Injecting a little creativity into your applications offering and spicing things up with new techniques can surely do yo..
02 April 2019
Injecting a little creativity into your applications offering and spicing things up with new techniques can surely do you no harm in aiding customer satisfaction and retention. Here, Bobby Fosson, Channel Sales Manager at SAi looks at how having the right software can help achieve this efficiently and painlessly, while also improving the bottom line.
When the going is good and your sign shop or large format business is doing just fine, it’s all too tempting to stick to your mainstay service or application offering. Why change what’s not broken, right?
Fair enough, but isn’t it sometimes healthy to mix things up a little and offer customers something a bit different? This needn’t involve changing your core business offering, but simply adding services that are attractive to the client and enable you charge a premium.
For me, customers of signs shops and large format businesses broadly fall into three different types. First, there’s the high-end client that may already have a marketing department, a certain style or a set of branding standards that they need to follow. Then there’s the more local businesses – those customers that are always looking for some sort of advantage to differentiate themselves from the competition. Thirdly, there are those customers wanting something more unique that nobody else can provide or nobody else has. These are the ones who are willing to spend more money to ensure they stand out.
In each case, regardless of the type of customer, the goal with any large format application is to capture and hold the attention of their respective audience. For POP/POS applications, that means producing the type of signs and displays that will grab their target markets’ gaze for those few vital seconds, draw them in and then encourage an action/purchase. If you have the right equipment, achieving this can often be a lot easier, quicker and less expensive than you – or your customers - might realise.
For example, the fairly straightforward addition of a clear UV coating to a standard retail POP/POS display or poster enables a matt or high gloss finish. Aside from delivering a more premium-level and up-market appearance, it instantly and quite literally, becomes more eye-catching once the light hits it. Importantly, the likelihood of customers noticing it increases several-fold.
For customers who have UV printers, there are other reasons to use varnish or clear ink. As some materials don’t accept UV inks well, printing the image first with a matt finish varnish (which has no pigment in that material or ink), provides a better base layer on which to then print the full colour graphic. It also increases the breadth of substrates you can print onto. As necessary, you can then go back over it again with a clear varnish.
Getting a feel for it
Another useful added-value technique is the use of UV clear ink for the creation of textures in the decorative or packaging markets, as well as promotional products like keychains, pens and USB sticks. For items such as a foam core or rigid substrate for example, rather than simply printing a flat logo, copy or graphic onto the substrate, with the right software and equipment, you can even produce a textured pattern, thereby giving a true tactile feel to the product.
Another customer I know prints onto the surface of Mahjong tiles, before adding texture over the ink for a different feel. Such print techniques also continue to prove popular for prototyping. Experimenting with textures in very short-runs on behalf of customers, enables cost-effective product testing and evaluation of look and feel before going to full production.
Better yet as you’re already putting together an estimate or quote for approval of the layout and production of the job, you can easily add a simple check box to say, ‘add spot UV’ or ‘add texture'. Do this and have some pre-printed samples to hand to demonstrate the effect, and you’re halfway there to being able to up the value – and the price – of the job.
Ain’t no mountain high enough
Of course, while it’s easy to see the benefits of leaving your comfort zone and differentiating your offering, there are factors that, for some, may present a barrier to doing this right away. That said, these are by no means obstacles that can’t be overcome.
Indeed, unless you’re already equipped, this could require capital investment ranging from as little as $15K to several times that. In terms of applicable devices, there are many on the market from leading players, among them Mimaki’s UJF Series, Mutoh’s ValueJet 426UF, as well as several different machines from Roland. Alternatively, if investment isn’t possible, there’s always the option to outsource projects to fellow sign shops or print providers.
In other cases, it might simply be a question of education that dissuades some companies from exploring these techniques. Ensuring operators are properly trained to set up files correctly can be daunting if they are unfamiliar, or they’ve been told to do it out of Adobe Illustrator.
Indeed, while they might provide users with the necessary workflow to undertake these applications, certain printer manufacturers push the use of Adobe Illustrator to create different types of patterns, as well as overflood fills and suchlike. Meanwhile, those users might be unaware that their existing software, in this case our own SAi Flexi software, can to do the same thing.
