Welcome to our first newsletter for 2022 and we hope everyone enjoyed a much-needed break during the holiday season.
Welcome to our March 2022 newsletter. This month we cover issues from flood affected areas, Fair Work actions taking place and DIN.
Welcome to our April 2022 newsletter as we move into election mode after the handing down of the Federal Budget and northern NSW and southern QLD communities continue to face flooding in their towns.
Welcome to our May 2022 newsletter as the Federal Election draws closer and the parties battle it out for the swinging voters. Join us on Election night to celebrate the winners and commiserate with the losers or just for a good night out to enjoy the food, drinks and entertainment.
Welcome to our June 2022 newsletter which sees the Federal Election out of the way after a fun Election Night Party and a new Prime Minister elected. A busy time for accountants coming up with the end of financial year just weeks away. Some interesting articles to follow.
Over the past year there have been a number of building company collapses, one of the most recent Probuild.
In the case of Probuild, questions are being asked by the Administrators about approximately $50M being lent from multiple Probuild entities to prop up the ailing Infrastructure arm, much of which was being sourced from Probuild's building arm, Probuild Constructions (Aust), thus reducing funds available to pay sub-contractors of Probuild Constructions (Aust).
All the elements are in play for the current trend in building industry collapses to continue, indeed, to increase in momentum. Sub-contractors often stand at the end of the line of creditors to be paid.
If one concentrates purely on one sector, home units, the following is applicable.
Covid-19 has been with us now for over 2 years. During this time, we have seen a boom in residential property prices and demand for residential property. At the same time, Covid-19 has led to supply chain issues and an increases in building material prices. In particular, steel prices have increased circa 25% over the past year. The effect on fixed-price contacts with sub-contractors is a major detriment.
Home unit price rises have slowed, indeed they are now declining.
Taking Parramatta as an example: (1)
To put 2,028 units on the market into perspective, it equates to roughly 10 towers of units consisting of 20 storeys each.
Added to the above, interest rates are now on the rise. For builders relying on the completion and sale of one project to pay sub-contractors and to fund the next project, the trend is particularly disturbing.
Time and time again, it is the sub-contractors that bear the major brunt of building companies collapses. Often sub-contractors work for only one building company. This makes them particularly vulnerable as all their eggs are in one basket. It also means they are often loath to chase up slow payment of their invoices or to fight for increases in their quotes due to increases in the prices of materials/inputs they provide.
If you have building industry sub-contractors as clients, it would be timely to assess their business health.
Helm is able to assist you and your clients in such assessments/discussions and where possible suggest courses of action to assist.
We share here a few photos from our recent Federal Election Party and will leave the other commentary on what took place on that evening across the Nation to the newspapers.
Never would we have thought that we had a Gandhi, a Castro, a Clinton, a daughter of Putin as well as a range of Julia, Zali, Scomo, Johnny, Katter and Bronwyn. We have the obligatory Trump as well as a few more from marketing.
The most popular cocklatil of the night was the "Build Better Negroni" (the official ALP beverage) and "The Teal Lady" was also a big winner!
We are still sifting through the photos for prizes to be awarded for the best-themed dress and would like to hear what you think who should be the winner? Send your feedback to Michael from our office.
As for our national seat guessing competition, winners are grinners. Labor won with a majority of 77 seats, Coalition with 58, Greens 4, Independents with 10, Centre Alliance and KAP 1. One Nation, and Palmer United failed to secure any seats. We congratulate all who voted Labor as a majority, and our group of winners, Suelen McCallum, Justin Mackintosh, Stephen Moss, Matthew Harris and Aaron Lee for closest to numbers. You all will be contacted soon for your lunch prize with us. Unfortunately our greatest miss was by Alison Drayton, winner of the wooden spoon; better luck next time! For full election results, head to AEC Tally Room.
Thanks again for all who attended the night and we look forward to you hearing about our big end of year black tie event.
Welcome to the new financial year and our July newsletter which considers the possibility of Australia entering into a recession and also announces our first conference in Bali.
Over three years ago we identified some future challengers for SME insolvency firms in finding trained insolvency staff when the employment market was contracting for SME professional service firms in Australia.
We created a new business to initially support our Sydney office called HA-Assist located in Tangerang, a suburb of Jakarta which is close to the international airport.
Now, not only does HA-Assist provide trained staff for HELM but HA-Assist has expanded to support a number of firms across Australia. We now have 25 personnel in our four-story modern office, all IT connected to service Australia.
So what about Bali? On the 26th to 28th July 2022, HA-Assist are holding a conference in a five-star resort, Hotel Nikko Bali Benoa Brach. We have invited fellow SME client accounting firms to meet our Indonesia Jakarta based staff.
There will be two mornings of short and sharp presentation sessions covering a range of current issues and business commerce topics, including governance, legal processes and insurance risk, just to name a few.
