Top 6 law changes for small businesses every accountant needs to know
You can set your watch to the new thicket of laws and regulations coming into effect every year. Luckily this year, the momentum seems to be with employers, and the government’s commitment to simplifying regulation seems genuine.
But every change signals a little bit of risk. As an accountant falling on the wrong side even of those regulations designed to make businesses more efficient, can carry serious fines and can seriously harm your professional reputation. Here we summarise the key changes to regulations in Australia and New Zealand in the last year – and spell out what they mean for you and your clients.
Significant changes have been made to the way privacy laws affect some small businesses: the most sweeping in nearly three decades.
New law changes enacted last year have ushered in 13 new ‘Australian Privacy Principles’ that oblige small businesses to protect any personal data they hold. Now ‘principles’ can seem misleadingly abstract. Failure to comply now carries serious penalties.
The changes affect any business with turnover greater than $3 million, and small businesses that “deal in personal information”. Fines for small businesses can top $300,000; larger companies can be hit with up to $1.7 million.
A particular emphasis is on internet security. There have been a series of high-profile internet security breaches in recent months. No one is immune, not even the Australian parliament. Ignorance of that threat is no longer an excuse. Businesses are now required to ensure they take steps to protect any personal information they hold from such acts.
What to do?
- A quick audit. Review the way the business in questions operates against the requirements of the Act; look particularly at the way it markets to customers and how data is being stored.
- Investing in encryption for hard data storage.
- Looking at the way data is stored; businesses dealing with offshore providers may face a regulatory minefield.
Employee share schemes
The practice of gifting shares to employees is increasingly popular. Start-up businesses in America are leading the change and using the practice to attract talent early on by substituting the promise of a share in future success for upfront salary. Many business leaders also argue that giving employees a stake in a company improves their business performance.
For the past five years, shares in a business given to employees have been subject to upfront taxation. But from July this year, the regulations will change.
The new laws apply to companies less than 10 years old and having an annual turnover of $50 million or less and which are not listed. Once a company qualifies, its employees will be able to defer paying tax on share options until they sell the underlying shares, for up to 15 years.
Employees of most other companies will also be able to defer tax on options until they are exercised and converted into shares, rather than paying upfront.
At the beginning of this year, a new franchising code of conduct came into effect. It’s an attempt by the government to make it easier for businesses to operate in what is a growing sector of the economy, estimated to top $140 billion and which grew about 9 per cent in the last two years. But it also arose from concerns about malicious conduct.
The new code includes:
- Obligations to “act in good faith” when dealing with your franchisor, or franchisee;
- New disclosure processes.
The ACCC has also been empowered with a range of new penalties with fines that could top $8500.
It’s important to review your business practices and make sure they align with these significant changes.
Late last year a number of sweeping changes were made to the New Zealand Companies’ Act, in response to concerns that offshore businesses were misusing entities in New Zealand. The changes were sparked by an intriguing case that could have appeared in the pages of a James Bond novel: a New Zealand-registered cargo plane in Bangkok was discovered to have tonnes of North Korean weaponry on-board. Directors must now live in New Zealand or an enforceable country (Australia) and provide greater disclosure about any holding companies.
In Australia, authorities have announced a greater focus on directors’ duties, though there has been no change to legislation. ASIC and the ATO are pushing for better education around requirements such as the obligation to not trade while insolvent. Where there’s an education campaign, greater regulatory activity often follows. So it’s probably a good idea to refresh your knowledge of your directors’ duties and review your practice against the law.
A significant and much delayed change to employment law takes effect in New Zealand in March. The laws are largely good news for small businesses and are widely seen to provide more power during the process of bargaining with employees. But it also requires employers to provide flexible working arrangements, not just in cases where an employee needs time to care for a dependent:
- Must provide flexible rest and meal breaks and offer all employers with flexible working arrangements.
- Can initiate bargaining at the same time as unions.
- Have more room to negotiate with employees about individual contracts at the outset of their employment; currently they must be employed under a collective agreement for the first 30 days.
- Receive written notice of any strikes or lockouts.
- Give permission before a union official enters the workplace (but this cannot be reasonably refused).
Asset depreciation writeoffs
In September last year, the Abbott government finally killed off its predecessors mining super profits tax.
That made headlines. But you may not have heard about another regulation casualty that day: asset writeoffs for small business.
Small businesses had been able to take advantage of generous tax deduction for cheap assets. You could claim an instant deduction for assets with a price tag of less than $6500, and write off cars in full if they came in below that cost.
A new law dropping that threshold to $1000 came into effect in September. But in a tricky piece of legal reasoning its effect has been backdated to January 2014, posing a headache for many small businesses.
These are only some of the changes that might be affecting accountancy. Needless to say, staying on top of obligations, compliances and rules is pivotal to operating a successful accountancy firm and offering the best service to your clients.
To read more about latest changes within the world of accountancy, download our free ebook: Beyond compliance: Five trends changing the world of accountancy.
Please note that this article is intended for general information only and is not legal advice. You should seek professional advice suitable to your own circumstances.