Welcome to our first newsletter for 2023 as we move into the autumn season and
with it the start of the NRL and Super Rugby competitions. It is concerning what the
ripple effect will be around the world and here in Australia from the collapse of two
banks in the USA.
Following the collapse of Silicon Valley Bank and Signature Bank in the USA, President Biden reassured the American Public that the US banking system was safe however shockwaves have been felt around the world with bank stocks dropping dramatically. The Silicon Valley Bank located in the UK was sold by the government for a nominal amount of one British Pound.
Some blame the aggressive interest rate hikes taken by the Federal Reserve Bank which caught SVB who almost exclusively dealt with tech companies and start ups. It had grown exponentially and was sitting on huge amounts of cash which it invested in long dated mortgage backed securities and government bonds which at the time were attractive rates.
However, as the interest rates moved upwards, the value of these securities and government bonds fell resulting in significant losses on paper. As customers started drawing on their deposits, SVB needed to sell the investments and realise the losses. SVB decided to make an equity raising which started their customers who made a run on the bank withdrawing $US42B. This resulted in the financial regulators to step in and take control.
There are number of Australian businesses caught up in the collapse as they utilised these banks to expand their operations into the USA. Start up and tech companies were already feeling the squeeze on credit caused by the interest rate hikes so there may be some fall out in these areas in the months ahead.
On 8 March 2023, the Reserve Bank announced a further interest rate rise of 0.25% which raised the official interest rate to 3.35%. Retail sales have slowed so evidence is starting to reveal that the interest rate hikes are starting to stifle spending. Savings have also decreased as Australians dip into savings to meet increased mortgage payments. Economists predict that we may not be far from the peak and then they expect the official rates to decrease.
The ATO has increased its activity in recovery action with winding up applications, money owing claims and bankruptcy petitions at their highest levels since 2019. Mind you this was coming off an extremely low base so there is still plenty of space for further increases.
There have been two major cases recently decided by the Australian High Court in relation to unfair preferences involving the peak indebtedness rule was not part of calculating the debt under a running account or continuing business relationship as described in s588FA (3) of the Corporations Act 2001.
The ability of creditor to set-off a debt or liability owed by the company against an unfair preference claim from a liquidator has been thrown out by the majority of the High Court.
The reasoning being that there was no mutuality between a debt incurred with the company and a liquidator's claim. The liquidator's claim was subject to the liquidator's decision to sue and the court's acceptance of the claim which are all after the date of appoinment. Such as there was no possibility of mutual dealings between the creditor and the liquidator.
HA - Assist is staging an Accounting Based Conference in Sanur on the island paradise of Bali in August 2023. Five major airlines ( Batik Air, Garuda Indonesia, JetStar, Virgin and Qantas ) are gearing up ready to take advantage to welcome visitors to the island.
With a mixture of TED talks and in person speakers, it will be filled with light topics and plenty of time for rest and recreation to recharge your batteries.
We have negotiated a fantastic local island rate with Mercure Sanur, wo why not enjoy a family holiday and come earlier to enjoy a week or more?
Our newest graduate, Allan Manzi, commenced at Helm Advisory on Monday 13 March 2023.
He is a recent graduate from S P Jain School of Global Management and was born raised in Rwanda then moved to the UAE with his family.
Allan enjoys playing basketball, going skiing, and reading about economics and politics to keep himself up to date with current global economic trends.
We are looking forward to the end of Winter and a looming beautiful Spring. To those fortunate and had attended our successful sister company HA-Assist conference in the warmth of Bali recently, thank you. Lock in now for next year's dates August 1 and 2, 2024. In the meantime, we bring you some topics, presented at the HA-Assist Bali conference. And save the date for our annual Helm Gala, happening on 30 November 2023.
Reflecting back on current businesses, appointments appear to be on the rise with court appointments, CVL's, VA'S and SBR's all on the increase. Some interesting articles to follow...
The first element is Offer and Acceptance. There needs to be a general agreement between the parties where one party makes an offer and the other party accepts that offer. It may involve a negotiation on the terms of the agreement. Acceptance may not necessarily be expressed as it may be inferred by the party's conduct or in some cases silence.
The second element of a contract is Consideration or quid pro quo ( “ Something for something ” ). Once the parties to a contract have formed an agreement there must be consideration exchanged for a contract to be valid. The agreement essentially represents a promise of an act or forbearance by one party in exchange for a voluntary liability or detriment from the other party. Consideration usually takes a monetary form but this does not always have to be the case. Nominal consideration such as one dollar will still give rise to a contract. Note that without consideration a contract cannot be validly format.
