SMSF’s Still On The Rise

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SMSF’s Still On The Rise

The June 2015 quarterly Self-managed Super Fund (SMSF) statistical report from the ATO highlights the continuing progression of self-managed super funds (SMSFs). 1.05 million Australians are now members of an SMSF. Further 556,998 SMSFs are collectively holding assets of $590 billion.

The ATO indicated that is an estimate of 6% rise in both the number of funds and total assets held over the previous 12-month period. Estimates around Limited Recourse Borrowing Arrangements (LRBAs) within SMSFs for the June2014 were reviewed as part of the report and rose from A$9.3 billion to A$15.1 billion in loans. Although this increase may be in part attributable to increased use of LBRA arrangements, or may also be due to improved data collection, with the new LRBA asset label as part of the SMSF annual return. The ATO’s current estimate for assets held under LBRAs as at June 2015 is $A15.6 billion.

This data indicates that people are increasingly becoming involved with SMSF sector to control their superannuation. They do this for a number of reasons.

  1. Total personal control over all their assets
  2. Consultation over the asset selection of the fund
  3. Ability to borrow within the fund and therefore obtain leverage
  4. Ability to buy property within the fund
  5. Control of costs as they are able to effectively ­­­budget super expenses

If you are considering setting you your own SMSF, we can assist you with this. We have access to Class software (the market leader) for all our funds. This software allows the fund to have up to date financial statements and market value updates at any time.

Please call us at the office on 02 9954 3843 to discuss further.

 

‘SMSFs still on the rise’. Acuity 2.10 (2015): 64-65. Print.

Budgeting Tips

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If you run a business, it’s possible that you are operating on a relatively limited budget. Whether sales are slow in your business or you are trying to pay back loans you took out to cover your start-up costs, it’s in your best interest to conserve money wherever you can. To keep your business operating in the black, you’ll need to account for both fixed and unplanned costs, and then create a solid budget.

1. Define and understand your risks

Every business venture has a certain degree of risk involved, and all of those risks have the potential for a financial impact on your company. Paul Cho, managing director of Headway Capital, said that small business owners need to consider their long- and short-term risks to accurately plan for their financial future.

“How will changes in minimum wage or super requirements impact your workforce?” Cho said. “Do you operate in a geography at high risk of a natural disaster? Do you rely heavily on seasonal workers? Understanding the potential risks facing you on a short- and long-term basis is important for all small businesses. Once you’ve mapped out the threats to productivity, a clearer picture can be built around emergency planning, insurance needs, etc.”

2. Overestimate your expenses

If your business operates on a project-to-project basis, you know that every client is different and no two projects will turn out exactly the same. This means that often, you can’t predict when something is going to go over budget.

“Every project seems to have a one-time cost that was never anticipated,” said James Ontra, CEO of presentation management company Shufflrr. “It usually is that one unique extra item [that is] necessary to the job, but [was] not anticipated when bidding the job.”

It is always ­­advisable to overestimate expenses to allow for unexpected events and have the funds available if necessary to cover this.

 3. Pay attention to your sales cycle

Many businesses go through busy and slow periods over the course of the year. If your company has an “off-season,” you’ll need to account for your expenses during that time. Cho also suggested using your slower periods to think of ways to plan ahead for your next sales boom.

“There is much to be learned from your sales cycles,” he said. “Use your downtime to ramp up your marketing efforts while preventing profit generation from screeching to a halt. In order to keep your company thriving and the revenue coming in, you will have to identify how to market to your customers in new and creative ways.”

4. Plan for large purchases carefully and early

Some large business expenses occur when you least expect them — a piece of equipment breaks and needs to be replaced or your delivery van needs a costly repair, for instance. However, planned expenses like store renovations or a new software systems should be carefully timed and budgeted to avoid a huge financial burden on your business.

“Substantial business changes need to be timed carefully, balancing the risk with the reward and done with a full understanding of the financial landscape you’re operating within.” Cho said, “An up-to-date budget and data-driven financial projections are important components that help guide when to make large investments in your business.”

