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The Federal Budget dropped on Tuesday, 11 May, with many announced amendments and changes that affected the superannuation and SMSF sectors. Non-concessional contributions increased maximum limits were announced and would come into effect as of 1 July 2021, increasing the cap from $110,000, up from the previous cap of $100,000.
Personal Contributions made into an SMSF from after-tax income on which no tax deduction is claimed, known as Non-Concessional Contributions. Non Concessional Contributions are personal contributions made into your SMSF from your own personal Bank Account and not contributions to your super made by your Employer.
You will be able to put non-concessional contributions into super (including using the bring-forward rule) up until age 74, without there being a need for you to work.
The bring-forward rule is a provision that allows Members of a superannuation fund to make non-concessional contributions that amounted to more than the contributions cap of $100,000 in one year by utilising the cap for the next two years. It has been amended to reflect the Budget’s rulings and come into effect on 1 July 2021.
You will still need to meet the work test if you wish to make tax-deductible contributions. Still, this outcome may provide some excellent planning opportunities for you regarding removing taxes from the death benefits that your adult children will pay on any benefits paid out to them from your superannuation.
As an example, with the increase to the age limits, there are many ways that you can take advantage of this to boost your super. Let’s say that you have extra cash that you would like put into the superannuation system that you weren’t previously able to, such as $100,000 that you wanted to put in when you turned 67 but were unable to because the age limit for non-concessional contributions had been reached.
With the increase, you will be able to put non-concessional contributions into your super up until you reach 74, which could amount to a hefty sum if you contribute the maximum cap limit amount each year.
We can offer you advice on how best to utilise this new non-concessional contributions cap to your advantage and our knowledge of strategies that we can use for non-concessional contributions to potentially save your children tens of thousands of dollars in death benefits taxes (currently taxed at 15%) if you wish to leave any of your super to your adult children.
Speak with us to find out more about the other ways that you can benefit from the newly released Federal Budget’s outcomes and announcements involving superannuation.
The Low and Middle Income Tax Offset has been extended for another 12 months, meaning that taxpayers whose wage earnings situate them within a certain income bracket will again be able to receive a little extra cash back into their pockets again this year.
Tax offsets are also known as rebates and directly reduce the amount of tax payable on your taxable income. Sometimes, this can lead to the payable amount lowering to zero, but these rebates cannot be used on their own to get a refund.
You are only able to receive this amount after you have filed your tax return at the end of the financial year and in a lump sum amount that is in accordance with which wage bracket you are in and the amount you will receive.
You don’t need to complete anything in your tax return for your low or low and middle-income tax offset to be worked out for you. Instead, the amount of tax offset you will receive is worked out for you once your tax return is lodged.
If you earn under $37,000 this financial year, you will receive an offset of $225. For those who earn between $37,001 and $48,000, you will receive $255, with an additional 7.5 cents to every dollar above $37,000 up to a max of $1,080.
Those who earn between $48,000 and $90,000 a year are set to get the best deal, with up to $1,080 on the cards.
If you have any tax-related questions that the Federal Budget announcements have brought to your attention, speak with us for assistance.
Gender gaps can affect superannuation accounts as much as they can affect salary rates. With barriers to entering into fields, lower hourly rates of pay, less hours worked and more unpaid labour affecting the amount of super Australian women are retiring with, as compared to men.
Currently, the median superannuation balance for men aged between 60-64 stands at $204,107 whereas the superannuation balance for women of the same age has a median total of $146,900. It’s a gender superannuation gap of 28%.
This gender gap in superannuation balances can be impacted even more by women using maternity leave. With women taking their time off from work and losing out on super contributions during this period of paid parental leave, it can affect their super in the long run as it exacerbates the income and superannuation gaps that were already in effect during their employment.
It can also be exacerbated by existing salary gaps across the workforce. Despite traditionally male-dominated fields experiencing high percentages of female graduates entering into the workforce, the positions that they fill are not always high-ranked, irrespective of experience.
There are threeproposed measures with regard to how the superannuation gap could be addressed at a macro level. These include:
- Including superannuation guarantee contributions in the Commonwealth Paid Parental Leave scheme, as a majority of recipients are women and it is a leading cause of the gap exacerbation.
- allowing unused concessional contributions to be made for recipients of Commonwealth Paid Parental Leave without time limits is having a negative impact on women’s superannuation outcomes, so the policy needs to be changed accordingly.
- Amending the Sex Discrimination Act to ensure employers are able to make higher superannuation payments for their female employees if they wish to do so without contravening the existing legislation.
Here are some examples of ways in which women can increase their super balances to make up for any losses that may have been incurred:
- Contribution splitting – by having their spouse transfer some of their superannuation contributions over to their account, their account can be increased.