The third element of a contract is Intention. The parties to the contract must manifest their intention to be legally bound by its terms. There may be circumstances where the first two elements of a contract exist but there is no intention to create a legally binding contract. Intention needs to be carefully considered as not all agreementsgive rise to legally enforceable rights under a contract.
The final element for the formation of a contract is Certainty. It must be sufficiently certain and complete. The obligations and rights of the parties to the contract must be clearly identifiable and enforceable. The element of Certainty encompasses three main issues:
A contract must be complete and the terms certain for it to be legally binding. A contract must be expressed in precise and clear terms for a Court to give it meaning.
We often have to make decisions regarding whether an asset is a fixture or a chattel, and there are differences.
What is a fixture? At its most basic level a fixture is something that is attached to the land in such a manner that it becomes part of the land. When the land is sold the title to the land will also include all fixtures however there are many consideration that need to be taken into account when determining whether an asset is a fixture or a chattel.
How is a fixture determined? To illustrate the difficulty in ascertaining the answer in whether a piece of property is a fixture or chattel, can be demonstrated in Australian Provincial Assurance Co Ltd v Coroneo, where the New South Wales Supreme Court had to decide whether or not seats bolted to the floor, and attached with one another in a theatre were to be considered as fixtures or chattels. Ultimately, the Court decided that the seats were not fixtures but chattels, with Jordan CJ saying:
Jordan JC also outlined the test which is to be applied, with his Honour Stating:
“ The test of whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed the intention that it shall remain in position permanently or for an indefinite or substantial period...or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose...
What about agricultural fixtures ? In some jurisdictions legislation has been created allowing a tenant certain rights in relation to agricultural fixtures that have been attached to the land. Generally speaking, a tenant may be able to retain title to the property which is affixed and also has the right to removal on the proviso that no damage is caused, or that the property can be restored after removal.
What is a chattel? Chattels are personal property that can be moved, such as furniture or household appliances for example. Additionally, chattels can be included in the sale of land or moved, and in some cases, a chattel can become a fixture, with the ability to be moved by a third party if they are the actual rights holder of the property.
How is a chattel determined? In order to make a determination on whether something is a fixture or a chattel, is dependent on the intention of the affixer, as well as the object which is annexed and the purpose of the annexation. In broad terms, if the property can be easily moved without causing too much damage to the land or property in which it is affixed, then an argument can be made that it is a chattel. However, if removal of the property can cause damage, then it can be argued that it is a fixture.
Ultimately, when making a decision on whether a piece of property is a chattel or fixture, it is dependent on the surrounding facts of the case, and the answers to the questions of intention, object, purpose, and the degree of annexation - which is the general starting off point. The main test is the intention of the person placing it. Intention can be determined by a number of factors including:
Working from home can be great for employees but it can also have its problems.
What are the benefits for employees?
What are the benefits of working at the office?
What are the issues with working from home?
Some safety tips for working from home:
Helm is organising its annual black tie event on 30 November 2023 at the Australian Museum. Put a note in your diary now to save the date. More information to follow.
The total number of insolvency appointments for the month of August was 898 which were
broken down to 229 Court Liquidations, 563 Creditors or Members Voluntary Liquidations
and 106 Voluntary Administrations.
The Total number of insolvency appointments for the month of August was 898 which were broken down to 229 Court Liquidations, 563 Creditors or Members Voluntary Liquidations and 106 Voluntary Administrations.
Winding-up applications continued to increase to 317 for August, with Victoria leading the country at 49% of total court winding-up applications. Rather than a reflection of the Victorian economy, it is more a consequence of the cheaper filling fees.
Small Business Restructure appointments have also hit a peak in August to over 80 appoinments with the regime becoming more popular for SMEs.
Should you have a client interested in Small Business Restructuring then please contact our office to discuss as there are strict eligibility requirements.
ARE WE IN A PER CAPITA RECESSION ?
The Reserve Bank's ramping up of interest rates which only recently have been put on hold, have resulted in a per capita recession. If it wasn't for the increase in Australia's population due to stronger immigration, it is likely that Australia would be in recession now.
Unemployment is starting to rise as the rate of unemployment increased from 3.5% to 3.7% in July 2023 and employers have indicated that further layoffs are on the cards.
GDP growth was only 0.4% for the June quarter of which all was accounted for by the increase in population of 0.7%. This is why we talk of a per capita recession.
Consumers have cut spending as the interest rates force them to tighten their belts as it slowed from increases of 0.3% in previous quarters to only 0.1% in the June quarter. Household's disposable income has fallen again in the June quarter by 0.2% as consumer prices rise quicker than wage rates.