5. Revise your budget constantly

Cho suggests, “Regularly revisiting your budget will help you better control financial decisions because you will know exactly what you can afford to spend versus how much you are projecting to make,” Cho said. “Take into account market trends from the previous year to help you determine what this year may look like. Once you have a clear understanding of your business’s budgetary needs, you can accurately forecast what can be set aside for an emergency fund or unexpected costs.”

Budgets are an essential element of any accounting system.

If you would believe you are having difficulties with your current budget or would like assistance in formatting a budget for your business, please contact John Hurley on 02 9954 3843 or email admin@hurleyco.com.au so we can assist you.

The original article can be found at:

http://www.businessnewsdaily.com/8323-small-business-budget.html

Could Your Business Be Eligible for the Research and Development Tax Incentive?

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The Australian Government has partnered with AusIndustry to offer companies that perform research the opportunity to gain additional tax concessions through the Research and Development Tax Incentive. If your company has performed any research throughout the year, is working on developing a new idea or has been developing software, you may be eligible for the Research and Development incentive.

The Research and Development (R&D) Tax Incentive provides a tax offset for eligible R&D activities and is targeted toward R&D that benefits Australia. The incentive, which came into effect on 1 July 2011 and replaces the R&D tax concession, is geared towards encouraging companies to engage in R&D. It has two core components:

  • a refundable tax offset for certain eligible entities whose aggregated turnover is less than $20 million
  • a non-refundable tax offset for all other eligible entities.

To be eligible for the R&D tax incentive you must be an R&D entity, be engaging in eligible activities and in most cases have notional R&D deductions of at least $20,000.

According to the ATO, there are certain steps that need to be undertaken in order to claim the R & D tax offset. Before you can claim the R&D tax incentive, you must first satisfy four initial requirements. You must be sure that you:

  • are an eligible R&D entity
  • carry out eligible R&D activities
  • have registered with AusIndustry
  • have incurred expenditure that qualifies as notional deductions.

If you would believe you may fit the criteria and may be eligible, please contact John Hurley on 02 9954 3843 or email admin@hurleyco.com.au so we can review your position.

Client Alert (October 2015)

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Excessive deduction claims on holiday homes on ATO hit list

The ATO is increasing its focus on holiday home investors and, in particular, whether they are correctly claiming deductible expenses. A key concern is when people make claims for expenses when the property was not available for rent. The ATO has recently advised that it will be sending letters to taxpayers in approximately 500 postcodes across Australia, reminding them to only claim the deductions they are entitled to, for the periods the holiday home was rented out or was genuinely available for rent.

TIP: Holiday home investors should be aware that the ATO appears to be taking a broad approach in monitoring rental deductions. Where relevant, it may be prudent for holiday home investors to take this opportunity to review the rules surrounding holiday home tax deductions to ensure that any risks or issues are addressed in a timely manner. It may also be a good idea to review records now so that you are prepared should the taxman come knocking. If you have any questions about this issue, please contact our office.

Foreign property investors – reduced penalty period ending

The ATO has reminded foreign investors that the reduced penalty period for possible breaches of Australia’s foreign investment rules for purchases of Australian real estate will close soon. The reduced penalty period is only available until 30 November 2015. From 1 December 2015, new criminal and civil penalties will apply. The ATO said if foreign investors disclose a breach of the rules for residential real estate purchases during the reduced penalty period, depending upon their circumstances, they may:

  • be given a concessional period of 12 months to divest themselves of the property, rather than a shorter period;
  • not be referred for criminal prosecution.

Payroll tax grouping – know the rules

For payroll tax purposes, businesses may be grouped with other businesses if there is a link between the companies. Businesses may be deemed linked in several ways. One of the most common ways is where two or more businesses are controlled by the same person or persons. However, there are specific exclusions under the payroll tax grouping rules which could apply for a business depending on the circumstances. This will require making an application to the relevant state or territory revenue authority.

