Blog – BMO Accountants

How to Read Financial Reports Like a Pro

Thu, 26 Mar 2026 23:13:22 GMT

Financial reports can seem intimidating—columns of numbers, unfamiliar terms, and endless pages. But if you know what to look for , these reports become one of your most powerful business tools . Here’s how to read them like a pro.

1. Start with the Balance Sheet

What it shows: Snapshot of your business’s assets, liabilities, and equity at a specific date.
What to look for:
Do your assets exceed your liabilities ?
Are debts manageable?
Is your cash position healthy?

2. Understand the Profit & Loss Statement (Income Statement)

What it shows: How much money your business earned and spent over a period.
What to look for:
Revenue trends – are sales growing or declining?
Expense patterns – are costs increasing disproportionately?
Profit margins – is your business making enough to sustain growth?

3. Check Cash Flow Statements

What it shows: How cash moves in and out of your business.
What to look for:
Can you cover short-term expenses?
Are you generating positive cash flow from operations?
Are investments or loans affecting liquidity?

4. Ratios Are Your Friend

Key ratios make reports easier to interpret:
Current Ratio: Can you cover short-term liabilities with current assets?
Gross Profit Margin: Percentage of revenue left after direct costs.
Debt-to-Equity Ratio: How leveraged is your business?

5. Look for Trends, Not Just Numbers

Compare reports month-to-month or year-to-year .
Identify patterns in revenue, costs, or cash flow. Trends tell a story that single numbers can’t.

6. Ask Questions

Don’t just read— ask what the numbers mean for your business strategy .
Why did expenses spike last month?
Which product lines are most profitable?
Where can we improve efficiency?

Don’t get lost in the details—focus on key metrics, trends, and cash flow. And remember, a good accountant isn’t just someone who prepares reports—they’re someone who helps you understand them and make better decisions. We are always here to help, so g ive us a call, or send us an email.

Xero Tips That Will Save You Hours Every Month

Thu, 26 Mar 2026 02:22:43 GMT

If you use Xero for your business accounting, you know how powerful it can be—but also how easy it is to spend more time than necessary on everyday tasks . At BMO , we’ve compiled our top Xero tips to help you work smarter, not harder .

1. Automate Bank Feeds

Connect your bank account to Xero and let transactions flow automatically.
Benefit: No manual data entry and up-to-date balances at a glance.

2. Use Bank Rules

Create rules for recurring transactions (like rent, subscriptions, or supplier invoices).
Benefit: Xero automatically categorises transactions, saving time each month.

3. Reconcile in Bulk

Use the “Reconcile” tab to match multiple transactions at once.
Benefit: Reduces the back-and-forth and speeds up month-end reconciliation.

4. Schedule Invoices

Set recurring invoices for regular clients and send them automatically.
Benefit: Ensures timely payments and keeps cash flow steady.

5. Track Bills & Expenses Easily

Use Xero’s mobile app to snap photos of receipts and upload on the go.
Benefit: Keeps records accurate without piles of paperwork.

6. Set Up Reports You Actually Need

Customize dashboards and reports to see the metrics that matter most.
Benefit: Quick access to cash flow, overdue invoices, and profit/loss insights.

7. Invite Your Accountant

Give BMO Business Centre access to your Xero file.
Benefit: We can spot opportunities, reconcile faster, and advise proactively—saving you even more time.

Many small businesses save 5–10 hours a month just by using bank feeds, rules, and scheduled invoices. That’s extra time to focus on growing your business!

Remember, we are always here to help set you up on Xero or provide your with training. Give us a call to find out more.

The EOFY jobs that might matter more than you think

Wed, 04 Mar 2026 23:10:37 GMT

As the end of the financial year (EOFY) approaches, investors often focus on topping up super, maximising deductions, prepaying interest or reviewing portfolios. While these are all valuable activities, there are some less obvious tasks that can have a big impact on your tax position, wealth preservation and long-term planning outcomes.

Here are five areas that investors can often miss in EOFY planning.

1. Capital gains in volatile markets

Investment markets have been volatile in recent years, with rapid movements in equities, property and fixed income. When investors buy and sell during choppy market periods, capital gains tax (CGT) considerations become even more important. ⁱ

So, the EOFY is the ideal time to assess whether:

You should realise gains this year or defer them - The decision can hinge on:

Expected income this year vs next year
Whether you qualify for the 50 per cent CGT discount
Available capital losses
Investment timeframes and risk appetite

You have unused capital losses - Losses can be used to offset realised gains, but they cannot be used against ordinary income. Some investors may find that realising strategic gains before 30 June allows them to "unlock" unused losses that have been sitting dormant.

Be aware of “wash sale” rules. Some investors plan to sell an asset to realise a loss and then quickly buy it back. The ATO calls this a wash sale and may deny the loss. ⁱⁱ

2. Superannuation recontribution strategies

A super recontribution strategy is sometimes overlooked because it requires coordination between pension payments, contributions and tax components. But, when used appropriately, it may significantly reduce future tax for beneficiaries and increase flexibility in estate planning. ⁱⁱⁱ

This strategy usually involves:

Withdrawing a portion of your super (usually from the tax free and taxable components proportionally), then
Recontributing those funds back into super as a non-concessional contribution (if you’re eligible).

The result is that more of your balance becomes tax free, which can reduce or eliminate the “death benefits tax” that applies when super passes to non-dependent beneficiaries, such as adult‑children. ^iv

EOFY is a good time to consider recontributions because:

Contribution caps reset on 1 July
Withdrawals need to be timed alongside pension minimums
Your age, work status and total super balance (TSB) limit your contribution options
Large transfers may benefit from splitting across financial years

It's not a strategy for everyone, but for retirees or those preparing for retirement, it may produce long-term savings.

3. Bringing forward deductions and deferring income

While prepaying expenses and deferring income is a well-known EOFY strategy, it may not be successful for everyone, so check carefully that it’s useful for you.

Bringing forward deductions – You may be able to prepay, interest on investment loans, income protection premiums, ongoing advisory fees, and professional subscriptions. But if you’re approaching income thresholds (such as Medicare Levy Surcharge minimums, private health insurance rebates or HECS/HELP repayment bands) it’s important to calculate whether prepayments will actually deliver you a benefit.

Deferring income - Small businesses using cash accounting may be able to defer invoicing until July and investors might choose to delay receiving distributions or bonuses. But don’t forget that deferring income may affect borrowing capacity or government payments.

4. Managing Division 7A loans

Division 7A can catch business owners off guard at EOFY. These rules apply when a private company lends money, pays expenses or provides assets to shareholders or their associates. If not handled correctly, the ATO may treat the payment as an unfranked dividend, resulting in significant unexpected tax. ^v

To stay on top of your Division 7A obligations:

Confirm all loans are documented - A written Division 7A loan agreement must be in place by the company’s tax return deadline. Without it, the full outstanding balance may be treated as a dividend.

Check minimum yearly repayments - Each year, borrowers must make minimum repayments of principal and interest and must be made in cash.

Consider whether to repay, refinance or restructure - Fully repaying a loan before EOFY may be the most tax efficient option. Or refinancing through a complying loan or restructuring the company’s finances may provide greater flexibility.

Don’t forget about company-paid personal expenses - Payments for personal use, such as private travel, home expenses or personal assets, may sometimes also fall under Division 7A.

A well-timed review can prevent unintended tax consequences and keep your structure compliant.

5. Reviewing your records

Another often missed EOFY task is checking that your records and substantiation are complete before preparing your tax return.

The ATO is increasing its use of data matching programs, so having accurate documentation is essential. This includes keeping receipts for deductible expenses and retaining statements for managed funds and other investments.

EOFY planning is about much more than topping up super or gathering receipts. Hidden traps like CGT and Division 7A timing can create unnecessary tax if ignored, while proactive strategies such as recontributions can deliver long-term estate planning benefits.

By taking a structured approach, you can ensure every part of your financial picture is working together, and no opportunity is missed. We're here to help. Please give us a call.

i Capital gains tax | ATO

ii Wash sales: The ATO is cleaning up dirty laundry | ATO

iii Super recontribution strategy: How it works | SuperGuide

iv Paying superannuation death benefits | ATO

v Loans by private companies | ATO

Managing unexpected retirement

Wed, 04 Mar 2026 04:29:41 GMT

Stopping work is a big shift – especially when you haven’t planned for it.

Why you might face a sudden retirement

Only one-third of Australians retire because they’ve reached retirement age. For many, retirement happens earlier than they expect due to events outside their control. These can include:

Job loss or redundancy: some people are forced to retire when they lose their job and can’t find another, or if their business closes
Caring responsibilities: people may stop working to look after a partner, parent, or child
Health changes: an unexpected illness or injury can make it hard to keep working
Problems at work: work can become unmanageable due to a lack of flexibility or feeling excluded or undervalued.
A partner's decision to retire: one partner retiring can prompt the other to stop working too.

Whatever the reason, unexpected retirement can throw your plans off course and leave you dealing with loss of income, purpose, and routine.

Managing the change means tackling short term pressures first – and then thinking ahead to what comes next.

Key steps to help manage unexpected retirement

Here are five things you can do to help regain control if you face sudden retirement.

1. Review your finances

If you’ve stopped working unexpectedly, you may not have had the time to assess your finances.

But knowing what you have and what you spend can help you take control and avoid bigger problems later.

Income and assets might include:

Termination payments: when you leave a job, you’re entitled to be paid out any unused annual leave, long service leave and other entitlements. If your employer ended your job, you might be entitled to redundancy pay or pay in lieu of notice.
Superannuation: leaving a job after turning 60 means you can access your super. If you’re under 60, there are rules about early access to super .
Savings: if you have money or investments outside super, these can support you when you're no longer working.
Property: this includes the home you own and live in, which you could downsize or borrow against, as well as any investment property you have.
Government payments: depending on your age and circumstances, you may be eligible for government support. Services Australia provides support for people who have lost their jobs.
Insurance: if you stopped work due to illness or injury, you may be able to claim on any income protection or total and permanent disability (TPD) insurance you hold.
Partner and family support: if you live with someone or have family who can help, their support may form part of your financial options.
Part-time work: if you have, or can take on, a part-time role, this can ease financial pressure.

Once you know what’s coming in, you can look at what you’re spending. Start with the regular expenses that you can’t easily avoid. These might include:

Housing: rent or mortgage payments, rates, insurance
Utilities: electricity, gas, water, phone, internet
Food and household goods: groceries, personal care
Health: healthcare and medical appointments
Transport: car registration, insurance and running costs, plus public transport

2. Manage any debts

Stopping work can make it harder to keep up repayments on home loans and credit cards.

When it comes to debt, the sooner you act, the more options you have.

First, make a list of who and what you owe, and when it's due. Then, plan payments in order of priority.

3. Check what support is available

Depending on your circumstances and your age, you may be eligible for government support – even if you’ve never applied before.

Read losing your job for information on what help is available and the steps you can take to find support. And visit Services Australia for more information. If you find the online information confusing to understand, Services Australia have Financial Information Services officers to help you.

Recognise that you might need support to take care of your mental health as well – and that it’s okay to ask for help. Talk to friends and family about how you're feeling.

Lillian's health scare

Lillian, 61, was working four days per week as an office manager at a local real estate agent’s office. She always enjoyed her job, loved a yarn with the team, and had hoped to keep working well into her sixties.

But things took an unexpected turn when Lillian experienced a serious health scare just over a year ago. Previously, she’d been fit and active, rarely needing more than the odd visit to the doctor, but the sudden onset of health issues meant she now had to focus on her wellbeing and attend regular medical appointments.

Learn what action Lillian took .

4. Start planning for what's next

Once you’ve organised your immediate situation, start thinking about what you want the next stage to look like.

That means making some decisions about how you want to live, and how your money will support that.

You might be living on less than you expected or using your super earlier than planned.

Planning now can help you make confident choices about:

How and when to draw down from super
Adjusting your spending to match your income
How your super is invested
Whether your housing arrangements are still suitable.

Speaking to us to make a retirement plan can help you work through these decisions.

5. Get help before making big changes

Some decisions are too important to rush.

Before you sell your home, start drawing from super or make major investment changes, get advice.

We can help you understand your options.

Source: Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/plan-for-your-retirement/managing-unexpected-retirement
Important note: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. Past performance is not a reliable guide to future returns.
Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The information in this article does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Subject to law, Capstone Financial Planning nor their directors, employees or authorised representatives gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of the information contained in this document. Principal Wealth Management Pty Ltd trading as BMO Financial Solutions ABN 53 109 336 601 is a Corporate Authorised Representative (CAR 277821) of Capstone Financial Planning Pty Ltd ABN 24 093 733 969 Australian Financial Services Licence (AFSL) No. 223135.

Got a side hustle? Don’t forget your tax

Wed, 04 Mar 2026 04:24:47 GMT

With the ongoing cost-of-living squeeze, record numbers of Aussies are supplementing their income with side hustles.

But before you dive into a new gig, it’s important to understand some of the tax essentials that come with running a small business.

Whether you’re monetising online content creations, running bootcamp sessions alongside your 9-to-5 job or regularly selling handmade goods at markets, the ATO may consider that you’re running a business and expect you meet your tax obligations.

Are you running a business?

Under the current tax rules, if you earn money through continuous and repeated activities to make a profit, it’s likely you are considered to be carrying on a business. ⁱ

Income from genuine hobbies is non-assessable, but income from a business must be declared in your tax return. ⁱⁱ

Business operators face a range of obligations including applying for an Australian Business Number (ABN) and registering for pay as you go (PAYG) withholding if you hire any employees. ⁱⁱⁱ

There is no legislative definition of "carrying on a business” but the ATO provides information and questions to help you decide:

Step 1: Identify relevant, related activities, including:

keeping records
obtaining and maintaining licences and permits
renting out premises or goods
providing goods or services.

Step 2: Are the activities a business?

The more “yes” answers, the more likely your activities in business:

Do you intend to be in business?
Do you intend to make a profit and is there a realistic chance of doing so?
Is the size or scale of your activity enough to make a profit?
Are the activities repeated and continuous?
Are your activities planned, organised and carried out in a business-like manner? For example, do you:
keep business records and use a separate business bank account?
advertise and sell your goods and services to the public?
operate from business premises?
maintain required licences or qualifications?
have a formal business plan or budget?
have a business name or an ABN?

Accurate recordkeeping from the start

It’s important to set up a recordkeeping system from day one to track your income and expenses accurately.

You’re legally required to keep records of all transactions relating to your tax, superannuation and registration obligations when you start, run, sell, change or close a business. ^iv

In most cases, these records need to be kept for five years, and you must be able to show the ATO your records if required.

Claiming genuine business-related expenses

If your side hustle is a business, all income must be declared, regardless of the amount.

The good news is you can claim tax deductions for business expenses, provided you keep receipts and the expenses directly relate to earning side hustle income (including the cost of managing your tax affairs).

If your annual turnover exceeds $75,000, you must register for Goods and Services Tax (GST) and pay all the GST collected on your taxable sales to the ATO every quarter. ^v

Managing cashflow

Good recordkeeping also helps you monitor the financial health of your business and know whether your business is running at a profit or loss.

It’s crucial for managing cashflow. One of the most common reasons small businesses fail, is losing control of their cash position and unable to pay their bills on time.

ATO data matching

If you are only earning small amounts, it might be tempting to assume the ATO won’t notice if you don’t report your side hustle income. But side hustles are now an important ATO surveillance target. ^vi

More than 600 million transactions are reported to the tax office each year. The ATO receives and matches data from banks, payment systems, government agencies, share registries, cryptocurrency service providers and building and construction payments. It can also gather industry-specific data under its “special purpose acquisition data programs”.

Impact on government benefits

Extra income from your side hustle can also affect your eligibility for government benefits. It may reduce or even eliminate payments such as the Family Tax Benefit or Child Care Subsidy. It may also affect how much Medicare Levy surcharge you pay and when you are required to start repaying a HECS/HELP debt.

Are you in business?

If you need help getting your side hustle onto a solid business footing, contact our office today.

Case study: Hayley’s four-wheel business

Hayley works in hospitality at night and spends most days fishing or four-wheel driving. She begins creating ‘how-to’ YouTube videos during her outings.

As her online following grows, she starts earning money from her content and cuts back on her hospitality work.

Hayley sets up a schedule outlining the type of content she will produce on a weekly basis, buys equipment to improve her production quality, completes an online video editing course and records all the expenses from her content creation activity.

In deciding whether her side hustle is a business, she looks at all her activities together. Hayley determines she is running a business because she:

intends to make a profit to supplement her salary and wage income
set up a regular schedule for these activities
operates in a business-like way (she has a plan and system for making a profit).

Source: ATO

i Are you in business? | Australian Taxation Office

ii What to include in your business's assessable income | Australian Taxation Office

iii PAYG withholding | Australian Taxation Office

iv Overview of record-keeping rules for business | Australian Taxation Office

v GST - Goods and Services Tax | Australian Taxation Office

vi Side hustles are front of mind this tax season | Australian Taxation Office

Are downsizer contributions losing steam?

Wed, 04 Mar 2026 04:13:20 GMT

Tax Office data shows fewer people used its super scheme in 2024-25.

Introduced in 2018, the home downsizer scheme allows eligible Australians aged 55 and older to contribute up to $300,000 from the sale of their home into superannuation, outside of normal annual contribution caps.

The idea was simple: improve retirement incomes while freeing up larger homes for younger families.

For eligible couples, up to $600,000 can be taken from their total home proceeds and split equally between their respective super accounts.

Yet, since peaking in 2021–22 when almost 20,000 people made downsizer contributions totalling just over $5 billion, both the number of contributors and the total value of contributions has declined. Last year 15,800 Australians took advantage of the scheme and contributed a total of $4.16 billion into super – the lowest number in five years.

Total individuals and downsizers contributions by financial year>>

Source: Australian Tax Office

Which leads to the inevitable question: has interest in home downsizing faded?

Not really. The initial rise in downsizer contributions was powered by people who were already planning to sell. For financially literate retirees with strong super balances and little reliance on the Age Pension, the policy was an obvious opportunity and many moved quickly to take advantage of it.

But a downsizer contribution can only be used once in a lifetime. When those early adopters acted, they permanently exited the pool of potential contributors. By 2021–22, many of the most prepared and motivated households had already made their move.

What followed was a predictable plateau, not a sudden loss of interest.

Many older Australians aren’t selling

Downsizer contributions depend entirely on one thing: older people selling homes. And despite high property prices, many are not willing to make the move.

This was one of the key findings in Vanguard’s How Australian Retires 2025 report , which found that less than 30% of retired Australians have moved or are planning to move into a new home since retiring.

In fact, most retirees see their home as something to hold onto either for life or to pass on as an inheritance. Only 9% of those surveyed considered their home a potential source of retirement funding.

For many older Australians, the family home represents stability, security and independence — benefits that rising prices alone don’t sever.

Interest‑rate uncertainty has bred caution

The past few years have also been marked by sharp swings in interest rates and economic uncertainty. While retirees may carry little debt, they are often more sensitive to volatility than younger households.

Selling into a shifting market raises fears of poor timing, unexpected price falls or difficulty securing suitable replacement housing. In that environment, many retirees have adopted a “wait and see” approach — delaying major decisions, including downsizing.

A lack of supply

Another persistent issue is supply. For downsizing to make sense, retirees need access to smaller, well‑located, accessible homes — ideally within their existing communities.

In many areas, that stock is limited. New apartments may be expensive, poorly designed for ageing residents or poorly located relative to services and family. When suitable housing is scarce, downsizing stalls — and so do downsizer contributions.

The Age Pension remains a silent spoiler

Perhaps the biggest structural brake on downsizer contributions is the government Age Pension.

The family home is exempt from the pension assets test. Superannuation is not. When retirees sell their home and move funds into super via a downsizer contribution, they can inadvertently reduce or eliminate their pension entitlement.

This trade‑off is well understood by us as financial advisers, and deeply felt by retirees near pension thresholds. For many, protecting or maximising the Age Pension outweighs the tax advantages of holding more assets inside super.

A mature scheme meets structural limits

The decline in downsizer contributions largely reflects the reality that downsizing is complex, deeply personal and shaped by pension rules, housing supply and risk aversion.

Early demand has largely been met. What remains is a smaller, steadier flow of people who are ready to move when circumstances align. For most retirees, the decision will continue to hinge on lifestyle, certainty and suitability — not just numbers on personal finances.

For more information on home downsizer contributions including eligibility, contribution limits, and how to make a contribution, feel free to contact us.

Source: Vanguard February 2026

This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

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ATO flags small business errors that can quickly blow up

Tue, 03 Mar 2026 04:06:43 GMT

If the start of your year reset hasn’t stretched beyond a fresh diary and a strong coffee, the ATO reckons now’s a good time to widen the lens, especially when it comes to tax.

The ATO is urging small businesses to start 2026 by tightening up the basics, saying most compliance problems come down to everyday habits that slip when you’re busy running the show.

ATO Assistant Commissioner Angela Allen says now is a good time to reset before small issues snowball.

“Every year we see small businesses run into avoidable issues because they haven’t kept accurate records, reported all their income or managed their cash flow effectively,” Allen said.

Small mistakes = big dollars warns ATO

According to the ATO, honest errors are a major reason behind the $27.2 billion small business income tax gap.

“Part of the $27.2 billion small business income tax gap is driven by mistakes, so it’s important to be aware of the ATO’s small business focus areas and if you’re unsure seek support early,” Allen said.

Allen suggests one of the easiest ways to stay out of trouble is getting advice from a registered tax practitioner, particularly when things get tricky or time-poor decisions start creeping in.

Don’t ghost the ATO

The ATO is ramping up efforts to recover more than $50 billion in unpaid tax, and small business debts continue to climb.

Allen says ignoring the problem only makes it worse.

“If for some reason you can’t pay in full or on time, our number one tip is to not stick your head in the sand. Engage with us or your registered tax practitioner early to discuss your options,” she said.

She also warned against treating the tax office like a handy overdraft.

“The ATO is not a bank or a cheap source of finance. Deliberately delaying tax payments to fund your business creates an unfair advantage over the many small businesses that are doing the right thing and paying on time.”

Fixing your cash flow stress

Cash flow is still the number one stressor for many small business owners, especially when BAS time rolls around and the numbers don’t quite add up.

The ATO suggests one practical fix is separating your tax money from your everyday operating cash.

“Keeping separate bank accounts for these obligations makes it easier to meet your commitments and avoid unexpected shortfalls,” Allen said.

That means hands off the GST and PAYG .

“Don’t be tempted to dip into GST you’ve collected, or PAYG withholding collected on behalf of your employees, as a way to bolster your cash flow.”

Short-term relief, the ATO warns, often turns into a much bigger problem when the bill eventually lands.

