Ongoing Milk Wars cause casualties

I have written before about the milk price wars.

Two years on, and the effect that the price wars have had upon dairy farming families incomes is plain for everyone to see.

Competitive tendering has forced many farmers to sell their product at a loss.

Brian Wilson from Tamworth says he lost $80,000 of income last year alone. Thirty (30) dairy farming families from New South Wales have been forced out of the industry over the last 12 months.....and NSW is not a state with a large population of dairy farmers. Many NSW dairy farms are very small in scale compared to their Victorian counterparts.

Now Coles state that their milk contracts contain "a rise and fall clause". If farm gate prices increase Coles argue that they will pay more. But for farm gate prices to increase we have to have a profitable milk processing industry....who in turn share this profit with the farmer producers......unfortunately independant milk processors are really only inclined to look after themselves.

The processors costs and profit margin are taken out before they pay farmers. Being capitalists, independent processors have no interest in farmer welfare, and unfortunately just think of themselves.

This is part of the problem.....brought about by privatising former farmer owned co-operatives.

Murray Goulburn (MG, a farmer owned co-operative, have just signed a ten year deal to supply Coles milk needs.

MG have plans to spend $120 million on state of the art factories to process the milk for Coles.

It is predicted that these new factories will reduce manufacturing costs by ten cents per litre.

Hopefully this reduction in cost will be passed back to farmers in higher prices.

Incidentally MG have to find a lot of new suppliers to deliver this milk, as their existing suppliers are fully committed.

This opens new doors for NSW and other suppliers to join the MG Co-operative.

I hope that interstate farmers have learned the error of their ways, and will stick with their co-operative.....which after all must have farmers best interests at heart....if they are to thrive and survive.

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Phishing, pronounced Fishing, also known as Identity Fraud produces a lack lustre result

Phishing is the process used by fraudster's who steal your identity, your credit card details, and they also empty your bank account.

How do phishers gain their information?

To get a favourable response from the population that they target the criminals, who mastermind these enterprises, employ psychologists to help them develop their scam. This ensures its success with certain types of people, through knowing which emotional hot buttons to press.

I reproduce below one such phishing email, so that you can see the format and read the story used.

The message is an attempt to create a warm and fuzzy relationship with a greedy receiver, so as to encourage them too respond and give away their banking and other information.

MR. DONALD TAYLOR
NO 16 DUNBAR STREET
JOHANNESBURG,
SOUTH AFRICA.

STRICTLY CONFIDENTIAL

ATTN: C.E.O/PRESSIDENT.

I KNOW THIS MESSAGE IS GOING TO SURPRISE YOU, CONSIDERING THAT I AM UNKNOWN TO YOU, BUT I WANT YOU TO KNOW THAT THIS FAX IS SENT WITH ALL GOOD INTENTION IN MIND.

MY NAME IS DONALD TAYLOR, A LIBERIAN AND YOUNGER BROTHER TO THE EX-PRTESIDENT OF LIBERIA, CHARLES TAYLOR, WHO HAS BEING EXILED FROM THE COUNTRY.

I HAVE BEEN DELEGATED BY CHARLES TAYLOR TO LEAVE LIBERIA FOR SOUTH AFRICA WITH THE SUM OF (US$28.M) TWENTY-EIGHT MILLION UNITED STATE DOLLARS, AND FROM SOUTH AFRICA LOOK FOR A TRUSTWORTHY PERSON WHO WILL ASSIST US WITH THE TRANSFER OF THE FUND OUT OF AFRICA TO A COUNTRY WHERE WE CAN INVEST, AND RESETTLE IN.

NOW, IF YOU DECIDE TO ASSIST ME, FIRST I WILL DEMAND ABSOLUTE CONFIDENTIALITY FOR MY BROTHER'S SAKE AND I WANT YOU TO KONW THAT YOUR ASSISTANCE YOU WILL BE COMPENSATED WITH 20% OF THE TOTAL SUM.

