BUSINESS & LEISURE: Frankston | Mornington Peninsula | Dandenong
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VOYAGE INTO NEW WATERS BOATBUILDER GOES SOLO AFTER 20 YEARS
LIQUID FINANCE NUMBER CRUNCHING COULD SINK POOL
PORT PLANNING GETS $110M
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Inside Port plan: Hastings port gets $110m for research
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NEWS
We’ll discuss pool, but where’s cash? Barrister Hugh Fraser, newly elected to Mornington Peninsula Shire Council, may have pulled the plug on the controversial Rosebud swimming pool project. While Cr Fraser failed in his move to delay any further consideration of the $33 million pool until 2017, he succeeded with a flurry of subsequent motions controlling spending, borrowing and reducing debt. These money-tightening decisions appear to leave little wriggle room for pro-pool councillors to find the required finance. It seems a case of Cr Fraser deliberately missing the crow in order to hit the duck. Former Age journalist turned councilwatcher David Harrison, writing in the Southern Peninsula News asked: “Had Hugh Fraser, experienced barrister-at-law, by careful and subtle subterfuge sacrificed a rook to ambush the king? Was planned borrowing to build (swimming pool) now not
possible until debt came down? Had his opponents been bested in the tactical battle? If so, had they noticed?” Cr Fraser pointed out that shire debt was $48 million and heading north. Mornington He noted that more than $10 Peninsula million had to be paid to Vision councillor Hugh Fraser. Super by the middle of the year to fund Defined Benefit Scheme superannuation benefits for some shire staff members. In his financial report card on council, Cr Fraser said that staff salaries and rates increases were outstripping increases in spending on shire infrastucture and services. His successful notices of motions seek to reduce shire debt by $30 million over the next four years. Funds will come from higher rates and charges and the sale of council-owned land,
including Mt Martha’s old quarry expected to raise about $4 million. Cr Fraser’s motions also call for plans for: • Rejuvenation of Rosebud foreshore and beach • Redevelopment or sale of Rosebud Central Shopping Centre and adjoining properties bought by council for nearly $5.8 million in 2012. • Speeding up building of public toilets, new or renovated sports pavilions, footpaths and traffic management aids. As well, councillors called for a briefing about whether the shire’s management of Pelican Park Recreation in Hastings complies with National Competition Policy and if the shire should be operating the centre and its pool. Cr Fraser told council that it must display a capacity to pay down debt before committing to high cost projects like the pool.
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BUSY BITES
Dangerous crossing The level crossing on the South Gippsland Highway in Dandenong South has been listed as one of the worst in the state. The rail safety organisation TrackSAFE has listed the top 10 worst level crossings in each state, from the perspective of train drivers. The lists have been followed with letters to state and federal transport ministers urging extra money to upgrade of dangerous level crossings. “The best way of avoiding crashes between cars and trains is to get rid of level crossings. Governments must commit to ... replacement of level crossing with bridges or underpasses on busy roads,” TrackSAFE board member and Australian Automobile Association Executive Director Andrew McKellar said.
Easier time with EPA Easier ways for business to deal with the EPA approvals process is part of the state government’s pledge to cut red tape for business by 25 per cent, according to VECCI. Among key reforms are measures to ensure EPA’S level of assessment is proportionate to each proposal’s level of risk; shorter application timelines; better guidance for applicants; and less prescriptive license conditions.
PLANNING FUTURE POINTS TO GROWTH BOUNDARY AND PORT
The state government’s latest discussion paper about planning in and around Melbourne favours the ‘steady as she goes’ policy directions supported by Mornington Peninsula Shire Council. The ‘Melbourne – let’s talk about the future’ planning strategy endorses long term planning elements already adopted by the shire. These include maintenance of the urban growth boundary and the peninsula’s green wedge, recognition of the conservation, agricultural and recreational value of the Mornington Peninsula and continued support for the Port of Hastings. Council’s response to the discussion paper was to be posted on its website following four public information sessions held in March. Council has told the ministerial advisory committee that directions outlined in the strategy under discussion “are supported by the feedback from the Plan Peninsula consultation process…” However, the response goes on to describe as “critical” the way in which these directions “are translated into policy and ultimately into statutory planning and other implementation mechanisms”. Council also stressed the need for a clear funding strategy.
Mornington Peninsula Shire Council tells the state government that sustainable development of the Port of Hastings is vital to the economic well being of the south east region.
“Unless funding to fully support the delivery of the infrastructure necessary to support economic development, population growth and equitable levels of service, is committed to on a timely basis, the implementation of the planning strategy will fail.” Council said the strategy should support the proposed Mornington Peninsula Planning Statement which has the urban growth boundary, the green wedge and Hastings port development as key elements. The urban growth boundary is considered by council to be vital in maintaining the distinctive role and functions of the Mornington Peninsula, combined with the need for strong protection of the peninsula’s green wedge from all forms of urban intrusion. Sustainable development of the Port of Hastings is seen as fundamental in the economic development strategy for the south east region.