Of course, it is a business that raise their prices in order to protect their profitabilily and in some cases, increase their profitability by limiting the wages of employees. Perhaps more competition is what is required to protect consumers from large price increases.
Artificial Intelligence, or AI for short, refers to the simulation of human intelligance in machines that are programmed to think and learn like humans. AI systems can perform machines that are programmed to think and learn like humans. AI systems can perform tasks that require human-like intelligence, such as visual perception, speech recognition, decision-making, and language translation. The development of AI algorithms has the potential to revolutionize various industries and transform our daily lives.
AI technology has already been integrated into many aspects of our lives, including virtual assistants, personalized advertising, and recommendation systems. While there are numerous benefits to AI, there are also concerns regarding its etchical implications and impact of employment. It is crucial to consider both the advantages and potential drawbacks of AI as we continue to develop and integrate this technology.
Advantages of AI
Artificial intelligance has brought several advantages to our lives. It has enabled us to automate repetitive tasks and make them more efficient. AI has also helped us to analyze data more accurately and make better decisions based on the insights we gather.
Additionally, AI has made it possible for us to create intelligent machines that can perform complex tasks with ease.
One of the most significant advantages of AI is its ability to learn and adapt. With machine learning algorithms, AI systems can improve their performance overtime by analyzing data and making adjustments accordingly. This allows them to become more accurate and effective in their tasks, which can lead to increased productivity and cost savings for businesses.
Disadvantages of AI
One of the main disadvantages of AI is that it can lead to job displacement as machines become more efficient and capable of replacing human labour. This can create economic and social issues as people lose their livelihoods and struggle to adapt to new industries.
Another disadvantage of AI is the potential for bias and discrimination in decision-making algorithms. Ig these algorithms are trained on biased data, they may perpetuate and even amplify existing inequalities in society.
Additionally, there is a risk that AI could be used for malicious purposes, such as cyber-attacks or surveillance
Regulating AI Including Facial Recognition
As artificial intelligance continues to advance, many concerns have arisen regarding the use of facial recognition technology. While it can be incredibly useful in certain situations, such as identifying suspects in criminal investigations, it also has the potential to be abused and violate privacy rights. As a result, there is a growing need for regulations around the use of facial recognition technology.
One potential solution is to require companies and organisations to obtain explicit consent from individuals before collecting or using their facial data. Additionally, there should be limits on how long this data can be stored and who has access to it. It will take careful consideration and collaboration between government agencies, tech companies, and privacy advocates to develop effective regulations that balance the benefits and risks of facial recognition technology.
Uses of AI for the Accounting Profession
Artificial Intelligence has revolutionised the accounting profession by automating repetitive tasks and making it easier to analyse large amounts of financial data. One of the most significant uses of AI in accounting is in auditing, where it can quickly identify inconsistencies and errors that may have been missed by human auditors. Additionally, AI-powered tools can help accountants with tasks such as tax preparation, financial forecasting, and risk management.
AI has also the potential to improve the accuracy and speed of financial reporting. By automating data entry and analysis, accountants can spend more time on value-added activities such as strategic planning and decision-making. Furthermore, AI can help identify patterns and trends in financial data, which can be used to make more informed business decisions.
This Bill, if passed, will be the biggest change to Australian industrial relations since the Fir Work Act commenced back in 2009.
It will potentially affect every worker and every business in Australia as it includes the following topics:
Further comment on some of the above points is provided below. New definition of casual employee An employee will only be a casual employee where:
Employees will be able to initiate a conversion notification with their employer to initiate the change in their employment status where the employee believes they no longer meet the definition of a casual employee and the employer is required to respond in writing within 21 days after a consultation with the employee.
What is the Multi Factorial Test? Under the multi-factorial test, the correct characterisation of the relationship between the parties is determined by an assessment of various indicia, including but not limited to:
Increased penalties and Introduction of a new Criminal Offence
The maximum penalty for an individual is 10 years imprisonment as well as a fine for three times the underpayment amount or 5,000 penalty units ($1,565,000).
The maximum penalty for a company is the greater of three times the underpayment amount of 25,000 penalty units ($7,825,000).
Civil penalties are also increasing exponentially.
The Bill proposes a new criminal offence for wage theft commencing from 1 January 2025 amount of 25,000 penalty units ($7,825,000).
Civil penalties are also increasing exponentially.
The Bill proposes a new criminal offence for wage theft commencing from 1 January 2025 and applying only to intentional conduct.
The offence will occur if an employer:
Under the Bill, Unions are provided with expanded rights of entry into workplaces where they suspect employees have been underpaid.
