Why is risk-taking and entrepreneurship important to the Australian economy?

10/12/2014 by Michael Jones

Risk is essential to the business environment. Entrepreneurship relies on creativity and imagination but with every new endeavour comes risk. The usual paradigm is that there is a direct relationship between the level of risk and return or profit attributed to that activity. The Jones Partners’ economic research project into small to medium business (SME) Insolvencies in the Australian economy looked at the impact of risk and risk-taking on entrepreneurship. The attached video excerpt tries to answer the question -why is risk-taking and entrepreneurship important to the Australian economy? And provides an interesting narrative commentary on this issue Most new ventures carry with

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The effect of the environmental movement on Insolvencies in Australia

08/12/2014 by Michael Jones

There are three major contributors to Australian insolvency statistics Obviously the overall health of the Australian Economy is important and this was clearly demonstrated in the Jones Partners Report on Insolvencies in the Australian Economy launched in July 2014. In that report it was clearly demonstrated that there is an inverse relationship between the level of GDP and the number of Insolvencies. This was more pronounced with respect to Company Liquidations, Voluntary Administrations and Receiverships than with Personal Bankruptcies. It’s important however to realise that the management of individual businesses is more important. In fact the major reason for Australian compa

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Is Small Medium Enterprises — the heartland of the Australian economy?

05/12/2014 by Michael Jones

It is clear that SMEs are the back bone of the Australian economy and at a recent function launching the Jones Partners Report into insolvency administrations in Australia Craig James, chief economist of the Commonwealth Bank said that 97% of Australian businesses employ less than 20 employees. It is therefore not surprising that over 80% of companies that fail are in this category. The businesses that dominate the corporate failure statistics roughly parallel the businesses in the SME sector and are very highly represented amongst construction, retail and professional services. The Jones Partners Report looked in some detail at the effect on the Australian economy of the failure of c

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How does the Asian economic boom affect Australian insolvencies?

08/07/2014 by Michael Jones

There is no doubt that the global economy is going through enormous structural change as the weight of global economic activity increasingly shifts towards Asia. The above diagram demonstrates that in 2012 the Asia-Pacific region together with the Indian subcontinent accounts for in excess of 36% of world GDP. Australia has benefited greatly from this structural change. Three quarters of Australia’s exports are to Asia. We have a similar dependence on Asia with respect to tourism and immigration. Australia has just emerged from the largest resources boom in its history and this is largely as a result of the economic development of mainland China. Moreover the structural change seem

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In Australia is the economy as robust as some economists would have us think?

19/06/2013 by Michael Jones

Whilst interest rates in Australia are at historic lows and we remain in relatively good financial shape when compared to other Western Economies, what lies beneath needs to be understood. During the calendar years 2010, 2011 and 2012 we have seen corporate insolvency levels across Australia increase on average at almost 4.5% per annum. Further, many SMEs are also reported continued periods of reduced or static profits. Interestingly, household debt levels also remain at near historical highs, despite some media commentary to the contrary. Will this lead to an increase in personal insolvencies in  Australia? In Western Sydney, for example,  Bankruptcy and other forms of personal inso

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Superannuation a useful way to protect personal assets of individuals

20/05/2013 by Michael Jones

It is true that superannuation funds are ordinarily protected property in the event that an individual becomes bankrupt. There is however and exception to this general principle where a superannuation contribution has been made to defeat the creditors. In particular Section 128 B of the Bankruptcy Act makes specific provision in relation to transfers of property to a super fund where it can be inferred from all of the circumstances that at the time of the transfer, the transferor was or was about to become insolvent. The kinds of transactions envisaged by these provisions relate to unusually large and irregular payments that are outside of the normal scope of the individual’s contributi

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Asset Protection for Directors and Business Owners

06/05/2013 by Michael Jones

Antecedent transactions Business owners are often anxious about what might happen to their private assets should their business runs into difficulties and ultimately fail. Many individuals contemplate transferring private property into some form of entity separate from the individual (such as a company or a trust), or transferring the property to a close relative or friend in the hope that if something untoward happened to them creditors would not be able to access the property. Unfortunately the Australian Bankruptcy Act anticipates this kind of conduct and in certain circumstances affords provisions for a subsequent Bankruptcy Trustee to reverse the effect of a transfer. In

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ATO – Insolvency and the Tax Man Jekyll & Hyde

13/12/2012 by Michael Jones

The title of this paper is named after the character created by Robert Louis Stevenson commonly known today as “The strange case of Dr Jekyll and Mr Hyde”.  The Jekyll and Hyde description usually refers to a person with a split personality, one good and one bad.  So it is that in many cases the Australian Taxation Office (The ATO) seems to have a Jekyll and Hyde approach when it comes to tax payers who are unable to pay their debts due to insolvency. WHY IS THE ATO THE CENTRE OF ATTENTION When businesses get into financial difficulty, cash flow becomes extremely tight.  The simple principle is that the noisy cog gets the oil, thus employees are paid before critical suppliers, c

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Ponzi Scheme

13/11/2012 by Michael Jones

Overview In the 1920’s an Italian emigrant in the United States by the name of Charles Ponzi perpetrated a number of frauds against fellow Italians emigrants in the Boston area in the United States of America. The frauds committed by Ponzi were many and various but his most successful schemes related to the genre that now bears his name. The essential element in the Ponzi scheme involves the offer and often payment of extremely high returns from doubtful sources in circumstances particularly where the investors who come into the scheme at the beginning are paid their investment returns using funds raised from investors who subsequently come into the scheme. Mr. Ponzi did not

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Phoenix Fire Reignites

by Michael Jones

The Phoenix Fire Reignites Over recent years there has been growing concern about the increasing level of the so calledPhoenixactivity in relation to the use of the corporate entity.  The Australian Government has recently issued a discussion paper on the impact of this kind of activity and a number of recommendations have been foreshadowed.  It is important to note that the discussion paper distinguishes between what it refers to as fraudulent Phoenix activity which involves usually evasion of taxes and other liabilities such as employee entitlements through the deliberate systematic and sometimes cyclic liquidation of related corporate entities as opposed to the legitimate use of the co

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