Kelly+Partners Post Issue 1

KELLYPARTNERS.COM.AU

THE

KELLY+PARTNERS POST ISSUE 1: JANUARY­­–JUNE 2016

THE $8BILLION MEN How Australian Start-Up Atlassian Grew

START OF YEAR

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MIKE CANNON-BROOKES ATLASSIAN CO-FOUNDER

KELLY+PARTNERS WEALTH PHILOSOPHY

ATO TARGETS HIGH NET WORTH AUSTRALIANS

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

It’s not the big that beat the small anymore, But the fast that beat the slow.

It’s not the amount of marble in your reception, But the relevance of your insight.

It’s not an accident who succeeds today, But a deliberate choice of a capable team.

It’s not the latest management fad, But proven principles.

It’s not those who talk about owning a business, But those who, like you, are doing the business.

We help business owners who want to go somewhere.

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

CO NTENTS

CO NTENTS

cerrone.com.au The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

THE KELLY+PARTNERS POST

WAYS TO ENGAGE It’s easy – choose the option that works for you

Contents

January–June 2016 | Issue 1 THE START OF YEAR ISSUE

Healthy

AT THE START OF THE YEAR MAKE PLANS TO HOLIDAY HEALTHY RECIPES TO ACCELERATE YOUR DAY

Wealthy MIKE CANNON-BROOKES

KELLY+PARTNERS.COM.AU Visit kellypartners.com.au for information and news.

KELLY+PARTNERS WEALTH PHILOSOPHY 4 TYPES OF CLIENTS AND EMPLOYEES TAX OFFICE TARGETING HIGH WEALTH AUSTRALIANS THE BEST BOOKS IN THE BUSINESS 2016 FEDERAL BUDGET REVIEW 2016 FEDERAL BUDGET REVIEW – SUPERANNUATION

Wise PART 1 – ON HAPPINESS PART 2 – ON HAPPINESS

THE KELLY+PARTNERS APP Receive updates and feeds with the Kelly+Partners App.

JACK COWIN’S 13 INSTRUCTIONS FOR LIFE

Kelly+Partners 2015 IN REVIEW 2015 PLAN TO WIN GOOD NEIGHBOURS

7 6

DUNCAN’S JOURNEY: THE CAPTAIN’S RIDE

12

10

16

GREAT EVENTS IN 2016 BETTY ZEREFOS MEMORIAL GOLF DAY

15 14 19

KELLY+PARTNERS DIRECTOR EMERITUS OFFICE LOCATIONS

18

EVENTS Look out for upcoming events in 2016 and see how you can make a contribution.

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6 8 10 14 17 18 20 22 24 26 27 30 32 34 37 38 41 42 45 47

Editors ELLA MARTIN, PAULA BOOTH AND STEPHEN BOWLES | Creative Director BRETT KELLY AND GARY CHESTNEY Feature Writers BRETT KELLY AND JOSH THOMAS | Contributing Articles TONY NUNES, KIM MEREDITH, SHAWN ACHOR, ANDREW SIMMONS AND PROFESSOR ROBERT WALDINGER Art Director GARY CHESTNEY | Graphic Design GARY CHESTNEY | Advertising by CERRONE, DAVID JONES, BELLE PROPERTY AND KELLY+PARTNERS Brand and Content Director BRETT KELLY Publishing by TOPPAN SECURITY PRINTING PTY. LTD. Images ADOBE STOCK IMAGE LIBRARY | Illustrations GARY CHESTNEY | Potography TRUDI HURT The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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THE KELLY+PARTNERS POST

Healthy

At the start of the year

MAKE PLANS TO HOLIDAY In working with thousands of business owners over the years the biggest impediment to better quality of life has been the inability to get away and have holidays.The negative impact on families, health, thinking, personal development, marriage quality, engagement with children cannot be underestimated.

So how to fix it 1.

School holidays

et a diary and mark one year ahead G the school holidays in December.

2. iscuss and actually book and pay for D your planned holidays (there are funds and insurance available for actual emergencies).

ONE DAY YOU WILL REALISE THAT MATERIAL THINGS MEAN NOTHING, ALL THAT MATTERS IS THE WELLBEING OF THE PEOPLE IN YOUR LIFE. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Healthy

3.

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THE KELLY+PARTNERS POST

hen focus on what you need T to do at work so you can go on holidays. It’s amazing how work and contacts expand to fill the time allowed.

4. nticipate and discuss with A your family your planned holidays and ask them to help you get there!

5.

TOOK A GRENADE TO SAVE LIVES, NO PRESS DURING RECOVERY

E njoy – nobody on their death bed wished they had worked more and, let’s face it, if you die tomorrow someone will do your job!

TOOK DRUGS AT A WHOREHOUSE TO GET HIGH, PRESS UPDATES EVERY HOUR.

STOP MAKING STUPID PEOPLE FAMOUS

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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THE KELLY+PARTNERS POST

Healthy Recipes

TO ACCELERATE YOUR DAY Recipes supplied by Andrew Simmons at Vision Personal Training

TUNA ACCLERATOR SALAD NUTRITIONAL INFO (per single serve) Carbs: 8.4g Protein: 27.2g Fat: 1.8g

INGREDIENTS (serves 1) 25g tuna in spring water 50g yellow capsicum 50g cherry tomatoes 50g cucumber 60g mixed salad leaves 50g celery

METHOD 1. C hop all salad ingredients and toss them together before serving on a plate 2. Layer tuna on top, season with salt and pepper, and enjoy

LIFE IS NOT MERELY BEING ALIVE,

BUT BEING WELL. - MARCUS VALERIUS MARTIALIS

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Healthy

Healthy

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THE KELLY+PARTNERS POST

SALMON WITH CAPSICUM AND ASPARAGUS NUTRITIONAL INFO (per single serve) Carbs: 7.5g Protein: 27.6g Fat: 9.4g

INGREDIENTS (serves 1) 100g asparagus 100g red capsicum 100g yellow capsicum 50g green beans 100g grilled salmon fillet Fresh chili Sprinkle of sesame seeds

METHOD 1.

2.

3.

4.

5.

S eason salmon steak with chopped chili, salt and pepper.

Grill salmon steak until golden brown on both sides then leave to cool Trim asparagus spears and green beans, then lightly steam Slice capsicum into strips Serve all ingredients on a plate, sprinkle with sesame seeds, season with salt and pepper, and enjoy!

APPLE AND CINNAMON BITES NUTRITIONAL INFO

METHOD

(per single serve)

1. C ombine all ingredients together in a high speed blender or food processor to form a thick paste, adding a small amount of water if necessary.

2. Using a teaspoon, spoon out mixture and roll into small balls. Place in the fridge for approximately 1 hour and store in an airtight container.

Carbs: 7.2g Protein: 2.6g Fat: 0.4g

INGREDIENTS (serves 1) 40g Vision Vanilla Protein Powder 30g oats 30g pitted dates 75g dried apple 5g cinnamon

THOSE WHO DO NOT FIND TIME FOR EXERCISE WILL HAVE TO FIND TIME FOR ILLNESS.

- EDWARD SMITH-STANLEY The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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THE KELLY+PARTNERS POST

Wealthy

The Australian who built an $8bn company by age 38

MIKE CANNON-BROOKES Co-Founder, Atlassian

Interview with Brett Kelly and Mike Cannon-Brookes Article by: Brett Kelly/Business Owners’ Wisdom

Atlassian, a provider of collaboration software for product development, started in 2002. Joint CEO and co-founder Mike Cannon-Brookes met his business partner, Scott Farquhar, while they were both students at the University of New South Wales. Originally started to avoid having to find regular jobs, the company now has offices in Sydney, San Francisco, Amsterdam and Tokyo, employs over five hundred people, has over twenty-five thousand customers around the world and achieved a revenue of $59 million in 2011.

This interview is from Business Owners’ Wisdom by Brett Kelly published in 2012.

Atlassian listed on the New York Stock Exchange and has a market capitalisation of $8 billion

TOP 5 REGRETS OF THE DYING

I WISH I HAD HAD THE COURAGE TO LIVE A LIFE TRUE TO MYSELF, NOT THE LIFE OTHERS EXPECTED OF ME.

1

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

2

I WISH I HADN’T WORKED SO HARD.

3

I WISH I HAD HAD THE COURAGE TO EXPRESS MY FEELINGS.

4

I WISH I HAD STAYED IN TOUCH WITH MY FRIENDS.

5

I WISH THAT I HAD LET MYSELF BE HAPPIER.

Wealthy

THE KELLY+PARTNERS POST

The Interview

Nike is another good example. They make iPhone applications now and they have shoes with chips in them and they make FuelBands for your wrists that sync up to web services online.

It’s all part of the Nike story. It’s no longer just buying a pair of running shoes, it’s how the whole thing fits into a package. Then, you go and look at other brands – how much more affinity do you have for Nike than Puma that doesn’t do anything technical.

Well, they’re going to catch up soon. After all, they’re going to be in trouble if they don’t. So, as that change is occurring, basically you have more and more people involved in the software process, and not just developers anymore but– BK: Marketers.

MC-B: Developers, the marketing department, customer service, they all have to be involved because if your Nike shoes break down, what are you going to do? It’s not a sizing problem anymore. It’s a technical problem. They don’t have a customer support department like Apple does, so they need to work that out. So all these different groups are getting involved, and what our tools really do is solve the collaboration problem around building a piece of software in a company so that all those folks can get involved and hopefully get the best successful outcome.

BK: The workforce today is highly distributed. People within these massive global companies building software are not in one room anymore. Your tools enable these businesses to draw the best people from wherever they are.

MC-B: Yes. You definitely have distributed teams – teams in different buildings, companies, countries, even. Often, there are different companies across different countries as well. You may bring in outside agencies to get some marketing help but you need to use in-house customer service, or whatever it is. So a distributed set of skills is also part of the challenge. We have some products that are highly technical and other products that have absolutely zero technical impact at all. They’re still involved in the software creation process but where you have a marketing team involved that are not technical.

BK: So your technology needs to be highly user-friendly?

MC-B: Yes, especially if they’re at the more business-oriented end.

BK: Tell me about the language. How much is that an issue for you? Is it all in English?

MC-B: No. We have thirty or forty different languages now.

It’s a lot. So, it’s very distributed. Our ten-step projects tend to run in one language and, to be honest, we don’t do any translation in the middle, but the software itself, yes, it supports many different languages.

BK: So what’s the vision for the business? Why does the business matter? And what’s its future?

MC-B: Well, my vision for the business revolves largely around solving the collaboration problem involved in software. It’s far from solved. It’s still a painful process, creating software. We’re trying to make it easier for everybody going forward. You know, we believe it’s only going to get more important for businesses to gain advantage doing this, to reduce the time it takes to ship software projects, to improve the input everyone has and hopefully have a better outcome overall. That’s a long-term project for us.

BK: So this is something you’re passionate about in the long-term?

MC-B: Yes. It’s changing a lot of things. It’s giving us better products. It’s giving us more dynamic products. You only have to look at telephones. We’ve crammed a hundred times as much software in the telephone now as we did five years ago.

The iPhone was launched in 2007. Five years ago what you could do by basically turning a computer into a phone, not the other way around, totally blew people away. And now telephones, apps, the massive amount of code running in these things has totally changed the way we use the telephone and communicate with people. That’s the sort of trend that is only going to continue through technical gadgets and even more so through the software and hardware interfaces that are going to start to creep into all sorts of devices that we use on a daily basis. ‘My vision for the business revolves largely around solving the collaboration problem involved with software.’

BRETT KELLY: Mike, can you tell us the story of Atlassian? How did you get started and why?

MIKE CANNON-BROOKES: Scott Farquhar and I founded the business in 2002, ten years ago. The honest truth is, when we started we didn’t want to get a real job. We didn’t really know what we were doing but we knew we wanted to create something. We had a hunch about how the internet would change software distribution for enterprises. Back then, everything was on CD and, you know, different. We thought we could distribute enterprise software through the internet and that we could do it very cheaply and scale it globally. So we worked pretty hard for a year to find products that would fit those theories. Zoom forward ten years later and we now have a burgeoning business full of products that prove that those hunches were correct.

BK: What was your background, what did you study?

MC-B: Scott and I met at university. We both had Co-op scholarships at the University of New South Wales in Business Information Technology (BIT) – half computer, half finance.

BK: So, you had a hunch. Did you want to prove out the model or did you have a particular passion for a particular industry or were you just looking for some software that you could distribute?

MC-B: We had a couple of tools that we tried making and one took off way better than the others. So we built a business around that tool. It predominantly helps other software or product teams run projects more effectively. It’s a project management tool in the abstract sense and it’s now used by not only software teams, but also all sorts of business teams and business people doing various project tasks. That tool, called Jira, is still our biggest product. We now have eight, nine, ten other products around that complete a set of tools. And ostensibly, if you look at all the products, what the business does today on a holistic level is solve the collaboration problem involved in software.

BK: Now, tell me about this collaboration problem – what is it?

MC-B: The first thing you have to understand is that there is a big trend at the moment – software is changing the world, software is leading the world. Basically, software is becoming a strategic advantage for every single business out there. So if you look at banks, if you look at car companies, if you look at any traditional business, software and technology is rapidly becoming a true differentiator, a competitive advantage. The tricky part about that is it means that for most of these businesses, you want to own and control your strategic advantage. So, they’re ‘inhousing’ a lot of the technology. But a lot of our customers, like Nike and Ford and other big companies aren’t necessarily technology companies.

BK: So they’re not software companies?

MC-B: No. BK: They are big traditional companies and software is a competitive advantage. Do they need to own it?

MC-B: That’s correct. Ford is a classic example that’s been used a lot in the last ten years and even more in the last five years. Cars have stopped competing on engines and wheels and what they look like, and have started competing more on the technology inside the car. They won’t tell you that, though.

What they will tell you is that it has a better navigation system, better entertainment system, it plugs into your phone. They talk about the way it unlocks and locks itself, the braking and safety systems, fuel efficiencies – and they are all run off software.