We hope that everyone had an enjoyable Easter break as we move out of daylight saving and into cooler weather. The International Monetary Fund has dropped a bombshell on the global economy with sombre forecasts for the rest of the decade. On 25 April 2023, we look forward to commemorating ANZAC day with a dawn memorial, a game of two up and a toast to our brave diggers.
The chances of the global economy achieving a soft landing have receded due to stubbornly high inflation and financial turmoil as reported in our March newsletter. Although inflation has shown signs of having peaked the IMF fears that the side effects of fast interest rate rises may extend the banking sector woes to the broader financial sector. The chances of a hard landing have risen significantly with the UK and Germany expected to enter into recession this year.
In Australia, GDP growth is forecast to limp along at only 1.6% in 2023 to 1.7% in 2024 which with a forecasted population growth of 2% pa the forecasts predict a fall in GDP per capita.
Inflation is expected to remain stubbornly above the Reserve Bank's target of 2 per cent with the IMF predicting inflation to be 5.3% for this year and falling to 3.2% in 2024.
Unemployment in Australia is expected to edge up from the record low of 3.5% to 4% in 2023 and 4.1% in 2024.
The Treasurer has been involved with talks at the G20 Meeting in Washington DC to gauge the sentiment from around the world before presenting his budget in May. The Government will need to look at ways of reducing spending in order to reduce the budget deficits.
From a global perspective, the IMF blames Brexit, ongoing US-China trade disputes and Russia's invasion of Ukraine as reasons for the deteriorating outlook.
Once headline inflation is under control, the IMF expects interest rates to fall to pre-COVID levels. This may not be until 2025.
The Small Business Restructure Regime is becoming more popular for small bsuinessman with creditors amounting to less than $1m as an alternative to Voluntary Administration as it allows the director to continue to control and trade the business. There are a number of prerequisites in order to qualify for the regime but the benefit of being in control of the Company's destiny whilst being protected under the Corporations Act is worth considering.
Should your client be interested in finding out more information on Small Business Restructuring, then please contact us.
We are sure that you have read about the recent spate of cybercrime at Medibank, Lattitude and Optus where the hackers have stolen vast numbers or personal data and then demanded a ransom which the organisation generally is advised to reject. Millions of customers have had their personal details uploaded onto the dark web to be used at any time in the future.
Developed by the man who invented mobile wireless EFTPOS machines, Daniel Elbaum, Vero Card is a multifactor authentication device offering the same level of protection as a bank transaction online.
The device is currently being used by defence forces and intelligence agencies as it replaces the need to have lots of different passwords. In contrast to a Google authentication process, this is a verificatory. Users of the Vero Card are assigned a PIN which is entered into the application that they are trying to access. There is no need to enter your details online ever again. If you are unfortunate enough to lose your Vero Card then it remains secure and can be easily replaced.
The only issue that needs to be overcome is whether consumers are prepared to carry the card as well as a mobile phone.
Our sister company HA-Assist is holding a Bali Conference from 2 August to 4 August 2023. Come join us for a get together and networking in a relaxed part of the world.
Click the button below to find out all about our HA Assist Bali Conference
Winter seems to be coming early with an Artic blast causing temperatures to plummet and early snowfalls in the Snowy Mountains and Western plains of NSW.
The Reserve Bank of Australia (RBA) shocked economists with another interest rate increase when economists were almost unanimous that the RBA would hold the rates steady.
The Labour Government announced a Budget surplus for 2022-23 due in the main to high commodity prices and the scrapping of the temporary tax benefits for it is likely that the projected surplus of $4B will be obtainable given that we are about 7 weeks out from the end of the financial year. The extraordinary turnaround has been assisted by the high commodity prices that Australian products are fetching and the cancellation of a tax offset for low and middle-income earners (LMITO) or known colloquially as the Lamington.
Tax bracket creep and full employment are expected to reap dividends for the Federal Government however a slowdown in GDP will ultimately increase the unemployment rate and put more people on to unemployment benefits.
Superannuation tax breaks cost the government $50B pa with the majority going to high-income earners. The Treasurer announced an increase in the tax rate to future earnings for superannuation balances over $3m. At this stage, the threshold is not indexed and it is forecast to capture middle-income earners in years to come. Unrealised gains will be taxed whilst losses will be carried forward indefinately.
Small business can obtain an instant write-off assesets (less than $20K) until 30 June 2024 and there is a small business energy tax incentive providing a 20% deduction with a cap of $20,000 pa. Build-to-rent investment has been encouraged for projects of 50 and over apartments by providing a 15% tax rate on distributions and an increased capital works deduction rate of 4%. In addition, there are State and Territory concessions for land tax and stamp duty.