When a group exists, only a single tax-free threshold will apply to the whole group. That is, the separate businesses themselves will not each have the benefit of the tax-free thresholds. Each member of the group will be liable for any outstanding payroll tax of the other group members. Therefore, it is important for businesses to identify whether they could be grouped for payroll tax purposes.

TIP: The potential eligibility for exclusion from the payroll tax grouping rules should be assessed. Furthermore, as business conditions may change and as part of the overall management of a business, it may be prudent to regularly examine your business’s payroll tax obligations.

No GST credits for mining accommodation

The Full Federal Court has dismissed a taxpayer’s appeal from an earlier decision which held it was not entitled to input tax credits for acquisitions relating to providing accommodation to employees and contractors working in the Pilbara.

The taxpayer, Rio Tinto Services Ltd, was the representative member of the Rio Tinto Ltd GST group, which carried on a large-scale mining enterprise in outback Australia. The group provided and maintained residential accommodation for its workforce in various locations, comprising some 2,300 houses and apartments. This was operated at a considerable loss, for example, in 2010 the taxpayer received $6.1 million in rent but the associated costs exceeded $38.8 million.

The case was conducted as a test case for GST paid in October 2010 on expenditure including construction and purchase of new housing, repairs, cleaning and landscaping. The taxpayer claimed it was entitled to input tax credits of nearly $600,000 for acquisitions made in providing and maintaining residential accommodation for the group’s workforce in the Pilbara region. It argued the housing for its workers were a necessary part of its mining operations.

The Full Federal Court said it was clear from the facts that all of the acquisitions related wholly to making supplies of rental residential accommodation. Although the supplies of accommodation were for the broader business purpose of carrying on the taxpayer’s mining operations, it said this did not alter the fact that the acquisitions all related to supplying premises by way of lease, which were input taxed supplies.

ATO’s proportionate compliance approach to SMSFs

From 1 July 2014 the ATO has three new regulatory compliance powers to deter and address contraventions of the superannuation law by trustees of self-managed super funds (SMSFs). These three new powers include the ability of the ATO to issue education directions, rectification directions and administrative penalties. The new laws were introduced to give the ATO more flexible and proportionate powers to deal with the various levels of noncompliant behaviour by trustees.

It is important for trustees to understand the ATO’s compliance approach to administrating the SMSF sector. A key message that the ATO has been communicating to all trustees is for them to rectify a breach as soon as it is identified. According to ATO Assistant Commissioner, SMSF Segment, Superannuation, Kasey Macfarlane, in these circumstances, the ATO would be “unlikely to apply further sanctions unless other factors are identified, such as if the same or similar contraventions frequently arose”.

Ms Macfarlane said the ATO uses “the new powers and penalties to drive compliance, not to increase revenue”. “So while you can expect to see us actively using the directions powers, in a large percentage of cases our application of SMSF administrative penalties will be more judicious, via favourable remission requests, for first offences,” she said.

Find your small lost superannuation accounts

A Bill has been introduced into Parliament which contains legislative amendments to increase the account balance threshold below which small lost member accounts will be required to be transferred to the Commissioner of Taxation, ie from $2,000 to $4,000 from 31 December 2015, and from $4,000 to $6,000 from 31 December 2016.

TIPS:

Moving all your super from multiple accounts into one account (known as “consolidating your super”) might help you to save on fees and make managing your super easier.

There may be sound reasons for maintaining a separate small superannuation account. It may be prudent to assess those reasons and, if those reasons are still valid, to take steps to ensure that you remain an active fund member.

Individuals are able to claim back their superannuation from the Commissioner at any time. Interest, calculated in accordance with the Consumer Price Index (CPI), has been payable on unclaimed superannuation money repaid since 1 July 2013.

Please contact us for further information.

Should you use a computer, not a person, to solve business issues?

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Here is when a human expert is not always best.

In an increasingly connected world, argues investment strategist, academic and writer Michael Mauboussin, experts add less and less value to predictions. They are being outcompeted by computers on the one hand, and collective wisdom on the other. Back in 2008, Mauboussin dubbed this trend “the expert squeeze”.