Good records = fewer dramas

The ATO continues to see income missed from tax returns, particularly in businesses that take cash or keep patchy records.

“Accurate, consistent and complete record keeping isn’t just a good idea – it’s a requirement,” Allen said.

If your filing system involves a drawer, a shoebox or a vague mental note, the ATO says it’s time to go digital. Sole traders can use tools in the ATO app like myDeductions and the business performance check tool, while online services let businesses track lodgements and outstanding debts.

Payday Super is coming

From 1 July 2026 , businesses will need to pay super guarantee contributions each payday.

The ATO is urging small businesses to start planning now rather than scrambling later.

“Review your payroll systems and super processes and get ready to pay super guarantee more frequently,” Allen said.

What’s on the ATO’s radar in 2026

The ATO updates its small business compliance focus areas every quarter and publishes them on its website, so business owners know exactly what’s getting extra attention.

“It’s all about being transparent about the compliance risks on our radar so small businesses can continue to get it right in 2026,” Allen said.

Where the ATO sees deliberate non-compliance, including shadow economy behaviour, it says firmer action will follow.

Shutting up shop? Do it properly

For business owners wrapping up their business in 2026, the ATO has guidance on cancelling ABNs, lodging final returns and meeting payroll and super obligations for the last time.

“If you decide it’s time to move on, closing your business the right way helps avoid future compliance issues,” Allen said.

Source: Flying Solo February 2026

This article by Cec Busby is reproduced with the permission of Flying Solo - Australia's micro business community. Find out more and join over 100K others https://www.flyingsolo.com.au/join.

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s).

How does your business compare?

Wed, 04 Feb 2026 21:40:52 GMT

Everyone likes to know how they’re travelling compared to their peers and business owners are no different.

To help you know how your business is doing, the ATO annually compiles a range of small business benchmarks that allow you to compare your results and decide if any changes are needed.

Benchmarking is a useful tool to help you understand how your business is performing within your industry. It compares your actual performance against averages for similar businesses.

The ATO’s benchmarks cover a wide range of industries across Australia and are based on data from two million businesses.

Industries that are included are:

accommodation and food
building and construction
education, training, recreation and support services
health care and personal services
manufacturing
other services
retail
professional, scientific and technical services; and
transport, postal and warehousing.

The benchmarks allow you to check common business ratios such as your cost of sales to annual turnover, total expenses to annual turnover, rent to turnover and motor vehicle expenses to turnover.

It is also an important way of assessing the value of a business when you’re considering buying it. You can check how it’s performed in the past against industry averages both to see whether it’s a wise purchase and also if the purchase price is reasonable.

Why check benchmarks?

Think of benchmarks like your annual health check, says ATO assistant commissioner Tony Goding. They help to highlight strengths and diagnose early warning signs.

“Whether you’re running a pizza shop, pet store or a plumbing business, the benchmarks can help you see how your business stacks up. If your numbers are outside of the benchmark range, compared to others in your industry, it may be time for a closer look at your business plan,” he says. ⁱ

This includes identifying where adjustments can be made to costs and expenses and reviewing profit margins to improve your business performance.

For example, you may note that your expenses are high relative to sales when compared with others in your industry. You may discover that you’re overspending on operating costs, such as rent or insurance and that your input costs are higher than your competitors. This could possibly be caused by high levels of waste or high supplier costs; or perhaps your staff costs are too high.

This useful independent data could help you to find ways to improve your business by increasing your profit, reducing your costs and better manage your operations.

Importantly, businesses that remain within industry benchmarks are generally less likely to attract the ATO’s attention.

“While we never use the benchmarks in isolation, small businesses who fall outside the ATO’s benchmarks are more likely to trigger a closer examination from us to identify if they are making mistakes or deliberately doing the wrong thing,” says Goding.

Checking where your business sits in relation to the benchmark range means you can gather any necessary information to explain and support why your business is reporting outside the normal range if you receive an ATO query.

Case study: Anna’s pizza shop

Anna operates a pizza shop as a sole trader and wants to know how her business compares to her competitors and how she can improve it.

Entering her details into the ATO Business Performance Check tool, Anna learns the key ratio of cost of sales to turnover for her shop is 44%.

While this is within the range for businesses in her industry with a turnover of $550,300, Anna sees that the range for cost of sales starts at 37%. She realises some of her competitors have a lower cost of sales figure.

As a result, Anna looked for other suppliers and got a better deal to reduce her business expenses and improve profits.

Where to start

Getting started is simple. You can enter your figures into the Business Performance Check tool and instantly see how you compare to similar businesses in your industry and turnover range.

Regularly reviewing benchmarks helps you to stay competitive by making informed decisions about pricing, cost control and operational efficiency.

If you need help understanding how to improve your business performance, contact our office today.

i ATO releases new small business benchmarks for 100 industries | Australian Taxation Office

Marketing made easy for small business

Wed, 04 Feb 2026 21:38:16 GMT

Attracting and retaining customers is the lifeblood of any small business. The tricky part is, marketing can feel like a whole other job you never signed up for. Social media, email campaigns, content creation and advertising can be overwhelming.

The good news is that you do not need to be a marketing expert to start seeing results. With a few practical strategies, some consistency and a little creativity, you can put your business in front of the right people and start growing your customer base.

Know your audience

Effective marketing starts with knowing exactly who you want to reach. Imagine your ideal customer. What do they like, where do they spend their time, and what problems do they need solved? Once you have a clear picture, you can tailor your message directly to them. Marketing, without a defined audience, is like throwing a party and hoping the right people show up. Be specific and speak to their needs, you shouldn’t be speaking to everyone and anyone.

Be visible and consistent

A strong online presence is essential. Even if your business is small or local, a simple website gives potential customers confidence that you exist and are trustworthy. You do not need flashy graphics or an expensive website production. Clear messaging, helpful content and a friendly tone go further than polished perfection.

Social media is a great tool for finding new customers, educating existing customers, and broadening your reach. It can be challenging to know what to post but sharing tips, stories, updates and behind-the-scenes moments is an easy and cost-effective way to showcase your business and the people behind it – never underestimate the power of connection between real people.

Posting regularly on social media, updating your website, or sending an email newsletter helps your audience remember you. Even small efforts done consistently outperform occasional big bursts.

Embrace email marketing

Email marketing is one of the most effective tools for small businesses. Collect emails from customers who want updates and send them occasional news, offers, or helpful tips. Keep messages short, personal and valuable. Your emails should feel like a friendly nudge rather than a hard sell. A simple monthly newsletter can do wonders for keeping your audience engaged and driving repeat business.

Make it easy

Marketing does not have to take hours every day. Scheduling and automation can save time and make your efforts consistent. Social media scheduling tools allow you to plan posts in advance so you are not scrambling to create content every day. Automated email campaigns can send welcome messages or follow-ups without you lifting a finger. Templates for graphics or posts help maintain a professional look without reinventing the wheel. The trick is to set up systems once and let them work for you.

Batching your work is another lifesaver. Dedicate one morning to creating content for the week rather than switching between tasks constantly. Small, repeated actions are more sustainable and less stressful than trying to do everything in real time.

Collaborate and leverage partnerships

Marketing does not have to be a solo effort. Partner with other businesses that share your target audience but are not direct competitors. Cross-promotions, events, or simple social media shout-outs can expand your reach without requiring a big budget. Word-of-mouth is still incredibly powerful, especially when combined with an online presence.

Test, tweak, repeat

Marketing is not a one-size-fits-all formula. Try different approaches, see what works, and focus on what brings results. Small changes to a social media post like, adjusting a headline, or testing a new offer can make a noticeable difference. Track results and learn from them. Marketing is about learning what resonates with your audience and doing more of it while dropping what does not work.

Keep it simple

The biggest mistake many business owners make is trying to do everything at once. Start small and use one or two channels that make the most sense for your audience and focus on doing them. Once these habits are in place, you can expand gradually.

Treat marketing like any other business task. Schedule it, protect the time, build routines around it - and celebrate the wins that provide the momentum to keep your marketing focus going and your business thriving.

Prepare for an SMSF shake-up in 2026

Mon, 02 Feb 2026 21:34:29 GMT

Self-managed superannuation fund (SMSF) trustees always have a lot on their to-do lists but the first few months of 2026 are likely to be busier than usual.

Topping the list is preparing for the introduction of Payday Super and the Better Targeted Superannuation Concessions on 1 July 2026.

Payday Super is a change to when you make your employees’ Superannuation Guarantee (SG) payment. From 1 July 2026, the SG must be paid to an employee’s super fund on payday and be received by the fund within seven business days. If you are taking on new employees or paying to a new super fund, these funds must be received within 20 business days. ⁱ

Employers are considered to have made a contribution when the fund receives it, not when they pay it, so SMSFs need to have the necessary systems set up and in place from 1 July.

Who’s affected?

The ATO has warned SMSF trustees that Payday Super should not be ignored.

If you are a business owner and pay contributions for yourself or your employees into an SMSF, the fund will be receiving more contributions and there will be increased administration requirements to deal with payment timing and record keeping.

The strict timing rules also come with tougher penalties and any delay may incur a Super Guarantee Charge, which is not tax deductible.

New clearing house partners

SMSFs also need to be prepared for closure of the ATO’s Small Business Superannuation Clearing House (SBSCH) from 1 July 2026. ⁱⁱ

Employers currently using the SBSCH should take immediate action to find an alternative. You could check your accounting software and payroll packages, which may already include super functions, or look at the options offered by commercial clearing houses or other software providers.

Failing to prepare for the SBSCH closure means you may risk a fine.

SuperStream updates

Payday Super’s 1 July start date will also usher in changes to contributions messaging within the SuperStream system, the electronic standardised format employers must use to make super contributions. ⁱⁱⁱ

Changes include clearer error messaging and are designed to reduce employee contributions being rejected by the receiving super fund.

SMSF trustees need to ensure their internal systems are updated and ready to cope with the SuperStream changes, as timely and correct contribution payments are a key goal of the new rules.

According to ATO deputy commissioner Emma Rosenzweig , one of the most common SMSF errors in this area is where the Electronic Service Address (ESA) was never activated with the provider or is no longer active.

This error means the employer receives a SuperStream error message but does not receive the matching refunded super contribution.

Prepare for earlier contributions

The ATO is encouraging employers not to wait until 1 July to start making Payday Super contributions to help improve the transition.

SMSFs should also ensure they are able to receive contributions via the New Payments Platform (NPP), as employers who currently use direct debit are being encouraged to move to faster payment methods such as EFT and NPP.

With contributions flowing in more regularly – rather than quarterly – it may also be timely to reassess your SMSF’s investment strategy and portfolio allocation to ensure it remains suitable for the shift in contribution flows.

High balance tax changes

Another thing to be mindful of is from 1 July 2026, SMSFs will need to be prepared for the commencement of the government’s much delayed Better Targeted Superannuation Concessions. ^iv

These new rules are intended to reduce tax concessions for individuals with a Total Super Balance (TSB) above $3 million.

Under the new rules, people with higher super account balances will face a higher 30 per cent concessional tax rate on the proportion of earnings corresponding to their TSB between $3 million and $10 million.

With a higher TBC in place for 2025-26, SMSFs should consider the implications of the new tax regime prior to making any pre-30 June contributions and potentially breaching the indexed thresholds in future financial years.

If you need help preparing your SMSF for the upcoming changes, contact our office today.

i Spotlight on… Payday Super | Australian Taxation Office

ii The Small Business Superannuation Clearing House is closing | Australian Taxation Office

iii SuperStream for employers | Australian Taxation Office

iv Better targeted superannuation concessions | Australian Taxation Office

Setting your grandkids up for the future: A Grandparent’s guide

Tue, 13 Jan 2026 21:34:49 GMT

Providing financial support to your grandchildren can be a meaningful way to invest in their future. From practical steps to financial strategies and legal considerations, there are several ways you can help set them up for long-term security and success.

Financial actions

1. Financial gifts and savings accounts

One off or regular gifts: Consider gifting money when you might otherwise give a physical gift. For special events like a birthday, graduation or a religious or cultural event, deposit a financial gift into a savings account specifically set up for your grandchild. According to the MLC Financial Freedom Report, 18% of grandparents provide one off financial gifts to celebrate milestones or alleviate significant expenses and 16% offer regular financial gifts to support their grandchildren.

Savings accounts: Open a high interest savings account in your grandchild's name. Compound interest helps regular contributions, no matter how small, grow significantly over time.

2. Education funds

Education bonds: These are tax effective investment vehicles designed to save for future education costs. Contributions to these bonds can grow. Income is taxed at 30% within the bond. Withdrawals for education expenses will attract a tax rebate for tax paid within the bond. There may be tax implications for the grandchild.

Paying for school or university: Directly paying for your grandchild's tuition can be a substantial help. This can reduce the need for student loans and the financial burden on their parents.

3. Investment accounts

Custodial accounts: These accounts allow you to invest in stocks, bonds and mutual funds on behalf of your grandchild. The assets in the account legally belong to the child but are managed by you until they reach adulthood.

Superannuation contributions: If your grandchild earns an income, consider making contributions to their superannuation fund. This can provide a significant boost to their retirement savings. Concessional contributions count towards a cap and penalties may apply if the cap is exceeded.

Practical steps

1. Financial education

Teach financial literacy: Share your knowledge about budgeting, saving and investing. Encourage good financial habits from a young age. The MLC Financial Freedom Report highlights how financial support from grandparents can lead to greater financial satisfaction and stability later in life. The report shows that 43% of Australians surveyed who received substantial financial support from their grandparents are extremely or very satisfied with their current financial situation, compared to 17% who did not receive such support.

Involve them in financial decisions: When appropriate, involve your grandkids in discussions about money. This can help demystify finances and prepare them for managing their own money.

2. Support for extracurricular activities

Funding hobbies and interests: Financially supporting your grandchild's hobbies, sports or other extracurricular activities can help them develop skills and interests that may benefit them in the future.

3. Housing and transport assistance

Living arrangements: Allowing your grandchild to live with you rent free or at a reduced rate can help them save money for other important expenses, such as education or starting a business.

Helping them buy a car: Nearly one in ten grandparents (9%) help their grandchildren achieve a degree of independence by assisting them with their first car purchase.

Other important considerations

1. Estate Planning

Wills and trusts: Ensure your Will is up to date and consider setting up a testamentary trust for your grandchildren. These trusts can provide financial support for specific purposes, such as education or buying a home and can be managed according to your wishes.

Power of Attorney and guardianship: Designate a trusted individual to manage your affairs if you become unable to do so. This ensures that your financial support for your grandchildren continues seamlessly.

2. Tax implications

Understand gifting rules: If you receive government support or a pension, there may be caps on the amount you can gift without affecting your pension. Make sure you check prior to gifting significant sums.

Consult a financial adviser: Work with a financial adviser to understand any social security and tax implications of your financial gifts.

Avoiding risks to your retirement savings

While supporting your grandchildren is a noble goal, it's crucial to ensure you don’t compromise your own financial security. Here are some strategies to avoid risks to your retirement savings:

1. Diversify your investments

Diversification can help protect your retirement savings from market volatility. By spreading your investments across different asset classes, such as stocks, bonds and real estate, you can reduce the impact of any single investment's poor performance.

2. Maintain an emergency fund

Having an emergency fund can provide a financial cushion in case of unexpected expenses.

3. Adopt a sustainable withdrawal rate

The 4% rule is a common guideline, suggesting that you withdraw 4% of your retirement savings in the first year and adjust for inflation in subsequent years. This can help your savings last longer during your retirement.

4. Consider annuities or IRIS products:

Speak to your financial adviser about whether annuities or an innovative retirement income stream (IRIS) product may work for you to reduce the risk of outliving your savings.

5. Regularly review your financial plan:

Periodically reviewing your financial plan with a financial adviser can help you stay on track and make necessary adjustments.

6. Limit large financial gifts:

While it's generous to support your grandchildren, it's important to balance this with your own financial needs. Consider setting limits on large financial gifts to ensure your retirement savings remain intact.

Inspiring the next generation

Your financial support can do more than just provide immediate benefits; it can inspire your grandchildren to achieve their own financial independence. By setting a positive example and providing the tools and resources they need, you can help your grandchildren build a solid foundation for their future.

Setting your grandkids up for the future involves a combination of financial gifts, practical support and intentional planning. By taking these steps, you can help your grandchildren have the financial stability and knowledge they need to achieve their dreams. Your legacy will not only be remembered in the form of financial support but also in the values and lessons you impart.

References

MLC Financial Freedom Report 2024
Australian Taxation Office (ATO) guidelines on gift tax

Source: MLC

Small business super and tax tune-up

Tue, 13 Jan 2026 21:28:20 GMT

This year is shaping up as one of the biggest for tax and superannuation reform.

Several major changes begin on 1 July, so small businesses that aren’t prepared, face compliance headaches, cashflow pressure and ATO scrutiny.

Here’s what you need to know.

Super must be paid every pay day

The most significant change is the introduction of Payday Superannuation. Payday Super will help employers meet their super guarantee (SG) obligations and help protect the retirement funds of millions of Australians.

From 1 July, employers must pay super at the same time as wage and salary payments. ⁱ

That means Super Guarantee (SG) contributions must be in an employee’s account within seven business days of each pay day. ⁱⁱ

For new employees, or those paying to a new super fund, you have 20 business days for the first payment to reach the account.

The new rules also include changes to how you calculate and report contributions.

Super will be calculated at 12 per cent of qualified earnings (QE) . These include ordinary time earnings; salary sacrifice contributions and certain payments to contractors who are treated as employees.

You must include the year-to-date (YTD) amounts of QE and super liability in each Single Touch Payroll report.

SuperStream messaging upgrades

From 1 July 2026 there are changes to the contributions messaging used in the SuperStream system, which is the electronic standardised format you must use to pay super contributions.

The messaging changes include clearer error messaging and are designed to reduce the likelihood that your employee contributions are rejected by a super fund.

What employers need to do

The ATO is urging small businesses not to leave preparations to the last minute. Payday Super will increase your administrative workload and payroll processes will need to change.

Confirm employee super fund details are current and correct
Check your default super fund’s registration details are up to date
Consider paying super contributions more frequently now to identify any errors or problems with rejected contributions before the rules change
Review your payroll software and internal systems to make sure they’re ready to support Payday Super and the SuperStream changes
If you currently use the Small Business Superannuation Clearing House, be aware that it closes on 1 July 2026 and you’ll need to make new arrangements
Read about the changes to SuperStream and the New Payments Platform

And, an important note for those who currently pay super quarterly; you should model the impact of the more frequent payments now to check how your cashflow will be affected after 1 July. For small businesses that have tight profit margins, you will need to plan carefully and potentially create a business forecast to manage your cash flow.

New lower tax rates

From 1 July 2026, the tax rate for individual income between $18,201 and $45,000 will fall from 16% to 15%, with a further reduction to 14% from 1 July 2027. ⁱⁱⁱ

Make sure your payroll system is ready for the change and that the correct amounts will be withheld from employees’ wage and salary payments from the first pay run.

Also, check that the new rates do not affect other payroll calculations such as salary packaging or super contributions.

Earnings tax on high balance super accounts

Some small businesses also need to be aware the Better Targeted Superannuation Concessions (BTSC) measures start from 1 July 2026.

Following recent amendments, the BTSC for high balance fund members now includes a second threshold on super accounts over $10 million, with a concessional 30% tax rate applying on the proportion of earnings corresponding to total superannuation balances (TSBs) between $3 million and $10 million.

A new 40% tax rate applies on earnings from the portion of the TSB over $10 million. The earnings tax only applies to ‘realised’ gains on assets, such as when interest is earned or a property is sold.

If you need help preparing for the upcoming tax and super changes, contact our office today.

i Payday superannuation | Australian Taxation Office

ii Spotlight on… Payday Super | Australian Taxation Office

iii Personal income tax - new tax cuts for every Australian taxpayer | Australian Taxation Office

What is a beneficiary and why you need one for your super

Mon, 12 Jan 2026 03:10:17 GMT

The assets that make up your estate may include property, bank accounts, investments and superannuation.

The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.How your estate will be distributed after your death will depend on who you nominate to be beneficiaries in your Will. That is, your estate minus your superannuation – unless you have specifically nominated your estate to be the beneficiary of your superannuation.

In that case, your Will can determine how your estate will be split.

But if you haven’t nominated a beneficiary for your super then it will be up to the superannuation trustee to determine where your superannuation will be paid and who will benefit.

Who can be a superannuation beneficiary

There are rules about who you can nominate to be your superannuation beneficiary.

A beneficiary can only be a dependant or personal legal representative – the person appointed as executor or administrator of your estate or a mix of these.

A dependant may include:

your spouse (including a de facto spouse)
your children (regardless of age)
someone financially dependent on you (fully or partially)
someone you had an interdependent relationship with.

An ‘interdependent’ relationship is a close personal relationship with someone you probably live with where you provide financial support to the other and where one of you provides domestic support and personal care to the other.

What are binding nominations, non binding, reversionary beneficiaries

To ensure your superannuation reaches the right people after your death you will need to have nominated a beneficiary.

There are two types of nominations – binding, which is legally binding, which the Trustee must follow, or non binding which isn’t legally binding but provides the Trustee with directions on how you would like your benefit to be paid.

If you select a binding nomination, you should also ensure that either you update this every three years or that you make it a non lapsing nomination.

Non binding nominations may be followed by the Trustee according to your wishes but ultimately is left to the Trustee’s discretion.

If you are receiving an income stream or annuity from your super and you have not nominated a reversionary beneficiary, the payment will cease on your death and the remaining balance or lump sum value will be distributed to your beneficiaries, in line with your binding nomination.

You may choose to allow your beneficiary to continue the pension or annuity – providing they meet an eligibility test, similar to a superannuation beneficiary.

Why is it important that you nominate someone

It’s important that you nominate someone as your beneficiary as your superannuation is not automatically counted as part of your estate. There have been cases where a person’s Will allocates the estate according to their wishes but because they have not named a specific beneficiary with their super fund, someone has made a claim on the person’s super – for example, an estranged spouse. The Trustee will have final say on how it is allocated so you should make your wishes known.

It is also important to consider the tax implications of who to name as your beneficiary if it is not one of the people listed above. If you are leaving your estate to various beneficiaries, a financial planner can explain the implications of the way you divide your assets including your superannuation.

Why you should review your beneficiary regularly

Like all your legal and financial matters, you should review regularly to make sure you are still in the same situation as you were when you last checked these.

In the last three years, have you married, divorced, had children or lost relatives? If you have done any of these things it is likely you will need to change your beneficiaries for your Will, your superannuation and even your insurance.

Once again, your Will does not automatically include your superannuation beneficiary – so make sure that you update both when there are any changes and review regularly.

