The importance of paying employee superannuation on time

By Chris Blomquist - Client Manager

At the end of each quarter many small businesses face a number of bills including quarterly Business Activity Statements and employee superannuation obligations. 

Unfortunately, employee superannuation is sometimes forgotten about. It is important to be aware that to ensure your employees receive their agreed superannuation on time, the ATO imposes heavy penalties if superannuation guarantee (SG) is not paid on time. 

SG is due on a quarterly basis and is due by the 28th day following the end of each quarter. Importantly, remember that any concessional lodgment dates for Business Activity Statements (such as the general extension for the due date of quarterly December BASs to the 28th of February) do not apply to superannuation obligations. The December quarter super is always due on the 28th of January. 

What are the consequences of not paying employee superannuation guarantee on time?

First, it’s important to note that penalties apply whether SG is paid one day late or six months late. This means that even if you are one day late, there can be significant administrative and financial consequences. 

If employee superannuation is not paid by the due date, the employer becomes liable for the superannuation guarantee charge (SGC). The SGC consists of: 

• the amount of the superannuation guarantee shortfall on your employee’s salary and wages; plus 
• interest on the late amounts; plus 
• an administration fee that is currently $20 per employee, per quarter. 

However, this does not tell the whole story. Most significantly, the SGC is not tax deductible. 

For example, say you have $10,000 of employee SG payments due for the quarter and your marginal income tax rate is 30%. SG payments are normally tax deductible, so this would reduce your overall income tax liability for the year by $3,000 ($10,000 x 30%). 

But if you are just one day late with your SG payment, you are now liable for the superannuation guarantee charge. The $10,000 is no longer tax-deductible, and you no longer receive the $3,000 income tax benefit. In addition, you need to lodge the required SGC forms, and pay interest and administration fees. 

The proposed superannuation guarantee amnesty

If you are already behind on super for any period from 1 July 1992 to 31 March 2018, it is proposed to introduce a one-off Amnesty. During the period 24 May 2018 to 24 May 2019, employers would be able to self-correct past SG non-compliance without penalty. 

It is important to note that the Amnesty is currently a proposed measure and that its introduction is subject to the passage of legislation. Also, the proposed Amnesty does not apply to any period after 31 March 2018. 

If you would like further information about the Amnesty or ensuring you meet your employee superannuation obligations, please do not hesitate to contact us.

Don't forget to read the legal stuff

Business Activity Statements – What are they and who need to complete them?

By Amanda Eggins - Client Services

I see you cringe at the sign of the word but the ATO have made this a necessary evil in the business world. But it doesn’t need to make you cringe anymore. 

The stress associated with BAS time can be more easily managed when you fully understand what activity statements are, when and if they need to be lodged and when they need to be paid by. 

If you have a system in place that prepares you for BAS time, the “red tape” process can be a positive experience for you and your business. 

Firstly, let me explain to you a little bit about activity statements. 

Activity Statements 

Activity statements are issued by the ATO so that businesses can report and pay a number of tax liabilities on the one form at the one time. 

There are two types of activity statements – an instalment activity statement (IAS) and a business activity statement (BAS). 

Instalment Activity Statement (IAS) 

The IAS is the simpler of the two forms and is only issued quarterly. 

On the IAS, the ATO tells you what your GST instalment amount is and where applicable what your PAYG instalment amount is. 

If the ATO considers you to be eligible for the IAS system, you will have the option to take advantage of this easier method on your September BAS – the first BAS of the financial year. If you elect this option, for each of the next three quarters you will simply be sent an amount that needs to be paid to the ATO. 

If you feel the instalments advised are too much or not enough to cover your liabilities, you may vary the amounts. Alternatively, you can wait until the end of the year. Any adjustments for GST will be calculated when your annual GST return is lodged and any adjustments on PAYG will result in an amount payable or refundable when your income tax return is lodged. 

If you choose to pay the amount shown on the form, you do not need to physically lodge anything with the ATO. However, if you wish to vary the amount shown, you will need to lodge the form by the due date. 

The instalment amounts will be payable as follows: 

Quarter                                             Due 

July – September                              28 October 

October – December                        28 February 

January – March                               28 April 

April – June                                       28 July 

Business Activity Statements (BAS) 

BASs are a little more complicated. They can include some or all of the following payments. Remember only those marked by an asterisk (*) are included on the IAS. 

Goods and services tax (GST)* 

Pay as you go (PAYG) income tax instalment* 

Pay as you go (PAYG) tax withheld 

Fringe benefits tax (FBT) instalment 

Luxury car tax (LCT) 

Wine equalisation tax (WET) 

Fuel tax credits 

BASs are issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO and payment made to the ATO by the due dates as follows. 

For monthly BASs: within 21 days of the end of the month on the form 

For quarterly BASs: as above for IASs 

How can IASs and BASs be good for your business? 