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CHRISTMAS COMES LATE FOR RETAILERS Retailers are celebrating the best start to the year in more than a decade with the second month of growth across the sector in 2013 – particularly good news for those in the department store and clothing sectors, according to Australian National Retailers Association (ANRA) CEO, Margy Osmond. The Australian Bureau of Statistics released retail figures showing a 1.3 per cent increase in February, following a revised up 1.2 per cent increase in January. This is the best result in the first two months of the year for retail since 2001. “The discretionary spend sector has been the poor cousin of the sector for some months, but this bounce in figures will give them a lift, even if retailers remain cautious about the prospects of long-term growth,” Osmond said. “The economic conditions point to improved spending – with house prices on the rise and employment reasonably stable – but retailers have seen this before and retailing has continued to struggle. We remain cautiously optimistic. “The cash rate drops at the end of last year are finally beginning to settle in and be factored into Aussie family budgets. Consumers need to feel confident to spend, so we will hold our breath to see if the Reserve Bank of Australia keeps rates coming down
Fewer voters at booths
to support that confidence. With increasing talk of a cash rate increase now, rather than continued decline, consumers may again apply the spending brakes. “Across the States and Territories there was significant growth for all but South Australia, Tasmania and the Northern Territory. “Across the country people regained their love of reading books and newspapers – up five per cent and put money into electrical purchases. The household goods bump – up 1.6 per cent – can be attributed to purchases of fans and TVs, indicating people are generally happy to buy a few more extras. Osmond said it was encouraging to see significant growth for department stores (1.6 per cent), clothing footwear and personal accessories (1.2 per cent) and household goods retailing (0.7 per cent). Food continues to lead the charge – increasing 1.1 per cent.
PETITIONS CITE VANDALISM, NOISE IN BAYSIDE COMMUNITY Mornington Peninsula Council officers will report to council about benefits and costs of a CCTV system in Rye township where violence and vandalism are said to be growing problems. Council has received a petition signed by about 2000 residents requesting the CCTV cameras because of “ongoing violence and vandalism … (over) many years…” The petition states that with increasing numbers of visitors the problem will grow. Officers agreed that CCTV cameras have provided
positive results by reducing crime. • Council’s planning compliance team and the environmental health team are investigating complains of excessive noise from Mornington’s Bay Hotel and The Social on Friday and Saturday nights. A petition signed by about 48 residents states that the noise causes their houses to vibrate from about 9:30 pm to 4am. Council is likely to ask the Environment Protection Agency (EPA) for noisemonitoring assistance at each of the venues to help determine whether regulations have been broken.
Voter turnout for the latest Mornington Peninsula Shire Council election was 68.66 per cent, compared with 74.18 per cent at the previous elections in 2008. The informal vote was 3.65 per cent in 2012 compared with 2.63 per cent in 2008. The highest percentage of returned ballot papers was for Watson ward with 71.53 per cent, with the lowest level of participation of 65.46 per cent in Nepean ward. Officers reported that there is generally a slightly lower participation rate where the number of non-resident voters is greater because it is not compulsory for non-residents to vote. The election cost $419,064, about $5000 more than the previous poll.
Small cap returns More than a third of Australian small cap equities are forecast to grow earnings in excess of 10 per cent a year over the next three years, according to research from boutique smallcap manager NovaPort Capital. The research is based on NovaPort’s proprietary methodology, based on analyst consensus estimates of valuations for 2015 earnings.
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May 2013 | Frankston / Mornington Peninsula / Dandenong | BusinessTimes | 7
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1. Action Coach Wayne Gillan hosted a forum for business owners to meet federal MPs Bruce Billson, shadow Minister for Small Business and Sophie Mirabella, shadow Minister for Innovation, Industry and Science. The forum was held at Action Coach offices, Carrum Downs on 27 March. From left are Peter Angelico, Kazed Industrial Solutions, Denise Bellmaine, of accountants Pacat Management Services, John Dorning, of Hopleys, general fabricators and Jane Curran. 2. Bank of Queensland Dandenong owner-managers Anu Prakash and Clayton Collins. 3. More Action Coach guests (from left) Chris Proctor, of Sealite, Somerville, Garry Spencer, director, Australian Quality Leadership Pty Ltd, and Gerald Suttie, PMG Engineering Services, Braeside. 4. Eliza Foster, of Made in the Shade, Action Coach Wayne Gillan, and Sophie Mirabella. 5. Former Fosters and Coles-Myer boss Peter Bartels (left) with Lee Kuzmanovic, of Versatile Precast Industries and John Dorning. 6. A new lunchtime BNI group met at Frankston International on 28 March. From left are Peter White, a director of BNI, Justine Barsby, of First Class Conveyancing, and Chris Tomlinson, of 2can Design. 7. BNI guests Michael Partridge, of The Website Pros, Amie Tennant, of My Mortgage Freedom, Peter Rowlston, of Melbourne IT Solutions, and Anthony Cox, technical manager of FastCloud, Carrum Downs. 8. BNI Frankston met for breakfast at Peninsula Country Club on 5 April. From left are Carl Bailey, of Carl’s Cutting Services, Kelle Dawson, of Fine Print Australia, Carrum Downs, and Martyn Lynch, of MK Auto, Seaford.