PLEASE, YOU CAN REACH THROUGH THE FOLLOWING PHONE NUMBERS (none provided) LISTED BELOW AND IT IS ALSO IMPORTANT YOU GIVE ME YOUR CONFIDENTIAL PHONE AND FAX NUMBERS ON INDICATION OF YOUR INTEREST IN THE TRANSACTION.

BEST REGARDS
MR. DONALD TAYLOR
(ON BEHALF OF MY BROTHER) email addresses deleted by the editor, so that you do not get taken in by the fraudster and pass on your banking and other information.

ABS reports disturbing trend

A recent study published by the Australian Bureau of Statistics (ABS),...

Too many snouts in the trough.

© Richard Beks, Publisher of the Western District Farmer. December 2012 Posted on December 5th 2012 by Peter Mulcahy FIPA

Coming back to the office a few weeks ago, after a holiday in Russia, the first letter I opened announced yet another paid maternity leave entitlement - from August 23, fathers and partners caring for a newborn or newly adopted child are now to get two weeks paid leave as well. This is in addition to the government's 18 week paid parental leave scheme which took effect last year.

After seeing how the Russians lived Aussie priorities couldn't be more different. Over there the sight of workers sweeping up autumn leaves in parks with a small plastic rake is common. In Russia people are happy just to have a job, it seems, no matter how mind numbing the task. At home, on the other hand, work days are fast becoming an annoyance interrupting a litany of different forms of leave. The good times, according to our expectations, won't end. But, boy is that a nonsense.

Because it bought a high Aussie dollar the mining boom, which employs relatively few people, has very seriously damaged sectors which provide the bulk of jobs.

Farmers have been hammered with reduced income from their exports. Manufacturing is being wiped out day by day, while tourism and education have suffered huge downturns because it's so expensive to come here.

We have been led into a fool's paradise and just can't take our snouts out of the trough. We're living with no thought for tomorrow or any interest in remaining competitive with our trading partners.

Examples big and small abound.

Fly with an Asian airline, and you'll immediately notice that cabin staff are overwhelmingly female, colourfully attired, cheerful, young, attractive and trim. Cabin staff, it seems, are selected because they fit a particular mould, and are quickly moved when their first uniform no longer fits or they lose their charm. The hostesses, I was told, accept that they are in a competitive service industry, and that their national airline's viability depends on giving customers a memorable experience.

Here in Australia, of course, with laws about discrimination so broad, no employer would get away with what would be regarded as sexist, racist and so forth. Here the "rights" of the individual are paramount despite the market disadvantage that sometimes flows compared with cultures where the good of the broader society takes precedence.

CAN WE HELP?

The ATO has a BIG win using Benchmarking.

Taxi drivers BEWARE.

© Peter Mulcahy 2012 Posted on September 25th 2012 by Peter Mulcahy FIPA

This case is an interesting use of tax Benchmarking, and illustrates extremely well how the process works, and how simple and lethal the approach is.

The ATO was reviewing the books and figures of a taxi operator for the 2006 income tax year. They totalled up the fuel purchased to 65,414.15 litres. Then using an average fuel consumption rate and the firm's charge out rate per kilometre, the ATO calculated cash income to be in excess of $381,000. The operator had declared only $285,000, a short fall of 33.68% (calculated as 381.000/285,000.
The ATO then postulated that the taxpayer routinely under declared his cash income and took the 2007 and 2008 income figures and inflated income by 33.68%.
The Administrative Appeals Tribunal (AAT) agreed with the ATO's approach, so the taxpayer lost his case. In summing up the AAT noted that the taxpayer had not provided records which would enable the AAT to calculate mileage and then be able to compare these calculations to the businesses' records, particularly the invoices issued to the drivers.
The taxpayer was also reporting cash and non cash income which was significantly lower than the average being reported by the taxi industry.

CAN WE HELP?

12 Steps to correct a MYOB SQL database challenge $$$$$$$

© Peter Mulcahy 2012 Posted on March 17th 2012 by Peter Mulcahy FIPA , and updated Friday 30th March 2012

This article is written for those with advanced PC skills and knowledge. Do not attempt any of this if you don't understand what you are doing! Just read the article, and expand your knowledge instead.