IASs and BASs can help you keep an eye on your business finances. 

Since you need to track your income and expenses to be able to calculate your GST and other liabilities on your BAS, why wait until the end of the quarter to do so? 

Each and every day you are collecting money for the ATO, so why not track each week to see what your likely liability will be? Wouldn’t it be great if there were no surprises at BAS time? 

By being organised, capturing information regularly, and setting aside money by generating weekly and monthly reports, you will start to focus more on your numbers. You will gain more confidence in this area of your business and you will be more prepared when it comes to meeting your obligations – including those relating to the ATO. 

My tip for the new financial year is to embrace technology, use your accounting software for your own benefit (daily, weekly and monthly) and then lastly use it to produce your BAS for the ATO. 

Don't forget to read the legal stuff

Is your public member super in the top 10?

By Kristy Churchill - Financial Planning Assistant

Since the global financial crisis of 2007/08, Australian Super has earned an average of 117% for its public offer funds[1] members in the past 9 years.

You may say that after 9 years the rally in markets since the global financial crisis may be getting a little long in the tooth, but research carried out by SuperRatings noted, that the last dip in markets in February this year, was just a one-month dip, in the 9 years since the global financial crisis. 

Over the period of 9 years since the bull market started rally, the median balanced option fund has delivered an average return of 9 per cent per annum, reflecting an accumulated growth of 117%.

Meanwhile, those public offer fund members with growth options, saw a median return of 9.99% pa or an accumulated 134%.

Market corrections can certainly cause pain for their investors and members, it causes uncertainty and panic; these are however often to balance and check that the market is capable of self-reflection, and Australian investors are focused on valuations as well as the broader economic picture.

This research shows why it is important for investors to caution away from making decisions based on short periods of performance, and SuperRatings CEO Kirby Rappell said “The lesson for superannuation members is that a focus on long-term performance is essential.  While members may be unnerved by recent market volatility, it is impossible to ignore the significant gains that super funds have delivered since the start of the bull market in 2009.”

Obviously fund choice does matter in all of this, as the significant difference between the best performing and worst performance balance and growth fund options.

Top Ten Public Offer Funds[2]

The Legal Stuff

[1]Public Offer Fund

A public offer fund is a superannuation fund that can be joined by members of the public. It is a regulated fund consisting of pooled superannuation sold commercially, for example, through life companies, bank subsidiaries or financial planners.

This category includes master trusts (where a large number of unconnected individuals or companies operate their superannuation arrangements under a single common trust deed) and personal superannuation products.

[2] as measured by SuperRatings over the 10 years to 31 January 2018

Four types of insurance for the newly divorced

Financial discussions during divorce tend to focus on dividing assets and cash, but managing your insurance is an area which can make a big difference for you and your family. 

Over 40% of Australian marriages fail, with nearly half of these involving families with young children1. While insurance protection may have been something that both parties had considered while married, it’s no less important after the relationship has ended. 

Insurance is about preparing for those unexpected situations which may make it difficult to care for yourself or manage your responsibilities, whether as the main caregiver or financial provider. These situations include temporary or permanent disablement, critical illness or death. Protection can be key when you are on your own, but can also make a difference to the ongoing welfare and care of children. If you already have insurance, it can be important to reassess the level of cover you have to see if it is still adequate for your new circumstances. 

Here’s four types of insurance cover you might consider taking out or reviewing, after a marriage or relationship breakdown. 

1. Living insurance 

Living insurance (also known as trauma insurance) can provide a lump sum payment for people suffering from one of a range of specified medical events. This can be crucial to assisting with medical and accommodation expenses if you suffer from a serious illness or injury and could also help you with more flexibility with work arrangements and continued family expenses. 

2. Income protection 

Whether you are the main caregiver or financial provider to your children, income protection can help you continue to provide stability and financial support in the event of temporary or permanent disability. 

In determining your level of cover, consider the financial contribution you make for your children, and/or the cost of someone to perform childcare and household duties. 

3. Term life insurance 

Term life insurance pays a lump sum benefit if you pass away or are diagnosed with a terminal illness. If you pass away, the benefit is paid to your nominated beneficiaries. It may be helpful to seek further advice on your beneficiary nomination. Where there are minor children involved, and you wish to ensure that there are ongoing financial provisions to cover their education, medical needs and care; you may need to allow for a testamentary trust in your will. 

You could also use a Term Life payment to pay out a mortgage, so children are able to inherit and live in a property debt-free. 

4. Different Total and Permanent Disability (TPD) definitions for your changing circumstances 

While people tend to be more aware of occupation based TPD insurance which covers a situation where you would no longer be able to work, there are also options for homemakers. A payment from this type of policy can be used to hire a professional to perform normal household duties if the homemaker is unable to as a result of permanent disability. 

TPD insurance can be important in helping you manage your own needs, as well as supporting your children. 