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9. Also at the BNI breakfast are Adam Rogers, of Adlikada Communications, Carol Noble, of Jukebox Express, and Scott Evans, of Frankston Painter and Plaster Repair. 10. Brenda Thomson director of the SMART Networking forums on 10 April ran a marketing workshop for 70 at Victoria University. She is pictured with BusinessTimes’ sales director Margaret Harrison. 11. Also at the SMART Networking workshop were Scott Amberley of Legal Essentials and Rosie Bucciarelli of Additiv+. 12. Ian Murray of Xceed International with Jo Wise, of Stellar Point at the marketing workshop. 13. BusinessTimes and Action Coach, Carrum Downs, hosted an ad writing and design workshop on 9 April. At the workshop were Cameron Young, of Allardice Group, Amanda Hunt, of Facey Real Estate, Dandenong, and Peter Stuckenschmidt, of RackID. 14. Among the guests at Frankston Tourism’s networking night at the Royal Botanic Gardens Cranbourne on Tuesday 16 April. were, from left, Stefford Dawson, of Quest Frankston on the Bay, Katia Nossiter, Sipcy Web Design and Charles Davidson, Peninsula Hot Springs. 15. At Frankston Tourism’s networking night are Lyn Sullivan and Travis Clarke, Frankston Council. 16. At Hallam BNI members’ day on Thursday 18 April are, from left, BNI executive director Brent Edwards, Judith Szucs, Soul Centered Healing and George Zeidan, ebusiness specialist Zeidan.
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INFRASTRUCTURE
Victorian Premier Denis Napthine has committed $110 million over four years to prepare Hastings port for development as a major container handler. Port development costs are estimated at about $12 billion and work is not expected to be completed before 2030. The new Premier said he was reaffirming his government’s vision for the ports and freight sector and recognising its key contribution to Victoria’s economic growth. “Containerised trade in Victoria is predicted to quadruple by 2035 and the only way to provide certainty to meet this expected demand is to invest in infrastructure,” Dr Napthine said. He said the 4000 hectares of land at Hastings set aside for future port development in the 1960s and a naturally deep port made Hastings the best option for development to meet Victoria’s growing freight needs. The $110 million will fund completion of preferred scope design works; transport connection planning; preliminary work to support environmental approvals processes: business case development; and procurement and delivery strategies. Dr Napthine said the port was a key component of Victoria’s future economic strategy. Decisive action was being taken to build a second Victorian container port and “ensure the state remains the freight and
APPOINTMENTS
Frankston-based building permit and inspection service Plan Scan has a new business manager, Darren Mills, left, and assistant building surveyor, Eric Hutchison, right. Darren’s computer systems and programming skills were honed in the design engineering and manufacturing sectors. He is looking forward to bringing this expertise to a new industry. Plan Scan issues 95 per cent of building permits in an electronic format known as Epermits and Darren says the success of a business depends on efficient operating systems. Eric has extensive experience in the building industry and is a qualified carpenter with more than a decade of on-site experience in the domestic construction industry. He has worked in New Zealand and Australia and has a Diploma of Building Surveying.
$110m to prepare for container port
Victoria’s new Premier Dr Denis Napthine announces $110 million funding to prepare the Port of Hastings for development as a major container port. YANNI PHOTO
logistics capital of Australia”, the Premier said. Ports Minister David Hodgett said the Port of Hastings would complement the Port of Melbourne, currently undergoing a $1.6 billion expansion of container and automotive capacity. “Import and export trade is performing strongly with more than $82 billion in trade handled through the Port of Melbourne last financial year, including a national record of 2.58 million containers,” Mr Hodgett said. “This container trade is continuing to grow between five and six per cent annually and is expected to double in the next decade. Without investing to meet future demand, Victoria will reach capacity by the mid 2020s, even with the benefit of current expansion projects. “When completed this multi-billion dollar development of the Port of Hastings will ultimately provide capacity for eight to nine million containers, which is almost double the current container capacity of the Port of
10 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | May 2013
Melbourne. Hastings MP Neale Burgess said the funding reaffirmed the government’s commitment to jobs in the region. Port of Hastings Development Authority (PoHDA) Chair Yehudi Blacher said the task had always been clear and now the resources were in place to begin the port development. “In addition to managing the port, PoHDA has the specific task of planning for its future development,” Mr Blacher said. “We got a head start with initial scoping investigations that are already underway and now this new funding will allow us to take the port’s development to the next level.” Dr Napthine dismissed recent moves by western suburbs councils and transport and logistics companies promoting the so-called Bay West option, a new port between Point Wilson near Geelong and Werribee South. Last September, a confidential Department of Transport briefing urged the government to consider Bay West, claiming a terminal at Hastings was potentially fraught with environmental and logistical problems. The government’s preferred Hastings option would involve “complex environmental management requirements”, a “high cost” of transport links and would cost more than $12 billion. It warned Hastings could prove too small by 2050, especially if the state government pushed ahead with plans to expand brown coal exports from the Latrobe Valley through Western Port. While Opposition Leader Daniel Andrews said Labor preferred the Bay West proposal, Dr Naphine said dredging costs alone would preclude any move in that direction. The Australian Industry Group (AIG) has welcomed the Victorian Government’s decision to provide funding to consolidate the next steps for the Port of Hastings development. “The announcement by the Victorian Premier and the Minister for Ports provides positive momentum towards establishing the Port of Hastings as Victoria’s second major container Port,” AIG Victorian director Tim Piper said.
