Powerline - Winter 2017

Here we are again, another financial year gone and a new one started!

When looking at the year just gone, it has been a world of change and uncertainty – the Brexit vote, election of Donald Trump, governments struggling with diminished certainty and revenue models, tech companies innovating and agitating for change in every sector (not just IT), and the real effect of social media on our lives, politically as well as the security of the world.

I am convinced the only normality of the future is change; we need to be prepared that the new norm is uncertainty and be comfortable with that. This Connected Economy centres around attributes we are not normally attuned to like Authenticity, Leadership, Personal Passion, Transparency, Relationships, and Co-Creation. Compare this to the Industrial Economy, Consistency, Standardisation, Precision, Risk Removal, and Non-Variance. This is a whole new set of skills.

All businesses need to think strategically and ensure you are looking over the horizon for insights to ensure you are not blind-sided by unexpected changes innovation may have on your business model. Strategic thinking is not about doing a budget for next year. It is about gaining insights into your industry and anticipating and preparing for new opportunities. These insights may be confronting but also rewarding by gaining first mover advantage in blue ocean markets. This will give you a distinct advantage over your competitors.

We at Power Tynan have been spending considerable time on insights and we look forward to sharing some of our thinking in the coming year with how we assist and engage with you to help with these insights.

We are excited to announce we have started our own fully licensed Financial Planning business called Magnify which will operate from our offices. It is managed by Stan Moffatt, an experienced Accountant and Financial Planner of over 25 years.  We also have 9 of our team licensed to assist in matters requiring an AFSL licence.

We have also established a Corporate Advisory business called TAS Consulting Group, situated in Sydney. This business specialises in capital raisings, due diligences, financial information memorandums, and restructures. This will operate under the AFSL license of Alpha Securities, and will be managed by Grant Allsopp, who has over 20 years’ experience in this field.

That's all from me, so until next time please remember to always enjoy what you do and make a difference to someone's life, no matter how small.

The Power Tynan Charitable Trust recently donated $1,500 to Off The Chain K9 Rescue Qld (OTC).

Established in 2014 by Jess Otto, this amazing charity rescues dogs in need - the dumped, the unclaimed, the unwanted and the abused - and cares for them until they are adopted by their forever family. As well as providing food and shelter, this care includes health checks, vaccinations, microchipping, worm, tick and flea treatment, desexing and registrations with the local council.

"Every dog deserves to be loved, but we need help to continue,” said Jess. “Each dog gets the best of care but food, vaccinations, desexing and vet visits don't come cheap!”

Several Power Tynan team members have adopted dogs from OTC, while others act as fosters while the dogs are still in OTC care.

"This donation will help us greatly, as we also have the expenses of insurance, administration software, trainers, boarding fees, and fencing materials. Donations of money, time or goods and services all help us make a change to an animal's life.”

For more information about this fantastic charity, or to find out what you can do to help, visit https://www.facebook.com/offthechaink9/

This quarter we celebrated the Power Tynan anniversaries of CEO Paul Hilton, who has been with us for 25 years!

Education

St Laurences College South Brisbane, QUT, Securities Institute for Post Graduate Studies, Mt Eliza Business School

Hobbies & Interests

Any form of exercise, fishing, camping – getting away from the hustle and bustle

When did you start working at Power Tynan?

August 1992

Why did you apply for a job at Power Tynan?

Peter Tynan approached me to work for the firm

Why do you enjoy working at Power Tynan?

I enjoy working at PT because of the variety of clients and different types of work, and the team we have is second to none

As ASIC and the lenders continue to tighten lending policies, there has been a lot of discussion recently about interest-only loans.

The government’s Money Smart website has produced this useful information to help borrowers better understand interest-only loans and the risks associated with them.

Is it in your interest?

As the name suggests, with an interest-only mortgage your repayments only cover the interest on the amount you have borrowed, during the interest-only period.

You might consider this type of loan if you're buying a house or refinancing your mortgage, but you need to think carefully about whether it will be the best loan for you in the long run. Here we explain the risks and benefits of interest-only mortgages.

How do interest-only loans work?

Most home loans are principal-and-interest loans, which means that your regular payments will reduce the principal (amount borrowed) as well as paying off the interest.