For multinational businesses, the minimum tax rate of 15% is to be implemented on or after 1 January 2024.
The ATO is to get more funding to collect tax debts, improve GST compliance and enhance the Serious Financial Crime Taskforce.
On 2 May 2023, The RBA increased the official interest rate from 3.6% to 3.85% despite economists forecasting the likelihood as close to zero. With inflation figures in Australia starting to decline it remains to be seen as to whether firther increases will be necessary.
With unemployment still at 50-year lows at 3.5%, it may be difficult for companies to resist calls for pay increases which ultimately will be passed onto the consumer through higher prices for goods and services.
The Federal Budget may also cause inflationary pressure with new spending to include a $14.6B package to assist households and single parents with the cost of living pressures.
The increased taxes on the energy sector are likely to lead to further increases in energy prices.
There is further pessimism on the outlook for inflation due to the costs of transitioning from fossil fuel energy to green energy which is likely to keep the costs of energy high.
Following the large numbers of immigrants for this year of approximately 400,000, the pressures on housing are increasing and it would appear that the housing market has bottomed out and is now on the increase. This may add further fuel to the inflation risk with not only increases in house prices but increases in rents.
In summary, the inflation story looks set to be with us for quite some time.
The ATO provided some statistics regarding collectible debt advising that:
The ATO's debt approach is as follows:
Self-service payment plans are available for individuals, sole traders and businesses with debts of $100,000 or less provided no active payment plan exists for the same account.
The payment plan must be for 2 years or less and the first payment is scheduled within 7 calendar days of actioning the request or 14 days of direct debit. It is a requirement to provide information to prove capacity to pay including business income and expenses.
Where the client cannot enter into a payment plan or their payment plan is in default, the ATO can take firmer action including gamishee, director penalty notice or disclosure of tax debt. Stronger action may be taken which includes legal action, statutory demand and application to wind up the company.
Our sister company HA-Assist is holding a Bali Conference from 2 August to 4 August 2023. Come join us for a get together and networking in a relaxed part of the world.
Click the button below to find out all about our HA Assist Bali Conference
As the end of financial year beckons, it is time to review the changes to the industrial landscape arising from the effect of the Fair Work Legislation Act 2022 for Secure Jobs, Better Pay and to consider the effects of the continuous rise in the official interest rates.
On 6 June 2023, the Governor of the Reserve Bank of Australia announced another interest rate increase of 0.25% bringing the official cash rate to 4.10%. The decision was made due to an increase in the April Consumer Price Index from 6.3% to 6.8% and concerns raised about the effect on inflation from the announcement by the Fair Work Commission of a 5.75% boost to the minimum wage.
It is estimated that 800,000 Australians will be coming off a low fixed rate home loan soon which probably had a 2 in front of it to a variable rate likely to have a 5 in front of it. This results in a large increase in repayments for these mortgage holders and leads to levels of mortgage stress which have not been seen for many years.
We are told that the misery index has risen significantly, productivity grew by only 1.1% and inflation is raging out of control. Housing prices have bucked the trend and surprisingly risen despite the increase in interest rates. Meanwhile Wall Street enters a bull market as the ASX follows with mining stocks and information technology stocks leading the charge.
The CEO of Boral recently commented that inflation will remain high for the next two years as his company, a major supplier of construction materials is pushing up prices of its key products to keep up with inflation. Where companies have an inelastic demand for their products or services, they will continue to raise their prices to keep up with inflation. Clearly, this has a drastic effect on construction companies caught with fixed-price contracts.
The ATO and companies continue to increase their winding up applications in Court causing a spike in applications close to pre-COVID levels.
There has not been any significant movement in Court recoveries from the major banks however this may change as interest rates bite. Non-bank lenders have also maintained their status quo in relation to Court activity with no major changes this year.
Total insolvencies for the month of May hit 900 for the first time in 2023 and the appointment of a Restructuring Practitioner continued its popularity with over 50 appointments for the month.
The Construction industry continues to represent the largest proportion of total insolvencies (YTD) at about 28% followed by the Accommodation and Food Services sector with approximately 14% of the total. NSW has over 40% of the total appointments (YTD) in Australia.
There are a number of legislative changes that management of companies need to be aware of:
Secrecy clauses
On 7 December 2022, any existing pay secrecy clauses ceased to be effective so employees are at liberty to discuss salary, bonus schemes and other incentives with others. From 6 June 2023, these secrecy clauses cannot be included in any new employee contracts.