So a Ford car has thirty or forty computers inside it. There are tens of millions of lines of code running the car. So when you go and look at the car ads and the differences at your car show, it’s really all about the software.

So this change has happened and is still happening. It has meant that software really stopped being something done in the basement by a bunch of guys and started to be something that the board cares about, the CEO cares about. And if you look at businesses, it’s changing.

SELF HELP

PAGE 11 BK: What are the possibilities that excite you most?

MC-B: Just the blending of all these things. I mean, if you think about your phone miniaturising, all the capabilities your phone has miniaturising …

If we go back to the Nike example, is it really that far-fetched to think that shoes could have a computer in them one day?

You imagine, you go for a run, and you run into your house.

The shoes know where you’ve been, they’ve got the GPS – it’s no longer in your phone, it’s in your shoe. They’ve got a little computer that says how many steps you’ve taken and as soon as you cross into your own home, the Wi-Fi network uploads it to the web. You don’t have to do anything. You can start to see the possibilities of putting computers into things. Now, you can get an effective computer that can run code for ten bucks.

That will just keep coming down and down and then it will be in everything.

BK: And the miniaturisation of it all as well.

MC-B: Yes. That’s more of a far-out phenomenon, what they call the ‘internet of things’, but it’s only a matter of time before all things are connected to the internet. Every door in your household, for example, suddenly gets somehow connected to an internet. So if someone presses your doorbell, it rings your phone and you check who it is. ‘Oh, it’s my sister, sweet.’ You let her in by pressing a button on your phone. You could even open a door in another country and let them in. Your house says, ‘Hey, I’m too hot at the moment.’

BK: Sends you a message.

MC-B: Sends you a message. Automatically turns on the air conditioning. It will let you know. The smartness of things is going to be exciting. It’s already exciting. It’s amazing. If you think about Dick Tracy or any of the sci-fi shows. Even Star Trek has a communicator thing that could do anything, look up any information. They’re basically on your phone now. You can be anywhere in the world and go to Wikipedia or the web and find information or solve a debate. ‘Hang on, let me just look that up.

Oh, here’s the history of this person or what they’ve done.’ It’s phenomenal what we can do now.

BK: The only thing we’re missing is flying cars– MC-B: Right. Communication, information access, images, even just photos. The traditional idea of taking photos and printing them and mailing them to someone or putting them in an album is almost obsolete. Nowadays, we take tons of shots of my son with the iPhone and it gets streamed straight up to the web. We were on the beach the other day and took an iPhone photo. It had gone up to our private group we have in the family and my father-in-law in Michigan had commented on it before we got back to the car. You see, he’s almost in the experience.

It’s like it’s a phenomenal change. Every person that carries a camera is able to share photos with the world every single moment of the day.

BK: Then there are the price points, the cost has become so manageable.

MC-B: Yes. I heard a stat the other day that the cost of digital cameras, like their componentry, the little thing that’s inside the phone, has come down a hundred-fold in the last five years because of the gajillion iPhones and Android phones and everything else.

BK: Who would be the biggest seller of cameras in the world?

MC-B: Apple or Samsung would be my guess.Their componentry costs are coming down so fast you could put cameras in your shoe. You could put them anywhere! ‘… one of the other strategic advantages of every business nowadays is that it has to be attracting (really great) people.’

BK: Your company is Growing. How many people do you employ now?

MC-B: We have a little over five hundred staff at the moment in six locations around the world.

BK: Is it challenging, managing them?

MC-B: Yes.We have a distributed company.We have a distributed management team, both of which are quite challenging. Roughly half the company is in Sydney, roughly a quarter of the company

HOW TO STOP TIME: KISS HOW TO TRAVEL IN TIME: READ HOW TO ESCAPE TIME: MUSIC HOW TO FEEL TIME: WRITE HOW TO RELEASE TIME: BREATHE The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Wealthy

in San Francisco and then we have four other offices that are about an eighth or sixteenth each. So even just the two big offices are separated by the Pacific Ocean – two hundred and sixty in Sydney, one hundred and forty in San Francisco.

Those two big offices are very separated – eighteen hour time difference, fourteen hours for an air flight. It’s hard for us to get people to collaborate effectively over that distance.

BK: Let me ask you about the challenge of attracting really great people.

MC-B: I think it’s one of the other strategic advantages of every business nowadays. It has to be attracting people. We spend a lot of time recruiting. We’ve Grown the company very, very fast, if you think about it.

BK: Are you in a competitive space for talent?

MC-B: We’re in a highly competitive space for talent. Software developers are gold, solid gold for every business. That’s one of the flipsides to this sort of software becoming strategic. If you think about the number of software developers we have now, in five years’ time, is demand going to outstrip supply?

Absolutely. It’s already outstripping supply and it’s going to get worse every week, every month. So, we spend a lot of time on talent acquisition. We also spend a lot of time marketing the company to talent, explaining to people what their job will be like, what their day will be like, what the company is like, a lot of time on benefits and, you know, ‘why work here’ programs, a lot of time on the hiring and recruitment pipeline. We’re hiring about three to four people a week. ‘… we play a lot of game theory in the business with how we run things. I’m a big game theory fan.‘ BK: There’s a very cool program on your website about recruitment and working with recruitment agencies. Who came up with that and how effective has it been?

MC-B: We get into trouble here. I mean, we play a lot of game theory in the business with how we run things. I’m a big game theory fan. If you can structure things correctly you can get interesting and accelerated outcomes. We haven’t had a lot of luck with recruiters in our business, to be honest, and they’ve cost us a lot of time. They all want to sit down and spend time understanding the business before they can do an effective job.

Then, after every unsuccessful candidate, they want to spend more time. What they’re really doing is honing their own sales process with your time to make money for themselves, which doesn’t necessarily work for us because they don’t have an outsized return.

So what we’ve done is flipped it around a little bit and said, ‘If you’re a recruiter, we’re going to have standard terms that we put out. You’re more than welcome to take them or not. You can totally make your own choice. Then, if you accept them, we have a rule that you can give us up to four candidates and if we don’t hire one of those four candidates, you can work for other people. So it changes the game for them because they know we have a very large hiring pool. We’re going to hire hundreds of developers over the next few years. If they want to get in on that action, fine. We want to make sure that they’re working hard in sending us the best candidates so we have a big carrot for them.

BK: Do you pay more?

MC-B: No. We usually pay less than average. I don’t know what the exact recruitment fee is but we’re doing huge volume.

BK: So if someone’s good, they can do plenty of business with you.

MC-B: They can, but they don’t tend to. To be honest, I think less than 5% of our hires come through recruiters. It’s not a very successful channel for us.

BK: So where are you finding your best people?

MC-B: Mostly organically. The organic channel works the best.

We heavily promote the business that way too.

BK: Is that working well internally, that ‘Refer a friend, get an air ticket’ idea?

MC-B: Yes. We have all sorts of different promotions to try to get people in. Some of them work and some of them don’t.

We’ve had quite a lot written up about us giving new starters and their partner two nights in a hotel locally to say thanks

for coming on board. They can take a break, decompress from their old job and take a couple of days out. It’s amazing when people walk in.They start with a very positive impression of the business. Because we’re not working with recruiters, we’re saving twenty to twenty-five grand, thirty grand, forty grand depending on who you’re hiring for a software developer. We can put that money to much better use in making the candidates that do come on board happier and in other innovative ways such as using social media to promote the business for recruitment purposes. Ultimately, it’s about making the guys that come on board happy, providing valuable jobs for them that they enjoy and doing all the things that help people stay in with you. We’ve got a very good retention rate. That then becomes your social network to hire other people.

BK: Will the business go public at some point?

MC-B: That’s a potential outcome for us, sure, in the future.

BK: Is it a goal?

MC-B: I don’t know if it’s a goal. I think if it’s the thing that makes the most sense for the business at the time, then we will do that. I mean, we’re of the size now that it’s a possibility.

It’s not a question of, ‘We need to be this much bigger to make that happen.’ It’s a question of when the business is ready for it. There are a lot of good things that come with going public.

It’s playing in the big league. It means you have to be excellent in everything you do. If you appreciate the capitalist process, the fact that there are so many rules and regulations on public companies is a good thing because it means that they have to be very well administered businesses, right? So the shareholders don’t get screwed, which is want you want. At the same time, some of those rules and regulations obviously inhibit some of the Growth possibilities of those businesses. So it’s about the right timing – when it makes sense for the business. Sure, it’s a possibility.

BK: A lot of young people who are interested in building technology companies would say, ‘I know that you did a private equity raising, but how have you funded the business over the last ten years?’

MC-B: We’re very unusual. We always say, don’t copy us as a model. Well, copy us if you can, but don’t use it as a case study on how every business should run. We were bootstrapped

for eight years – we didn’t raise any money for the first eight years. We were profitable, Growing very, very fast and heavily invested the profits of the business back in Growth every year.

So there were eight years with no fund raising, then we raised $60 million from a tier one US venture capital investor, Accel Partners.

BK: How much of the company did they buy at that price?

MC-B: A pretty small piece.

BK: Was that public?

MC-B: No. It’s like a very small piece of the business.

BK: Now, when you say you were bootstrapping it, does that mean you were on a subsistence-type wage? What sort of money were you guys pulling out just to live on?

MC-B: That’s the old chestnut. Profitable from day one clearly means on day two you weren’t paying yourself anything. We didn’t pay ourselves for probably six or nine months, as in zero salary. Then, from nine months to about two years, we paid ourselves very, very little, a couple of hundred dollars a week sort of thing. After that we paid ourselves a pretty modest salary for a very long period of time.

BK: What was it?

MC-B: Around forty, fifty grand, something like that. It’s an interesting thing, right, because at some point, you can pay yourself more. I mean, we were being paid a modest salary for a far longer period than was necessary for the business.

BK: You get into the habit.

MC-B: Well, you get into the habit and your financial outcome is more dependent on the Growth of the business than the salary that you’re pulling out. So, if you don’t necessarily need it, then why not? You think, ‘Well, if I put it in the bank, that’s not going to help me. I’d rather invest it in the business.’ So we took that long view for a long period of time. The only thing that changed it was our CFO complaining that everything should be commercially accurate, market rates etc. It was a CFO-driven change and even now, our CFO is still arguing that it’s not at market rates– BK: When the private equity guys came in, was it a long process?

A difficult process? What was it that you thought that you had to

‘ Associate with the noblest people you can find; read the best books; live with the mighty. But learn to be happy alone.

Rely upon your own energies, and so not wait for, or depend on other people.’

– PROFESSOR THOMAS DAVIDSON The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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THE KELLY+PARTNERS POST

Wealthy have prepared most in order to make that as successful as it was?

MC-B: Good question. A few things. We spent a lot of time with the private equity guys before that. So, for the first three years of the business, no-one cared. Then, from about year four to about year eight, there was a five-year period where we didn’t want to raise any capital. We didn’t need to at that point. We probably weren’t Growing so why would we bother? But the smart thing we did was we were very honest with them. We’d always say, ‘Hey, we’re not going to raise any capital, so there’s really no point meeting.’ And they’d always say, ‘Ah, but we’d love to catch up anyway, just to have a coffee.’ So we tried to always schedule lunches or breakfast so it didn’t take any time out of my day.

Then we created a spreadsheet that our PA maintained of all the firms we’d met with, basically if we liked them or not on a personal level. Then, around 2010, we were about eight years into the business and we were really thinking, ‘What do we want to do here? Do we want to sell the business? Do we want to recommit for another eight years?’ Both of us got married around that time so we took a little time off. I had a threemonth break. We both went travelling with our wives and just reconsidered life a little bit. We decided that we had a lot more to achieve in the business. We wanted to recommit and therefore looked at the next eight-year goal, going public and a whole bunch of other things. We thought we probably needed a partner to help us do that. There were a lot of big challenges to get over. Also, there’s a thing in software that a hundred million is the ceiling that a lot of businesses struggle to break.

They come out with a good product, a good service and can kind of scope it at twenty million, thirty million, forty million, so to fifty and a hundred million it starts to flatten out.They go like twenty, forty, sixty, eighty, eighty, eighty, eighty, and then there’s a big problem. We wanted to hit through the hundred and keep going. That was a big thing for us.

So, we looked around and we brought on these guys. When we ran the process, it was very simple. Again, we employed our game theory hats, talked to five firms, told them we were only talking to five firms, told them we were going to pick one, shared exactly the same information with all of them, controlled the process, told them exactly when we were going to be in the States, what pitches we were willing to do, gave them a bunch of time that they’re free to do whatever they wanted, a couple of hours. Anyone that asked a question, we shared the answer so there was totally equal information.

We were very clear on what we wanted. We said we wanted a partner. We said how much of the business we wanted to sell.

We said that it was clear that we were going to be in control.

At the time, we controlled 100% of the business between the two of us. So, you’re buying a very small piece. You either like what we’ve done, understand the fact that we’re in control and want to ride with us as a partner or not. So, we were very clear on what we wanted in the timing and how clean we wanted to be. Some of them turned up. We gave them all one shot. It was a one-bid process. We didn’t want to run a whole process. We told them there were five criteria that we would rank all the bids on in terms of how much we liked the firm, how much they had helped us out or we felt they could help us out all the way through valuation and obviously the financial metrics– BK: So what were those five things? How much you liked them?

How much you felt they could help you?

MC-B: Personal connection was a big one for us so we tried to meet as many people from the firm. We looked at it as a hiring decision. We were hiring a partner. Were they going to help us out for five years or were they going to help us out for six months, that sort of thing. We got references from all the firms on entrepreneurs they had worked with, were currently working with and had worked with in the past, even the people who had left. We wanted good and bad references.

Some didn’t really provide bad references or just provided some sort of bullshit answer. References, financials obviously, a valuation of how much money they wanted to put in. That was an interesting one because if we could’ve sold 1% for a small amount of money, we would’ve done that. But obviously, we realised that they have to make a return, so there was like a weird dancing game.

BK: The offer had to be big enough to bother?

MC-B: Had to be big enough to bother, right. So, the sixty million – they all wanted to put in a hundred in change and we wanted to put in twenty. So we were driving it in opposite directions.