Source: Money & Life

Enjoying your retirement

Fri, 09 Jan 2026 03:05:56 GMT

Retirement can be a golden opportunity to make changes to your lifestyle and routine and boost your wellbeing in the process. Find out more about the benefits of using your extra leisure time to stay active and connected to your community.

Making the most of a new life stage

If you’ve been working for much of your life, starting retirement is likely to bring some significant changes to your routine. By taking the opportunity to make the most of all this extra time on your hands, you can plan for a retirement that’s as exciting as it is rewarding. Enjoying a retirement that keeps you active and social is also a great way to invest in your mental and physical health, now and in the future.

More time for your health and wellbeing

Retirement often means healthy and positive changes to lifestyle habits. Compared with their working peers, retired people are likely to sleep more, spend less time sitting down and more time being physically active.

A major life change like retirement creates a great window of opportunity to make positive lifestyle changes – it's a chance to get rid of bad routines and engineer new, healthier behaviours. When people are working and commuting, it eats a lot of time out of their day. When they retire, they have time to be physically active and sleep more.

Whether it’s spending more time planning healthy meals, getting into the habit of going for a regular walk or bike ride or joining a local gym, sports club or team, there are plenty of ways you can use your time in retirement to keep yourself in the best of health.

Stay social to boost your health even further

Some of these activities will also come with the added bonus of new social and community connections. After stopping work, you could find that your social circle will change. Opportunities to connect with work friends may be less frequent, particularly if they haven’t retired yet or you’ve made a move to a new location as part of your retirement plan.

It seems pretty obvious that keeping up with friends and family will be good for your mental health, regardless of your age. Seeing more of friends in your later years has a very positive impact on life satisfaction, as social isolation can actually be as bad for your health as smoking and drinking alcohol and has a bigger impact on life expectancy than lack of exercise or being overweight.

It can take time to build up your social network in retirement, so start to make a plan for how you’ll connect with your local community while you’re still at work. Your local council will be a good resource for information about groups you can join and finding out what’s going on locally. Searching online is also a great way to discover activities you’d like to take part in.

Feel good about giving back

Volunteering can also be a great way to meet people and make a positive contribution to your community. If you find yourself missing the routine and sense of purpose you experienced with your job, volunteering can be a good substitute. Keeping active and getting involved in voluntary work definitely brings retirees a lot of benefits that would have been brought about by keeping on working.

Speak to local community groups or search online to explore opportunities that interest you or could benefit from your skills. As well as organised volunteering programs, you might be interested in sharing your skills in a mentoring or tutoring arrangement. You can choose to offer your time and skills as a volunteer or by working part time if you need an income boost.

Spread your wings

Your retirement is also the ideal time to tick off some destinations on your bucket list. Many companies organise travel programs specifically suited for people who are travelling in retirement. These trips can be ideal if you’re looking to meet and travel with like minded people and have all the hard work and planning taken care of. Remember to arrange insurance to make sure you’re covered for unforeseen events and any medical issues on your travels.

Keeping busy on a budget

Staying social and active in retirement doesn’t have to cost much. While some interests, like golf or crafts, may involve spending on memberships and materials, there are plenty of recreation activities that are low cost or even free. Investing in a sturdy pair of shoes is all you need to join a local walking club and showing your support at a local sports event likely won’t cost you a cent.

With life expectancy rising, you could have many years ahead of you to enjoy new interests, friendships and opportunities to support your community. But it’s also important to plan for a secure retirement income so you can enjoy all these things with peace of mind about your financial future.

Source: Challenger

Payroll Compliance Checklist for 2026

Tue, 06 Jan 2026 03:51:35 GMT

Staying on top of payroll compliance is critical for businesses. Missing deadlines or miscalculating payments can lead to fines, audits, or unhappy staff. Here’s your 2026 checklist to stay compliant and stress-free.

1. Single Touch Payroll (STP) Reporting

Ensure all employee payments (wages, allowances, bonuses, super) are reported to the ATO via STP .
Tip: Check that your payroll software is updated to handle STP Phase 2 requirements.

2. Fair Work Compliance

Keep up-to-date with the Fair Work Act , Modern Awards, and Enterprise Agreements.
Ensure correct rates for overtime, leave loading, and penalties .

3. Superannuation Contributions

Pay super at least quarterly at the correct Super Guarantee rate .
Verify employee eligibility and ensure contributions go to the nominated super fund.

From 1 July the Australian Government’s Payday Super reforms will require employers to pay superannuation guarantee (SG) contributions on the same schedule as employee wages — not quarterly as occurs under the current system.

This means:

Super contributions must be paid each payday — weekly, fortnightly, or monthly — and must **reach the employee’s nominated super fund within seven business days of the pay run.
Employers will need to ensure their payroll systems, processes and reporting are updated to support this new timing. This includes changes to Single Touch Payroll (STP) reporting (including Qualifying Earnings and Super Liability fields) so the ATO can match super payments with pay runs.
The ATO’s Small Business Superannuation Clearing House (SBSCH) will be phased out and no longer available from 1 July 2026, so alternative arrangements or software integrations should be in place ahead of time.

What we recommend you do now:

Review your payroll and super processes to ensure they can handle per-pay-cycle super payments.
Speak with your payroll software provider about upcoming updates or required configurations.
Check your processes for collecting and verifying employee super fund and tax details.
Plan your cash flow to accommodate more frequent super payments.
Train payroll, HR and finance staff on the new requirements.

We are here to support you through this transition and can assist with planning, system readiness, and compliance. Please contact us if you’d like help assessing your current setup or preparing for the 1 July 2026 changes.

4. Payroll Tax

Confirm whether your business meets the state payroll tax threshold .
Lodge returns and pay payroll tax on time.

5. Leave Entitlements

Track employee leave balances accurately, including annual leave, personal leave, and long service leave .
Keep written records of leave accruals and approvals.

6. Employee Classification

Correctly classify staff as employees vs contractors .
Misclassification can result in penalties and back-payment obligations.

7. Termination Payments

Calculate final pay correctly, including unused leave, notice periods, and redundancy payments .
Lodge STP finalisation reports if applicable.

8. Record-Keeping

Maintain payroll records for at least 7 years , including payslips, leave records, and tax documents.
Digital records are acceptable but must be secure and accessible.

9. PAYG Withholding

Deduct and report PAYG withholding accurately.
Ensure end-of-year summaries and reports are submitted to the ATO on time.

 10. Stay Updated

Payroll legislation, awards, and tax rates change regularly.
Schedule a quarterly review to ensure compliance and avoid surprises.

Pro Tip from BMO:

Automating payroll through Xero or Employment Hero and syncing with STP reporting can save hours of work and reduce errors—giving you peace of mind and happy employees.

Accounting in 2026: What the Latest Trends Mean for You

Mon, 05 Jan 2026 04:26:51 GMT

The world of accounting is changing fast. In 2026, Australian businesses and individuals will experience smarter, faster, and more strategic accounting than ever before. But what does this actually mean for you? Let’s break it down.

1. Faster, More Accurate Insights

Thanks to automation and cloud accounting, your financial data is now processed in real time.

No more waiting weeks for reports.
Fewer errors mean you can make decisions with confidence .

2. Advice That Goes Beyond Numbers

Accounting isn’t just about compliance anymore. With more focus on advisory services, you’ll get:

Cash flow forecasts
Budget planning
Strategic business advice

Your BMO accountant becomes a true business partner , helping you plan for growth and avoid pitfalls.

3. Access Anytime, Anywhere

Cloud accounting lets you:

Check your financials online
Collaborate with your accountant from your laptop or phone
Stay on top of your business anytime, anywhere

No more endless paperwork or waiting for monthly updates!

4. Greater Security & Peace of Mind

As accounting becomes more digital, security is a top priority.

Your sensitive data is better protected against cyber threats
You can feel confident that your information is safe

5. Sustainability & ESG Reporting

Many clients now want to track their environmental, social, and governance (ESG) performance.

Your accountant can help measure your impact and report on sustainability metrics
This can enhance your reputation and appeal to investors or stakeholders

6. Smarter Financial Decisions

AI and advanced analytics make it easier to:

Spot cash flow issues before they become problems
Identify profitable areas of your business
Make informed decisions faster

7. More Collaboration, Less Admin

With routine tasks like bookkeeping and payroll automated, you spend less time on paperwork and more time on your business or personal priorities.

The Bottom Line

In 2026, accounting isn’t just about numbers — it’s about partnership, insight, and peace of mind . You’ll get real-time information, strategic advice, and more time to focus on what matters most.

At BMO, we’re embracing these trends to help you make smarter, faster, and more informed financial decisions.

Celebrating with heart - not habit

Tue, 09 Dec 2025 22:44:19 GMT

As the festive season approaches, there is a noticeable shift in the air. The days grow longer, school terms wrap up, and communities across the country begin to prepare for end-of-year celebrations in all kinds of ways.

For some, it is about unpacking boxes of decorations, preparing familiar family recipes and racing around the shops. For others, it is time to head to the beach, host a BBQ, or simply enjoy a well-earned break from routine.

The festive season in Australia looks different for everyone. That’s part of what makes it so special. We live in a society full of rich cultural traditions. Some festive traditions have been passed down for generations, such as midnight Mass or gathering for a family meal on Christmas Day. Others have come to us through popular culture, often shaped by images of snowy winters and roaring fireplaces that don’t quite fit our sunny, southern hemisphere reality.

Think hot roast dinners in 35-degree heat, matching Christmas jumpers despite the sweat, and singing about snowmen and sleighbells.

And that’s okay. That’s part of the rich tapestry that is celebrating the festive season.

However, while tradition can be beautiful, it’s also worth asking yourself: do these traditions still bring joy to my life? Or am I doing them out of habit or obligation?

Reducing stress, reclaiming joy

The lead-up to the holidays can easily become overwhelming. This time of year often brings with it a long list of expectations about what to cook, where to be, and what to buy.

Trying to meet every expectation, real or imagined, can drain the joy right out of what is meant to be a time of celebration.

By letting go of pressure and embracing flexibility, we can shift the focus back to what really counts. Laughter. Connection. Rest. Reflection.

It is okay to opt out of what no longer fits. In fact, doing so often creates more space for what actually feels meaningful.

Rethinking what celebration looks like

While traditions can be a wonderful way to connect with our roots, they are not set in stone. Over time, life changes. Families grow and shift. Priorities evolve. The way we mark special moments can grow with us.

So, it is worth pausing to ask: are these traditions still adding joy to my life? Or am I continuing them out of pressure, or a sense of obligation?

Giving yourself permission to do things differently can be both freeing and fulfilling.

Making meaning in your own way

Reimagining tradition does not mean abandoning everything you love. It means choosing what feels right for you and creating space for joy, connection and rest - however that looks.

You might decide to swap the roast for prawns and salad and the pudding for a pavlova. Or ditch the mess of wrapping paper and presents in favour of shared experiences.

Whether your festive season is full of people or quiet moments, it only needs to reflect what matters most to you.

The season is yours to shape

There is no one way to celebrate. What is right for one person may not suit another and that is the beauty of it. The festive season does not have to look a certain way to be valid or joyful.

You might still love baking recipes passed down from your grandmother or sitting under the stars trying to catch a glimpse of Santa’s sleigh. Or you might find joy in starting completely new customs that reflect your values and lifestyle today. Either way, the important thing is that your celebrations feel true to you.

Small moments can become meaningful rituals too. A quiet morning coffee, a favourite song playlist, or calling someone you have not spoken to in a while are all things that can bring warmth and joy without adding stress.

Whatever this season means to you…

We hope it brings you joy.

Get a jumpstart on your finances for 2026

Tue, 02 Dec 2025 05:21:36 GMT

The new year is just around the corner and, while many are thinking about the holidays, a little planning now can help get your finances off to a flying start in 2026.

It’s not just about getting your paperwork done, it’s about spending some time considering the strategic side of your personal finances or business operations to make it more successful.

Where the ATO is focusing

With some changes to personal tax rules this financial year, it may be time to take a closer look at your tax affairs, particularly given the ATO’s focus is on personal deduction claims.

The tax regulator is continuing to emphasise its concern about some taxpayers’ work-related expense claims, deductions for investment properties and holiday homes, income from the sharing economy and cryptocurrency. ⁱ

Given this focus, it’s sensible to check you are following all the current tax rules and have the necessary documents to substantiate any deduction claims or income sources come 30 June.

For businesses, keep an eye on BAS lodgement dates and super contribution deadlines early in the new year to avoid missing them and copping a fine.

Upcoming tax rate changes

From 1 July 2026, the tax rate for individual income between $18,201 and $45,000 will be reduced from 16% to 15%. ⁱⁱ

From 1 July 2027, there will be a further reduction to 14% for individual taxpayers. It’s worth checking the potential impact of these changes as you may need to update your existing salary packaging or super contribution arrangement with your employer.

It may also be worthwhile reviewing any capital gains tax obligations for this financial year and offset them against any capital losses.

Review your super position

With higher non-concessional contributions and total super balance caps in place for 2025-26, if you intend to make extra contributions into your super account prior to 30 June, check your account balance for the prior year to avoid exceeding your annual cap limits .

People with higher super account balances (over $3 million) should also review the Treasurer’s revisions to the Better Targeted Superannuation Concessions (Division 296) legislation. ⁱⁱⁱ

These adjustments include the introduction of a second threshold on balances above $10 million and indexing of the threshold for balances between $3 million and $10 million.

Getting your business’ paperwork in order

Business taxpayers also need to focus on super, as 1 July will see the start of the new Payday Superannuation rules, which requires employers to make their Super Guarantee (SG) contributions at the same time they make wages and salary payments. ^iv

Preparations for this major change include checking whether your payroll software will be ready to cope with the shift from quarterly to more regular contribution payments.

At an operational level, employers traditionally paying their SG contributions on a quarterly basis should model the likely impact of the new payment rules on their business cashflow.

And don’t forget to ensure your digital records are secure and backed up. With the ever increasing threat of cybercrime, enable two-factor authentication, update passwords and review your data storage practices.

Strategic issues to consider

Now is also a good time to review your budget and financial position. Identify any potential bad debts that should be followed up in the new year.

Consider timing income and expenses strategically. For example, you may be able to defer income or bring forward tax deductible expenses. Depending on how the business is performing, start evaluating any planned deductible purchases or expenses now, rather than waiting until just prior to EOFY.

Although the government’s announced extension of the $20,000 instant asset write-off to this financial year is yet to be made law, consider whether you will take advantage of it. For new business assets to be eligible, they must be installed and ready to use by 30 June.

If you need help preparing your tax affairs or business strategy for 2026, contact our office today.

i ATO unveils ‘wild’ tax deduction attempts and priorities for 2025 | Australian Taxation Office

ii Personal income tax - new tax cuts for every Australian taxpayer | Australian Taxation Office

iii Reforms to support low-income workers and build a stronger super system | Treasury.gov.au

iv Payday superannuation | Australian Taxation Office

Understanding Australian dividend franking credits

Tue, 02 Dec 2025 05:15:54 GMT

A simple guide for investors and pensioners

Australia’s latest dividends stream was flowing strongly recently as many listed companies and exchange traded funds (ETFs) collectively paid out income returns directly to their investors.

The bulk of those payments were the dividends that were declared in August during the latest company reporting season and related to announced earnings from the operating period that ended on 30 June.

Many investors factor in company dividend payments and ETF distributions as a core part of their annual income stream. But a key focus for investors in Australia, beyond the actual amount of the dividend income itself, is the percentage of franking credits that have been applied by companies to the dividends.

They can have major beneficial tax consequences, especially for retirees who have moved their superannuation from an accumulation account to a pension account to receive receiving income payments.

What are dividend franking credits?

Australian dividend franking credits are a feature of the country’s tax system designed to prevent the double taxation of company profits.

When an Australian company makes a profit, it pays company tax to the government before distributing dividends to shareholders.

These dividends may come with franking credits attached, which represent the tax the company has already paid on those profits.

Franking credits are also referred to as imputation credits because the tax paid is “imputed” to the shareholder.

This system means that shareholders get credit for the tax already paid, so they aren’t taxed twice on the same income.

Maximising after-tax returns

For investors, understanding franking credits can help maximise the after-tax return from Australian shares.

If you receive a franked dividend, you can use the franking credit to reduce your own tax liability.

For example, say you receive a $70 dividend that is fully franked, with a $30 franking credit attached.

This means the company paid $30 in tax (at the 30% company tax rate) and you are effectively receiving $100 in pre-tax earnings.

When you lodge your tax return, you declare both the dividend and the franking credit as income.

Your personal tax rate is then applied to the total amount, but you also claim the franking credit as a tax offset.

If your marginal tax rate is lower than the company rate, you may be entitled to a refund for the difference.

This is especially advantageous for investors on lower incomes or those with concessional tax rates.

Potential benefits for pensioners

Pensioners who are in a tax-free environment can benefit even more.

Because pensioners may not have to pay any income tax, the franking credits attached to their dividends can be refunded in cash by the Australian Taxation Office (ATO).

This means that even if no tax is payable, the pensioner receives the full benefit of the franking credit.

For example, a pensioner receiving $1,000 in fully franked dividends with $429 in franking credits could receive a $429 cash refund from the ATO.

This boosts the effective yield of their investments, which can make Australian shares particularly attractive for many retirees.

It’s important to check the franking level of dividends before investing, as some may be only partially franked or unfranked.

Keeping good records of dividends and franking credits received will make tax time easier and ensure you claim your full entitlement.

Consulting with us or accountant can help clarify how franking credits apply to your specific situation.

Remember, franking credits are only available on Australian shares, not on international investments.

Whether you’re building wealth or drawing down in retirement, franking credits are a valuable feature to keep in mind.

For all Australian investors, franking credits can enhance returns and help manage tax obligations more efficiently.

For pensioners, it’s a way to increase income without paying extra tax and potentially receive valuable cash refunds.

Understanding how franking credits work is a key part of making informed decisions about your investment portfolio.

Important Information Information in this article is not a substitute for tax advice. It has been prepared based on a set of assumptions which may not be applicable to you. If you are in any doubt about your personal tax position, we recommend that you seek advice from a registered tax agent.

Source: This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

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Take a moment to reflect and reset for the year ahead

Mon, 01 Dec 2025 05:07:20 GMT

As the year draws to a close, it’s easy to get swept up in the rush to wrap things up, finish final projects, meet client deadlines, and manage that growing list of tasks you swore you’d complete before the new year. But before you power through the last stretch, it’s worth taking a short pause.

In the time it takes to read this article, you can reflect on what’s gone well, what you’ve learned, and what you want to achieve next. The final month of the year is the perfect window to reset your focus, recharge your motivation, and plant the seeds for a successful year to come.

Look back with intention

Reflection isn’t about perfection. It’s about awareness.

Ask yourself:

• What projects or achievements am I most proud of this year?

• When did I feel at my best, most productive, creative, or engaged?

• What moments challenged me, and what did I learn from them?

Taking time to acknowledge your growth helps you see patterns in your success. Maybe you thrived when collaborating closely with your team, or perhaps you produced your best work when you blocked out time for deep focus. Recognising these patterns gives you valuable clues for how to work smarter in the year ahead.

Refine what’s working and release what’s not

Efficiency doesn’t just come from doing more. It comes from doing what matters most. Review your routines and workflows. Are there habits or tools that save you time and make your days run smoothly? Keep those. Are there tasks that drain your energy without much payoff? Find ways to delegate, automate, or simplify them.

You might:

• Batch similar tasks together instead of switching contexts throughout the day.

• Schedule a daily “power hour” for focused work before emails and meetings take over.

• Revisit your digital setup by clearing your inbox, decluttering your desktop, and updating systems that slow you down.

Even small improvements can add up to a big difference in clarity and productivity.

Set goals that inspire you

As you look toward the new year, think beyond resolutions and focus on meaningful goals. The best goals are specific, measurable, and motivating. Instead of saying “I want to grow my business,” try “I want to increase client retention by 15% through more consistent follow-up and improved service delivery.”

Break larger goals into smaller milestones and schedule time each month to review your progress. When goals are tracked, they stay alive, and progress feels more rewarding.

Invest in learning and growth

Professional success is built on continuous learning. Identify one or two skills that would make the biggest impact on your performance or your business next year. That might mean strengthening your leadership capabilities, exploring new technology, or developing your communication skills.

Learning doesn’t have to be time-consuming or formal. You can listen to a podcast in the car or on the tractor, join a professional community group, or take an online course at your own pace. The key is to stay curious and proactive.

Prioritise wellbeing to sustain success

No improvement plan is complete without balance. High performance and wellbeing go hand in hand. Build habits that help you recharge, because even small changes can have a big impact on focus and energy.

Try adding:

• Short breaks between meetings to reset your mind.

• A daily walk or stretch to boost creativity and reduce stress.

• Boundaries around your work hours so you can truly disconnect.

Remember, productivity isn’t about constant output. It’s about sustaining the energy and clarity needed to produce great work consistently.

Step into the New Year with purpose

Before the year slips away, take stock of how far you’ve come and the progress you’ve made, even the quiet, behind-the-scenes wins that others might not see.

Each one is proof of your resilience, adaptability, and commitment.

Then turn your attention forward. Choose one meaningful goal that excites you and one habit that will help you reach it. Write them down, tell someone who can keep you accountable, and start small. The momentum you build now will carry you confidently into the new year.

So, here’s to closing the year with gratitude, clarity, and a renewed sense of purpose, and to stepping into the next one ready to learn, grow, and achieve more than you thought possible.

Smart business strategies to prepare for the festive season

Thu, 27 Nov 2025 02:36:24 GMT

The festive season is a unique time for small businesses. It can bring a wave of opportunities such as more customers, increased sales, and chances to strengthen relationships. But it also comes with its fair share of challenges like higher operational costs, unpredictable demand, and the quieter period that often follows the silly season.

Taking control now can help you make the most of the season’s potential while smoothing out the difficulties.

Here are a few tips to manage the ups and downs and stay focused while still embracing the opportunities the season brings.

Get in early

One of the biggest advantages you can give yourself is a head start. The festive season often disrupts normal business rhythms so planning your cash flow, stock levels, and anticipating staffing requirements ahead of time will set you up to respond well whether demand surges or dips.

If you expect busy periods, having enough stock and team capacity means you won’t miss out on sales. If things typically slow down, early planning helps you avoid overspending or overcommitting during quieter times.

Managing inventory can be challenging and for many businesses stocking up for Christmas makes sense, but be careful to plan in advance, and avoid over-ordering. Getting stuck with excess inventory after the holidays can be a big drag on your financials.

Being proactive and planning ahead also means you can factor in higher costs like holiday pay, or penalty rates for casual employees, extra shipping fees or even festive promotions, so your budget isn’t caught off guard.

Keep control: protect your margins

With the festive cheer certainly comes a temptation to discount or run flashy promotions. These can be great opportunities to boost sales and attract attention but without careful tracking they can erode your profits.