While the end of a relationship can be a stressful and difficult time for you and your family, reviewing and revising insurance cover so that it meets your new requirements can eliminate one area of concern for you – the ongoing needs of your children. 

It can also be helpful to discuss financial protection with your former partner. This can provide comfort to both of you that your children will have continued security and financial support. 

If you would like to determine your current insurance needs and establish what policies may be suitable for you and your family, please feel free to arrange a time to speak to our Advisor.  Make an appointment by calling (07)4616 9000.  

1 Australian Institute of Family Studies - Marriage in Australia, and Divorce in Australia

Don't forget to read the Legal Stuff

Learn the share market: a school holiday activity?

Wondering what to do with your kids these school holidays?  How about adding “sensible money management” to your to-do lists.  

It's never too early to teach your kids about money.  

Encourage kids to take interest in everyday living, the cost of groceries, how your earn money and how long it will take save for certain items. This way you’ll give them a firm financial foundation from the outset, one of the best gifts a parent can give their kids.

Giving kids a good grounding in sensible money management sets them up for life.

For older children, you could use online share games, like the one offered by the ASX to encourage children to explore the processes of investment markets and how to buy and sell shares while monitoring their portfolios.

Parents looking to encourage financial literacy can also consider giving pocket money digitally by opening up a bank account for their children and setting up a direct debit that can be cancelled if the kids slack off on their chores, or boosted if the kids take on more responsibility.

Opening up about the family’s finances – to an appropriate level – is also an important step in helping children understand money.

Parents should talk about the different pay rates of jobs, the costs of buying a house or renting and the ways in which home loans work.  In a way children can understand.

For example, if your child gets $5 per week pocket money for doing their chores and wants a $20 toy.  they need to understand it is four weeks worth of chores to get that toy.  Get them to weigh up the value of their time against the possession.  

Teaching your children young to understand money, will hopefully set them up to manage their funds better as their life stages change.  

A Super Idea

By Shane Wilson - Director DC Advisory Group

A Super Idea

Superannuation is something I am quite passionate about. This concept around investing money throughout your working life to provide for your retirement. Some people, depending on how much super they retire with, may be required to also rely on the government aged pension to meet their lifestyle needs. 

For most people, superannuation begins when you commence your working life. It was not until approximately 1983 that the government and trade unions agreed to forgo a pay increase of 3% for employees but rather have that increase placed into super. In 1992 the Keating government introduced the compulsory employer contribution scheme of which is very similar to what we know today. The superannuation concept made sense in that we were addressing Australia’s ageing population and retirement income dilemma which in time, was going to put a massive strain on the Australia economy through meeting aged pension commitments. 

According to the Association of Superannuation Funds of Australia (ASFA), superannuation assets at the end of December 2017 tipped a staggering $2.6 trillion. That amount is set to grow substantially in the years ahead due to not only organic growth but also the proposed increase in the contribution level beyond 9.5% (to increase by 0.5% each year until it reaches 12% by 2025). 

I find it interesting however, that there is a message or incentive to promote superannuation and to save for your retirement, yet the government are forever shifting the goal posts and changing laws. For me these changes often negatively influence a retirement benefit (and ultimately your retirement income) and generally disincentivises people from wanting to contribute to super. 

What do I mean? 

Some Incentives: The superannuation environment offers a concessional tax rate of 15% in accumulation phase (pre-retirement). Further, superannuation will also provide a potential tax-free income stream once retiring or in pension phase. Earnings outside super at the highest marginal tax rate is 45% plus Medicare. Superannuation is simply the best taxed structure to house your wealth leading up to and during retirement. 

Some Disincentives: The government continues to reduce annual limits for both concessional (deductible) contributions ($35,000 to $25,000) and non-concessional (non-deductible) contributions ($180,000 to $100,000) which prevents people from committing more money to super and increasing their member balances. Further, the super reforms introduced a new Transfer Balance Cap (TBC) which means that you can only ever commit a maximum of $1.6M to pension (subject to indexation). Anything over this limit will become subject to tax (earnings at 15%). If your total super balance is over the $1.6M TBC you will not be able to contribute any further to super. That means a potential ceiling on what you can get into super and also no more completely tax-free earnings within super. 

Recently we learned of a government announcement where qualifying individuals can withdraw up to $30,000 of personal super contributions (plus earnings) to help purchase their first home. Should this be allowed if you consider the long-standing sole purpose test (that funds are for the sole purpose of retirement)? Is this providing for your old age retirement? I guess that is another debate for another day. 

I still love superannuation

So, what does all this mean? I still love superannuation – my position has not changed, and this savings vehicle still carries huge benefits for all of us. I want to stress that any negative commentary should be taken with a grain of salt and we should not discount super as an integral part of any holistic financial plan. It is important to have a long-term approach to super and to saving for retirement. I want my clients to retire comfortably without having to rely on any government pension. Don’t change your mindset but rather condition yourself to adapt to change and updates to legislation. My key message if you take anything from this article would be to start saving for your retirement early because if you leave it too late and the superannuation window closes, you will lose your opportunities to get money into this great tax environment. 