NBN and Small Business – What does it mean for your business? The National Broadband Rollout is slowly gaining pace and more and more of our customers are getting access to the much faster internet speeds that the NBN is going to offer. What does it mean for your business and how can you benefit from it. There are a range of technologies that will benefit significantly from the higher speeds and these technologies will enable you to take advantage of the NBN in your business. VoIP: The first thing that comes to the mind of many people is VoIP. Voice over IP, the technology behind companies like Skype, works very well when there is enough bandwidth at both ends of the call. More bandwidth will mean voice calls can be made with little audible difference to a normal phone line. We have been using Skype for 2 years now, and the quality has improved dramatically and NBN will only make it better for everyone. This means that you will be able to decrease your spend on long distance and overseas calls, by using Skype instead, which is a lot cheaper. Videoconferencing: The next step on from VoIP is videoconferencing, which means communicating with someone remotely by sending images as well as voice. Traditionally this has only been an option for customers with large travel budgets that they were trying to cut, but now many businesses are using teleconferencing to interact with customers and suppliers more frequent and to reach out to companies overseas. The cost savings in time and money are incredible.
Working offsite: Having team members offsite, either at home or at customer site will be much less painful than it can be today. For those without the NBN yet, start planning for it. Start thinking about ways to interact with customers and start planning for how you are going to take advantage of the NBN, because it will be a game changer for a lot of businesses and those that are slow to adapt will be at a price disadvantage. If you plan to replace your routers now, ensure to get one now that is NBN ready. D-Link have the perfect NBN router, the D-Link DSR-500N Unified Wireless N Services Router which is available for $ 327.00 inc GST. It supports connecting to the NBN and the high speed bandwidth that the NBN will deliver. If you need help implementing a NBN network or assistance with building an NBN strategy for your business, please call the team at Extreme Networks.
Transfer of large files: Some businesses, particularly engineering, design, marketing and print have had large problems transferring very large files between offices, teams and customers. This is going to become a lot easier. Backups to the cloud or remote location: Being able to transfer large files means that offsite backup will become a lot more practical for businesses and will greatly improve the redundancy and disaster recovery times for all small businesses. Video training: Many instructions for products are written down when it is a lot easier to show someone how to use a product. Larger bandwidth means that many people will be able to stream high definition video and see instructional videos on product. This will decrease support costs and incorrect warranty returns because customers will be able to view a video and get a much better picture of how to use their product.
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May 2013 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 11
FEATURE: GOING SOLO
Craft for the sea WORDS & PICTURES BY KEITH PLATT
A
fter 20 years working for someone else, Mark Abbott decided to up anchor and set up his own business. Using the skills learned during a four-year apprenticeship and building a reputation as a craftsman, Abbott’s new course seems to be well chosen, if not all plain sailing.
Wooden boat craftsman Mark Abbott alongside a luxury cruiser that could be a future mainstay for his Rosebud-based Corsair Boats. 12 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | May 2013
The nautical references are apt, Abbott is a boat builder, specialising in wooden boats. His company Corsair Boats initially relied on his reputation for making and maintaining couta boats, the celebrated and prized vessels originally used primarily by Port Phillip-based fishermen. Superseded by all sorts of modern marine craft, couta boats nevertheless remain prized and sought after by recreational sailors, both for competition and just plain sailing. Sturdy and wide of beam, the boats have a fair amount of sail and an inboard motor. They can cope with the bay’s various moods and are the backbone of the Sorrento Sailing Couta Boat Club, which each year runs a regatta that sees the cream of Australia’s business community seeking line honours on the bay. Abbott’s decision to set up his own company
Abbott reckons there are about 100 couta boats in the bay, based mainly at Sorrento or Queenscliff. Twenty to 30 of these are raced in two classes, 26 footers and the smaller 18-23 footers. About 30 boats passed through his boatyard last year. The limited number of couta boats creates a “small marketplace, where attracting new customers can be difficult”. “Many boat owners tend to follow the pack and we rely on word of mouth rather than marketing.” Abbott did a four-year shipwright’s apprenticeship, which he describes as “being more than a chippy” as well as studying naval architecture. “I learned the basics of design. We buy plans for the hull shapes of the couta boats we build and then do the rest ourselves. “We use a drawing board as well as a bit of CAD [computer aided design]. There are class rules for couta boats, parameters within which they must be built. But they’re for racing and must be fast and sail well – every boat has subtle differences. They’re not popped out of a mould.” 14
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was made after reflecting on his future with a long-term employer. “I took a few months off and dabbled in a few other industries and then got a call out of the blue from someone wanting a couta boat, so I needed somewhere [to build it] pretty quickly.” His wife saw a ‘for lease’ sign on a factory in Rosebud and Corsair Boats was in business, at first with a partner which “ended quickly”. Corsair these days has a full time staff of six several sub-contractors hired on an as-needs basis. The start-up time was not ideal, 2008 was the middle of the GFC (global financial crisis). “In that first year I had eight couta boats to maintain and then one restoration,” Abbott says. “It was a shocking time to start a new business – luxury items like boats were among the first things to go. “But the owners of wooden boats are a breed apart, they appreciate their vessels are craftsman built from a natural product. They understand the need for maintenance, but it’s a very small market and attracting new clients can be difficult.”