With an interest-only loan, you only pay interest on the amount you have borrowed for an agreed period (usually up to 5 years). At the end of this time, the loan reverts to a principal-and-interest loan and you start repaying the principal as well as the interest. Before you take out an interest-only home loan, you'll need to work out if you can afford the increased repayments.

Work out your repayments before and after the interest-only period using ASIC’s MoneySmart interest-only mortgage calculator: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/interest-only-mortgage-calculator

Australia's interest-only mortgages

Take a look at ASIC’s MoneySmart interest-only mortgages infographic which explains how interest-only mortgages have grown in Australia, how much people are borrowing for an interest-only loan and how much you will really pay for this type of loan: https://www.moneysmart.gov.au/borrowing-and-credit/home-loans/interest-only-mortgages/australias-interest-only-mortgages

Using an offset account on an interest-only loan

Some people make extra payments into an offset account to reduce the amount of interest they pay on their home loan.

This is a good strategy with an interest-only loan but it will only work if you can keep making these extra repayments without making any withdrawals. If you're tempted to dip into your offset account, then you might be better off with a principal-and-interest loan instead.

Case study: Violet and James get an interest-only loan

Violet and James took out a $500,000 home loan over 25 years, with an interest-only period of 5 years. They planned to reduce the interest they paid on the loan by making extra payments into an offset account.

After 2 years, they decided to go overseas for a few months and started withdrawing money from the offset account to cover their trip. When they returned from the trip they had a big credit card bill to pay off so they no longer had enough money to make extra payments into the offset account.

When the interest-only period ended, they only had 20 years to repay the entire $500,000 principal, so their repayments were suddenly a lot higher and they struggled to keep up with all their bills.

Risks of interest-only home loans

Interest-only home loans seem more affordable because their repayments are initially lower than principal-and-interest home loans, but they will cost you much more in the long run.

The extra interest you'll pay on an interest-only loan

During the interest-only period, you do not reduce the amount of money you owe, which means you'll end up paying a lot more interest over the life of the loan, compared to a principal-and-interest loan. For example, with a $500,000, 25-year loan, with an interest rate of 5%, a person would pay $40,062 more in interest with an interest-only loan compared to a comparable principal-and-interest loan.

Increase in repayments after the interest-only period ends

Once the interest-only period ends you need to start repaying both interest and the principal, and you'll have less time to do it in. This means the repayments after the interest-only period will be significantly larger.

Case study: Daisy's interest-only loan repayments

Daisy wants to buy her dream apartment and has been looking online at the different loans available. She needs to borrow $500,000, the interest rate advertised is 5% and she wants to repay the loan over 25 years.

Daisy is deciding whether a loan with an interest-only period of 5 years or a principal-and-interest loan would be best for her. She was worried that she might not be able to meet loan repayments after the interest-only period ends.

Daisy used ASIC's MoneySmart's interest-only mortgage calculator to see what the repayments on an interest-only loan would be compared to a principal-and-interest loan.

While the initial repayments on the interest-only loan were only $2,083 per month, after the interest-only period ends they increase to $3,300.

Daisy didn't think that she would be able to afford the increased monthly repayments, when the interest-only period ends. She decided that a principal-and-interest mortgage, with constant repayments of $2,923 would better suit her budget.

No equity in your home

If your property does not increase in value during the interest-only period, you risk having no equity in your home at the end of this period, despite making payments every month. Holding no equity in your home puts you in a risky position if there is a downturn in the market or your circumstances change and you have to sell the house.

Benefits of interest-only home loans

If you will make extra repayments during the interest-only period, and you can cover the extra payments when the loan reverts to principal-and-interest, an interest-only loan might work for you. You can also use the money saved from lower repayments to repay higher interest loans like credit cards and personal loans. 

Some people choose interest-only loans to maximise their tax benefits or the amount they can borrow when they buy an investment property. If you're considering an interest-only loan, think carefully about whether it's the right loan for you, or contact our Leasing & Finance team for assistance.

Each quarter we interview one of our clients to get an insight into their business. This issue we spoke to Bruce from Big Tyre.

When did your business commence?

It was started in 1954 as a tyre retreading factory.

We purchased it in 1992.  At that time the business was primarily retreading tractor tyres (50%), grader tyres, truck tyres (15%), speedway & drag racing (15%), etc.