Parental Leave
On 6 June 2023, there will be new obligations for employers to respond to requests from employees for an extension of unpaid parental leave and to consider a request for a flexible work arrangement from pregnant employees. This can include a request for an additional 12 months leave totalling 24 months provided their partner has not already taken 12 months leave.
Flexible Working Arrangements
Further, employees with particular personal circumstances such as parents of school-afe children or younger, carers, disabled employees and employees over 55 years old may also be eligable to request flexible working arrangements.
Employers are required to respond to the employee's request within 21 days otherwise the matter may be referred to Fair Work Commission for conciliation or arbitration. Employers will need to look at any limitations that may exist to flexible working conditions and provide the grounds for refusal such as loss of productivity, impact on customer service and employing new staff may be impractical.
Zombie Agreements
In addition, zombie agreements need to be identified in the company. Zombie agreements include collective agreements, workplace agreements and Australian Workplace Agreements made under the Workplace Relations Act 1996. By 7 December 2023, these agreements will cease to operate unless an extension has been sought in the Fair Work Commision.
Multi-Enterprise Agreements
Unions can apply to the Fair Work Commission for Multi-Enterprise Agreements from 6 June 2023 which may bind companies with a common interest into an agreement that has already been negotiated between the unions and other employers.
Wage Theft
From 1 July 2023, the small claims compensation cap for proceedings under the Fair Work Act will increase from $20,000 to $100,000 which will provide access to claims from a much wider number of workers.
Fixed Term Contracts
The amendments apply to new fixed-term contracts which will restricts the use of these types of contracts for a period of two years with some exceptions such as the performance of a distinct and identifiable task using specialised skills, a training agreement or high-income earning employees.
Enterprise Bargaining and Agreements
From 6 June 2023, new powers will commence for the Fair Work Commision to resolve enterprise bargaining disputes and the application of a Better Off Overall Test to enterprise agreement approvals. There will be a greater limitation for the Fair Work Commision to terminate enterprise agreements.
Further industrial law reforms are expected to be introduced to Parliament later in the year.
Our sister company HA-Assist is holding a Bali Conference from 2 August to 4 August 2023. Come join us for a get together and networking in a relaxed part of the world.
Scan the QR Code or click the button below to find out all about our HA Assist Bali Conference.
Welcome to the start of the new financial year and we hope that the year is rewarding and successful for you. It won't be without its challenges with the after-effects of numerous interest rate increases yet to be felt and the world economy slowing down with some economies likely to slip into recession.
A members Voluntary Liquidation ( MVL ) is used for the winding up of a solvent company and commences with the lodgement of a Declaration of Solvency ( Form 520 ) signed by the directors which required to be lodged with ASIC before issuing the notice of meeting of members.
It is commonly used where the company has been used as an investment vehicle and the main investment has been sold. The Company is no longer required however the funds need to be distributed amongst the members. All tax returns need to be lodged up to the date of appointment of the liquidator in order to obtain tax clearance from the ATO before making a distribution.
Although directors can look at appointing an accountant or someone else, 80% of the MVL appointments are for a registered liquidator as they are used to the lodgement process and can continue to act where the company may be found to be insolvent. In addition, a registered liquidator has all the precedents to provide the directors with a seamless process.
By making a formal appointment as opposed to lodging a deregistration form with the ASIC provides peace of mind for the directors that they have followed the proper process prior to deregistering the company.
Contact our office if you have any questions regarding this type of appointment.
Recent cases in the NSW Supreme Court and the Federal Court of Australia confirm that the use of a Holding DOCA is not an improver purpose when used as a means to avoid the operation of s 32B of the Securities for Payments ( SOP ) Act. This section prevents a company in liquidation from utilising the SOP Act.
The Company in voluntary administration, Kennedy Civil Contracting Pty Ltd ( Kennedy) had served several payment claims to Richard Crookes Construction Pty Ltd ( Crookes ) under the SOP Act. Crookes had responded to some of the payment claims but had failed to respond to other claims.
Kennedy filed a notice of motion seeking summary judegement under the SOP Act due to Crookes failure to pay in accordance with payment schedules and not issuing payment schedules. Crookes filed a notice of motion claiming that the proceedings were an abuse of process and also filled proceedings in the Federal Court that the DOCA be terminated.
The Court held that the holding DOCA preserved Kennedy's claim under the SOP Act and that utilising the provisions of the Corporations Act to avoid s32B of the SOP Act was not an improper purpose. Companies in a similar situation may wish to consider a holding DOCA as a way of obtaining payment of claims under the SOP Act or alternatively extend the administration convening period to enable recovery of debts under the SOP Act.