We were also trying to think of what the other metrics were, firm reputation and all that sort of stuff. Branding advantage, that’s a big thing.There was a fifth criteria that I forget. We were pretty open with them about how we were going to judge it up front, and the fact that they got one bid only– BK: Not a Dutch auction– MC-B: No, we tried to run a clean and ethical process where we just shared all the information and told them how it was going to run.

BK: So what’s the motto, quote or thought that really appeals to you about life or business?

MC-B: We have a very strong values-driven company. Our number-one value that’s up on the wall over there in the next room is, ‘Open company, no bullshit’. We’ve always espoused all our values very strongly. Building companies is a hard thing to do. It’s even harder to do it in a values-driven way. Everyone claims that they do that, but for most people it’s bullshit. Our value basically says, ‘Hey, look, we’re going to be as open as we can.’

Again, open doesn’t equal transparency in everything. It’s not like everyone’s salary is published on a wall, it’s just saying, where possible, the default is going to be openness. We’re going to share. ‘Hey, things are going well, things are not going so well.’

You know, those sorts of things. And the no-BS thing is kind of interesting. It’s basically saying, ‘We’re going to treat you guys like adults and not BS you around.’ And sometimes, that’s painful, right. I had to write on the firm update why we had let people go recently and my philosophy on letting people go. That’s a hard thing to read, right?

‘I don’t think there are bad people. There are good people in the wrong places. They’re in the wrong job for their skills.’

BK: What’s your philosophy on firing people?

MC-B: Oh, it’s a long diatribe. I don’t think there are any bad people. There are good people in the wrong places. They’re in the wrong job for their skills, or it’s the wrong time. It talked about how Growth companies are really hard because they outGrow people but the benefit is that they create opportunities all the time. Any crack that opens up as the company Grows is filled with another person who takes advantage and Grows their own little piece. That’s a big benefit. But at the same time, it means certain jobs can Grow very, very fast and people just can’t scale that fast. It usually means they’re the wrong person and then they get fired and it’s like, ‘Hang on, I was a superstar three years ago and now I’m getting fired. How do I deal with this?’

It’s one of the unspoken, hard things about Growth companies that that happens. Certain roles are really hard to scale. Finance is a good one – the finances of a $1 million company compared to a $10 million company, compared to a $100 million company, as compared to a publicly listed, billion-dollar company. They’re utterly different things. And if that happens in a five- to ten-year timeframe, one person just cannot scale through all those things when it comes to the financials.

BK: And you can’t always accommodate them as part of the resulting team.

MC-B: Right.

BK: They’re the CFO now and their expertise is about a $10 million company and it’s just not going to move to the next level.

MC-B: Exactly. We value people very much and we have these values, but we make no excuses for expecting high performance.

We have a lot of rewards for working here, it’s a great place to work, but those rewards are built on the backs of all the people that have worked really hard to make this a high-performing place. And if you’re not high-performing and then you take rewards, there are probably other places that you should be working.The job that they’re doing is not a fit for them anymore.

But it can often be really hard because you can’t be transparent about people being let go. Like, ‘I had that opportunity, now I’m moving on’ – you don’t know if they were doing it for themselves

or if they were let go. And it’s up to them. Often they don’t want to tell you and that’s totally fine. But, you know, sometimes you can tell. Someone says, ‘Hey, I’m leaving tomorrow.’ OK, that was unexpected. Something probably happened there. But at the same time, there’s this weird stigma that gets attached to people. You thought they were doing a really good job, but you don’t have the context. Obviously, the manager of their team doesn’t think they were doing a good job so they let them go.

You can be like, ‘But I worked with that guy three months ago.

He was great.’ Maybe in the thing he worked on with you he was great. You just don’t have the right context. So, that can cause a lot of tension. You’ve got to trust that the people who do have the context, their team, their manager, the manager’s manager, is making the right decision on the part of the company. That can be really hard.

Also, just because they’re no longer your colleague, it doesn’t mean they’re not your friend, like they’re diseased or something.

That’s not the way we run. We’ve had people leave and come back. We’re old enough that people have gone through cycles.

And we have a good alumni network, even people who’ve been let go. We have a really good track record, something I’m proud of. People come back three years later, or a year or two years later and say, ‘Hey, thanks for doing that.’ Like, it’s a weird thing because they end up in a better, happier place but they may not have realised at the time that they’re in an unhappy place and then they land somewhere.

For example, someone who’s managing a team that’s struggling as the team gets bigger. Then they go back to a much smaller company. They go back to a twenty-person startup where they’re managing four people and they’re so much happier in what they’re doing. They feel like they’re achieving something and perhaps the lessons they’ve learned and the things they did wrongly, when they Grow that team from five to twenty, they’ll be much more adept in handling that twenty-person team in three years’ time than they are now. Then they realise that that journey has been a positive thing for them, it’s been a Growth thing for them, whereas at the time, there’s a rejection and a hurt immediately.

And you know, you have to do all these things in a very balanced and humane and heartfelt, compassionate kind of way. It’s a tough process for everybody to go through. It’s tough on the manager doing it.

BK: One of the things that I’ve found in the organisaton that I run is that it is very wearing on the leadership. Those conversations are very emotional if they’re done in a humane way. Often, no matter how much the boss appears to care, the person on the other end probably doesn’t realise that it is emotionally wearing for all concerned.

MC-B: For any manager we have who knows they have to let someone go on a Wednesday, Tuesday night is a terrible night.

They don’t sleep well. They’re humane people. They realise they’re doing the right thing for the business, for the team, for the individuals. And there’s always that great quote that I like – ‘they’re firing the person who’s not doing his job today so they won’t have to fire everybody tomorrow.’ If the company goes down the tubes, nobody has a job. People stay up nights, they sweat about it, they feel terrible. It’s a really, really hard thing to do and it never gets any easier.

I think the more times you do it, the more you start to be proactive about upfront performance conversations because you realise how painful it is down the end when you get to that point, especially if you haven’t had them. If you go to someone and say, ‘Hey, we’ve got to let you go’ and they say, ‘But six months ago you told me I was doing a good job.’ You’re like, yeah. I just punted on a hard conversation six months ago, and it’s now even harder.

So, you know, we also have this rule that nobody being let go should be surprised.We’ve failed as a company, as a management organisation if they’re surprised at all about that decision. There should be plenty of warning signs. There should be plenty of conversations before it gets to that point. There will be people surprised, we’re not perfect, but there should be no surprises.

BK: Excellent, Mike. I really want to thank you for your time.

‘ENOUGH IS ABUNDANCE TO THE WISE.’ – EURIPIDES The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Wealthy

Kelly+Partners

WEALTH PHILOSOPHY

PICTURED: BRETT KELLY

Our ideas about money and ability to build LET ME TAKE YOU wealth are most profoundly influenced by the people who raised us. These people THROUGH THESE IDEAS passed on their understanding of what AS FOLLOWS: money is all about. So today you and I primarily act ‘instinctively’ or as a ‘gut 1. Your Money,Your Choice feeling’ when making monetary decisions • Ideas are paramount without considering where we gained the • Integrity is critical knowledge on such an important subject. • Your standards For more than twenty years, I have helped people manage their money. Through reading and researching the subject of money and wealth accumulation and observing diverse challenges and success, plus academic study, I have formulated a view that Kelly+Partners can help people master the important area of managing their money, to enable them to spend more time on the more important aspects of life: friends, family, connection with community and living the best life possible.

•

Your definition (goals)

Examine what ideas you have. The people you spend the most time with will influence you. What are their ideas and what are the ideas that your parents and upbringing instilled in you?

Review them and think through whether they make sense or are the best ideas you can access.

Integrity, to us, is simply doing what you say and living according to what you claim to believe in. Think about where you spend your money, how you earn your money and whether what you are doing matches us to your professed values. It is no use saying you believe in investing and then not putting that into action.

Think about your standards. Do you regard saving 20% of your income and investing it excellent or maybe 80%? Or is thinking about saving but racking up credit card debt more your thing?

In the area of money and wealth, as in all things, the higher your standards the better.

Your definition of what you want out of life, financially, and how you want to live is critical to determining what actions you must take to achieve your goals.

2. Protect Family •

Spend less than you earn

•

Insurance

•

Non-business assets in non-business owner spouse’s name

•

Stay married

•

Estate planning

When people think about protecting their family financially, they typically only think of insurance and even then most Australians are chronically underinsured. There are many other ways you can financially protect your family. Spending less than you earn is the most important one and seemingly obvious, but many people and families often struggle with this. The long-term effect of overspending is massive, especially in terms of lost opportunity. Insurance is a must and should pay out any debt on death as well as replace income. Asset protection, by structuring assets away from risk, can make a life-changing difference. Don’t risk your life’s work. Staying married makes a huge financial difference. The long-term financial impact of divorce is never, or seldom, discussed. Estate planning, if done professionally, will result in controlling who gets your wealth when you die.

NO MATTER HOW EDUCATED, TALENTED, RICH, OR COOL YOU BELIEVE YOU ARE, HOW YOU TREAT PEOPLE ULTIMATELY TELLS ALL.

INTEGRITY IS EVERYTHING. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Wealthy

LIFE IS SO LIMITED THERE IS NO TIME TO BE WASTED

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3. Get a Business (as many as you can) In the Australian taxation system, generating wealth as an employee is difficult, so being a business owner will make a difference for those suited to this type of role or endeavour.

That said, I have seen hundreds of folk who have started a business and earned less than they would have in a job, so think hard about your idea for a business and, equally, your suitability as a business owner. If you cannot sell and cannot lead people you should think again. Everyone should seriously test the income-generating ability of their idea before giving up their day job.

4. Build Equity Saving and investing then aggressively paying down debt is virtually never discussed by the average person as a wealth creation activity. The interest rate being charged by a financier if paid down and reducing your interest bill is a handy return for most investors.

5. Own Your Own (Modest) Home That old adage of ‘people spending money on things they don’t need to impress people they don’t like’ is so true of housing, particularly in the Sydney market where real estate is as expensive as virtually anywhere on earth. Housing should be thought through as a need rather than a want. What do we need now. But plan for a future where you can upgrade.

It is better to build income streams that can pay off a house than buy the house and then wonder how to pay it off. Houses should be bought on the basis of being paid off in 8 years or

YOUR SMILE IS YOUR LOGO

less, not 25 years. You will argue that can limit what you can buy and I will agree that it does, but it only limits what you can buy today. If you buy well, improve your asset, accumulate equity and pay down debt, then you can more easily get what you want later.

6. Invest (in Growth Assets) for the Long Term (>10 years)

In general a long-term view can really test people’s thinking about an investment. Concentrating on the areas in which you have some expertise, or are prepared to become an expert in (shares, property, businesses) makes the most sense. Better to be an expert in a little than a fool about much. Target a return of 5% over the long term (net) and you will be well off, very well off. As Charlie Munger says, aim to be wealthy by 70 years of age, don’t rush.

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7. Leave a Legacy At the end of the day a clear financial plan, plus activity that is focused and thoughtful can free us from making money the primary focus of our life. With great advice and a good team you can be free to focus your attention on friends, family, community relationships and becoming the person you always hoped to be ‘when you grew up’.

Life is limited: there is no time to be wasted !

Article by: Brett Kelly

linkedin.com/KellyPartnersCharteredAccountants BLOG

www.kellypartners.com.au/blog

YOUR PERSONALITY IS YOUR BUSINESS CARD. HOW YOU LEAVE OTHERS FEELING AFTER HAVING AN EXPERIENCE WITH YOU BECOMES YOUR TRADEMARK. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

A HIGH LEVEL, STRATEGIC BUSINESS COURSE DESIGNED TO...

Grow your sales, profit and income Turn your business into a highly saleable asset F ree up your time, dissolve business stress and improve your lifestyle.

‘IF YOU WANT YO GO PLACES, MOVE FORWARD BOTH PERSONALLY AND IN BUSINESS, I HIGHLY RECOMMEND GROW PROGRAM’.

- Scott Evans | Managing Director of Game Farms

‘EVERY PERSON IN THE ROOM COMES FROM A DIFFERENT PERSPECTIVE AND THE GROWTH IS PHENOMENAL. BORROW, BEG,PAY OFF, WHATEVER IT IS , GO TO THE COURSE’.

- Jim Aitken | Founder of Jim Aitken & Partners

‘THE TOOLS THAT ARE GIVEN TO YOU ARE TOOLS THAT YOU CAN ACTUALLY TAKE AWAY AND MAKE A DIFFERENCE IN YOUR BUSINESS THAT DAY’ - Louise Cordina | CEO of Summertime Holdings

‘I DEFINITELY RECOMMEND IT TO ANY BUSINESS OWNER THAT WANTS TO GROW THEIR BUSINESS, WHETHER YOU’RE STARTING OFF SMALL OR WITH AN ESTABLISHED COMPANY I THINK YOU CAN GET A LOT OF VALUE OUT OF THE SESSION.’ - Andrew Simmons | F ounder and CEO of Vision Personal Training

www.growprogram.com.au The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Wealthy

PAGE 17

4 types of Clients

AND EMPLOYEES How can you get more from your Kelly+Partners advisor (and insights into better people performance) Article by: Brett Kelly All business owners will tell you that the absolute key to their business is people. But Jim Collins, the best selling author of ‘Good to Great’ made the distinction that it is not your people but the ‘right people’ that drive performance in the business. Prof. Boris Groysberg of Harvard Business School, an expert of high performing people claims that up to 90% of all profit, in any business is driven by the top 10% of employees.

So what to do.

Great people want to ‘go somewhere’.

That is, be part of a culture and business that is on a mission to make a difference

to its clients and community. Jack Welch the former CEO of GE provides a great model for what to do with your people, how to think about them and how to develop them.

This also applies to your clients.

There are four types of employees and clients as follows: 1. High performer that buys into the corporate culture – promote and empower them as much as possible 2. Low performer that doesn’t buy into the corporate culture – fire them as quickly as possible

DELIVERS RESULTS LIVES BY VALUES DOES NOT LIVE BY VALUES THE CLASSY PEOPLE

3. Low performer that buys into the corporate culture – give them a second chance in a different position to see if they can be an ‘A’ player 4. High performer that doesn’t buy into the corporate culture – do a public hanging where you fire them and then discuss with other managers their short – comings Like all powerful ideas the value is in the consistent and disciplined implementation.

