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Monday, 30 March 2015

Chartered Accountants ANZ and Smithink 2020 partner to support accountants of the future

Chartered Accountants Australia and New Zealand today announces it will partner with Smithink 2020 Pty Limited (Smithink) to deliver ATSA (Accountants’ Technology Showcase Australia) – Australia’s leading independent technology conference and exhibition for accountants in practice – in 2015.

Chartered Accountants ANZ and Smithink have also undertaken to work toward a broader strategic partnership to explore future opportunities to deliver leading edge business educational programmes, conferences and events for accountants in public practice.
Smithink’s founding Director, David Smith said that Smithink is pleased to be working with Chartered Accountants ANZ to further develop the ATSA event, which was attended by over 550 people in 2014 with over 45 exhibitors.

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“Chartered Accountants ANZ will strengthen our efforts by strategically boosting our marketing activities in programme development and engagement with potential exhibitors. We are certain that this will deliver the best possible education to a wider audience” Mr Smith said.
Chartered Accountants ANZ’s Head of Education Jason Dale said that working with Smithink 2020 will facilitate new opportunities to deliver education to accountants in practice, assisting them to position their business for success.
He said: “Technology is as disruptive in the accounting space as it is in other areas.  With cloud accounting, offshoring, technology development by regulators and enhanced software tools all impacting the operation of accounting businesses, we are facing a significant shift in how accountants operate. ATSA 2015 will be an invaluable event highlighting the impact that technology will have on the profession and the things that accountants need to know now to prepare them for the future”.
Media Enquiries:
Kylie Kwong, Communications Consultant
Ph: +61 2 9290 5562 or +61 404 001 629

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Institute of Chartered Accountants India

In February 2009 the Institute of Chartered Accountants India (ICAI) and CPA Australia entered into a mutual recognition agreement (MRA) to further develop the relationship between the two bodies and establish guidelines on how qualified members can gain reciprocal membership.

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This collaboration and mutual endorsement was symbolically strengthened with the re-signing of the MRA in September 2014, indicating a commitment to support and assist those ICAI members who want local recognition and representation in Australia and Asia.

Becoming a CPA gives ICAI members the opportunity to promote their technical expertise through an association that is well recognised throughout Australia and the Asian region.

Step 1: Determine eligibility

CPA Australia accepts membership applications from around the globe. If you are a full Associate member of ICAI, you are eligible to apply for CPA Australia Associate membership if you:

  • are a member of good standing and not currently subject to any disciplinary sanctions or investigations
  • did not gain entry through another mutual recognition agreement
  • have successfully completed:
  • the ICAI exams
  • the ICAI practical experience requirements

  • hold a university degree recognised by the Australian Education International – National Office of Overseas Skills Recognition as being at least equivalent to Australian bachelor degree level. This will be determined during the assessment of your application

  • have at least five years' work experience in professional accounting
Step 2: Complete application

Complete the application form (PDF) and submit it with the following:

assessment fee and membership fee
certified true copies of 100 points of identification (see application form for points values)
an original, or certified, copy of a letter of good standing from ICAI that contains:
the date you joined ICAI
the date you achieved your current member status
the date your membership fees are paid until
confirmation that you are not a member of ICAI through another MRA
certified true copies of university academic award (degree certificate) and official transcripts (marksheets) or workplace testimonials
certified true copy of an official transcript from ICAI
certified true copies of university academic awards and official transcripts or mark sheets or workplace testimonials
certified true copies of change of name documentation (if applicable)
Step 3: Submit application

Send your application with certified true copies of your documents to or mail them to:

CPA Australia
Member Services
GPO Box 2820

Alternatively, you can mail your application to your nearest CPA Australia office.

Step 4: Processing of application

Your application will take approximately 10 to 15 working days to process. If there are any queries about your application, a CPA Australia employee will contact you.

If your application is successful, an email will be sent to you informing you of your success. A welcome pack will follow by post.