Join us for social organised events in the afternoons or explore the island yourself..
The HA-Assist conference is open to all our friends of Helm and fellow IP colleagues.
Chase the warmth in July and join us in Bali. For further information, please contact Michael Chin at michael@ha-assist.id.
We are living in very different times to any period in recent memory as we emerge from a pandemic, floods in the East Coast of Australia and war in Ukraine. The war in Ukraine has affected oil and gas prices around the world together with agricultural products and fresh produce. Supply issues have emerged from China as as result of its zero tolerance policy for the pandemic and lockdowns of major cities such as Shanghai.
After many years under control by the central banks, inflation has raised its ugly head and the central banks are reacting quickly with sharp interest rate increases to bring it back under control. The question is whether the central banks are able to negotiate a soft landing using the blunt tool of interest rates or does the world enter into a recession? How far will the central banks need to increase rates? The Federal Reserve has indicated that a monthly rate increase of 50 basis points will be on the menu to arrest inflation with an expectation that interest rates will increase to 4%. The RBA may have to follow this lead.
As a result of inflation, consumers are being hit in the back pocket and with full employment in Australia, wage earners are in the box seat to demand wage increases. This of course leads to wage inflation which together with price inflation is the perfect recipe for a recession.
However, Australia is in an enviable position with strong commodity prices and record savings during the pandemic. Our record real estate prices will fall as the cost of borrowing rises with each successive interest rate hike. The issues for Australia is how the recent house owner copes with the increases in their mortgage repayments and how businesses cope with increases in their loans and overdrafts. Ultimately the interest rates will bite harder and consumer confidence will drop leading to a drop in demand for discretionary products.
Perhaps only have one coffee a day and skip the avocado toast for morning tea? Unfortunately, some will suffer a lot harder with defaults on housing loans and business loans becoming more common. The banks' delinquencies will inevitably rise on the back of successive interest rate hikes.
Equity markets are a good indicator of market sentiment and we are seeing a lot of volatility in both the US and Australia. Global liquidity is destined to shrink as the central banks tighten money supply. The share market will be abandoned as returns decrease in favour of increasing bond yields. Equity valuations are likely to come under pressure. Are we heading for a bear market in 2022?
However, desperation should not set in as typically recessions only last an average of 10 months. Much of the recovery depends on the end of Ukraine war and the improvement in productivity from China. China may be able to assist us from entering into recession should they enter a growth phase and require our commodities.
Welcome to our August newsletter after a fantastic Australian team effort at the Commonwealth Games in Birmingham to win 178 medals ahead of the host nation on 176 medals. Our gold medal tally was 67 medals with England next on 57 gold medals. The most important feature was the integration of Paralympic athletes with the able-bodied athletes.
As the Australian Taxation Office ramps up its recovery actions, we are being approached by directors who have received Director Penalty Notices (DPN) or Notices of Intention to issue a DPN.
At this stage of the recovery process, it appears to be the favoured action by the ATO instead of commencing winding up proceedings. Winding up proceedings by the ATO are still in very small numbers.
As mentioned previously in an earlier newsletter, it is essential that all lodgements with the ATO are made on time or at least within three months of the due date. By ensuring compliance, the director may avoid a lockdown DPN where the options are limited to payment in full or declaring themselves bankrupt.
Where compliance has been achieved, the director has more options available including the appointment of a liquidator, administrator or restructuring practitioner within 21 days from the date of issue of the DPN.
By proceeding with the formal appointment of an insolvency practitioner, the penalty is likely to be remitted. Contact our office to obtain the proper advice for your client's circumstances as this should only be considered general information.
Although insolvency appointments are recovering back to levels of pre-COVID years, this appears to be a backlog of insolvent companies which are being forced to take action as a result of creditor action.
Commodity volumes and prices continue to climb resulting in record trade surpluses in Australia over recent months. Unemployment continues to hover around record lows allowing a reduction in those claiming unemployment benefits from the Government.
Inflation has raised its ugly head resulting in regular interest rate rises from a very low record base. Although some economists appear to be predicting falls of 18-20% in Sydney house prices, my recent discussions with some real estate agents reveal that there is still a lot of demand for real estate as the prospective buyer realises that interest rates are still at extremely low levels. It will remain to be seen whether Sydney prices fall by the percentages predicted in a market where demand still outstrips supply.
The economists may have been right about a soft landing for the Australian economy despite recessions currently underway in the UK and USA. It will depend on how the Governor of the Reverse Bank of Australia handles the monetary policy over the next few months.
I recently attended a discussion group where John Vohralik, Solicitor and Nationally Accredited Mediator, presented on this topic and I thought it might be useful for anyone who may become involved in commercial mediation.
Firstly, it is important that your pre-mediation is properly organised including the selection of a mediator. Do you need a facilitative mediator or an evaluative one? Do you need expert reports?