- Salary-sacrificing contributions into their super to make up for the shortfall from not working in previous year.
If you are concerned about your superannuation, or would like further advice, please speak with us.
Market research is an effective tool that can be used to boost your business in terms of sales, customer engagement and how your competitors may be performing. It allows you to make well-informed decisions that can potentially add value to your business.
When conducting market research, ensure that you are covering all of the potential areas that may affect how your business has been performing. This may include:
- Products or services
- Business location and local area
Products & Services
Researching what your customer is looking for when it comes to your business’ products, services and interactions with them can be a simple way to get ahead of your competition. It can also provide you with an understanding of where you fit into the market for your customers, and how you differentiate from what your competitors are offering.
Market research can also assist in figuring out where you are positioned in the market in terms of your products or services being considered as high-end, competitive or a low-cost alternative to what your competition is offering. It can also aid in determining the anticipated demand of products by customers, so that you can adjust accordingly.
Conducting market research on suppliers can assist you in working out pricing of your products, whether or not you are getting the right price from your suppliers with regard to your orders and the overall quality of what suppliers deliver.
Collecting customer data through feedback, be it online (such as email, surveys) or analog (talking with customers, feedback forms), can be an invaluable insight into what your customers want from you. This style of direct customer research can assist in learning about what their needs are, what they’re willing to pay and the anticipated demand for your products. It can also assist in giving more information that you can use to better target your marketing efforts.
Investigating your competitors in business can assist you in understanding your position in the marketplace in comparison to them. This can assist in developing your marketing plan by understanding your strengths and weaknesses, opportunities and threats and planning for how you can better use them. You can obtain this data through observation of your competitors marketing practices, networking with your competitors and through researching their presence on the internet (via websites, blogs or other social media).
Market research, when used effectively, can be a turning point in a business’s marketing plans, and assist them in planning their business’s future direction.
There’s a new normal towards how Australians are approaching their work, with remote working now a more viable option for businesses and their employees, and it’s affecting the way that Australians now make claims for tax.
With many businesses affected by city-wide lockdowns during parts of the 2020-21 financial year, and some whose employees preferring to remain as work-from-home or remote workers after theirs had ended, it’s more important than ever for work tax deductions to be correctly claimed and the process duly followed.
Where once the expenses and claims that needed to be made during tax return season could be more clearly defined in terms of business or pleasure, work-related expenses or personal expenditure, remote working and work-from-home employees need to keep careful records of what they can and cannot claim as “home office expenses”.
To simplify the process of claiming these expenses, the ATO introduced a “shortcut method” applicable to the 2020-21 financial year as a result of the impact COVID-19 has had. This method is only applicable from 1 March 2020 through 30 June 2021. Depending on an individual’s circumstances, it may be a better alternative to employ when claiming home office expenses than the fixed rate method or actual cost method.
Essentially, individuals can claim a fixed rate of $0.80 per hour worked from home, with the aforementioned shortcut method covering expenses such as phone, internet, depreciation on furniture & equipment. No other expenses can be claimed for working from home if this shortcut method is employed.
To use this method to their benefit when claiming home office deductions, individuals must keep a diligent record of the actual hours worked at home. This is a simpler process than claiming on the actual expenses incurred. Claiming on the actual expenses incurred requires individuals to comply with the necessary and more complex record-keeping requirements outlined by the ATO.
It is important that Australians are aware of their entitlements and tax deductions when working from home/remotely. Speak with us to ensure that you are in compliance with your tax return obligations when claiming.
Contractors who run their own business and sell their services to others have different obligations to their super than what employees in a business may usually have.
A contractor (also known as an independent contractor, a subcontractor, or a subbie) who is paid wholly or principally for their labour is considered to be an employee for super purposes, and may be entitled to super guarantee contributions under the same rules as other employees.
A contract may be considered ‘wholly or principally for labour’ if:
- You’re paid wholly or principally for your personal labour and skills
- You perform the contract work personally
- You’re paid for hours worked, rather than to achieve a result
If hiring a contractor to perform solely their labor for a fee, the employer may also have to pay super contributions on their behalf.
In this sense, if you are a contractor who is being contracted to an outside business than your own to perform your usual work or labour, your employer must contribute to your super the same way they would any other employee.
This could be seen in an example of an electrician who runs their own small business, or is employed by a small business who has been hired by another business to supplement their workforce and perform a specific role that they can fit to.
Say the electrician who runs their own business has been subcontracted by the larger business.
