CAMBRIDGE Mercantile Group, a specialist in corporate foreign exchange and global payments, has expanded operations into the Asia-Pacific (APAC) territory through new regional headquarters in Sydney. It is a natural shift, according to Cambridge Mercantile, as the Australian currency develops into one of the most traded in the world.

Australian dollars are now in the top five traded currencies in the world.

A catalyst for the move is that the Australian dollar (AUD) has in recent years become one of the world's top five traded currencies, a reflection of the country's strong economy.

Establishing headquarters in Sydney affords Cambridge access to a new demographic and better services Australian domestic clients.

Timothy Connors is the new managing director of the Asia-Pacific region, having joined Cambridge from Western Union Business Solutions (WUBS), where he served as director of sales for corporate and enterprise accounts. In his new role at Cambridge, Mr Connors oversees all aspects of operations, critical customer relationships and sales functions.

"I'm excited to lead the team and be at the forefront in developing trusted and lasting relationships with customers in the APAC region," said Mr Connors. "The remarkable growth experienced in APAC financial markets is certain to continue and we expect these markets to play an important role in the world economy.

"I'm keen to work with our existing clients and build new relationships to offer our complete range of global payments and FX solutions to meet the growing demands of this region."

Cambridge Mercantile Group CEO Bernard Heitner said, "The launch of our APAC headquarters marks another significant milestone for Cambridge this year. As we celebrate our 20th anniversary at Cambridge, we continue to forge ahead with delivering the best-in-class FX and global payment solutions to our clients.

Since its inception in 1992, Cambridge Mercantile Group has grown to become a leading provider of global payments and currency risk management solutions. With more than 14,000 clients worldwide, Cambridge is among the largest bank-independent providers of hedging and risk management products, powered by technologies widely regarded as industry leading.

With offices strategically located across the globe, including North America, Europe and Australia, Cambridge facilitates the secure movement of more than $20 billion dollars annually.

www.cambridgefx.com

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MANY small and micro business owners around Australia are leaving themselves open to penalties from the Australian Taxation Office (ATO), simply because they do not have the facts about their rights and obligations. A national American Express poll of more than 1000 small businesss found "long-held tax myths" continued to plague Australian small businesses.

By the numbers: small business owners lost without proper tax knowledge.

The American Express survey, conducted by Galaxy Research, found that the understanding of tax reporting requirements varied enormously depending on the length of time in business and the type of business, with many subjecting themselves to substantial losses and the risk of being penalised by the ATO.

Author and taxation researcher Adrian Raftery said he was concerned that business owners, specifically younger entrepreneurs and those who work from home, risk inadvertently "running afoul of the ATO" due to a lack of understanding about their tax reporting requirements.

"If you don't know your business obligations, then why are you in business?" Mr Raftery said. "Knowing your obligations and knowing what to claim and what not to claim is the key, however there exists some long-held misconceptions based on tax myths that continually trip business owners up."

According to the research, one-in-two small business owners has no idea about the write-offs that home-based businesses can claim for equipment purchases, and 40 percent are in the dark when it comes to tax-breaks for asset purchases under $6,500.

Additionally, the majority (65 percent) of small business owners mistakenly believe that businesses with a turnover greater than $50,000 are required to register for GST, despite the threshold changing to $75,000 in 2007.

"GST and registration for GST is an area that always creates confusion in small business," Mr Raferty said. "The rule is that businesses with a turnover greater than $75,000 must register for GST with the ATO.

"Businesses that fail to do so, or incorrectly register, risk being penalised for their mistake," he said.

"When operating a home-based business it is important to keep clear and separate records of expenses that relate to the running of the business, and not to confuse them with the everyday expenses related to running a household."

The research also identified that almost half (46 percent) of small business operators incorrectly believe they can claim $300 worth of deductions without receipts.

Furthermore, 44 percent of business owners believe they are entitled to claim more than they are allowed to or else have no idea about the tax deductions they can legitimately claim for entertainment expenses.

"At some stage, most business owners have had a ‘friend' who has told them a clever way of getting more out of their expense claims, but the reality is a mistake in expense claims could add up to a big expense in the long run," Mr Raftery said.

"Business owners should be getting their advice from credible sources, and if in doubt, they can always ask the ATO. Contrary to popular belief, asking the ATO for clarification does not put the owner on a ‘watch list', it only serves to ensure they don't make a mistake in the first instance," he said.

However, the problem with that suggestion is that business owenrs rarely have the time to endure long waiting times on the phone tot he ATO.

Younger small business owners, the research showed, were most prone to mistakes

According to the research, small business owners aged 18-34 are most vulnerable to making losses and mistakes due to their lack of knowledge of their taxation rights and obligations.

Among this group, significant confusion prevails regarding write-offs, with almost half (47 percent) not sure of the write-offs they're entitled to on asset purchases and nearly a quarter (23 percent) mistakenly thinking they can write-off asset purchases under $1,000 only.