I had an eventful week.

On Monday afternoon I tried to open my MYOB AO v2011 tax package and upon logging in I was met with the following message. "There is a problem connecting to ... SQL Server does not exist or access is denied. Error 27502" This is the sort of message you dread receiving from a database, as it signals trouble. None of the assertions were correct, but it was confusing to start with.

As Monday was a public holiday I had to wait until Tuesday to contact the MYOB help desk. Help were friendly, pointing me in a direction and providing (NB: there are 3 .pdf files here not 1) three .pdf files which were extremely useful. I was also told to make sure I had a backup of my data files. I took another copy to an external hard drive, which were to prove very useful.

I then uninstalled several MYOB AO patches so that I had the original installation, and tried running the install again. You have to run install in order to get to the Repair option.
This proved frustrating as during the software's review of the installation it aborted while inspecting SQL, telling me that "Peter does not have sufficient permissions within SQL", and then that "There is a problem connecting to the database." Both are meaningless MS messages and were false in their assertions, as the database was partially corrupted. Read on.
That evening I contacted my local technician who was honest enough to tell me that databases were not his forte, and he couldn't think of anyone locally who could help me. He did suggest that I do another installation to a clean PC and see if I could get the data working there. If I could I would then be right to delete and reinstall on my main PC. So I was on my own!

I slept well that night. It is marvelous what a good sleep can do.

I am running Windows 7, 32 bit. What I report may differ to Win 7, 64 bit of earlier operating systems.

The following day I did a second installation only to find that it would not open for me when I logged in. I haven't bothered to investigate why. But the process gave me the confidence to ruthlessly tackle my PC.

I did further research and found that MYOB AO installs two MS SQL programs on your PC when it does the initial install.

7 Reasons Why you need to have a Will $$$$$$$

© Peter Mulcahy 2012 Posted on February 8th 2012 by Peter Mulcahy FIPA

It is a sad fact that for many people thinking about or planning for your eventual demise can be depressing, so they put off drawing up a Will, and it is never attended too. The older you get the worse the dilemma becomes, because it now becomes too hard for you, acting on your own, to work out.
Unfortunately, accidents do occur, even if you are extra careful. And thankfully none of us know when these accidents will occur.
If you die without a Will the Government force their Will distribution rules upon your estate. The Australian Taxation Office will be a large beneficiary, via Capital Gains Tax, and Income Tax, and State governments benefit from Stamp Duty on asset sales.

Many famous people, in many countries, have died without Wills, and an examination of their results is informative.

Heath Ledger: Died in 2008 while making the film "The Dark Knight." His Will was drawn in 2003, and left all of his estate to his parents. But Heath had not updated his Will, and in the time since drawing his Will, a daughter Matilda had been born. Under the existing Will Matilda was entitled to nothing. Fortunately, Heaths parents used common sense, and ensured that Matilda was looked after.

After reading the newspaper report it is obvious that this was a messy, and expensive exercise to sort out.

There are ways to insulate yourself from ATO benchmark attack!

© Peter Mulcahy 2011 Posted on December 22nd 2011 by Peter Mulcahy FIPA

Develop a strong working relationship with your accountant, and advisers, who are there to make your life easier.
If you insist on being paid by cheque, EFT or credit card and avoid cash sales you have removed the main area of ATO attack.
As all your sales will now be passing through your bank account/s there is little room for the ATO to dispute your business income, even if you still fall outside the ATO benchmarks. It is then up to the ATO to prove that you have made sales which you are not declaring.
By refusing to accept cash you also remove the pressure from customers to give a discount because the sale "is off the books", and you preserve your profit margin from customer attack.
Keep excellent records, with all invoices for purchases and sales, credit notes etc., and keep your book keeping up to date.
Also keep records of your holidays, time off etc., as the benchmarks ignore that you may have had an extended holiday.