Challenges like managing inventory shortages or delivery delays are common this time of year too. Keeping a close eye on your costs, stock levels, and pricing strategies will help you avoid unnecessary losses and maintain healthy margins.

Use the season to build relationships

While the holidays bring a chance for quick wins, the real opportunity lies in nurturing lasting connections. The festive season is a perfect time to show appreciation to your existing customers and welcome new ones with care and attention.

Balancing the rush of immediate sales with the slower, steady work of relationship-building will pay off beyond December and January. Focusing on service quality and thoughtful communication can turn seasonal buyers into loyal supporters.

Prepare for the new year holiday slowdown

One of the trickiest challenges of the season is the January lull. Even after a strong December, the quieter start to the year can strain cash flow with expenses still coming in and income slowing down.

Building a financial buffer and chasing outstanding invoices early, or even offering discounts for early payments, can help soften this blow. This way, you’re not scrambling to cover bills or missing opportunities because of tight funds.

A slow period in your business can also be the optimum time to catch up on admin, review your processes to look for efficiencies and set goals for the year to come, so plan to make the most of down time.

Balance your energy as carefully as your books

Make time for yourself too.

The demands of the season can stretch you thin. Managing financial pressures while keeping up with increased workloads, customer expectations, and personal commitments is no small feat.

Remember that your own wellbeing is part of your business’s health. Prioritise rest, delegate where you can, and focus on what will make the biggest impact both in your finances and your daily work.

The festive period is a time of contrasts: excitement and pressure, opportunity and challenge, growth and recovery. By approaching your finances with a clear plan, attention to detail, and an eye on both short-term gains and long-term stability, you can ride those waves successfully.

This season doesn’t have to be a stress test for your business. It can be a chance to finish the year strong and start the next one with confidence.

Lodging your SMSF return on time is more important than ever

Mon, 17 Nov 2025 05:27:11 GMT

Running your own self-managed super fund (SMSF) comes with many responsibilities and lodging an annual return is one of the most important.

While paperwork may not be anyone’s favourite task, the Australian Taxation Office (ATO) takes the SMSF Annual Return very seriously. As of February 2025, around 85,000 SMSFs had not lodged their annual return for the 2023 income year and some 54,000 were still outstanding for 2022. ⁱ

The ATO has made SMSF lodgement a key focus of its 2025-26 Corporate Plan and is now taking targeted compliance action against trustees who fail to meet their obligations. Penalties may include fines, loss of concessional tax status and even disqualification from managing an SMSF.

Why lodging matters

The ATO considers timely SMSF annual return lodgement a fundamental obligation for SMSF trustees.

The SMSF annual return is more than just a tax return. It includes regulatory information, member contribution data and enables payment of the SMSF supervisory levy. It must be lodged every financial year, even if the fund has no activity or tax liability.

Non-lodgement is a red flag for the ATO, especially in newly established SMSFs. It may indicate illegal early access to super savings and can hinder the ATO’s ability to monitor compliance with contribution caps, Division 293 tax and transfer balance caps.

Potential penalties

The SMSF sector continues to grow with more than 625,000 funds holding assets worth just over $1 trillion, making up a quarter of the total assets held in superannuation funds. ⁱⁱ

In recent years, the regulator has invested in data-matching technology and analytics to identify non-compliant funds more quickly. This means trustees who fall behind on lodgements are more likely than ever to be detected and penalised.

Failing to lodge your fund’s SMSF annual return can result in:

Fines – administrative penalties can be imposed on each trustee, not just the fund
Loss of concessional tax status – non-compliant funds may lose their concessional tax treatment, resulting in a higher tax rate on income
Tax penalties and interest – extra charges may apply for late payments or under-reported income
Disqualification as an SMSF trustee – this is recorded on a public register and can have long term consequences

If your SMSF annual return is more than two weeks overdue, its Super Fund Lookup status may be changed to ‘regulation details removed’, restricting its ability to receive super rollovers and employer contributions.

Understanding your SMSF annual return responsibilities

Trustees must follow a specific process each year to meet their SMSF annual return obligations:

Prepare financial accounts - including valuing the fund’s assets, which may require consulting a professional valuer if the assets not regularly priced on an open market.
Appoint an approved SMSF auditor – at least 45 days before your lodgement due date.
Complete the audit – the auditor reviews the fund’s financial statements and assesses its compliance with the super laws then provides a report to trustees that may include issues to be addressed.
Lodge the SMSF annual return – include auditor details, audit summary and payment for any outstanding tax and the funds SMSF supervisory levy .

The ATO does not issue a Notice of Assessment for SMSFs but will issue a Notice of Amended Assessment if subsequent amendments are made to the tax return.

With the ATO increasingly focussing on this area, it’s time to check the lodgement status of your SMSF.

How we can help

Managing an SMSF can be complex, so a qualified accountant can be an ally when it comes to successfully and efficiently running your SMSF.

Given the significant responsibilities involved in managing an SMSF, the ATO recommends trustees consider using professional help. We can advise and support you when it comes to the financial aspects of running your SMSF and ensure everything is lodged on time.

i SMSF Association National Conference address | Australian Taxation Office

ii SMSF Association National Conference address | Australian Taxation Office

5 strategies for financially surviving divorce

Tue, 11 Nov 2025 05:20:25 GMT

Divorce can be one of life’s most emotionally and financially disruptive events. Whether you’re in the early stages of separation or rebuilding after a settlement, understanding the financial implications and taking proactive streps can make all the difference.

More than 47,000 divorces were granted in Australia in 2024, down 3% on the previous year. At divorce, marriages had lasted around 13.2 years. The median age of those divorcing was 47.1 years for men and 44.1 years for women. ⁱ

Divorce reshapes your financial landscape, dividing assets, splitting incomes and doubling expenses as two households replace one. The cost of divorce can be as much as $870,000 per couple, according to one estimate, which also finds that women – particularly older women – often experience a 30-45% drop in living standards. ⁱⁱ

This financial strain is compounded by legal fees, potential spousal maintenance, child support obligations and the need to reassess retirement plans.

Step 1: Get a clear picture of your finances

Start by taking stock of your financial position to provide clarity when negotiating settlements and planning your future.

List all of your assets including property, superannuation, vehicles, bank accounts and investments.
Identify liabilities, such as mortgages, credit cards and personal loans.
Detail your income sources including employment, Centrelink, child support and spousal maintenance.

Step 2: Budget for your new life

Post-divorce budgeting is more than balancing numbers. It’s about redefining your financial identity. You may need to adjust your lifestyle, reconsider housing options and build an emergency fund to cushion unexpected costs.

Don’t overlook your credit health. Joint accounts and shared liabilities can affect your credit score, even after separation. Close or convert joint accounts, monitor statements and make sure that bills are paid on time. Maintaining good credit and cash flow is important for securing housing loans and for your future financial stability.

Step 3: Understand asset division and superannuation

Property settlements can be complex and have serious tax implications. Assets acquired before or during a marriage, including super, are usually part of the asset pool. Super accounts can be split as part of a settlement, transferring a portion from one partner to the other, a move that can significantly affect retirement planning.

Don’t forget that timing matters in financial decisions during divorce. Rushing into asset division or investment choices while emotions are running high can lead to costly mistakes. Take time to understand your options, get independent advice and avoid making decisions based on short-term comfort, such as keeping the family home if it will unreasonably strain your budget. A measured approach helps protect your long-term security.

On the other hand, don’t forget there may be legal time limits to settlements both for married people and de facto couples.

Step 4: Plan for tax and legal issues

Divorce can trigger other tax consequences, especially when transferring or selling assets. But make sure you’re aware of the possible capital gains tax rollover relief and stamp duty exemptions that may apply in your circumstances.

It’s also important to update your will, powers of attorney and insurance policies as quickly as possible.

Because these decisions have long-term effects, it’s wise to seek guidance from not only your lawyer but also a tax specialist and we are here to assist you and assess your financial situation.

Step 5: Rebuild with purpose

Once the dust settles, it’s time to rebuild.

Take the time to:

Set new financial goals
Develop an investment strategy suited to your risk tolerance
Maximise your super contributions where possible
Plan for retirement with revised expectations.

Divorce is a financial reset. While the outlook can seem daunting, there’s also an opportunity to take control of your financial future. With the right advice, you can emerge from divorce not just surviving but thriving.

If you’re facing separation, consider obtaining financial advice early in the process. The sooner you start planning, the better positioned you’ll be to protect your assets, support your family and rebuild a secure future.

Please give us a call if we can help at any stage.

i Marriages and Divorces, Australia, 2024 | Australian Bureau of Statistics

ii 6 Steps to Financially Plan for Divorce | My Wealth Solutions

Super tax shake up

Thu, 06 Nov 2025 05:15:40 GMT

Superannuation tax rules are changing again and there are implications for those with very large balances as well as those on lower incomes.

In a nutshell, the new plans include:

more targeted tax rules for people with very large super balances
extra support for low-income earners who contribute to super
indexation (automatic increases) to make sure the tax thresholds keep up with inflation
the removal of the proposed tax on unrealised gains

The new super tax rules will begin on 1 July 2026 and will be based on your total super balance as at 30 June 2027.

The changes follow feedback from industry groups, financial experts, and the public. Treasurer Jim Chalmers said the updates are designed to make the system fairer while still meeting the government’s goals. ⁱ

New rules for higher balances

If your total super balance (TSB) is more than $3 million, you’ll be affected by new tax rates on earnings.

Here’s how it works:

for balances between $3 million and $10 million, earnings will be taxed at 30 per cent instead of the usual 15 per cent for the proportion of earnings between the thresholds
for balances over $10 million, a tax of 40 per cent will apply on the proportion of earnings over the threshold

These are still concessional rates, meaning they’re lower than the top personal income tax rate, but they’re higher than the standard super tax rate.

The thresholds will be indexed over time. The $3 million threshold will increase in steps of $150,000 while the $10 million threshold will increase by $500,000 each time.

This means fewer people will be affected in the future as the thresholds rise with inflation.

Only a small number of Australians will be affected by the new rules. Less than 0.5 per cent of super account holders are expected to have balances exceeding $3 million in the 2026-27 financial year. The $10 million rule is expected to apply to fewer than 8,000 accounts, less than 0.1 per cent of all super accounts. ⁱⁱ

If you’re affected, you can choose to pay the tax from your super account or from funds outside of super.

No tax on unrealised gains

One of the most controversial parts of the original proposal was a tax on unrealised gains, meaning increases in the value of assets that haven’t been sold yet (such as property or shares).

This idea has now been dropped.

Instead, the new tax will only apply to realised gains (actual earnings such as interest, dividends or profits from selling assets).

Extra top-up for low income earners

The government is increasing support for low-income earners through the Low Income Superannuation Tax Offset (LISTO). ⁱⁱⁱ

LISTO is a 15 per cent tax offset paid by the government into the super accounts of people earning up to $37,000 a year and is worth up to a maximum of $500.

From 1 July 2027 , the current LISTO income threshold will increase to $45,000 to match the top of the second income tax bracket. Around 3.1 million Australians will then be eligible for LISTO.

The maximum government top-up payment will also be increased from $500 to $810 to account for the recent increase in the Superannuation Guarantee (SG) rate to 12 per cent.

Special rules for defined benefits funds

Some judges and politicians are members of defined benefit super funds, which work differently from regular super accounts. ^iv

Because it’s harder to calculate earnings in these funds, the government will develop equivalent arrangements to apply the new tax fairly.

We’re here to help you understand how the changes may affect your super and your long-term financial goals, so please give us a call.

i Reforms to support low-income workers and build a stronger super system | Treasury Ministers

ii https://www.superannuation.asn.au/media-release/proposed-super-tax-changes-will-make-system-fairer-for-low-income-workers-asfa/

iii Low Income Superannuation Tax Offset | Treasury.gov.au

iv Super contributions to defined benefit and constitutionally protected funds | Australian Taxation Office

ATO red flags for property investors

Mon, 13 Oct 2025 04:12:31 GMT

Aussie investors have long had a passion for property investment, but it’s also become a key focus for the ATO when it comes to spotting errors in tax returns.

The ATO estimates it’s missing out on around $9 billion in unpaid taxes by property investors and it’s planning a major crackdown over the next three years on rental property income and expenses reporting.

It will be using AI analysis and extensive data-matching from a variety of sources (such as rental bond and agent information), to identify tax returns for audit and further investigations.

What is drawing the ATO’s attention?

If you want to avoid attracting attention, it’s worth knowing the ATO’s red flags when it comes to property investor tax returns. They include:

1. Claiming deductions incorrectly

Only claim expenses when your property is genuinely available for rent and be ready to prove it. The ATO may expect to see evidence of both an active marketing campaign and a competitive rental price. ⁱ

Claiming 100 per cent deductions for a property used for private purposes at any time – or only available for certain parts of the year – risks closer attention.

Another risky practice is claiming a deduction for a special body corporate levy. Although body corporate levies are claimable for routine maintenance of common property, special levies for capital expenditure cannot be claimed until the capital works are complete.

2. Failing to declare rental income

The ATO is particularly interested in property investors who misreport their rental income and is identifying discrepancies by cross-referencing bank transactions, property records and property transaction databases. ⁱⁱ

Data is also being collected from short-term rental platforms like Airbnb, real estate agents and rental bond authorities to confirm the accuracy of investors’ income reporting, so full disclosure is essential.

The detailed information the ATO now has access to allows it to identify patterns of non-compliance, and individuals who may be underreporting income, or overclaiming expense deductions.

3. Misclassifying capital improvements

Confusing repairs and maintenance with capital improvements is a common error. ⁱⁱⁱ

Remember that repairs (such as replacing a broken window) are deductible but upgrades like a new kitchen or bathroom are capital works that must be depreciated over time.

4. Cherry-picking expense apportionment

The ATO is increasingly taking a close look at jointly owned rental properties to check that both income and expenses are split according to the legal ownership share.

Claims cannot be skewed towards an owner in the higher tax bracket so if you own 50 per cent of a property, you can only claim 50 per cent of the expenses.

Joint investors also need to be aware of the CGT implications when they sell or dispose of a property. The ATO is using its data matching capabilities to identify unreported CGT events.

5. Incorrectly claiming loan interest

Note that only the interest on the investment portion of your loan is deductible. In other words, claiming a deduction for interest payments on a loan that’s been used in part for personal expenses is not on.

If you redraw funds from your investment loan for personal use (such as a holiday or to purchase a new vehicle) only the interest relating to the investment portion is deductible.

Keep clear and detailed records and apportion your interest expenses accurately, or you are likely to face an audit.

How to survive an ATO audit

One of the simplest ways to avoid problems is to keep the claims you make for your rental property investments straightforward and accurate.

Ensure you keep detailed documentation supporting all your claims, so you can prove they are legitimate and correctly calculated.

The ATO has released an updated version of its Rental Properties Guide to assist taxpayers and make sure their returns are correct.

For more information on how to correctly meet your tax obligations for property investments, call our office today.

i Rental property genuinely available for rent | Australian Taxation Office

ii Rental income you must declare | Australian Taxation Office

iii Repair and maintenance expenses | Australian Taxation Office

New aged care act: what you need to know

Tue, 07 Oct 2025 00:15:10 GMT

Sweeping reforms to aged care are set to begin on 1 November to help improve the quality, transparency and flexibility of care.

With more care levels, clearer pricing, and greater control over how your funding is used, the new system aims to better match services to individual needs. Providers will be required to offer detailed cost breakdowns, empowering you to make informed decisions about your care.

While the reforms are a step forward in care quality, they also come with changes in how services are funded and that may mean higher out-of-pocket costs for some.

What you pay depends on your financial situation – whether you receive a full or part pension or are self-funded – and the services you access.

As the aged care landscape evolves, staying informed is key to making confident choices. Whether you're planning for yourself or supporting a loved one, understanding the new system will help you access the right care at the right time.

Help at home

From 1 November the current Home Care Packages will be replaced by a new program called Support at Home.

The key changes include:

Eight levels of care (up from four) to better match individual needs
Extra funding for assistive technology, home modifications and palliative care

Services are expected to remain the same but the way you pay for them may change.

For example, clinical care (such as nursing or physiotherapy) will be fully funded by the Government.
You may pay more for everyday living services (such as meal preparation or cleaning) than you do for independence supports (like personal care or transport).
The out-of-pocket costs for everyday living will range from 17.5 per cent for full pensioners to 80 per cent for self-funded retirees.
Non-clinical support, like showering, will cost five per cent for full pensioners to 50 per cent for self-funded retirees.

If you were approved for a Home Care Package on or before 12 September 2024, you will be eligible for fee concessions to ensure you are not worse off under the new rules.

The package level you are assigned sets the total funding available to pay for care, with 10 per cent allocated to the care provider to cover the cost of care management.

You then work with your provider to decide how you want to spend the rest of the budget. The provider will set their fees for services and you will make a contribution based on your income.

Residential aged care

Room prices in aged care facilities have been steadily rising following an increase in the Refundable Accommodation Deposit (RAD) threshold from $550,000 to $750,000.

Higher RADs mean you may need to use more of your savings or income to cover aged care costs.

From 1 November 2025, anyone who moves into care after this date and pays a RAD, will have two per cent of that amount deducted each year, for up to five years.

You can still opt to pay a Daily Accommodation Payment (DAP), but this will increase every six months in line with inflation.

Other fees include:

the basic daily fee (set at 85 per cent of the single age pension)
a means-tested fee or non-clinical care contribution
potentially a higher everyday living fee (previously known as extra or additional services)

Fee caps and planning ahead

The lifetime cap on aged care contributions continues. You won’t pay more than $130,000 (indexed) over your lifetime towards home care and residential care combined.

Understanding how the changes affect your financial future is vital. You’ll need to consider:

whether someone will remain in the family home
your current income and assets
potential age pension entitlements
estate planning strategies

Use the government’s fee estimator at MyAgedCare to get a clearer picture of your potential costs.

Get advice early

Navigating aged care can be complex and the upcoming changes add new layers of decision-making.

We can help explain your options, structure your assets, minimise fees and plan for your future care needs.

If you would like to discuss your aged care options, please give us a call.

The hidden tax trap: understanding personal services income

Fri, 03 Oct 2025 00:15:42 GMT

With more Australians choosing self-employment and small business ownership, many turn to company structures for tax efficiency and flexibility.

The appeal is clear: companies with a turnover under $25 million benefit from a flat 25% tax rate, compared to the top personal marginal rate of 45% (plus the Medicare levy). That’s a significant difference and one that can make incorporation seem like a smart move.

A company structure also offers other advantages, such as the ability to claim tax deductions, retain profits within the business and distribute franked dividends to shareholders.

But, while the benefits are appealing, the ATO’s Personal Services Income (PSI) rules can quickly change the game. If the ATO determines that your income falls under PSI, it can override the positives of operating through a company and result in higher personal tax obligations. ⁱ

What is PSI?

PSI is income that is mainly a reward for your personal effort, skill or expertise. It’s assessed on a contract-by-contract basis and applies whether you operate as a sole trader or through a company, trust, or partnership.

Taxpayers in almost any industry, trade or profession can earn PSI, including financial professionals, engineers and medical practitioners.

Income is not normally deemed to be PSI if it is mainly derived from supplying or selling goods, generated by an income-producing asset, or produced from granting a right to use property (such as intellectual property). ⁱⁱ

One example of PSI is the income earned by an IT consultant employed by their own company using a client’s equipment to complete their work, because this mainly involves their personal effort and skills. Another example may be a freelance engineer, hired to provide design expertise on a project.

On the other hand, the ATO is less likely to consider as PSI a truckdriver who drives their own truck because the income is mainly derived by the use of the truck, not the truck driver’s personal effort. Similarly, the income a photographer earns from selling prints or licensing images is not likely to be deemed PSI.

Only individuals can earn PSI, but it can be received directly (as a sole trader) or indirectly through a company, trust, or partnership. If you earn PSI through another entity, that entity is referred to as a personal services entity (PSE).

How do you know if the PSI rules apply?

Taxpayers who receive PSI must self-assess each year to determine whether the PSI rules apply. You can avoid the PSI rules for one year if you qualify as a Personal Services Business (PSB) by passing one of the following tests:

The results test At least 75% of your income must meet all three of these conditions: you’re paid to produce a specific result; you provide your own equipment or tools; and you’re required to fix mistakes at your own cost.
The 80% rule Less than 80% of your income comes from one client and you meet at least one of three tests: unrelated clients test , employment test , and business premises test .

What’s the impact of the PSI rules?

If you don’t qualify as a PSB, the PSI rules kick in and they can significantly affect your tax position.

Here’s what changes:

Your income is taxed at your personal marginal rate, even if it’s earned through a company, partnership, or trust
Your business can only claim deductions that an individual would be entitled to (such as work-related travel or equipment)
You cannot claim deductions for rent, mortgage interest, payments to associates, or other business-like expenses unless they directly relate to earning PSI

Does PSI affect your business relationships?

Importantly, the PSI rules do not change your legal or contractual status.

You can still operate under an Australian Business Number (ABN), register for goods and services tax (GST) and maintain a contractor relationship with clients.

However, PSI does affect how your income is taxed and what deductions you can claim.

If PSI is generated by a number of people within your business, deductions must be allocated proportionally to each person’s income. ⁱⁱⁱ

The PSI rules can be complex, so if you would like more information on how they affect your tax obligations, call our office today.

i Personal services income | Australian Taxation Office

ii Income that is PSI | Australian Taxation Office

iii Claiming deductions when receiving PSI | Australian Taxation Office

Is your super looking a bit sad?

Wed, 01 Oct 2025 22:50:09 GMT

Why sole traders are at risk of a retirement crisis

If you’re a sole trader or running a micro business, chances are you’ve thought to yourself: ‘I’ll sort out super later. Right now I’ve got a business to build’. If this sounds familiar, you’re not alone.

New research from AMP has found that almost half of Australia’s smallest business owners aren’t putting a cent into their super. Instead, they’re channelling every spare dollar back into the business (or just using their cash flow to keep the lights on).

The trouble is, while reinvesting in your business feels smart in the moment, it could set you up for a rude shock come retirement. Unlike employees, who get their 12 per cent super paid automatically thanks to the Super Guarantee, the self-employed aren’t covered. That’s 2.2 million Aussies essentially flying blind when it comes to their financial future.

And if you’re a sole trader? The stats are even worse. Only half of solopreneurs and 55% of micro-business owners (those with four or fewer staff) are regularly tipping into their super.

Superannuation: the long game we keep putting off

It’s no secret why. AMP’s Director of AMP Bank GO, John Arnott, suggests many soloists and micro businesses are simply struggling to make ends meet

“In the early stages, cash flow is often tight – paying a wage, let alone contributing regularly to super, can be a real challenge.”