If your application is unsuccessful, an email will be sent to you outlining the reasons why. We will provide advice about how you can meet CPA Australia's membership requirements.

Step 5: Advance to CPA status

Once you become an ASA member of CPA Australia you must complete the following study units within two years:

  • CPD063 – Better Practice in Governance and Accountability
  • CPA117 – Global Strategy and Leadership
An enrolment form for these study units will be sent to you when your application for membership is approved, or you can download it from this page. Upon successful completion of both courses, you will automatically advance to CPA status. You will receive a CPA certificate and will then be eligible to use the CPA designation
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Thursday, 26 March 2015

What is a Chartered Accountant?

The Institute of Chartered Accountants Australia (ICAA) and the New Zealand Institute of Chartered Accountants have amalgamated to become Chartered Accountants Australia and New Zealand.
As a result, some content from the ICAA website has been relocated to our new corporate website.

Australian Chartered Accountant

Visit our new website to read about the role and benefits of a Chartered Accountant and to discover all about the new leading trans-Tasman professional body for accountants.
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Wednesday, 25 March 2015

About Chartered Accountants Australia

In the same way there are many different types of doctors and lawyers, the same is true of accountants.

Around the world there are over 2.5 million qualified accountants including chartered, certified, management, practicing, professional, and technicians among others. Each have completed various professional accountancy qualifications, and have different knowledge, skills and experience to suit their specific field. 

Being a member of Chartered Accountants Australia and New Zealand sets you up to thrive in business and the world. 

Chartered Accountants Australia and New Zealand brings together 100,000 highly trained professionals. It is a trading name for the Institute of Chartered Accountants in Australia and the New Zealand Institute of Chartered Accountants. 

Chartered Accountants Australia
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Tuesday, 10 March 2015

Why You Need a Chartered Accountant Before You Set Up Your Business

Four Reasons Why You Need a Chartered Accountant On Board Before You Set Up Your Business

When you are setting up in business you may assume that you don’t need to involve an accountant until its time to prepare a set of accounts and file a tax return. This underestimates the added value of having a knowledgeable professional on your side from the start.
An accountant will ensure that you register for taxes on time and that you tick all the right boxes when it comes to tax compliance. However, the "Chartered" qualification, whether it is "ACA" or "FCA", is a business qualification and a qualified Chartered accountant will be able to assist you in many different areas besides taxation.
Here are four key reasons why it makes good business sense to engage a Chartered accountant before you set up your business.

Business plan

When you start a business it’s tempting to focus on promoting and selling your product or services right away.
This is understandable, but don’t rush in without a clear business plan. Go over every aspect of your proposed activities as carefully as possible before you start trading. You may already have put an outline plan together, but have you accurately factored in all the costs associated with your business?
A chartered accountant can provide more than just a second opinion and will have an excellent understanding not only of what costs you’re likely to incur, but of how to finance the business as well as providing tips and advice on what you may offset against tax.
An accurate business plan backed up with efficient tax planning will provide a firm platform on which to launch a business and ensure that there are no unforeseen costs lurking around the corner.
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What trading structure?

The next step is to think about what form your business should take - a sole trader or a limited company, a partnership or a limited liability partnership?
Making the wrong decision about a trading structure at the start could have dramatic implications for you. Not only can it affect how you hold property and contracts, but it will also affect the rate of tax you pay and availability of different tax relief.
A Chartered accountant can talk through these options with you and advise on what’s right for your specific situation.

Systems, software and accounting

Not everyone’s idea of dynamic business practice, but putting the appropriate management information, accounting and bookkeeping systems in place before you start trading will help you run your business as efficiently as possible.
A Chartered accountant will know which systems will benefit you the most, so ensuring you have all the information you need to make your business profitable. Installing good systems from the outset will save you time and money sooner than you think.