Computers outdo experts on decisions with set rules and a limited set of outcomes – credit scoring, for instance, or simple medical diagnosis. And large groups of people also outdo experts wherever probabilities have to be assessed – from the poker table to the economy.

When to use experts

That doesn’t mean experts are past their use-by date. In Mauboussin’s analysis, the one area where experts still outperform others is on “rules-based” problems where the rules allow for a very wide range of outcomes. Think of chess, or the game of Go. In business, that category of problem tends to crop up in areas such as innovation, strategy development and troubleshooting.

Rather than throw an expert at every problem, “managers must carefully categorise the business problems they face,” writes Mauboussin. Computers should be used to crunch data on rules- based problems with limited outcomes, for example, identifying which customers are most profitable for a business. Probabilities such as sales forecasts, should be based on the crowd wisdom of diverse but knowledgeable individuals right across a company. Experts should focus on issues where they recombine existing building blocks in new and creative ways.

The best experts for such problems? They’re not super-specialists, but informed generalists who “tend to know a little about many aspects of their field and are not wedded to a single approach in solving complex problems,” writes Mauboussin.

US psychology professor Philip Tetlock came up with similar finding political pundits: they don’t know any more than the average intelligent person who reads the newspapers. The worst predictions came from those who saw the whole world through one or two guiding principles and used those to make spectacular predictions. “Boom and doom pundits are the most reliable over-claimers,” says Tetlock.

 

‘Should You Use A Computer, Not A Person, To Solve Business Issues? In The Black (September 2015): 10-11. Print

What Sort of Accounting Software Product Should I Use?

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Do you find it challenging to decide on the one accounting software product that works the best for you and your business? Should you use spreadsheets, purchase your own software or use subscription cloud based software? These are common questions that arise for business owners when it comes to decision making.

With the growing quantity of different mediums available to perform accounting work, it is often difficult to settle on the best solution. We have reviewed the following three most used and efficient products in accounting to assist you in your decision.

  1. Excel Spreadsheet: If you are operating a business, use a limited number of bank entries every year and not relying on information on an ongoing basis, an excel spreadsheet is sufficient. You can probably do most of the work yourself and it is a low cost alternative. This is usually a starting point for a business.
  2. MYOB: If you have been a long term MYOB user of their various products, you may prefer to stay with your own MYOB or move to their online offerings. Their suite of product includes ­MYOB Essentials, MYOB AccountRight and MYOB AccountEdge. The advantage for existing users of MYOB is that you are already familiar with the features. Also with the newer additional online features, it can ultimately save you time spent on accounting. If you are in a business, the time saved can be more profitably used to run your business and do what you are good at.
  3. Xero: The Xero suite of products is relatively new but is becoming the fastest growing company in this segment of the market. Their products are completely cloud based and no data is saved on your local hard drive. This product is especially useful when you have different users in multiple locations. Xero also offers a very large array of apps which works in with the Xero product. Again, this product will cost a fee each month but will make up for that in the time saved.

For more information regarding your different options please send an email to admin@hurleyco.com.au or call Patrick on 02 9954 3843.

The main reason of period of absence concession

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Tax Counsel Pty Ltd. ‘Going Away? The Main Residence Exemption Absence Concession’. Taxation in Australia 49.10 (2015): 594 -596. Print.

The main reason of period of absence concession

The absence concession that is available when applying the CQT main residence exemption can provide substantial benefits and must not be overlooked.

Background

The CGT main residence exemption provides a number of targeted concessions which must not be overlooked. For example, there are concessions which apply in relation to moving into a dwelling, changing main residences, and when a dwelling is built, repaired or reconstructed. One concession which can provide a considerable benefit is what may be called the “absence concession”.1 This article considers the concession.

 

The concession

The absence concession potentially is available where a dwelling ceases to be a taxpayer’s main residence and permits the taxpayer to choose to continue to treat the dwelling as being his or her main residence.