In fact, Flexi also offers another extremely time- and cost-efficient capability when it comes to printing promotional items like pens or USB drives. As you may be aware, with many small format (up to 30-40 inches wide) desktop UV printers, it’s not just a case of putting such items down on the table and printing directly to them. First, you need to create a jig or fixture to drop these pieces into an item that has been pre-cut.
The good news is that, Flexi allows you to easily design the fixture around the product. You can then export the EPS file and send it to your router, laser engraver, or vinyl cutter to cut the jig or template to put on the table of the printer. Better yet, you now know exactly where to place these items and – in some cases – hold them in place for perfect registration.
Clearly, using just one software for the design of the jig and artwork, to the addition of UV or textures, as well as the direct output to the device, is more beneficial. It saves a lot of time, reduces the file size and decreases costs - along with overcoming the issue around familiarity with multiple-packages. Indeed, the need to handle various software packages and ensure different designers at each stage are fully conversant with each, is a major bugbear for sign shops.
Stand out in 2019
To that end, I would encourage you to take a look at the various software packages available on the market. Consider how they might help you to explore some of the techniques I’ve mentioned, and of course, others not discussed.
By fully exploiting their potential and pushing the envelope with new print substrates, techniques and applications that currently fall outside your area of focus, you’re better placed to both secure repeat business from existing customers and attract new ones.
The future of the retail industry is beginning to look much different than many predicted. While it seemed for a while t..
11 February 2019
The future of the retail industry is beginning to look much different than many predicted. While it seemed for a while that online shopping would dominate the retail scene, millennials and Generation Z have surprisingly begun to show a preference for shopping in brick-and-mortar locations.
Around 40% of consumers make purchases inside of physical stores at least once a week, with over half citing reasons such as not wanting to wait for delivery or wanting to see a product in-store before buying. Point-of-purchase (POP) displays have long been an essential marketing tool for brick and mortar stores. Customers want fresh, new experiences and the right POP display will help provide that.
POP Displays Provide Desired In-Store Experience
POP displays are meant to present consumers with something fresh, new, and exciting as they approach checkout. These displays enhance consumers' retail experiences while showcasing unique products. Marketers utilising POP displays have the option to issue calls-to-action and do a little bit of storytelling to get consumers familiar with and interested in their brands.
Aiming to get the best consumer reactions from your POP display should be item number one on a marketer or retailer's agenda. Fresh and enticing features, such as digital displays, should work effectively to capture consumer attention and allow retailers to make changes to displayed information quickly. When designing POP displays, consider incorporating the following:
Interactive displays that give consumers an experience in-store are fantastic ways to catch the attention of the consumer and nudge them toward the sales cycle. Examples include secure video game console displays or makeup testing options, which give consumers hands-on opportunities to interact with the product.
The option to touch, feel, or test products when applicable is paramount to purchasing decisions. Consumers are turning back to brick-and-mortar because they want to see the products they are considering in person.
POP displays should give consumers a taste of the brand the product represents. Consumers in younger generations, especially, are looking to feel a connection with the products they buy—they want to feel good about the purchases they make.
By customising POP displays to showcase innovative design and marketing techniques, marketers can project the things they value, such as minimalism, eco-friendly practices, or social sustainability.
Consumers seek out brands that they feel good about. They want to have a medium to connect with the world around them and the causes they care about when they make purchasing decisions. Through showcasing aspects of a business that highlight these things, a retailer or marketer can anticipate a positive consumer response.
Every Retailer Has Its Place
Retail marketing has seen a turbulent decade. Forecasts have shifted dramatically as retailers try to pin down trends in a volatile and disrupted market. With the rising popularity and efficiency of the internet, brick-and-mortar retailers feared what the future would bring. Luckily, older and younger generations alike seem to be heading in-store once again for many of their purchases, suggesting that brick-and-mortar and online retail can co-exist after all.
