It's that time of year ... when that overly complicated area of tax law becomes front of mind again. (A tax which accounts for just 1.2% of tax revenue should not have so many different provisions and calculation rules!)

So what exactly should accountants be aware of when preparing thier clients' FBT returns this year?

Three of the more significant changes which will affect the returns you prepare for the 2011-12 FBT tax year are:

1. Car fringe benefits

Under the new provisions (which apply to new vehicle contracts entered into after 10 May 2011), there is just one flat rate of 20% that applies regardless of the distance travelled. This flat rate will be phased in over the course of four years (although an employer can elect to jump straight to the flat rate if it doesn't disadvantage the employee).

Under the old provisions, the more an employee drove, the lower the tax rate - creating a rather politically incorrect incentive to drive more which was doing nothing to improve our carbon footprint. (Although - and call us cynics - we suspect that the Government's decision to make this change had more to do with an estimated $1.1 billion in "lost" revenue rather than any environmentally based motivation!)

You can read more here.

2. Extension of the exemption for fly in / fly out arrangements

This exemption has been extended to cover travel between home and work sites for fly in / fly out employees working overseas and their employers (subject to certain conditions being met).

This change was driven by a need for more certainty and consistency and to remove the possibility of double taxation of fly in / fly out benefits received by Australians working in remote overseas locations.

The changes apply retrospectively from 1 July 2009, and there are provisions allowing for amendments to be made to any reported fringe benefits by employers and employees.

You can read more here.

3. Tax concessions available to non-profit organisations

Where a non-profit organisation carries on commercial activities that are unrelated to its charitable purpose, the organisation will not qualify for a range of tax concessions, including FBT concessions, in relation to those unrelated commercial activities. 

This change commenced on 1 July 2011 and affects any new unrelated commercial activities that a not-profit organisation began after 10 May 2011.

You can read more here.

As for what lies ahead, you need to be aware of changes to the living away from home allowance and benefits which will apply from 1 July this year (you can read more here).

Tax planning isn’t something that accountants should do for their clients once the calendar ticks over to 30 June, but something that is planned for and managed throughout the year.

This is certainly not a revelation in thought, rather a reminder of the importance of providing considered tax planning services well before tax time.

But for many accountants struggling with the dual burden of completing accounting and tax compliance jobs and staying up-to-date with current taxation regulation, finding both the time and the right process needed to deliver effective tax planning advice to clients can be incredibly difficult.

This is where having the right tax planning tools comes into play.

To be truly effective, your tax planning tools (by which we mean the set of procedures, workpapers and checklists your team relies on to guide them through the tax planning job process) must (1) empower your team to cut back on the amount of time it takes them to prepare and deliver tax planning advice and (2) provide you with confidence that your team are considering everything they should be in order to deliver sound advice.

So how can you know whether your tax planning templates (or, for that matter, any set of templates relied on by your firm) are effective? Here’s a few pointers:

- They must always be up-to-date (for the latest rates, legislative changes and industry best practice).

- Updates must be shared with team members well in advance of the point at which they will need to rely on them (for familiarisation and training purposes).

- They must make it easy for your team to complete them electronically or on paper (to suit all preferences).

- They must allow your team to select those items which need to be considered for the job at hand, given the particular circumstances of the client (one size does not fit all clients).

- They must be flexible in their design, so that they are useful and relevant for junior accountants (who tend to rely on them for guidance and learning) as well as those more experienced (who tend to refer to them only for a ‘checklist’ function).

Frequently, accounting firm partners and principals find that relying on a reputable external provider for tax planning and other templates is the more cost and time-effective approach. After all, with the many client engagements to keep them busy throughout the year, just how many accountants have the time to spend creating and maintaining their own (effective) templates?  

Given all the hype around ‘the cloud’ over the last 12 to 18 months, you’d be forgiven for being surprised by the fact that just 36% of accounting firms surveyed as part of this year’s Good Bad Ugly benchmarking study are using some kind of cloud-based software or application. However, this is most certainly what the statistics reveal, and also what our own experience with our own clients supports.