The Reserve Bank of Australia announced on 4 July 2023 to keep interest rates on hold following a decrease in the inflation rate to 5.6% and to gauge the effect of the previous rate increases on costumer behaviour and the Australian economy.
In their recent bulletin, Macquarie Bank noted that the US yield curve has inverted where the Treasury yield rose above the 10-year yield in July which has historically preceded recessions by 12 - 18 months. The two-year yield rose as high as 5.06% in March resulting in the most inverted yield curve since 1981. Time will tell whether the inverted yield curve is still a good barometer of recessions.
Meanwhile, the ASX 200 performed well in the 22-23 financial year with a strong return of 14.8%. The housing market continues to show signs of recovery after a low in February 2023 which was 10% below the peak in April 2022. The recovery in the last few months has gained momentum however on a low turnover due to a shortage of stock.
The labour market continues to be strong with near-record-low unemployment.
Following our article in last month's communique, there are a number of new limits and increased thresholds that employers need to be aware of in the new financial year.
Superannuation
The Superannuation Guarantee Charge has increased to 11% from 1 July 2023 and is set to increased by 0.5% each year up to 12% in 2025 - 2026. In addition, there is a new concessional superannuation cap of $27,500 pa for the 2023 - 2024 financial year.
Redundancy
The new limit for the tax - free component of genuine redundancy payments is $11,985 plus $5,994 for each completed year of service.
National minimum wage
The new national minimum wage is now $882.80 per week or $23.23 per hour for employees who are not covered by an award or employment agreement.
Unfair Dismissal
The unfair dismissal compensation limit is set at $83,750 for the 2023/2024 financial year. The high-income threshold for daiming unfair dismissal is set at $167,500pa.
Welcome to our November newsletter for 2023 which is full of news on insolvency statistics, interest rates and the Australian economy.
A reminder that Helm is holding its Annual Gala soon on 7 December 2023. If you have not registered yet, there is still time. Think of it as pre-Christmas festivities. Further details below.
Insolvencies in October continued to remain above pre-COVID levels at about 900 appointments. Overall court activity has caught up to pre - COVID levels with both winding up applications and bankruptcy petitions reaching their highest levels since 2019. The number of small business restructuring appoinments continues to increase in popularity achieving its highest level since the new regime commenced.
In line with our commentary in last month's newsletter, the RBA increased interest rates a further 25 basis points to 4.35% amid some economists calling for larger increases in order to curb inflation and others warning of tipping the Australian economy into a recession.
Only time will tell whether the RBA has balanced its monetary policy correctly. A healthy population growth may just be the remedy to avoid a recession, however, interest rate increases cannot be ruled out whilst inflation remains high at 5,4%.
Business owners are blaming deteriorating economic conditions for declines in profitability. Productivity, a key driver of prosperity in the economy, is also falling making it harder to drive down inflation.
Inflation remains sticky and well above the band of 2-3% which the RBA aims for. This led to the recent increase in the official interest rates which will put further pressure on businesses and mortgage holders. Housing affordability has fallen to levels not seen since the 1980's. Housing price growth is expected to slow as affordability continues to be stretched.
The labour market is also expected to slow as consumers tighten spending reducing demand for products and services. Obtaining new talent and retaining current staff will continue to be difficult for some time.
Following the increase in interest rates announced by the RBA governor, the Aussie dollar increased to USD 0.65 but is still well below it's median of around USD 0.75.
The Federal Government required all existing and new directors to go through a detailed identification process to register for a DIN. Elderly directors and those without passports had to jump through hoops to obtain sufficient identification documents which often meant obtaining birth certificates.
The insolvency profession saw it as a step in the right direction towards identifying directors and stamping out straw directors. The DIN was to be included in the modernisation of the Company regsiters which was being undertaken by the ATO and other government agencies. Was it a matter of being the cart before the horse ? It would be appear so.
Following an independent review of the program for modernising business registers, it was found that the program was off course and could now cost up to $2.8 billion more than the original estimate of $480.5m. The Federal Government has halted the program so the value of a DIN has been very much diminished as there is currently no register to check a DIN againts.
Helm has moved it's annual Black Tie Event to 7 December 2023 at the Australian Museum.
If you were unable to attend the earlier date on 30 November 2023 and would like to attend please let us know. Please email us on events@helmadvisory.com.au
If you had planned to come along to our party on 30 November 2023, there's a change of date to the following week. If you previously could not make it, perhaps the new date will suit you.
Join us for a night of fun and frivolity.
As you may recall, the theme of the Gala is "A Night of the Museum - Dress as your favourite historical figure or hero". We are looking forward to seeing your creative costumes and learning more about the people who inspire you. Whether you choose to dress as Cleopatra, Lone Ranger, or a Gladiator, we are sure you will make a lasting impression!