Interactive, fresh POP displays will remain a relevant and effective way to drive interest and sales from customers who come looking to get a taste of what they're buying before they part with their funds.
The new year is finally here, and with it, lots of chances to capitalise on trends to grow your sublimation business. Am..
29 January 2019
The new year is finally here, and with it, lots of chances to capitalise on trends to grow your sublimation business. Among them are a stable of trending products and designs that sublimation product decorators can leverage for increased sales throughout the year.
“In 2018, we saw a range of trending substrates and applications that have generated enormous buzz and excitement among product decorators,” said Jimmy Lamb, manager of education for Sawgrass. “Among them are sublimation transfer papers for cotton fabrics and dark colours, substrates that can stand up to outdoor environments, all kinds of creative new drinkware and a renewed focus on home décor.”
Here is a look at some of the trending products Lamb recommends for product decorating businesses to explore in 2019.
• Sublimation on Cotton and Darks
Sublimation for cotton fabrics has long been a missing piece of the puzzle for product decorators. However, last year, several transfer paper products hit the market that enables those with a sublimation system to print and transfer their digital images to cotton. New transfer media offerings from PrintLAT and FOREVER, along with new Virtuoso Print Manager settings for each, deliver impressive results.
In addition to these new papers that enable sublimation to cotton, there are also new twill and flock media options from Chemica and Poli-Tape that enable customers to create transfers for use on dark and cotton fabrics. This media enables you to print directly onto the flock or twill with your Virtuoso printer and Virtuoso Print Manager, use a plotter to cut around the design and then heat set the transfer to the fabric. Within this process, your designs sublimate for permanent coloration and the final transfer adheres to the surface of the fabric.
All of these transfer media options open up new worlds of products that you can offer your customers – and on their favourite fabric. These are a must-try and a massive opportunity for increasing sales in 2019.
• Outdoor Applications
The effects of UV light have inhibited recommended use for sublimated signage or other products for use outdoors. Unisub and ChromaLuxe, really moved sublimation applications forward in 2018 with their lines of outdoor products.
All year, we saw an upswing in the number of products that sublimation businesses offered – everything from outdoor business and event signage to garden stakes, yard signs and decorations, outdoor art installations and home placards.
These will be especially popular come spring and summer for yard decoration, in addition to year-round applications for art installations, exhibits, business and organisational signage, and advertising.
The entire drinkware segment is incredibly popular right now. One reason for this is the demand for double-wall vacuum-insulated tumblers, which keep beverages piping hot and frosty cold for hours on end. We are also seeing many of new types of drinkware, such as clear and frosted mugs, steins and shot glasses, metallic coatings and even coated stemless wine glasses and growlers (holds up to 64 oz of draft beer).
This growing diversity of drinkware offers many opportunities to creatively bundle products for your customer base or break into the craft brewery/restaurant market. Either way, these are great substrates to try out, build samples of and use to drive new sales.
• Sublimated Décor
There are a number of opportunities to offer sublimated products meant for turning a house into a home. You can use your system to decorate baby and throw blankets, sequin pillows and faux-textured pillowcases, welcome mats, hand towels, key and jacket hangers, and many other items people will love to have in their homes – or give as gifts! Even if you have a smaller printer – SG400 or SG800 – you can use multiple transfers and presses to imprint larger products, such as blankets and doormats.
What’s even better with items for home décor is that there is often demand for personalisation, which gives you the opportunity to set premium prices. It costs little to add a name or photo to a product, but customers pay more for the value delivered.
By Chelsea McDougall (http://www.labelsandlabeling.com/author/chelsea-mcdougall) Some call it the ‘G..
24 February 2018
Some call it the ‘Green Rush.’ Others liken it to the Wild West. Experts say it’s growing faster than the dot-com era in the early 2000s. Call it what you will, the legal cannabis market is growing by an unprecedented rate and is presenting a tremendous opportunity for the label and packaging industry.
In the US, eight states (Alaska, California, Colorado, Oregon, Massachusetts, Maine, Nevada and Washington) and Washington, DC have fully legalized cannabis to be sold and taxed in dispensaries for recreational use. Another 22 states and Washington, DC have active legal markets in the form of legalization for medical or scientific purposes.