Prepare a statement of issues or position paper to assist the mediator with:
It is important not to overload the mediator with all the evidence and affidavits filed in the matter but rather a summary may be provided in the position paper. Often it is good to encourage your client to speak at the mediation to provide the commercial and moral issues that may not be addresses by your legal team.
Secondly, you should consider the following during the mediation session:
If the matter settles, prepare a deed of settlement including all critical terms and do not settle for a Heads of Agreement as problems may arise later.
If there is no settlement reached, consider putting your best offer and provide a reasonable time for acceptance. This may lead to a compromise or Calderbank offer which may lead to a post mediation settlement.
Welcome to our September newsletter as we enter into Spring and the warmer weather after what seemed a cold and wet winter.
Despite the new legislation for Small Business Restructuring (SBR) on 1 January 2021, it has taken over 12 months to gain traction in the insolvency market. With only an average of 5 appointments per month up until April 2022, the new SBR appointments have soared to levels of almost 50 appointments in August 2022 alone. It appears that this may be correlated with the increase in the issuing of Director Penalty Notices by the ATO and insolvency practitioners becoming more familiar and comfortable with offering the SBR as an alternative to a Voluntary Administration.
Directors also are likely to favour this administration as they maintain control over the ongoing trading of the business and generally the cost of an SBR is cheaper as the insolvency practitioner is not involved in the day to day operations and is not required to hold two creditor's meetings in contrast to a voluntary administration.
The limitations of an SBR lie in the eligibility criteria which restricts it to companies where the total liabilities must be less than $1m and the director must not have been a director of another company that has entered into restructuring or simplified liquidation in the past 12 months. The Company must also have been substantially compliant with the lodging of its tax returns, BAS, SGC and other tax lodgments.
Should you have a client interested in discussing this option further, please contact us.
The Australian economy continued to grow strongly for the quarter ending June 2022 with the Gross Domestic Product (GDP) increasing by 0.9 per cent for the quarter and an annual GDP of 3.6 per cent.
Driving the gain in GDP for the quarter was increased spending in the travel and hospitality sectors together with a continuation of the mining boom due to high commodity prices. Profits of mining companies surged nearly 17 per cent to $83b for the quarter.
The construction sector was one of the few sectors which declined for the quarter and has been subject to a lot of press over the past few months due to construction company insolvencies. Completion of work in this sector has been hamperes by staff and raw material shortages.
The record low unemployment rate has led to an increase in real wages of approximately 2.4% over the quarter, however, it still felt short of the price increases of 3.3% for the same period.
The continued increase in inflation led to the Reserve Bank of Australia (RBA) making a further increase in the official cash rate of 0.50% to 2.35%. The RBA continues to watch the spiraling cost of living and has been clear about its priority to bring inflation under control. Further increases in the official cash rate are likely in the months to come.
The increased cash rates are having the desired effect on the housing prices around Australia and in particular the major capital cities. Consumers have chosen to spend to the detriment of savings as the savings rate declined from 11.1% to 8.7%. This is unlikely to continue as consumers decide to cut back on discretionary spending. The effect of the cash rate increases is likely to be evident in the remaining quarters of 2022.
Welcome to our October newsletter as we endure the traditionally volatile month for stock markets and a smaller than forecast increase in interest rates by the RBA. Following the onesided Grand Finals in both the AFL and NRL, we can look forward to the Spring Racing Carnivals.
On 28 September 2022, Senator Deb O'Neil, Chair of the Parliamentary joint Committee on Corporations and Financial Services announced a comprehensive review of Australia's insolvency and bankruptcy laws, Company trusts need to be dealtwith in the new laws to streamline insolvency involving corporate trustees.
Our insolvency laws are overly complex and difficult to navigate due to numerous additions and deletions over the years.
In summary, the terms of reference for the inquiry include the following:
It is hoped that the review will address the complex issues with the current law and improve the efficieny and effectiveness of the insolvency and bankruptcy regimes.
The rhetoric in the press is increasing with a number of experts including the International Monetary Fund and World Bank, predicting that the World will slip into recession during 2023.
The former US treasury secretary, Larry Summers, expects the Federal Reserve to increase interest rates further in order to battle wage inflation caused by the shortage of staff and low unemployment. A recession, which Larry consider inevitable, will cause the unemployment rate to increase and reduce the current pressures on wages.
Local economist, Shane Oliver predicts that Australia could slip into recession due to inflation and the energy crunch caused by the Ukraine War. Oliver believes that Europe and the UK may already be in recession. As the recession takes hold then commodity prices will soften and the Australian dollar will continue to slide. The good news is that this does assist companies in the export sector but makes that overseas trip more expensive.
China will not be our saviour this time due to the volatility and disruptions in the property sector and their zero COVID policy.