So why is this the case? If the cloud is as great as it is frequently made out to be, why aren’t accountants rushing to implement some kind of cloud solution?

The answer no doubt in large part lies in the fact that there is an overwhelming amount of cloud-related commentary, events and promotions being thrust in the faces of accountants, making it difficult to break through the hype to find some sensible, practical and non-biased advice.

Whilst we haven’t attempted to provide all of this advice in this one blog entry, what we have done is made a start by identifying the fundamental questions which you must seek the answers to before deciding on any cloud-based solution for your firm.

Let’s start with the ‘deal breaker question’ – the one which will decide whether or not you go ahead with any particular cloud-based solution:

Will product / solution / application / service X allow us better (or at least the same) ease of use that we currently enjoy, reliability of service and sufficient space to store all of our data – and all at a price that is affordable?

The answer must be a resounding ‘yes’ before you go ahead.

To answer the deal breaker question, you’ll need to have the answers to the following (not so much deal breaking, but nonetheless fundamental) questions:

1. Why do you want to move the cloud?

2. Have you considered all the issues you need to consider before selecting any particular cloud-based solution? Internet connectivity? Costs? Convenience and ease of remote access? Degree of comfort around data security? Managing the change process (frequently the biggest hurdle – often overlooked)? Your exit strategy (in the event you want to stop using the cloud solution)?

3. Which cloud model will work best for you – the infrastructure as a service (private cloud) model, or the software as a service (public cloud) model?

4. How will you get your processes ready for the cloud? What is your plan?

5. Have you thoroughly evaluated your preferred cloud-based solution provider? Are they established? Do they have similar clients? Can they customise their offering? Are there limits on data storage? Which jurisdiction will your data sit in? What about back-up systems? What do they offer in terms of training and support? And the list goes on ...

In a nutshell? Do your homework so that you can be confident that changing from the status quo will be an improvement, not another frustration.

If you’re after comprehensive, practical, ‘how to’ advice and information to help you answer these questions – and select the cloud solution that is right for your firm – you should take a look at Supplement #2 to our 2011 Good Bad Ugly Report. Very must not just another blind promotion of the virtues of the cloud, and certainly not written with disregard for any practical realities or context, this report is a valuable resource for any accounting practice weighing up its cloud options.

You can download the free Executive Summary here, or purchase the report via www.thomsonreuters.com.au/goodbadugly.

Two of the key challenges faced by accounting firms today are how to improve the efficiency of firm-wide processes to ensure the firm is – and remains – profitable and competitive, and how to ensure all staff stay on top of current rates, legislation and industry best practice so as to manage the risk exposure of the firm.

Indeed, these two challenges have been consistently identified as top challenges over the ten years in which Business Fitness’ industry leading benchmarking study – the Good Bad Ugly – has been carried out.

At Business Fitness, we therefore continue to be surprised that less than one third of Australian firms are paperless or thereabouts, for an effective strategy for going paperless will naturally help an accounting firm to overcome these two challenges. Essential elements of any paperless strategy include effective electronic document management and the use of electronic workpapers – perhaps not coincidentally, these are also two of the most effective (and most easily achievable) ways to improve accounting firm efficiency.

Perhaps we can put this down to a possible misconception that the paperless office is something which can simply be ‘bought’. Or maybe it is due to a lack of a well thought out strategy in place from the start, a lack of leadership, or not having the right electronic document management system in place.

Whatever the reason may be, there is no denying the fact that, by not going paperless, firms are retaining the burden of some hefty costs that are well within their control to eliminate. Take, for example, the fact that, on average, it costs $20 to file a single paper document, $120 to search for a misfiled document, and $220 to reproduce a lost document.¹

Just how much could your firm save by implementing smarter processes and technologies in your practice?

Business Fitness are the experts in helping accountants (and their SME clients) to go paperless. Contact us if you'd like to find out more.

The comments in this blog are explored in detail in our first Good Bad Ugly Supplement Report - 'How to Profit from Going Paperless' - now available for purchase from Thomson Reuters. You can download a free copy of the Executive Summary here.

