HALL CHADWICK ASSOCIATION

NEWSLETTER

Spring 2015

INSIDE:

2 A message from our Chairman

3 Employee Share Plans and other alternatives for incentivising your employees without costing the bank

4 A new style of Audit report

6 ATG (Ahead of the Game) Sports Wealth Advisors

7 Sunshine Coast Practice Acquisition

7 Hall Chadwick Association – Our People

Hall Chadwick Association

Newsletter2

A message from our Chairman

As we move to the last quarter of the year, spring in Queensland makes us turn our mind to football finals. The flowering of jacaranda trees is a reminder to students that exams are around the corner.

In Australia we have seen another change in Prime Minister. Malcolm Turnbull tells us we need to be technologically savvy. There is a need to adopt technology to be part of the ever-changing world.

There is a push from various sectors for tax reform to be a major plank of the government’s new innovation agenda. A recent summit referred to the need to adapt new innovation and productivity to compete in the new world.

Many of our clients are in business in different parts of the world. In days past, our New Zealand clients often took investment positions and branch offices within Australia. Much of the Australian property boom a decade ago was fuelled by New Zealand funds.

Today, we have many clients doing business in New Zealand and other parts of the world. There is a need for accountants to have an understanding of domestic and international tax, tax residence and practical guidance.

Hall Chadwick is a member firm of AGN International: a worldwide association of separate and independent accounting and advisory businesses, providing services in audit, accounting, tax and corporate advice. AGN International has 188 members in 89 countries worldwide.

In this newsletter, we refer to employee share plans and other alternatives for incentivising employees. An existing employee trained to the systems and practices of your business is a valuable commodity. Keeping them happy, both financially and through a challenging and rewarding career path is essential in creating a good work culture and efficiencies within business.

Recently, I was speaking with a client who referred to the challenges of employing and maintaining their 60 employee professional practice. The need to maintain a positive culture and opportunities for advancement are paramount for profitable business.

Football finals are now complete. We are reminded of the economic significance of sport. Our sports men and women now command huge pay packets and compete around the world. Our various offices have capability to guide these people to assist them in their financial decision making. This specialty was established to provide assistance in the area of taxation, accounting, legal, investment and structuring advice.

The Hall Chadwick Association continues to expand with the recent opening of offices in Darwin and Caloundra on the Sunshine Coast. We have a philosophy of taking our services to clients in all parts of Australia and New Zealand.

Recently, Kieran Bowden of our Sydney office was nominated for Young

Accountant of the Year (Under 30) in the 2015 Australian Accountant Awards. Kieran works in Business Services with Sally Saad and David Kenney and has been with the firm for almost six years since he started as a cadet in 2010. Hall Chadwick will be attending the event with full support and best wishes for Kieran.

Australia and New Zealand are still regarded as two countries with the highest standard of living in the world. Recently, George Megalogenis of ABC radio referred to these two countries reaching a critical moment in history. For much of the nineteenth century, our countries thrived on the back of agriculture and then mining.

But this long boom was followed by 30 years of less prosperous times. No doubt things have been difficult but he has forecast our two countries to emerge again as prosperous and efficient due to the adoption of the new digital age. Tourism, professional services and property investments along with agriculture and mining will lead the way with new opportunities for investment.

I hope you enjoy reading our spring newsletter and enjoy the run home to Christmas and the end of 2015.

Brendan Vaughan, Williams Hall Chadwick, Brisbane

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Contributed by: Craig Torry, Director at Williams Hall Chadwick, Brisbane

Do you own a private Australian resident company that has been operating for less than 10 years that has less than 50 Million Turnover? If so, the recent changes in the Income Tax Assessment Act 1997 to make employee share Plans more tax effective may be of interest to you.

Recent start-up concessions were announced for companies satisfying the above criteria so that shares can be offered to employees without causing any adverse tax consequences for the employees.

Employee Share Plans and other alternatives for incentivising your employees without costing the bank

Employment Condition Employee required to be employed or contracted.

Ordinary Share Condition Employee Share Plan Interest must be ordinary shares or the right to acquire ordinary shares.

Integrity Rule Employee of trading company.

Minimum Holding Period 3 years (Commissioner may exercise discretion)

Broad available of Plan Must issue to 75% of employees that have been employed for 3 years or more. (Note: if no employee has been employed for 3 years – ok).

Maximum Holding Rule No employee can hold greater than 10% of shares and control more than 10% of the vote at a general meeting.

20/12The Corporations Act requires further disclosure to be made if you offer the Plan to more than 20 employees (excluding senior management) in any 12 month rolling period.

The basic conditions for satisfying the start-up concessions are as follows:

• The discount given to employees can be no more than 15% of the market value of the share

• Where the Employee Share Plan interest is a right to acquire shares (e.g. options) the exercise price of the option must be equal or greater than the market value of a share in the company at the time the Employee Share Plan interest is granted.

Obviously this raises the question, what is the market value of the company and how is it calculated? The legislation provides guidance on two approved methods being Maintainable Earnings and Net Tangible Assets (we can assist you with these calculations).

