I TYPED these words on a computer designed by Apple, co-founded by the college dropout Steve Jobs. The program I used to write it was created by Microsoft, started by the college dropouts Bill Gates and Paul Allen.

And as soon as it is published, I will share it with my friends via Twitter, co-founded by the college dropouts Jack Dorsey and Evan Williams and Biz Stone, and Facebook — invented, among others, by the college dropouts Mark Zuckerberg and Dustin Moskovitz, and nurtured by the degreeless Sean Parker.

American academia is good at producing writers, literary critics and historians. It is also good at producing professionals with degrees. But we don’t have a shortage of lawyers and professors. America has a shortage of job creators. And the people who create jobs aren’t traditional professionals, but start-up entrepreneurs.

In a recent speech promoting a jobs bill, President Obama told Congress, “Everyone here knows that small businesses are where most new jobs begin.”

Close, but not quite. In a detailed analysis, the National Bureau of Economic Research found that nearly all net job creation in America comes from start-up businesses, not small businesses per se. (Since most start-ups start small, we tend to conflate two variables — the size of a business and its age — and incorrectly assume the former was the relevant one, when in fact the latter is.)

If start-up activity is the true engine of job creation in America, one thing is clear: our current educational system is acting as the brakes. Simply put, from kindergarten through undergraduate and grad school, you learn very few skills or attitudes that would ever help you start a business. Skills like sales, networking, creativity and comfort with failure.

No business in America — and therefore no job creation — happens without someone buying something. But most students learn nothing about sales in college; they are more likely to take a course on why sales (and capitalism) are evil.

Moreover, very few start-ups get off the ground without a wide, vibrant network of advisers and mentors, potential customers and clients, quality vendors and valuable talent to employ. You don’t learn how to network crouched over a desk studying for multiple-choice exams. You learn it outside the classroom, talking to fellow human beings face-to-face.

Start-ups are a creative endeavor by definition. Yet our current classrooms, geared toward tests on narrowly defined academic subjects, stifle creativity. If a young person happens to retain enough creative spirit to start a business upon graduation, she does so in spite of her schooling, not because of it.

Finally, entrepreneurs must embrace failure. I spent the last two years interviewing college dropouts who went on to become millionaires and billionaires. All spoke passionately about the importance of their business failures in leading them to success. Our education system encourages students to play it safe and retreat at the first sign of failure (assuming that any failure will look bad on their college applications and résumés).

Certainly, if you want to become a doctor, lawyer or engineer, then you must go to college. But, beyond regulated fields like these, the focus on higher education as the only path to stable employment is profoundly misguided, exacerbated by parents who see the classic professions as the best route to job security.

That may have been true 50 years ago, but not now. In our chaotic, unpredictable economy, even young people who have no interest in starting a business, and who want to become professionals, still need to learn the entrepreneurial skills that will allow them to get ahead.

True, people with college degrees tend to earn more. But that could be because most ambitious people tend to go to college; there is little evidence to suggest that the same ambitious people would earn less without college degrees (particularly if they mastered true business and networking grit).

And while most people who end up starting businesses likely have college degrees, those degree-bearers should be well aware (as they learned in their freshman statistics classes) that correlation does not equal causation. Assuming that college was responsible for their success gives higher education more credit than it deserves.

AFTER all, there is not one job market in America, but two. The formal market we always hear about — jobs that get filled through cold résumé submissions in reply to posted ads — accounts for only about 20 percent of jobs.

The other 80 percent get filled in the informal job market. Any employer knows how the informal job market works: you need a position filled, so you ask your friends, colleagues and current employees if they know anyone who would do a good job.

In this informal job market, the academic requirements listed in job ads tend to be highly negotiable, and far less important than real-world results and the enthusiasm of the personal referral.

Classroom skills may put you at an advantage in the formal market, but in the informal market, street-smart skills and real-world networking are infinitely more important.

Yet our children grow up amid an echo chamber of voices telling them to get good grades, do well on their SATs, and spend an average of $45,000 on tuition — after accounting for scholarships — while taking on $23,000 in debt to get a private four-year college education.

It’s time that we as a nation accepted a basic — and seldom-mentioned — fact. You don’t need a degree (and certainly not an M.B.A.) to start a business and create jobs, nor is it even that helpful, compared with cheaper, faster alternatives.

Parents could turn the system on its head if they weren’t so caught up in outmoded mentalities about education forged in the stable economy of the 1950s (but profoundly misguided in today’s chaotic, entrepreneurial economy).