They are performing labour but also providing materials (ie, themselves plus a toolbox plus a van full of powerpoints and wiring etc), they would be seen as a contractor and not an employee for super purposes. They must pay themselves super, in this case.
However if they are sub-contracted to perform labour only then the company that has sub contracted them may be liable to pay super on the amount that they pay to their contractor. This would be the case where the electrician just turns up with their tool box and everything else is provided by the “employer”.
If they are in an employment-like relationship with the person that they entered their contract into, they may need to have their super paid to them by their contract employer. In order for super to be applied from what you earn, the contract must be directly between you and your employer. It cannot be through another person or through a company, trust or partnership.
It is important that both parties in the process are aware of their super obligations during the contracted period. There can be significant penalties for employers who use contractors if they fail to correctly pay super. Each case regarding contractors and super needs to be assessed independently to ensure that you are doing the right thing. There is no definitive black and white line between a contractor and a contactor in an employment-like relationship that can be obviously seen after all.
If you’re unsure about whether or not you’re meeting your obligations as an employer, or are a contractor looking to make sure their super is being correctly paid into, speak with us.
With tax return season approaching quickly this year, you may have already started looking into lodging your income tax return. Ensuring that your details are correct and that any information about your earned income from the year is lodged is the responsibility of the taxpayer and their tax agent. However, if during this income tax return process the tax obligations of the taxpayer fail to be complied with, the Australian Taxation Office has severe penalties that they can enforce.
Australian taxation laws authorise the ATO with the ability to impose administrative penalties for failing to comply with the tax obligations that taxpayers inherently possess.
As an example, taxpayers may be liable to penalties for making false or misleading statements, failing to lodge tax returns or taking a tax position that is not reasonably arguable. False or misleading statements have different consequences if the statement given results in a shortfall amount or not. In both cases, the penalty will not be imposed if the taxpayer took reasonable care in making the statement (though they may still be subject to another penalty provision) or the statement of the taxpayer is in accordance with the ATO’s advice, published statements or general administrative practices in relation to a tax law.
The penalty base rate for statements that resulted in a shortfall amount is calculated as a percentage of the tax shortfall, or in the case of no shortfall amount, as a multiple of a penalty unit. This percentage is determined by the behaviour that led to the shortfall amount or as a multiple of a penalty unit, which are as follows:
- Failure to take reasonable care – 25% of the shortfall amount or 20 penalty units
- Reasonable care is not taken if the taxpayer failed to do what a reasonable person in the same situation would have done.
- Recklessness – 50% of the shortfall amount or 40 penalty units
- Recklessness is determined as disregarding or showing indifference to a real risk of a shortfall amount arising that a reasonable person would have been aware of.
- Intentional Disregard – 75% of the shortfall amount or 60 penalty units
- Intentionally disregarding the law occurs if there is full awareness of a clear tax obligation, and the obligation is disregarded with the intention of bringing about certain results (underpaying tax or over-claiming an entitlement).
If a statement fails to be lodged at the appropriate time, you may be liable for a penalty of 75% of the tax-related liability if:
- A document that is necessary to establish tax-related liability fails to be lodged
- In the absence of that document, the tax-related liability is determined by the ATO.
To ensure that the statements, returns and lodgements are done correctly, and avoid the risk of potential penalties, contact us today. We’re here to help.
If a business cuts costs, it’s usually to save on the money that is being spent. However, cutting costs too deeply may actually impact employee and customer satisfaction, and overall harm the success of the business that has been built thus far. In saying that, if cost-cutting measures aren’t employed enough, that can also be a threat to the business’s very viability.
There are a number of ways through which businesses can attempt to optimise and achieve a balance in their cost-cutting strategies, without sacrificing or reducing their overall success.
When beginning the cost-cutting process, align with what the business strategy actually needs to be cut. Rather than approaching the budget with a hacksaw method of reducing the most expensive items, consider optimising the cost against what the business strategy requires from it, and consider the inherent value of what could be cut. Is it something that adds value to the business, despite the cost? Will this cost return on investment against what the strategy purports?
Similarly, do not simply approach cost-cutting with a reduction in staff as a solution to the issue. Reducing staff is merely a short-term approach to cost-cutting that may have a long-term impact on the resources that the business will have available for use.
Instead, aim to optimise the staff available in the business. Consider the expertise that the business will require in moving forward, and plan accordingly. Retain the talent from the existing pool of staff, fill any existing vacancies and consolidate roles where people may be being underutilised. If people involved in the business are underperforming, consider culling these specifically.
Ensuring that employee satisfaction is being fulfilled by the business can assist in cost-cutting, as higher employee satisfaction leads to lower turnover for employees. This measure should cost businesses far less in the long run.