May 2013 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 13
FEATURE: GOING SOLO
13
same boat ready for another customer by Christmas. “I want to build more of these motor boats,” Abbott says. “The two clients I’m building for now could have gone to the Unites States and saved quite a bit of money but they’ve chosen to support a local industry. “We’re fortunate that Australia has some of the best boat building timbers in the world – huon pine, King William pine, celery top pine – some of which are getting harder to source but are still available. “They’re all from Tasmania and I’ve built up a friend ship with a mill owner and take clients there to see logs in the yard. It’s good marketing and they like to see their boat in stages of its construction. “I try to use all native timbers in my boats, it’s a point of difference.” Abbott has a “five-year evolving business plan”. “Couta boats are unique to this area and good for cash flow but I can predict how many are going to come to my company each year. I’d like to see the
motor boat side of the business develop. I want to become more efficient and the ultimate dream is to build high-end luxury boats. “It’s a whole new level, in technology and materials and I’ve hired a specialist with experience in building racing yachts. “There’s a lot to learn about building boats and I don’t pretend to know everything and am not scared to ask other people in the industry or clients [for help]. “But you can’t listen to everybody and the business has evolved without too much thought. “I have core values. I’m always transparent and do what I say. I keep to deadlines and don’t string clients on.” Abbott says starting Corsair Boats “wasn’t for the money” and freely admits that his employees could get higher pay elsewhere. “Boat building is very labour intensive and you need to be highly skilled, but there’s variety in the job. “It’s a battle finding good staff and keeping them. I’m lucky.”
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Abbott sails in couta boats, mostly with clients with whom he has lasting friendships built over many years. However, the future growth of Corsair Boats is most likely being steered by an order to build a much larger vessel. The 11-tonne, 40ft “lobster boat” is a United States-designed pleasure craft. Looking decidedly workmanlike from the outside, the boat’s interior has every mod con passengers occupying its six berths could wish for. Fitted with a 530 horsepower Yanmar diesel engine, the deep-keel boat is designed for those “who want seaworthiness, not speed”. One of the $750,000 boat’s first voyages is likely to be a trip to Tasmania in company with a similar, albeit four foot longer, lobster boat owned by Will Baillieu, brother of former Victorian president, Ted Baillieu. “They’re ocean going motor yachts that from the outside look rugged but on the inside are pure luxury,” Abbott says. He will have a 35ft version of the
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14 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | May 2013
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LEGAL
Easing the pain of breaking up Separating can be a stressful and confusing time. Often clients see their lawyer to get some reassurance about the future and their entitlements. Unfortunately, family law is anything but certain. Questions like ‘How much am I entitled to?’ and ‘What are my rights?’ hardly ever have a straight forward answer. Before visiting the process of family law in children and property matters (an endless topic), here is some advice for those thinking of separating, are separating or know someone in those categories: What to do: n When you leave take the things that matter most to you like photographs, pictures, books and personal belongings. It can be difficult to get these things after you have left.
n Make sure you have copies or originals of financial records. It can cost hundreds and thousands of dollars in legal fees to get financial information you could have obtained for free. n Seek professional help to get you over the hurt and shock of separation. It will pay off in the long run. n Most importantly, look after yourself. What not to do: n Do not leave things you want in the former matrimonial home. Remember, possession is nine tenths of the law. n Do not get rid of assets deliberately. It will not help in the long run. n Do not live electronically (using social media) as these things can be used in court. n Do not send abusive text messages, which can come back to haunt you in court. This is not an exhaustive list, it is something to get you to think during this
messy time called separation. Once you have separated and you need to sort out property and or children (or both) every action taken by each of you will be examined microscopically and interpreted to suit the other person’s motive. It can pay not to provide extra ammunition in an already fragile backdrop. * Tanya Thistleton is a practicing family lawyer at White Cleland Solicitors. She has written extensively on the subject of family law, both non-fiction (including a summary of Australian Family Law for a German legal loose leaf service) and fiction, with publications of short stories and her novel Just and Equitable earlier this year.
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By Tanya Thistleton
May 2013 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 15
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TAXATION
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Companies need to be ready for changes to Australia’s transfer pricing legislation. Following two unsuccessful court cases, the Australia Taxation Office (ATO) has ‘modernised’ the Australian transfer pricing legislation. Although the legislation has only just passed through parliament, the changes will retrospectively apply from 1 July 2004. Further legislation has been introduced into parliament and will apply from 1 July 2013. As a result, transfer pricing risk review and audit will become a focus point of the ATO for the coming years. Taxpayers are required to prepare transfer pricing documentation before lodging their tax return to avoid facing penalties in the event of any adjustment by the ATO. If a company has dealings with international-related parties it can start by assessing:
The ATO has warned about scam emails that claim to be from the ATO. These emails request the recipient to download an attachment that contains malware or to click on a link to an external website that is used to steal their personal details. The emails should be deleted. In 2012, the ATO received 26,000 reports about scams including fake job advertisements, emails and bogus phone calls. If correspondence seems suspicious, too good to be true, asks for personal details or cannot be verified through an official source, it is likely to be a scam and should be reported If you think you have been the victim of a scam, c all the ATO on 1800 060 062. Suspected email scams can be forwarded to the ATO. There is a security page on the ATO website with information about online protection.