Employers could alter this landscape if they explicitly offered routes to employment for those who didn’t get a degree because they were out building businesses.

And the government could divert some of the money it now spends encouraging college for all, and instead promote the idea that creating a start-up is a worthy, respectable alternative to academics. This would go a long way to helping our unemployment problem.

If I were betting on the engines of future job creation, I wouldn’t put my money on college students cramming for tests and writing papers with properly formatted M.L.A.-style citations in order to bolster their résumés for careers in traditional professions and middle-management jobs in large corporate and government bureaucracies.

I’d put my money on the kids who are dropping out of college to start new businesses. If we want to get out of the jobs mess we’re in, we should hope that more will follow in their footsteps.

Michael Ellsberg is the author of “The Education of Millionaires: It’s Not What You Think and It’s Not Too Late.”

See original article at : http://www.nytimes.com/2011/10/23/opinion/sunday/will-dropouts-save-america.html?pagewanted=2&smid=fb-share

Cash controls are essential to any business. Follow Geoff Rooney CA, from Ernst & Young as he guides us through critical steps in the cash control process, important for preventing fraud.

Click on link below to watch video

What is Fringe benefits tax (FBT)?
Fringe benefits tax is a tax paid on certain benefits employers provide to their employees or their employee’s ‘associates’ (typically family members). FBT is separate from income tax and is based on the taxable value of the various fringe benefits provided.
The FBT year runs from 1 April to 31 March.

A fringe benefit is a benefit provided in reward for employment. This effectively means a benefit provided to an employee (or their associate) because they are an employee.
An employer can provide these benefits, or they can be provided by:

Ø  an associate of theirs

Ø  A third party under an arrangement with the employer.

An employee can be a current, future or former employee.

FBT was established when the government realised that people were being paid in benefits rather than as salary. Employers had been creative with ways of paying their people: provision of cars when they did not really need them for work, payment of expenses (mortgage, school fees, holidays, long lunches etc) that had nothing to do with the expenses of the business other than it was paid as part of the reward for the employee.

History:

When employees were paid a salary/wage, it is caught in the PAYG Withholding system: ie you pay money to the employee then you need to withhold tax.

Development 1:

Increase the reward to the employee by paying their expenses for them.

Why:

When company tax rates are only 30% compared to personal tax rates, which can be as high as
48.5 %, and the employee had a $100 non deductable expense to pay i.e. mortgage or school fees. If the employee had to pay it out of after tax salary then they had to earn then $195 before tax ($95 as tax to government, $100 to employee for expense). If the company paid the $100 for the expense then it costs the company only $130 ($100 for the expense and $30 for the additional company income tax because it was not a tax deduction).

Government response:

Create Fringe Benefits tax so that the cost to the company and the amount of tax is the same as if it was salary.

There were a couple of changes of the legislation but it ended with today’s system: (and now we add the GST impact) when the company pays the expense, the company will now get a tax deduction for that expense but only when they pay FBT. The company will also get the GST back. So the amount of the FBT equates to the same amount of tax as though the employee had been paid salary and no GST credit was allowed ie the $100 expense (including GST, or 90.9 excluding GST) gets grossed up to $195 and taxed at 48.5% therefore the government gets $95 tax and the employee gets reward by having the expense of $100 paid.

(Please note today’s marginal tax rate is lower therefore the FBT rate is lower but do remember that Medicare levy is added to make up the total of the FBT rate)

It is not a legal option for the company to pay the expense and NOT claim the tax deduction as a way of not paying FBT.

CARS

The most common Fringe Benefit has been the car. The employer picks up all the costs of the car and provides it to the employee who has that car available for private use. We now have varying different arrangements including company owned vehicle, leased, novated lease etc where it is still considered the company is providing a fringe benefit of the car)

It is the fact that the car is available for private use that is the issue, it immediately becomes subject to Fringe Benefits Tax.

Car Fringe Benefits and the bookkeeper

How can a bookkeeper help the accountants work out the Fringe Benefits Tax amounts?

1)    Upon each: purchase of a car, sale of a car, change of employee driving a car and every 31 March get a odometer declaration signed by the employee driving the car (templates available to members see below)

2)    Provide either a summary of each cars expenses from the accounting records for the year 1 April to 31 March, so this may be in two different files given the different financial years. The trick here is to be able to provide the expenses for each separate vehicle.

