Let’s get fiscal

June 30 signals the end of another financial year. There’s still a little time to get this year’s finances in order or take the opportunity to make some resolutions about how you manage your money from July 1.

Here are our top tips for a more fiscally fabulous financial year.

Manage your mortgage

It’s easy to put your home or investment loan on the mental back burner, especially with interest rates so low. But complacency could be costing you thousands over the life of your loan. It costs nothing to talk to your broker to see what other lenders are offering or if you can slice the interest rate with your current lender.

Sock away extra savings

Make a point of hoarding any extra cash throughout the year. Turn tax returns, pay increases and work bonuses into savings, not spending. Inject these and other windfalls into your mortgage to reduce the cost and life of your loan. If you have a redraw facility you can always pull the cash back out if a need arises.

Double down on clearing debt

Pay down your most expensive debts first, then take care of the rest. If only making the minimum repayments on credit and store cards, you will be carrying debt for a lot longer than needed and making it harder to get ahead. Review your debts and make a point of paying off those attracting the highest interest rates first. You should also consider transferring high-interest credit card debt to a low interest option. Keep an eye out for zero-interest transfer offers and make the most of the opportunity to clear your balance sooner.

Get savvy with your super

Your annual super statement will land in the new financial year. Take the time to read it and see how your nest egg faired. Employers must contribute a minimum of 9.5 per cent of your salary to your super, and some offer more. You can also salary sacrifice contributions to top up your investment. How much depends on your stage of life and personal finances.

Talk to your financial adviser to check how much extra you can contribute without being penalised and whether making extra contributions is the best option for your financial circumstances. From July 1 concessional (before tax) contributions will be capped at $25,000 per year for all ages.

You should also check your investment mix and adjust it if not happy with its performance. Your super fund should offer a choice of investments based on risk. The higher the yield opportunity, the higher the risk. How you spread your super across various investments, such as shares and cash, is up to you.

If receiving more than one super statement, consider bundling your accounts into one. Super builds on compound interest, so you may be short-changing yourself if your accounts are dispersed.

Cash in on deductions

You still have time to make any tax deductable purchases before June 30. Check with the ATO what you can claim for your specific job if you are a PAYE employee.

Small business owners have until June 30 this year to cash in on the $20,000 instant asset threshold. This allows you to immediately deduct the business use portion of a depreciating asset that costs less than $20,000.

Now is also the time to make tax-deductible donations to a registered charity of your choice.

If you are cashed up, you may be able to pre-pay some tax deductable expenses, such as accountant fees, interest costs on investments and some work-related expenses, for the next financial year. Check with your financial advisor to ensure you are eligible for pre-payments and they suit your situation.

Tax: the information in this article does not constitute advice. As taxation legislation is complex we recommend you speak with your financial advisor, tax advisor or contact the ATO for further details and expert advice regarding your personal circumstances.

A boost for business lending

Small business lending is set for a shake-up that will make terms fairer for the little guys if recommendations by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) are introduced.

The Carnell Report, released in February following an inquiry into bank lending for small-to-medium enterprises, has made 15 recommendations designed to address regulatory gaps and shortfalls in lending practices that disadvantage business borrowers.

Bank loans remain the most readily available source of funding for businesses, so are often the first port of call. They come with a repayment plan attached to an interest rate, with lenders requiring some form of collateral, which they can confiscate and sell if payments are not made on time.

The problem, according to the Carnell Report, is that rules have traditionally been stacked in favour of lenders. While the report conceded many defaults on commercial loans were a result of poor business decisions, it found operators were also often unfairly hampered by one-sided contracts that allowed lenders to move the goal posts with no, or minimal, recourse for customers.

The report found small businesses were vulnerable when faced with:

  • Insufficient timeframes around key loan milestones.
  • Misleading and conflicting information between bank sales staff and credit risk staff.
  • A lack of transparency and potential conflict of interest around dealings with third parties, such as valuers, investigative accountants and receivers.
  • No recourse other than the court system, which led to borrowers with few resources taking on banks with deep coffers and considerable legal clout.
  • To address the imbalance, the inquiry recommended longer notice periods of changes to loan terms and clearer, more concise explanations of clauses and covenants.

Perhaps the most significant recommendation is for a new external dispute resolution (EDR) service for small business borrowers. The Federal Government has agreed to set up a one-stop-shop for consumer complaints to provide faster access to justice, make binding determinations and provide compensation.

Finding finance

Regardless of which way you turn, you should have a sound business plan to demonstrate revenue and, importantly, cash flow. If already in business, your previous three years’ financials will also be helpful. The more the funder knows about your business, the more likely they are to say “yes”.

Grants

It’s hard to go past free money, with various private sector and government grants up for grabs. Applications often take time and require significant information, but the windfall can be worth it.

Keep in mind competition is fierce, so be prepared to go the extra mile to promote your enterprise’s vision and worth.

Use the Federal Government Grant Finder to locate funds for a range of initiatives – from start-ups to exports and research and development – across various industries, including digital technology, agribusiness, science and many more.

Many companies and individuals also offer a leg-up for small businesses. The Business Aid Centre is a good starting point with helpful hints and listings by industry and grant dates.

Talk to your broker

Many mortgage brokers are leveraging their relationships with residential mortgage lenders to offer commercial finance. The benefit of borrowing through your broker is they know your financial situation and can explore your most suitable options.