Financial advice

Almost all young businesses need to borrow money at some point, either at launch or when they’re looking to expand. With the present economic climate, borrowing from banks may not be possible.
A Chartered accountant will be able to suggest a number of alternative options, from venture capital to a range of central and even local government grants. All borrowing options have their positives and negatives, and being able to draw on your accountant’s expertise will help you decide on the most appropriate financing for you.
Using a qualified chartered accountant to help you plan and set up your business isn’t an excessive luxury, it’s a sensible investment that will reap dividends for years to come.

The information contained in this article is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. The author and the publisher disclaim all responsibility for any loss arising from any action taken or not taken by anyone using the information in this document


Friday, 6 March 2015

Share price surge prompts fresh warning to new investors

A SURGING Australian sharemarket has been feeling the love, but people are being warned against rushing into the buying spree now.
Share prices have been boosted by falling interest rates and local and overseas investors seeking generous dividends paid by Aussie companies, which has prompted concerns they may be due for a fall soon.
There was a slight sell-off this week but the All Ordinaries index — which measures the value of our 500 biggest companies — has still climbed 14 per cent since December to close to 5900 points.
Among the big companies to bounce strongly, BHP Billiton is up 19 per cent, Westpac up 20 per cent and AMP up 23 per cent.
Catapult Wealth director Tony Catt said he was a fan of billionaire investor Warren Buffett’s famous quote “be fearful when others are greedy and greedy when others are fearful”.
“It’s a great quote and I have used it a number of times with my clients,” he said.
“Everyone’s in a hurry to get the returns, and the fear of missing out is starting to kick in at the moment. The emotional behaviour is worrying.”
Mr Catt said most advisers felt that now was not the best time to pile into shares, and a better strategy might be to spread your investing over several months.
“The future is murky at the moment. It’s unpredictable, so tread carefully.”
Quay Equities managing director David Reynolds said that late last year some share analysts made an “optimistic call” and tipped 6000 points for the All Ordinaries by the end of 2015.
“We have just done it in three months,” he said.
“I’m not saying stock prices are going to crash, but it is more than fully valued.”
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Mr Reynolds said new share investors should understand how diversification would help them ride out the market’s ups and downs. “Don’t put all your eggs one basket, and don’t allocate all your funds upfront,” he said.
“Contribute over time, on a monthly or quarterly basis — the compound return you will get is better than trying to time the market. Take a sensible approach and get advice.”
Macquarie Private Wealth division director Kieran Purcell said his firm was still positive about shares, but most of the big gains had already occurred and investors should not expect this pace of growth to continue.
“I would say it’s still a good time to put some money into the market, but I would hold some funds back as I would suspect there will be some pullbacks over the year, which might provide some good buying opportunities,” he said.
“We caution that stocks are looking fully priced.”

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Wednesday, 4 March 2015

Analysis: Short-sellers deliver epitaph for Bernie Brookes' time at Myer

Myer's customers love a good sale, but not quite as much as Myer's investors who, for the past few years, have profited handsomely from betting on the shopping emporium's declining stock price.
With news of longstanding boss Bernie Brookes' departure this morning, they cleaned up again as Myer shares nosedived, retreating a further 12 per cent to $1.61.5.

Along with Brookes, chief financial officer Mark Ashby is also departing for an unspecified role offshore, a development that clearly spooked the market.
For the past few years, Myer has earned itself the unenviable distinction of being the most heavily "shorted" stock on the Australian Securities Exchange.
Short-selling is a high risk trading strategy employed by investors who believe a company's share price will fall.
It involves selling shares they do not own and hopefully profiting by buying in at a cheaper price down the track.
As of last Friday, more than 18.5 per cent of Myer's outstanding capital was short-sold.
While it has hardly been a ringing endorsement of Brookes' management, the burst of selling that greeted his departure this morning indicates investors hold little hope that his successor will deliver the goods.
Myer has been mired in controversy ever since it relisted on the bourse on Melbourne Cup day 2009.
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The shares, sold to punters in the float at $4.10 a piece, shed as much as 10 per cent on day one and have never been within daylight in the intervening years.
It is hardly fair to pin the blame entirely on Brookes, however.