3)    Ensure that at least within each 5 years a log book is kept for 13 consecutive weeks for each car. A new log book must be kept each time the purpose of the vehicle or the driver changes.
For the ultimate ATO version of explanation about FBT http://www.ato.gov.au/businesses/content.asp?doc=/content/fbt_guide.htm

Entertainment

 

 

Entertainment expenses are probably the most ugly of the fringe benefits considerations. FBT applies to some and not to others.

The ATO provides the following table to explain how FBT applies to different entertainment scenarios

The following table gives a simplified summary of the FBT and income tax results that generally arise from providing entertainment to employees and others. The table is not intended for use by income tax-exempt employers.

Situation	Income tax	FBT
Employee takes two clients tolunch at a restaurant cost $150	Employees portion $50 tax deductibleClients portion $100 non-deductible	Employees portion$50 fringe benefit Clients portion – No FBT
Employee has meal in restaurant while travelling on business trip	Tax deductible	No FBT (”otherwise deductible” rule)
Employee has meal in an “in-house canteen”	Tax deductible	Exempt from FBT
Employer provides sandwiches and juice for working lunch in office (not entertainment)	Tax deductible	Exempt from FBT
Employer provides substantial lunch with wine for employees in office but not in “canteen”	Non-deductible	Exempt from FBT
Employer provides social function for employees in office	Non-deductible	Exempt from FBT
Employer provides social function for employees and associates in office	Cost per employee Non-deductibleCost per associate Tax deductible	Cost per employee Exempt benefitCost per associate Taxable fringe benefit
Employer reimburses employee for cost of private party	Amount reimbursed is tax deductible	Taxable fringe benefit
Employer provides employee and associates with theatre tickets	Tax deductible	Taxable fringe benefit

 

Q How does a bookkeeper help to ensure the right information is kept or provided to work out the FBT obligation?

A  Obtain from the accountant advice on which method the accountant wishes used to record and therefore value the Entertainment Fringe Benefit
The types of entertainment benefit changes the records required:

a.    Meal Fringe Benefits (in connection with food or drink)

b.    Expense payment FB (purchase of tickets)

c.    Property FB (providing food & drink i.e. giving the food to them or paying for supply of food that is not prepared food, does not include restaurant.  It would not be paying for lunch or dinner)

d.    Residual (Providing accommodation or transport)
For b, c & d need to tag and report the amount paid per employee
For this can be identifying and then dissecting the amount per the table above for each incident or:

1.    50/50 split method, Fringe Benefits Taxable Value is deemed to be 50% of the total meal expenditure

2.    12 week register method, classify each incident according to the above table and then establish the Fringe Benefits Taxable Value percentage of the total and use this for the year

Bookkeepers Recording & Reporting Recommendation
Use a tagging system, for some clients use job numbers for some maybe it requires a change to the chart of accounts
Cars: dissect or tag the expenses for each unique vehicle
Entertainment (meal benefit), use the 50 / 50 method so ensure all meal entertainment expenses are tagged or allocated to one chart of account line and this is advised to the accountant (remember this type of FB doesn’t have to be reported on each employees PAYG Summary.
All other benefits, tag them.  Because these expenses are typically part of an employee’s package then many employers would/should allocate such expenses to one account called Salary package expenses.  If they are expenses outside of the package then maybe it’s an account simply called Fringe Benefits.  At least the amounts are then caught and obvious for each FBT year reporting.

Who pays FBT on the BAS?

-          Businesses that have cars as a salary package

-          Businesses with high Entertainment expenses

-          Not for Profit Organisations Salary Sacrifice Packages

-          Living Away Allowance for employees.

Note  If FBT is under $3,000 or more in the previous year, the ATO will provide an amount based on the most recent FBT assessment.

Bookkeeper Role

If a business purchases a car or some other expense that is subject to FBT within the period of the BAS then it’s important to advise the Accountant of the acquisitions as the installment rate may need varying.

 

 

Are some benefits exempt from FBT?

Some benefits provided to employees are exempt from FBT. These can be:

• Certain work-related items
• Minor benefits
• Relocation expenses

Items not subject to FBT

-          Salary and Wages

-          Acquisition of shares under employee approved scheme

-          Superannuation employer contributions

-          Termination payments that includes a company car given or sold

-          Certain Benefits provided by religious institutions to their religious practitioners

Items exempt from FBT

-          Minor benefits <$300

-          Portable Electronic Device

-          Computer Software

-          Protective Clothing

-          Briefcase

-          Tool of Trade

FBT fields on the BAS?