What does your business do?

These days our company primarily manufactures and reconditions solid wheels for underground forklifts, used in longwall coal mining, and rebuilds rubber tracks and solid undercarriage wheels of large agricultural tractors. We also repair large pneumatic tyres for the local mining trucks that typically weigh about 3 tonnes each and we even retread a few tyres.

In addition to manufacturing, we are the Australasian distributor for two of the top three brands of rubber tracks for agricultural machinery and we have developed an on-line tyre store where we market over 3,500 tyres covering over 40 brands and 1,100 sizes.

What makes your business successful?

We innovate.  We are constantly on the lookout for ways to improve our products and services as well as working at the edge of our business to find new opportunities that fit well with our existing market and are consistent with our strengths and/or manufacturing processes.  Although we are very pleased to supply our products through dealers, we also supply end-users directly and attend agricultural field days and mining expos where we can not only market our products and liaise with customers but also learn of opportunities and developing trends in the industries we serve.

What has been your biggest achievement to date?

It is hard to identify a single achievement as being our greatest.  Our major achievements that vie for such include:

• Surviving an industry shake-out that occurred when there were too many players in a shrinking mature tyre retreading market.  Retreading prices in the market were at cut-throat levels that could not be sustained long-term.  This occurred during the first 3 years after we purchased the business and were still learning how to run it!  We concentrated on lowering our cost structure.  Late in 1995 this situation was exasperated by significantly increased rubber prices, causing 75% of our competition within 1500 km to cease retreading. This gave us a bigger client base with the nearest competitor 900 km away as well as the ability to price products properly which gave us a strong business until …

• We were back to survival mode due to the Government’s abrupt removal of import tariffs in July 1997 that resulted in us losing 70% of our tyre retreading business over the following 4 years to much cheaper new tyre imports.  We survived this only through the product innovation we had already implemented to recondition rubber tracks for agricultural machinery and solid wheels for underground mining.  These two product lines grew quite rapidly and offset about half of the lost business from retreading.

• In 2009 we captured the solid-wheel business of DBT Australia, a large manufacturer of underground mining machines, which was later bought by Caterpillar Global Mining – our biggest customer.  The mining boom propelled us soaring; the bust was bruising!  Survival mode again!

• We export our solid wheels to China and South Africa directly but indirectly to over 50 countries through Russell Mineral Equipment which sells their machines with our solid wheels fitted.

• In 2011 we received acknowledgement and a significant award and prize in “What’s Your Big Idea, Queensland?” for our attempts to reinvent the wheel, inspired by the realisation in 2002 that neither pneumatic nor solid wheels suit the underground mining industry well. This project has had very significant support from ACARP (Australian Coal Association Research Projects) but we are yet to design a non-pneumatic non-solid wheel to carry 10 tonne that is financially viable.

• In 2014 we were granted the Australasian distributorship for new agricultural tracks from Goodyear and then later from Bridgestone also.  This is a market we know well from rebuilding over 1,000 tracks in the last 20 years. Marketing new agricultural tracks has become a primary product line for us and is much easier than manufacturing!

What is one piece of advice you would give to someone starting up a business?

Equip yourself in all aspects of business and finance.  “Make hay while the sun shines” and keep a reserve for resilience to handle the cyclical nature of business.  Be genuinely keen to provide the best service you can to your customers and always work at the edge of your business and invest in the future because the world rapidly changes and you can’t afford to be left with an old dead cow that has been milked to death without having a line of young calves to follow.

How do you relax from the pressures of being in business?

Operate within your area of expertise and your comfort zone for risk.  Avoid undue financial pressure so that when major challenges arise this added resilience makes it easier to chill out – for me the beach is good.

The Power Tynan Charitable Trust was established in July 2010, with the aim of giving back and making positive contributions to the communities within which the firm operates.

One such organisation is Queensland Police Legacy. Established in 1971, this charity does a tremendous job of assisting the families of deceased Queensland Police Officers, Queensland Police Officers whose spouse/partner has passed away, and Queensland Police Officers suffering from an incurable/terminal illness.

Over the past 46 years, this organisation has provided assistance to 226 families and 406 dependent legatee children. The importance of this charity hit close to home recently, when local police officer Senior Constable Brett Forte tragically lost his life in the line of duty earlier this year.