Myer 'cut to the bone' during Brookes reign

The Myer float was overhyped - where model Jennifer Hawkins' vital statistics were far more prominent than earnings projections - during a brief burst of post financial crisis stock market optimism.
The former owner, US private equity group TPG, scarpered within hours of the listing, funnelling the $1.9 billion proceeds of the sale through a series of tax havens in the Caribbean and Europe.
Brookes cut Myer to the bone during its time in private equity ownership.
He sold off a huge part of the inventory, streamlined the supply chain, offloaded the real estate and controversially cut floor staff numbers.
It was a strategy that delivered fabulous profits to TPG and the private investors - which included the Myer family and himself - but left the retailer ill-prepared for the firestorm that was to engulf Australian retail.
The financial crisis devastated sales volumes as Australians eschewed credit and suddenly transformed themselves into savers.
That coincided with the rise of online distributors operating out of cheap warehouses offshore rather than high cost high street CBD shopping centres.
Just to add some fire to that lethal combination, the Australian dollar surged to record levels as the mining boom took hold, and Europe and the US engaged in an extended currency war.
Myer and its arch rival David Jones were blind-sided by the developments, and each struggled to belatedly hatch plans to cope with the new threat.
By late 2013, however, with Brookes signalling his departure, Myer believed the only option was to attempt a merger with David Jones where a vicious war between management and the board was being played out in public.
Brookes managed to renegotiate a new contract for himself, to lead the combined entity, that was far more generous than his previous package.
Base salary rose to $2 million from $1.8 million, with the potential to earn a further $3 million in bonuses.
But it all came to nought, at least for Myer shareholders.
South African-based Woolworths rode in with a far more generous offer, trumping Myer and leaving Brookes firmly in control.
After nine years at the helm, chairman Paul McClintock delivered the expected praise for the outgoing chief executive.
But he made no secret of emphasising the challenges now facing the company, that "to thrive in a modern retail environment, Myer must adapt more quickly and be closer to its customers".

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Tuesday, 3 March 2015

Company Operating Profits Slip In December Quarter.

COMPANY gross operating profits fell in the December quarter, against analysts’ expectations of a slight lift, official data shows.
According to the Australian Bureau of Statistics, company profits dropped 0.2 per cent in the quarter, seasonally adjusted, compared with a 0.5 per cent increase in the September quarter.
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Economists surveyed by Bloomberg were expecting a rise of 0.5 per cent.
In the year to December, company profits were 5.9 per cent lower, the ABS said.
The business indicator’s release contributes to analyst forecasts for gross domestic product.
Official GDP figures are due to be released by the ABS on Wednesday.
Estimated business inventories, in seasonally-adjusted chain volume terms, slipped 0.8 per cent in the December quarter.
The estimate of income from sales by manufacturers in the December quarter, in seasonally-adjusted chain volume measures, was flat, while the same measure for wholesalers was up slightly, increasing 0.3 per cent.
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Thursday, 26 February 2015

Wage Growth Slows To New Annual Low

Wages in Australia have grown at their slowest ever annual rate since the government started issuing data on wage prices nearly two decades ago.
Official figures show wages rose by 0.6 per cent in the December quarter, while the annual pace of wage growth fell to a new record low, reflecting ongoing weak conditions for businesses and pointing to low inflation and interest rates for the foreseeable future.
For the year to December, the Australian Bureau of Statistics’ wage price index rose 2.5 per cent, in line with analysts surveyed by Bloomberg.
That rate is above the inflation rate of 1.7 per cent, which fell in the most recent ABS release.
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The seasonally adjusted annual wages increase was the lowest result since the ABS started issuing the data in 1997.
The index measures movement in underlying wages by calculating the change in wage and salary cost across a range of occupations.
Wages growth has slowed as Australia’s resource-rich economy undertakes a difficult transition away from growth led by mining. Commodity prices are also falling sharply, delivering a cut to national income and driving unemployment higher. Non-mining investment is still sluggish, compared to the drop in investment from the mining boom.
In the private sector, wages excluding bonuses rose 0.6 per cent in the third quarter and by 2.5 per cent from a year earlier. Public-sector wages climbed by 0.7 per cent in the third quarter and by 2.7 per cent from a year earlier.
The information media and telecommunications industry had the largest quarterly wage rise of 1.2 per cent due to regular December quarter pay increases, while the smallest quarterly rise across all industries was the accommodation and food services industry, where wages rose 0.2 per cent.
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Tuesday, 24 February 2015

