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NEWSLETTER AUGUST 2012

Peregian Accounting Services
Unit 3 12 Grebe Street
Peregian Beach Q 4573
What's been happening with stocks lately? Much has been made of the resources boom in Australia, particularly in Queensland and Western Australia, but the resource majors have been weak of late, with the steel sector taking another hit like it did last year. Market conditions are bear-ish, which is affecting a wide range of miners, as well as stocks with interests in oil and gas.

With the media attention over Hancock Prospecting's bid for board representation in Fairfax Media, Newscorp's fourth quarter loss attributed largely to a writedown in value of its Australian newspapers, and continuing industry-wide layoffs, media stocks are also looking dire.

Meanwhile banking stocks are on the up, although it remains to be seen if this will be a continuing trend. Other sectors showing solid uptrends include Utilities, Telecommunications and Food & Beverages. Health Care stocks feature heavily on watch lists at the moment too, particularly CSL and Ramsay Health Care (RHC): 2 of the 7 stocks on the Australian Associated Press' watch list on Monday August 6 2012 were Health Care stocks (CSL and RMD). The others were APA, HDF (Utilities fund), BHP, OMH (minerals) and OSH (oil & gas).

ALERT: Directors May Now be Personally Liable for Some Payroll Obligations

In our October 2011 newsletter we detailed upcoming changes to legislation that would make directors personally liable for the overdue payroll obligations of their company. On 1 July 2012 the legislation became operative, which means that in the coming months directors will come into the sights of the ATO if they don't report or pay the superannuation and PAYG Withholding bills of their company. Here is a recap of the changes you need to know about:

  • If PAYG Withholding is overdue by 3 months or more and has not been reported to the ATO then a director is personally liable, meaning payment of the debt can be sought from the director's personal assets.
  • Directors can also be made personally liable for the overdue and unreported superannuation obligations of their employees.
  • Personal liability cannot be avoided by entering the company into Voluntary Administration or Liquidation if PAYG Withholding and/or super obligations are unreported and unpaid for 3 months or more.
  • The director's personal PAYG tax credits can be used to satisfy the employees' outstanding PAYG Withholding debt, thereby increasing the directors personal tax bill or reducing their tax refund.
  • The ATO can serve a Director's Penalty Notice on a director ordering them to pay the amount within 21 days of the notice. Ignoring the Notice may result in recovery action against the director.
If you are a company director you need to:
  • Lodge all reports - preferably before their due date, but certainly before 3 months after they were due. Do this even if you can't afford to pay the obligations (you can set up payment arrangements with the ATO).
  • Pay PAYG Withholding and sueprannuation within the prescribed dates, or organise a payment schedule with the ATO.
  • If you receive a Director's Penalty Notice do not delay in taking the action set out in the Notice, or if you will be incapable of taking that action then contact us or the ATO immediately to work out a plan.

Peregian Beach near our office
Peregian Beach near our office
LINKS
ATO Home page
ASIC Home page
Institute of Public Accountants Home page
Xero home page
MYOB Home page
Quickbooks Home page

Contact
Peregian Accounting -
Adaptive Accounting

Web:www.adaptive.net.au
Email: info@adaptive.net.au
Phone: 61 7 5448 1218
Fax: 61 7 5448 1221



Help Wanted

We are installing a new window display at the office, and are calling for your historic photos of the Sunshine Coast.

We can take the photos in any format or scan them and return them to you straight away. If you wish we will also acknowledge source.

Please do come down to the office and have a look at the display next time you're in Peregian Beach Square.

Upcoming Due Dates

  • August 14 : PAYG Withholding Payment Summary Annual Report due date, for businesses who don't use a BAS or tax agent to prepare the report.
  • August 21 : July 2012 monthly activity statement lodgement due date (only for those on monthly reporting cycles).
  • August 25 : June 2012 quarterly activity statement lodgement due date (for those lodging electronically).
  • September 21 : August 2012 monthly activity statement lodgement due date (only for those on monthly reporting cycles).
  • September 30 : PAYG Withholding Payment Summary Annual Report due date, for businesses who use a BAS or tax agent to prepare the report.

Hybrid Securities

While it's good news for mortgagees, our low cash rate of 3.50% is not great news for term deposit holders. Returns are in decline, and with no increase to the cash rate on the horizon it might be time to jump ship towards good quality hybrid securities. New issues are rapidly coming onto the market; recently ANZ sought to raise $500 million and offered a margin of 2.75% above the 90-day bank bill rate of 4.43% (a total interest rate of 7.18%) on subordinated notes. They actually allocated $1.5 billion to the issue due to the strong demand from investors.

So what are hybrid securities? Hybrid securities incorporate features of both debt instruments (eg bonds) and equity instruments (eg shares). Two common types of hybrids are convertible bonds and income securities. Convertible bonds are bonds that have put options attached, meaning the investor loans money to the company, which pays a predictable rate of return to the investor until a certain date, at which time the investor has the right to purchase the underlying share in the company. Income securities are a mixture of share and bond; the bond portion (a fully paid debt security called a "note") pays interest and the share portion (which is usually an unpaid preference share) pays dividends. Income securities are "stapled securities"; the two components cannot be traded separately.

Hybrids come with higher risk than bonds and term deposits, which is why they have higher potential returns. It is therefore crucial that you do your homework to invest in good quality securities. Traps to look out for include:

  • Market price volatility: listed hybrid security prices may fall below the price that you originally paid, and changes in the company's share price can also be reflected in the price of hybrid securities.
  • Subordinated ranking: hybrid securities are generally unsecured, meaning that if the company issuing the hybrid securities becomes insolvent hybrid investors would rank behind secured creditors (including bondholders, generally) when the company is liquidated.
  • Deferral of interest payments: offers may contain fineprint allowing the company to defer the interest payments to investors. Although this interest will eventually be paid, you could be out of pocket indefinitely, with the added kick that the deferral decision may affect the security's market price.
  • Early termination: offers may allow the company to buy back the investment early but you, as investor, may not have the same right.
  • Long timeframes: some investment terms can be decades-long. This could be a problem if you need to divest and there is no demand for your security on the ASX, or if the company defaults on its obligations, or runs into financial difficulty, which are just some of the risks that increase over the long term.
(Adapted from
ASIC's MoneySmart webpage on Hybrid securities and notes)

If you have any feedback or suggestions for our newsletter please email us at newsletter@adaptive.net.au

Until our next contact
Good Health & Good Luck

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