Labor unfair dismissal chaos … Mixed expectations for this quarter … Rates unlikely to rise … Pitfalls for DIY super funds … MIS transition considered … Foreign R&D on way?

Labor’s unfair dismissal position uncertain

Calls are growing for Labor to make clear its position on unfair dismissal, after confusion has broken out about whether Labor would exempt very small companies from unfair dismissal laws.

Newspaper reports on Monday morning claim that Labor’s stance on unfair dismissal is softening, with Labor considering a proposal for some employers with a small number of employees to be exempt from unfair dismissal laws.

But business groups are calling for more detail, claiming Labor’s position has not changed from the policy announced by former Labor leader Kim Beazley last year, and that confusion is growing.

The debate was sparked after deputy Labor leader, Julia Gillard, appeared on the ABC’s Insider program on Sunday night, saying Labor is open to discussing concerns about unfair dismissal. “We want to make sure we’ve got a fast system, an efficient system and we will be talking to small business about its full range of concerns.” A Labor spokesperson told SmartCompany that Gillard stood by her comments on Insider.

But Peter Hendy, chief executive of the Australian Chamber of Commerce and Industry, says there has been no softening — in fact Gillard has just restarted the position announced by former leader Kim Beazley last year.

In early March last year, Beazley announced that Labor would set up a tribunal to fast-track unfair dismissal claims for small companies, so they would be dealt with quickly and more efficiently.

Hendy believes this is what Gillard is referring to — setting up a tribunal to hear claims by small businesses with less than 15 employees — and there has been no backing down on its plan to reinstate unfair dismissal rules for all small business workers.

“Labor’s plan is just going back to the old system — whether it’s the industrial relations tribunal or a tribunal by another name. It would still be a huge red tape burden for small business,” says Hendy. “That system was terribly abused and we would be back with employers paying ‘go away’ money.”

David Gregory, head of workplace relations policy at VECCI, says the number of unfair dismissal applications have dramatically reduced the number of unfair dismissal cases.

“Despite the changes, there doesn’t seem to be any outpouring of stories of exploitation from employees. Yes, it’s a strong labor market, but under the old system a lot of people were pushed into making unfair dismissal claims when they were doubtful. We don’t see any need to backtrack. The changes are sensible and they are working.”

Meanwhile Prime Minister John Howard has dismissed a strong poll result for Labor leader Kevin Rudd, which shows he is the most popular opposition leader of the past 35 years.

The first ACNielsen poll since Rudd became Labor leader last year puts his approval rating at 65%, the best for an opposition leader in the history of the poll and higher than Bob Hawke’s rating in March 1983.

Rudd is leading Howard as preferred prime minister by 48% to 43%, according to the poll published in Fairfax newspapers on Monday.

Business expectations mixed for coming quarter

Dun & Bradstreet’s (D&B) Business Expectations Survey, to be released Tuesday 13 February, paints a confusing picture of the outlook for SMEs. It reports the outlook for the June quarter:

• Growth in sales is expected for the first time in four quarters.
• Expectations for growth in profits has improved but remains in negative territory.
• Almost two thirds (62%) of business executives expect higher selling prices in the June quarter than a year earlier.

But there are also continued concerns regarding fuel prices, the drought and employment:

• The significance of fuel prices as an influence on business operations has increased to 64% – up from 42% in December.
• The drought has had a negative impact on more than one third (33%) of all firms surveyed, including 5% with a very negative impact.
• More than one in 10 (11%) of businesses anticipate a decrease in staff numbers in the quarter ahead.

Interest rates unlikely to rise in the short term

In its statement on monetary policy, released this morning, the Reserve Bank explained why it left interest rates on hold in February. It says the December quarter CPI figures – showing 0.5% underlying increase – increased the RBA board’s confidence that underlying inflation was forecast to “decline somewhat in the period ahead”.

It concludes: “With the economy still operating at a high overall level of capacity utilisation, it remains possible that the upward pressure on inflation that was evident for much of last year could re-emerge.

