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Terms of engagement

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Are there rules that you play by in business?

An aspect of small business that many hardworking business owners all too often ignore is knowing and keeping the rules of engagement in business.

These rules are seldom read out to new business owners and as a consequence can come back to haunt those in the fast lane trying to build a wonderful operation.

So what are the rules?

A stand out set of rules that many of us latch onto relate to those laid out in the Tax Act.

Recently, a small business owner was once asked about his transparency with respect to his books of account. He had explained how he had introduced profit sharing into his business and it was a logical question to ask. If an employee was to receive profit, the books had to be a straightforward read for those who were to pocket a split of the bottom line.

The very mentioning of those very scary letters – ATO – made him go red. He quickly explained how he had learnt long ago that he had to play it straight, if only to sleep well at night.

Tax experts always warn that no matter how careful you can be with your records it is very easy to make mistakes because the Tax Act is so complicated and open to misinterpretation.

The best strategy is to get good advice about grey areas and do your best to document why you have taken a particular stance on expenses and income. That said, everyone in business – both small and big – live with the doubt that comes out of tax laws which are over one metre in height if stacked vertically.

That’s why we seek help.

What other rules come into play?

However, that’s not the end of the rule keeping that small business owners need to be aware of.

When it comes to health and safety in the workplace there are many rules which, if not kept, could see you run foul of authorities.

In some states a small business needs to have all electrical equipment such as hot water jugs used by staff tested for safety by a trained electrician. Those items need to have a tag to show that they have been tested and are safe.

Unions recently have been agitating for employers to be charged with manslaughter where basic safety issues are ignored and employees suffer as a consequence.

Experts recommend having a safety audit to ensure that there isn’t a danger lurking in your business that could prove very costly for employees and employer.

Warning signs on stairs, safety charts about doing things such as lifting and other potentially harmful actions are also suggested as good ideas to demonstrate that you have knowledge of the health and safety rules that apply to your employees.

Any other rules?

Another critically important area is how you employ staff. Here’s a hypothetical example to make the point.

Imagine you have kicked off a business, say you and your wife, as a home-based business. It progresses nicely and you now employ staff in external premises.

Like hundreds of thousands of small businesses you have not read the awards that apply to your workers.

Part of the reason is that you know you are paying way over the award. You give great holidays and care for your staff, giving them training and a real career path.

Then you have a stoush with one employee and he runs to the union and complains. A union rep comes to your office and accuses you of not giving morning and afternoon tea breaks. Lunch times are not specified and there is not a set area for staff to eat lunch.

You didn’t do this because no one asked for it, everyone was happy to either go out for lunch when they liked or they were happy to eat at their desk having a laugh, a joke or even they kept on doing the work they loved.

You might have a contract or simply a handshake but this does not free you from the conditions of the relevant award. You could be heavily fined for not respecting the award.

Smart business owners have been taking out Australian Workplace Agreements with the Office of the Employment Advocate to formalise their arrangements with their staff.

This gives the employer protection for not following the letter of the award’s law. You can build in many aspects of the award and add in what helps your business and your employees.

Either stick to the award, possibly with over-award payments, or you look at AWAs.

You and your business are at risk if you leave yourself in no man’s land between these two ways of employing staff.

Any tips?

•    Get good advice when it comes to tax issues.
•    Document your reasons for decisions about expenses and income.
•    Be aware of the occupational health and safety aspects of your business.
•    Understand the award conditions of your employers.
•    Examine if an AWA is the way to go for your business.

Published on: Thursday, October 29, 2009

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