The research also highlighted that half of young entrepreneurs (51 per cent) are not aware that errors in their tax return are their responsibility, not their accountant's, and half of young entrepreneurs are unsure as to whether their business is susceptible to an audit by the ATO.

Mr Raftery said nearly three-quarters of small businesses (72 percent) incorrectly believe they can claim back taxes paid last year based on losses made this year despite this proposed legislation yet to pass through parliament.

"For young business owners, it is as equally important for them to be an expert in their chosen field as it is for them to develop an understanding of their tax reporting obligations. A good tax reporting process, established early in the business' life, is essential to long-term viability," Mr Raftery said.

"At the end of the day, business owners need to recognise the role of the ATO and work with the system to ensure they get the most benefit out of it. To do that, they need credible advice and to actively seek clarification in areas of uncertainty," he said.

He suggested small busienss owners get the right advice and apply that knowledge to the current tax year.

Undertaken by Galaxy Research, the study was commissioned by American Express and comprised 1,003 small business owners across Australia with businesses generating an annual turnover of up to $2 million. The research was conducted in May 2013.

Adrian Rafferty has a few ways to avoid common tax pitfalls:

• The ATO runs a free national seminar program for people who are new to business - an ideal way get up to speed with tax concessions and reporting obligations for small businesses;
• Speak to an accountant about the latest regulatory and legislative changes as well as the tax regulations that apply to your individual business;
• Don't assume the same rules apply to a business as to an individual - take time to identify and fully understand the differences;
• Always keep business and personal expenses separate by using a dedicated business card; and
• Consider accounting software and other financial products that will help more efficiently and accurately record transactions. (Here Mr Rafferty puts his sponsor forward, suggesting use of an American Express Business charge card which displays monthly expenses on a single statement with ATO-approved, GST-compliant itemisation for downloading into leading accounting software packages, eliminating the need for manual data entry and itemisation of receipts).

www.americanexpress.com.au

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RESERVE Bank moves to officially limit the amounts retailers can charge customers for processing credit cards pose a problem until banks – the owners of the credit card brands – reduce their own impost on retailers.

Jost Stollmann - calling on banks to lower their card fees to retailers.

Tyro Payments CEO Jost Stollmann said the changes – which were announced on March 18 and aimed at bringing down allowable credit card surcharges from as much as 4 percent to 1 percent – would benefit consumers, but the major banks had a responsibility to help bring down costs for struggling retailers.

“If excessive surcharging on all credit and debit card transactions was removed it would save the Australian consumer an estimated $350 million a year,” Mr Stollmann said.

“Often consumers are charged nothing to use their credit cards, but in many cases they do have to pay a fee, for petrol, clothing and food. It can be for anything.

“The major banks impose unnecessary costs on small retailers, who then pass the costs onto consumers.

“Banks are making record profits, while retailers are struggling to survive. Banks need to lower their ‘interbank’ fees, which will give retailers the capacity to lower credit card fees for consumers,” he said.

From March 18, the Reserve Bank of Australia (RBA) issued a guidance note on new Standards that give credit card companies the power to force retailers to limit what they can charge consumers to use credit and debit cards.

Mr Stollmann said the ramifications could be huge as Australians spent $440 billion on credit, debit and charge card transactions last year.

Jost Stollmann (right) interviewed on ABC's Lateline Business (now The Business).

This included $208 billion on Visa and MasterCard credit cards, $130 billion on eftpos cards, $54 billion on AMEX and Diners Club charge cards and $49 billion on Visa and MasterCard debit cards.

American Express and Diners Club card transactions attract surcharges of 3-4 percent, while 36 percent of all retailers levy a surcharge on credit card purchases, according to the RBA’s Review of Card Surcharging: A Consultation Document, published in June 2011.

The use of surcharging has grown dramatically in recent years, Mr Stollmann said, and is most popular with large retailers who wield strong market power. The RBA first allowed credit card surcharging from 2003 to ensure customers who paid in cash did not subsidise those who used credit cards, which require costly technology.

Mr Stollmann said today 44 percent of large retailers charge customers to use credit cards, compared with only 23 percent of small businesses. This is thought to be because small business has a closer and more interdependent relationship with its customer base.

In December 2010, the average surcharge paid by consumers for Diners Club was 4%, for American Express 2.9%, for Visa 1.9% and for MasterCard 1.8%, according to RBA research.

In taxis, customers are forced to pay 10% when paying for their trip with a credit card. The RBA is currently considering whether to regulate the Cabcharge system as it does the Visa, MasterCard and eftpos payment schemes.This would open up the Cabcharge system to competition for the first time in 36 years.

Mr Stollmann said Australians spent an estimated $4.6 billion on cabs in 2011 from 209 million separate journeys, according to Australian transport industry statistics.