Where the taxpayer does not use the dwelling (after it ceases to be his or her main residence) for the purposes of producing assessable income, there is no limit on the length of time that the taxpayer may treat the dwelling as continuing to be his or her main residence.

Income-producing use of dwelling

If, however, the taxpayer uses the dwelling for the purpose of producing assessable income after it ceases to be used as his or her main residence, then:

(1) if the income-producing use is only of a part of the dwelling that the taxpayer used for income-producing purposes before the dwelling ceased , to be his or her main residence — the dwelling can be treated as continuing to be the taxpayer’s main residence without any time limit, but the CGT main residence exemption may also be reduced on a pro rata basis.

and (2) if the income-producing use is either of the whole dwelling or of a part of the dwelling that was the taxpayer’s main residence immediately before the taxpayer ceased to use the dwelling as his or her main residence — the maximum period for which the absence concession can apply while there is such income-producing use is six years.


Example 1

Leonie owns a post-CGT dwelling which she has used solely as her main residence for the past three years. She decides to go overseas for an extended period from 15 January 2014 to 16 August 2015 and rents the dwelling out in her absence. During the period that Leonie rented the dwelling out, she incurred interest on a borrowing that was applied to acquire the dwelling.

Leonie can choose (under the absence concession) to treat the dwelling as continuing to be her main residence for the period she is away. She can claim a deduction for the interest she incurs during this period.

 

Non-resident becoming resident

If a non-resident individual becomes a resident and continues to own a post-CGT dwelling overseas that has been his or her main residence, the absence concession will be available to the individual in respect of that dwelling.

 

Example

Rick (an Australian resident) moved from Australia to the United Kingdom in 2010 and became a resident of the UK. He acquired a dwelling in London in 2012 which was his main residence. In order to be with his family, Rick moved back to Australia in April 2015. Rick waits for the UK property market to appreciate before selling the dwelling in 2017. It will be open to Rick to make an absence choice in respect of the London dwelling which would mean that any capital gain he makes would potentially be within the CGT main residence exemption. The first element of Rick’s cost base of the dwellirig would be its market value at the time he again became an Australian resident (s 855-45 ITAA97).

Essentials SMSF Planning Tips Pre 30 June 2015

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The Australian Tax Office make changes every year and we have provided you with the most recent updates. The following SMSF planning tips and information will assist you with your tax return for the 2015 financial year.

Exceeding contribution limits

Exceeding contribution limits will in most cases result in additional taxes and charges.
Please see contribution caps for year ended 30 June 2015 as a reference.

Contribution Type Age at 30 June 2014 Contribution Cap
Concessional Aged 48 or under $     30,000
Concessional Aged 49 or over ₁ $     35,000
Non-concessional Everyone ₁,₂ $ 180,000
  1. If 65 or over at time of making the contribution the member needs to pass the work test.
  2. Three year bring forward cap of $540,000 can apply

If you go over the deductable cap from 1st July 2013, the excess contributions will be included in your assessable income and taxed at your marginal tax rate (plus an interest charge) rather than at the top marginal tax rate.

Action!

  • Review whether members over 65 meet the work test requirement before they make contribution
  • Advise members of the CC and NCC contribution cap limits leading up to 30 June
  • Check if any contribution can be classified as exempt, ie CGT


Pension Payment

If you are currently operating a SMSF in a pension mode (an account based pension – ABP), please ensure those pensions that are paid by 30th June 2015. Any funds which in a pension mode is required to pay a pension by 30th June 2015. The amount payable depends on the opening balance and is based according to age. Please refer to the table below.

Age Percentage of account balance
2013-14 onwards
Under 65 4 %
65-74 5 %
75-79 6 %
80-84 7 %
85-59 9 %
90-94 11 %
95 or more 14 %

Please note that any amount paid as a pension must leave the fund in cash prior to the end of financial year.