Other general conditions that must be satisfied to issue an Employee Share Plan under the new legislation are as follows:

continued next page ...

Hall Chadwick Association

Newsletter4Employee share plans may be structured so that the shares/options are issued either directly to the employee or issued indirectly through an employee trust. Issuing shares/options to an employee trust may be advantageous if you are concerned about providing financial statements and other financial data to employees.

Employee Share Plans can be useful if you want employees to share in the growth of the company. However, if the objective is so that the employee simply shares in the profit of the business there may be alternative options that are more flexible, less costly and more appropriate, such as:

• Dividend Shares – Similar financial outcomes as paying a bonus except that employees may also get the benefit of franking credits. However, due to dividends being paid out of after tax dollars the employer will forgo the tax deduction. (Be mindful of dividend streaming in this situation).

Contributed by: Graham Webb, Partner, Hall Chadwick, Sydney

Audit reporting will never be the same again.

The Australian Auditing and Assurance Standards Board (AUASB) proposes to revise and amend five standards and issue a new one on ‘Key Audit Matters’ (KAMs). Eight other standards contain

A new style of Audit report

• Phantom Plans – Employee get a cash bonus based on what would have been received had he/she owned a percentage of shares in the company

• Remuneration Trust – The employer contributes a percentage of profits to a trust in which participating employees are beneficiaries/unit holders.

Another alternative when considering an Employee Share Plans may be that the existing owners simply sell a portion of shares directly to the employee.

If an Employee Share Plan sounds right for the company it is important the correct documentation is put in place, covering such things as:

1) Eligibility criteria

2) How the employee will pay for the shares

3) Will financial assistance be provided by the company (if so, watch Division 7A).

It is also important to point out the management structure when issuing employee shares, as having a number of employee shareholders may change the dynamics of the business.

consequential amendments. Boards and management will be surprised as to the extent of the changes and implications for them.

The amendments will match recent changes by the International Auditing and Assurance Standards Board (IAASB) that are aimed

at promoting enhanced auditor reporting throughout the world. The proposed new and revised standards lay the foundation for the future of global auditor reporting and improved auditor communications.

Should you wish to discuss Employee Share Plans further or other alternative ways to

remunerate staff members, please call Craig Torry of

Williams Hall Chadwick.

Consistent with counterpart international standards, the new and revised Australian standards will be effective for audits of financial reports for periods ending on or after 15 December 2016.

These new and revised standards represent significant changes in practice. Collaboration by all participants in the financial-reporting supply chain will be needed to ensure that the objectives of enhanced auditor reporting are realised.

The proposed revised standards are:

• ASA 700 ‘Forming an Opinion and Reporting on a Report’

• ASA 705 ‘Modifications to the Opinion in the Independent Auditor’s Report’

• ASA 706 ‘Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report’

• ASA 570 ‘Going Concern’, and

• ASA 260 ‘Communicating with Those Charged with Governance’.

The proposed new standard is ASA 701 ‘Communicating Key Audit Matters in the Independent Auditor’s Report’.

The most notable enhancement is the new requirement for auditors of listed entities to communicate

KAMs, that is, matters that the auditor views as most significant, together with an explanation of how they were addressed in the audit.

The introduction of KAMs is a significant enhancement that will change not only the auditor’s report but is also expected to improve the quality of financial reporting, and, therefore, the informative value to investors and other key stakeholders such as analysts.

The AUASB has also taken steps to increase auditors’ focus on going-concern matters, including disclosures and transparency about an auditor’s work.

This includes:

• Description of the respective responsibilities of management and the auditor for going concern

• A separate section when a material uncertainty exists, and is adequately disclosed, under the heading ‘Material Uncertainty Related to Going Concern’ (previously included in an Emphasis of Matter paragraph), and

• New requirement to challenge the adequacy of financial-report disclosures for so-called ‘close calls’ in view of the applicable financial-reporting framework when events or conditions are identified that may cast significant doubt on an entity’s ability to continue as a going concern.

Other proposed changes include:

• An affirmative statement about the auditor’s independence and fulfilment of relevant ethical responsibilities and the identification of relevant Australian ethical requirements, and

• Enhanced description of the auditor’s responsibilities and key features of an audit.

These ‘long form’ audit reports may also become best practice in Australia and required for all audits under the Corporations Act, not just listed entities.

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Audit reporting will never be the

same again.

Hall Chadwick Association

Newsletter6

Contributed by: William Tuffley, B. Bus, Chartered Accountant, Manager at Williams Hall Chadwick, Brisbane

The professional sports industry continues to prosper at an extremely rapid rate. Ever since the sporting landscape shifted from an amateur level to the highly tuned, billion dollar professional industry it is today, we have continued to see the levels of income earned by our professional athletes rise, both in Australia and overseas. Nonetheless, we continue to hear stories of professional athletes going bankrupt post career. The question must be asked as to why this is so, despite lucrative sponsorship deals and salaries being well above the national average during their sporting careers. How effectively are these potentially ‘once in a lifetime’ incomes being managed?