F1 – ATO provided amount

Write the F1 amount at 6A in the Summary Section

Varying Installment amount

F2, F3, F4 are used for varying installment amount

Warning A penalty is incurred if the varied amount is under 90% of the actual FBT Liability therefore seek Accountants’ Advice before varying.

 

F2 – Estimated FBT for the year

-          F2 = Estimated grossed up FBT Liability for the year ended 31^st March

-          F3 – Varied amount for the quarter and place same amount In 6A

if negative write ‘zero’ and place negative value in 6B

Formula for F3
F2 x Relevant Percentage (see table for %) LESS previous installment liabilities and credits claimed

Quarter ending	Relevant percentage
30 June	25%
30 September	50%
31 December	75%
31 March	100%

 

F4 – Reason code for variation for varying FBT installment amount, see below possible reasons.

Reason	Code
Current business structure not continuing	22
Change in fringe benefits for employees	30
Change in employees with fringe benefits	31
Fringe benefits rebate now claimed	32

 

 

GST and FBT?

Calculation of FBT return may also incur an adjustment to GST in the next BAS lodged.  The accountant will provide a GST Adjustment amount to be added to the BAS.  This amount will either increase or decrease G1 and 1A or G11 and 1B respectively.

 

When to pay FBT on the BAS?

Quarterly Lodgement 28^th

 

Summary

If your business (or your clients business) provides fringe benefits to employees you need to:

• calculate how much FBT you have to pay
• keep the necessary FBT records
• register for FBT
• report fringe benefits on your employees’ payment summaries
• lodge a return and pay FBT to the ATO
  ·         understand which benefits are exempt from FBT

Although this information refers only to fringe benefits provided to employees, fringe benefits can also be provided to an employees’ friends or associates (such as a family member).

If you’re sick of dealing with the shoebox full of receipts it could be time you considered hiring a bookkeeper. Here are ten questions to ask before you do.

1. What qualifications and professional memberships do you hold?

The Tax Agent Services Bill 2008 and as of 1st March 2010, this means that anyone providing BAS services for a fee will need to be a registered BAS agent. If your bookkeeper is processing BAS work, then they should be registered.

At a minimum, your bookkeeper should have qualifications such as Certificate IV in Financial Services. Look for someone who is a member of one of the various professional bookkeeping associations in Australia such as The Institute of Certified Bookkeepers (ICB).

1. What insurances do you have?

If they are a registered BAS agent, then  they must have professional indemnity insurance.

1. Who will undertake the data entry and BAS preparation?

Establish whether the work will be consistently undertaken by the same bookkeeper or by any member of the team and whether the work will be reviewed.

1. What experience / references do you have?

References may not always be reliable, but it is worth taking the effort to do a little research before hiring a bookkeeper.

1. If the work is done in an accounting package, who retains the ownership of the datafile?

Many bookkeeping organisations will process the work on their own datafile, which will save you the expense of purchasing the software upfront. If at a future date you wish to bring the bookkeeping in-house, the transfer of ownership will cost a nominal fee; currently a MYOB datafile transfer costs about $25.

1. Where will the work be done?

Will the bookkeeper work onsite, offsite, or remotely?

1. Who will be responsible for rectification work?

Mistakes may date back years; corrections can be costly exercises, involving re-keying data, reworking BAS, and reviewing end-of-year financial statements. Will the bookkeeping work be redone free of charge or will the charges be reimbursed?

1. What does the bookkeeper require to process the work?

Before hiring a bookkeeper establish what your bookkeeper will need from you on a regular basis. Do they want the receipts sorted? Are you required to write account codes or explanations on the receipts? Unless you’re paying extra for mind reading services I would expect this to be the case.

1. How will the bookkeeper communicate with your accountant?

Unfortunately I have come across instances where the business tax accountant treats the bookkeeper in a derogatory fashion and open lines of communication suffer.

When this happens you suffer too, so you need to establish how the bookkeeper will communicate with the accountant, and how the accountant will charge you. I strongly advise you to introduce your bookkeeper to your accountant, and to encourage a professional relationship between them.

1. What will it cost?

The elephant in the room is that the work of bookkeepers is vastly undervalued. Staying with the jungle theme, if you pay peanuts you get monkeys.

What now?

Once you have found your bookkeeper don’t simply outsource and ignore. You need to look at your management reports on a timely basis and incorporate them into your decision-making processes. Most importantly, regard your Bookkeeper as another Financial advisor, because he/she is the closest person to your businesses financial activities. If they are well qualified and experienced, their input will be invaluable for the continued success of your business.