It is important to note that this article is general in nature and you should seek your own independent financial advice in considering personal and specific circumstances. You should really embrace the relationship you hold with your tax professional and your financial planner. A favourite cliché of mine that you should all consider adopting is ‘failing to plan is planning to fail’. Be on top of your world. 

5 ways work is making us fat

Written by Dr Vincent Candrawinata for Wellness Daily 23 May 2018 - comments by our very own Marketing Coordinator - Candice Dolley

I received this inbox, five ways work is making you fat!  Finally a reason I am overweight, it isn't because I make bad eating choices, it is works fault.  BOOM!  Love it.  As I read Dr Vincent Candrawinata article, I realised, it is still about me and the choices I make, and not avoiding the temptations of a "free lunch".  

Dr Vincent Candrawinata writes... 

There are different reasons as to why your work causes you to pack on kilograms. Stress, lack of physical activity, free cakes and chocolate in the office, business lunches and dinners or even commuting all play a part. 

You should take a moment to really dissect your daily life to understand what aspects of your work habits need changing.

Some of the key reasons are:

Stress 

Do you know that an estimated 17.3 million people will die each year from heart disease and stroke?

This number accounts for around 30 per cent of all total deaths! Stress is one of the causes and precursors for many health conditions, including heart disease. 

Stress triggers the release of hormones that can increase appetite, which make you crave more sugary and fatty foods while at the same time, lower your metabolism. Managing your stress level is key to stop the domino effect of work-related weight gain. 

You are too busy

Poor time management could be an underlying cause of stress and unhealthy habits. When you are late, you take a taxi instead of walking. When you are late, you don't have time for breakfast, so you snack on a chocolate bar. When you are late, you have less time to prepare for a meeting which in turns gives you a tremendous amount of stress and we all know what stress can do to us!

My father always tells me that being late is expensive and now I know why, it doesn't only cost you more money, being late could actually take a toll on your health.

Lunching out with colleagues

If you pay attention to the lunch options around offices, at least three out of five options are actually unhealthy.

A study proved this by showing that the group with the most exposure to takeout joints at work was almost twice as likely to be obese in comparison to those with who were least exposed.

Sure, we can always choose a healthier option on the menu but let's be honest and realistic, would you really swap those fries with the sad looking salad in a fast food joint? And if you say yes, let me ask you this, how often do you actually do it? A key way to stop eating junk food is to stop going out to lunch with colleagues. 

Packing your own lunch helps you to eat healthy at work and it is socially acceptable to take your lunch box and sit with your co-workers who order salted egg pork ribs with fried rice. Not only will it save you on the unnecessary calorie intake, it will save you dollars and without you knowing it, it does save you time!

Stop drinking coffee and start drinking water (I read this as I head for another coffee)

In this modern lifestyle, 50 per cent of the time when we think that we are hungry is actually a sign that we are thirsty. So, before you reach for a handful of M&M's or a packet of chips, drink a glass of water first.

Staying hydrated also helps to ensure that your body's systems work well which means you could be less likely to experience headache, cramping and even bad breath! And stop drinking coffee. While everyone drinks coffee and it is good to catch up for a cuppa with the boss to pretend you are interested in what they are saying, you could be drinking water instead. Drink out of a mug and no one will know the difference.

Eat well

You are what you eat, right? Your first and main source of nutrients should always be fresh and healthy food. Eat your veggies, fruit, protein, healthy carbs and fat.

Some people need supplementation, like Vitamin D, B12 and B6, but these have to be customised for the individual.

The two supplements I take are Activated Phenolics and fish oil, because we live in the highly polluted world, if you eat enough fish to supply your body with enough omega-3, you’d likely die of mercury poisoning first! And you can eat all the apples, grapes and acai berries in the world, but at those low [antioxidant] absorption rates, you are taking in more sugar and water than anything else.

Be more active

Take charge of your life. If you want to change something, do something. Every little thing counts, taking the stairs instead of the lift, waking up half an hour earlier to do a quick workout, skipping a happy hour drink after work and do a meal prep instead.

End of financial year super strategies

Bonus blog article!

The end of the financial year is a good time to think about how you could grow your super and get started with saving for retirement. Here are some options you could consider to help your super work harder for you. 

First home buyers 

You may be able to make voluntary superannuation contributions to use towards a deposit for your first home under the First Home Super Saver Scheme (FHSSS) starting from 1 July 2017. Voluntary contributions you make, plus associated earnings, can be accessed from 1 July 2018 subject to meeting eligibility criteria. Whether using concessional or non-concessional contributions, the total amount of contributions you can withdraw is capped at $15,000 a year (or a maximum of $30,000 in total). Superannuation Guarantee contributions, as well as contributions that don’t count towards or are in excess of the contribution caps, cannot be accessed under the FHSSS as part of your deposit. See more here. 