He’s right. When you’re hustling to pay invoices, super feels like a luxury problem. But ignoring it only makes the gap bigger.

To put it in perspective, AMP’s modelling shows that if you start at 30 and chuck just $100 a week into super (with a 6% return), by 65 you could be looking at over $500,000. That’s half a million bucks your future self will thank you for. Not bad for the price of your week’s coffees and a couple of smashed avo brunches.

Who’s contributing and who’s not

The research also uncovered some pretty stark differences across industries and locations. Those working in financial services seem to be leading the way, with more than 70% making regular super contributions. At the other end of the scale, creatives are falling behind, with fewer than half putting money aside for retirement. It’s proof that passion projects don’t always pay the bills later in life. Location and business maturity also play a role. Owners in rural areas, along with those still finding their feet in the first three years of business, are among the least likely to contribute to super.

How to stop playing catch-up

It’s not all bad news though – a few tweaks could get your super back on track. Even small, regular contributions make a difference.

Try these tips to get started:

Stay in the know
Don’t bury your head in the sand. Use tools like AMP’s retirement calculator, ATO and ASIC’s MoneySmart website, or your bank’s resources to stay on top of changes and crunch the numbers.

Pay yourself first
Treat yourself like an employee. Set up a regular transfer into your super, even if it’s a small amount – or make lump sum contributions when cash flow allows.

Grab government incentives
Look into the government’s super co-contribution scheme or tax-deductible personal contributions. Free money from Canberra? Yes please.

Automate the boring stuff
Use your banking app or accounting software to automate payments and track cash flow. That way, you won’t forget to pay yourself super.

Ask for help
Super can feel like alphabet soup. Get advice from your super fund or an accountant, and lean on your business mates for ideas that actually work in the real world.

Running a small business is already a juggle, but the future you deserves more than relying on selling the business one day or living off the pension. Even a few dollars a week adds up when compounding interest works its magic. So next time you’re tempted to skip super in favour of a shiny new gadget for your biz, think twice. Your business might be your baby now, but your retirement self will thank you for thinking ahead.

Source: Flying Solo August 2025

This article by Cec Busby is reproduced with the permission of Flying Solo - Australia's micro business community. Find out more and join over 100K others https://www.flyingsolo.com.au/join.

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s).

Succession planning that honours the business you built

Wed, 10 Sep 2025 05:50:32 GMT

For many small business owners, the business they’ve built is more than a livelihood, it’s a legacy. Building a successful business takes years of hard work and dedication and when you're ready to retire or move on to the next chapter of your life, the path isn’t always clear. That's where succession planning comes in.

Whether your children have chosen different careers or there’s no obvious successor in sight, succession planning can be one of the most emotionally and financially complex aspects of running a business.

Recent Australian research shows that most small businesses won’t be passed on to the next generation. In fact, nearly half of SME owners expect that when they retire it will result in the closure of the business or selling to someone outside the family.

Only 39% anticipate a family member taking over, and just one-third have a documented succession plan in place.

Without a clear plan, many business owners find themselves working well past the traditional retirement age. The reasons vary from lack of interest from family, uncertainty about valuation or simply not knowing where to start and the consequences can be significant.

Who will take over your business?

Succession planning isn’t just about protecting financial outcomes; it’s also about preserving relationships. When expectations are unclear or decisions are made under pressure, family dynamics can suffer. Open conversations, guided by a shared vision and professional advice, can help avoid misunderstandings and make sure that everyone feels heard. Even if the next generation isn’t stepping in, a thoughtful plan can honour your legacy and reduce stress for those around you.

A plan also helps the business operate without disruption during change, which is vital for employees, customers, and stakeholders alike.

Start early for a smoother exit

The key to a successful business exit is planning early.

A well-considered succession plan allows you to decide how and when you leave your business, rather than being forced to react to circumstances.

Planning ahead also helps avoid complications with the Australian Taxation Office. Transferring control or assets within a family business can trigger tax consequences, especially if the structure isn’t reviewed in advance.

A strong succession plan should cover:

whether you’ll retain any ownership or involvement post-transition
how the successor will fund the purchase (if applicable)
contingencies for unplanned events like illness or sudden death
tax implications of asset transfers, CGT, GST, and restructuring
a current business valuation and regular reviews
legal documentation and buy-sell agreements

If your business involves trusts, shareholder loans, or complex structures, it’s particularly important to seek professional advice. The ATO is actively reviewing transactions involving family wealth transfers, internal restructures, and use of concessions so clarity and compliance are key. Transactions of interest include assets being moved around within a private group; family member interests being restructured; accessing of concessions, exemptions and rollovers; settlement of shareholder/associate loans (Division 7A loans); and transfer of wealth through trusts.

Get good advice

Succession planning isn’t just about paperwork. Whether you’re preparing your business for sale, transferring ownership to a family member, or simply exploring your options, professional advice can make all the difference.

We can help you to:

choose the right tax structure
understand the implications of buy-sell agreements
maximise available CGT concessions
prepare your business for valuation and sale

If you’d like to start the conversation or review your existing plan, please contact our office. The earlier you begin, the more choices you’ll have and the more confident you’ll feel about your next chapter of your business.

Unlock more time in the day with AI

Wed, 10 Sep 2025 05:43:26 GMT

AI is everywhere these days, and honestly, it can feel a bit overwhelming. There’s a flood of apps, tools, and buzzwords available. With so many options, it’s hard to know where to start or even if it’s worth your time investigating. But here’s the good news; when used thoughtfully, AI can be a total game changer, saving you precious hours every week.

In fact, while it needs to be acknowledged this is a rapidly changing space, reports from early 2025 indicate that workers using AI tools frequently save 2-4+ hours per week . ⁱ

The trick isn’t trying to jump on every new AI bandwagon - it’s about finding the right tools that help you streamline the tasks that eat up your day. The first step - get clear on what’s taking up your time.

Make a list

Take a moment and note down the things you spend the most time doing. Is it answering emails? Scheduling meetings? Creating social media posts? Organising files? Handling customer questions?

This simple exercise is powerful because it shifts your focus from feeling overwhelmed by all the noise in your day, to pinpointing where you need help. This focused approach means you’re solving a real problem, not just chasing shiny new tech.

Looking for AI tools

Once you’ve identified areas that need to be streamlined, pick one or two of the most time-consuming tasks and explore an AI tool that can assist. Start small and consider the bigger picture as well.

When evaluating solutions, make sure you are clear about what you want the tool to do. For example, if managing your inbox is a struggle, success might be 'cutting daily email triage time in half’. Clear goals help you evaluate tools more objectively.

Choose AI tools that integrate with the apps and platforms you already use and are easy to implement. This reduces set up time and helps you automate more seamlessly.

Check reviews, watch quick demo videos, and look at whether the tool offers good customer support or tutorials. Some AI tools come with built-in onboarding, tutorials, or AI assistants that guide you as you learn. These features can dramatically cut the time it takes to get comfortable. Many AI tools offer free trials or limited free plans. Use this to your advantage to experiment, test features, and see if it fits naturally into your workflow.

Let’s look at some ways AI can lighten your load:

Email management

If your inbox feels like a never-ending stream of messages, apps like Superhuman and SaneBox use AI to sort your emails, highlight what’s urgent and snooze less important stuff for later. They learn your habits over time, making your inbox easier to manage and reducing the time you’d normally spend dealing with emails.

Scheduling made easy

Back-and-forth emails trying to find a meeting time? Tools like Calendly or x.ai handle all that automatically. They connect to your calendar and let others pick a time that works for you - no more awkward email chains or missed appointments.

Content creation helpers

Stuck staring at a blank screen not knowing where to begin? AI writing assistants like ChatGPT or Jasper can help brainstorm ideas, draft emails, or even social media posts. They don’t replace you, but it speeds up the writing process, so you can spend less time typing and more time creating.

Customer support assistants

If you receive repetitive questions from customers, AI chatbots such as Drift or Intercom can answer those instantly. This frees you up from constant interruptions while ensuring customers get quick responses.

Task automation

Platforms like Zapier or Make connect the apps you already use and automate repetitive tasks - like saving email attachments directly to your cloud storage or adding new contacts to your CRM.

Getting started

Don’t try to do everything at once. Give yourself time to get comfortable, test things out, and adjust as you go. As you begin to see how these tools save you small amounts of time here and there, you’ll find your days feeling less rushed and more productive. Over time, those small pockets of saved time add up into extra hours to focus on being more effective in your role or simply just enjoying more breathing room.

AI isn’t about replacing you - it’s about helping you do more of what matters by taking the busywork off your plate. The future of productivity is here to help you reclaim your most valuable resource: your time.

i https://kanerika.com/blogs/10-authentic-generative-ai-stats/

Strategies for an unexpected retirement

Wed, 10 Sep 2025 05:41:04 GMT

The best time to start planning for retirement is yesterday.

But the second-best time? Today.

About two-thirds of Australians retire earlier than they anticipated because of unexpected events such as job loss or redundancy, they need to care for a family member, have a sudden illness or injury, problems at work or a partner’s decision to retire. ⁱ

But, whether you're in your 50s, 60s, or even beyond, it's never too late to take meaningful steps toward a more secure and fulfilling retirement.

The good news is that with the right guidance and a few smart moves, you can still build a retirement plan that reflects your values, supports your lifestyle and gives you peace of mind.

Where to begin

Before you make any changes, it’s important to understand your current financial position. This includes:

your superannuation balance
other savings or investments
debts such as your mortgage, credit cards and personal loans
expected retirement income sources including the Age Pension, rental income and part-time work

Boost your super

Even if you’re starting later, there are ways to accelerate your super growth using:

Salary sacrifice Contributing pre-tax income into super can reduce your taxable income while boosting your retirement savings.
Personal contributions You may be eligible for a tax deduction or government co-contribution depending on your income.
Catch-up contributions You may be eligible to add to your super but be aware of the caps on contributions. ⁱⁱ

These strategies can be especially powerful in your 50s and 60s, when your income may be higher and retirement is on the horizon.

It’s also a good idea to regularly consider your super investment options and review your risk tolerance and time horizon.

Deal with debt

If possible, getting your debt under control before you retire is a useful strategy.

You could consider using your superannuation or other savings or downsize your home to pay off a mortgage or other loans. But first, it’s essential to carefully check the tax impact, the effect on your super and whether any potential government benefits will be affected.

Reassess your lifestyle goals

Retirement isn’t just about money, it’s about how and where you want to live, how much travel you’d like to do and if you’d continue to work part-time.

Clarifying your lifestyle goals helps shape your financial strategy. It also ensures your retirement plan reflects your values, not just your bank balance.

How much will I really need?

Aim to create a retirement budget . Estimate your future expenses including housing, food, travel and healthcare and compare them to your expected income. This helps identify any shortfalls and guides your savings strategy.

You will also need to consider the amount of time you might spend in retirement. This will depend on when you retire (planned or unexpected) and how long you live. This is called longevity risk. Given life expectancy is unpredictable, there is a possibility that your retirement savings may not last throughout retirement.

Understand your entitlements

Many Australians are eligible for government support in retirement, including:

Age Pension Based on income and assets, available from age 67 (for those born after 1957).
Concession cards For discounts on healthcare, transport and utilities.
Rent assistance If you’re renting privately and receive the Age Pension.

Even if you don’t qualify now, you may be able to restructure your finances to maximise future entitlements.

Review regularly and remain flexible

Retirement planning isn’t a one-time event. Life changes and so should your strategy. Regular reviews help you:

Adjust for market movements or legislative changes
Update your goals and spending patterns
Ensure your estate planning is current

Flexibility is key. Whether you retire gradually, take a sabbatical, or pivot to a new venture, your plan should evolve with you.

Next steps

Retirement planning is about taking the next step rather than chasing perfection. Whether you’re starting late or simply refining your strategy, every step you take now helps shape a more secure and meaningful future.

And remember that retirement isn’t an end point. It’s a new beginning even if you retire earlier than you anticipated. With the right plan in place, you can step into this next chapter with clarity, confidence and purpose.

We’d be happy to help you review your current retirement plan and identify any gaps in retirement goals and create a strategy should you need to retire earlier than expected.

i Retirement and Retirement Intentions, Australia, 2022-23 financial year | Australian Bureau of Statistics

ii Understanding concessional and non-concessional contributions | Australian Taxation Office

Trusts are back in the ATO spotlight

Wed, 06 Aug 2025 06:20:44 GMT

With more than 947,000 trusts operating across Australia, it’s no surprise the ATO continues to keep a close eye on how these structures are managed. Trusts remain central to many wealth and succession plans, but their complexity means they also attract compliance scrutiny. ⁱ

Closer attention to how trust structures are now being used is part of the ATO’s focus on ensuring taxpayers pay the required tax and do not inappropriately use structures to reduce their tax liabilities.

What’s attracting attention

The ATO’s latest data analysis has pinpointed a few emerging behaviours it’s concerned about:

Overclaiming tax deductions: Some trusts are reducing their net income by claiming deductions that don’t stack up - often without the documentation to support GST refunds.
Loss trafficking: This refers to the creation and use of artificial losses to offset income, giving the appearance of reduced profitability.
Misuse of tax-exempt vehicles: Ancillary funds and other exempt structures are sometimes used to access concessions or private benefits where there’s no real entitlement.

If these practices sound familiar, it might be time to get back on track.

Family trust elections missteps

Family trust elections (FTEs) and interposed entity elections (IEEs) are meant to define clear tax relationships. But when recordkeeping falls short or elections aren’t properly understood, issues arise - particularly with Family Trust Distribution Tax (FTDT). ⁱⁱ

Trustees are also being encouraged to check the FTEs and any IEEs the group has in place and to clearly identify members of the family group.

Trustees should ensure they understand the tax implications of making these elections and how they affect distributions and tax responsibilities for both the trust and its beneficiaries. In fact, the ATO is seeing instances where individual beneficiaries are incorrectly returning amounts on which FTDT has been paid.

Trusts in succession planning

Using a trust to transfer wealth is common in succession planning - but it needs to be done correctly.

Trouble often arises when capital gains tax events are overlooked, the tax consequences of transactions are misunderstood and Division 7A issues are ignored when loans, payments or debt forgiveness are involved. ⁱⁱⁱ

These oversights can lead to unexpected tax bills at a time when stability and clarity matter the most.

Amendments to a trust deed (such as changes to the trustee, adding or removing beneficiaries, or amending the vesting date) can also create tax risks for trustees.

The same applies if the trust has a family trust election in place but makes distributions outside the family group.

Trusts with an IEE in place to include the interposed entity in its family group may also find the ATO asking questions.

Don’t forget the franking account

Another area of focus right now is discrepancies in trust franking account balances and situations where a trustee fails to apply the franking credit integrity rules when making or receiving franked distributions.

Trustees need to ensure they are complying with the 45-day holding rule if they wish to avoid scrutiny. This rule requires shares to be held ‘at risk’ for a continuous period of at least 45 days (90 days for preference shares) during the qualification period.

It is also important to check you have family trust elections in place if you wish to access franking credits for the trust’s share holdings.

If your trust touches any of these areas - from family elections to succession plans - now is a good time to review your setup. Good governance and clear records don’t just help you comply with ATO rules; they protect your beneficiaries, your finances, and your legacy.

The ATO has a checklist that is designed to help avoid basic trust errors if you don’t fully understand your obligations or take reasonable care to get things right.

The checklist states you should:

Understand how income is defined for the trust estate.
Identify the trust’s beneficiaries.
Understand resolutions and present entitlement.
Identify any family trust elections (FTE) or interposed entity elections (IEE).
Maintain clear and accurate records.

Want help reviewing your trust structure or clearing up a few grey areas? Get in touch with our office today.

i Trust statistics | Australian Taxation Office

ii Areas of focus 2024–25 | Australian Taxation Office

iii Areas of focus 2024–25 | Australian Taxation Office

Keeping your cool when the markets heat up

Tue, 05 Aug 2025 01:00:21 GMT

Investing isn’t just a numbers game. It’s an activity that stirs various emotions from hope and optimism to fear and anxiety.

Whether the ASX is surging or stumbling, emotional responses to market movements can shape outcomes just as much as economic fundamentals.

Understanding those responses is crucial to building resilience, especially in unpredictable times.

These patterns underscore the importance of long-term perspective, especially in a market shaped by both global sentiment and uniquely local factors.

How emotions enter the equation

We like to think our financial decisions are rational, but the truth is more complex. Investors aren’t robots crunching numbers in isolation. We are influenced by news cycles, cultural values and personal stories from friends, family and colleagues.

When markets rise, euphoria and FOMO can drive hasty buying decisions. During downturns, anxiety and regret can push investors to sell at a loss, despite having sound long-term strategies.

This pattern has played out across decades, from the dot-com bubble to the COVID recovery. And remember that emotional investing isn’t just a beginner’s problem. Even seasoned investors can be swept up by sentiment if safeguards aren’t in place.

Psychologists have long observed how financial stress activates similar responses to physical threats, triggering fight-or-flight instincts rather than thoughtful analysis. That’s why even well-informed investors may react defensively when facing market instability.

The good, the bad and the balancing act

Emotional investing isn’t all risk. In the right conditions, it reflects conviction, clarity and purpose. For example, values like patience and belief in the future can help investors stay committed during market dips.

Life changes such as home ownership, welcoming a child or retirement can bring useful emotional clarity to financial decisions. And ethical investing often stems from emotions such as care and connection to community.

When used with discipline, emotions can reinforce sound decisions rather than undermine them. Investors who use emotional clarity to establish long-term goals tend to feel more confident, even when short-term volatility strikes.

That said, emotions can also derail strategy. Panic selling during downturns, overconfidence after gains and herd mentality all pose risks.

The 2022 market correction saw many Australians pull out of super investments prematurely, missing the rebound that followed. These reactions stem not just from fear but also from a desire to act, even when patience may be more effective.

Learning from behavioural finance

Behavioural finance gives us tools to interpret emotional reactions. Biases like loss aversion, recency bias and anchoring affect decision-making in subtle but powerful ways.

These include:

Loss aversion - People often feel the sting of losses more intensely than the joy of equivalent gains, which can lead to overly cautious or reactive choices.
Recency bias - Recent events weigh heavily on perceptions, leading investors to expect trends will continue simply because they’ve just occurred.
Anchoring - Fixating on a past portfolio value or arbitrary benchmark can skew rational assessment.

Recognising these tendencies helps investors avoid knee-jerk decisions and design portfolios that stay aligned with goals over time. It’s not about eliminating emotion; it’s about becoming aware of how it operates and mitigating its effects through smart responses.

After all, markets are always shifting. Emotions will always emerge. The goal isn’t to shut them out, but to understand them and develop structures to keep emotions from steering the ship. When investors learn to pause, reflect and act with intent, they not only improve outcomes but feel more confident in their journey.

If you’d like to explore strategies to build emotional resilience in your portfolio, or tools to help remove bias from investment decisions, please give us a call.

Time to clear your digital cobwebs

Fri, 01 Aug 2025 04:08:52 GMT

Spring cleaning isn’t just for closets.

We’re used to tackling the physical mess. We clear out closets, sort through garages, and sometimes even face that overflowing utensils drawer in the kitchen. But there’s another kind of clutter we often ignore - the kind that lives on our devices, in our inboxes, and across the dozens of apps and platforms we use every day.

Our digital lives can become chaotic without us even realising it. Old files pile up, passwords go unchanged, unused apps stake up digital space, and outdated accounts hang around long after we’ve forgotten them.

Cleaning up your digital life isn’t just about tidiness. It’s about taking back control, reducing stress, and protecting your personal information. A little effort can help you make the most of the technology you rely on every day.

Start with the inbox

Email is one of the easiest places for clutter to grow unnoticed. Between unread messages, endless subscriptions, and decades of digital dust, many of us feel buried in content before we even open our inbox.

Start by deleting messages you no longer need. Use the search function to batch-delete emails from certain senders or file size, especially those you no longer want to hear from. Unsubscribe from newsletters or promotional emails you tend to ignore and consider setting up filters to automatically sort messages into folders moving forward.

Even if you only clean up a few hundred emails, you’ll immediately feel a sense of relief. A tidier inbox helps you spot what’s actually important and reduces the mental load of “dealing with it later”.

Declutter your devices

Next, look at your phone and computer. These devices often become digital dumping grounds. Photos, documents, apps, and downloads accumulate over time and can start to feel overwhelming.

Begin by deleting apps you haven’t used in the last three months. If you’re not sure about something, check when it was last opened. Move photos and videos to cloud storage or an external drive to free up space. Organise documents into clearly labelled folders and delete duplicates or outdated versions.

Some parts of digital clutter are less visible but still worth clearing. Take a moment to empty your downloads folder, clear your browser cache, and remove temporary files. These forgotten corners of your devices can quietly slow things down and make everything feel more chaotic.

Audit old accounts

Over the years, you’ve probably signed up for countless shopping websites and other services, many of which you’ve long forgotten. These inactive accounts can pose security risks, especially if they’re linked to old or weak passwords.

Use a password manager to help identify and organise your accounts. Close the ones you no longer use and update the passwords for those you still need. Closing unused accounts limits the number of places your data is stored, which reduces your exposure in the event of a data breach.

This step may take a little time, but it’s one of the most powerful ways to protect your digital footprint.

Check your digital security

While you’re auditing, take time to strengthen your online security. Start with your most important accounts - like email, banking, and cloud storage - and make sure each one uses a strong, unique password.

Enable two-factor authentication where possible. This extra layer of protection only takes a few minutes to set up and can make a big difference in keeping your accounts secure.

Finally, don’t forget to check for software updates on all your devices. These often include important security patches, so keeping your system up to date is one of the easiest ways to stay protected.

Refresh your social media

Social media can be a powerful tool, but only if it reflects who you are now. If your feed feels stale or overwhelming, take a few minutes to clean it up.

Unfollow or mute accounts that no longer resonate with you. Curate your feed so that it reflects your current interests, values, and goals. This simple step can turn mindless scrolling, or doomscrolling, into a more positive, inspiring experience.

Digital spring cleaning is not about perfection. It’s about creating a digital environment that supports how you live and work right now. If this all sounds a little intimidating just take it one step at a time. Wherever you begin, the most important thing is to begin.

Planning is key as SMSFs enter new phase

Fri, 01 Aug 2025 04:05:46 GMT

Self-managed superannuation funds (SMSFs) have long been associated with older Australians and small business owners looking for greater control over their retirement savings.

But recent data suggests the sector is undergoing a quiet transformation.