RBA tipped to leave rates on hold at next week’s meeting

The RBA is set to keep interest rates on hold, rather than risk another cut. Source: Getty Images
THE Reserve Bank of Australia will likely leave interest rates on hold at next week’s policy meeting, fearing a further cut could put a rocket under too-hot property prices.
With the country’s home prices already at record-high levels, there are signs of renewed upwards momentum following this month’s surprise cut in the benchmark cash rate to an all-time-low of 2.25 per cent.
Housing auctions last weekend in Sydney saw a near-record 86 per cent of all properties sold, compared with about 83 per cent a week earlier.
That gives the central bank — which has repeatedly warned against too much speculative property lending — further cause for worry, at a time when the economy remains fragile as a mining boom fades.
Nationally, home prices have climbed 22 per cent since mid-2012. Melbourne and Sydney prices have risen by more than 50 per cent since 2009. A sudden crash in home prices could undo much of the hard work interest rates have done to modestly spur non-mining sectors of the economy, such as retail.
The RBA debated the problem of frothy house prices on February 3, according to minutes of their last meeting, before deciding to cut rates for the first time in more than a year and a half. The nine member board was divided on the wisdom of a cut.
Australia’s banking regulator has recently stepped into the debate, saying it would step up its monitoring of investment-housing loans and may implement lending curbs if the credit tap continues gushing.
Since those warnings, data shows that the scale of speculative buying hasn’t diminished. If anything, it’s encouraged speculators to jump in while the going is good.
While interest-rate swap markets have a 50 per cent chance of a rate cut in March priced in, the central bank will be cautious about cutting while the impact of regulation that may or not be brought in remains unknown. It makes better sense to pause for a while and consider more data.
News of a jump in unemployment to 6.4 per cent in January, its highest level in more than 12 years, is likewise an unlikely trigger for a second consecutive rate cut. True, joblessness is rising, but averaged over a number of months it’s still only a gradual climb.
Next week the RBA is likely to signal its intention to cut rates again — just not immediately.
After all, much more needs to be done to lift Australia’s economy out from the rubble at a time when prices for the nation’s commodity exports have also fallen dramatically.

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Thursday, 19 February 2015

Cut Corporate Tax Rate To 25 percent BDO

Australia should aim to cut the corporate tax rate to 25 per cent to stop businesses moving offshore.

That’s the view of business consultants BDO, which says it not only costs Australian jobs when a business moves elsewhere, but also millions of dollars in lost revenue.

At 30 per cent, Australia’s corporate tax rate is higher than all but three of the 34 OECD countries – Belgium, France and the United States.

“Corporate tax is a big cost for business and obviously plays a significant role in any decision about where to base a company’s operations,” BDO tax partner Mark Molesworth says.

In a new analysis, BDO says services-based firms – such as software and technology developers, whose geographic considerations are less important – are taking away up to $15 million in tax for every $100 million in turnover when they moves to another country.

For manufacturers, it’s $4 million in lost tax per $100 million in turnover.

Mr Molesworth concedes it is not realistic for Australia to move to a very low corporate tax rate like Switzerland (8.5 per cent), Ireland (12.5 per cent) or Canada (15 per cent), but there is certainly room to move lower.

Even in the US, where the rate is 35 per cent, President Barack Obama has recently proposed lowering it to 28 per cent.

An achievable target for Australia could be to move to 25 per cent, which would bring us close to the OECD average,” Mr Molesworth says.

