed the following undertakings:
- The dealer will not:-
• make false or misleading representation
• engage in conduct that is misleading or deceptive
- Issue a letter to all effected customers and offer to switch to their Premium Warranty
ACCC – Care In Advertising
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ACCC imposed the following undertakings:
- Issue notices in the daily newspapers and on their
website
- Implement a Trade Practices Compliance Program
within 3 months of the Undertaking
ACCC – Care In Advertising
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The ACCC will do the following:
- Make the Undertaking public
- From time to time make public references to the
Undertaking in the media
- Will not denigrate the rights/remedies available to
any other person arising from the alleged conduct
- May hold in the Public Register a summary of the
ACCC Compliance Program Review reports
ACCC – Care In Advertising
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The dealer paid two infringement notices totalling
$13,200
ACCC – Care In Advertising
Infringement Notices
- The ACCC may issue an infringement notice where it has reasonable grounds to believe that a person has contravened certain consumer protection laws.
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ACCC – Care In Advertising
Infringement Notices
- Infringement notices may be issued for alleged contraventions of various provisions of the Australian Consumer Law. These include:
• unconscionable conduct• certain unfair practices• pyramid selling• certain product safety and product
information provisions
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ACCC – Care In Advertising
Infringement Notices
- The ACCC may also issue an infringement notice in relation to an allegation of:
• failure to respond to a substantiation notice
• provision of false or misleading information in response to a substantiation notice
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ACCC – Care In Advertising
Infringement Notices
- The ACCC must issue an infringement notice within 12 months of the alleged contravention
- The penalty amount in an infringement notice will vary, depending on the alleged contravention, but in most cases is fixed at $6600 for a corporation (or $66 000 for a listed corporation) and $1320 for an individual for each alleged contravention.
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ACCC – Care In Advertising
Infringement Notices
- The compliance period for payment of an infringement notice penalty is 28 days, but this may be extended for a further 28 days in certain circumstances.
- A person may choose not to pay an infringement noticepenalty. However, if a person does not pay the penaltywithin the prescribed period, the ACCC may commencecourt-based action in respect of the conduct alleged tohave contravened the Act.
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ACCC – Care In Advertising
Infringement Notices
- Infringement notices may be issued for alleged contraventions of various provisions of the Australian Consumer Law. These include:
• unconscionable conduct• certain unfair practices• pyramid selling• certain product safety and product
information provisions
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Afternoon Tea
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Cash Management
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How to tackle late payments
How to avoid these issues
Know your customer
Cash Management
Business failures are easy to predict (retrospectively)
When dealing with your business clients - panel shops, repairers, wholesalers – there are some warning signs:
- Margin Erosion - Overtrading
- High Gearing - Inadequate Working Capital
- Unknown cash flows - Tax Obligations
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Cash Management
Obtain annual credit applications
Review accounts
- You are providing credit
- Scrutinize the accounts with the above in mind
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Cash Management
How to tackle late payment
Haven’t received the invoice
- Email with read receipt
- Follow up
- Email whilst on the phone
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Cash Management
How to tackle late payment
Purchase order number
- Usually applicable for large businesses
- Small businesses don’t use this process
- Follow up
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Cash Management
How to tackle late payment
Faulty part- Using the excuse to avoid payment- Should return part or collect it
Not yet due- Ensure your credit terms are clear- First delivery provide clear terms
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Cash Management
How to tackle late payment
DP is away, can’t sign the cheque
- Constant follow up
- Call early or late, DP may answer
You have “messed up”
- Common customer complaint
- Phone orders should be reconfirmed
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Cash Management
How to tackle late payment
Cash flow problem- Most honest reason- Any concessions first must be in writing- Due diligence- Credit card payment- Track customers progress through the accounts receivable system
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Cash Management
How to tackle late payment
Rather pay in a lump sum
- This is OK
- Care should be taken with reconciliation
- Ensure all invoices are paid
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Cash Management
How to tackle late payment
Horse trading- Scratch ‘our’ back- Buy customers product first- Proceed with caution
End of the queue- Some firms get preferential treatment- Enforce your payment terms
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Cash Management
How to avoid these issues
Strong administrative procedures
Good invoicing process
Tenacious debt collection – ongoing customer follow up
Do not collect debts at end of month
Issue invoices promptly
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Cash Management
How to avoid these issues
Verbal and written reminders within 60 days
Use of debt collector
Credit card payment
Chasing accounts should be everyone’s responsibility
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Cash Management
Know your customer
Dun & Bradstreet survey
Businesses on average take 52.1 days to pay their bills
90 day accounts up 7% (Dec 2010 quarter)
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Cash Management
Know your customer
Small firms at the mercy of larger firms
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Employees Days to settle debts
200+ 56.4
50-199 48.1
20-49 50
6-19 50
1-5 51.3
Whiteboard Items
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Whiteboard Items
1. Vehicle preparation/yard staff
measurement of cleaners to retail units
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Whiteboard Items
2. Forum Members responses to Veda Auto Does presentation
3. Unions
- Have any dealers been contacted recently?
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Whiteboard Items
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4. Advertising
- What is the most effective medium
for your dealership?
- Where do you currently spend most of
your advertising budget?
Whiteboard Items
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5. After market commissions
6. AMEX merchant fees follow up
Questions
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Surveys Please
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Thank-youFounding member of
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