Alongside tax reforms and persistent compliance challenges, younger people are slowly moving into the SMSF space. While 85% of SMSF members are 45 years or older, there’s been significant growth in members aged between 25 and 34 years from just 2.4% two years ago to around 10% now. ⁱ

Almost 8,000 new SMSFs were established in the three months to the end of March 2025 with the number of new members increasing by 13,000. Australia’s SMSFs hold an estimated $1.02 trillion in assets with 26% invested in listed shares and 16 per cent in cash and term deposits. ⁱⁱ

A new tax era

The new proposed Division 296 super tax, due to apply from 1 July 2025, is aimed at those with total superannuation balances exceeding $3 million. An extra 15% tax will apply to earnings on the portion of a member’s balance above $3 million, effectively lifting the tax rate on those earnings to 30%.

What makes the proposed Division 296 particularly contentious is the inclusion of unrealised gains. For example, a share portfolio the SMSF holds has seen positive returns. Trustees may face tax liabilities on paper profits, even if assets haven’t been sold. This may cause issues for SMSFs holding illiquid assets such as property or farmland that has increased in value.

SMSF Australia and other industry bodies have raised concerns about fairness, complexity and the potential for unintended consequences.

Trustees with high balances should begin planning now before 30 June 2026, to consider asset rebalancing, contribution strategies and the timing of withdrawals. SMSF Australia recommends obtaining advice about your specific circumstances. ⁱⁱⁱ

The advice gap

Despite the increasing complexity of SMSF regulation, the vast majority of trustees continue to operate without professional advice. While the number of SMSFs using financial advisers has grown to 155,000, up from 140,000 in 2023, some 483,000 are not using a financial adviser. ^iv

This could lead to costly mistakes, especially when navigating contribution caps, pension strategies or related-party transactions. SMSF Australia says that while there’s no legal requirement to obtain advice from a licensed financial planner, “unless you have the skills and expertise to do this yourself, it is certainly conventional wisdom to do so”. ^v

The compliance burden

Every SMSF must undergo an annual audit by an approved SMSF auditor. This includes verifying the fund’s financial statements and ensuring it is compliant with super laws. Trustees are also required to value all fund assets at market value as at 30 June each year, using objective and supportable data.

For property and other complex assets, valuations can be time-consuming and costly. The ATO recommends using qualified independent valuers when assets represent a significant portion of the fund or are difficult to assess. Auditors may request evidence such as comparable sales, agent appraisals or formal valuation reports. ^vi

Failure to maintain accurate records or provide sufficient documentation can result in audit delays, contraventions or penalties. Trustees must also ensure their investment strategy is regularly reviewed and documented, particularly when starting pensions or making significant contributions.

Looking ahead

As the SMSF sector evolves, trustees face a dual challenge: adapting to new tax rules and maintaining rigorous compliance. For those considering an SMSF - or already managing one - the message is clear. Getting financial advice can give you peace of mind when the rules are regularly changing. ^vii

With Division 296 to contend with and a younger demographic stepping in, the sector is poised for both growth and greater scrutiny.

Whether you're a seasoned trustee or just starting out, now is the time to review your fund’s structure, seek expert guidance and ensure your paperwork is in order. The future of SMSFs may be more dynamic than ever, but it will also demand greater diligence.

i Highlights: SMSF quarterly statistical report March 2025 | Australian Taxation Office

ii Self Managed Superannuation Funds - SMSF quarterly statistical report March 2025 - Data.gov.au

iii Understanding Div296 I How will taxation of unrealised gains work

iv New SMSF trustees propel uptake of financial advice, but $1 trillion sector still has significant advice gaps | Vanguard Australia

v What are the rules for Financial Planners giving SMSF Advice? - SMSF Australia

vi SMSF administration and reporting | Australian Taxation Office

vii About SMSFs | Australian Taxation Office

Separating business and personal expenses

Fri, 01 Aug 2025 04:01:32 GMT

When you’ve poured your energy into building a business from the ground up - celebrating milestones, weathering challenges, and investing personal time and money - it’s easy to feel like the company is an extension of yourself. After all, it probably reflects your values, your efforts, and your long-term goals.

That’s why moments of overlap can seem harmless. Maybe you use the business card to cover a personal bill, thinking you’ll sort it out later, or you take the company vehicle for a weekend getaway.

But the tax office sees your business quite differently: as its own legal entity, with its own rules and responsibilities. And crossing the line, even unintentionally, can lead to complications that are better avoided.

Imagine someone who runs a thriving small business. They’re the sole director in the company that owns the business. After years of hard work, the business owner books a long overdue personal holiday and charges it to the business credit card. They plan to reimburse the company but with tight deadlines and tax time approaching, the repayment slips their mind.

When the business owner lodges the company’s tax return, that innocent transaction hasn’t been dealt with properly. According to Division 7A of the tax law, the payment could be treated as personal income and taxed at the business owner’s individual marginal rate. It’s known as an unfranked dividend. ⁱ

Division 7A exists to ensure that shareholders (and their associates, like family members or business partners) don’t use company funds in ways that sidestep formal dividend payments. If money is withdrawn or business assets are used privately without the correct documentation - such as loan agreements or reimbursement records - the ATO may step in and reclassify those transactions as income. The result? Unexpected tax bills and a lot of stress. ⁱⁱ

What counts as private use?

It’s not just about major purchases. Even small , recurring habits can raise red flags. For example:

Paying for groceries or rent from your business bank account
Using company tools, vehicles or property for personal reasons
Lending money to a relative from the company’s reserves
Failing to create a loan agreement when borrowing from your business

If the money isn't repaid or formalised before lodgement day, these amounts may be treated as Division 7A dividends, even if the spending was accidental.

Borrowing money without a complying loan agreement , or simply taking the money and failing to declare it, can also lead to major tax headaches.

Fringe benefits and private use of assets

Let’s say you occasionally drive the company car to drop the kids at sport or to pop down to the local hardware store on weekends. It seems harmless but unless it’s documented correctly, it could attract Fringe Benefits Tax (FBT). ⁱⁱⁱ

Businesses must:

declare private usage in their annual FBT return
keep records of reimbursements and expenses
ensure that any benefits are correctly valued and disclosed

FBT might feel like one more thing to worry about, but it can also work in your favour. Businesses may claim GST credits and tax deductions related to fringe benefits, provided everything is above board.

Practical tips to stay on track

If you do use business money or assets for personal purposes, recordkeeping becomes your best ally. Here’s what that might look like:

Create clear loan agreements between the right entities
Avoid journal entries that falsely suggest repayments
Don’t borrow company funds to repay previous Division 7A loans
Ensure loan repayments meet the benchmark interest rate set by the ATO
Declare all interest earned by the company as part of its assessable income
Include relevant transactions in the tax returns of both the company and the person receiving any benefit.

Resources to help

While the rules are firm, the ATO does offer resources to make them more manageable. The ATO has a number of webinars explaining common issues surrounding the Division 7A rules, plus a Division 7A repayment calculator and decision tool .

Small business owners can also take a short online education course outlining the rules for using business money and assets.

If you’re unsure whether a past transaction needs correcting, or you want to make sure your systems are set up properly for the future, we’re here to help. An early conversation now could prevent a last-minute panic when tax time rolls around.

i Managing Division 7A risks, and corrective action | Australian Taxation Office

ii Tax treatment of Division 7A dividends | Australian Taxation Office

iii Fringe benefits tax (FBT) | Australian Taxation Office

Hiring a new worker

Thu, 10 Jul 2025 01:50:39 GMT

How to determine whether your worker is an employee or independent contractor, and forms for new employees to complete.

Determine your worker's classification

You must firstly determine whether your worker is an employee or independent contractor.

It's important to do this as it affects:

your tax, super and other obligations (such as worker's compensation insurance)
your worker's entitlements.

To classify your workers, you need to consider the whole working relationship. Some key things to remember include:

An employee works for you in your business, while an independent contractor is running their own business.
Apprentices, trainees, labourers and trade assistants are always employees, never independent contractors.
You may still have to pay super for independent contractors if their contract is principally for labour.
It's against the law to wrongly treat an employee as an independent contractor, so you need to check that you've got it right.

When determining a worker's classification, you also need to consider other key differences between employees and independent contractors .

Confirm they can work in Australia

You'll need to confirm that your new worker is legally allowed to work in Australia. Australian citizens, permanent residents and New Zealand citizens are legally allowed to work in Australia.

If you believe your worker is a foreign national (other than a New Zealander), you must confirm they have a visa with permission to work. More information about employing overseas workers is on the Department of Home Affairs website.

Working holiday makers

If you're hiring someone on a working holiday visa (subclass 417 or 462), you must also register as an employer of working holiday makers . You need to do this before paying them.

Tax and super obligations

When inducting your new employee, you need to ask them to complete the following forms:

This will allow you to work out how much tax to withhold, and how much super to pay them.

Online commencement forms

New employees can complete their online commencement forms by logging in to ATO online services (linked to their myGov account). This is an alternative to your employee completing a Tax file number declaration and Superannuation standard choice form to obtain their details.

Your employee must complete their online commencement forms within 28 days of starting. Once submitted, the information is sent directly to the ATO.

Your employee will need to print out the employee tax details summary and give it to you. You don't send the printed form to the ATO. Instead, you simply input the information into your payroll software, so they're set up and ready to be paid.

Tax file number declaration

Your employee's Tax file number declaration tells you:

their tax file number (TFN)
their residency status
whether they have any government study loan debts
whether they are claiming the tax-free threshold.

You'll need these details to work out how much tax to withhold from payments you make to them.

Your employee can complete a Tax file number declaration:

through Online services
your employee will need to print the employee tax details summary and return it to you
you keep the printed copy and don't send it to the ATO
on paper by ordering the Tax file number declaration

If your employee doesn’t provide you with their TFN or claims a valid exemption, you must withhold at the top rate of tax (plus Medicare).

Standard choice super form

Most employees and some independent contractors are entitled to choose their own super fund for their super guarantee payments.

To enable them to do this, you'll need to provide them with a Superannuation standard choice form (NAT 13080).

If your new employee doesn't choose a super fund, you may need to ask the ATO to provide details of their stapled super fund .

If your employee gives you their TFN, you must provide it to their super fund. You need to do this the next time you make a payment for them, or within 14 days of receiving it, whichever is later.

Hiring through a labour firm

As an employer, it's your responsibility to protect the welfare of your workers. This includes a worker you engage through a labour hire firm.

If your business has a contract with a labour hire firm, then they're responsible for pay as you go (PAYG) withholding, super guarantee contributions and fringe benefits tax obligations.

See more information on the Fair Work Ombudsman website.

Other support when hiring workers

When hiring workers for the first time, you can also use tools and checklists available at business.gov.au:

Speak to us if you have any questions regarding this article.

Source: ato.gov.au January 2025

Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/engaging-a-worker/hiring-a-new-worker

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: BMO Accountants does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Do you know who gets your super when you die?

Thu, 03 Jul 2025 06:02:40 GMT

Do you have a plan for who will receive your super if something happens to you?

For many Australians, superannuation is their greatest asset outside the family home.

But do you have a plan for who will receive your super if something happens to you?

The laws around super death benefits are complex, with strict rules about who can receive these benefits. So, it’s crucial to plan ahead.

One approach that can help provide certainty is making a binding death benefit nomination, but even then, there are some important things to consider.

What happens to your superannuation when you die?

Upon your death, your super and any life insurance held in your fund must be paid out to a beneficiary, according to super law and your fund’s trust deed.

Importantly, the rules for who receives superannuation are different from other assets, like property and shares held outside of superannuation, and superannuation does not automatically form part of your estate. Even if you have written instructions in your will about your wishes, the rules about beneficiaries in super law take precedence.

That’s why choosing a beneficiary is such an important decision.

Who can you nominate as your beneficiary?

The trustee of your super fund can usually only pay a death benefit to one of your “dependants”, as defined by super law.

This includes:

Your spouse - both married and de facto partners (unmarried but living together as a couple).
Your children - including adopted children, stepchildren, children of your spouse or other legally recognised children.
Your ‘interdependents’ - someone you live with in a close personal relationship, where one or both of you provide financial, domestic and personal care support to the other.
Your legal personal representative - the executor of your will or administrator of your estate. They are not considered a dependant but can still be nominated as a beneficiary.

The dependency rules are complex and very important in the context of administrating death benefits, and there are also tax implications .

That’s why it’s a good idea to seek advice from us or estates lawyer about your personal circumstances.

What happens if you don’t nominate a beneficiary?

If you don’t nominate a beneficiary with your super fund, the fund’s trustee will decide who receives your death benefit based on superannuation laws and the fund’s trust deed.

This could result in your super being given to someone you might not have intended.

In these situations, the trustee will first try to pay the benefit to your dependants and/or a legal personal representative. If you have neither, the trustee will pay the death benefit to another person they determine.

How binding death benefit nominations can help

To avoid unintended consequences, you can lodge a binding death benefit nomination with your super fund.

A binding nomination is legally ‘binding’ on the super fund’s trustee. As long as your nomination is valid at the date of your death, the trustee will generally be bound to follow your instructions.

Binding nominations usually expire after three years. But some super funds offer non-lapsing binding nominations which don’t expire (but which you can still change or revoke if you want to at any time).

You can also make a binding death benefit nomination if you have a self-managed super fund (SMSF), providing it’s allowed in the trust deed.

What to know about non-binding death benefit nominations

Many funds also allow members to record non-binding nominations.

If you have a non-binding nomination, the trustee will take your preferences into account when deciding how to distribute your benefit in accordance with superannuation law.

However, it doesn’t guarantee that your death benefit will be paid exactly according to your wishes.

For example, the trustee may change the proportions or may include other dependants not named in your nomination.

Why it’s important to regularly review your super beneficiaries

If you have a binding death benefit nomination, it's important to regularly review it to ensure it reflects your current wishes and circumstances.

A good rule of thumb is to check your nomination of beneficiaries whenever your personal circumstances change.

For example, if you get married, register a relationship, get divorced, have children, change an interdependency relationship, start a new interdependency relationship, or if one of your nominated beneficiaries dies.

Death benefit nominations are a complex topic, so it's a good idea to seek professional advice.

For more information, including how to make a binding death benefit nomination, give us a call.

Source: Vanguard

This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

We have not taken your or your clients' objectives, financial situation or needs into account when preparing our website content so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for the product before making any investment decision. Before you make any financial decision regarding the product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard's financial products can be obtained on our website free of charge, which includes a description of who the financial product is appropriate for. You should refer to the TMD of the product before making any investment decisions. You can access our Investor Directed Portfolio Service (IDPS) Guide, Product Disclosure Statements (PDS), Prospectus and TMD at vanguard.com.au and Vanguard Super SaveSmart and TMD at vanguard.com.au/super or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This website was prepared in good faith and we accept no liability for any errors or omissions.

Important Legal Notice - Offer not to persons outside Australia.
The PDS, IDPS Guide or Prospectus does not constitute an offer or invitation in any jurisdiction other than in Australia. Applications from outside Australia will not be accepted. For the avoidance of doubt, these products are not intended to be sold to US Persons as defined under Regulation S of the US federal securities laws.
© 2025 Vanguard Investments Australia Ltd. All rights reserved.

Legacy or liability? Planning a smooth wealth transfer

Thu, 03 Jul 2025 05:59:24 GMT

Australians inherited an estimated $150 billion in 2024, an increase of more than 70 per cent in a decade, according to a JBWere report. ⁱ

It’s a number that’s predicted to grow more rapidly over the coming 20 years to $5.4 trillion, the report finds.

Managing this flow of wealth to family groups, often complicated by divorce and remarriage as well as children from previous marriages, can lead to disputes and legal challenges if not carefully handled.

Legal firms agree that the number of challenges to wills has been increasing each year with adult children most likely to take action. One firm estimates more than 60 per cent of claims are brought by adult children and around 20 per cent by partners or ex-partners. ⁱⁱ

Yet, many still do not have wills.

In the latest research available, the Australian Law Reform Commission found that almost 40 per cent of adult Australians did not have a will although, this figure declined to 7 per cent for those older over 70. ⁱⁱⁱ

If you die intestate in Australia, your estate is distributed according to state and territory laws, and the laws vary slightly between each state and territory. Generally, the estate goes to the next of kin starting with the surviving spouse or partner followed by children, parents, siblings and then other relatives. If no relatives can be found, the estate may go to the government.

So, if it is important to you to have a say in how your assets will be distributed, a will is a must.

Meanwhile, for those in a new partnership but have children from a previous marriage, a binding financial agreement can be a useful way of protecting your partner’s interests if something happens to you.

It’s a legally enforceable contract that details how assets, liabilities and responsibilities will be divided if you separate, divorce or one partner dies.

Designing your transfer of wealth

Distributing your wealth now or later can depend on the family dynamics, any businesses you may own and whether you have a passion for creating a legacy – donating to a charity, for example. Alternatively, you may prefer to spend it on yourself and your partner to enjoy your later years.

The housing crisis and the emergence of the ‘bank of mum and dad’ has increasingly seen wealth transfer happening while the benefactor is still alive. You may wish to help your children or grandchildren to get a foot onto the property ladder, contribute to their superannuation, or pay their school fees or student loans. But it’s crucial to obtain professional advice to understand any consequences of giving lump sums, particularly those receiving government entitlements, as they could potentially be impacted.

Another alternative is testamentary trust. This is commonly used to provide financial security for beneficiaries, such as family members or loved ones. It is used to manage and distribute assets according to specific instructions laid out in the will.

It can be specifically written and incorporated in your will and takes effect when you pass away. It is administered by a trustee, who you would also name in your will. The trustee would take legal control over the trust assets and is responsible for the management and distribution of the assets to the beneficiaries, based on the instructions in the trust.

This strategy could also potentially minimise any tax liabilities. However, there are a lot of things you need to consider when deciding whether or not a testamentary trust is right for you.

Some might prefer to establish or contribute to a charitable foundation as a way of building a family legacy. It’s a move that allows you to have some say over how your hard-earned wealth is distributed and could involve family members to allow them to build knowledge and experience in philanthropy.

Most importantly, creating a family legacy relies primarily on the strength of family relationships. Any disputes will more than likely be magnified after a death and some relationships may be strained, so it may be helpful to discuss your intentions with family members and any other beneficiaries. Be clear about your plans and don’t ignore negative reactions.

Getting your affairs in order

After all, wealth transfer isn’t just about finances - it’s about securing family harmony and ensuring your legacy is preserved according to your wishes. Taking the time to plan, communicate openly with loved ones, and seek professional guidance can make all the difference.

i Bequest Report | JBWere

ii The numbers don’t lie | Solomon Hollet Lawyers

iii Wills | ALRC

Your future just got a super boost – are you ready?

Thu, 03 Jul 2025 05:56:27 GMT

With the new financial year comes a fresh wave of superannuation changes that could make a real difference to your retirement savings.

Let’s unpack what’s changing - and how to make the most of it.

The SG rate hits 12%

One obvious lift to retirement incomes is the increase in the Super Guarantee (SG) rate from 11.5 per cent to 12 per cent. That means more going into your super account.

Your employer must now pay 12 per cent of your ordinary time earnings into your chosen super account. So, it’s a good idea to check your first payslips for the new financial year to make sure the changed rate is applied.

If you have a salary sacrifice arrangement, note that the SG calculation applies to your total salary, as if the arrangement was not in place.

For a quick update on what the change will look like for your super balance, check the MoneySmart calculator .

More for retirement phase

Beyond your regular contributions, the amount of super that can be transferred into the retirement phase – known as the general transfer balance cap (TBC) - has increased from $1.9 million to $2 million from 1 July 2025. ⁱ

If you exceed the cap, you’ll need to transfer the excess back to your accumulation account or withdraw it as a lump sum - plus, you may pay tax on the earnings.

If you’ve already started a retirement income stream, you’ll have a personal TBC - your own individual limit, which may be less than the general TBC. Your personal cap is based on the general cap at that time you started, adjusted for how much you’ve used and any indexation you’re entitled to. ⁱⁱ

For example, if you started a pension with $2 million on 1 July 2025, you’ve used your entire cap. The cap doesn’t limit the amount you can hold in super. If you have more than the cap available, the remainder can be left in your super fund’s accumulation account.

You can check your cap in ATO online services , which records all the debits and credits that make up your balance.

Special rules apply for defined benefit income streams.

More qualify for after-tax contributions

The change in the general TBC to $2 million may also allow you to increase non-concessional (after-tax) contributions using the bring-forward rule. While the $120,000 annual limit on non-concessional contributions hasn’t changed, eligibility for using the bring-forward rule now applies to those with a total superannuation balance below the general TBC of up to $2 million.

The rule allows you to bring forward the equivalent of one or two years of your annual non-concessional contributions cap ($120,000), allowing you to make contributions two or three times more than the annual cap.

No change to contribution caps

While more investors may now be eligible to access the bring-forward rule, the caps on both concessional (before tax) and non-concessional contributions haven’t changed.

The tax paid on contributions depends on whether you’re paying from before-tax or after-tax incomes, you exceed the contribution caps, or you’re a high income earner. ⁱⁱⁱ

The concessional contributions cap is $30,000 and if you have unused cap amounts from previous years, you may be able to carry them forward to increase your contribution in later years. You can make up to $120,000 in non-concessional contributions each financial year and you may be eligible for the bring-forward rule allowing up to $360,000 in one contribution.

Not sure how the rules affect you? Talk to us today about how to stay ahead and make the most of your retirement savings plan.

Awaiting the new $3m tax

The proposed new tax on earnings above $3 million in super accounts, known as the Division 296 tax, has not yet been ratified by Parliament. Nonetheless, it is expected to be applied from 1 July 2025.

The new tax doubles the tax rate from 15 per cent to 30 per cent for earnings on balances that exceed $3 million.

An earnings loss in a financial year, can be carried forward to reduce the tax liability in future years.

i Transfer balance cap | ATO

ii Calculating your personal transfer balance cap | ATO

iii Concessional and non-concessional contributions | ATO

New financial year, new super rules

Tue, 01 Jul 2025 05:52:50 GMT

With a new financial year underway, now’s the time for small business employers to check they’re across the latest changes to super obligations - from Superannuation Guarantee (SG) increases to updated balance contribution caps.

Here’s a brief roundup of the super changes you need to be aware of from 1 July 2025.

SG rate rises to 12% - what it means for you

A key change employers need to be aware of is the increase in the SG rate to 12 per cent.

This means you need to contribute a minimum of 12 per cent of your employees' ordinary time earnings to their chosen super account. (Obviously, if your eligible employees have a higher percentage listed in an award or employment agreement, you need to pay this higher amount). ⁱ

You should ensure all super and payroll calculations reflect the increased rate.

Employees making voluntary contributions or salary-sacrificing should be encouraged to review their super arrangements to avoid exceeding their annual contributions caps.

Make sure no employee is missed

Now is a good time to check you are paying SG for all eligible employees. Before 1 July 2022 you didn’t have to pay SG for workers earning less than $450 a month. But you now have to pay super, regardless of how much they earn .

