Having spoken to a number of business colleagues and associates over the past few weeks, most are happy to see the end of 2015 and are looking forward to a more positive environment in 2016. It has been a very taxing year economically, politically and in world affairs.
2015 has also proved a difficult year for most economic commentators, both public and private sectors to get forecasts anywhere near accurate and most were left to “crystal ball gazing”. I expect this will continue for 2016 while the Australian economy staggers through its transition from the biggest resource boom Australia has experienced in decades, to a broader based industry recovery.
There is no doubt that the slowing of the Chinese economy has had a negative impact upon the performance of Australia’s economy. In due course however, the slowing of China will be replaced by improved growth rates in the US, Europe and the Indian economy coupled with a more competitive Australia.
What about the recent rate rise in the US? The first time since 2006! Is it a lump of coal in the economic Christmas stocking or the gold coin in the pudding? Initial indicators suggests the markets liked the fact that the US increased rates, as it was a further sign that the US economy is back on line, so I’m hedging towards the gold coin.
Despite the positive signs, the transition of the Australian economy and a return to normalised growth is still some time off. To some extent, Micro, Small and Medium Enterprises (MSME) across a variety of sectors have been slugging it out over the last 12 to 24 months and there is anecdotal evidence in the marketplace, that there is a level of financial distress that will translate into increased numbers of insolvencies in the New Year.
But this isn’t necessarily a bad thing, particularly if you operate in a similar business in the immediate economy of the failing business. Businesses under performing or teetering on the edge of insolvency tend to have a positive effect on other like businesses in their immediate economy. Rationalisation of insolvent and under performing businesses free up scarce resources for those other businesses, improving revenue streams and reducing costs leading to improved performance.
So what does 2016 hold for an Australian enterprise? In our opinion, it’s going to be more of what we experienced in 2015 unfortunately, as our economy moves from the bottom of the J curve in its transition to a broader based economic recovery.
Shaw Gidley 2015 Newsletter Series in Review
All Shaw Gidley’s past newsletters can be accessed from our website. Looking at the year in review, the Taxman featured heavily, probably because of the heightened level of collection activity in the first quarter of the 2015/2016 Financial Year. To assist you reference our 2015 newletters we summarised and linked them below.
Firstly, the Directors and staff of Shaw Gidley welcome you to the New Year and wish you a prosperous 2015 in all respects. No doubt at the stroke of midnight 31 December 2014 millions of New Years resolutions were made Australia wide, struck in granite, hand on heart, by way of oath to a higher being and if broken, to be struck down by lightning.The point being, we make personal New Years resolutions, so why not make them for our business as well?
In our October 2014 newsletter, Paul Gidley discussed the increasing use by the Australian Taxation Office of the practise of issuing notices under section 260-5 of Schedule One of the Taxation Administration Act (TAA), otherwise known as Garnishee Notices. These are used to collect outstanding tax liabilities. In this month’s newsletter, we are taking a look at the powers of the Commissioner of Taxation to issue garnishees beyond the company’s bank account to recover the ATO’s outstanding debts.
March 2015 – Tough Employment Times in the Mining Sector
Over recent times, falling coal prices and the high Australian dollar have heavily impacted the local mining sector, forcing many of the local mines to cease production and focus on care and maintenance activities. It has recently been reported that New South Wales coal production jobs have fallen below 20,000 for the first time since late 2010 as the Hunter’s unofficial unemployment rate remains higher than the state average. This newsletter looks at the flow on effect in the market.
Despite the downturn in the economy, one industry that appears to be bucking the trend is the accounting industry, witnessed by the level of activity in the acquisition of accounting practices.
The Personal Property Securities Act brought about somewhat of a seismic shift in the legislative framework, challenging traditional concepts. No longer is ownership of personal property determinative of a party’s rights. Graeme’s article discusses some of the key considerations when securing property on the register.
June 2015 – Time Period for Loans to Shareholders to be repaid
In the course of a Members’ Voluntary Liquidation of a private company, a liquidator may realise assets and have surplus cash. If this happens, shareholders need to understand how a tax-effective distribution of profits might work before they proceed.
May and June 2015 have seen the largest number of Australian Taxation Office winding up applications filed since August 2013, as the ATO continues its attempt to rein in its $19.5 Billion debt. As part of its debt reduction strategies, the ATO has been commencing wind-up applications on companies and individuals with debts that are dramatically lower than those they would historically seek.
Market data out this quarter suggests the Commissioner of Taxation is maintaining the rage in collection activities against the SME sector, with May’s record 556 winding up applications. In this newsletter, we discuss the possible rationale for this increase, the Commissioner’s recent treatment of SMEs facing winding up applications, how this activity may affect the broader business community and what to do if your clients find themselves as the recipient of a winding up application.
Do you have a client, friend or acquaintance who has received a claim from a liquidator or trustee in Bankruptcy? While specialist insolvency firms such as ours are typically known for their traditional insolvency and business turnaround services, it is perhaps not as well known that we can be engaged to defend a company or individual facing claims from opposing liquidators or trustees.
October 2015 – When to talk to the Commissioner
In our July 2015 newsletter, Jeff Shute discussed the ATO’s pursuit of corporate taxpayers and their Directors. This article looks at the steps Directors can take to avoid the “big stick” approach adopted by the ATO, and also some pit falls facing Directors if they ignore their obligations in relation to insolvent trading.
Did you know that a person who holds a directorship for only one day may become personally liable for a company’s entire SGC and PAYG withholding debt? This may be the extreme scenario but the amendments to the Director Penalty regime contained within the Taxation Administration Act 1953 introduced in June 2012 provide for this exact situation.