Elsewhere in North America, the Canadian government is expected to legalize recreational marijuana for the entire country by July 2018, and Mexican President Enrique Peña Nieto recently signed a decree opening the door for medical cannabis legalization.
All this points to an industry that is accelerating faster than any other in recent memory, and the payoff could be huge for label and packaging suppliers.
Arcview Market Research has studied the legal marijuana market and its growth opportunities. According to its reports, the legal cannabis market reached $6.7bn USD in US, Canada, and Mexico as these countries have expanded their legal marijuana market.
At a 34 percent growth rate, this industry is growing larger and faster than the dot-com era (see boxout), and the market will reach $22.6bn USD by 2021, according to the Arcview’s most recent ‘State of the Legal Marijuana Markets’ report.
‘Very few consumer industry categories reach $5 billion USD in annual spending and then post anything like 25 percent compound annual growth across the following five years,’ Arcview’s report states.
A wide market
The products for this market are plentiful. There’s the flower – or the traditional marijuana ‘bud’ – but also cannabis-infused edibles and beverages, cannabis lotions, oils, topicals, capsules, tinctures, vape pens and pre-rolled cigarettes. Additionally, dispensaries sell all the accouterments to indulge – pipes, pre-rolled cigarettes, cigarette paper and more. Not to mention the products for medicinal marijuana. The list of legal cannabis and auxiliary products and services is practically endless: all products that require a label and need packaging guidance. Converters prepared to enter this developing market could be at the forefront of this so-called ‘Green Rush’.
Packaging could play a key role in guiding an industry that looks to shed its stoner image as it moves toward wider adoption. As these companies evolve, they’re looking for their labels and packaging to represent a grown-up image. High-end dynamic packaging is in demand.
‘Now [marijuana companies] have a prime product that will reside on shelves,’ says Gary Paulin, Lightning Labels director of sales and client services. ‘Consumers are going to walk into a dispensary and expect the products to look high-end. Recreational legalization has been a real game changer, it puts the prime label front and center.’
Lightning Labels, a label converter based in Denver, Colorado, has been at the front lines of this evolving market. Paulin continues: ‘You have an industry that’s grown out of the shadows. But it’s grown up, and now it deserves to be taken seriously. These companies are putting more thought into branding and realizing that the brand is so much more than a logo. A brand is who you are.’
The industry, while profitable, has a unique set of challenges.
In the US, branding is met with roadblocks. Even though there are active legal markets in 30 states, marijuana still remains a federally illegal substance. The office responsible for registering trademarks – US Patent and Trademark Office – is a federal office, and therefore will not trademark marijuana retailers or marijuana products. This means brands are effectively left open to counterfeiters and trademark infringement.
And while the future of US cannabis legalization under the Trump administration is unclear, repeal of federal prohibition would ‘fuel explosive growth,’ Arcview notes in its report.
Digital flexible packaging converter ePac, based in Middleton, Wisconsin, has seen greater interest in this arena since opening a second location in Boulder, Colorado. Carl Joachim, ePac’s chief marketer, has lovingly compared the emerging legal market to ‘the Wild Wild West’.
‘I’m referring to the level of maturity of the industry,’ says Joachim. ‘From the standpoint of the income opportunity the industry promises to deliver: there are many companies vying for market position, and a few larger entities beginning to emerge. While new entities are formed and licenses are obtained, in many states lawmakers are still defining the regulations that are needed to govern the industry, while enabling an infrastructure to support growth.’
As states iron out the rules guiding this new industry, oft-changing regulations can lead to headaches for label and packaging converters, according to both Joachim and Paulin, as they require changes to the packaging. However, digital technology lends itself well to this industry, as there are many smaller, boutique brands, with short runs and frequent artwork changes.
‘Often there are new state regulations that deal with how the product needs to be marked,’ Joachim explained. ‘These are simple changes we can easily make, without the need for additional plate fees. Our customers often drive other changes once they understand how we can help them create great packaging with eye-popping graphics.’