Generally, all employees must be paid super, despite their employment status. This includes full-time, part-time and casual workers, temporary residents such as backpackers, company directors and family members.

If an employee is under 18 years , SG must still be paid when they work more than 30 hours in a week.

Reduced SG base for high-income employees

The higher SG rate also affects the indexed maximum super contribution base used to determine the maximum quarterly limit for a high-income employee’s earnings base.

From 1 July 2025, the quarterly maximum super contribution base is $62,500 , which means the maximum SG payment amount per quarter is $7,500. The new limit is a decrease from the 2024-25 quarterly limit of $65,070.

As an employer, you are not required to pay SG on the part of your employee’s earnings above this quarterly limit, so review your payroll settings to ensure they reflect the reduced cap.

Annual contributions caps remain stable

While knowing these super changes is important, it’s also essential to know what is not changing on 1 July 2025.

The annual concessional contributions cap remains at $30,000, while the non-concessional contributions cap stays at $120,000. This means the three-year bring-forward cap also remains at $360,000 (The bring-forward rule allows those who are eligible to pay up to three years of after-tax super contributions in one year). ⁱⁱ

While you’re not responsible for tracking employees’ contribution caps, it’s important to understand them because they may affect staff making voluntary contributions or salary sacrifice arrangements.

Suggest that employees track all contributions entering their account and consider adjusting their super arrangements if they are nearing their annual cap.

Balance caps increase

The other key changes to be aware of is the increase in the general transfer balance cap (TBC) from $1.9 million to $2 million from 1 July 2025. The TBC is the limit on the total amount of super that can be transferred to the retirement phase.

The total super balance cap (TSB), which includes all of an employee’s super and retirement phase accounts, is also increasing to $2 million . This cap is used to determine eligibility for non-concessional contribution and bring-forward arrangement amounts, carry-forward concessional contributions, spouse tax offsets and government co-contributions.

The cap increases do not directly affect employers, but they may influence an employee’s decision on making additional super contributions or moving into retirement.

If you would like more information about the new super obligations for 2025-26, contact our office today.

i Super guarantee | Australian Taxation Office

ii Concessional contributions cap | Australian Taxation Office

How the $3m super tax may affect you (and what to do next)

Thu, 19 Jun 2025 23:27:16 GMT

As the federal government moves to introduce a new 15% tax on superannuation earnings above $3 million (known as Division 296 tax), concerns and debates have emerged about the broader implications for investment strategies, retirement planning, and even the property market.

It is intended that once passed by Parliament, the new tax – which doubles the tax rate from 15% to 30% for balances that exceed $3 million - will apply from July 1, 2025.

The tax change is expected to directly affect less than 0.5 per cent of investors or around 80,000 people. ⁱ

Treasurer Jim Chalmers describes the increase as “a modest change” that will make “concessional treatment for people with very large superannuation balances still concessional but a little bit less so”. ⁱⁱ

He says it will help fund other priorities such as Medicare, cost-of-living relief and tax cuts.

The Grattan Institute says tax breaks on super contributions cost the federal budget nearly $50 billion in lost revenue each year. ⁱⁱⁱ

The Institute says that, while super is intended to help fund retirement, it has become a “taxpayer-subsided inheritance scheme”. By 2060, Treasury expects one-third of super withdrawals to be as bequests – up from one-fifth today.

How will the rate be calculated?

The formula for the additional tax payment due calculates the difference between the member’s total superannuation balance for the current and previous financial years and adjusts for net contributions (which excludes contributions tax paid by the fund on behalf of the member) and withdrawals.

An earnings loss in a financial year, can be carried forward to reduce the tax liability in future years.

The calculation of earnings includes all unrealised gains and losses.

Implications for investors

The Grattan Institute says taxing capital gains as they increase removes incentives to “lock in” investments. “But it can create cash flow problems for some self-managed super fund (SMSF) members who hold assets such as business premises or a farm in their fund,” the Institute says. ^iv

Many commentators speculate there will be a major change to asset allocation in super, particularly in SMSFs, as a result of the move to tax unrealised gains.

Meanwhile, one property analyst predicts a structural shift in property investment with commercial real estate becoming more attractive because of its stronger income yields relative to capital growth. ^v

The new tax could also reduce the appeal of super as an inheritance tool with investors likely to explore alternative wealth transfer methods.

Navigating the changes

With the tax changes looming, we’re helping clients to ensure their portfolios will continue to meet their expectations.

For those looking to minimise their exposure to the tax, there are a number of strategies that may be useful.

These include:

Diversifying investments outside of superannuation by, for example, making direct investments in equities, bonds or private businesses.
Considering alternative retirement savings vehicles such as family trusts.
Actively planning to optimise tax efficiency by, for example, structured withdrawals to keep balances below the $3 million threshold, making use of tax exemptions and considering asset reallocation.

The new tax marks a significant shift in Australia’s retirement savings landscape. While the government argues that the measure is modest and targeted, its long-term implications—particularly the taxation of unrealised gains—could reshape investment strategies for high-net-worth investors.

For those nearing retirement with a high super balance, careful financial planning will be essential and all investors who could potentially be affected, should be reassessing their portfolios and weighing up whether alternate wealth management strategies may be an option.

Please get in touch if you would like help to navigate the changes.

i Better targeted superannuation concessions - factsheet (PDF)

ii Interview with Michelle Grattan, Politics podcast, The Conversation | Treasury Ministers

iii, iv Tax reform will make super fairer and the budget stronger - Grattan Institute

v $3 million superannuation tax change sparks property warning as 'panic’ selling begins

The superannuation changes from 1 July

Thu, 12 Jun 2025 00:20:55 GMT

The super changes coming into effect in the 2025-26 financial year. Australian superannuation laws are set to change once again in the 2025-26 financial year as the nation’s fast-growing retirement savings system continues to evolve. Below is a summary of the changes that will come into effect from 1 July, 2025, as well as looming legislative changes.

Increased super guarantee (SG)

Millions of working Australians will receive a welcome superannuation boost from the start of July when the mandatory superannuation guarantee (SG) rate rises by 0.5% to 12%.

The SG is the percentage of your ordinary time earnings (in addition to wages) that is paid into your super fund account by your employer.

The 2025-26 rise marks the end of a series of five 0.5% SG rate increases since the start of the 2021-22 financial year, when the SG rate was lifted from 9.5% to 10%.

Higher transfer balance cap

Individuals starting a pension for the first time on or after 1 July 2025 will be entitled to a personal transfer balance cap (TBC) of $2 million, which will be increased by $100,000 from the current level of $1.9 million.

The TBC is the maximum amount that an individual can transfer from their superannuation accumulation account into a tax-free pension account on their retirement. Any amount over the TBC must be retained in an accumulation account, where any contributions and investment earnings are still taxed at 15%.

Keep in mind that investment earnings within the pension account can increase the account balance above the $2 million transfer balance cap without any penalty.

Carry-forward concessional contributions

Eligible workers can “carry forward” any of their unused annual concessional super contribution cap amounts from up to five financial years ago and add them to their concessional contribution cap in the current financial year.

That means it may be possible to contribute more than the current $30,000 concessionally taxed limit, subject to you having a total super balance of less than $500,000 at 30 June of the previous financial year and you having unused concessional contributions cap amounts available.

From 1 July the starting financial year for carry forward amounts will roll over to 2020-21. As such, the deadline for taking advantage of any unused entitlements you may have from the 2019-20 financial year will end on 30 June.

Proposed higher taxes on $3 million-plus super balances

Following its recent re-election, the federal government is likely to reintroduce its Division 296 tax bill to be passed as legislation.

The proposed Division 296 legislation would introduce an additional 15% tax on the earnings of super funds with balances above $3 million (which would apply to earnings on any amounts over $3 million). This would include any unrealised gains on assets held inside a super fund, such as shares and property, even if they had not been sold.

Important information and general advice warning: Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee of Vanguard Super (ABN 27923449966) and the issuer of Vanguard Super products. The Trustee has contracted Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) to provide some services to members of Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc. (collectively, "Vanguard"). The retirement savings tips provided above are general in nature and don’t take into account your personal financial objectives, situation or needs. You should consider your objectives, financial situation or needs, and the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before making any decision about Vanguard Super. The PDS and TMD can also be accessed free of charge by calling 1300 655 101. Before you make any financial decision regarding Vanguard Super, you may wish to seek professional advice from a suitably qualified adviser. Any past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. The information above is current as at time of publication and was prepared in good faith and we accept no liability for any errors or omissions. ©2025 Vanguard Investments Australia Ltd. All rights reserved.

Smart moves before the financial year ends

Thu, 12 Jun 2025 00:17:16 GMT

The end of the financial year is an opportunity to optimise your financial strategy, take advantage of tax deductions, and set yourself up for the new financial year.

Whether you're looking to maximise tax benefits, rebalance your investment portfolio, or to simply ensure you’re ticking all the right boxes, smart end of financial year (EOFY) planning can make a big difference.

So, to finish the financial year on a high note, start by mapping out your finances and investment portfolio and collect all the relevant documents. It can be a tedious task if your filing isn’t up to scratch, so it can be useful to set up a system as you go to make it easier for the next financial year.

You will need your bank statements, superannuation fund statement, self- managed super fund (SMSF) paperwork if relevant, a record of any capital gains or losses from the sale of assets such as shares or property, details of share dividends including any dividends earned through a Distribution Reinvestment Plan, and records of any other investments or income received.

Looking for deductions

On the other side of the ledger, there are limits on deductions for most categories of expenses but it’s a useful exercise to gather the evidence of all costs associated with employment and income-producing investments – whether or not they’re tax deductible.

For the most part at least, some deductions are allowed for certain work-related costs, donations over $2 to approved not-for-profits, the costs of managing your tax affairs, eligible investment property expenses, income protection insurance premiums (if the premiums are paid outside of your super fund), and expenses linked to a financial investment - such as attending a seminar directly related to the investment or the cost of account keeping fees on bank accounts used only for investment.i

The ATO is keeping a close eye on work-related expenses and working from home deductions this year, saying there must be “a close connection to your income earning activities, and you should be prepared to back it up with records like a receipt or invoice”.ii

Get ahead with early payments

One way of maximising deductions in this financial year is by paying early deductible expenses due next year such as insurance premiums, subscriptions, or business rent if applicable. But remember to check first to see which expenses may be eligible to prepay.

Small businesses also have access to an instant asset write-off for the business portion of assets under $20,000, that were purchased and used in this financial year. The instant asset write-off is available to businesses with an annual turnover of less than $10 million.iii

Review your portfolio

At this stage of the year, it’s a good time to take stock of your investments including shares, superannuation and property. You may want to check that your investment strategy is still appropriate for your needs and expectations and review any underperforming assets.

The review will help you to decide whether you have an opportunity to top-up your super fund or SMSF. If you have funds to spare, making the most of the total contribution amount allowed both in this financial year and for the last five years, could give your retirement planning a serious boost.

It’s also a chance to review super indexation changes due from 1 July to see if there’s a need to take action before 30 June or to wait. For example, the amount that can be transferred into the retirement phase (known as the general transfer balance cap) will increase to $2 million on 1 July, up from $1.9 million this financial year. That might affect the decision to begin a pension this month as opposed to next.

There’s a lot to consider right now to make sure you’re optimising tax savings and that your planning today leads to a financial reward tomorrow. Give us a call if we can help.

i Deductions you can claim | Australian Taxation Office

ii ATO unveils ‘wild’ tax deduction attempts and priorities for 2025 | Australian Taxation Office

iii Instant asset write-off for eligible businesses | Australian Taxation Office

Volunteering in retirement: finding purpose, structure, and joy

Tue, 10 Jun 2025 00:13:33 GMT

Like me, retirement might be just around the corner, or maybe you’ve recently crossed that exciting threshold. We’ve worked hard for decades, and now we’re ready to trade in the alarm clock for leisurely mornings and to-do lists that are actually fun. But as we move into the next phase of life; a thought might cross your mind: What now?

While the idea of unlimited free time sounds wonderful at first, many people find that after the novelty wears off, there’s something important missing. Work often provides structure, purpose, and a sense of accomplishment. Without that, it’s easy to feel a little... adrift.

So, when you picture what your ideal retirement looks like, it can be a good time to think about what you still have to offer the world and consider volunteering. As well as helping others, you’ll also enrich your life in so many ways.

Enhance your life

A study commissioned by Apia found that more than half (56 per cent) of Australians over 50 years of age, are currently engaged with community or volunteer work. ⁱ And the benefits are not just the recipient of their support - it’s been proven that volunteering can boost your own happiness, your mental health, and even your physical well-being. ⁱⁱ It’s like a secret ingredient for a fulfilling retirement.

Retirement beyond the finances

Planning your retirement is more than just numbers on a spreadsheet; it’s about creating a fulfilling, meaningful lifestyle. Volunteering can help restore that sense of purpose when you are no longer working, and add structure to your days, all while benefiting others. Thinking about volunteering before you leave the workforce can give you a head start in discovering what really lights you up, and it will give you a smooth transition into the next chapter of your life.

Here are a few tips on how to get started, make your time count, and make sure you’re doing something meaningful and truly brings you joy.

Consider your skills

You have years of knowledge, skills and life experiences to draw upon and it can be enormously satisfying to use those to help others. Your contribution can reflect the skills you honed in the workplace or talents you developed along the way. Have you always been the go-to person for organising family events or helping friends with their tech problems? Think about how you can use your skills - whether that’s helping others, improving areas in your community - like gardening, or even just making someone smile.

Choose a cause that sparks your passion

Think about what has always inspired you. Volunteering is most fulfilling when it aligns with your interests and values. So, take a moment to consider what causes excite you and look for organisations that align with your passions - maybe a local food bank, animal rescue, or environmental group. Your volunteering experience should feel like a rewarding activity, not an obligation.

Start exploring early

Ideally, don’t wait until your last day of work to decide how you’ll spend your free time. Start researching volunteering opportunities in your community or online. Many organisations offer flexible, part-time opportunities, so you don’t have to dive in full force right away. There are so many options out there that can fit into your schedule.

Volunteering, however, you approach it, can open up a whole new world. Once you look for opportunities to assist others, you also enhance your own well-being in a myriad of ways. Working with other like-minded people can give you an incredible sense of community and connection, developing fantastic friendships along the way. Not to mention the sense of satisfaction you’ll feel as you learn new things and are exposed to new ideas.

Consider how you can weave volunteering into your new life. It can be a way to make your retirement truly extraordinary, while also making the world a better place.

Volunteering ideas to consider

Mentoring : Share your knowledge by helping someone in need of guidance - whether that’s through career coaching, tutoring, or life skills.
Local charities : Get involved in your community by assisting with food banks, shelters, or organising fundraisers for causes you care about.
Animal shelters : If you’re an animal lover, consider helping out at your local shelter, either by walking dogs or assisting with adoptions.
Environmental causes : Join efforts to clean up parks, plant trees, or raise awareness about environmental issues.

i https://www.apia.com.au/apia-good-life/community-relationships/value-of-volunteering.html

ii https://pmc.ncbi.nlm.nih.gov/articles/PMC7375895/

Get prepared to make tax-time easier

Mon, 09 Jun 2025 06:19:11 GMT

There are always lots of tax-related tasks to complete every EOFY, but as we move into the upcoming financial year, it is also worth getting to grips with new tax changes the Government’s election promises will usher in on 1 July, which we’ve outlined below.

New 2025-2026 tax changes

During the election campaign, the Labor government announced a number of tax changes.

These include the introduction of a standard $1,000 deduction for work-related expenses for taxpayers with labour income, a 20% reduction in HECS-HELPS debts, and an extension of the $20,000 instant asset write-off until 30 June 2026.

Legislation has already been passed to cut the tax rate for individuals and is effective from 1 July 2026. The rate for income between $18,201 and $45,000 will be reduced from 16% to 15%, with a further reduction to 14% in the following financial year.i

The government has also made it clear it intends to proceed with its draft legislation (Division 296) reducing the tax concessions for super accounts with a balance exceeding $3 million. This legislation will double the tax rate on earnings related to the portion of the balance over $3 million from 15% to 30%.

Now, let’s look at a few ways you can get prepared in the lead up to 30 June.

Start your tax preparations now

The ATO has announced its tax time hitlist, so it’s also important to check your current tax arrangements are not going to leave you vulnerable to an audit or significant penalties. The main focus for the ATO this year is work-related expense claims, investment properties and holiday home claims, and sharing economy income and cryptocurrency.i

With the ATO taking a much tougher stance on both tax reporting and payments, make sure you lodge and pay on time, or you could face penalties and interest charges. From 1 July 2025, interest paid to the ATO will no longer be tax-deductible.

Tips for businesses

Review and update all of your financial records and identify expenses that could be deductible.

You may want to make some deductible purchases prior to EOFY to help reduce your taxable income for the financial year. The small business instant asset write-off limit for 2024-25 is $20,000.ii

Also check your debtors, inventory and fixed assets, and ensure you write-off any debts that are not recoverable. Review any capital gains and losses and consider offsetting the gains with capital losses.

Check all required super contributions for employees have been made, plus any additional contributions for business owners. Ensure these contributions are received by the funds specified cut-off date to qualify for any tax deduction.iii

To-do list for personal tax

Getting your personal tax information prepared is also important, particularly given the ATO’s focus on personal deduction claims.

If you have regular deductible expenses (such as interest on investment loans and annual payments), consider prepaying them before 30 June so you can claim a deduction this financial year.

If you are likely to have personal capital gains tax obligations from the sale of assets, consider whether you should try to offset them against capital losses.

Time for some super contributions

Consider making extra personal super contributions before the financial year ends if you can.

Before making any contributions, check the total amount of both your concessional (before-tax) and non-concessional (after-tax) contributions across all your super accounts to ensure you do not exceed the annual cap limits.iv

Other super contributions to consider include personal tax-deductible contributions, contributions on behalf of your spouse and eligible contributions that could earn you a co-contribution from the government.v

If you would like to discuss EOFY preparations for either your personal tax or business, please call our office today.

i ATO unveils ‘wild’ tax deduction attempts and priorities for 2025 | Australian Taxation Office

ii Instant asset write-off for eligible businesses | Australian Taxation Office

iii Missed and late super guarantee payments | Australian Taxation Office

iv, v Caps, limits and tax on super contributions | Australian Taxation Office

Protect your SMSF savings from fraudsters

Wed, 14 May 2025 23:16:07 GMT

Recent cyber-attacks on major super funds show criminals are always looking for new ways to illegally access Australia’s growing pool of retirement savings, but it’s not just the big guys who need to worry. Smaller funds are also under threat.

Self-managed super funds (SMSFs) are being targeted both through email scams to steal personal identifying information and through schemes that encourage fund members to inappropriately access their retirement savings.

Email super scams

Both the ATO and the Australian Securities & Investments Commission (ASIC) are warning super savers about scammers using online, phone and email communications to target their super savings. ⁱ

The ATO’s latest scam alerts include cautions about emails being sent out by scammers pretending to be from the tax regulator or myGov. ⁱⁱ

The emails falsely tell people they are due to receive compensation from the ATO and ask them to reply with information such as payslips, their tax file number, driver’s licence and Medicare details.

Scammers then use the information to commit refund fraud, steal the target’s superannuation, or sell their ID to organised crime groups on the dark web.

Super scheme warnings

In addition, scammers are also offering schemes that encourage super fund members to inappropriately set up and use an SMSF.

The schemes encourage people to establish an SMSF for inappropriate and illegal reasons, such as obtaining present day benefits. They can also involve stealing the fund member’s superannuation benefit. ⁱⁱⁱ

Some schemes are designed to convince people to move their super from an APRA-supervised large super fund to an SMSF so they can access their super before a condition of release is met, or to invest their super savings into fraudulent investments.

Other schemes being offered involve property, non-concessional cap manipulation, dividend stripping, limited recourse borrowing arrangements (LRBA), personal services income, asset protection, creating multiple SMSFs and inappropriate use of reserves.

Participating in these types of schemes, risks not only losing some or all of your retirement savings, but also serious penalties including disqualification as a trustee and your SMSF being wound up.

Ask before proceeding

The ATO cautions SMSF trustees not to be tempted by ‘too good to be true’ offers and to seek independent advice from a professional with no connection to the scheme before committing.

It also emphasises the importance of considering how a super scheme may affect your SMSF and whether it contravenes the tax and super laws. This is particularly the case if the scheme includes transactions involving related parties, as this may break the rules around dealing at an arm's length basis. ^iv

If the scheme involves the SMSF purchasing business interests (such as property or a share in a business), the trustees should always check the acquisition will be at arm's length by obtaining an independent valuation prior to the transfer.

Identifying unlawful SMSF schemes

According to the ATO, unlawful SMSF schemes can often be recognised by features such as artificial or contrived arrangements with complex structures around an existing or new SMSF, or the use of seemingly unnecessary steps or transactions.

Warning signs of an SMSF scheme often include the illegal early release of super or encouraging people to set up an SMSF to use their super savings for personal purposes.

Tax avoidance schemes encouraging you to channel money inappropriately into your SMSF to avoid paying tax are also usually illegal. ^v

To avoid making an illegal investment, ensure you seek professional tax and financial advice about both establishing an SMSF and the assets in which it invests.

Reporting schemes

If you are offered an unlawful super scheme, you should reject it and report it to the ATO immediately.

You can report unlawful super schemes and their promoters to the ATO via its online tip-off form , the ‘contact us’ section of the ATO app , or by phone on 1800 060 062.

Taxpayers who disclose to the ATO that they are involved in an unlawful super scheme may be eligible for a reduction in penalties.

If you suspect that you have already been involved in a fraudulent scheme, contact us or the ATO, so we can help to correct your current position and your potential exposure to further scams.

i Superannuation scams - Moneysmart.gov.au

ii Scam alerts | Australian Taxation Office

iii SMSF schemes | Australian Taxation Office

iv How SMSFs are taxed | Australian Taxation Office

v Tax schemes | Australian Taxation Office

ATO watchlist for small business breaches

Tue, 06 May 2025 23:07:07 GMT

Pandemic-era leniency is a thing of the past and the regulator is warning small and medium enterprises (SMEs) it is keeping an eye on them.

Information is now published quarterly on the ATO’s SME focus areas webpage. The focus areas currently include - deductions and concessions, personal use of business income, operating outside the system and poor reporting habits. ⁱ

Business not personal income

Incorrect use of business money and assets is a perennial issue for the ATO, but it is reporting an increased use of business money and assets for personal purposes.

The ATO says the main area where SMEs are making errors relates to the integrity rules in Division 7A of the Income Tax Assessment Act. These rules apply when a private company attempts to provide money or other benefits to its shareholders or their associates tax-free.

According to the ATO, common errors in this area are caused by shareholders (both owners and associates) failing to understand the company is a separate legal entity and its money and assets do not belong to them and cannot be used for private purposes.