Downsizer contributions 

From 1 July 2018, if you are planning on downsizing your family home of ten years or more and are aged 65or over, you may be able to contribute up to $300,000 from the sale proceeds to superannuation as a downsizer contribution. If you have a spouse, they could also contribute up to $300,000 to their superannuation from these proceeds. Downsizer contributions do not count towards your before or after-tax contribution caps or caps on contributions for total superannuation balance. You can find out more about whether you might be eligible at ato.gov.au. 

Tax-deductible super contributions 

You may be eligible to claim a tax deduction for your personal super contributions. By doing this, you may be able to pay less tax while saving more for your future. Your eligibility can be affected by your age, sources of income and the level of salary sacrifice and certain other employer contributions made for you. To claim a deduction, you must give a notice to the Trustee of your super fund and have it acknowledged. 

Keep in mind that personal deductible contributions count towards your annual before-tax contributions cap. The current before-tax contributions cap is $25,000 per financial year. Any contributions made above these limits will attract additional tax. 

Consider a one-off contribution 

After-tax super contributions are made from money you have already paid income tax on and won't be claiming a tax deduction on. For example if you work for an employer, making a contribution to super directly from your bank account is considered an after-tax contribution. 

Investment earnings within your super accumulation account are taxed at up to 15%, compared to your marginal tax rate which applies to investments you may hold outside of super. Please note that depending on your income level, your marginal tax rate may be less than 15%. 

The annual limit for after-tax contributions is currently $100,000 if your total superannuation balance is below $1.6 million at the start of the financial year. In certain circumstances, you may be able to bring forward three years of after-tax contributions into one year, contributing up to $300,000, if you haven't triggered the rule in the previous two years and your total superannuation balance is below $1.4 million at the start of the financial year. You may still be able to contribute part of the bring-forward if your total superannuation balance is between $1.4 million and $1.5 million at the start of the financial year. 

Salary sacrifice to top up your super 

Salary sacrifice is an arrangement where part of your before-tax wage or salary is paid into your super account instead of being received as take-home pay. It could be an effective way to boost your super and help you with saving for retirement. There may be tax advantages for you, depending on how much you earn. 

To get started, do a budget to work out how much you can afford to invest from each pay packet. You may also consider talking to your employer to find out if they can set up salary sacrifice arrangements for you. 

Keep in mind that salary sacrifice contributions count towards your annual before-tax contributions cap of $25,000 per financial year. Personal deductible contributions and contributions made by your employer also count towards your annual before-tax contributions cap. 

Government co-contribution 

In the 2017/18 financial year, if you are a middle to low income earner, adding to your super from after-tax money could see you entitled to a government co-contribution worth up to $500. 

To be eligible you need to earn less than $51,813 in the 2017/18 financial year and be aged below 71 at 30 June 2018. You must also have a total superannuation balance of less than $1.6 million at the start of the financial year to be eligible. 

The maximum co-contribution of $500 is available if you earn less than $36,813 in the 2017/18 financial year and if you have made a contribution yourself of at least $1,000. The co-contribution steadily reduces as your income rises and until it reaches zero at an annual income of $51,813. 

Spouse super contribution tax offset 

If your spouse or partner’s assessable income is less than $40,000 in a financial year, and you decide to make super contributions on behalf of your spouse, you may be able to claim a tax offset for yourself. 

The maximum tax offset available is up to $540 if your spouse receives $37,000 or less in assessable income in the 2017/18 financial year. The tax offset is progressively reduced until it reaches zero for spouses who earn $40,000 or more in assessable income in a year. 

Be aware of annual limits 

As annual limits apply to the amount you can add to your super each year, it is important to consider how much you have already added to your account (or accounts) during the financial year to know which strategies can work for you. Visit ato.gov.au for the latest information on super contributions.

The legal stuff

Succession Planning

The Three Categories of Succession Planning

There are many benefits to being a small business owner such as being your own boss, leading a team and the ability to give back to your community. A well-funded retirement account, though, is not one of these many benefits. Most of us believe that, when the time is right, we will sell our business and easily transition into retirement on the earnings generated from the sale. It’s certainly an appealing scenario. To pull it off, however, takes years of preparation and careful planning. This succession planning can be broken down into three categories – people, systems and finances.