“Nonetheless, given the currently available information, the board judged that the most likely prospect was that underlying inflation in the medium term would be a little below its recent rate, and in these circumstances decided to hold the cash rate unchanged at its February meeting.”

The RBA board said it would continue to monitor incoming data and adjust monetary policy as required “to ensure that inflation remains satisfactorily contained”.

Pitfalls for unwary in DIY super

The number of small and medium sized business owners choosing DIY super is quickly growing, but many aren’t aware of the heavy compliance obligations and penalties if things go wrong, superannuation experts say.

Tax office figures for the 2005-06 financial year show that almost 2000 new self managed superannuation funds are established each month, collectively covering more than 600,000 people.

Jonathon Bonnett, a senior adviser with superannuation specialists De Vryer & Associates, says he is seeing four times as many inquiries from business owners looking at setting up a self-managed super fund as he did last year.

But, he says, “a lot of people who have self managed funds shouldn’t have them. They think its an opportunity for them to do what they want with their funds when actually the super environment is highly regulated.”

Many people looking at DIY super are unaware of their exposure to hefty penalties if they breach superannuation legislation.

Bonnett says while people are generally given a slap on the wrist for minor breaches, significant breaches can be penalised with fines of up to $220,000. In some cases, the super fund itself can also be exposed to punitive measures.

Paul Clements, principal of business advisory firm Clements Dunne & Bell, says many business owners are not aware of the costs and “onerous and complex” compliance and paperwork obligations associated with DIY super funds.

Clements says many DIY fund managers struggle with the sole purpose test, which requires that no immediate personal benefit is derived from any assets held in super.

“The test is very broad and can be very easily breached — and the penalty can be as high as 46.5% of the assets of the fund, or even criminal penalties,” he says.

The many compliance obligations DIY fund managers are required to meet include:

• Lodgement of annual tax and other returns.

• Preparation of statutory accounts (full balance sheet and profit and loss, and an annual report).

• Members statements that must be provided.

• Annual audits.

• Maintenance of separate member accounts and proper bookkeeping

The tax office conducted 3600 audits of self managed super funds in 2005-06 and wound up 13 funds in the preceding year.

PM considers MIS transition period

Prime Minister John Howard says he will consider introducing a transition period to assist businesses hit by the abolition of tax breaks on some managed investment schemes.

Howard yesterday told Channel Nine that he was prepared to listen to his parliamentary colleagues, several of whom have expressed concern about the transitional impact of the change.

Last week the Government announced that it would not direct the tax office to continue issuing product rulings that secure tax breaks for the cultivation of agricultural goods such as olives, walnuts and grapes.

Shane Kelly, managing director of research house Adviser Edge, says the end of the scheme will devastate operators and the thousands of agricultural contractors who work for them.

“Companies with projects in the pipeline for future years will have invested in infrastructure, contractors have bought machinery and employed people; for them it will be a disaster.”

Plan to lure foreign research spending

SMEs in the biotech industry are welcoming the prospect of a relaxing of the restrictions on foreign companies claiming tax concessions for R&D conducted in this country.

Now, only local companies that hold rights to intellectual property are entitled to tax concessions on the cost of R&D of 125% or more. But the Federal Government is considering allowing foreign holders of intellectual property to claim the tax concessions, according to a report in The Australian Financial Review. The Labor Party is also reported to have indicated it would like to relax the rules to boost foreign investment in R&D.

Changing the rules could help smaller Australian biotech companies partner with big multinationals on big research projects, and some small Australian biotechs that miss out on the concessions because their IP is registered in the United States would get the tax relief.

Economic round up

The S&P/ASX 200 has hit the ground after recent record highs, plummeting over 17 points on Monday morning’s trading.

The drop was driven by lower than expected first half profit announcements by Lend Lease and Fairfax Media.

While shares and the RBA’s quarterly statement dominate economic news at home, finance ministers from the worlds biggest seven economies have been meeting in Germany.

The key issue on the G7’s table has been the weakness of the yen, which fell a record low against the euro on the back of the talks.

But the G7 is positive about the prospects for the world economy, US Treasury secretary saying the world’s economy was currently enjoying one of the “strongest” growth periods in memory.