Similarly, in this constantly changing business environment, the impact of COVID-19 has furthered the question of whether or not the way that businesses can operate should remain the common practice. If housed in an office (and it is practical to do so), consider employing remote work as an option or alternative for employees. It can bring down the rent, energy, and other office expenses significantly, while also potentially give you better access to talent.
The overall finances of the business should be looked into as well, to ensure that the costs of financing are not severely impacting the business. Simple measures that can be employed include changing banks to a more cost-effective facility, consolidating credit cards into one with a lower rate, or other changes that may reduce fees and improve access to capital. Similarly, paying bills early or switching to a monthly fee can also improve financial performance, as it can assist in getting the cash flow of the business under control.
Removing non-essential expenses (such as gifts and entertainment) can also be a cost-cutting measure to employ in business. Going paperless, becoming more energy efficient in the office or negotiating with suppliers for more cost-effective alternatives are other similar, simple measures that can be made use of in the cost-cutting approach to business.
Cost-cutting for your business does not have to be a particularly painful process. By looking at your business with a critical, and strategically aligned eye, you can optimise the cost-cutting process to suit what your business needs. For assistance with business planning, cost-cutting, or other business-related advice, speak with us today.
Sometimes there are a few unexpected expenses that can impact on our financial situations, and make things just a little more difficult to deal with. The refrigerator breaking down the same week that the car registration is due could be too much of a financial burden for many individuals. With many credit-providing schemes and dubious loans advertised to the public, there is a simpler way to solve your financial issue if you are applicable.
The No Interest Loan Scheme is provided by the Australian government for individuals and families to have access to safe, affordable credit.
No interest loans are designed to assist people in getting back on a more stable footing financially, allowing them to borrow up to $1,500 to pay for essentials. The term for this loan is between 12 and 18 months, with no credit checks, interest, fees or charges. Repayments for no interest loans are affordable as you are only paying for what is borrowed.
To receive a no interest loan, you must:
- Have a Health Care Card, a Pensioner Concession Card or an income less than $45,000
- Have lived at your current address for more than 3 months
- Show that you can repay the loan.
There are only a couple of steps that need to be completed to apply for a no interest loan under the scheme. A meeting must be arranged with a NILS provider through a telephone or website enquiry, in which you will be interviewed and helped through the application process. Then they will assess your eligibility and present you with an outcome. Loan assessments generally take between 45 and 90 minute, with the loans being approved within 2 days. If all paperwork is provided on the day, it can sometimes be same-day approval.
No interest loans can only be used for essentials. These can include:
- Household items, like a fridge, washing machine, computer or furniture
- Educational materials e.g. tablet or textbooks
- Some medical and dental services
- Car repairs and tyres
With a significant number of Australians approaching retirement and looking at the best ways to maximise their retirement assets and income from their super for it, retirement planning makes sense.
Unfortunately, there are those who want to target people approaching and planning for their retirement with schemes designed to ‘help’ retirees and prospective retirees avoid paying tax by channelling their income through a self-managed super fund.
Retirement planning schemes are designed to help people avoid paying tax on the income earned through their assets (often in an illegal manner). Those schemes may seem like a simple get-rich-quick solution in maximising assets and income for retirement but can put people’s entire retirement savings at risk.
Anyone can fall prey to a retirement planning scheme. Anyone who is looking to put significant amounts of money into superannuation can be at risk of being ensnared, particularly those who are over 50, and who are:
- SMSF trustees
- Self-funded retirees
- Small business owners
- Professional service providers
- Individuals who are involved in property investment
Checking for standard features of retirement planning schemes can be an excellent way to avoid becoming tangled in one. Retirement planning schemes usually:
- Are artificially contrived and complex, with SMSF members often targeted and encouraged to use their SMSF as part of the scheme
- Involve a lot of paper shuffling
- Are designed to leave the taxpayer with a minimal or zero tax, or even a tax refund
- Aim to give a present-day tax benefit by adopting the arrangement
- Sound too good to be true – in most cases, they are.
Currently, there are a number of schemes targeted towards those individuals who currently have an SMSF, as they have a high level of control and autonomy in the way that their retirement savings are invested (subject to applicable tax and super laws).
Some examples of retirement planning schemes include:
- Some arrangements involving SMSFs and related-party property development ventures.
- Refund of excess non-concessional contributions to reduce taxable components
- Granting legal life interest over a commercial property to SMSFs
- Dividend stripping
- Non-arm’s length limited recourse borrowing arrangements
- Personal services income
- Liquidating an SMSF
To avoid becoming a part of a retirement planning scheme, seek professional advice on super or SMSFs from an accountant.« Older Entries