People

Identifying and training the right person, or team, to take over the business requires the most time and effort. The smoothest and most obvious options will be family members or long-time, current employees. Start having these conversations at least five years prior to your anticipated transition date. If you need to look outside your current organization, it’s crucial to start looking early for several reasons.First, it may take quite a long time to find the right fit. You’re not just looking for someone capable of executing the work. You’re looking for someone to take over relationships with clients and employees that you’ve built over decades. You’re looking for someone to run an operation that most in your community will still associate with you.Once you have selected a successor, the two of you should spend several years essentially tag teaming the job together. Make it clear to both your team and your clients that this person not only has your full trust and confidence, but you’re also transferring all of your knowledge through a clearly set out and transparent transition process.

Systems

Much of this transition process will be facilitated through systems. The more your business operates based on system, as opposed to based on you, the stronger position you’ll be in to hand it over to someone else. This can prove to be tremendously difficult in small businesses founded and run by one person over several decades. When it comes time to step away, we quickly discover that processes are not documented. It’s easy to take for granted the fact that you know how to operate so much of your business without consulting guides, checklists or procedures. You built it, you ran it, you know how it works. And indeed, this may have worked for many years. However, now that someone other than you is preparing to run the business, getting those processes out of your head and onto paper is a critical task.Again, the time to do this is years before the transition. Ideally, documenting and implementing systems that explain your function in the enterprise should be done from day one. Even if you are not thinking of succession anytime soon, growing your business can prove frustratingly difficult if you’re constantly pulled back into operations because your systems are weak.

Finances

The final piece of the succession planning puzzle is financing, which will require a significant amount of outside expertise. Defining your equity, untangling your personal finances from the finances of the business, setting a price and determining a purchase structure can be daunting tasks. That’s where we come in. We understand the complexity and nuances of succession planning. We will work with you to create a customized approach, unique to your business and your goals for retirement.

While succession may be far in the future for you, the time to start building the systems to facilitate a successful handover is right now. We’d love to sit down with you to have a conversation about this process in more detail. Contact us to set up your appointment today.

Useful links

• The legal stuff

Federal Budget 2018-19 Summary

Prepared by Kristy Churchill - DC Advice 

As we all know, on 8 May 2018, the Government delivered the 2018-19 Federal Budget, and it would be reasonable to say that this Budget starts to lay a foundation for the next Federal election.

The focus of the budget was building a stronger economy by creating jobs and guaranteeing

essential services. As most households have had to tighten their budgets over the past few years, the Treasurer has announced that the Government must also live within its means. He said the Government has made real progress in getting the budget back on track and that it has stayed on track for a surplus for six successive budget updates.

The client budget paper, outlines the budget, from an advice perspective.  

If you have any questions about anything in the paper, contact us and don't forget to read "the legal stuff".

Government delivers SMSF friendly 2018-19 Federal Budget

By Tony Beckett

An SMSF friendly budget is the good news coming out of the 2018-19 Federal Budget. With SMSF members still working through the wide-reaching and complex superannuation changes which took effect from 1 July 2017, this Federal Budget will provide much needed stability while looking to reduce costs for SMSFs and prove additional flexibility. 

The key changes proposed for SMSFs and superannuation are: 

Three‑yearly audit cycle for some self‑managed superannuation funds 

The Government will change the annual SMSF audit requirement to a three yearly requirement for SMSFs with a history of good record keeping and compliance. The measure will start on 1 July 2019 for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner. 

Expanding the SMSF member limit from four to six 

As already announced, the Federal Government confirmed its decision to expand the number of members allowed in an SMSF from four to six. Expanding the definition of an SMSF to a fund with a maximum of six members will provide greater flexibility in how funds can be structured. 

Work test exemption 

The Government will provide more time for Australians aged 65 to 74 to boost their retirement savings, by introducing an exemption from the superannuation work test. 

This exemption will apply where an individual’s total superannuation balance is below $300,000 and will permit voluntary superannuation contributions in the first year that they do not meet the work test requirements. 

Life insurance cover in super to be opt-in for individuals under 25 years of age 

The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances. Life insurance cover will also cease where no contributions have been made for a period of 13 months. 

Older Australian package 

The Government introduced the following measures to enhance the standard of living older Australians: 

• Increase to the Pension Work Bonus from $250 to $300 per fortnight. 
• Amendments to the pension means test rules to encourage the take up of lifetime retirement income products. 
• Expansion of the Pensions Loan Scheme to allow more Australians to use the equity in their homes to increase their incomes. 

Personal income tax bracket changes 

The Government has provided personal income tax relief to lower and middle income earners. A Low and Middle Income Tax Offset will now be available for individuals with incomes of up to $125,333. 

The $87,000 income threshold, above which a 37 per cent tax rate applies, will increase to $90,000. 

Other changes 

• A surplus of $2.2 billion is expected in 2019-20, one year ahead of schedule. 
• The Government’s planned increase in the Medicare levy from 2 per cent to 2.5 per cent, to fund the National Disability Insurance Scheme, will now not go ahead due to increased tax revenues. 

How can we help? 

If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2018-19 Federal Budget, please feel free to call to arrange a time to meet so that we can discuss your particular requirements in more detail. Our details can be found on the contact us page.

