thomsonhall.com.au

I have always been extremely skeptical when ever a politician promises to cut red tape. I met with the former NSW premier John Fahey about this way back before he even became premier, and he has been retired for ages now. And little has really changed.

However, I do think that a lot of what The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP released for discussion are very worthwhile reforms. I how they can successfully pull it off.

“The reforms will reduce unnecessary reporting obligations on companies and implement a number of other important refinements to our corporate regulatory framework.” Mr Bowen said

The key measures to reduce red-tape include:

• significantly reducing the regulatory burden on companies limited by guarantee (which typically have a not-for-profit purpose), by introducing a three tiered differential reporting framework;
• streamlining parent-entity reporting;
• providing greater flexibility for companies to pay dividends, by replacing the profits test with a solvency-type test; and
• allowing companies to more easily change their year-end date to minimise the burden on companies and their auditors during peak reporting periods.

The reforms will also implement refinements to the regulatory framework, including:

• improving disclosure of non-financial information in the directors’ report;
• protecting solicitors’ representation letters from disclosure to enable auditors to properly verify a company’s contingent liabilities;
• refining the statement of compliance with International Financial Reporting Standards contained in the directors’ declaration; and
• clarifying the circumstances in which a company can cancel its share capital.

Copies of draft amendments, the explanatory material and the regulation impact statement can be obtained from the Treasury website: www.treasury.gov.au.

The closing date for submissions is 3 February 2010.

National Australia Bank’s recent fee cuts have received much positive media attention yet the moves mask a deeper strategy by the bank to access cheaper funding lines.
The media has generally portrayed the move as having the aim of keeping existing customers happy whereas it was more likely done as a move to attract new deposit customers.
NAB has performed the worst of the Big Four in attracting retail deposits throughout the rush into deposits sparked by the financial crisis. Even though NAB increased retail deposits by $13 billion to $56 billion from mid-2007 to August 2009 this was well below the  performance of its peers.

NAB’s banking rivals attracted somewhere in the range of $11 billion and $22 billion more of cheaper funding during the recent crisis, leaving NAB now scrambling for market share.It is easly to conclude that NAB’s latest round of fee cuts appear more like a desperate attempt to claw back some of the ground it has lost recently.

The move by NAB is set to cost the bank over $100 million a year.

But if it succeeds in boosting deposit levels, it will prove a cunning move.

If NAB can increase deposits quickly, it will provide a funding source for a potential spike in residential lending, as the newly acquired mortgage broker army from Challenger begins writing the bank’s loans.

The strategy at NAB seems to be a case of giving with one hand and while taking back with the other.

Thanks to www.burning-pants.com/ for the bringing this to our attention

The ongoing fight over the Australian tax Office’s decision to refuse tax deductions for fees paid by sportsperson to their managers was finally decided by the Australian High Court  in June and now the ATO his issued its response. 
 
For the background to this see our earlier articles at tax-office-loses-2-court-cases-on-sportsperson-fees-appeals and sportsperson-management-fees-tax-deduction .

The Courts decision was that the taxpayers’ appeals were allowed. The fees were deductible. Now the ATO has release a Decision Impact Statement .

The tax office had argued that the footballers were employees and that the fees paid for the negotiation of the playing contracts were incurred only to obtain new employment contracts and had no connection with the course of the taxpayers earning income from their non-playing businesses.
However The High Court unanimously held in both cases that the fees were deductible as being incurred by the taxpayers in the course of gaining or producing assessable income from carrying on a business of commercially exploiting their sporting prowess and associated celebrity.

The Tax Office will now amend Taxation Ruling TR 2000/5 to clarify that it does not apply to employees whose employment activities form part of the carrying on of a business. That is, it accepts the fees are deductible, but only for those whose activities extend beyond mere employment and can be regarded as carrying on a business.

A USA bank now allows customers to deposit cheques online by simply scanning and uploading them. If you have an iPhone, you can even just photograph and submit a cheque via the iPhone app.

We generally only go to the branch to deposit cheques and would love NAB to implement this.