Go well.

DOES NOT DELIVER RESULTS

STAR RETAIN

A**HOLE COACH

LOVABLE FOOL TRAIN

FORMER EMPLOYEE FIRE FIRST

WHY HAVEN’T YOU EVER SEEN A LAMBORGHINI COMMERCIAL BEFORE? BECAUSE THE PEOPLE WHO CAN AFFORD THEM AREN’T SITTING AROUND WATCHING TELEVISION. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

THE KELLY+PARTNERS POST

PAGE 18

Wealthy

Tax Office Targeting

HIGH WEALTH AUSTRALIANS At Kelly+Partners we have seen a significant increase in audit activity over the last few months – this is an obvious outcome of the ATO’s 1000 planned reviews and audits of the wealthy and their private groups.

The management of tax risk has been a priority for large businesses and multinationals for many years. Although the tax issues may be different and on a smaller scale for small and medium enterprises (SMEs), tax risk is like any other risk that must be dealt with as part of carrying on a business.

We have therefore compiled this booklet so you can understand how the ATO assesses your risk profile and can take steps to manage this risk profile and, start the process of working with us to favourably impact your risk rating. The benefits of success are tangible: lower compliance costs, lower advisor fees, less resources required to deal with scrutiny from the ATO and less disruption to your business.

1. Background Each year the Commissioner of Taxation announces the ATO’s Corporate Plan and Compliance program. The Corporate Plan sets out the ATO’s priorities which are, broadly, to support the government’s priorities, to assist taxpayers fulfil their responsibilities and to deal with unwilling taxpayers.

The Compliance Plan sets out the ATO’s areas of focus for the coming year having regard to those areas of potential risk to the revenue which it has identified. The areas of risk may have been identified because of a change in the law or a change in general economic circumstances. The ATO does not chase every dollar. The ATO’s approach is to operate under a risk management basis, which means that the ATO’s approach is to ‘make intelligent, risk based assessments about the allocation of its resources in optimising compliance in a tax system of self-assessment’. The engine that drives this approach is the risk identification and management tool that the ATO uses to identify high risk taxpayers and high risk sectors of the economy.

The ATO obtains the information for this tool from its own data mining activities of taxpayer data, but can also obtain information from other sources such as the Australian Securities and Investments Commission (ASIC) and the Australian Transaction Reports and Analysis Centre (AUSTRAC).

The ATO’s program targeting the SME sector (which includes Australia’s wealthy) has been particularly successful. In November 2011, the ATO acknowledged that it identified and monitored 2660 Australian high net wealth individuals (total wealth between $5m and $30m) and their accountants. Further announcements by the ATO indicate that they have identified and are monitoring a further 3000 Australians in this category.

All highly wealthy individuals (ie those controlling a total wealth of $30 million or more) are monitored by the ATO. Last year’s 386 income tax reviews and audits of highly wealthy Australians, raised $281 million in liabilities. The compliance program targeting high net wealth individuals resulted in 291 income tax reviews and audits, raising $1.1 billion in liabilities.

2. Who makes up the SME market?

This is a diverse group of taxpayers which ranges from simple, single entities to businesses with highly complex group structures to

highly wealthy individuals controlling $30 million or more in wealth.

There are almost 160,000 SME taxpayers with turnover between $2 million and $250 million. They are broken down into four SME market segments by the ATO: 1. Entities with turnover between $2 million and $10 million 2. Entities with turnover between $10 million and $50 million 3. Entities with turnover between $50 million and $100 million 4. Entities with turnover between $100 million and $250 million In addition, the ATO categorises taxpayers in this SME market as private groups, Highly Wealthy Individuals (HWIs) and Wealthy Australians (WAs). Highly Wealthy Individuals are Australian resident individuals who, together with their associates, effectively control an estimated net wealth of $30 million or more. Wealthy Australians are Australian resident individuals who, together with their associates (often including micro-enterprises), effectively control an estimated net wealth between $5 million and $30 million.

The categories of HWI and WA are important. In September 2012 the ATO noted that it would take the following action in respect of these two categories: Higher Risk Taxpayers • Undertake audits and reviews of all HWIs over two years.

• Undertake audits and reviews of 20% to 25% of SMEs and Wealthy Australians over two years. (Note that these are large populations compared to HWI) • Other treatments include expanded returns and where appropriate, prosecutions.

Medium Risk Taxpayers • Contact all HWIs over two years through specific issue audits and reviews, letter and phone campaigns.

• Contact 20% to 25% of SMEs and Wealthy Australians over two years through specific issue audits and reviews, letter and phone campaigns.

The latest anecdotal evidence would suggest that now in 2014 HWIs are constantly monitored by the ATO, while more WAs have been identified and are subjected to regular audits and review.

3. The compliance approach that the ATO uses for Small to Medium-sized Enterprise (SMEs), Highly Wealthy Individuals (HWIs) and Wealthy Australians (WAs) The SME business line within the ATO maintains a comprehensive online guide outlining this team’s approach to SME compliance issues.

The guide is a comprehensive, open and transparent view of what the ATO expects from taxpayers and how this team approaches compliance.The main chapters within the guide are: Building a mutual relationship • How we can help you • Our approach to interpreting the law • Our approach to compliance • How we manage compliance • Working together on compliance • Audit and review process • Assessment and amendment periods • Resolving disputes The ATO guide also explains SME’s risk management approach,

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

as an approach: • which reduces the costs of compliance for low-risk taxpayers; • ensures the ATO invests its resources in the areas of greatest risk; • supports taxpayers willing to participate and who need the ATO’s assistance; and • deals firmly with those not willing to comply.

A key point to note from this team’s approach is the strong emphasis on risk management and the prudent use of the resources available to the ATO. Under the heading ‘How we manage compliance’ more information is provided on this by the ATO’s explanations about SME’s private group and risk differentiation framework approaches.

4. The private group approach The SME team within the ATO uses several approaches to manage compliance risks, one of which is the private-group approach.

This categorisation helps the ATO to identify and profile wealthy individual taxpayers and their groups within the SME market.

A ‘private group’ is a group of entities under the control of an individual and their associates. By control, the ATO is referring to ‘effective control’, (ie where an individual has the key decision-making role over the business). The private-group approach links all entities related to a controlling individual.

Using data-mining techniques, the ATO is often able to detect relationships between privately grouped entities, including wealthy individuals companies, trusts and partnerships. Subject to privacy restrictions, the ATO prefers to deal with the head of the group rather than separate group entities when carrying out their activities. This approach allows the ATO to better understand the behaviour of the ‘controlling mind’ behind a private group structure and as a consequence, the ATO riskassesses compliance behaviours at a holistic group level rather than at an entity level. This is an important point to note, as a consequence of this approach is that the whole group is rated in accordance with the ranking of ‘lowest’ ranking entity (ie if one entity in the group is rated as being a higher risk taxpayer, this same ranking will be given to all entities in the private group).

The ATO uses a broad range of factors to risk rate private groups, but generally an entity is likely to attract the ATO’s attention where: • its financial or tax performance varies substantially over time or differs from the industry benchmarks; • it consistently pays little or no tax; • it has generated commercially unrealistic losses or it cannot justify its tax losses’ • it implements a transaction inconsistently with the advice provided in a ruling; • it has a history of aggressive tax planning; • it uses tax exploitation schemes.

5. The Risk Differentiation Framework (RDF) The Risk Differentiation Framework (RDF) is the ATO’s approach to assessing and managing tax risk.

The RDF initially applied only to large business (ie, those taxpayers with greater than $250 million annual turnover) .

The ATO commenced the pilot program in June 2011 for SME taxpayers, when it commenced assigning risk ratings to SME taxpayers. RDF assesses taxpayers in terms of both the risk of non-compliance and the financial impact of non-compliance on tax revenue. A risk rating is assigned to a taxpayer by the ATO

Wealthy depending on the taxpayer’s attributes and behaviours. Using a range of risk filters, the ATO assigns taxpayers a rating into one of four risk ’quadrants’: • ‘higher risk’ taxpayers; • ‘key’ taxpayers; • ‘medium risk’ taxpayers; and • ‘low risk’ taxpayers.

If a taxpayer has been allocated the highest risk category rating, this can result in significantly increased compliance costs, advisor fees and resources required to deal with the increased scrutiny the taxpayer will receive from the ATO. This table from the ATO website summarises how the RDF categories direct ATO activity and provides numbers about the types of clients in each category and information about the types of interactions the ATO will have based on the categorisation. (This table and further RDF information is available at www.ato.gov.au/ smecompliance.)

Table 3.1 Applying the risk differentiation framework to SMEs and wealthy individuals.

The allocation of resources and taxpayer numbers in each categorisation may change according to our priorities. Our active compliance activities are not limited to a particular categorisation.

The classification of taxpayers in the RDF process is not a negotiated or agreed process. There is a range of factors which we have seen in principle influencing taxpayers’ classifications into the various risk categories. These factors include both quantitative and qualitative items. The approach in the SME market, mainly due to size of the market, is a quantitative system based approach using tax return and third party data. Factors that are taken into account include matters such as: • effective tax rate; • compliance history (are returns lodged and payments made on time); • amendment history (taxpayers regularly amending lodged returns is perceived as a negative); • accuracy of disclosure information; • openness and transparency with the ATO; • taxpayer’s behaviour and attitude in response to the ATO’s request for information, reviews and audits; • financial ratio analysis – especially analysis of profitability, economic and tax performance relative to industry norms • whether or not there is ongoing business losses; • unusually large expense claims; • major business transactions; • changes in financial ratios; and • whether the tax performance of wealthy individuals is in line with the economic performance of their private groups.

While this list is not exhaustive, it includes factors which many taxpayers have historically not seen as key elements of the tax system, but which the ATO has focused on and which have therefore impacted ratings. Attention to these, while not necessarily sufficient to change a rating, should be considered a pre-requisite to ensuring a favourable rating is maintained, or a requirement to move to a more favourable rating if you are currently in a higher risk category.

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‘By being under constant review by the ATO, the taxpayer’s tax function is likely to have increased pressure brought to bear on its operations’ The ATO has indicated that the risk rating assigned to a taxpayer does not ‘in any way influence the outcome of a possible tax risk review, but it does influence the likelihood of a review and the formality and intensity of it.’

Taxpayers that are in the higher risk taxpayer category: • The ATO views the taxpayer as one willing to take more risks relative to industry peers.

• The taxpayer will be under constant scrutiny (i.e. continuous real time review) by the ATO. • The ATO’s engagement with the taxpayer will be more formal and frequent than the lower rated taxpayers.

• The taxpayer will have increased compliance costs associated with the additional ATO scrutiny.

• The taxpayer will be the first selected to test new or pilot ATO programs.

By being under constant review by the ATO, the taxpayer’s tax function is likely to have increased pressure brought to bear on its operations. The taxpayer’s resources will be required to be allocated to respond to an increased number of Requests for Information from the ATO. The ATO will focus a number of different ATO products concurrently on the taxpayer and they will be expected to deal with all concurrently. In our experience, most high risk taxpayers have had to boost headcount to deal with this classification. The increased intensity of investigation will likely also result in higher costs for engaging external advisors and counsel.

Taxpayers placed in the higher risk category should reassess their behaviours, processes and procedures and modify them if they wish to be moved out of this category and into the lesser risk key taxpayer category. A change in approach will need to be demonstrated over a prolonged period of time in order to achieve a lower rating, such as being a ‘key taxpayer’.

The significance of being a key taxpayer is that they are not as heavily scrutinised by the ATO. It is important to note that the RDF itself also places constraints upon the ATO, because the ATO must choose interactions with taxpayers that are appropriate to their categorisation.

6. Improving your Risk Differentiation Framework (RDF) rating In light of the current ATO scrutiny that is being directed towards private groups and, in particular, Wealthy Australians, it is only prudent to take steps to manage your tax risk and in so doing, improve your RDF rating.

1. Perform a due diligence review of your business We recently helped a client with a payroll tax audit, where the Office of State Revenue (OSR) changed its policy on how the payroll tax legislation was applied. The client has been in business for over twenty years and has had several payroll tax audits over the years, where their approach was ratified by the State Payroll Tax auditors. There was no announcement of the new interpretation of the payroll tax legislation and there certainly was no ruling on this issue from the OSR. However, this did not stop the OSR from wanting to go back 5 years to claw back several million dollars of payroll tax.

Even if you have been diligent in keeping up to date with your tax obligations, tax laws change, the interpretation of tax legislation changes, either through court cases or simply by there being a new tax administrator, and your business circumstances change.

Because you have always done something a certain way, does not mean it is right.There has been a spate of changes in recent months – speak to your tax advisor about the changes and if necessary, have them perform a due diligence of your affairs.

There are significant reductions in penalties where you find an error in your tax affairs and approach the tax office cap in hand.

2. Stay on top of your tax obligations By simply being a Wealthy Australian, you are already on the ATO

PAGE 19 ‘watch list’. Keep up to date with your compliance obligations – that includes completing and lodging forms on time, as well as making any payments on time. Remember that this factor is one of the most important in the ATO’s RDF model.

The ATO’s view is that ultimate responsibility for the enterprise’s tax affairs rests with the business owner. It encourages those responsible for the tax function within an SME to ensure sound organisational governance is in place to manage tax risk. This includes understanding your tax obligations, establishing sound risk management processes, getting advice commensurate with the complexity of your business dealings and ensuring your record keeping obligations are met. Remember that the ATO’s assessment of a taxpayer’s corporate governance policy and its operation is one of the factors that the ATO uses to detect and assess a taxpayer’s tax risk and thereby influences the taxpayer’s RDF rating. It is critical therefore that private business owners document their tax corporate governance procedures and have evidence of the application of these procedures and policies in their business operations.

