The WA Government-funded COVID-19 Business Relief Grants program has been expanded to offer more financial support than advertised previously. We recommend every WA business owner takes a look at the grant’s eligibility criteria and considers whether or not their business can apply.
As always, if you need any help, please just let us know. The deadline to apply is 4:00pm AWST on Thursday the 30th of June 2022.
“It’s a trap!”
We recently had a client reach out to us to advise us of a scam email doing the rounds, which looked deceptively like official communication from the Australian Government. The original email itself, shown below, looked quite convincing, with the scammers using myGov branding and contact details to add a veneer of legitimacy to the communication.
As another person may well have fallen for this scam, we wanted to remind you all of the things to keep in mind when online:
- Communications from myGov will always advise you that you have a new message in your myGov inbox. If you receive emails like the one above, do not click on any of the links. Instead, open a new browser window and either enter the relevant URL yourself or Google the address if you don’t already know it. Importantly, do not download, open or unzip any email attachments.
- If you aren’t sure if an email is legitimate or not, there are a few things you can check, including checking the “from” email address. In this example, the from address is email@example.com. Official government URLs and email addresses will come from a .gov.au account (or wa.gov.au if it’s from the Western Australian state government) and so .com or .biz or .info extensions are a fast way to know you’re dealing with something phishy.
- Spelling and grammar mistakes are another dead giveaway that something isn’t right. In the email above, you’ll see the word “apologize” is spelled with a “z” and not an “s” as is commonly done in Australia. The language used throughout the email itself is also not the standard Australian Government tone of voice. “Personal fiscal dues” is not language any government department would use. It’s also unlikely the Australian Government will ever be “delighted” to pay you a tax refund.
- Although it has been edited out, the refund amount displayed in the original email looked more like an IP address than an actual dollar amount, which was another dead giveaway something was wrong. Whilst we’re sure we’d all love a six- or seven-figure pay day, it’s highly unlikely you’ll ever see a tax refund of that size. On the off-chance you do, we would let you know about it ahead of time, on the finalisation of your tax return.
As always, if you come across anything that doesn’t pass the proverbial “sniff test”, please be sure to run it by us or another trusted friend or advisor for a second opinion. It is far better to be safe than sorry.
Speaking of scams…
We are increasingly active in social media (more on that to come at a later date) and have noticed recently a couple of profiles that don’t belong to us. The first was a profile for someone claiming to work for us and yet who was based in Texas. The second was an Instagram account for an overseas accessories provider using a @handle quite close to some we use.
The only people who work for Up-To-Date are Jody Nichols, Joseph (Joe) Giura, Zelia van Heerden, Louisa Bowman and Gaye Clark. We also currently have a work experience student with us named Jessie, who for now is firmly behind the scenes.
In a future newsletter, we’ll fill you in on where else you can find us online, in case you’d like to connect. In the meantime, if you see something that doesn’t quite look right, please be sure to let us know.
Operating Profit Ratio
In our last newsletter, we spoke of the importance of knowing your numbers and how vital it is to analyse and understand your financial statements. The regular use of meaningful business ratios can be invaluable in helping you identify your business’ strengths, weaknesses, opportunities and threats.
Picking up where we left off, once you have your gross profit ratio calculated, the next ratio you might consider is your operating profit ratio.
Operating Profit Margin
Your operating profit margin is calculated by dividing your operating profit by your total operating revenue. The margin is often also referred to as EBIT, which stands for Earnings Before Interest and Tax.
Here’s how to work it out:
Operating Profit Margin = Operating Profit / Total Operating Revenue
=$34,600 / $150,000
=0.23 or 23%
That means for every $1.00 coming into your business, $0.23 is operating profit leftover to cover your interest and tax liabilities.
Like most, your operating profit margin ratio will differ depending on the industry you’re in. For business valuation purposes, industry benchmarks are used and will compare like with like. That is, your specific operating profit ratio can be used to identify how well your business is performing compared to your competitors or peers. It’s also indicative of how well the business is being managed, which can have finance and investment implications since operating costs like rent, wages and office supplies are variable costs and not fixed costs. A business might have little control over the cost of raw materials, for instance, but far more leeway over how much employees are paid, and where else the business allocates its money.
Operating Profit ratios that are on the large or high side are often indicative of strong management and typically seen as a “good bet” by lenders and investors. Small or low operating profit ratios, on the other hand, can indicate a business has issues:
- It’s possible that prices haven’t been adjusted in a while to keep up with rising costs.
- You might need to consider alternative suppliers for various products or services.
- Staff may not be operating as efficiently as they otherwise could be and may need to have their roles and/or processes re-examined, or be further incentivised or performance managed to improve productivity/output.
- It might be possible to automate or outsource specific activities to improve efficiencies.
- Rent and utility costs might be higher than they otherwise could be and a move of premises or change of provider might be warranted.
Every business is different and so your mileage may vary, however, as we’ve said before, unless you first know your numbers, you won’t know where to look to make changes.
Next edition, we’ll cover how to calculate your net profit margin and explain why it’s another useful metric to measure.
Asked & Answered
Outstanding Super Payments
Question: I am the sole director of a company that used to trade very profitably, however, in recent years is turning over very little. The company currently owes me money; some for expenses I have personally covered, and some in unpaid superannuation guarantee.
From a record keeping perspective, I am still doing things relatively manually. I have an old copy of MYOB that I enter my various company transactions in, but as I don’t have staff, I am not set up for Single Touch Payroll just yet. I would consider deregistering the company and simplifying my life but I have a capital loss on my books that I’d like to make the most of, and I know ASIC won’t let me de-register without first paying off the super debt. I can’t just magically make that go away.
If I can make enough money through to company to pay myself the superannuation the company owes me, will I have to declare and pay superannuation guarantee charges and penalties/interest on the amounts outstanding? The debt was incurred over five years ago and so that will potentially cost me quite a lot. How far back will I have to go for compliance reasons? Is finally paying off the super debt likely to raise any red flags with the ATO?
Answer: Unfortunately, when it comes to unpaid superannuation, the ATO has the ability to audit you as far back as the 1st of July 1992, which is when the Superannuation Guarantee Charge Act became operational. In terms of how far back they might go in your situation, that would be assessed on a case-by-case basis.
When superannuation is paid late, or not at all, you are required to lodge a Superannuation Guarantee Charge statement with the ATO. The SGC statement is due one calendar month after the due date for the Superannuation Guarantee, and as SG is required to be paid quarterly, so is the SGC. As a deterrent for late payment, there is interest and admin fees payable on lodgement of SGC statements. There is also a penalty for failing to provide a Standard Choice form, or not paying into an employee’s chosen fund. (More information on the SGC is available on the ATO website, here.)
The best way to understand the charge is by way of example.
Let’s say you forgot to pay superannuation for the June 2020 quarter, and the gross wages paid in that quarter totalled $30,000. The SG that should have been paid was $2,850 at 9.5% at that time and was due for payment on or before the 28th of July 2020. If you lodged an SGC statement on the 10th of May 2022, as an example, then the SGC payable would be:
If the original superannuation contribution had been paid on time, the amount of $2,850 would be deductible. Unfortunately, when paid late, the full SG charge amount of $3,471.23 is not tax deductible.
In your particular situation, we can’t provide guidance as to what you might owe without knowing specifically what is outstanding in terms of superannuation guarantee payments. We can say with confidence, however, that you cannot ignore this unpaid liability. We therefore recommend that you make every effort to get on top of the outstanding SGC lodgements and debt as quickly as possible. The longer you delay, the more you will ultimately have to pay.