At the last election, the Abbott government promised a cut in the corporate tax rate to 28.5 per cent from July 1, 2015, although the top 3400 companies would be simultaneously asked to pay a 1.5 per cent levy to pay for a new paid parental leave scheme.

While that PPL scheme has since been scrapped, it remains unclear whether the levy will remain to fund a new families and childcare package, resulting in a two-tier business tax rate.
The 2010 Henry tax review also proposed a 25 per cent corporate tax rate as a target.

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Tuesday, 17 February 2015

RBA To Monitor Property Prices

Australia’s central bank debated whether to cut interest rates at its February policy meeting or wait until March, before choosing the earlier date which had the option of communicating its reasons in a quarterly policy statement just days after.
“In deciding the timing of such a change, members assessed arguments for acting at this meeting or at the following meeting,” the Reserve Bank of Australia said in minutes from the meeting.
“On balance, they judged that moving at this meeting, which offered the opportunity of early additional communication in the forthcoming Statement on Monetary Policy, was the preferred course,” it added.
The RBA cut interest rates by one quarter of a percentage point at the start of the month to a record low 2.25%, its first cut since August 2013, citing falling global interest rates, weak domestic growth and the risk of rising unemployment.
The RBA also said it will be watching property prices in the wake February’s record-low official rate. “Given the large increases in housing prices in some cities and ongoing strength in lending to investors in housing assets, members also agreed that developments in the housing market would bear careful monitoring,” the minutes said.
“Housing price inflation had moderated from the rapid rates seen in late 2013, but remained high and in Sydney and Melbourne had been well above the growth rate of household income,” the RBA said.
The RBA said growth of investor credit had continued to increase “at a noticeably faster rate” than owner-occupier housing credit, while a range of indicators suggested further growth of dwelling investment in the near term, the bank said.
The RBA said it would keep a close eye on the impact of moves late last year by the Australian Prudential Regulation Authority, designed to temper investor activity.
In board member’s discussion of the economic outlook, they noted that forecasts for output, which were conditioned on an assumption of no change in the cash rate, had been revised lower in the near term, and that non-mining business investment was likely to occur “later than had previously been anticipated”.
“The revisions to GDP growth implied that the unemployment rate would peak at a higher rate and later than had been previously forecast, before declining gradually,” the minutes said.
GDP growth itself would remain below trend over the course of this year, before gradually picking up to an above-trend pace in 2016, the minutes said, somewhat later than had been previously expected.
There was no indication of whether the RBA will follow up February’s rate move with another cut in March.
Many in the financial markets were not expecting the cut in as RBA Governor Glenn Stevens had indicated as recently as December that interest rates stability remained an attractive option.
Financial markets are now betting the RBA will cut interest rates at least one more time by mid-2015, with some market participants expecting it will continue cutting in the second half of the year.
A high Australian dollar had added to the woes of the economy, albeit it has now fall by close to 30% since its historic peaks above parity in 2011.
The Australian dollar has fallen a long way against the U.S dollar, but not so against other major currencies.
“A lower exchange rate was likely to be needed to achieve balanced growth in the economy,” the minutes said.
Stevens told parliament Friday the economy was in need of more growth, with employment data the day prior showing a jump in unemployment to its highest level in around twelve and half years.
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Friday, 13 February 2015

Australian Billionaire Gerry Harvey Accuses Tax Lobbyists Of Pushing Multinational Companies Interests