Useful links

• The legal stuff

Do you still remember how to have fun?

Has the business of selling ourselves as well as our product, stopped us from having fun?

Did you know, that having fun can make your more attractive and the more successful you will become?  Why?

• You will smile more
• have more energy
• you will attract good things and good people into your life.

People are intrinsically more attracted to the smiling, enthusiastic person in the room.  If you have a fun work environment, everyone is excited to be at work, emails are written with smiley faces, phone calls are filled with laughter and settlements are completed with a purpose.  

What is NOT fun

• Fun is NOT getting drunk on a Friday night.
• Fun is NOT watching TV or surfing the internet.
• Fun is NOT attracting likes on Facebook.
• Fun is NOT in the next new car or pair of shoes you buy.
• Fun is NOT found in walking around a shopping centre.

As children we have fun for ourselves.  We are not trying to please anyone.  As we start school, get our first job, become parents, we lose our fun.  We start doing things to please others and we stop smiling and start taking ourselves too seriously.  

We forget how to have fun, we think scheduling fun activities into our days is a waste of time.  When in fact in can improve how we do our jobs.

Lets remember how to have fun

1. SMILE - yup it is that simple.  Simply smiling at people and changing your body language will improve your mood and maybe, make someones day.
2. Watch a funny movie.  Scientists have shown that having fun can make you smarter.
3. Surprise your family and friends.  Do the unexpected.
4. Surprise your customers and/or staff.  Be thoughtful.
5. Use fun emoji’s and be funny with your emails and texts. This does not make you unprofessional as long as this fun approach is coupled with displays of competence. Fun communications just make you more human and interesting and people will be genuinely intrigued to meet you in person.

Some ideas on how to have fun

• Organise a cards night with whisky, cigars or whatever turns you on.
• Go on a country drive on weekends with a cavalcade of cars.
• Pretend you are a tourist and/or put on an accent for the day.
• Go to the farmers market or better still, go fruit picking at a farm.
• Invite your neighbours over. Especially the weird ones haha.
• Host a movie night with popcorn and ice cream.
• Share your bucket list with others and talk about what each means to you.
• Go through your old photos and relive stories. This does not mean you live in the past. Rather, it inspires future adventures.
• Go on a bike ride. The wind in your hair makes you smile.
• Go bowling or better still, play lawn bowls.
• Take turns cooking. Boys cooking for the girls always ends in laughter.
• Go to the park and on the swing set with your kids.
• Play board games and charades.
• Tell or read your kids stories at bedtime.
• Play backyard cricket or touch footy.
• Attend a seminar with colleagues – yes learning should be fun.
• Organise a surprise party for a friend or family member.
• Go dancing! 

Having fun doesn't make you unprofessional.  In the end, it could help you attract more clients as you are happier, you smile more and you have FUN.  

Is your personality impacting your savings?

It has been identified that there are seven different savings personalities, which one do you fall into? 

Budget 2018-19

 Budget 2018 website 

 contact us 

The 2018-19 federal budget was handed down last night by the Honourable Scott Morrison MP. 

Being a pre-election budget, the government has looked at whatever capacity it has to win some easy votes and distinguish itself from the Opposition.  Focusing primarily on the low to medium income earners with tax cuts.

Government commentators have indicated, they believe that they have focused their budget toward this demographic as these are the people who will return them back to power at the next election.

Political gains aside, lets take a look at the high level budget. 

Plan for a stronger economy

1. Provide tax relief to encourage and reward working Australians and reduce cost pressures on households, including lowering electricity prices,
2. Keep backing business to invest and create more jobs, especially small and medium sized businesses,
3. Guarantee the essential services that Australians rely on, like Medicare, hospitals, schools and caring for older Australians,
4. Keep Australians safe, with new investments to secure our borders, and, as always,
5. Ensure that the Government lives within its means, keeping spending and taxes under control.

Budget overview

Tax relief to encourage and reward working Australians

• Seven–year personal income tax plan for lower, fairer and simpler taxes
• Immediate relief for low and middle income earners
• Tackling bracket creep
• Helping families with cost of living pressures
• Simplifying the personal tax system by abolishing the 37 per cent tax bracket
• No increase in the Medicare Levy because a stronger economy delivers stronger revenue

Keep backing business to invest and create more jobs

• Legislating lower taxes for Australian businesses
• Extending the $20,000 instant asset write‒off
• $75 billion for transport infrastructure
• Building a stronger and smarter economy
• A 21st century Medical Industry Growth Plan
• Supporting Australia’s international competitiveness and exports in agriculture and the defence industry

Guaranteeing the essential services that Australians rely on

• Supporting more choices for a longer life
• Continuing to guarantee the Medicare Benefits Schedule
• Backing the Gonski Review
• Record funding for a new hospital agreement
• Fully funding the National Disability Insurance Scheme
• Lower energy bills and more investment to keep the lights on

Keeping Australians Safe

• Strengthening airport security
• Managing biosecurity risks to protect our environment, exports and agricultural and tourism sectors
• Improving the national security architecture
• Continuing Operation Sovereign Borders to combat the threat of people smugglers

Ensuring that the Government lives within its means

• Disciplined fiscal management and tax and welfare integrity
• Maintaining the trajectory to projected surplus in 2020‒21
• No longer borrowing for recurrent expenditure
• Limiting payments growth to 1.6 per cent
• Ensuring multinationals pay their fair share of tax
• Tackling the black economy

So how does this relate in layman's terms?

