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business growth

It's not about money. It's all about Money Intelligence!

It's not about money. It's all about Money Intelligence!

In the beginning...

I began my business journey in 1995, while working full time for small accounting firms in Sydney. I drove around in my red Ford Telstar, doing people’s tax returns in their homes on weekends and in the evenings. Two years into the business, I bit the bullet and left the security of full-time employment for the bumpy, “joyful” ride of small business.

Contractors vs. employees and the super guarantee dilemma

Recent high-profile cases highlight the risk of hiring contractors who could be deemed to be employees. The Roy Morgan Research court case resulted in the federal court decision that the company's researchers, who were engaged as contractors, were deemed to be employees – hence, super guarantee was payable.

This decision has negative consequences for many small businesses that employ contractors who do not work for them full time or who provide them with basic services, e.g. training companies, medical professionals, sales companies and tourist operators. This includes any business that employs contractors who could be classified by the ATO as employees.

To help you decide whether the contractors you employ could be deemed as employees, and whether super and work rules apply (e.g. annual leave and sick leave), consider the following:

1. Delegation: Do your contractors have the right to delegate the work you give them to a sub-contractor?

2. Risk: Do your contractors bear risk of any poor workmanship or injury?

3. Assets: Do your contractors provide their own equipment and assets? Are these used to provide core or non-core services?

4. Appointment: Do your contractors advertise their own services to the public at large, e.g. on a website?

5. Hours of work: Do you work out set hours for the contractors or do they?

6. Result: Are your contractors paid per hour or per day? Has a contract been signed specifying the provision of a result, product or service?

7. Level of control: Are your contractors supervised? Or do they have full control over a specific area of your business?

It doesn't matter if your contractors operate as a sole trader, partnership, trust or company. The business structure they operate under will not protect you.

If the above test is not passed, it's likely that your contractors would be deemed as employees. Hence, the super guarantee could be payable. The ATO has unlimited power to amend previous years’ accounts. The four-year limit doesn't apply; hence the risk is extremely high. If it transpired that your contractors were deemed employees, your business as an “employer” would be liable to the super guarantee. From 1st July 2012, directors are personally liable for the unpaid super guarantee.

The financial consequences of the federal court ruling could be devastating for your business. You might argue that the rate you pay your contractors is already higher than the hourly rate you would pay them if they were employees (full time, part time or casual). The ATO does not care and will impose the super guarantee and force you to pay super on the gross amounts paid.

I recommend that you review your arrangements with all your contractors. Review the questions above and determine whether your business can pass the contractors’ test. If not, you need to consider making changes with your contractors and negotiate terms of agreement, payment rates and super rates.

This ruling takes Australia back to the 1960s and does not take into account the changing global business environment and increasing competitiveness of lower-labour countries. Sadly, it is yet another red tape for the small business community. Pardon the ranting: I have seen more red tape and less help for small businesses from governments, both state and federal, over the years. This ruling is another blow.

Let's ensure that you deal with this issue head-on – fast and furiously!

Feeling uncertain? Keep on imagining the future

2011 started with news of disasters: the Queensland floods, the tsunami in Japan, the carbon tax debate, weak consumer sentiment, the Greek tragedy, the stock market crash, downgrading of the USA credit rating … the bad news keeps on coming. Things couldn’t get worse than this, or could they? 

Bad news can affect how we view the world, our life and our business. We become fearful of the future and decide not to do anything new, risky or even necessary to make our personal and business dreams a reality. 

The irony is that if everyone on the planet thought this way, nothing would happen. Economies around the globe – most of them driven by sentiment and confidence about the future – would collapse. We all rely on each other to realise our dreams and build our businesses.

I love how John McGrath puts it: “Stop blaming Julia, the GFC, the floods on what happens to your business.”

I have been in business for more than 16 years. I have seen how some businesses flourished while others failed during the mid-‘90s recession, the 2000 technology crash, the year GST was introduced, September 11 and the 2008-2010 global financial crisis. When I look back at the clients who flourished, I see a pattern of behaviour distinct from those who struggled or failed.

Here is my 2 cents worth on dealing with uncertainty:

1. Leadership: Successful entrepreneurs show distinctive signs of strong and courageous leadership coupled with a BIG vision of what their businesses will look like in the future.

2. Value: Their products/services add perceived and real value to their customers, so that they, as opposed to their competitors, are at the forefront of their customers’ minds.

3. Up-Skilling: Successful entrepreneurs continuously learn new management, sales, finance and marketing skills to improve their businesses.

4. Financial Management: They are prudent financial managers who ensure ZERO wastage of financial resources.

5. Productivity: They demand the most out of their people, ensuring they perform to their KPIs and give 100% of their capabilities (and if they don’t, they are let go of quickly!).

6. Adapt: Their businesses are agile and fast enough to adapt to new challenges and uncertainties. They are strengthened by a strong team and culture of open communication.

 7. Mindset: They instinctively understand the one encompassing truth about business (and life, for that matter), which is: "If you are not growing, you are dying slowly.”

Imagining the future should be at the forefront of your mind. Everything you do should be aligned with your BIG vision. Anything less leads you to feel uncertain and bleak about the future.