Australian retail billionaire Gerry Harvey slammed the country’s powerful business lobby groups for pushing the interests of profit-shifting multinational corporations ahead of Australian companies. Harvey said companies that pay their fair share in taxes have no voice in government.
The billionaire retailer spoke after it was publicly revealed that Apple Inc only paid $80 million in tax to Australia despite earning $6 billion in local revenues. Without mentioning a specific company, Harvey said “a lot of lobbying” has been happening. He added that multinational companies have many lobbyists in Canberra in an effort to present their case.
Sydney Morning Herald reports that the Harvey Norman franchise owner is one of the few business leaders in the country to speak out against corporate tax avoidance. Harvey said both Australian-owned and foreign multinational companies are more interested in weakening tax laws so they avoid paying high taxes. He believes it was unfair for local companies to pay the right amount of tax while foreign companies don’t.
A spokesman for the Business Council of Australia said there were certain risks if it acted alone against the practice of shifting profits. The council recommended taking caution and acting based on evidence to ensure competitiveness will not be diminished. He said unless a multinational agreement is in place, Australia can continue to enforce its tax laws which many believe are some of the “toughest” in the world.
Michelle DeNiese, executive director of the Corporate Tax Association, shares the same view with Harvey. She said multinational companies should be able to pay their own fair share of tax. DeNiese spoke out against the view that Australia’s corporate tax system is “fundamentally flawed.”
Despite having 15 retail stores in Ireland and Singapore, Harvey claimed he has never used them to shift profits. Harvey Norman has paid higher taxes than Apple in 2014 with $89 million compared to the Cupertino-based company’s $80 million, according to accounts filed with the corporate regulator.
Meanwhile, Kate Carnell, chief executive of the Australian Chamber of Commerce and Industry, told SmartCompany that Harvey’s comments were disappointing. She said the ACCI has been lobbying for the government to address issues of large corporations that have the option to pay taxes wherever they choose.
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Friday, 6 February 2015

RBA Cuts GDP Inflation Forecasts

The Reserve Bank of Australia has downgraded its forecasts for Australia’s GDP growth and inflation giving an insight into its reasons for cutting the official cash rate to a record low on Tuesday.
In its latest quarterly Statement on Monetary Policy, the RBA revised the forecast for GDP growth for the year to June to 2.25 per cent, compared with a forecast of 2 to 3 per cent for the same period in the bank’s previous estimate. The forecast for the 2015 year was cut by 0.25 per cent to 2.25 to 3.25 per cent.
The RBA slashed its inflation forecast for the year to June to 1.25 per cent, down from its former estimate of between 1.5 per cent to 2.5 per cent in its November statement.
The central bank cut the official cash rate to 2.25 per cent earlier this week, meeting market expectations, but surprising many economists, who believed the bank would hold or cut at a later date.
The RBA said today it downgraded the growth forecasts as the Australian economy had been growing at “a bit below its average rate” in the second half of 2014, while the end of the mining boom was dampening inflation growth.
“While growth in non-mining activity has picked up a little over the past two years, all components except dwelling investment look to have grown at a below average pace over the past year,” the RBA said.
GDP growth is now expected to remain below trend over the course of this year and then to pick up to an above-trend pace in the latter part of the forecast period, in response to rapid growth in LNG exports and the lower exchange rate and interest rates.
But the bank also said gas exports were expected to increase less rapidly than first thought, picking up less slack from the end of the mining boom.
This suggested that consumption will continue to grow at a below-average pace for a time and non-mining investment will remain subdued until at least mid-2015, the RBA said.
In particular, the ABS capital expenditure survey suggests that there will be only very modest growth in non-mining investment in the 2015 financial year, according to the statement.
Lower commodity prices and the depreciation of the exchange rate in the Australian dollar have offset some of this gloom, the RBA said.
This forecasts in this statement are based on the price of Brent oil remaining at US$59 per barrel, which is more than 30 per cent lower than the price forecasts used in November.
“The decline in oil prices is expected to have a positive effect on overall growth in the Australian economy,” the RBA said.
After a year and a half of stable interest rates, the board said on Tuesday that a reduction in the cash rate was appropriate, taking into account the flow of recent information and updated forecasts.
Explaining the rate cut, Mr Stevens said earlier this week that available information in Australia suggested growth was continuing at a below-trend pace, with domestic demand growth overall quite weak while the jobless rate has gradually moved higher over the past year.
Most analysts believe there will be another interest rate cut this year because of a gloomier economic outlook. The Reserve Bank historically has a higher chance of making a second cut in the month directly after a first move.
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