Although today acceptance for legal cannabis is hugely popular (polls show that 80 percent of Americans approve legal access to medical cannabis, Arcview says), for years it’s been an industry that’s operated in the black market, so it’s reasonable that some businesses would be apprehensive about jumping in.
At Lightning Labels there were few misgivings. ‘To choose not to participate in it because you may not agree with it, that’s now seen as somewhat foolish,’ he continues. ‘Our attitude is: legal is legal. It’s a huge vertical that we don’t even know the potential of long term. We’re going to be active in it, and we’re going to be transparent. We’re not doing this is the shadows. It’s an exciting business to be a part of.’
By Peter Nevell, Partner – Tax Only individuals, and not companies or trusts, can have a hobby or a privat..
31 January 2018
By Peter Nevell, Partner – Tax
Only individuals, and not companies or trusts, can have a hobby or a private recreational pursuit.
The pursuit of a hobby by an individual may be to supplement wages, create income after having lost a job, test the waters for a new commercial venture or simply follow a passion. The pursuit of a hobby is not the same as carrying on a business for taxation purposes, which means that money derived from a hobby is not income and therefore is not assessable. Conversely, hobby expenditure is not tax deductible.
There is a risk for individuals conducting profitable hobbies that the Commissioner of Taxation will regard them as carrying on business operations.
A hobbyist is not entitled to an ABN and cannot register for GST because private recreational activities, pursuits or hobbies are specifically excluded from the definition of an enterprise.
The Queensland Supreme Court in 1985 concluded that an individual was in the business of primary production after he acquired and used one purebred female angora goat for the purposes of breeding and selling the kids. Afterwards, the Commissioner withdrew his long-standing guidelines on what quantity and land areas were considered necessary for the carrying on of a business operation.
These days there is significant economic activity conducted by taxpayers in cyberspace and for those that conduct such an activity there needs to be a word of caution. For instance, on its website, the Australian Taxation Office (ATO) states that if a taxpayer ‘sets up a shop on an online trading or auction site, you are likely to be carrying on a business – especially if you paid fees to operate the shop.’
The distinction between a hobby and a business is determined by the ordinary meaning of those words as determined by the Courts, although the Income Tax Assessment Act 1997 defines ‘business’ non- exhaustively as ‘including any profession, trade, employment, vocation or calling, but not occupation as an employee.’
Court cases over the years have established the circumstances that generally need to be present before a business is regarded as being operated by a taxpayer. A summary of these business indicators from a primary production perspective is found in the Commissioner’s ruling TR 97/11 which analyses an individual’s activity based on whether:
No one indicator is decisive, and analysis of the indicators must be considered in combination. The conclusion is drawn from the general impression gained during the analysis.An individual can carry on a business of a limited nature which is preparatory to or in preparation for carrying on another business on a larger scale.As losses are frequently encountered by startup businesses, it is recommended that a business plan, incorporating cash flow projections and assumptions, be prepared on a realistic basis.
Because of the difficulty involved in determining whether an individual is carrying on a business or a hobby, and the sheer number of individuals making losses from these activities, parliament introduced Division 35 of ITAA 1997 (non-commercial loss rules) during 2000.
Division 35 outlines that a loss made by an individual (including an individual in a general law partnership) from a business operation will not be deductible in the income year in which it arises unless the following conditions are satisfied;
And, if the exception rule doesn’t apply, one of the following tests is satisfied:
If one of the preceding four tests is not satisfied, you may apply to the ATO for the Commissioner to exercise his discretion.
For the Commissioner to exercise his discretion favorably, it is important that the individual demonstrates that the business activity will, more than likely, satisfy one of the tests or produce a tax profit and outline the period within which a commercially viable business would do so. A business plan and cash flow forecast are necessary, as well as supporting evidence from an independent source. Appropriate independent sources include industry bodies or relevant professional associations, government agencies, or other taxpayers conducting successful comparable businesses.
Any loss denied as a tax deduction will be deferred to future income years and offset against the assessable income from the “non-commercial” business activity.