¹Source: Kofax White Paper: The Business Case for Automating Document Driven Business Processes (2010) (figures based on the results of a study conducted by PwC)

By Jenelle Schultz - our wonderful Business Fitness Client Manager ...

Some of us from the Business Fitness team last week attended Bruce Sullivan’s seminar – well worth the trip into the city, even if the coffee at the Chifley was a bit ho-hum!

The seminar was titled, ‘Building Rippa Relationships at Work and at Home! With the Energy, Attitude and Resilience of a Four Year Old.... Almost Every Day!’

Long title, but a simple message – it basically boiled down to ‘if you want to have a better day, change your actions!’

So true… both at home and at work, we spend so much time complaining about the outcome of situations, when really we need to look at what we’ve done along the way to contribute to the result.

We all left the seminar invigorated – how could you not be after such an energetic and funny presentation? – but, like so often happens with these events, a few of us commented at lunch that the sort of changes Bruce talks about are really difficult to implement once you’re away from the enthusiasm of the group session.

The brains trust (over a steak, some arancini balls and a diet coke) agreed that the old adage ‘one day at a time’ was the best way to go – taking small bites at a problem gets a better result. If you bite off more than you can chew, you may have to admit that it was ‘my turn to be an idiot’ (another of Bruce’s phrases – his book Rippa! is worth a read).

If I had to pick one small bite from the seminar that could be easily done, it was Bruce’s theory on ‘adding to’ not ‘taking away’ from at situation … he says that we need to think about what we bring to the table – what we can contribute – rather than tearing down an idea or a system just because we can.

The problem here is that it’s easier to pick holes in things – I’m as guilty as anyone – show me an idea or a process and I’ll tell you what’s wrong with it!

But retraining our thinking to ask ‘what can I add here?’ is much more useful – coming up with a new way of doing things could lead to greater efficiency gains than just simply stopping an old inefficient process. Plus, being part of a better solution makes you a more valuable team member.

As part of our 2011 Good Bad Ugly accounting firm performance benchmarking study, we interviewed and profiled six of this year's top performing firms. The idea was to get a feel for the strategies that these top performing firms have in place for driving success.

There are some significnat differences in the size, structure, nature and location of the firms profiled. In particular, some focus on maximising efficiency and therefore profit through compliance work, whereas others concentrate on growing profit through providing services that go beyond compliance. However, that being said, it was clear that all firms profiled understand that doing compliance work efficiently and profitably is integral to the overall profitability of their firm, regardless of their preferred type of work.

Other common themese included:

- A dedication to developing and implementing best practice systems which promote efficiency in firm processes;

- Effective client engagement processes which include agreeing prices and fees up-front;

- A continuous focus on the needs of their clients and what these might mean for the kinds of services proivided as well as the way in which they are provided;

- A firm commitment to staff training;

- A disciplined approach to workflow management, relying on the right tools and working with clients to schedule work;

- Recognition of the role the paperless office has to play in streamlining processes and improving job turn-around;

- Clear agreement amongst firm leaders as to the future direction of and plans for the firm, including through documented succession plans; and

- An understanding of what sets the firm apart from its competitors - what makes it 'unique'.

You can download a free copy of the Executive Summary of the 2011 Good Bad Ugly here. The full report is being published and sold by Thomson Reuters this year - please visit their site for information on how to purchase.

Ten years ago, Business Fitness provided its first set of accountants templates to an accounting practice in Brisbane. Last month, we delivered our 150th update to our accountants templates to over 6,000 people working in accounting practices across Australia.

During this time we have witnessed the most rapidly changing business and technology environments in history, and Business Fitness has evolved in step with the challenges and opportunities these have presented.

Whilst our products today may appear different to what they did ten years ago, their purpose and our mission have remained the same: to help Australian accountants streamline their practices and improve their efficiency through the use of best practice tools and systems

We'd like to say a big thank you to our clients and business partners - some of whom have been with us from the very beginning - for contributing to our journey over the past 10 years. Stay tuned for regular blog posts!