The Australian treasurer, Jim Chalmers, stated that Australia won't be immune from a world recession but expects that growth will be slashed and unemployment will increase. He further advised that his budget assumes growth in 2023.
The Financial Times tracking index has revealed that growth together with financial markets and confidence indicators have deteriorated markedly over recent months due to soaring prices and uncertainty fuelling pessimism in world economies. The UK economy is suffering from a plunge in the pound sterling, continued fallout from Brexit and undisciplined fiscal policy leading to a bailout by the Bank of England to shore up the currency.
The recent decision by OPEC to reduce production is likely to fuel the energy crisis and has been strongly criticised by the US Treasury and the Biden Administration. Developing countries have limited tools available as their debt rises exponentially.
The question remains as to whether Australia can avoid being tipped into recession.
Welcome to our November newsletter as we enjoy the cricket, horse racing and hopefully some more sunshine. Our thoughts go out to the flood-savaged communities in the Eastern States.
All directors appointed under the Corporations Act 2001 (Cth) are required to have a DIN by 30 November 2022 if they were appointed as directors before 31 October 2021. This is the looming deadline for most directors who have been in the job for over a year.
For those directors appointed between 1 November 2021 and 4 April 2022, they needed to apply within 28 days of appointment.
For new directors from 5 April 2022, they need to apply before their appointment.
If you cannot apply by the due date then you need to complete an application for an extension of time to apply for a DIN. It is a criminal offence if you do not apply on time.
There is no current requirement to provide your DIN to either ASIC or the companies to which you are a director. You still need to advise your company of any change in address or other details so that the company can update the public record.
There are now four new director ID offences in the Act which come under ASIC's enforcement division:
Penalties for breaches of the first two sections listed above include a maximum criminal penalty of $13,200 and a maximum civil penalty of $1.1m for an individual.
Penalties for breaches of the second two sections listed above include a maximum criminal penalty of $26,640. One year imprisonment or both and a maximum civil penalty of $1.1m.
So please ensure that your clients register for the DIN to avoid any penalties. As you can see the penalties are quite large.
Visit the ABRS website for more information and to apply www.abrs.gov.au/director-identification-number
Until recently, directors of a solvent company owed a duty of care to the company and its shareholders.
A recent case in the UK Supreme Court, BTI 2014 LLC v Sequanan SA and others (2022) UKSC 25, confirmed that directors owed a duty of care to creditors under common law and equity where there is either imminent insolvency or there is the probability of an insolvent liquidation or administration that the directors know or ought to know.
In this case, the company did not enter into insolvency for nine years after the distribution of a significant dividend to shareholders so directors were found to have not breached any duty owed to the company or its directors. The insolvency was not imminent.
As Australia has derived much of its corporate law from the UK, it is likely that our courts would follow this judgement made by their Lordships in the highest court in the UK. Notably, the duty of care to creditors is not to be enlivened where there is temporary cashflow conflict. Their Lordships stated that the duty to creditors arises out of common law rather than a statutory duty which makes the case particularly useful for Australia.
Recent news of cyber attacks at Opus and Medibank have rocked the confidence of the Australian public in providing confidential and private details to these large public companies. Both companies have been criticised for their poor communication of the cyber attack with their customers.
In the case of Optus, not only the personal data of current customers were disclosed but former customers as well. Passport details and driver's license details were among some of the personal information that was stolen. Luckily, NSW had introduced a two-stage identification process with their driver's license which meant that the cyber thieves were unable to use the data without the card number on the license.
Originally Medibank revealed that the cyber attack was limited to its budget insurance sub-brand, AHM and data collected about international students studying in Australia who use Medibank under its OSHC service. More recently, Medibank has revealed that its main brand was also attacked and stolen customer data was from all three entities. It is believed that the hackers stole the credentials of someone who had high-level access within the Medibank computer systems which allowed them to infiltrate the computer network.
Even an online cyber security conference held by the Australian Institute of Company Directors was recently hacked and participants trying to log in them tried to use the online chat. A link was posted on the online chat requesting credit card details for a fake Eventbrite link.
The online conference was subsequently cancelled. It is unknown whether any of the
participants entered in their credit card details and had them stolen.
Clearly, it is time for these large companies to invest in higher level cyber security to protect
their customer's private information that they hold on their databases otherwise these
breaches will become more common.
The Federal government is to introduce legislation to increase the penalties for repeated and serious privacy breaches from $2.2m to the greater of $50m, three times the value of any benefit obtained through the misuse of information or 30% of a company's adjusted turnover in the relevant period. In addition, the Australian Information Commissioner has been provided with additional of strengthened powers in the Bill.
Our team is being relocated to brand new office space on level 6 of the OCBC Building, 75 Castlereagh Street Sydney. You will still be able to contact us on the usual emails and telephone numbers but drop in and check them out anytime after 5 December 2022. We are closer to the Court and right near Centrepoint.