Please re-confirm your attendance by replying to this new date as soon as possible. We appreciate your understanding and support.
CONFIRMATION OF ATTENDANCE
Place : Australian Museum, 1 William Street, SYDNEY
Time : 6 pm until 11 pm
New Date :
Any queries, please email to events@helmadvisory.com.au or michael.chin@helmadvisory.com.au
Welcome to our October newsletter for 2023 which is full of news on insolvency, interest rates and the global economy.
During September 2023, insolvencies continued to be higher than pre-COVID levels with Court activity being significantly increased from the big four banks however the ATO winding-up applications have continued to subside from their peak in May / June.
Although appointments of a small business restructuring practitioner (SBRP) were lower than in August, the trend is certainly upward.
As mentioned above, SBR has increased in popularity particularly where the company has been served with a statutory demand from the ATO. Unsurprisingly, the ATO is a creditor in 98% of SBRs and is the major creditor in 90% of them.
Where a director has received a standard director penalty notice ( DPN ) as opposed to a lockdown DPN, the appointment of an SBRP will cause the DPN to be remitted and it cannot be reinstated. A standard DPN is one where the company has been compliant with lodging its tax returns withing 3 months of the due date.
All tax returns must be brought up to date before the restructuring plan is proposed to creditors. The ATO will confirm with the SBRP as to what returns remain outstanding. In addition, the company must pay all outstanding wages and employee entitlements including SGC other than accrued leave for current employees. Total unsecured liabilities must not exceed $1m. There are further requirements to be eligible which can be discussed on a case by case basis.
97% of SBRs have progressed to the acceptance phase and the ATO has approved over 90% of the plans submitted for its consideration. This can be compared favourably against approximately 30% approval for Deed of Company Arrangement proposals.
Where the ATO is a creditor, a draft plan and report can be submitted to them before being sent to creditors in order to gain their input. This is useful as the plan cannot be varied during the acceptance phase. For a plan to be accepted, you need a majority in value.
Many small companies have director's loans and the ATO takes into consideration whether the director has paid themselves instead of paying the ATO debt. This may mean a higher dividend to be proposed in the restructuring plan. The average dividend rate proposed is approximately 22c in the dollar.
Restructuring plans are very flexible and may include a cash contribution, payments from future trading profits or the sale of company assets. For plans involving the payment from the company's future profits, a detailed ash flow forecast is required to support the payments. The ATO may also require quarterly reports from the SBRP to check on the progress.
Should you have a client interested in Small Business Restructuring then please contact our office to discuss as there are strict eligibility requirements. Helm Advisory specialises in Small Business Restructuring.
The Reserve Bank's new Governor has started her governance by holding the official interest rate steady at 4.1%. However annual inflation increased to 5.2% in August 2023 which was the first increase in four months. All eyes will be on the next inflation figures due out later this month. It would not be unusual for the RBA to announce an increase in the official interest rate on Melbourne Cup Day.
China's economy is struggling with youth unemployment at a record high of 21.3 percent in June after which China's statistics bureau abruptly stopped publishing this statistic. Jobless graduates have been feeling the pinch from rising housing costs and the slowing economy resulting in them leaving the cities. Manufacturing is falling short of expectations and the property market continues to languish as the likelihood of deflation looms ahead. Evergrande Group with total liabilities of more than A$467 billion and its founder suspected of crimes, is edging closer to the risk of liquidation. Attempts to restructure its debt have been thwarted by the investigations into crimes.
Europe is concerned about future growth as China's economy falters and the restrictive interest rates adopted worldwide make it difficult for major exporters. Australia will also need to deal with the southbound trajectory of China as a major trading partner over the long term. On the bright side, China is looking at slashing tariffs on Australian wine which should bring smiles to the Australian wine producers.
The global oil price peaked a week ago at US$96.55 a barrel and has fallen to US$85.80 a barrel recently despite OPEC confirming its commitment to cut production to drive process up. The price drop is likely due to the drop in demand in the US which is at its lowest level for 22 years. Demand for credit in the US has also dried up as the rising costs of borrowing have afftected demand for mortgages and credit cards.
The US dollar has been strong rising more than 7 per cent on a trade - weighted basic since mid-July and has caused a plunge in the Australian dollar from US69 cents to just over US63 cents. This causes other countries to intervene to shore up their currencies against the rise of the US dollar.
The US economy and the world economy msy not have escaped the risk of a recession yet.
Helm is organising its annual black tie event on 30 November 2023 at the Australian Museum. Put a note in your diary now to save the date. More information follow.