In the ATO reviews we have assisted with, the ATO were certainly very interested in understanding our client’s processes, the advice that they have obtained and the underlying systems that helped them keep track of their affairs. Why increase the chances of an ATO audit by not meeting these expectations and raising your risk profile?

3. Get proper advice upfront before entering into any significant transactions One of our clients had a significant takeover transaction recently. Three months after the transaction they received a letter from the ATO requesting details on the transaction.

The client had not yet committed anything to its tax return.

Often clients enter into transactions and tell their tax advisors about it when they are engaged to complete the tax return.This may have worked in the past, but if you want to ensure that you don’t run into any issues, it is critical to obtain tax advice upfront for any transactions that are out of the ordinary course of your business. The ATO is moving towards real time auditing and as taxpayers we need to ensure that we employ best practice in all our tax affairs if we want to avoid any issues.

4. Maintain good records and keep them!

The general rule is that tax records have to be maintained for 5 years. However, there are exceptions, for example where tax losses are utilised, records must be kept for at least 5 years after the taxpayer has utilised the losses. With one of our clients this meant keeping adequate records for over 17 years, because the tax loss was incurred in 1996 and only fully utilised in 2008.

There is nothing more frustrating than knowing that your tax position is correct but not being able to prove it due to a lack of evidence. At Kelly Partners we have seen, and worked our way through, many boxes of records to know that keeping records can be a problem – and the more complex your affairs, the more difficult it is to maintain your records. However, there are many technologies today that can enable taxpayers to maintain records indefinitely. It will be well worth the effort to explore which one will work for you to enable you to maintain your records.

5. Get audit insurance We all know the saying that taxes and death are certain. If you are a high net worth taxpayer, you can add a tax review or audit to that list. In recent months we have assisted conservative taxpayers with a squeaky clean record with ATO reviews. In some cases these reviews have escalated into an ATO audit on the flimsiest of reasons – in one case a reason for the escalation was that the client’s company had consistently paid sufficient dividends, so that the client did not have a division 7A loan. Addressing these ATO reviews and audits takes time and money. Even if the ATO does not find any issues when reviewing your tax affairs, you still need to answer their queries as comprehensively as possible. This takes time and money – expect a bill north of $10,000 to address an ATO review where no issues are found. Having audit insurance to cover ATO reviews will help cover these costs that you will inevitably incur. ––■

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Wealthy

The best

BOOKS IN THE BUSINESS Tune in for business building ideas Article by: Brett Kelly

We know that if you want to have a culture that is unique and different, you must have your own language – concepts and ideas that can be quickly and powerfully understood by your team. At Kelly+Partners we have done this over the last decade by selecting a reading list and ensuring

that our teams read the books, the same books, so we have commonality of some core strong ideas that can make a difference in our business.

Ideas like ‘The Flywheel’ concept from Good to Great emphasise that it takes time to do things well but that there is enduring momentum once

YOUR MONEY, YOUR CHOICE

GOOD TO GREAT

This book provides you with the questions to ask your current accountant and to help you take control of your financial future. Too many people get carried away with one or two (supposedly) clever tricks and forget that just getting the simple things done correctly is a large part of getting everything else to work properly. These are the things you need to do to get your financial future sorted out.

The Challenge: Built to Last, the defining management study of the nineties, showed how great companies triumph over time and how long-term sustained performance can be engineered into the DNA of an enterprise from the very beginning.

you get moving over time.

Raving Fans has emphasised to our people that we want to deliver services that have our clients wanting to refer new clients to us that we can also help. The level of referrals is a clear indicator of the happiness of our clients.

RAVING FANS

Jim Collins

Kin Blanchard

Brett Kelly

NOW, DISCOVER YOUR STRENGTHS Marcus Buckingham

‘Your customers are only satisfied because their expectations are so low and because no one else is doing better. Just having satisfied customers isn’t good enough anymore. If you really want a booming business, you have to create Raving Fans.’

Marcus Buckingham, coauthor of the national bestseller First, Break All the Rules, and Donald O. Clifton, Chair of the Gallup International Research & Education Center, have created a revolutionary program to help readers identify their talents, build them into strengths, and enjoy consistent, near-perfect performance. At the heart of the book is the Internet-based StrengthsFinder® Profile, the product of a 25year, multimillion-dollar effort to identify the most prevalent human strengths.

YOU CAN’T BUY LOVE, BUT YOU CAN The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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THE KELLY+PARTNERS POST

Wealthy

‘IF YOU CLAIM TO HAVE A CULTURE, YOU MUST HAVE A LANGUAGE – GREAT BOOKS CAN GET EVERYONE AROUND GREAT IDEAS’

THE MILLIONAIRE NEXT DOOR Stanley & Danko

HOW TO WIN FRIENDS & INFLUENCE PEOPLE

THE 7 HABITS OF HIGHLY EFFECTIVE PEOPLE

INFLUENCE: THE PSYCHOLOGY OF PERSUASION

For more than sixty years the solid, time-tested advice in this book has carried thousands of now famous people up the ladder of success in their business and personal lives.

One of the most inspiring and impactful books ever written, The 7 Habits of Highly Effective People has captivated readers for 25 years.

It has transformed the lives of Presidents and CEOs, educators and parents – in short, millions of people of all ages and occupations.

Influence, the classic book on persuasion, explains the psychology of why people say ‘yes’ – and how to apply these understandings.

Dr. Robert Cialdini is the seminal expert in the rapidly expanding field of influence and persuasion. His thirty-five years of rigorous, evidence-based research along with a threeyear program of study on what moves people to change behaviour has resulted in this highly acclaimed book.

Dale Carnegie

The bestselling The Millionaire Next Door identifies seven common traits that show up again and again among those who have accumulated wealth. Most of the truly wealthy in this country don’t live in Beverly Hills or on Park Avenue – they live next door. This new edition, the first since 1998, includes a new foreword for the twenty-first century by Dr. Thomas J. Stanley.

Buy Handmade

Stephen R Covey

Robert B Cialdini

AND THAT’S KIND OF THE SAME THING. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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THE KELLY+PARTNERS POST

2016

FEDERAL BUDGET REVIEW 2016 Budget changes announced from the Federal Government Article by: Tony Nunes

This year Australians get the budget a week earlier than usual and, as expected in an election year, there were no dramatic changes to tax laws, no new taxes and generally good news for taxpayers. This year, the Treasurer, Hon Scott Morrison handed down a Federal Budget that is targeting business growth through support for innovation and tax reductions for small businesses.

Here are some of the highlights from this year’s budget…

Business Taxation 1. SMALL BUSINESS THRESHOLD TO INCREASE TO $10M

The government has announced that the small business entity turnover threshold will increase from $2m to $10m from 1 July 2016. Businesses that fall below the small business threshold gain access to a wide range of small business concessions, such as: • i mmediate deductibility for various start-up costs (such as professional fees and government charges); • t he simplified trading stock rules, which give businesses the option to avoid an end of year stocktake if the value of the stock has changed by less than $5,000; • t he simplified depreciation rules, including immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017 and then less than $1,000; • a simplified method of paying PAYG instalments calculated by the ATO, which removes the risk of under or over estimating PAYG instalments and the resulting penalties that may be applied; • t he option to account for GST on a cash basis and pay GST instalments as calculated by the ATO; • a 12-month prepayment rule; and • m ore generous FBT exemption for work-related portable electronic devices (such as mobile phones, laptops and tablets) However the change in the small business threshold will not apply for the purposes of determining eligibility for the small business CGT concessions, which will only be available for businesses with an annual turnover of less than $2m, or, that satisfy the maximum net asset value test (and other relevant conditions such as the active asset test).

2. A SSISTANCE FOR UNINCORPORATED BUSINESSES

16% in 2026-27. The current maximum value of the discount will remain at $1,000 per individual for each income year.

The tax discount will increase incrementally to 8% on 1 July 2016, and remain constant at 8% for 8 years.

Further increases will be made to 10% in 2024-25 and 13% in 2025-26, reaching a new permanent discount of

3. REDUCTION IN THE CORPORATE TAX RATE

To complement the company tax rate reductions, the tax discount for unincorporated small businesses (such as sole traders and partners in a partnership) will increase from 5% to 16%. over a 10 year period.

Further, from 1 July 2016, access to the discount will be extended to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5 million, an increase from the current threshold of $2 million.

The government has committed to cutting the company tax

The budget is not just a collection of numbers, but an expression of our values and aspirations.

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

- JACOB LEW

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by 1 July 2017. Excess balances for these members may be converted to superannuation accumulation phase accounts.

A tax on amounts that are transferred in excess of the $1.6 million cap (including earnings on these excess transferred amounts) will be applied, similar to the tax treatment that applies to excess non-concessional contributions.

2. A 30% TAX ON CONCESSIONAL CONTRIBUTIONS FOR TAXPAYERS EARNING MORE THAN $250,000, LOWER CONTRIBUTIONS CAP AND A LIFETIME CAP FOR NON-CONCESSIONAL CONTRIBUTIONS rate for small business entities to 27.5% (down from 28.5%) from the 2016-17 income year. The rate is set to reduce further to 27% in 2024-25 and then by 1 percentage point per year until it reaches 25% in 2026-27.

The Government also intends to streamline this rate across all companies by reducing the company tax rate to 25% by 20262027. The timeframe for how each entity will be effected will, depend on the company’s aggregated annual turnover, with small businesses gaining access to lower rates sooner.

4. IMPROVEMENTS TO THE OPERATION OF DIVISION 7A

The current rules on Division 7A are viewed as overly complex and difficult to apply. Subject to the outcomes of a consultation process, the Government will amend the Division 7A rules to include: • a self-correction mechanism for taxpayers whose arrangements have inadvertently breached Division 7A with the opportunity to make any voluntarily corrections without penalty; • a mended rules, with appropriate transitional arrangements, regarding complying Division 7A loans, including having a single compliant loan duration of 10 years and better aligning calculation of the minimum interest rate with commercial transactions; • t echnical amendments to improve the overall operation of Division 7A; and • N ew safe harbour rules, such as for use of assets, to provide certainty and simplify compliance for taxpayers.

These changes are designed to provide clearer rules for taxpayers within the overall policy intent of Division 7A and will take effect from 1 July 2018.

5. ESTABLISHMENT OF THE TAX AVOIDANCE TASKFORCE.

The Government is taking tax avoidance even more seriously.

The Treasurer announced that the Government will provide

$678.9 million to the Australian Taxation Office (ATO) to establish a new Tax Avoidance Taskforce.

This is a 55 per cent increase in funding for compliance programs targeting multinationals, private groups and high wealth individuals.

The Treasurer announced an increase in ATO staff levels for audits and enhanced information sharing between the ATO and the Australian Securities and Investments Commission to support the operation of the Taskforce through improved risk analysis and detection.

Other measures targeting tax avoidance were also announced, such as the strengthening of the protections for whistleblowers who come forward and report tax avoidance, the introduction of laws to require tax advisers and promoters of tax schemes to disclose reportable tax schemes to the ATO, and a strengthening of the transfer pricing rules.

Superannuation

Leading up to the budget, there has been much speculation around the changes to super. Super is seen as a long term savings mechanism towards retirement, thus the rules are generally inflexible and any reforms could have unintended consequences for taxpayers and the industry. The Treasurer announced several changes to super, but some of the key announcements were:

As from 1 July 2017, the point at which taxpayers pay additional contributions tax has been lowered from $300,000 to $250,000. The rate of tax on these concessional contributions has also been increased to 30 per cent tax, up from 15 per cent .

From 1 July 2017, the superannuation concessional contributions cap will be reduced from $30,000 (or $35,000 for taxpayers aged 50 or over) to $25,000 per annum. According to the Treasurer, only around three per cent of superannuation fund members are affected by this change.

A $500,000 lifetime cap for non-concessional contributions was also introduced, ostensibly to limit the extent to which the superannuation system can be used for tax minimisation and estate planning. The lifetime cap will take into account all non-concessional contributions made on or after 1 July 2007 and will commence at 7.30 pm (AEST) on 3 May 2016.

Contributions made before commencement cannot result in an excess. However, excess contributions made after commencement will need to be removed or subject to penalty tax.

The lifetime non-concessional cap will replace the existing annual caps which allow annual non-concessional contributions of up to $180,000 per year (or $540,000 every three years for individuals aged under 65).

Tony Nunes

BCom LLB LLM MTax CTA Registered Tax Agent

Senior Client Director – Tax Consulting

1. A $1.6 MILLION SUPERANNUATION TRANSFER BALANCE CAP

From 1 July 2017, a $1.6 million transfer balance cap on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase. Subsequent earnings on these balances will not be restricted. Where an individual accumulates amounts in excess of $1.6 million, they will be able to maintain this excess amount in an accumulation phase account (where earnings will be taxed at the concessional rate of 15 per cent). Members already in the retirement phase with balances above $1.6 million will be required to reduce their retirement balance to $1.6 million

TO DISCUSS THE IMPLICATIONS OF THE FEDERAL BUDGET FOR YOU AND YOUR BUSINESS, PLEASE CONTACT YOUR CLIENT DIRECTOR.

It isn't what you earn but how spend it that fixes your class. ― Sinclair Lewis The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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THE KELLY+PARTNERS POST

2016

FEDERAL BUDGET REVIEW 2016 Budget changes to Superannuation Article by: Kim Meredith

1. INTRODUCTION OF A $1.6 MILLION SUPERANNUATION TRANSFER BALANCE CAP From 1 July 2017 the Government proposes to introduce a $1.6 million transfer balance cap on the total amount of a taxpayer’s superannuation balances that can be transferred from their accumulation account into a pension account or into pension phase. Subsequent earnings on these pension accounts will not be restricted.

This will then limit the amount of superannuation assets that will be subject to a zero tax rate (Exempt Current Pension Income) whilst in the pension phase.

Individuals with superannuation balances greater than $1.6 million will be able to retain the additional amounts in their accumulation accounts where the super fund income is subject to a 15% tax rate.

Superannuation fund members with existing pensions that have balances greater than $1.6 million will be required by 1 July, 2017 to reduce these pension balances to $1.6 million.

