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Elements of good business management - The leucaena Network

THE LEUCAENA NETWORK

2011 CONFERENCE

Bill Sheehan FCA

Director

Statham Cheesman Pty Ltd

www.stathamcheesman.com.au


Elements of Good Business

Management

Keep Good Records

– For management accounts

– For G.S.T reporting

– For the bank

– For the Tax Man

YOU CAN’T MANAGE WHAT YOU

DON’T MEASURE


Elements of Good Business

Management cont..

Choose the Right Business Structure

– For ease of operation

– For succession planning and asset

protection

– For tax minimisation

– Review its relevance


Elements of Good Business

Management cont..

Farm Management Deposits

– Available to the extent of primary

production income.

– Current limit $400,000.

– Unavailable to trusts and

companies

– Exceptional circumstances allow

withdrawal without penalty within

12 months


Elements of Good Business

Management cont..

Formulate A Business Plan

– If you don’t have a plan, you plan to

FAIL.

– Review your plan regularly


Elements of Good Business

Management cont..

Consider Your Risk Management

Issues

– Property Insurance

– Life Insurance

–TPD Insurance

REMEMBER ALL KEY

STAKEHOLDERS


Make the time to work ON your

business as well as in it.

– Make time for holidays


Succession Planning

–Start early

– Consider all stakeholders and all

options

– Requires patience, respect for

all, and good communication

– Must be documented and kept

under review

– WILLS


THE X FACTOR

THE HARDER I WORK, THE

LUCKIER I GET”

–Sam Goldwyn

–Thomas Jefferson


THE X FACTOR

THERE ARE FEW OVERNIGHT

SUCCESSES

Behind what looks like sudden

success is often years of work,

trial and error, and failures. But

the harder you work the more

good ideas and chances you may

make for yourself.


THE X FACTOR

COMMUNICATE

COMMUNICATE

COMMUNICATE


DROUGHT MYTHS

Myth Number 1

“My fodder supplies are disappearing fast,

but tax will kill me if I sell down”

NOT SO!

Leads to

– Animal welfare issues

– Land degradation

– Financial loss


Heading Style

Body Two copy options are available for primary

> producers Bullet style whose livestock needs to be

sold due to:

– Drought

–Fire

– Flood


Heading Style

Body copy

> Bullet style

S 385-105

– Forced disposal profit spread equally

over 5 years including the disposal

year.

– Very inflexible in a highly variable

industry sector.


Heading Style

Body copy

> Bullet style

S 381-110

– Forced disposal profit offset against

cost of replacement stock, or

– To maintain breeding stock to

produce replacements.

– Applies to disposal year and

subsequent five years.


Heading Style

Body copy

> Bullet style

S 385-115

– Allows inclusion of “any amount you

CHOOSE for each replacement

animal breed”.

– Allows taxpayer to choose not to

include an amount.


Gibber Ridge Pastoral Company

– INSERT PAGE 9 of old presentation

when found

CLIENT

YEAR 2007

N/I VALUE 20.00

ACTUAL FIGURES

PROJECTED

NUMBERS VALUE NUMBERS VALUE

OPENING STOCK 2,542 115,645.00 2,542 115,645.00

PURCHASES - -

PROPOSED PURCHASES - 583 232,956.00

NATURAL INCREASE 702 702

SALES 996 957,058.00 996 957,058.00

PROPOSED SALES - - -

DEATHS -

RATIONS - - - -

CLOSING STOCK 2,248 89,868.03 2,831 268,261.48

GROSS PROFIT FROM TRADING 931,281.03 876,718.48

AVERAGE VALUES - CLOSING STOCK 39.98 94.76

DECREASE IN TAXABLE INCOME -54,562.55


CLIENT

Gibber Ridge Pastoral Company

YEAR 2007

N/I VALUE 20.00

ACTUAL FIGURES

PROJECTED

NUMBERS VALUE NUMBERS VALUE

OPENING STOCK 2,542 115,645.00 2,542 115,645.00

PURCHASES 583 232,956.00 583 232,956.00

PROPOSED PURCHASES - - 230,000.00

NATURAL INCREASE 702 702

PRIOR

YEAR

OFFSET

SALES 996 957,058.00 996 957,058.00

PROPOSED SALES - - -

DEATHS -

RATIONS - - - -

CLOSING STOCK 2,831 268,261.48 2,831 98,120.37

GROSS PROFIT FROM TRADING 876,718.48 936,577.37

AVERAGE VALUES - CLOSING STOCK 94.76 34.66

INCREASE IN TAXABLE INCOME 59,858.90


Other forced disposal scenarios

– Compulsory land acquisition/ resumption.