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n Whether it is prepared for completing the international dealing schedule (IDS), which forms part of the annual income tax return. The IDS replaces the Schedule 25A and requires significant additional information. n Whether the company has contemporaneous transfer pricing documentation that satisfies the ATO’s four-step process and supports the IDS disclosures. This is different to transfer pricing documentation prepared by the foreign parent company. Companies should be proactive in understanding, addressing and managing their transfer pricing issues and risks in case of scrutiny by the ATO. For practical, proactive and costeffective transfer pricing advice call Shannon Smit, director of Transfer Pricing Solutions on 5911 7001 or visit www.transferpricingsolutions.com.au, LinkedIn or Facebook .
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May 2013 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 17
HEALTH
The myth of born talent I was watching A Current Affair the other week. (That got your attention, right? He was watching what?) Well, sometimes it just comes on while you’re doing something else, like chopping the vegies. Come on – it does! Michael Ellis*
Chinese Herbalist
Ambition, however, may derive from the positive reinforcement you receive while practising your skill in those formative years – winning prizes, receiving praise, getting selected for advanced training programs, and so on. Studies of musical aptitude show categorically that the difference between hobby musicians, amateur orchestra members and virtuoso performers boils down to one simple thing: hours of practice. That’s it. Here’s an example of the research from the sporting field. An academic charted the birthdates of the 600-odd players in the professional Canadian Hockey League (a competition of similar proportions to the AFL). To his surprise, he found that 40 per cent of players in the league were born in the first three months of the year. Only 10 per cent were born in October-December. Was it possible that men born in January to March were inherently more talented hockey players? Something astrological, perhaps? No, the explanation is in the cut-off dates for Canadian under-age hockey competitions – December 31. Boys born in the first three months of the year are more physically developed and therefore tend to dominate those born six to 11 months later but in the same age group. Talent scouts were regularly mistaking maturity for talent and selecting those physically dominant kids for rep teams and development pathways that give them the
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“Studies show that every child has their own particular talent,” declared the presenter. I didn’t catch what followed as I was busy choking on my tzatziki dip and rice crackers. I marvelled at this impeccably researched and thoroughly referenced introduction to whatever inane item was to come. Now we know that 6.30 “current affairs” programs peddle more prejudice than fact – in this case playing to every parent’s fantasy that their offspring has a special talent, whether sporting, academic, social or artistic, if only they can find it, and that it will blossom if given the opportunity and encouragement. But actually, this is not what “studies” show at all. They show quite the opposite of what the program so blithely asserted. Talent is not innate. Talent is learned. In fact, given some baseline physical and intellectual parameters, just about everyone is born with the ability to do just about anything – to an elite level. What it takes to reach that level, in any field, is two things: firstly, opportunity and secondly, 10,000 hours of practice. Yes, that’s a hell of a lot of hours – to save you the maths, it’s the equivalent of 40 hours a week for five years – but it’s the demonstrated amount of practice required to get elite at anything: a musical instrument, surfing, football, dancing, mathematics, line drawing, lawyering, medicine – whatever. And what decides whether you get those 10,000 hours? Several things, but mostly it’s opportunity. Of course you also need ambition. It generates the will to do those 10,000 hours.
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extra hours of practice that ultimately produce elite skills. It’s a self-fulfilling process: mature kid becomes skilled professional, justifying the talent scout’s judgment in the first place. But did the kid have a special talent? Or did he make it ahead of others by the luck of his birth and opportunity to do his 10,000 hours of practice? Are we locking kids into patterns of achievement and under-achievement that can stretch through their entire lives simply through the accident of their birthdates? A 2008 study of Aussie rules and the AFL found a less-marked but noticeable bias towards January-March birthdates. Football scouts are now more aware of the potential for overlooking “bottom-age” kids. In Czechoslovakia, a similar exercise revealed an identical skewing of professional soccer players’ birthdates. There the bias was so great that the sport concluded it was squandering half its potential talent. In other fields there are many examples, and studies, demonstrating this outcome again and again. In academic pursuits the nature of the opportunity may be different, but the same principles apply. Yes, you need a baseline adequate IQ to “make it” in an intellectual pursuit. But that baseline is surprisingly low. An IQ above 120 is ample. A higher IQ – even a lot higher – confers no extra likelihood of success. Among the many ponderables here, I wonder whether we should so readily be making role models of elite sports people. Why? Because of their luck? Anyhow, I guess I need to wrap this up with a health point. Oh yeah: never watch current affairs TV while preparing dinner. *Michael Ellis is a registered Chinese herbalist in Mt Eliza. Visit www.mtelizaherbal.com • Main reference: Outliers, The Story of Success (2008), by Malcolm Gladwell, New York: Little, Brown and Company. (Available online, free.)