The right finance can help you fuel growth and help build a strong and successful business. Get it wrong and the debt can often have the opposite effect. In business, the right finance is so much more than just finding the lowest interest rate and reducing fees. Not only do you need the right type of finance, you need to be able to choose from the widest range of options and the right structure. Needless to say, there are a lot of complexities. It can be a difficult area to navigate, and to have the confidence to know you’ve made the right choice.

With help from your broker you have the peace of mind knowing your business has the right funding in place, and leaving you to get on with doing what you do best – growing your business.

AFG asks ACCC to keep an eye on banks

AFG has today asked the regulator to keep a watchful eye on the big banks to ensure they do not use the Government’s recently announced major bank levy and their own Australian Bankers’ Association (ABA) Retail Banking Remuneration Review as a justification to implement changes designed to reduce the financial viability of providing broking services and marginalise large portions of the lending sector, leaving them without a distribution network.

“The ‘big bank levy’ announced by the Treasurer on budget night recognises the artificial taxpayer subsidy the four major banks and Macquarie have received through their lower borrowing costs since the GFC,” said AFG CEO (Interim) David Bailey.  “The government is finally seeking to level the playing field.

“History suggests the big banks will undoubtedly pass this new cost on.  The extent to which they are able to pass this levy on will depend on how strong our regulators are with the new supervisory powers also announced on budget night.

“Supervision of mortgage pricing has been tasked to the ACCC and the Productivity Commission will be conducting an Inquiry into competition in the sector.  AFG welcomes this news.

“We will be telling the Productivity Commission that the four major banks dominate the Australian lending market and a viable mortgage broking market is crucial for retaining competitive pressure,” he said.

The Australian Securities and Investments Commission (ASIC) has recently completed an exhaustive review of the remuneration of mortgage brokers and the overriding conclusion was that brokers are good for competition and as such have delivered good consumer outcomes.

“ASIC identified some areas where the industry could be strengthened but it did not recommend wholesale changes to the current remuneration structure as incorrectly reported in some quarters,” said Mr Bailey.

“It is incumbent upon the industry as a whole to respond to the regulatory process and our industry is doing so.  AFG will continue to play a leading role in this response representing our 2,800 mortgage brokers.

“One very vocal industry participant, the Australian Bankers’ Association (ABA), conducted their own review into remuneration structures, principally about their own sales channel, which is entirely appropriate. However, at the time the scoping document was released AFG questioned why, given the width and breadth of the ASIC review the ABA would choose to incorporate the broker channel in their scope.

“For the ABA Review to be regarded as a significant analysis of the broking industry is quite frankly outrageous.  We continue to assert that it is nothing more than the opinion of a single interest group, the banking lobby group.

“All major lenders came out within hours of the ABA review being released and committed to implementing all of the changes recommend.

“For anyone to suggest that the ABA should be the one driving remuneration change when there is already a consultative process underway with ASIC and Treasury is ridiculous.

“Tweaks are needed, not wholesale change; we would urge the regulators and government to ensure the ASIC Review is not used as a lever to drive an even better outcome for the big banks.”

“We all need to come back to the central conclusions of the ASIC Review – brokers are good for competition and for consumers.  If consumers were not satisfied with the broker channel they would have abandoned it.  In fact, recent statistics show that that broker market share is growing.

“A significant change to the broker remuneration model impacts the ability of the broking industry to survive which mean the non major lenders, who rely on the broker channel to distribute their products across the Australian market becomes compromised,” said Mr Bailey.

“This means less choice for consumers and higher home loan rates.  This is not a good consumer outcome but does provide more strength to the Big Four banks.

“AFG has worked hard at providing choice for our brokers’ customers and with 45 lenders on our panel more than 30% of our flow now goes to non-major lenders. This is a great consumer outcome.  We would like to think the non-majors are supportive of the current remuneration structure,” he concluded.

Download: AFG asks ACCC to keep an eye on banks

SEM – the basics of what you need to know

Search Engine Marketing, or SEM, is paying to ensure that the people who are using keywords to find products and services online, can easily find your business. It’s like buying advertising space in a newspaper, but the newspaper is filterable by keywords.

The first step to starting your business on a SEM journey is to ascertain what your objectives are. Your strategy should be very different if you are trying to convince people to spend thousands of dollars, as opposed to an objective of finding people to enrol in a free seminar or follow your business on social media.

Secondly, it’s important to decide how much you would like to spend on your SEM campaigns. SEM is not a set and forget method and your spend on different keywords and target markets should be adjusted regularly in response to the traffic you are seeing and the seasonality of the campaign.

Ensure you decide what you are expecting to achieve from your spend. Decide what success looks like to you before you embark on this new method of attracting new leads to your website. Set some targets and check up on your progress each week.

Before you hit the ‘Go’ button on your campaign, think about what your new leads will see when they land on your website. Your ad could perform very well but if you don’t give your leads something interesting, they will not convert once they land on your website.

In our increasingly risk adverse world, you always need to be careful that the way you promote your business is legal and compliant with any applicable industry legislation. If your product or service is part of a particularly heavily regulated industry, then it’s always best to get an expert legal opinion on the wording you use in your offers.

If you are spending a large amount of money on SEM then it may be worth considering A/B testing for your first month. A/B testing means creating two versions of your ad and testing to see which works better. The same concept can also be used for your landing page and your conversion form. Some businesses convert better using first person terms such as, “I want to know more,” on their buttons, whereas others may prefer, “Click here to find out more.” Testing the different versions can help you figure out which works for you and your leads.

As with all digital marketing methods, take it one step at a time and don’t let anyone convince you to throw all your eggs into one basket. If an advertising or promotional method is going to use all your marketing budget, be sure that you will see the return on investment that you expect!