The benchmark system is flawed, and if you have excellent records you will be able to prove that the ATO are wrong, but doing this is not a cheap process.

Your tax accountant should be able to offer you audit insurance, which is fully tax deductible. For a nominal cost you can protect yourself for up to $10,000 of audit expense. Unfortunately tax audits are an expensive process, particularly if you have to employ a tax lawyer to appear at a Tax Tribunal hearing to argue and defend your case.

High quality record keeping for a small business is now crucial.

© Peter Mulcahy 2011 Posted on November 23rd 2011 by Peter Mulcahy FIPA

The ATO are now focusing heavily on bench marking of financial performance, and increasing GST audit activity. It is clear that the ATO's focus on benchmarking and GST is really an analysis of business record keeping.

I think it timely to review the legal requirements for business record keeping.

By law businesses must keep records:

for five years after they are prepared, obtained or the transactions completed, whichever occurs latest, and
in English or in a form that we can access and understand in order to work out the amount of tax you are liable to pay.

The ATO expect a business owner to:

Record every sales transaction through their cash register or point of sales system
conduct a daily sales reconciliation between the ‘z' total (or end of day report if using an electronic system) and cash in the register till, taking into account cash taken for business expenses and personal use.
regularly transfer daily sales figures into a cash receipts book.
perform a bank reconciliation between the bank statement/s and the cash receipts book at least monthly.

Retain these records for five years:

the ‘z' totals or point of sale system end of day reports
daily reconciliations
bank records and cash receipt book
till rolls or end of day reports that record details of each individual transaction. Note: If the ‘z' totals have been reconciled with actual cash sales and bank statements, the detailed till roll can be discarded after one month, plus
maintain a filing system to keep track of paid and unpaid accounts.

Further information can be sourced from the ATO

Want to know more?

ATO continues to ramp up Business Bench marking.

© Peter Mulcahy 2011 Posted on November 11th 2011 by Peter Mulcahy FIPA

The ATO has now developed business benchmarks for 109 industry sectors with another 30 sectors set to be bench marked within the next 12 months. The latest industries bench marked are :

Landscape construction
Motor vehicle retail - new and used
Panel beating and smash repairers
Lawn mowing and garden services
Tattooing services
Pharmacy.

So far the ATO has identified 46,000 businesses which are operating outside benchmarks and 50% of these businesses are represented by just 1,900 tax agents. The ATO has written to 107,000 taxpayers regarding their performance against industry benchmarks.

The ATO has noted that many businesses it contacted responded by :

reporting more GST revenue in following BAS's after receiving the letter
explaining why they were operating outside the benchmark concerned,
1,400 taxpayers voluntarily disclosed income not declared in prior years.

Good quality record keeping is crucial.

Bench marking is really all about record keeping, and the quality of business records. The ATO has repeatedly stated that taxpayers with poor records are at risk if prosecuted, because without adequate records a taxpayer has no way to prove that what they are saying is correct. Taxpayers are at risk because it is up to them to prove that the ATO position is incorrect. The ATO do take into account the individual circumstances of each business that it reviews, based upon records maintained by that business. Where records are complete and reliable the ATO will not use benchmarks to estimate sales, even where the business is outside the industry benchmark.

Understanding Derivatives

Peter Mulcahy did not write this article. A Google search attributes it to at least two American websites (www.city-data.com, freedombrotherhood.wordpress.com) so the author and source are unknown. I reproduce it here because I feel it is worthwhile.

Posted on November 11th 2011by Peter Mulcahy FIPA

Helga is the proprietor of a bar in Your City. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. Helga keeps track of the drinks consumed on a ledger (thereby granting the customers' loans).

Word gets around about Helga's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Helga's bar. Soon she has the largest sales volume for any bar in Detroit. By providing her customers freedom from immediate payment demands, Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Helga's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Helga's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!!! At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS. These "securities" then are bundled and traded on international securities markets.

Naive investors don't really understand that the securities being sold to them as "AA" "Secured Bonds" really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb!!!, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

What is Incorporation (.Inc)?