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18 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | May 2013
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MARKETS
A flytrap for tourist dollar One of way to successfully invest in China is to keep well away from it. As its new Premier said recently, “painful” decisions are required to tackle corruption, provide breathable air and reduce over-capacity. Li Keiqiang also said China urgently needs to open up its economy to offshore services so that it can re-balance its one-sided, asset heavy economy. What he did not say was that this skewing has pushed debt to worrying levels. Specialists estimate that China’s local government debt is 25-30 per cent of GDP with a fair chunk of it “non-performing” as loans made to grossly over-built production facilities in areas like shipping, cement and solar panel plants sour and fail. A sickening proportion may have also gone missing in various scams and kickbacks as regional party chiefs followed the example of high officials like Zhang Shuguang, the deputy chief engineer of the Ministry of Railways who is now detained on charges of embezzling US$2.8 billion. The official estimate is that about 18,000 lesser officials pocketed US$120 billion since 1990. This combination of bumbling miscalculation, negligence and fraud is unlikely to undermine China’s relatively robust financial position, but does add urgency to the need to reform structures and systems across China. One pre-condition of reform is the creation of a more independent, more demanding middle class. This is happening. Allowing for much variation, wages have broadly tripled in a decade and more sophisticated skills and education is required. Mandatory minimum wages increases of 12-13 per cent a year have
Richard Campbell* Stock Analyst
helped. A study by McKinsey reports that 50 per cent of the population will earn between US$17,000 and $30,000 a year. by 2020 which is fairly comfortable given the low living costs. There will be more and more demand for better appliances, furniture and clothing. Travel, the next stage of relative affluence, is already taking off. In fact we have all seen the beginnings of what is becoming a flood as Chinese tourist buses replace parties of Japanese at Healesville Sanctuary and at the Phillip Island Penguin Parade. Last year more than half a million Chinese visited Australia spending almost $4 billion. These numbers are likely to double by 2020. One near certain way for the investor to share in these numbers is through that ultimate bottleneck, Sydney Airport. In its current stapled security form the listed “SYD” is a stand-alone business and one of the busiest airports in the world. As an asset of Map Airports Limited, it was the centrepiece of a portfolio developed by Macquarie Bank. As with many Macquarie structures the promise was greater than the outcome as hefty fees winged their way back to Macquarie Bank, seemingly at the slightest pretext. However, the airport is unlike Macquarie’s dismal record as a toll road manager,
mainly because it is quite difficult to travel to Australia and not pass through Sydney. By their very nature airports are natural fly-traps, collecting cash across a range of services. In this case aircraft landing fees are about half last year’s pre-tax profit of $848 million but retail provides a solid 28 per cent and the eye-watering parking fees bring in a handy 14 per cent. Investors should be aware of the typical Macquarie high debt structure ($6 billion no less) and the 100 per cent pay-out, but growth of 4-5 per cent a year as charges rises will gradually bring this highly geared, but also fairly safe debt, down to more reasonable levels. A second Sydney airport would clearly dint earnings, but after 40 years of talk Badgery’s Creek remains a decade away – if it ever happens. Meanwhile, investors can be confident of management’s capacity for “monetising” every aspect of the airport’s revenue potential. A charge for breathing may be tricky, but a sitting levy might work. In the short term the high $A encourages eight million Australians to travel abroad every year. When the dollar weakens – as it will when the world realises that China has over-built its factories and infrastructure at great cost to its air and water quality – there should be a rising tide of visitors disembarking at the emerald city. On a good day its harbour sparkles: on a good day in Wuhan or Guangzhou visibility extends to an almost tolerable two – or if you’re really lucky – three kilometers. * Richard Campbell is Executive Director of Peninsula Capital Management, Tel. 9642 0545. rcampbell@peninsulacapitalmanagement.com.au
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MOTORING
Comfort in a ‘driver’s car’ It’s not often that the entire Australian motoring media agrees on the merits of a particular vehicle, but such has been the case with the Subaru BRZ. This exciting and affordable two-door coupe has gained rave reviews from just about everyone who’s driven it, although such has been the worldwide demand that prospective buyers have had to be patient. Australia’s quota from the first production run in July 2012 was 200 units with of around 50 of these being allocated to dealers as demonstrators meaning that demand was always going to heavily outweigh supply. All of the first delivery was sold in just over three hours. BRZ is built at Subaru’s Ota plant in Japan as a joint venture with the company’s part-owner, Toyota, and it competes directly against its identical twin, the Toyota 86. The division of labour between the two companies makes a lot of sense with Toyota looking after the product planning and styling while Subaru is in charge of engineering development and production. The BRZ breaks new ground for Subaru in that it has rear-wheel drive – all its other Australian models have all-wheel drive. The Subaru coupe certainly looks the part with its low-slung styling and short
Ewen Kennedy Motoring Journalist
overhangs. The front is dominated by a large, hexagonal grille with sweeping headlights and the rear is tall and square with an additional brake light positioned between twin large tail pipes. Too often otherwise enjoyable driving cars are spoilt by cramped interior space but although it’s necessary to hunker down into the driver’s seat, once settled in the seat is firm but comfortable and there’s plenty of leg and headroom. Although there are four seats the rear pair are basically there for emergency use rather than for long-distance travel. The boot is quite small, although the rear seatbacks do fold flat for extra storage space. Surprisingly for a car where space is at a premium BRZ comes with a fullsize spare wheel. Power for the BRZ comes from an allnew two litre turbocharged horizontallyopposed petrol engine that generates 147 kW of power at 7000 rpm and 205 Nm of torque at 6600 revs. We’ve always loved the throaty sound of the Subaru boxer engine and so were quite happy to sit and
20 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | May 2013
enjoy this aural prelude before setting out on our test drive. Weight minimisation is paramount with performance cars and the BRZ’s combination of high tensile steel in the body and aluminium bonnet and wheels keeps its weight down to 1256 kg (manual) and 1278 kg (automatic). As expected in a car of this type, the ride is firm with plenty of feel for the road yet comfortable enough for an extended trip. Steering is precise and direct with excellent driver feedback. Both the six-speed manual and sixspeed automatic transmissions were specifically developed for the BRZ. Our test car had the manual, a delightful shortthrow unit which is fast and smooth and just asks to be used frequently. Equipment levels are high with standard safety equipment that includes dual front, side and curtain airbags, ABS brakes with electronic brakeforce distribution and brake assist, vehicle stability control and a retractor brake pedal. It comes with a five-star ANCAP rating. Also standard are cruise control, leather-wrapped steering wheel and gear lever, push-button start and stop, sports seats, front and rear fog lights and power folding side mirrors.