As a concluding point, once an individual’s activities move from being a hobby to carrying on business, the small business capital gains tax concessions potentially become available. This concession can exempt from tax some or all of a capital gain from the disposal of a capital asset that is used in the individual’s business operations.
Given the complexity of these rules, we recommend that you discuss your specific circumstances with your Crowe Horwath tax adviser.
We all know the global economy is changing at a rapid rate, and as business owners we need not only stay abreast of ..
31 January 2018
We all know the global economy is changing at a rapid rate, and as business owners we need not only stay abreast of changes but, be open to them. Drawing from key points made in a recent talk by David Lindberg Head of Commercial Banking, Westpac, I highlight in this article, six areas of the economy where a lot of the action is happening.
1.SERVICES AND AGRICULTURE
The industries driving the Australian economy over the coming 10-20 years will be Services and Agriculture.
Services contribute about 75% of Australia’s Gross Domestic Product (GDP*), employing about 85% of the Australian workforce. Services include such things as education and tourism, financial services, energy and mining-related services, environmental services and financial technology (Fintech).
The services sector contributes more to total productivity growth in the economy than does the goods sector. How? While productivity grows more slowly in the services sector, as the services sector is so much larger than the goods sector, the services sector contributes more.
An efficient services sector is critical to trade and economic growth.
*(GDP– the total amount of goods and services we produce as a nation)
Australian farmers produce food for more than 80 million people per annum and with the emerging Middle Class in Asia, agriculture stands as one of Australia’s major exports.
The value of Australia’s agricultural sector is tipped to peak at $63.8 billion this financial year. The total value of Australia’s farm exports is expected to reach a new record of $48.7 billion, $1 billion higher than in 2016. This growth was driven by significant increased crop production with record harvests enjoyed in every state in Australia.
The future of economic success for Australia depends on these two industries.
As the Chinese get richer at an astonishing rate their demand for our goods and services will grow too. We will therefore see a growing trend away from buying from China, to selling to China.
Some interesting statistics:
The Chinese are consuming at an unprecedented rate as demonstrated by the following stats from the world’s biggest online shopping giant, Alibaba, owned by Chinese billionaire Jack Ma:
The 2015 China-Australia Free Trade Agreement (ChAFTA) increases the ease of doing business with China. This coupled with Australian innovation, an established services & agricultural sector and our proximity to China, places Australia ahead of nations such as the US, Canada and Euro Union, to get much of this export action.
To read more:
Therefore, we need to do more for less, and automation will be key. 57% of jobs will be automated by 2025, so we will be seeing a massive change in the work people do. Fields where social interaction is fundamental will be those in demand, also those in the creative landscape, such as Health and Education services.
The relationship between big and small business is changing and should continue to do so. Small and Mid-Size business (SME) employ half the Australian workforce and generate 57% of GDP. This sector is growing at twice the rate of big business.
We are seeing a growing trend of big business outsourcing services to small business. The reason for this is that most of the innovation and new ideas come from smaller organisations who are much more agile and nimble than their bigger counterparts. The new economy will rely on the relationship between big and small business, and all parties need to adjust to this new relationship.
For business owners to attract and keep the best talent, they need to offer a workplace that is intrinsically fun. Research shows that the millennials (those born roughly between 1985 and 2004) have quite different drivers than those generations before them.
This is what they are looking for:
For the millennials, the notion of “work/life balance” does not resonate. It suggests that work is boring and “life” happens after the work is done. Merging the two is what concerns them.
Robotics is upon us and we will see more over the coming five years and beyond in all facets of society. Artificial Intelligence (A.I) will sweep across every business and is already being used. This will include the likes of driverless cars, medical advances and fraud prevention to name a few. Recent research found that 70 % of Americans couldn’t tell the difference between the voice on the phone between a real person and one driven by A.I.
Experts and thought leaders are divided as to whether this will bring positive or negative changes to work and society at large, but for sure we need to be watching this space.
These six drivers of change are upon us and bring challenges and opportunities alike for our business community. Embracing these changes and seeking out opportunity to benefit from these will be key to your success.