Because of this, the Power Tynan Charitable Trust presented Andrew and Anna from Queensland Police Legacy with a cheque for $1,500.

"Our primary focus has always been on ensuring that the dependent children of these families receive the education their parents intended for them, that they deserve and that they may have been deprived of due to circumstance,” said Andrew. “As at June 2017, Queensland Police Legacy supports 54 families, including meeting the educational expenses of 86 dependent children.”

The Power Tynan Charitable Trust has donated over $160,000 since its inception in 2010, and is open to the firm's staff, clients and all members of the public to contribute funds.

To donate to the Power Tynan Charitable Trust, or to nominate a local charity to be considered as a beneficiary of the Trust, please visit http://www.powertynan.com.au/community/power-tynan-charitable-trust.

Corporate Triathlon

At the end of April, members of the Power Tynan team participated in the AustralianSuper Corporate Triathlon, Gold Coast event. This involved a 400m swim, followed by a 10km cycle and 4km run.

Congratulations to all who took part, and thank you to those who came along to support the Power Tynan crew!

IRONMAN

Congratulations to our very own Dan Cuthbert for completing the full IRONMAN in Port Macquarie.

Dan finished with a time of 12 hours 20 mins (swim 1:10, bike 6:35, run 4:20).

Well done Dan, we are extremely proud of you!

After a few days off to recover, Dan returned to work to find the Stanthorpe team had decorated his office with 224 balloons - one for each kilometre he completed as part of the IRONMAN!

BKR Conference

Jetsetters Paul and Amanda attended the BKR International Asia Pacific / EMEA Joint Regional Conference in Singapore in May.

The conference includes a variety of sessions covering topics such as Digital Disruption and Wellness in the Workplace, with the social agenda allowing them to experience the more vibrant niche areas of the city.

Australian Accounting Awards

Power Tynan has once again been recognised at the 2017 AccountantsDaily Australian Accounting Awards.

Power Tynan was awarded Graduate Program of the Year for the second year in a row, acknowledging the firm’s scholarship program run in conjunction with the University of Southern Queensland (USQ). Based on graduate development initiatives, this award considers how the firm develops and retains quality staff through a structured development program.

“The Power Tynan Scholarship Program offers final year high school graduates the opportunity to study a business or commerce degree part-time at USQ while working for our company on a full time basis. We offer between one and four scholarships each year, and have done so for the last ten years,” said CEO Paul Hilton.

“We are extremely proud of this program. In regional areas such as Toowoomba and Stanthorpe, it can be difficult to entice the younger generation to stay in town after graduating from high school; however we have retained all scholarship recipients upon graduating and, due to this program, are a significant employer within our district.”

Power Tynan were named as a finalist in three categories at the Australian Accounting Awards, being Graduate Program of the Year, Community Engagement Program of the Year and Young Accountant of the Year (Peter Rowe).

Members of the Power Tynan team attended the five-star gala dinner at The Sofitel Sydney Wentworth, where the winners of the fourth annual Australian Accounting Awards were announced to a crowd of 500 people.

Biggest Morning Tea

Power Tynan held a Biggest Morning Tea in support of the Cancer Council, raising $314.05. Our Bake Off Winners were Toni Jackson (Stanthorpe) and Peter Rowe (Toowoomba).

Pride of Workmanship Awards

Congratulations to Chloe Morello of our Stanthorpe office, who was recognised for her professionalism, hard work and dedication at the Stanthorpe Rotary's Pride of Workmanship Awards in June.

PT Day

The Power Tynan team got together in Toowoomba for ‘PT Day’, to reset our focus for the new financial year and participate in some team building. Thank you to Anna and her team from Shiny Happy Art for facilitating our painting activity. You will see the end result displayed in both Toowoomba and Stanthorpe in the coming weeks!

Homeless for a Night Sleepout

On Tuesday 1st August, members of the Power Tynan team are participating in Base Services Homeless for a Night Sleepout, to raise awareness of homelessness in Toowoomba and funds to keep Toowoomba's only soup kitchen open.

To show your support for this fantastic cause, visit www.homelessforaweek.com.au/sleepout/participants/power-tynan