Professional athletes have often not been able to take advantage of these high incomes due to:

• Poor investment decisions

• Lack of industry specific related financial knowledge

• Overspending

• Career duration

• Poor choices in obtaining industry specific financial advisors

As a result of this, Williams Hall Chadwick have teamed up with Williams Hall Chadwick SMSF & Financial Advisors (Toby Winton), UBS Wealth Management (Don Chandler) and Mohr Keddy Lawyers (Scott Keddy) to deliver a Sports Wealth Advisory division under the name ATG (Ahead of The Game) Sports Wealth Advisors.

ATG Sports Wealth Advisors aims to provide sports players with a broad range of services and advice (including accounting, legal and financial) during and beyond their sporting careers, tailored to their particular sporting industry. ATG is a move away from the traditional managerial style of sports management, with the focus purely

on providing strong, objective and independent accounting, legal and financial advice, and not acting in any ‘managing’ capacity for the players. The aim is to provide independent, fee for service, rather than commission driven advice, to sports people at any level and at any stage of life. The parties involved have a real and keen interest in the sporting world.

If you have any queries in relation to the division or if you know any professional sports people who may be interested in obtaining these services, please do not hesitate to contact William Tuffley (wtuffley@wpca.com.au) or Michael Williams (mwilliams@wpca.com.au).

ATG (Ahead of the Game) Sports Wealth Advisors

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We are pleased to announce the acquisition of a long established accounting practice owned by Chartered Accountant Gordon Hogarth at Caloundra, Sunshine Coast. Home to several iconic beaches Caloundra is some 90 km north of the Brisbane CBD and is part of a vibrant business and tourism region. The new world class hospital construction and continued relocation of major corporate head offices to the

Sunshine Coast Practice Acquisition

area will only serve to strengthen this already vibrant business and professional hub. The area is also home to a major University which strengthens the diversity of the region’s present and future success.

Gordon Hogarth is the father of WHC manager Ken Hogarth who works with Director Greg Kelly. Gordon has long been established on the Sunshine Coast and the practice is a great fit with our practice both client and culture wise. The full

time existing office at Caloundra is being maintained with Gordon and staff remaining on site with weekly visitations form Greg, Ken, Brett Gilles and Tom Gray. Gordon will remain in our employment as he works towards a well-deserved retirement to ensure the orderly transfer of the practice goodwill. We look forward to a long association with this prosperous & vibrant area of Queensland.

NSW

Inala Rugby World Cup Charity Lunch

On June 19th 2015, Hall Chadwick was the Major Event Sponsor of the annual Inala Rugby World Cup Charity Lunch held at Four Seasons Hotel in Sydney CBD.

Hall Chadwick has now been the Major Event Sponsor of the Inala Charity Lunch for the last 5 years.

The luncheon was a huge success with the theme being ‘Rugby World Cup”. The Australian coaching

Hall Chadwick Association – Our People

legend Laurie Lawrence was MC and approximately $200,000 was raised throughout the day.

The proceeds of the 2015 luncheon will be put towards transport options for Inala’s Community Access Program.

WESTERN AUSTRALIA

PerthMaxim Hall Chadwickinfo@maximgroup.com.au255 Hay StreetSubiaco, Perth WA 6008Tel: +61 8 9489 2555

Hall Chadwick – Business Recovery and Insolvencyperth@hallchadwick.com.auLevel 11, 16 St Georges TerracePerth WA 6000Tel: +61 8 6557 6200

NEW SOUTH WALES

SydneyHall Chadwicksydney@hallchadwick.com.auLevel 402 Park StreetSydney NSW 2000Tel: +61 2 9263 2600

VICTORIA

MelbourneHall Chadwickmelbourne@hallchadwick.com.auLevel 10, 575 Bourke StreetMelbourne Vic 3000Tel: +61 3 8613 0000

NORTHERN TERRITORY

DarwinHall Chadwick – Business Recovery and Insolvency jgawlak@hallchadwick.com.auLevel 1 48-50 Smith Street Darwin NT 0800 Tel: +61 8 8943 0645

NEW ZEALAND

ChristchurchHFK Limitedinfo@hfk.co.nz567 Wairakei Road, RussleyChristchurch 8053 NZTel: +64 3 352 9189

Hawkesbury Race Day

In June Hall Chadwick welcomed its guests for an afternoon of racing and networking in raising funds for the White Ribbon ‘Say No to Violence’ Race Day.

All funds raised support prevention programs aimed at changing attitudes and behaviours that result in men’s violence against women.

QUEENSLAND

BrisbaneWilliams Hall Chadwickgeneral@wpca.com.auLevel 19144 Edward StreetBrisbane QLD 4000Tel: +61 7 3221 2416

Caloundra19 Mayes AveBrisbane QLD 4551Tel: +61 7 54916711

Hall Chadwick – Business Recovery and Insolvencybrisbane@hallchadwick.com.auLevel 19144 Edward StreetBrisbane QLD 4000Tel: +61 7 3211 1250