This can be achieved by either transferring or rolling back amounts from their pension accounts into their accumulation accounts or withdrawing amounts from superannuation altogether. This would then reduce the minimum pension that they would be required to withdraw from the fund each year.

If the member is over 65 or retired they could, if they wished, withdraw lump sums from the unrestricted non-preserved balances in their accumulation account (tax free for over 60).

The $1.6 million transfer cap will be indexed in $100,000 increments in line with CPI and where members make more than one transfer into pension phase the amount of the cap remaining will be determined by apportionment of the cap previously used.

Additional tax similar to the tax treatment that applies to excess non-concessional contributions will apply to amounts transferred to pension phase in excess of $1.6 million (including earnings on the excess transferred amounts).

We would expect that this Transfer Balance Cap would operate on a per member basis not a per fund basis.

Therefore it wouldn’t matter if you have balances in more than one Super Fund you would only be allowed to have a total of $1.6 million transferred into pension phase across all of your superannuation funds.

2. CHANGES TO TRANSITION TO RETIREMENT INCOME STREAMS (TRIS)

From 1 July 2017 the government proposes to remove the tax exemption on earnings of assets held within a superannuation fund that support a TRIS. The fund earnings would then be treated the same as for an accumulation account and taxed at 15%.

The government also proposes to remove the rule that allows individuals to treat certain superannuation income stream (pension) payments as lump sums in order to access the tax free low rate cap of $195,000 for 2016/17.

3. INTRODUCTION OF A LIFETIME CAP FOR NON-CONCESSIONAL SUPERANNUATION CONTRIBUTIONS

Effective immediately, the Government will propose to introduce a $500,000 lifetime non-concessional contributions cap that takes into account all non-concessional contributions from 1 July, 2007.

Those who are already over $500,000 by Budget night will not be counted but excess contributions made after Budget night will need to be removed or will be subject to penalty tax.

This lifetime cap replaces the existing annual non-concessional caps of $180,000 per year (or if under 65 and bring forward triggered, $540,000 every three years).

A lifetime cap creates more complexity for the superannuation system and the retrospective nature of this change may be unfair to members who made nonconcessional contributions under the existing rules since 1 July 2007.

The Australian Taxation Office has non-concessional contribution records for members since 1 July, 2007.

4. L OWERING THE CONCESSIONAL CONTRIBUTIONS CAP TO $25,000 FOR ALL INDIVIDUALS.

From 1 July, 2017 the Government proposes to lower the concessional contributions cap to $25,000 for all taxpayers.

This cap will then be indexed in line with wages growth.

The existing concessional contributions caps will still apply for

the 2016 & 2017 financial years $30,000 for those aged under 50 and $35,000 for those aged over 50 (work test rules apply for over 65).

5. ALLOWING CATCH UP CONCESSIONAL SUPERANNUATION CONTRIBUTIONS

From 1 July, 2017 the Government proposes to allow individuals with superannuation balances of less than $500,000 to make additional catch up concessional contributions where they have not reached their concessional contributions cap in previous years. Unused cap amounts can be carried forward commencing from 1 July, 2017 on a rolling basis for a period of five consecutive years.

6. REFORMING THE TAXATION OF CONCESSIONAL SUPERANNUATION CONTRIBUTIONS (LOWERING THE DIV 293 THRESHOLD) It was announced in the 2012 Federal Budget that there would be a reduction in the tax concessions available for the superannuation contributions of high income earners. Division 293 tax of 15% is currently applied to certain concessional contributions of taxpayers where their adjusted taxable income is greater than $300,000. Individuals pay 45% income tax on their annual income over $180,000. Concessional superannuation contributions are taxed at 15% in the super fund which ultimately results in a 30% super tax concession.

The Division 293 tax of 15% effectively reduces the tax concession to 15%.

From 1 July 2017 the Government proposes to lower the Division 293 income threshold (the point at which high income earners pay additional contributions tax) from $300,000 to $250,000.

7. HARMONISING CONTRIBUTION RULES FOR THOSE AGED 65 TO 74

From 1 July, 2017 people between the ages of 65 and 74 will

Courage is what it takes to stand up and speak; courage is The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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THE KELLY+PARTNERS POST

no longer be required to satisfy the work test in order to be able to make superannuation contributions. You will also be able to make contributions to a spouse aged under 75 without the need for the spouse to meet the work test.

Currently if you are aged between 65 and 74 you are required to be gainfully employed for at least 40 hours in 30 consecutive days each financial year in order to make most types of concessional or non-concessional contributions.

8. TAX DEDUCTION FOR PERSONAL SUPERANNUATION CONTRIBUTIONS

From 1 July 2017 the Government proposes to allow all individuals up to age 75 to claim a personal tax deduction for member superannuation contributions up to the concessional contributions cap.

Individuals will be required to lodge a Notice of Intent to Claim a Tax Deduction with their Superannuation Fund and receive acknowledgement from the Fund prior to lodging their Income Tax Return.

9. IMPROVE SUPERANNUATION BALANCES OF LOW INCOME SPOUSES From 1 July 2017 the Government proposes to increase the low income spouse superannuation tax offset by raising the income threshold for the low income spouse to $37,000 from $10,800.

The contributing spouse is able to claim a tax offset of up to a maximum of $540.

The tax offset is calculated as 18% of what ever is lower:- $3,000 reduced by every dollar the spouses’ income is over $37,000

- or the amount of the spouse contribution

10. INTRODUCTION OF A LOW INCOME SUPERANNUATION TAX OFFSET (LISTO) From 1 July 2017 the Government proposes to introduce a Low Income Superannuation Tax Offset (LISTO) to replace the existing Low Income Superannuation Contribution (LISC).

LITSO will apply to members with adjusted taxable incomes up to $37,000 that have concessional contributions up to a cap of $500.

11. REMOVE THE ANTIDETRIMENT PROVISIONS

From 1 July 2017 the Government proposes to remove the anti-detriment provisions.

These provisions operated to allow superannuation funds to claim a tax deduction when paying lump sum death benefits in particular circumstances.

Comments

The Government’s proposed changes to superannuation will need to be legislated after the upcoming election.

There are unanswered questions in relation to the exact detail of how some of these measures will work and the mechanics of the changes.

The Government will also be legislating the objective of superannuation as ‘to provide income in retirement to substitute or supplement the Age Pension’.

There are many administrative changes that will be required to be made within the superannuation industry to be able to monitor the changes contained in these budget measures and many of these measures add to

the complexity of an already complex superannuation system.

Systems will need to be put in place to keep track of lifetime limits and rolling five year caps. There will be additional documentation required for lump sum payments from accumulation accounts instead of pension payments and actuarial certificates. These changes greatly increase the administration requirements for superannuation funds and members going forward.

The reduction in the concessional and non-concessional contributions caps may reduce the numbers of Australians that will be able to adequately save for their retirement within the superannuation system especially given the fact that we are all living longer in retirement.

These are the most significant changes to the superannuation system since the 2006 Budget. Constant changes from one budget to the next reduce the overall confidence in the superannuation system. Let’s hope that there will now be some ongoing consistency within the superannuation system in accordance with the superannuation objective.

If you have any questions or would like some assistance with identifying exactly how these proposed changes are likely to affect your superannuation please do not hesitate to contact your Kelly+Partners Client Director.

Kim Meredith

BCOM, CPA, SSA, JP

Senior Client Director - SMSF Specialist Advisor Phone: +61 2 4625 7711 Email: kim.meredith@kellypartners.com.au

also what it takes to sit down and listen.

- Winston Churchill

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Wise

Part 1

ON HAPPINESS Some healthy advice on your happiness Article by: Shawn Achor

TAKE TWO MINUTES EVERY DAY AND DO ONE OF THESE THINGS: 1. Write down three new things that you’re grateful for.

2. Journal about one positive experience you’ve had in the last 24 hours.

3. Try meditation, to teach your brain to focus.

‘Shawn, why do you waste your time studying happiness at Harvard?

Seriously, what does a Harvard student possibly have to be unhappy about?’

But the crazy truth is, Harvard kids are as unhappy as anyone else. What’s going on in your life – from health, to money, to relationships, to prestige – predicts only about 10% of your happiness.

So ... if I had a million dollars ... I wouldn’t be any happier?

Shawn’s work flips our understanding of happiness inside out.

You don’t get happy by achieving success. You achieve success by getting happy.

4. Use the first email you write every day to praise or thank someone you know. Spread the happy.

And it wouldn’t hurt to disrupt the endless barrage of bad news by sharing this with your friends, right? Everyone needs a little more happiness

Dopamine, which your brain makes when you’re happy, has one important side effect: It makes you smarter. A positive brain is 31% more productive.

It’s better at sales, faster and more accurate at diagnosing problems.

So how can you up your dopamine?

HEALTHY RELATIONSHIPS

ACCOUNTABILITY

SAFETY

• Admits mistakes when wrong • Accepts responsibility for behaviours, attitudes and values

• Refusing to intimidate or manipulate • Respecting physical space • Expressing self non-violently

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

HONESTY • Communicate openly and truthfully

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THE KELLY+PARTNERS POST

Wise

Part 2

ON HAPPINESS In this TED Talk, Harvard’s 75-year study yields real insight Article by: Ted Talks/Professor Robert Waldinger

It is the longest happiness study ever conducted.

This is what they believed would make them feel happy and fulfilled.

Seriously.

Harvard professor Robert Waldinger is the director of a 75-year study following the lives of 724 men.

It is the longest happiness study ever conducted.

In a newTED talk, Waldinger revealed the three main fi ndings of the study and they weren’t being able to buy the world’s most expensive wine, becoming famous or being cradled by your masseuse.

While there is room to enjoy other ‘stuff ’, the three things that determined whether the men were happy in their old age were all to do with relationships.

1. The first lesson was that social connections make us, and that loneliness breaks us. ‘It turns out that people who are more socially connected to family, to friends, to community, are happier, they’re physically healthier, and they live longer than people who are less well connected,’ Waldinger said. ‘And the

experience of loneliness turns out to be toxic.’

2. ‘The second big lesson that we learned is that it’s not just the number of friends you have, and it’s not whether or not you’re in a committed relationship, but it’s the quality of your close relationships that matters,’ he explains. ‘It turns out that living in the midst of conflict is really bad for our health. High-conflict marriages, for example, without much affection, turn out to be very bad for our health, perhaps worse than getting divorced.

And living in the midst of good, warm relationships is protective.’

3. ‘The third big lesson that we learned about relationships and our health is that good relationships don’t just protect our bodies, they protect our brains,’ Waldinger says. ‘It turns out that being in a securely attached relationship to another person in your 80s is protective, that the people who are in relationships where they really feel they can count on the other person in times of need, those people’s memories stay sharper longer.

SUPPORT • • • •

Supporting each other’s choices Being understanding Offering encouragement Valuing opinions

COOPERATION • • • •

Asking not expecting Accepting change Making decisions together Willing to compromise

‘And the people in relationships where they feel they really can’t count on the other one, those are the people who experience earlier memory decline.

And those good relationships, they don’t have to be smooth all the time.

Some of our octogenarian couples could bicker with each other day in and day out, but as long as they felt that they could really count on the other when the going got tough, those arguments didn’t take a toll on their memories.’

Waldinger’s suggestion, if we want a good life and a happy life, is to start leaning into our relationships.

‘Just like the Millennials in that recent survey, many of our men when they were starting out as young adults really believed that fame and wealth and high achievement were what they needed to go after to have a good life,’ he said.

‘But over and over, over these 75 years, our study has shown that the people who fared the best were the people who leaned in to relationships, with family, with friends, with community.’

TRUST • Accepting each other’s words • Giving benefit of the doubt

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Kelly+Partners Mini’s

Coming Soon!

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

THE PLANET DOES NOT NEED MORE ‘SUCCESSFUL PEOPLE’. BUT IT DOES DESPERATELY NEED MORE PEACEMAKERS, HEALERS, RESTORERS, STORY TELLERS, AND LOVERS OF EVERY KIND. IT NEEDS PEOPLE WHO LIVE WELL IN THEIR PLACES. IT NEEDS PEOPLE OF MORAL COURAGE WILLING THE WORLD HABITABLE AND HUMANE. AND THESE QUALITIES HAVE LITTLE TO DO WITH SUCCESS AS WE HAVE DEFINED IT. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Wise

13 Instructions for life

JACK COWIN Article by: Brett Kelly

He became an insurance salesman with London Life for four years in Toronto before deciding to visit Australia to assess some business opportunities.

Seeing long queues at a Chinese takeaway restaurant while vacationing in Sydney, he became convinced that fast food would sell well. He later returned to Australia to evaluate expanding KFC into the market that at that stage had limited fast food options.

He bought the right to open ten KFC franchises in Western Australia, raised $10,000 from each of thirty people to launch the business in December 1969, having moved with his wife and young child. Those who invested $10,000 then had an investment worth around $8.9 million as of March 2006.

After opening eight KFC outlets, he bought the rights to Burger King. They both later discovered someone else had the rights to the Burger King trademark in Australia, so Cowin instead called the outlets Hungry Jack’s. Many years later he had a falling out with Burger King over the name and other issues related to their franchise agreement which was eventually resolved in his favour. The business Competitive Foods Australia continues to be privately held by his family, with an estimated value of $350 million. It owns 50 KFC outlets in Western Australia and the Northern Territory in addition to the 350 Hungry Jack’s outlets throughout Australia, only 100 franchised.

Cowin also owns a meat processing business that exports throughout the world. He sold a substantial investment in Stanbroke Pastoral Company, one of the country’s biggest cattle station operators. He is also an investor with 40% of BridgeClimb, the business that operates walking tours over the Sydney Harbour Bridge. Bridgeclimb itself made an estimated $10 million profit in 2002. He also invested in Network Ten, the television broadcaster, selling out of his stake with a profit of around $100 million. Cowin is also an investor in the Lone Star restaurant chain in Canada.