Age is defined as the age at

  • 1st July in the financial year in which the payment is made
  • The commencement day if that is the year in which the pension or annuity commences

‘Account balance’ means one of the following:

  • The pension account balance on 1st July 2014 in the financial year in which the payment is made
  • If the pension commenced during the financial year – the balance on the commencement date

 

Super Co-Contribution

You will be eligible for the super co-contribution if you can answer yes to all of the following:

  • you made one or more eligible personal super contributions to your super account during the financial year
  • you pass the two income tests
    • your total income for the financial year is less than higher income threshold ($49,488 for 2014-15)
    • 10% or more of your total income comes from eligible employment-related activities or carrying on a business, or a combination of both
  • you were less than 71 years old at the end of the financial year
  • you did not hold a temporary visa at any time during the financial year (unless you are a New Zealand citizen or it was a prescribed visa)
  • you lodged your tax return for the relevant financial year.
If your personal super contribution is:
$1,000 $800 $500 $200
And your income is: Your super co-contribution will be
$34,488 or less $500 $400 $250 $100
$36,516 $400 $400 $250 $100
$39,516 $300 $300 $250 $100
$42,516 $200 $200 $200 $200
$45,516 $100 $100 $100 $100
$49,488 or more $0 $0 $0 $0

 

Superannuation Administrative Penalties

Starting from 1st July 2014, a trustee (individual or corporate) of a SMSF or a director of a corporate trustee of a SMSF will be liable to administrative penalties if they contravene provisions of the SIS Act. The penalties range from 5 penalties units (currently $850) for such breaches as failure to appoint an investment manager of a SMSF in writing, failure to comply with an educational direction before the end of the period specified etc to 60 penalty units (currently $10,200) for breaches related to borrowing and lending by SMSFs and non-compliances by SMSFs with the in-house asset rules.

If a trustee of a SMSF is a company, which is liable to an administrative penalty, the directors of such trustee at the time it becomes liable to the penalty are jointly liable to pay the amount of the penalty.

For example, if a SMSF corporate trustee with two directors breaches the in-house asset rules, the penalty of $10,200 in imposed on such corporate trustee. Even though the two directors are jointly and severally liable to pay this penalty, its total amount remains the same.

However, if a SMSF has two individual trustees and they fail to ensure compliance with the in-house asset rules, the penalty of $10,200 is imposed on each individual trustee resulting in the total penalty of $20,400 being imposed.

Please note that such contraventions as breaches with respect to borrowing and lending by SMSFs or failure to comply with the in-house asset rules, which occurred before 1st July 2014 and continued after that date, can result in penalties imposed from 1st July 2014.

Consider your current SMSF structure as to whether you need to change your individual trustees to a corporate trustee to reduce the amount of liability in case of administrative penalties being imposed.

In-House Asset

Ruling

Subsection 71(1) provides a basic definition of the term ‘in-house asset’ of a superannuation fund.

Basic definition of ‘in-house asset’

‘In-house asset’ is defined in subsection 71(1) as:

an asset of the fund that is a loan to, or an investment in, a related party of the fund, an investment in a related trust of the fund, or an asset of the fund subject to a lease or lease arrangement between a trustee of the fund and a related party of the fund, …

This part of the definition contains many terms which are defined in the SISA and require further consideration.

From the year ended 30 June 2001 onwards section 82 limits the market value of in-house assets that may be held by an SMSF at the end of each financial year to 5% of the market value of the total assets. In the event that this limit is exceeded, section 82 provides procedures which must be followed by the trustees of the SMSF to reduce the level of in-house assets within 12 months. In addition, section 83 prohibits the acquisition of an in-house asset if the 5% limit on in-house assets is exceeded or if the acquisition will cause the 5% limit to be exceeded. Section 84 imposes civil penalties on trustees where these requirements are not met in addition to the potential for the SMSF to be given a notice of non-compliance.

So you should consider your fund’s investment strategy and determine whether the investment is appropriate and that any acceptable loans are on commercial terms.

