You hire equipment to a mining company which goes into administration. The Administrator then sells your equipment and uses the proceeds to pay the mining company’s creditors. Can they really do this? The answer is yes, unless you have fully complied with the Personal Property Securities Act (PPSA).

What is the PPSA?
The PPSA introduces legislation enabling business’ to take security over the equipment you hire out or the goods you sell on credit terms with the ultimate goal of protecting your interest in your goods and equipment in the event your customer becomes insolvent. Your customers and your equipment will then be listed on the Personal Property Securities Register (PPS Register). Similar to how a bank registers a mortgage on a title to a property that they have lent money for.

Why do I need to register?
The main question is, “Why do I need to register my ‘equipment on hire’ or the customers who I have sold goods to”? The answer is to retain ownership in your property and protect your property from forming part of the pool of assets which may be lost in the event your customer becomes insolvent.
If liquidators are brought in, they would salvage what they can and pay the debts first to people and entities with priority and finally to unsecured creditors. If you have not registered under the PPSA you will be an unsecured creditor. If you have registered you’ll be one of the priority creditors.
For example a business hiring equipment is critically exposed to the PPSA and faces the loss of its equipment on the insolvency of the customer. The solution is simple, comply with the PPSA.

A business selling goods on credit terms can now take security over the goods.

Who does this apply to?
This can be relevant to potentially anyone who is in business and sells goods, has hire arrangements, has equipment loan arrangements or even businesses who provide equipment as part of a service.

Unfortunately the PPSA has changed the concept of ownership to one where possession will often trump ownership.

The most vulnerable are businesses who hire equipment out beyond one year or in an open ended agreement. For such businesses the PPSA creates a high degree of risk. A failure to comply with the PPSA when you should will result in the loss of your equipment, even though you own it. If your customer collapses whilst in possession of your equipment it becomes their property.

Whilst the PPSA is bad news for hirers it is fantastic news for anyone selling goods on credit. The PPSA has given legislative backing to the historical ‘retention of title’. Suppliers complying with the PPSA significantly improve the likelihood of recovering goods or their value on the insolvency of a customer.

Any of these types of businesses who have customers in vulnerable industries are particularly at risk. At the moment the natural resource sector is generally unstable. Similarly, the construction industry is having its own challenges. The scary thing is that, most of us do not know what types of business will be in trouble tomorrow. Simple law changes can decimate an industry. The downfall of the mining industry can have flow on effects in other industries that are heavily reliant on the mining sector. On that basis I would consider the business that makes the machinery that supplies the equipment to the mining entities vulnerable.

In my next blog I’ll discuss equipment hired to related parties, what happens when a client becomes insolvent and how to register.

Author: Adrian Wardlaw
Email: Adrian@faj.com.au

As a sole trader you do not have an obligation to contribute money into super each year for yourself, but if you choose to contribute you may be entitled to a tax deduction.

To be eligible to claim a super deduction you need to contribute to a complying super fund and advise your super fund that you intend to claim a tax deduction equal to your super contributions.

Under current laws you also need to ensure that less than 10% of your income for the year comes from salary and wages (the 10% rule). This is tested on a yearly basis, so you can get caught in a situation where your employment income increases at the end of the financial year to the point where it disallows your contributions made earlier.

Pro Tips:

• The easiest way to side-step the 10% issue is to salary sacrifice any wages you have to super. This is a safe way of making sure you get the tax benefit of contributing to super.
• At the recent budget the government announced changes to scrap the 10% rule from 1 July 2017. Until then you will still need to ensure you meet these rules.

Author: Brigette Liddelow
Email: brigette@faj.com.au

Generally the Australian Taxation Office considers home to work travel to be private and therefore non deductible.

However, there are a few exceptions:
1.    From your normal workplace to an alternative workplace while still on duty and back to normal place of work or home.
2.   Shifting places of work – e.g. regularly working at more than one site each day before returning home.
3.   From your home to an alternative workplace for work purposes and then returning to normal workplace or home.
4.   Where you need to carry bulky tools or equipment that are used for work. The requirements for this travel to be deductible include:

• The tools or equipment are needed to complete your work
• Your employer expects you to transport the tools or equipment
• There is no reasonable secure storage area available at your workplace

A general guide to tell if the tools or equipment are considered bulky is if it is difficult to transport them on a bus.

You can’t claim travel if:
1.   The travel is for minor work related tasks – e.g. travel down the road to pick up newspaper for the office on the way to work.
2.   You need to drive between your home and workplace more than once a day.
3.   You are on call – e.g. your supervisor contacts you to come into work.
4.   You are travelling to work outside of normal business hours.
5.   You do some work at home.

Itinerant work – you cannot count your home as a workplace unless you carry out itinerant work. If you perform itinerant work you can claim the travel costs of driving between alternative workplaces and home.

Factor’s indicating you perform itinerant work include:
1.   Travel is a major part of your work, not just because it is convenient to you and your employer.
2.   You have various workplaces to travel to through out the day.
3.   You are continually travelling from one site to another.
4.   You are often uncertain of the location of your work site.
5.   Your employer provides you with an allowance in recognition for your continual travel between different work sites through out the day.

Pro Tip:
The ATO are targeting home to work travel claims this year. We recommend speaking in detail with your accountant to ensure you’re entitled to claim the deduction.

Author: Rhys Frewin
Email: rhys@faj.com.au

An EPA allows you to give someone the authority to deal with your finances on your behalf.  This is different to a “normal” power of attorney as it continues to operate should you suffer a loss of capacity to make decisions.

A person appointed under an EPA is not permitted to make personal and lifestyle decisions, including decisions about medical treatment.  The authority is limited to decisions about property and financial affairs.

To cancel or revoke an enduring power of attorney you must be of sound mind.  It is recommended that the revocation is made in writing.

An EPA can be useful should you become unable to look after your affairs at some stage in the future.  This could be due to physical ailments, loss of mental capacity or something unforeseen, such as a motor vehicle accident.

The appointed attorney has a legal obligation to always act in your best interests and must keep their own money and assets separate from the money and assets of you.

Pro tip – EPAs are normally drafted along with your will. If in doubt, always seek legal advice.

Author:  Stacey Walker

Email:  stacey@faj.com.au

Beware of phone calls supposedly from the Australian Taxation Office (ATO).

Recently there have been a lot of fake phone calls from the ATO. These people can be very convincing and can catch you off guard if you’re not prepared.

Here are a couple of tips to help you to recognise a fake call:

• The caller may accuse you of some level of fraud and suggest that unless you pay an amount immediately you are going to go to jail. The ATO doesn’t work this way. This tactic can be particularly effective with the elderly.
• The caller may ask you to confirm your personal details before they discuss “your ATO account”. These details could later be used for identity fraud.
• Most times a genuine ATO officer will call your Tax Agent. If you are unsure then insist that they call your agent.
• Generally speaking ATO employees are quite courteous. If the caller sounds pressuring or even threatening then the chances are that they are not from the ATO.

Pro-Tip
If you are in doubt ask for their phone number and pass it on to your Tax Agent to call them back. If you feel that your personal details may have been compromised then please let your Tax Agent know and they can discuss with the ATO as to whether a new tax file number should be issued.

Author: Matthew Moonen
Email: matthew@faj.com.au