He is a member of the board of directors of Ten Network Ltd. He is also a director of the Sydney Olympic Park Authority, a director of Chandler McLeod Recruitment company and in July 2012 joined the board of directors of Fairfax Media. Cowin is an active member of the World Presidents Organization. He lives in Sydney with his wife, with whom he has had four children. (from Wikipedia)

IF YOU ARE WILLING TO DO MORE THAN YOU ARE PAID TO DO, EVENTUALLY YOU WILL BE PAID TO DO MORE THAN YOU DO. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Wise

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JACK COWIN’S 13 INSTRUCTIONS FOR LIFE 1. IF YOU LOSE YOUR HEALTH, NOTHING ELSE MATTERS. 2. IF YOU LOSE YOUR INTEGRITY NO AMOUNT OF SUCCESS WILL BE MEANINGFUL AND IT WILL PRODUCE A HOLLOW FEELING WHEN YOU LOOK IN THE MIRROR. 3. CONTROL YOUR OWN DESTINY. 4. BE PREPARED TO TAKE SOME RISKS. LIFE’S AN ADVENTURE. 5. NO SHORTAGE OF GOOD IDEAS. DON’T WAIT UNTIL THE DOGS ARE BARKING TO DO SOMETHING. 6. GET SOME MONEY OUT OF THE BUSINESS – YOU’LL SLEEP BETTER AT NIGHT. KEEP SOME POWDER DRY. HAVE AN OPPORTUNITY FUND. 7. FIND A TOLERANT WIFE OR HUSBAND WHO APPRECIATES YOUR SEARCH FOR SUCCESS AND FULFILLMENT. BE GOOD TO YOUR KIDS. THEY’RE THE ONES WHO CHECK YOU INTO THE NURSING HOME. IT CAN BE UNFULFILLING TRYING TO ENJOY YOURSELF WHEN OTHERS DON’T ENJOY YOUR COMPANY. 8. NEVER EVER GIVE UP IF YOU THINK YOU’RE RIGHT. BIG COMPANIES WORK ON THE BASIS THAT THE LITTLE GUY WILL FOLD. 9. DON’T GET CAUGHT UP IN YOUR OWN SELF-IMPORTANCE. TRY TO BE HUMBLE EVEN IF YOU DON’T BELIEVE IT. LAUGH AT YOURSELF. 10. LIFE IS ABOUT DEALING WITH PEOPLE. YOU CAN SOLVE THE BIGGEST PROBLEMS IN LIFE IF YOU HAVE A SMILE ON YOUR FACE. 11. TRY AND SURROUND YOURSELF WITH SMART PEOPLE WHO COMPLEMENT YOUR SKILLS. 12. FOCUS. DON’T GET THE NEW GIRL SYNDROME, READILY DISTRACTIONS. BE A RIFLE NOT A SHOTGUN. 13. UNDERSTAND THE BASICS OF BUSINESS. NO ONE REALLY UNDERSTANDS THE LOGIC OF WHY SOMETHING IS WORTH WHAT IT IS.

OPPORTUNITIES DON’T HAPPEN. – CHRIS GROSSER

You create them.

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Kelly+Partners

2015

IN REVIEW See the highlights of a great year Article by: Josh Thomas

MYOB ACCOUNT SYSTEM

Kelly+Partners is recognised as one of the most efficient and fastest Growing accounting firms in Australia, receiving multiple BRW awards. 2015 was one of the biggest years for the firm With a proactive approach to improving internal process, Kelly+Partners assigned a new accounting team to oversee the company’s and provides a bright outlook on where the company is going accounting operations. Pauline Michelakis ( Chief Financial Officer) and Kenneth Ko ( Financial Manager) bring a wealth of experience in the future. Here’s a breakdown of what Kelly+Partners was and knowledge to improve operations. up to in 2015.

Two Thousand and Fifteen was a year for explosive Growth for Kelly+Partners, opening four new offices across New South Wales, Hong Kong (1 September), Oran Park (8 September), Southern Highlands (16 September) and Northern Beaches (2 November). With Growth in the company’s priorities in 2016, expect big things to come.

MARCH–FUTURE LEADERS

Starting off 2015, Kelly+Partners held their quarterly interview series, Family Business in Conversation – series intended to share the experiences and expertise of some of Australia’s leading family business owners. Garlo’s Pies CEO, Sean Garlick, was the topic of conversation and told the story of how Garlo’s Pies came to be. A fantastic event which you can look forward to attending in 2016.

February also saw the second year of Kelly+Partners Grow Program – a strategic business course designed for private business owners wanting to go somewhere in business.

Eleven private business owners gathered once a month to take part and learn how to better manage their business, finances and time. Participants included – Andrew Simmons (Founder, Vision Personal Training), Bryan Murphy (CEO Colour Smart Solutions) and Allan Gray (Director, UltraTune). Make the most Kelly+Partners hosted their annual high performance retreat, Future Leaders – 20 high-performing staff gathered on the out of your business and time and join the 2016 Grow Program Gold Coast to take part in a week of strategic self-building, learning how to improve performance and become more effective leaders in their given positions.

MARCH TO OCTOBER–STRATA IN CONVERSATION

Hong kong Office

Kelly+Partners highly regarded discussion forum, Strata in Conversation was back in 2015 and expanded to events in Melbourne (6 March), ACT (24 April), Sydney (21 August), Cairns (28 August), Melbourne (9 October), Sydney (18 October) and Brisbane (29 October). The series returns in 2016 with events already set for Boorangaroo Sydney, ACT, Melbourne and Gold Coast.

In the end, only three things matter: how much you loved, how gently you lived, and how gracefully you let go of the things not meant for you.

– BUDDHA The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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APRIL–NEW PARTNERS

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on the accomplishments and performance of the company’s people. Emma Micallef was awarded the gold calculator, an award highlighting Emma’s high performance throughout the year.

NOVEMBER–LOCAL BUSINESS HEROES

Kelly+Partners signed three new partners to the Growing firm – Ryan Bultitude (Central Coast), Joel Russell (North Sydney) and Scott Coombes (Norwest). The firms new partners bring a wealth of experience and knowledge, making a positive impact on company operations.

MAY–GLOBAL EXPANSION With foreign expansion on the forecast, Kelly+Partners joined tgs, a global network of accountancy firms specialising in accounting, audit, tax, business advisory and commercial and legal services. Being a part of the tgs demonstrates a firms entrepreneurial approach to their own and their own clients’ businesses.

Local Business Heroes is a discussion based forum with different topics and guest speakers at each event. This year the event was held at Pilu on the Northern Beaches and the topic of conversation was, innovate like a start-up. Local Business Heroes returns in 2016, but if you would like to attend, get in quick, because it sells out fast.

NOVEMBER–PLAN TO WIN

AUGUST–STRATEGY DAY

2015 marked the inaugural Plan to Win, an inspirational speaking engagement for private business owners wanting to go somewhere in business.The event was a massive success, selling out weeks before it started and attracting some of the most successful private business owners in Australia, including Jack Cowin, Collette Dinnigan, Tom Waterhouse, Angus Kennard, Andrew Simmons and James Stevens. Join Kelly+Partnes at the Hilton, Sydney, on Thursday 17 September for an insightful day of learning from the top business owners in Australia.

DECEMBER Kelly+Partners held their annual Strategy Day – an employee-focused event, sharing, discussing and improving on internet and external business strategy. The event was held at the Harbourview Hotel in North Sydney.

AUGUST–AWARDS DINNER

The final year of the month was an extremely productive time for Kelly+Partners as two company portals were implemented, Print and Merchandise portals, allowing all employees to access company stationery, print resources and also branded merchandise. The portals allow Kelly+Partners to consolidate resources and simplifies the access of company stock.

The Annual Kelly+Partners award dinner was held at the Studio Sydney Tower, a time to reflect

To reach great height a person needs to have great depth – ANONYMOUS

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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2015

PLAN TO WIN Article by: Brett Kelly

Gather nine prominent entrepreneurs in one room and the atmosphere is definitely one of winning.

Late last year, Kelly Partners hosted a one-day Plan to Win conference in Darling Harbour, bringing together some of the sharpest business minds in the country to share their wisdom to a sold-out crowd of 300 guests.

Most private business owners have a plan: goals, milestones, KPIs, targets. But how many actually have a plan to WIN? In an entrepreneurial world, failure can become glorified. We’ve all heard the ‘fail hard, fail fast’ mantra. Failure builds character and resilience, opening several new doors in place of one that closes, yet winning builds confidence on the road to success. Ultimately, it’s about setting a clear plan and following your purpose with consistency. Each speaker had their own story to tell of peaks and troughs on the journey. Jack Cowin even shared his ‘13 Instructions for Life’, which had guests scribbling notes while furiously trying not to miss a word.

The underlying themes of 2015’s conference were culture, values and purpose. Collette Dinnigan, one

CHARLIE MUNGER

of Australia’s most well-known fashion designers, shared the reasons behind her brave decision to stop production of the bridal line and shut down several boutiques. For mother-of-two Dinnigan, living your purpose is about being in the moment – without guilt, whether you’re at work or home – rather than the myth of work-life balance. James Stevens and Tom Waterhouse shared interesting insights into the current digital age that’s allowing us to be at work no matter where we are, from way back when moving a business online was seen as a risky move.

Brett Kelly and Andrew Simmons from Vision PT agreed that company culture and values also means having the right people in the right positions; building a solid, skilled team is crucial, but it’s also about knowing when to let go. Dinnigan shared that one of her toughest challenges along the way has been holding onto the wrong people: ‘A lot of decisions need to be made on gut instinct, rather than formula.’ The rules certainly vary in entrepreneurship – who would’ve thought former Rabbitohs’ player Sean Garlick would end up

‘THE GAME OF LIFE IS THE GAME OF EVERLASTING LEARNING. AT LEAST IT IS IF YOU WANT TO WIN’

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

teaming with his pastry chef brother to start a pie company?!

Angus Kennard, of Kennards Hire, opened the morning with a video showcasing the importance of fostering strong company culture in building a trustworthy, recognisable brand and bring your values to life. ‘Every person, every leader, every dollar we spend has to serve that purpose,’ Kennard said. Bookending the day was husbandand-wife power team, jewellers Nicola and Carmela Cerrone, who agreed on the value of company culture in building your brand, saying ‘It’s about being unique, authentic and making people feel valued.’

Ultimately, the journey to winning is summed up by Cowin as ‘genuine and enduring entrepreneurship.’

This year’s Plan to Win conference will be hosted

by Kelly Partners on 9 September at the Hilton Hotel, Sydney. Speakers are yet to be confirmed, but for now, ask yourself ‘What’s my plan to win?’

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NEVER WISH LIFE WAS EASIER, WISH THAT YOU WERE BETTER - JIM ROHN The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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JANUARY - MARCH

MELBOURNE • SYDNEY • BRISBANE • ADELAIDE • PERTH

12 ROSES $99.95 • 24 ROSES $169.95

INCLUDING SAME DAY DELIVERY FOR ORDERS PLACED BY 1 PM, MONDAY - FRIDAY

1300 889 876 10% OFF DAVID JONES FLOWERS

WHEN YOU ENTER PROMO CODE KELLY10 AT CHECKOUT OFFER EXPIRES 30TH JUNE, 2016

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Kelly+Partners

GOOD NEIGHBOURS

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Duncan’s Journey

THE CAPTAIN’S RIDE STEVE WAUGH FOUNDATION

Over 6 days Duncan Kerr cycled 920km from Sydney to Byron Bay. Article by: Josh Thomas

PICTURED: DUNCAN KERR

Today will never come again. Be a friend. Encourage The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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‘We strive to improve the quality of life for children and families affected by rare diseases.The rare disease patient is the orphan of the health system, often without diagnosis, without treatment, without research and therefore, without reason to hope.

The Foundation has already supported over 200 families through generous donations from our Patrons, corporate partners and supporters. Over a million dollars has been used for medication, treatment, specialised equipment and financial support.’

– STEVE WAUGH Duncan Kerr is not known for doing things by halves. The former British Navy Officer, professional sports trainer and NSW paramedic takes challenge in his stride, even if it is a 920km bike ride from Sydney to Byron Bay. A long time supporter of the Steve Waugh Foundation and a close friend to its founder, Duncan jumped at the chance to take part in the six-day journey, which would see him battle the elements and some of the toughest stretches of road in New South Wales as he ventures through six rural towns on his way to Byron Bay. ‘It’s tough, it puts you out of your comfort zone, it challenges you, it stretches you, all the things that these people with rare diseases need to go through’,Duncan explained as being what motivated him to take Steve Waugh up on his offer of joining the exclusive Captain’s Ride.

The Captain’s Ride dedicated each of the six day legs to different diseases and used each checkpoint as a way to meet the people living in the area with rare diseases.

‘We met many amazing people along the way and it was incredibly inspiring to hear their stories and see the impact that the Steve Waugh Foundation is making in these people’s lives’, mentioned Duncan who highlighted day 3, Gloucester to Armidale and meeting Liam who suffered from Acute Disseminating, a disease that damages Myelin, the protective covering of nerve fibres.

Duncan was sponsored along his Journey by Kelly+Partners who set out to assist this determined individual raise $10,000 for the Foundation. Kelly+Partners are also big supporters of the Steve Waugh Foundation and managed to raise a total of $50,000 through sponsorship and holding a fundraising auction at their annual Plan to Win conference.

When asked if Duncan would be taking part in next year’s Captain’s Ride, he had this to say, ‘Absolutely, I have already spoken to Steve Waugh and said I am keen to give it another go and CEO of Kelly+Partners, Brett Kelly, has said he would join me’.

The Steve Waugh Foundation is committed to a coordinated approach to the service, identification, treatment and research of rare diseases to improve the quality of life of children and young adults affected by rare diseases (0-25 years of age).

We strive to improve the quality of life for children and young adults and their families affected by rare diseases.

The rare disease patient is the orphan of the health system, often without diagnosis, without treatment, without research and therefore, without reason to hope.

Families and carers of children and young adults with rare diseases experience significant psychological stress due to social isolation, unemployment, diagnostic delays, lack of information and difficulty accessing appropriate health care.