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Who loves those performance reviews? Good leaders understand that business success is very dependent on the individual performance of their key people, but very few leaders enjoy doing the hard work required to actually manage performance optimally. In larger organisations, HR departments have made a mess of performance management systems over many years to the extent that they often created specific paperwork processes to encapsulate their notion of an effective system. This usually included a series of paperwork forms that a manager and their reporting individuals had to fill in once a year. This usually degraded the process to the extent that it was done without any real commitment as simply an exercise to fill in “the HR paperwork”. The end result was usually that both the manager and those reporting came away from a performance discussion feeling let down and disappointed. The main difficulty with this approach was that these systems were founded on traditional beliefs that the manager’s job was to set goals and assess performance, while the employee does the work. In this 21st Century and in small businesses, these concepts are well out of date and really not very useful. In a small business, there is usually a continuous dialogue on performance as the small team does its daily work. Many small businesses lack more formal performance discussions that are focussed on growing both the business and its people. Given all of these complexities in managing performance, the usual answer is that no one loves it. This is a real pity as this should be a treasured part of running a successful business. There is a better process to manage performance and it is no surprise that it starts with your business strategy. Growing great people within your business so that you can fulfil your long-term strategy is a huge issue particularly for small businesses. This is particularly true for businesses where the business leader hopes to retire and to be able to hand over a valuable business to a family member or to a prospective purchaser. The first major change is to redefine the accountabilities for performance. It is not the team leader who is accountable for the
Hamish Petrie*
Business Consultant
performance of their reports: each individual report carries with it a performance responsibility. Sure, the team leader is accountable for explaining strategy, key activities and specific targets for the whole team. Each of their reports is then responsible to work out how they are going contribute to achieving each of these team goals. They should do this by defining their key activities, the required resources, their complementary targets and timelines, and the measures of their progress. These need to be reviewed initially with the team leader, who should take on the role of coach rather than the role of judge. It is best if the whole team then has a group discussion where every team member presents his or her contributions to the team’s success. This way the whole team can ensure that individual activities and goals are synchronised with a cohesive team plan. The team leader’s role through time is to observe and coach team members using the 21st Century model of coaching – using constructive positive feedback as the basis for building on each individual’s strong points. While negative feedback has to occur occasionally, think of it like a gardener who wants to grow a perfect lawn. He has one pocket filled with fertiliser and the other one filled with weed killer. He needs both, but knows that success comes by using a lot more fertiliser than weed killer. At least once every three months your team should have a progress discussion. Each individual team member should collect and collate their relevant data and prepare an assessment of their own performance. If the team is comfortable, then they can also use a process to collect behavioural feedback from the other team members to enhance the clarity of their individual contributions. Ideally, this discussion starts off with the team leader reviewing their perspective of their
22 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | May 2013
own and the collective team’s performance, thereby setting the stage for discussions led by each team member. This process is well suited to small teams as it builds an open performance dialogue, where team dynamics are focused and positive. Leaders who are able to create this environment will be really surprised to see just how stimulating this process can be. Obviously, there are a number of connected agendas that link back to this process. Compensation, promotions, succession plans, and career plans are all derived from this process. Each of these topics needs to be carefully managed in terms of confidentiality with each individual and with the team. As the team maturity develops, more of these topics can be managed openly, for example with more of the at-risk compensation being linked to shared team goals. In a traditional performance management system, the team leader has to do most of the work and can often doubt the benefits that come from all the effort. In this alternative process, most of the accountability and work falls to the individual and the boss’s role is much more constructive. In practice, when it is done well, both the team leader and their reports will find that they do love both the process and the results. Action Planning Questions: 1. Do you have experience in a traditional HR driven performance management system and was your experience positive? 2. Have you asked your team members if they love your current process for managing performance and listened openly to their responses? 3. Do you believe that there has to be a better process to enhance individual and team performance? 4. Have you designed a process to share key business goals with your reporting team and coached them to determine their individual contribution to these goals? 5. Do you have an effective progress review process that is dominantly led by your team members?
*Hamish Petrie had a 37-year corporate career including 25 with Alcoa Inc. His latest position was VP People and Communications for the Global Alcoa Corporation based in New York. He can be contacted at hamish@nitroworld.net or on 0404345103. © Hamish Petrie 2012
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