The Financial survival guide covers the key practices that small businesses should adopt to ensure good financial management. The guide was produced by CPA Australia and Small Business Victoria

By implementing these practices early, small businesses will benefit
from strong financial management that will operate without detracting
from their core business operations.

Information in this guide includes:

• Chapter one: Profit in your business
• Chapter two: Financial management
• Chapter three: Increasing operating liquidity
• Chapter four: Cash flow management
• Chapter five: Financing
• Chapter six: How to handle your bank
• Chapter seven: Import and export finance
• Chapter eight: Financial controls

You can down load the guide from CPA Australia

ASIC, in conjunction with Consumer Affairs Victoria (CAV), has released a report examining how lenders and mortgage brokers respond to borrowers experiencing financial difficulties.

The report, Helping home borrowers in financial hardship (REP 152), found that while some lenders are responding well to the needs of their customers, there is generally room for improvement and provides guidance to industry on how to improve practices.

‘This report highlights the importance of industry taking an active role in dealing with hardship’, said ASIC’s Senior Executive Leader, Deposit Takers, Credit and Insurance Providers, Mr Greg Kirk.

‘With forecasts of growing unemployment, we can expect to see increasing numbers of borrowers experiencing mortgage stress. In many cases, however, financial difficulties will be temporary, allowing problems that arise to be resolved.’

‘It’s important that lenders and intermediaries have processes and procedures in place to provide constructive responses to financial hardship. These include procedures to identify customers in hardship, to provide clear and timely information to customers on their right to seek relief, and to engage sufficiently with a customer’s circumstances in order to provide appropriate and flexible assistance’, said Mr Kirk.

The report found that:

• Information about financial hardship is usually only provided following payment default, making it very difficult for borrowers to take positive action at an early stage. Equally concerning, this information is often insufficient for borrowers to understand their options and make informed choices;
• Some lenders do very little to identify borrowers who may require hardship assistance. Many lenders leave this identification of need to collection officers who may not be trained for the purpose eg. one lender only identifies hardship where the borrower raises the need for assistance themselves;
• Lenders appear to prefer offering short-term assistance, such as a three month payment moratorium, rather than genuinely engaging with, and responding to, a borrower’s specific situation. For example, a home loan borrower who has lost income through reduced overtime may need their loan to be extended with lower repayments over a longer period. In such circumstances, a short moratorium is a very temporary fix leaving the borrower likely to default when repayments resume;
• Some lenders have adopted policies that are inconsistent with the rights and remedies available to borrowers under the Uniform Consumer Credit Code. For example, by refusing hardship assistance once payments are more than 60 days overdue or limiting any variation in repayments to a maximum period of six months; and
• Despite clear industry standards mortgage brokers generally have a limited understanding of their role in responding to financial hardship. While most brokers say they offer assistance, there is little evidence of formal policies and procedures to ensure it is done effectively or constructively.

‘This report examined industry practices as at late 2008 and there are already moves within some sectors to improve. On 5 April 2009, the Federal Treasurer announced an agreement with the four major banks wherein they commit to assist borrowers who are experiencing financial difficulty as a result of the global recession’, Mr Kirk said.

‘ASIC is confident industry will welcome the guidance provided by the report, and we’ll continue to work with them to promote better outcomes for borrowers.’

‘Helping home borrowers in financial hardship’ also provides guidance for borrowers. Further information for borrowers is also available on ASIC’s consumer website, FIDO, at www.fido.asic.gov.au.

Victorian borrowers are also encouraged to visit the Consumer Affairs Victoria website (www.consumer.vic.gov.au) for publications that can assist them in dealing with their credit providers. These publications explain the rights and responsibilities of both lenders and borrowers in Victoria.

Dr. Peter Stiedl, Partner, Business Planning for Mindshare discusses recession strategies for business.

The Australian Government has announced reforms aimed at ‘curbing excessive golden handshakes’ (or termination payments) paid to company executives. The government proposes to amend the Corporations Act 2001 to lower the threshold at which termination payments must be approved by shareholders from the current seven year’s average base salary down to one year. The Treasurer noted, however, that the changes cannot be made retrospectively and that the announcement ‘will not prevent existing contracts on termination payments from proceeding’.