The Steve Waugh Foundation is working to help change things for children with a rare disease by giving hope, providing medicine, equipment and treatment, supporting education and research, partnering with other like agencies and organisations as well as supporting specific projects and programs. The Foundation has already supported over 200 families through generous donations from our Patrons, corporate partners and supporters. Over a million dollars has been used for medication, treatment, specialised equipment and financial support.

We invite you to join the Steve Waugh Foundation to give children and young adults with a rare disease and their families ‘somewhere to turn’.

visit at www.stevewaughfoundation.com.au

someone to take time to care. Let your words heal, and not wound.

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Great

EVENTS IN 2016 Giving, celebrating and learning in 2016 Article by: Josh Thomas Traditional business models do not typically allow for abstract concepts like self-expression, creativity, and brand identity. But this is exactly why engaging these subjects is integral to our success. Everything we do has been guided by a set of principles that define our character and culture. Giving, celebrating and learning is a way that we express ourselves and humanise our brand.

Two thousand and sixteen is a year we continue our passion for giving back, to our charities,

team and clients. The inaugural Betty Zerefos Memorial Golf Day is an opportunity to support a member of our Kelly+Partners family who tragically passed away from brain cancer, while raising funds for research by the Cure Brain Cancer Foundation.

Sydney. An event which showcases how far we have come and where we are going.

One thing all highly successful organisations have in common is the value they place on how their people learn. If people are an organisation’s best asset, then the skill level of the employees must be continually developed. Two thousand and sixteen we host our annual Plan to Win conference for private business owners, an event which asks us ‘why are we in business’, where are we going and how we will get there.

It is important to look back at past successes and celebrate your accomplishments, as a way to focus on future plans and goals. Two thousand and sixteen is a year we celebrate our 10-year anniversary with a spectacular event in

PLAN TO WIN 2016

BETTY ZEREFOS MEMORIAL GOLF DAY Kelly+Partners held its inaugural Betty Zerefos Memorial Golf Day at Terrey Hills Golf and Country Club on Thursday 3 March.

Betty was a wonderful, energetic and much loved member of the Kelly+Partners team from 2008 through to October 2015, when she passed away from brain cancer, aged 39. She leaves behind her husband Vic and twins John and James and Christian and Dean. We have set up an education fund for Betty’s boys and all moneys raised from the golf day will be split between this fund and the Cure Brain Cancer Foundation.

We are very pleased to have Professor Charlie Teo from Cure Brain Cancer Foundation as our guest speaker at lunch, following the golf.

Friday 9 September – Kelly+Partners are excited to announce the return of Plan to Win, an inspirational speaking engagement for private business owners wanting to go somewhere in business. Last year’s sold-out event was a huge success, attracting over 300 attendees for a day of learning from some of the most successful private business owners in Australia, including Jack Cowin, Collette Dinnigan and Tom Waterhouse.

Join us at the Hilton, Sydney on Thursday 17 September for an insightful day of learning from the top business owners in Australia.

The course at Terrey Hills is magnificent and as the event is an Ambrose, you don’t have to be a star golfer! I hope you will consider joining us for golf and to support these great causes.

LESSONS LEARNED IN LIFE

IN THE BLINK OF AN EYE, EVERYTHING CAN CHANGE. SO FORGIVE OFTEN AND LOVE WITH ALL YOUR HEART. YOU MAY NEVER KNOW WHEN YOU MAY NOT HAVE THAT CHANCE AGAIN. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Betty Zerefos

MEMORIAL GOLF DAY CURE BRAIN CANCER FOUNDATION

Kelly+Partners raised over $30,000 for Betty Zerefos and Cure Brain Cancer Foundation Article by: Josh Thomas

PICTURED: TERREY HILLS GOLF AND COUNTRY CLUB On Thursday 3 March Kelly+Partners hosted the inaugural Betty Zerefos Memorial Golf Day at the Terrey Hills Golf and Country Club with the goal of raising $30,000 which would be split equally between an education fund for Betty’s children and to fund research for Cure Brain Cancer Foundation.

Betty Zerefos was an integral part of the Kelly+Partners family and acted as Kelly+Partners founder and CEO, Brett Kelly’s PA from October 2008 to February 2015. Betty tragically passed away from brain cancer on the 30 October 2015, aged 39, leaving her husband Vic and twins John, James, Christian and Dean.

More than sixty golfers attended the Betty Zerefos Memorial Golf Day, playing 18 holes at the world-class Terrey Hills

PICTURED: BETTY ZEREFOS course and enjoying a gourmet 2-course lunch with a special presentation from Professor Charlie Teo. Professor Charlie Teo discussed the tremendous impact Brain Cancer has on society and the foundation’s reliance on donations and on-going support.

‘The disease is indiscriminatory to who it effects. I understand Betty was very fit, ate well, was very positive… and to be struck down with brain cancer is tragic and very, very unfair,’ Professor Teo expressed.

Following Professor Teo’s presentation, a fundraising auction was held for a number of donated items such as a weekday’s stay at Palazzo Versace, event voucher for Aria Restaurant, Garden Fireplace and a HD TV.

Brain Cancer kills more people under 40 in Australia than any other cancer, yet only receives a fraction of federal government cancer research funding. Cure Brain Cancer was founded in 2001

by Prof Charlie Teo with the primary goal to increase the 5-year survival rate to 50% by 2023.

We are delighted with the response and support received for the Betty Zerefos Memorial Golf Day and look forward to hosting the event annually.

Including donations, attendance on the Golf Day and money raised from the auction items, Kelly+Partners raised $36,439 which will be split equally between an education fund for Betty’s children and to further research for Cure Brain Cancer Foundation.

WE MAKE A LIVING BY WHAT WE GET, The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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BUT WE MAKE A LIFE BY WHAT WE GIVE. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

TAKE CONTROL OF YOUR FINANCIAL UNIVERSE • Income & tax calculators • Income tracker & logbook • Latest news & reports Use your smartphone’s ‘QR’ code scanner to download the ‘Kelly+Partners’ App. Or you can also download by visiting SCAN QR CODE

#GoSomewhere kellypartners.com.au

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Kelly+ Partners

DIRECTOR EMERITUS These are our valued senior team members that have helped build Kelly+Partners into the business it is today.

Rex Hoeben Jan 1965 J oins Coopers & Lybrand as a trainee Accountant Jul 1977 Leaves Coopers & Lybrand to commence practice as Rex Hoeben Chartered Accountant.

Sep 1980 Merges with Garner & Hughes, to practice as Hughes Hoeben & Co. Partners: G D Hughes, R Hoeben and 3 staff Mar 1983 G D Hughes retires and Rex Hoeben continues trading as Hughes Hoeben & Co. Feb 1985 Merged Practice with Pritchard Adams in Crows Nest. Partners: R Hoeben, Peter Cronin and 7 staff Jun 1995 Practice moves to CBD Barrack Street, Sydney with 6 Partners and 50 staff.

Jun 2007 The Firm of Pritchard Adams dissolves and each of the Partners goes their separate ways.

Rex Hoeben joins Kelly Partners, with his PA and 4 Strata support staff.

Jun 2014 Rex Hoeben retires

Albert Cachia Dec 1961 Completes Higher School Certificate at Waverley College Dec 1961 Commences with Walmsley Cowley as an Audit Clerk Oct 1970 Bachelor of Commerce - UNSW Equivalent, Institute of Chartered Accountants Jan 1971 Joines KPMG Peat Marwick as a Manager at Port Moresby, PNG, office, working in the disciplines of audit, accounting, company secretarial, taxation, liquidation and company reconstruction, valuation of businesses, family law valuations, litigation support Jul 1982 Admission as a Partner at KPMG Peat Marwick, based in the Wollongong office Mar 1994 Joines Bill Bartlett and forms a new firm, Bartlett & Cachia Oct 2008 Sold Practice and retained as a Consultant with AJ Bartlett Cachia Oct 2013 Consultant to Kelly Partners Wollongong Nov 2013 Resigns as liquidator and member of Insolvency Practitioners Association of Australia Dec 2014 Retires as a Kelly Partners Consultant

Bill Croker Practice commences as Anthony Marks Croker & Co Practice merges with D F Cheetham & Associates to become Marks Croker & Cheetham.

Jul 1986 A D G Marks retires from Practice Jul 1989 W S Dinale admitted as a Partner Jul 1990 D F Cheetham retires from Practice Jul 1992 Practice changes name to Dinale Croker Partners Jul 1997 T B Bryan admitted as a Salary Partner Jul 1998 T B Bryan admitted as an Equity Partner Jul 1999 Practice Celebrates 20 years in Practice Jul 1999 W S Dinale retires from Practice Jul 1999 Practice merges with BCD Financial Services Pty Ltd and R A Burns becomes a Partner Jul 2000 Practice changes name to BCP Accounting & Business Advisors Jul 2001 J L Ramos admitted as a Partner Jul 2004 W T Croker celebrates 25 years in Practice Sep 2005 J L Ramos retires from Practice Jul 2006 Super Certain Pty Ltd is established with Partner K M Meredith Jul 2008 P G Campbell admitted as a Partner Jul 2008 A R Eagar admitted as a Salary Partner Jul 2011 BCP Accounting & Business Advisors joins Kelly+Partners Chartered Accountants Group Jun 2013 W T Croker retires from Practice Jul 1979 Jul 1984

DON’T BE ASHAMED OF HAVING FELT SOMETHING SO BEAUTIFUL AND REAL FOR SOMEONE ELSE. EVEN IF THEY DIDN’T DESERVE IT. DON’T BE ASHAMED. IT TAKES PHENOMENAL STRENGTH FOR YOUR HEART TO BE THAT SELFLESS. HONOR THAT. The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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We have Sydney Covered KELLY+PARTNERS OPERATING ALL AROUND SYDNEY OVER THE LAST 10 YEARS. ALWAYS GROWING AND LOOKING TO GO SOMEWHERE!

CENTRAL COAST

BATHURST

NORWEST

WESTERN SYDNEY

NORTHERN BEACHES

NTH SYDNEY ORAN PARK

SOUTH WEST SYDNEY

SOUTHERN HIGHLANDS

ERS GROUP HOLDINGS • 151_KP LOCATIONS_HORI_V24_02.16

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

WOLLONGONG

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Kelly+Partners

OFFICE LOCATIONS Kelly+Partners office locations profiled

The firm was founded in a serviced office of 20 square metres in 2006 and has Grown to be one of the top 30 accounting firms in Australia, though the heritage of clients in antecedent firms go back some 90 years.

WESTERN SYDNEY

SOUTH WEST SYDNEY

The Western Sydney team, located in Penrith, has been a premier provider to business owners for more than 20 years in the region. The office is located in Penrith, a short distance from the train station and major roads.

For more than 32 years the Campbelltown based team has been the leading service provider to business owners in the Macarthur region. The office is located in Campbelltown.

NORWEST

ORAN PARK

The clients of the firm were its true Founders. These clients wanted an integrated, forward looking financial advice solution that dealt with the full range of personal and business needs of the Private Business Owner.

Kelly+Partners has always worked on the maxim that ‘the quality of our business must be our best business card’ and to this end we are proud to invite prospective clients to look at our business first before deciding whether we can add any value to their business. Here are profiles of the 10 Kelly+Partners offices around NSW. Learn about the firms history and Growth over the past 10+ years.

Kelly+Partners Norwest opened in November 2011 and serves the private business owners in this Growing business district.

Kelly+Partners Oran Park joined the group in January 2015.

As one of Australia’s fastest Growing areas, our Oran Park team is very excited to bring our unique approach to private businesses in the area.

CENTRAL COAST

CENTRAL TABLELANDS

SOUTHERN HIGHLANDS

The first K+P team started in Erina and the focused practice looks after the Central Coast’s Growing businesses.

Kelly+Parters Central Tablelands, located in Bathurst, opened in March 2013 and is committed to looking after Growing businesses in the region. The office is located in Bathurst.

The team at Mittagong in the Southern Highlands is excited to be looking after the Growing businesses in the region.

NORTH SYDNEY

NORTHERN BEACHES

WOLLONGONG

The North Sydney team of more than 40 professionals has served some clients for more than 10 years, representing more than three generations.

Kelly+Partners Northern Beaches is the 10th addition to the Growing Kelly+Partners firm. The office which opened in August 2015 is located in Brookvale, at the heart of Sydney’s Northern Beaches.

The team at Wollongong Kelly + Partners opened the new office in October 2013 and is excited to be looking after the Growing businesses in the region.

The information contained in this newsletter is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Amateur or Professional?

KELLY+PARTNERS IS THE ACCOUNTING FIRM FOR BUSINESS OWNERS WITH DRIVE. It’s the go-getters, the driven, the ones that make things happen and that don’t accept second best who we love to help. If you’re one of these people, let us share with you how we can help.

Visit kellypartners.com.au or contact us today at 02 9923 0800

The information contained in this document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. The information contained is not intended to address the circumstances of any particular individual or entity and is not to be relied upon by individuals or any other entity in making financial or investment decisions. Individuals and other entities should seek appropriate professional advice tailored to their circumstances in making financial decisions.

Although Kelly + Partners has taken care in creating this document, no guarantee is given as to its accuracy, currency or correctness. Kelly + Partners is under no obligation to update any information included in this document. To the extent permissible by law, Kelly + Partners and its associated entities shall not be held liable for any for any errors, omissions, defects or misrepresentations in the information contained in this document, or any loss or damage, however caused, suffered or incurred by persons who rely on information in this document for any purpose.

Each office of Kelly + Partners (Office) is a separate legal entity. Services are delivered independently by each Office. These Offices are not members of one national partnership or otherwise legal partners with each other, nor is any one Office responsible for the services or activities of any other. Kelly Partners Group Holdings (KPGH) is not responsible or liable for any acts or omissions of an Office and specifically disclaims any and all responsibility or liability for acts or omissions of an Office.

An Office cannot act as agent of KPGH or any other Office, cannot obligate KPGH or any other Office, and is liable only for its own acts or omissions and not those of KPGH or any other Office. Similarly, KPGH cannot act as an agent of any Office, cannot obligate any Office, and is liable only for its own acts or omissions.

© 2016 Kelly Partners Group Holdings Pty Ltd | 070116_KP Post Issue 1