– Tick eradication campaigns.

– Compulsory livestock destruction for

disease control.

– Destocking due to contamination.

– Bovine TB – 10 year deferral.


Myth Number 2

“I can’t use the forced disposal provisions

unless I am drought declared, can I?”

NOT TRUE!


Myth Number 2 cont’

– TD 95/6 allows forced sale election

after a drought declaration is

withdrawn.

– AT ID 2002/780 indicates a property

can be considered drought affected

although not officially drought

declared.

Main issues:

– Rainfall records, and

– Livestock reduction.


General

Myth Number 2 cont’

– Elections required on/ before next tax return

lodgement.

– Partnerships or Trusts must make the

election.

– Not required to be lodged.

Business Restructures

– Forced sales follow the livestock –

s385-165.

– Applies to Partnerships but omits

Companies.

– Provisions not species-specific.


Saleyard Myths

Myth Number 1

“My agent told me that if I buy cattle just

before 30 th June, it’s a tax deduction.”

NOT SO!

Effect on profit affected by:

–Averaging value of existing stock, and

–Average value of livestock purchased.


Saleyard Myths

CLIENT Gibber Ridge Pastoral Company

YEAR 2007

N/I VALUE 20.00

ACTUAL FIGURES PROJECTED

NUMBERS VALUE NUMBERS VALUE

OPENING STOCK 2,542 1,398,100.00 2,542 1,398,100.00

PURCHASES 583 232,956.00 583 232,956.00

PROPOSED PURCHASES - 200 120,000.00

NATURAL INCREASE

SALES 996 957,058.00 996 957,058.00

PROPOSED SALES - - -

DEATHS -

RATIONS - - - -

CLOSING STOCK 2,129 1,111,205.83 2,329 1,226,529.15

GROSS PROFIT FROM TRADING 437,207.83 432,531.15

AVERAGE VALUES - CLOSING STOCK 521.94 526.63

DECREASE IN TAXABLE INCOME -4,676.68


Saleyard Myths

CLIENT Gibber Ridge Pastoral Company

YEAR 2007

N/I VALUE 20.00

ACTUAL FIGURES PROJECTED

NUMBERS VALUE NUMBERS VALUE

OPENING STOCK 2,542 1,398,100.00 2,542 1,398,100.00

PURCHASES 583 232,956.00 583 232,956.00

PROPOSED PURCHASES - 200 60,000.00

NATURAL INCREASE

SALES 996 957,058.00 996 957,058.00

PROPOSED SALES - - -

DEATHS -

RATIONS - - - -

CLOSING STOCK 2,129 1,111,205.83 2,329 1,184,502.08

GROSS PROFIT FROM TRADING 437,207.83 450,504.08

AVERAGE VALUES - CLOSING STOCK 521.94 508.59

INCREASE IN TAXABLE INCOME 13,296.25


Saleyard Myths

Myth Number 2

“My livestock agent told me he would hold

onto the proceeds of the cattle I have just sold

until after 30 th June, so it doesn’t have to be

included in income this year.”

NOT SO!

-Sales of livestock (and/or grain) must often

be recognised prior to proceeds being

received.

- Recognised from the signing of a contract ,

or fall of the hammer.

- Even a verbal agreement can constitute a

contract


Landcare expenditure

Cell Grazing

– Can be regarded as part of landcare

operations.

– Must be approved by an ATO accredited

consultant.

Great Artesian Basin Sustainability

Initiative (GABSI)

– Operation is primarily and principally to

prevent or combat land degradation –

therefore expenditure is deductible in

one year rather than three.

– Must also be approved by ATO

accredited authorities.


QED

The End !

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