1. Cash refunds on excess dividend imputation credits

In contrast to Labor’s divisive proposal, Mr Morrison said the government opposes “unfair tax grabs on retirees and pensioners” and the cash refund arrangement for excess dividend imputation credits will not be changed.

2. Pension Loans Scheme opened to all older Australians

Mr Morrison said the scheme will be available to all older Australians, including full rate pensioners and self-funded retirees, “so they can boost their retirement income by up to $17,800 for a couple, without impacting on their eligibility for the pension or other benefits”.

This will be the case from 1 July 2019.

The scheme allows older Australians to unlock the equity within their homes without impacting their benefits.

For single pensioners, this could mean a boost of up to $11,000. For couples, the benefit could be as much as $17,000.

3. Pension Work Bonus

Pensioners in paid work will now be able to earn up to an extra $1,300 a year before seeing any impact on their pension.

Self-employed pensioners will for the first time have the ability to earn up to an extra $7,800 a year.

As it stands, pensioners can earn up to $250 a fortnight without impacting pension eligibility. This change will see that figure increased to $300.

4. Superannuation Work Test exemption

As it stands, Australians between 65 and 74 need to work at least 40 hours over a 30-day period in the financial year in order to make contributions to superannuation.

However, as of 1 July 2019, these Australians – provided they have super balances of less than $300,000 will be able to make contributions for 12 months from the end of the financial year in which they last passed the work test.

5. Retirement income covenant

Superanuation fund trustees will be required to develop strategies to assist members in achieving their retirement income objectives.

“This will focus the industry on providing a higher standard of living for retirees,” budget documents predict.

6. Restart wage subsidies

Access to this subsidy for Australians 50 and over will be expanded, with businesses given financial incentives of up to $10,000 to hire mature-age employees.

Mr Morrison hopes this measure will address age discrimination in the workforce. It’s costed at $1.1 million.

7. Skills Checkpoint for older workers

According to budget documents, this checkpoint will help older workers with advice on the skills and training needed in building their careers or transitioning to new jobs and industries.

These checkpoints will be at ages 45 and 65 and will measure their skills, health and finances.

8. Superannuation exit fees banned, charges capped

Exit fees charged upon changing funds will be banned as of 1 July 2019 and passive fees charged on accounts with balances of less than $6,000 will also be capped at 3 per cent.

9. Super reunification

In a move estimated to see $6 billion returned to three million super fund members by 2020, the Australian Taxation Office will have increased abilities to “proactively” find and send lost superannuation to members and their accounts.

Accounts which haven’t been touched for at least 13 months will see monies below $6,000 transferred to the ATO which will then use data-matching to find the saver’s active account. This program will begin from 1 July 2019.

10. Opt-in to life insurance

Super funds will no longer be able to force Australians younger than 25 to pay for life insurance policies.

11. Home care places

As predicted, the government is set to increase the number of home care places by 14,000. This increase will come at a cost of $1.6 billion and will take four years.

Mr Morrison said: “By 2021-22, over 74,000 high level home care places will be available, an increase of 86 per cent on 2017-18.

“We will also be providing $146 million to improve access to aged care services in rural, regional and remote Australia.”

12. Funding to improve aged care services

The My Aged Care website will receive a $61.7 million boost and $14.8 million will also be used to “streamline the assessment process for aged care services”.

$22 million will be dedicated to fighting elder abuse, with plans to trial specialist elder abuse support services.

As it stands, aged care services spending sits at $66.7 billion this year. This will hit $77 billion by 2012-22.

13. Personal income tax cuts

The government predicts more than 10 million Australians will receive a $530 benefit thanks to tax cuts targeted at low and middle income workers.

Australians with taxable incomes of up to $37,000 will see up-to an extra $200 tax offset.

Those earning between $37,001 and $47,999 will see reductions of up to $530.

Those earning between $48,000 and $90,000 will also see an offset of $530.

The Honourable Scott Morrison MP has said that by 2019-2020 we will be back in surplus.  All in all, compared to previous years budget, this one is fairly timid.  Changes are minimal and impacts and legislative changes minimal.   If you have any questions about anything in the budget, please contact our office.