A misleading newspaper headline? Surely not!

I read in the Financial Review a page one headline to the effect "trusts are under attack from ATO".

We normally get our tax news from a variety of subscriptions rather than the Fin Review, so I read on with interest thinking we had missed something.  After all, there has been plenty of action on attacking trusts in the last year or two, so another one should not be a surprise.

The thrust of the article was that capital gains made in trusts may not attract the 50% discount that normally applies if the investment has been held for more than 12 months.  Surprised and a bit alarmed, I went to the ATO Ruling that was referred to, only to discover that there were no new principles espoused at all.  In essence, the Ruling was saying that if eg shares had been acquired for profit making by resale, then the 50% discount would not apply.  Now this is  a well known principle and applies regardless of the owner of the investment.

Conclusion?  Don't get your tax advice from newspaper headlines.  Surprise, surprise - they may be there to create a story, rather than impart genuine information!

Written by David Overell 

Self-Assessments COULD be doing more harm than good

When performance evaluation time comes around, managers more often than not ask employees to write a self-evaluation critiquing how they think they are doing. However, according to a recent article in “The Australian Financial Review”, written by Dick Grote, although this may seem like a good idea, it may not always be the case.

Theoretically, getting an employee to give a self-rating on their performance gives managers extra information to use in their evaluations and also gives employees a preview of what they should expect from their review. This method can actually “create a false impression of what performance appraisal is”. A performance review can be defined as a meeting where a manager provides their opinion on the quality of an employee’s work. This review meeting “is a discussion, not a negotiation” and this is where self-appraisals can encourage misunderstandings.

Dick’s research for his book “How to be Good at performance Appraisals”, proved that individuals are “notoriously inaccurate” when it comes to assessing their own performance and that “the poorer the performer, the higher (and more inaccurate) the self-appraisal”.   Incompetent employees are blind when it comes to assessing the distinction between a good and a bad performance. During Dick’s studies, a senior executive described to him his company’s practice of using a forced-ranking system to identify the A,B and C performers. This executive said, “The A’s are afraid they’ll be considered B’s, the B’s are scared they’ll be seen as C’s, and all the C’s are convinced that they’re A players.”

Managers are the most accurate assessors as they provide a generally unbiased evaluation of the job their employees are doing, the positives and the negatives, which can be something the employees don’t do themselves.

If it is company policy to conduct self-appraisals, there is a better way to go about it. First of all, the manager can explain the main purpose of these self-evaluations is a way to gauge how the employee is performing from their own point of view and that it will be only one of the data sources used to prepare their actual performance evaluation. Secondly, you should ask employees to fill these appraisals out well in advance of the actual review meeting, so it can be used by the manager to prepare for it.

Written by Bronte Packer-Hill

Tech highlight - Praemium

For the past two years we have been using Praemium, a portfolio admin service, which allows us to efficiently and accurately process a client’s portfolio for year end tax purposes.

Key advantages include:

•    fully automated corporate actions to handle situations such as demergers and consolidations
•    automatic broker feeds and upload function to record buys and sells efficiently

If you have a portfolio which consists mainly of term deposits, listed shares or other equity investments, then Praemium portfolio reports may well assist with your investment performance reporting and management.

Praemium has another online feature, V Wrap Investor, which allows access to reports and graphs of:

•    daily trade info
•    portfolio performance
•    performance for any listed security
•    estimated dividends/distributions
•    market activity showing top twenty upward moving securities
•    broker trades analysis by security

If you have a portfolio already set up with us, it is free to access once we have given you a log in.  Watchlists and alerts can also be set up.

So please feel free to contact us if this interests you.

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Written by Carinne Foong