ABOUT THE AUTHOR
Marian Taggart-Holland is the director of Ecolease, an independent commercial broker, specialising in equipment finance to the Sign, Print, Display and Graphics Industry and member of the Visual Impact Suppliers Association.
Printing Impressions in the US has released its forecast for the future of printing for the coming year. It’s ..
16 January 2018
Printing Impressions in the US has released its forecast for the future of printing for the coming year. It’s an interesting breakdown of key markets. Although it is US centric, it should provide some insight for Australian print professionals and business. Click on the link for the PDf and … enjoy the read.
Invoicing is a critical activity for all businesses but it can be a frustrating drain on time and resources. Many busine..
12 December 2017
Invoicing is a critical activity for all businesses but it can be a frustrating drain on time and resources. Many businesses still create and issue invoices by hand; even when they’re sent by email, a number of time-consuming manual processes are involved. If time spent on the invoicing function can be slashed, small businesses will instead be able to devote it to revenue generating activities. That said, NEOPOST have released a fantastic eBook that will help you and your business improve your invoicing options. Click here for the eBook.
The Australian Taxation Office (ATO) has recently released Taxation Ruling 2017/D6, setting out the ATO’s upda..
18 October 2017
The Australian Taxation Office (ATO) has recently released Taxation Ruling 2017/D6, setting out the ATO’s updated guidelines regarding when an employee can claim a tax deduction for their travel expenses and the Fringe Benefits Tax (FBT) implications of these expenses.
According to the ruling, an employee can claim a tax deduction for travel expenses incurred in earning their salary or wage, or if the expense is work-related. However, what exactly constitutes an expense “incurred in earning income”, and what is considered “work-related”?
Normally, the factors looked at when determining if a travel expense is tax deductible include:
Travel expenses that are typically tax deductible include transport, accommodation, meals and incidentals paid for by the employee during a work-related trip. Travel costs where the employee is travelling to a site or alternative workplace are also included.
Travel expenses that are typically not tax deductible include;
These principles hold true in the ATO’s current draft ruling. The draft ruling does not provide new ground for tax deductions, but rather provides better and clearer guidance in the context of the modern workplace environment.
In particular, the ruling deals with fly-in-fly-out (FIFO) workers, as well as addressing the more transient nature of modern workplaces, such as where an employee is required to work in two different locations (i.e. two days a week in one location and the rest of the week in a second location).
For FIFO workers, the draft ruling states that in certain circumstances fly-in and fly-out travel may be deductible, and therefore is not subject to FBT if the employee is being paid for that travel time and is under the employer’s direction and control whilst travelling. However, if the employee is not paid for that travel time, and is not subject to the employer’s direction whilst travelling, these expenses will not be tax deductible and if paid by the employer, may be subject to Fringe Benefits Tax. The ruling provides a number of examples that can assist in determining any associated travel expenses of the employee and therefore whether the trip itself would be FBT exempt for the employer.
In certain circumstances employees who are required to work in two different locations (called “co-existing work locations” in the draft ruling), may claim their travel expenses between these locations (including accommodation, meals and incidentals) as tax deductible. Consideration must still of course be given to whether there is a private and therefore non-deductible portion to these travel expenses.
The ruling introduces a term “special needs travel,” which supports the potential for travel expenses to be deductible. These workers are generally FIFO workers, but this term could also extend to others were the demands under their employment include; a requirement for them to work remotely, travel is part of their employment activity, to continuously change work locations or to work away from home.
The draft ruling provides eighteen examples of various travel expenses and working arrangements, the tax deductibility available on those expense and the associated FBT impact. Not all scenarios will be covered by these examples, however when read in context, can provide guidance for assessing one’s unique circumstances.
Importantly, the ruling is still only a draft, but we expect that many of the concepts and examples to remain in the final ruling.
For more information about this draft ruling, or to get advice around Fringe Benefits Tax or travel expenses, contact your financial adviser.
This article was written by Courtney Van Zyl (Manager Tax Advisory) & David Hall (Associate Partner Tax Advisory).
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