© Peter Mulcahy 2011 Posted on August 6th 2011 by Peter Mulcahy FIPA

The following information should not be viewed as a substitute for legal or professional advice.

Incorporation, within Australia is a legal process conducted under State or Territory legislation, and registration provides associations or community groups with certain legal advantages in return for accepting certain legal responsibilities. Incorporation of a body gives that body legal status separate from that of its members, and offers some protection to both office holders and members, from debts and liabilities incurred by the group, provided that the group is not run as a profit making body; that is you are genuinely "not for profit".

Incorporation allows you to have a bank account in the name of your body, to insure in the bodies name, to rent and lease in the name of your body, rather that your own natural name. If something goes wrong and someone sues, they sue the incorporated body, not the office holders or members. Therefore, the office holders and members have a "firewall" between the incorporated body and the office holders and members own assets. This is a huge advantage.

So incorporation is a legal status granted to not for profit community and service bodies who meet specific requirements, and are registered with a government authority. In Victoria, you will register with Consumer Affairs Victoria (CAV) and will operate under the Victorian Associations Incorporation Act 1981 as amended in April 2009. The legislation is 163 pages long, and details the rules and processes that an incorporated body must follow, including how you are to conduct your meetings, and these rules and processes must be complied with if you wish to remain incorporated.

Why would an Accountant in Public Practice tell you about this?

Incorporated (.Inc) bodies are required to have their financial accounts audited after the close of every financial year.

To do this your body must document:

the receipts and expenditure of the organisation
the assets and liabilities of the organisation
the mortgages, charges and securities affecting any of the bodies property
details of any trust for which the body was trustee
details of any trusts held on behalf of the body, in which funds and assets have been placed.

Bodies must hold an annual general meeting and present the audited accounts to members, and must file an annual return with CAV.

Challenges with the new MYOB AO; a new users perspective

This is my fourth year using MYOB Accountants Office (AO) to prepare tax returns.

I have had the misfortune this week to be trying to prepare small business tax returns with the new version of MYOB AO Tax v5.1.0.169 Plus with tax v2.50.3.63.

There is a steep learning curve involved in using this version. The version I have installed on my PC does not have all of the options shown in the training video, so that it seems to be impossible to get generated dollar information depositing into the correct cells within the tax return. For example business car costs are deposited by default to cell D1 in the "I' return, rather than motor vehicle costs in the business return.

The problems I was facing here turned out to be corrupt registry errors in Windows 7 Pro. Once the Registry has been corrected the software began working properly. So if you are facing similar issues try checking your registry. Norton Utilities resolved the issue for me in under two minutes. >:-)

Depreciation immediate write off (DIWO) also termed "simplified depreciation" by the ATO

Another area of angst is the lack of depreciation immediate write off DIWO. The tax rates within the new AO are greyed out and therefore cannot be altered. MYOB in their wisdom give three ordinary depreciation rates, 37.5% ( low value pool), 30% (general pool), and 5% (long life pool, plus a software development rate, but for some reason they have not provided a 100% rate to cater for small business entities who use the depreciation immediate write off method. This appears an enormous oversight as the recent predecessors of Accountants Office have all catered in full for depreciation immediate write off.

For some reason MYOB choose to make it impossible for users to provide feedback about their AO Tax product, hence this blog.

It is tax time and the scammers are back

It is now tax time, and a very busy time it is.:-)

I am reproducing this message from the Tax Office as it has much value, and relevance.

The Australian Taxation Office have issued a very timely warning to all tax payers too beware of scammers who masquerade as, or claim to be from the Australian Taxation Office (ATO) in order to steal your identity, or to steal your banking and credit card details.

The ATO advise that "you may receive an SMS or email from us or notice our presence on social media sites such as Facebook, Twitter and YouTube. Our presence in this space is legitimate and can be accessed through www.ato.gov.au"

The ATO also advise that "we will never use these channels to request that you confirm, update or disclose confidential details like the following:

your name
date of birth
address
passwords
credit card details."

