Articles

- They both grew up and were educated in Queensland (Aileen in Toowoomba, Rachel in the outback of Central Queensland).
- They both under took their Bachelor of Commerce at the University of Southern Queensland in Toowoomba.
- They both commenced their professional careers at the same accounting practice in Toowoomba. It was there they became friends.
- They both moved to big four fims in Darwin. It was there that they had lots of fun together.
- They were both transferred back to Brisbane.
- They both moved to Melbourne and both joined Fordham in 2003 and 2004.
- They were both promoted to become directors of the firm as at 1 July 2008.

Remarkable story!

They do work in different teams, Aileen in the Specialist Motor Dealer Services group and Rachel in a Business Services group. They are both passionate about delivering the highest level of relevant client services, but with Aileen's focus on an industry knowledge and highly specialised motor dealer advice.

For Rachel, her experience in many high level corporate finance transactions is a stand out.

But for both, it is recognition of their immense capability and the future that they hold with the firm in delivering more of the same.

Congratulations Aileen and Rachel.

Click on Our People above to see their profiles.

The question of what is the best structure for a particular situation involves a consideration of a number of diverse factors ranging from income tax, capital gains tax, asset protection and estate planning.

Despite what you may have heard or read over recent times, trust structures continue to be the most popular and widely used form of business structure. Whilst a decision should never be based solely upon tax, trusts offer many advantages including the ability to distribute income in a tax effective manner, access to most forms of capital gains tax concessions, asset protection and commercial flexibility. The humble trust has developed significantly over time to deal with a number of historical shortcomings and there are now many different forms of trusts available including family trusts, discretionary trusts, unit trusts, class unit trusts, class discretionary trusts, fixed trusts, hybrid trusts and even partnerships of trusts.

At Fordham, we specialise in helping clients choose the best structure for their circumstances and help them to implement and manage the structure into the future.

HOW DEEP IS THIS PROBLEM?

To understand this is to look back at the causes. Massive earnings growth in financial sectors has been driven by the creation of ever more complex derivative products. No single person, let alone regulators, can ever understand the extent of the total risks held by many financial institutions. This was the nature of the derivitives boom.

But this pyramid depends on the survival of each and every participant. Falling house prices in America against highly geared (sub-prime) home loans provided the catalyst. As affected financial institutions began falling, the effects spread through the USA, Europe and Asia. Some fall out has now occurred in Australia too.

HOW LONG WILL IT LAST?

How long this will continue will depend on the time it takes for financial institutions to come clean with the extent of their losses. Lessons from the past indicate that this takes time. The active support from central banks can actually prolong the problem. Japan supported their insolvent banks throughout the 90s at huge cost to the economy (and taxpayers).

Unravelling the long chain of derivatives itself will take many years. Once the major institutions provide for a reasonable estimate of their loss, confidence will return. This could still take a long time.

WHAT IS THE DOWNSIDE FOR AUSTRALIA?

The immediate impact is the overnight "death" of easy money. Many of our business owner clients have sold their businesses for incredible multiples during the last few years. For the time being, that is all over.

Some observers point to a potential recession in America and draw a conclusion that Australia is heading the same way. The Reserve Bank of Australia is actually doing everything it can to slow our economy down. Record growth and low unemployment driven by our minerals boom continues to push inflation way past the target range of 2%–3%. Expect more interest rate rises. Good for lenders, bad for borrowers. Of course, the dollar remains good for importers, bad for exporters.

It is entirely possible that any recession could bypass Australia. The effects of the capital markets crisis is likely to be isolated to specific industries with high gearing and exposure to the financial sector.

Perhaps the single biggest determinant of the value of a business is its current and recent profit history. It represents the reward to the business owner, and of course, the future business owner. The second major determinant of the value of a business is "future risk". It is an assessment of the probability that the profit of the business will be maintained or grow. Factors to be considered in assessing this risk include:

- the dependency of the business on the business owner
- sustainability of competitive advantage
- intellectual property
- growth and profit trends
- business disciplines and practices
- culture and professionalism
- the market in which the business operates.

Whilst "profit" and "risk" can see opposing accountants argue about theoretical value indefinitely, the ultimate determinant of value is the strategic position of a buyer.

Beauty is in the eye of the beholder.

Factors such as: economies of scale, cross fertilisation of products and markets, market domination or even fast tracking of growth, can see particular buyers pay more for acquisitions than an accountant’s valuation.

But even for those who did contribute the large amount, an on-going strategy is still appropriate. So what are the future opportunities?

- Taxpayers over 55 should consider salary sacrificing the maximum amount ($100,000 per annum) while drawing down a pension to fund lifestyle.

- Business owners who may be selling their business in the next few years could consider borrowing funds to bring forward the next three years of undeducted contributions (totally $450,000) and contributing in this financial year.

- Make every effort to obtain the maximum deductible contribution for yourself and your spouse.

- Ensure that if you are over 55, that your super fund balance converts to a tax free pension mode.

- Look at investments in your own name (commercial property, publicly listed shares) and seek to use these (or their sale proceeds) to fund deductible and undeducted contributions in super. It is still possible for a couple over 50 to contribute a total of $1.1 million this year. Earnings are concessionally taxed or potentially tax free if over 55. Whilst in your own name, they are taxed at your highest marginal rate.

- Business owners need to ensure that the opportunity to sell their business and still obtain the small business “tax-free” exemption (and associated super contributions) is not lost.

Such advice is general in nature and brevity could lead to misinterpretation. Readers must not act on super strategies without consulting us and obtaining specific advice relevant to their circumstances.