If you still decide to go ahead and lend money from your SMSF, the ATO advise that:

“you should:

  • write an appropriate loan agreement and have it signed by all the parties involved
  • ensure the loan agreement specifies all the terms of the loan, such as: ensure the interest and repayments are received by the fund according to the loan agreement

o    what the security for the loan

o    what is the repayment period

o    when repayments will be paid

o    the amount of the repayments

o    the interest rate

  • take appropriate action to protect the fund’s investment if the loan agreement is not followed
  • ensure the loan is sensible and does not put the members’ benefits at risk
  • ensure that the conditions of the loan agreement do not provide the borrower with favourable terms.

The ATO benchmark rate, 5.95%, for the 2014-2015 financial year should be considered as interest rate and should be included in the loan agreement.

Things that shape us

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Watson, Aaron. ‘Things That Shape Us’. Acuity 2.5 (2015): 58-59. Print.

Alberto Saiz has learned lessons from the world’s most inspiring business leaders, in his role as MD of the World Business Forum in Asia Pacific. Acuity quizzes him about what he’s picked up along the way.

We operate in a complex and dynamic business environment in which there is much to learn – where should a business leader start?

Honestly, I think that a leader should start from the beginning of their career. There are certain attitudes that shape us from the beginning, such as the assumption of responsibilities – particularly of your failures, working for the team instead of for yourself, and sharing your successes.

There are important attitudes that we develop internally and there are also very important lessons that we learn from the leaders we have worked with. I think that one of the worst things that can happen to anyone is to have the wrong leader in the early stages of your career.

My advice to young professionals: if you don’t feel proud of your leaders, change jobs.

There is a lot of talk about turning failure into learning – are there ways to ensure you learn from negative experiences rather than become despondent?

I don’t like to fail, so I’ll never encourage anyone to fail. However as I have unfortunately failed a lot of times, I have observed that you learn much more from failures than from successes.

When you succeed, it is difficult to extract learnings as we tend to enjoy what is happening rather than reflect and analyse the factors that you took to reach it. At that moment in time, your ego increases and people that you’re around flatter you. In these circumstances it is difficult to have the humility to learn.

When one fails there is an enormous loneliness. Your insecurities grow and some people around you say “I knew that would happen”. It is under these circumstances, if you stay self- controlled, when an enriching learning experience begins.

What is a key thing you have learned from the experience of others?

Create an environment in which people always feel free to say these three things:

  1. I’m wrong: an organisation where people hide their mistakes is doomed to failure. We all make mistakes and if you make many decisions you make them more often. Don’t penalise errors or people will try to hide them.
  2. I don’t know: don’t assume everything you need to be done, can be done. Sometimes you have to teach how.
  3. I need help: the important thing is the project, not who does it. Get your team to feel supported.

 

I believe these three things will help you to build high performance teams. Furthermore, the most important thing for me in business is honesty.

Marketing is often left to experts. Does a senior executive need to understand it?

I have a very crude way of defining marketing: how to make your customers buy from you.

In an era when the customer is the king, a senior executive can’t ignore marketing. In the past it had a certain vision that marketers focused on creativity, without specific purposes. I think that this has changed radically.

 

Even so, if we were to survey and ask how many marketing directors sit on executive committees or boards of directors, we will probably find that very few do so. I think that this is a serious mistake and that this is going to change over time, both the profile of the marketing executives and the vision of the rest of the organisation towards them.

Marketing is strategic within an organisation, not tactical.

Are brands still important in a world of instant online consumer feedback on products and services?

I think that the customer has changed so much that brands must adapt. Relationships have changed, but brands are still very important

We must remain faithful to the brands that are doing well, as consumers are willing to pay more for them or wait longer to get their products. I think it is very important to define your attributes well: what do you want to be? how you communicate this with your customers? and why is your offer is better than that of your competitors.

The professional body for chartered accountants in Australia and New Zealand launched its new brand in 2014 – I expect in order to change stakeholders’ perceptions of chartered accountants.

When a client thinks about a product or service, they should think of your brand and associate it with the attributes you want.