The ATO knows most of this information about you already. In my experience the only time the ATO ask for information of this kind is when you contact them, and they want to confirm your identity.

What assistance do First Home buyers receive?

This article is relevant to Victoria only.

Possibly you are thinking of buying your first home, and are wondering what assistance is available.

The State government, have for many years provided, through the State Revenue Office (SRO) up to three grants for first home buyers. For many people these grants amount to you getting back the stamp duty that you will have paid to purchase your home. Such grants are gratefully received by the grant beneficiaries.

Firstly you have to be eligible in order to qualify.

Eligibility criteria:

Applicant and partner must not have ever received a grant from any State or Territory within Australia.
Applicants must never have owned a residential property, either jointly, separately, or with another person before 1 July 2000.
Applicants must never have occupied a residential property,for more than six months in which they acquired a relevant interest 1 July 2000 in any State or Territory within Australia.
Each applicant must be at least 18 years of age.
At least one applicant must be a permanent resident of Australia, or a NZ citizen with a special category of Visa.
At least one applicant must occupy the home as their principle place of residence for a continuous period of at least 6 months, commencing within 12 months of completion of the eligible transaction.
Each applicant on or after 1 July 2000 must:
* enter a contract to purchase a home,OR
* enter a contract to build a home, OR
* commence construction of a home as an owner builder.

Eligible Transactions

A contract to purchase a home.
A comprehensive building contract entered into by a person who has a "relevant interest" in land on which the home will be built.
A comprehensive building contract entered into by a person who, at the completion of the contract, will have a "relevant interest" in the land on which the home is built.
House and land packages.

Application is by approved form. Grants to successful applicants are paid within 14 days of receipt of your "Certificate of Occupancy".

For established homes grants are paid within 14 days of application, after settlement.

There are up to three grants available.

Everyone loses through price discounting.

Price discounting does no one any good as suppliers lose, processors lose, retailers lose, and ultimately governments and taxpayers lose, as the taxpayer ends up carrying the unemployed and displaced. In the very short term consumers reap a benefit, but in the longer term they are much worse off, due to a lack of competition, and possibly limited supply. One of the excuses offered to the Senate inquiry into milk pricing by supermarkets was “we supermarkets have very low profit margins (because they are grossly inefficient) and therefore we have to discount the prices that we pay to producers.” Clearly, if you are selling a product at cost price, or below cost price, you cannot and never ever will be able to make a profit. You do not need to be very intelligent to work this fact out. Yet supermarkets need to make good profits, if for no other reason than they need to pay dividends to their shareholders, who in part are funding the growth of these monoliths.

Australian farmers, like all farmers throughout the world, have never been in a a strong position when it comes to selling their product. Generally the produce is perishable and they have to be price takers in order to sell their product quickly. So it is at present for milk and egg producers, and processors, who are being screwed by the big supermarket chains, Coles and Woolworths.

Fosters Brewing have demonstrated the advantage of being in a duopoly, where there are a limited number of suppliers for a product. Fosters are reported by 'The Age', Melbourne 23/03/2011, as quite rightly refusing to sell to Coles and Woolworths because they were going to sell Fosters various beer brands at below the cost of production. Full marks to Fosters management for having the courage to withhold supply.

Penfolds profits while discounters lose lots This is a very interesting case study. Clearly discounting is an unsustainable situation for any producer or retailer, as they quickly become financially weakened and will eventually become insolvent, and then bankrupt, as their cash supply dwindles and they cannot pay their suppliers and employees as and when the various debts falls due.

If farmer producers as an industry and the middle men or co-operatives who process their product were to adopt a similar approach to that adopted by Fosters, and value add their products by perhaps drying the milk, producing rare minerals, or cheese, butter, etc., or pulping the eggs and drying them, for sale on the world market, particularly at this time of the year they will reduce the available local supply. It wouldn't matter how low a price Coles or Woolworths offer, and advertise milk or eggs at, if they cannot get stock into their stores consumers will very quickly become very annoyed, and this ridiculous price discounting cycle will very rapidly come to an end.