The government has also announced that the Productivity Commission will examine the regulation of director and executive remuneration. The Treasurer said the review is a broad-ranging examination that will consider the existing regulatory arrangements that apply to director and executive remuneration for companies that are disclosing entities under the Corporations Act. The review will also consider the role of equity-based payments and incentive schemes, and the role played by the tax treatment of equity-based remuneration.

The Commissioner of Taxation (CoT) lost its priority status in liquidations in 1993, when it gained the right to issue Director Penalty Notices. The CoT’s also have the power to issue notices to parties that owe a taxpayer money directing the payment of that money to the CoT.
These notices were not commonly used in the past and rarely used once a corporate taxpayer went into liquidation. But the CoT did issue such a notice after the liquidation of a company had already commenced.

That notice was challenged and the matter proceeded to the Court of Appeal in the Federal Court.
The case of Burton Holdings Pty Ltd was decided in December 2008.

The essence of the case is determining the right of the CoT to issue a section 260-5 Notice after a company enters into a voluntary winding up.

A section 260-5 notice is really a garnishee order. It is served by the CoT on parties that owe the company money. This group includes not only trade and loan debtors and bankers, but any party that has a judgment against them in favor of the taxpayer company. The first implication is that monies due to the company can now be obtained by the CoT outside the priority provisions in the Corporations Act.

Historically it was widely assumed that the CoT would not issue a section 260-5 Notice after the liquidation of the company commenced, even though some parties thought it theoretically allowable. It was assumed that enforcing such a notice would be stopped by section 500 of the Corporations Act voiding any “attachment, sequestration, distress or execution” against the property of the company. The Full Court of the Federal Court disagrees, and this is where the situation stands at the moment.

The wider implication is that liquidators often obtain judgments against directors for insolvent trading, or creditors and other parties for preferences and other void transactions. Whilst the actions must be taken by the liquidator, the judgments are in the name of the company and direct the money to be paid to the company. It is possible that these judgments debts can be caught under 260-5 notices.

This may have significant implications to a liquidator that has spent significant time and money proving a void transaction or insolvent trading claim against a party, only to lose the recovery of that money to the CoT through the issuance of a piece of paper. While it may be argued that the liquidator and the legal team should be paid from the proceeds under a ‘fruits of their labor’ argument – we are not aware that this has ever been tested – the creditors will surely lose any dividend from any of these monies.

We understand that the liquidator will be seeking special leave to appeal to the High Court. [Burton Holdings Pty Ltd (in liquidation) v Commissioner of Taxation [2008] FCAFC 184]

This article from Worrells

There was much joy among residential lenders in January as they celebrated droves of first home buyers returning to the residential property market.

First home buyers also appear unafraid of loading up with cheap debt – combining the carrot of the Government grant and lower interest rates to push the average first loan up 7 per cent for the quarter.

The latest Australian Bureau of Statistics figures, for the quarter ending November 2008, show the average first time home loan jumping $18,100 to $269,200.

This suggests that first home buyers are ‘stretching’ themselves and not necessarily reducing the amount required to borrow as rates fall.

In fact, first home buyers are taking a punt Australian official interest rates continuing to fall from 4.25 per cent, which seems likely in the short term with March and June 90 day bank bill futures contracts below three per cent.

This is reflected by the fact new mortgage borrowers remain heavily skewed towards variable lending, with only 2.5 per cent of the 49,383 mortgages financed in November having fixed rate terms.

This is a dramatic turnaround from the 19.3 per cent fixed average for all loans financed during the 2008 financial year. The current fixed average for FY09 is 4.4 per cent.

Overall, new home purchases financed in November 2008 (the latest Australian Bureau of Statistics housing finance data) jumped 18 per cent to 11,665, month on month, as the falling interest rate environment and the government grant encouraged new entrants.

Existing property purchasers are placing less confidence in the market, with financed loans crashing 13 per cent in November to 37,718, leaving total loans financed for the month down three per cent to 49,383.

From www.burning-pants.com