“It is a scandal how Cabcharge is allowed to continue to stifle competition and gouge the Australian consumer,” Mr Stollmann said. “Customers pay 10% in a cab every time they use a credit, debit or Cabcharge card, yet only pay between zero and four percent in a shop.

“The payment system in cabs is more expensive than in a retail store, but there is no justification for the 10% if the market was open to competition. Every man, woman and child in Australia takes more than 15 taxi journeys a year on average, so the stakes are high.”

The 10% taxi surcharge contributed $90 million of revenue to Cabcharge in the 2012 financial year, charged on $1.05 billion in taxi payment turnover.

Mr Stollmann said the momentum to provide customers with a better deal was growing.“Every man, woman and child in Australia takes more than 15 taxi journeys a year on average, so the stakes are high.”

Mr Stollmann lamented the inequalities that bedevil Australia’s payment systems. He said Tyro was the first new entrant into the EFTPOS business in more than 14 years, and is independent of the brand ‘eftpos’, which is majority owned by the major banks.

He pointed out that a major anomaly was that Cabcharge is not registered with APRA, holds no financial services licence or credit licence with ASIC and is not governed by the RBA, yet the proprietary Cabcharge payment system processed $438 million in fares 2012 financial year.

www.rba.gov.au

www.tyro.com

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PROFESSOR Hari Tsoukas, a Cypriot academic based at the UK's Warwick Business School, has warned unemployment could double to 30 percent in Cyprus following the nation's bailout.  The EUR10 billion rescue plan agreed by the European Union and Cypriot MPs will see depositors with more than 100,000 losing 40 percent of their cash while the Popular Bank will be closed and its debts absorbed by the Bank of Cyprus.

There will also be controls on cash flows to stop more money being drained out of the country. Although it has stopped the Cypriot economy from collapsing Professor Tsoukas believes it will bring great hardship for the next decade.

The Cypriot professor, who is back in his homeland at present, said,  "Unemployment is likely to at least double from 14 percent to at least 25 percent and possibly up to 30 percent. Not so long ago it was just five percent.

"Those two banks employ around 8,000 people, which is a big number for a country like this.

"They are extremely important for the economy.

"Imagine if the City of London was a country and its financial institutions were suddenly wiped out. It's extraordinary. If you try to impose a new business model overnight, the country will stop functioning.

"This is a fascinating case study of how to turn a problem into a drama and a drama into a crisis. Things should not have escalated to this point," Prof Tsoukas said.

"I think the future could be terribly bleak. It's going to have huge knock-on effects for the whole economy."

There is speculation that Cyprus will leave the Eurozone now with a lot of resentment towards the European Union, and although Prof. Tsoukas believes the interest of the country is best served within the Euro, the price Cyprus pays for Eurozone membership has become so high that he will not be surprised if the debate concerning a return to the Cyprus pound intensifies and, ultimately, the country is forced to exit the common European currency.

"There is a lot of anger against the Eurozone in Cyprus because of the way this has been handled. The EU has been perceived by many people as almost hostile to the country; after all we are talking about the shrinking of the banking sector which is the most important sector of the economy almost overnight. It is a violent change to the business model and people will see their lives being turned upside down," Prof. Tsoukas  said.

"These voices to exit the euro will increase, but I don't think they will dominate in the short term at least, and I still think people will probably see it is in their best interests to stay part of the euro."

Prof. Tsoukas says in the long-term Cyprus' untapped gas reserves will offer a way to grow the nation's economy again.

"It is a huge challenge now facing the Cypriot people, we have been resilient before and we will need all that again," said the Professor of Organisation Studies.

"We have seen for the first time since 1974 signs of the country sliding into a non-normal economy. People have been able to get by, but most worryingly people are seeing their daily lives out of normality.

"We are going to see things getting worse in Cyprus, life will deteriorate. Life will be difficult for people living in Cyprus and the country will be another version of Ireland and Greece with a tough austerity programme.

"In another decade we can look forward to another recovery and money coming from the country's natural gas reserves. Banking will still play a part but the economy of Cyprus will shift to an energy-based economy and other services. The question of course is how people will survive between now and the end of the decade. But the powerful members need not worry about it - Cypriots do not vote in their elections!"

www.wbs.ac.uk

BACKGROUND:

Warwick Business School, located in central England, is the largest department of the University of Warwick and the UK's fastest rising business school according the Financial Times. WBS is triple accredited by the leading global business education associations and was the first in the UK to attain this accreditation. Offering the full portfolio of business education courses, from undergraduate through to MBAs, and with a strong Doctoral Programme, WBS is the complete business school. Students at WBS currently number around 6,500, and come from 125 countries. Just under half of faculty are non-UK, or have worked abroad. WBS Dean, Professor Mark P Taylor, is among the most highly-cited scholars in the world and was previously Managing Director at BlackRock, the world's largest asset manager.

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