Failing to meet Division 7A requirements when making, repaying or managing loans to shareholders and associates is also attracting the ATO’s attention.

A private company making these types of loans must meet a number of requirements, including - entering into a complying loan agreement, charging interest at the benchmark interest rate , declaring the interest in the shareholders’ assessable income, and making repayments by 30 June (see Case Study). ⁱⁱ

Incorrect deductions and concessions

The ATO has also turned the spotlight onto those who incorrectly claim and offset business losses against other income sources.

Some taxpayers are claiming losses from a business activity (as either a sole trader or an individual in a partnership) where the activity is not related to their primary source of income.

Non-commercial business losses (NCL) cannot be offset against assessable income earnt from other activities in the year in which the losses are made. ⁱⁱⁱ

Operating outside the tax system

Although taxi, limousine and ride-sourcing services have been on the ATO’s hitlist for some time, there is a continuing focus on businesses operating outside the tax system.

Operators in this area must register for GST regardless of their annual turnover and ensure they collect and pay GST and income tax on all rides and other business income.

The ATO is using a range of data sources to check that all drivers register for a Tax File Number (TFN), Australian Business Number (ABN) and the Goods and Services Tax (GST).

Drivers choosing not to register or comply with GST and income tax obligations may find the ATO itself registers them for GST and backdates their registration.

Contractor income and TPRS

The ATO is also checking on contractors who incorrectly report or omit contractor income.iv

The taxable payments reporting system (TPRS) now covers building and construction, courier, cleaning, IT, road freight and security services. These businesses must now lodge a taxable payments annual report covering contractor payments. ^v

Building good habits

The final area of current focus is changing small business GST reporting from quarterly to monthly.

From March 2025, those with a history of failing to comply with their reporting obligations will receive written communications from the ATO notifying them their reporting cycle has changed to monthly.

Targets of this action will be businesses who failed to respond to previous ATO communications and who have demonstrated a poor compliance history (such as paying late or the incorrect amount, failing to lodge or lodging late, and reporting their tax obligations incorrectly).

The shorter monthly reporting cycle change is designed to embed good business habits into the targeted business by better aligning reporting with their reconciliation process. According to the ATO, some SMEs have voluntarily moved to monthly GST reporting to improve cash flow management and keep their recordkeeping accurate. ^vi

Please give us a call if you are concerned about any of these issues so that we can help you decide on the best course of action.

i Small business focus areas | Australian Taxation Office

ii Loans by private companies | Australian Taxation Office

iii What is a non-commercial loss? | Australian Taxation Office

iv Contractors omitting income | Australian Taxation Office

v Taxable payments annual report (TPAR) | Australian Taxation Office

vi Good business habits | Australian Taxation Office

5 steps towards a financially fit retirement

Wed, 30 Apr 2025 22:58:53 GMT

If retirement is just around the corner, the current financial climate may make you feel a little uneasy. Watching the markets fluctuate might leave you worrying about whether your superannuation will be enough to see you through.

It’s not a time for hasty moves, though.

If you are concerned a calm review of your current portfolio and investment strategy may be helpful.

After all, the average Australian spends around 20 years in retirement, so it’s important to create a retirement strategy that takes account not only the current market conditions but also the risks and opportunities in the years ahead.

As one of the most significant retirement assets, your superannuation needs a carefully considered assessment as you approach any new life stage.

Here are five useful tips to help ease you into the next chapter towards retirement.

Review your risk profile and portfolio allocation
Check your super portfolio's risk profile. Generally speaking, investors take a high-growth approach when they’re younger to take advantage of higher returns, however, as with normal share market cycles, there will be fluctuations in the share market. Having a long-term strategy gives you the time to recover from any market downturns before retirement. Older investors may prefer a more conservative investment strategy that can help to stabilise returns by potentially protecting super from share market volatility.
Calculate retirement expenses
Be realistic about the living expenses you’ll need when you finish working. For some, it may cost less to live in retirement because of reduced expenses such as commuting costs and maintaining a work wardrobe. On the other hand, you may plan to travel more or buy a new vehicle or renovate your home, so these expenses need to be factored in when working out how much you’ll need. According to the Association of Superannuation Funds of Australia (ASFA), the annual average budget to maintain a comfortable lifestyle in retirement is $73,077 for a couple and $51,805 for a single person. ⁱ And to maintain a modest lifestyle, ASFA estimates a couple will need $47,470 and a single person will need $32,897. Both estimates assume you already own your own home. You can find easy-to-use tools on the MoneySmart website to help you work out your budget and also estimate your income from super and the Age Pension.
Take action on mortgages and loans
Entering retirement with manageable or small levels of debt can contribute to feeling more financial stable. If you’ll still be repaying a mortgage after you’ve retired, you could consider downsizing your home or using superannuation funds to pay down the debt, keeping in mind the tax implications and ensuring that you comply with superannuation laws. If you’re considering either of these courses of action, we’d be happy to explain your options and obligations.
Check your timing
Understanding when and how you can access your super is important. You can use your super to fund your retirement when you reach “preservation age”, which is from age 60. You can also use your super to begin a transition to retirement income stream (TRIS) while continuing to work. ⁱⁱ Alternatively, if you continue working beyond preservation age, you can withdraw your super once you turn 65. There are also some circumstances in which you can access your super early such as illness and financial hardship, however, eligibility requirements do apply. ⁱⁱⁱ
Decide how to withdraw your funds
You may be able to withdraw your super in a lump sum, if your fund allows it. This could be the entire amount you have invested, or you could receive regular payments. If you ask your fund for regular payments (paid at least once a year), it is known as an income stream and your super account transitions from the accumulation phase - where contributions are made - to a pension. There are minimum withdrawals that you must make once you commence an income stream from super. For example, for those aged under age 65, a minimum annual withdrawal of 4 per cent of your super balance is required and this drawdown rate increases as you get older. ^iv

There is a lot to think about as you approach retirement, so if you’d like to discuss your retirement income options, please give us a call.

i ASFA Retirement Standard, December 2024 - The ASFA Retirement Standard - ASFA

ii Super withdrawal options | Australian Taxation Office

iii When you can access your super early | Australian Taxation Office

iv Payments from super, April 2025 - Payments from super | Australian Taxation Office

Retiring with debt?

Wed, 26 Mar 2025 01:42:20 GMT

About 36% of homeowners still have a mortgage when they retire, up from 23% a decade ago. This increase in mortgage debt is due to soaring property prices, changes in retirement ages and easy access to drawdown equity loans (where you use your home as security to get a loan, which can be used to fund travel, medical costs and other expenses).

Option 1: keeping the home and the debt

If you keep the family home in retirement, you get to own a property and can still receive the age pension .

For example: Jackie has a home worth A$2 million with a $200,000 mortgage. She also has $800,000 in superannuation. She is 67 but is not eligible for the age pension because her assessable assets – her super – is above the $695,500 cut off.

If Jackie takes $200,000 from her super and repays the outstanding mortgage debt, she will save on interest and principal repayments for the next ten years. She will also reduce her assessable assets by $200,000. This makes her eligible for a part pension.

So while Jackie has less super, she gets to receive a pension and gets all the subsidies associated with being a pensioner.

Option 2: downsizing to clear the debt

Downsizing can extinguish any remaining debt, and can free up money for holidays, restaurants and the good life in retirement. It also enables a move to a more age-friendly home or apartment.

And the government does provide a superannuation incentive via the downsizing contribution .

This allows homeowners over 55 who have lived in their home for more than ten years to make a one-off contribution of $300,000 (singles) and $600,000 (couples) to their super, using money from the sale of their home.

But when a person reaches pension age, currently 67, any money in super will be included in the government’s assessment of your financial assets and income. It could mean you don’t qualify for a pension or pensioner subsidies.

Of the approximately 2.6 million who receive a part or full the age pension, only 78,000 people have taken up this initiative. That begs the question if this option really does create a true financial downsizing incentive.

Think again of Jackie, the woman with the $2 million home and the $200,000 in mortgage debt. Say she decides to sell her home and move to a smaller house close to family and friends. This will incur about $40,000 in selling and marketing fees, and stamp duty of around $62,000 on her new $1.4 million apartment.

Downsizing leaves her with $1.1 million in financial assets (after transaction costs), which means that Jackie is not eligible for the pension.

While she’ll be able to fund a comfortable lifestyle, this decision to downsize may not be as attractive as keeping the house.

The decision to sell and move has cost her an extra $100,000 in transaction costs and her pension.

So, people need to think carefully about downsizing. It can allow people to move closer to children, grandchildren, and the services they need – but these should be balanced against the financial implications.

What about renters?

Paying market rent while on a fixed income can be very hard, so renting is a challenge for retirees.

According to the 2021 census , women aged 55-64 and those over 65 are among the fastest-growing groups experiencing homelessness.

The good news is many profit and not-for-profit retirement communities provide rental models and discounted entry contributions to residents with limited means (but there are often waiting lists).

Retirement village residents may also be eligible for rent assistance depending on their circumstances.

Rent assistance is an extra $5,751 per year in social security benefits and provides extra financial support to eligible age pension recipients .

Retirement communities provide vulnerable older Australians a unique opportunity to move into a community under a leasehold or licence agreement. More than 260,000 senior Australians live in about 2,500 retirement communities across the country.

While a retirement village may not be the first option for many retirees, they can provide affordable accommodation.

Making the best choice

Navigating housing decisions as you approach retirement means balancing financial, emotional, and lifestyle considerations.

Homeowners retiring with a mortgage face a choice: keep their home or downsize to alleviate debt.

Keeping the home and accessing super to pay the outstanding debt improves cash flow and allows you to keep your biggest asset.

Downsizing helps eliminate debt and boosts the super balance, but comes with extra transaction costs (and you may end up with less pension, or none at all).

Seeking professional financial advice is crucial, so contact us today if you have any questions regarding downsizing or the Age Pension eligibilty.

Source: https://theconversation.com/retiring-with-debt-experts-explain-downsizing-using-super-for-your-mortgage-and-pension-eligibility-240679

Federal Budget 2025-26: Spotlight on tax

Tue, 25 Mar 2025 22:41:04 GMT

In the shadow of an upcoming election, Jim Chalmers’ fourth Budget delivered small but unexpected tax cuts for all Australian taxpayers.

The modest cuts were delivered against a backdrop of growing economic uncertainty, with the treasurer emphasising the need for national resilience in the face of rapid global change.

Tax cuts for everyone

In a surprise revelation, the treasurer announced two new tax cuts in the 2025 Budget.

The first is a cut in the lowest personal income tax rate, which covers every dollar of a taxpayer’s income between $18,201 and $45,000. The current 16% rate will reduce to 15% in 2026-27 and be lowered again to 14% from 1 July 2027.

According to the government, the reduction will take the first tax rate down to its lowest level in more than half a century. Combined with the 2024 tax cuts, an average earner will be paying $2,190 less in 2027-28 compared with 2023-24.

The second tax cut is an increase of 4.7% to the Medicare low-income threshold for singles and families. This means the Medicare Levy will not kick in until singles earn $27,222, rather than the current $26,000 level. The threshold for families will rise from $43,846 to $45,907, while single seniors and pensioners will have their threshold increase from $41,089 to $43,020.

Energy relief for small business and households

The Budget also provided small businesses and households with a welcome additional energy bill rebate to cope with the burden of high energy costs.

Around one million eligible small businesses will receive an additional $150 directly off their energy bills from 1 July 2025. This will extend the government’s energy bill relief until the end of 2025, as the previous rebate scheme was due to end on 30 June.

Abolition of non-compete clauses and licensing reform

Some businesses may be less pleased with the Budget announcement of a planned ban on non-compete clauses covering low- and middle-income employees leaving for another business or to start their own.

Competition law will be tightened to prevent businesses making arrangements that cap workers' pay and conditions without their knowledge or agreement, or that block them from being hired by competitors. The government claims this will increase affected employees’ wages by up to 4% as they will be able to move to more productive, higher-paying jobs.

Work will also begin on a national occupational licence for electrical trades, which is intended to provide a template for other industries where employees are currently restricted from working across state and territory borders.

Beer excise freeze

Government support for the hospitality sector and alcohol producers was also announced in the Budget.

Indexation of the draught beer excise and excise equivalent customs duty rates will be paused in a measure costing about $165 million over five years.

Strengthening competition law

Small business will benefit from the government’s decision to work with the states and territories to extending unfair trading practices protections to small businesses.

Over $7 million will be provided over two years to strengthen the Australian Competition and Consumer Commission’s enforcement of the Franchising Code.

Subject to consultation, protections from unfair contract terms and unfair trading practices will be extended to all businesses regulated by the Franchising Code.

Supporting Australian businesses

Local companies will also benefit from $20 million in additional support for the Buy Australian Campaign, which encourages consumers to buy Australian-made products.

The Budget further supported local businesses with $16 million in funding for a new Australia-India Trade and Investment Accelerator Fund.

Additional ATO tax compliance funding

The ATO will be happy, with the 2025 Budget providing $999 million over the next four years to extend and expand its tax compliance activities.

This includes additional funding for the shadow economy and personal income tax compliance programs, together with $50 million from 1 July 2026 to ensure the timely payment of tax and unpaid super liabilities by businesses and wealthy groups.

The federal government has slashed the popular instant asset write-off scheme for 2025-26, ending the current $20,000 asset threshold and putting the policy’s future in serious doubt.

Information in this article has been sourced from the  Budget Speech 2025-26  and  Federal Budget Support documents .

It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.

How to master FBT compliance

Tue, 18 Mar 2025 23:00:55 GMT

Preparing for the Fringe Benefits Tax (FBT) year-end is never a walk in the park and, with the ATO now using increasingly sophisticated data matching programs, it is more important than ever to get your return right.

As part of the ATO’s post-pandemic campaign to improve taxpayer compliance and payment of tax debts, the ATO is using data matching tools to check whether businesses should be reporting employee fringe benefits and paying tax on them.(i)

As a small business owner, you shoulder full responsibility for accurately calculating the taxable value of all fringe benefits, lodging the FBT return, paying any required tax, and reporting fringe benefits on an employee’s payment summary if the individual benefits exceed $2,000.(ii)

Areas to check in your FBT return

Vehicle benefits are a continuing source of mistakes when it comes to FBT returns. The ATO is particularly interested in commercial vehicles (mainly dual cab utes) provided to employees. Many employers wrongly believe these vehicles are fully FBT-exempt. But an exemption only applies where private use of the vehicle is minor and infrequent. Check out this article for more information on why the ATO is flagging this area.

Dining and EV benefit rules

Entertainment and in-house dining fringe benefits are another area where it’s easy to be caught out.

Ensure you have detailed records related to these types of benefits (including any contributions made by employees) and check the benefits provided have met the 'minor and infrequent' rule.

Also keep an eye on the implications of new rules covering electric vehicle (EV) benefits.

Getting employees to play their part

To simplify the process of putting your FBT return together, it helps if your employees play their part.

For example, encourage employees who use salary packaging to spend all of their available annual balance before 31 March to avoid the headache of unspent or claimed benefits rolling over into the next FBT year.

If employees do not use their unspent balance, it still needs to be reported and deducted from their cap limit in the new FBT year, which can create additional paperwork.

Employee declarations

If you plan to use the FBT exemptions and concessions on offer, you may also need to obtain detailed records from your employees (such as travel diaries, logbooks, declarations and odometer records).(iii)

Any change in car usage due to a new work role needs to be noted and the business use percentage adjusted, or a new logbook started.

Start collating this information as early as possible to simplify the calculation and lodgement process.

Meeting the lodgement deadline

Unlike the normal tax year, the FBT year ends on 31 March, with the 21 May lodgement and payment deadline giving you only a short window to get your paperwork in order. If you lodge with an accountant the deadline is 25 June.

You need to determine the taxable value of the different fringe benefits your employees have received during the year, calculate the tax you need to pay and collect any required employee declarations.

All employee declarations must be obtained by the time your FBT return is due to be lodged. Even if you do not have to lodge a return, you must have the declarations by 21 May.

We can help with any questions you may have and assist you with preparing your FBT return. We also have a comprehensive Factsheet here.

(i) Addressing collectable tax debt – Tax Institute's Tax Summit 2023 | Australian Taxation Office

(ii) Reportable fringe benefits | Australian Taxation Office

(iii) Employee declarations | Australian Taxation Office

Sole trader? Smash your business goals

Tue, 18 Mar 2025 22:51:22 GMT

It sounds like an odd question to ask in March, but did the start of the financial year sneak up on you? Join the club!

While everyone talks about July 1st as the big reset button in business, let’s be honest — the new financial year probably came and went, and your grand plans for getting your business finances and other elements sorted didn’t quite happen.

Between juggling customers and actually running your business, sometimes those many financial, sales, marketing, and admin housekeeping tasks slip through the cracks. But here’s the good news: it’s never too late to get your business firing on all cylinders. Now is actually the perfect time to give your business that fresh start you’ve been promising yourself.

So let’s get your business firing on all cylinders faster by taking a look at some top ways to smash through this year.

First things first: where are you at?

Before diving into any changes, take a good hard look at your current situation. Don’t worry — this doesn’t have to be scary! Pull up your profit and loss statement, check your cash flow, and have a peek at those forgotten receipts in your phone’s camera roll.

Another thing: when was the last time you actually reviewed and updated your prices? Take a good look at your pricing structure and determine if you’re still making enough margin, or if increasing costs have been eating away at your profits and it’s time for a price increase. The clearer picture you have of where you’re at, the better decisions you can make moving forward.

“It’s important to regularly keep an eye on how you’re tracking to be able to see early indicators of underperformance,” says Beth Dowsett, a Product Marketing Manager for SMEs at MYOB. “Doing so helps you to stop big problems before they hit your P+L (profit and loss statement).

Get your financial house in order

Remember all those things you promised yourself you’d sort out in July? Well, now’s your chance. Start with the basics and get your bookkeeping up to date. This isn’t just about keeping the ATO happy but about knowing exactly where your business stands. If you’re still using spreadsheets or that old shoebox system, it’s time to check out the many user-friendly features of MYOB’s accounting software solutions. You also need to chase up any outstanding invoices that have been lingering. The time you invest in getting up to date now will pay dividends throughout the coming year. “Your data is only as good as your data entry,” says Beth. “If you’re relying on reporting to know what your financial position is then you need to automate your data entry to keep that reporting accurate. Tools like automated bank feeds, and email invoice imports mean you do less admin while your reporting stays up to date.”

Use systems to make your life easier going forward

Let’s talk about working smarter, not harder. Set up some simple systems now, and you’ll thank yourself later. Good systems will make your life easier not more complicated.

Consider:

Setting up automatic bank feeds within your accounting software
Creating clear, effective, branded templates for your invoices and quotes
Getting a separate business credit or debit card if you haven’t already
Setting up recurring reminders for regular financial tasks
Looking at your customer service workflow to see if enquiries ever fall through the cracks and using tech tools to manage this better
Reviewing your project management tools and communication channels and consolidating into one or at least fewer systems

Sometimes a few small tweaks to existing processes can make a world of difference to your daily operations. Solo by MYOB is the all-in-one app for sole traders, freelancers, and the self-employed that frees you up to do what you do best. Get the time back to focus on what truly matters to you.

The power of professional help

Here’s the thing — you really don’t have to do this “business thing” alone. If numbers aren’t your strong suit (and let’s face it, for many of us they’re not), there’s absolutely no shame in calling in the experts. A good bookkeeper or accountant can help you not just get organised, but also spot opportunities you might be missing. Use this time to think about the support you’ll need over the coming year and budget for it.

Have a digital clean-up

Your online presence might need more attention than you realise, so don’t delay in doing a digital clean-up where needed. Take a fresh look at your website, where those COVID notices from 2020 aren’t relevant anymore, and your “latest” blog post from 18 months ago isn’t doing you any favours. Your social media profiles might need a refresh to reflect your current offerings and brand messaging, too. It’s also worth checking if your online business listings are up to date across all platforms. Plus, your venture’s cybersecurity deserves special attention. While you’re at it, take a look at all those software subscriptions you’re paying for and decide if you’re really getting value from each one.

Marketing makeover

If you’re still running the same marketing playbook you’ve been using for years, it’s time for a fresh look. Dig into your marketing metrics and honestly assess what’s working and what’s just eating up your budget. Your customer personas might need updating, too. Are they still an accurate reflection of who’s actually buying from you? Start planning fresh content for the new year that will genuinely engage your audience. Consider experimenting with that new marketing channel you’ve been curious about, as well, but make sure you can measure the results.

Your action plan starts today

The best time to start with a business reset was July 1st, but the second-best time is right now. Don’t let perfect be the enemy of good — even small steps in the right direction will make a difference.

Start with one thing today, maybe another tomorrow, and before you know it, you’ll be wondering why you didn’t do this sooner. Remember, every successful business owner has been where you are now. The difference between staying stuck and moving forward is simply taking that first step.

Source: MYOB February 2025

Reproduced with the permission of MYOB. This article by Kellie Byrnes was originally published at https://www.myob.com/au/blog/sole-trader-smash-your-business-goals-in-2025/

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Master your employer obligations in 2025

Tue, 18 Mar 2025 22:38:23 GMT

If you employ staff, here are the important dates and obligations to remember throughout the year, to set yourself up for success.

Super guarantee (SG)

28 April, 28 July, and 28 October are the quarterly due dates for making SG payments .
The SG rate is currently 11.5% of an employee’s ordinary time earnings.
Ensure SG for your eligible employees is paid in full, on time and to the right super fund. If you don’t, you'll need to lodge a super guarantee charge (SGC) statement and pay the SGC to the ATO.

Fringe benefits tax (FBT)

31 March 2025 marks the end of the 2024–25 FBT year. There are 4 key steps to nail your obligations for FBT tax time .

Identify if you've provided a fringe benefit.
Determine the taxable value to work out if you have an FBT liability.
Lodge an FBT return and pay any FBT owed (if you have a liability) by 21 May 2025. If your registered tax agent lodges electronically for you, you have until 25 June 2025.
Keep the right records to support your FBT position.

Pay as you go (PAYG) withholding

You need to withhold the right amount of tax from payments you make to your employees and other payees, and pay those amounts to the ATO.

This helps your employees meet their end-of-year tax liabilities.

Your accounting or payroll software, the ATO tax tables or the ATOs online tax withheld calculator will help you do this.

Single touch payroll (STP)

Finalise your STP data by 14 July 2025 for the 2024–25 year.

This ensures your employees have the right information they need to lodge their income tax returns.

If you have any closely held payees, you may have a later due date for those payees only. Remember to finalise all employees you’ve paid in the financial year.

You can also check out our range of resources for employers .

Remember, we can help you with your tax and super obligations.

Source: ato.gov.au February 2025

Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/businesses-and-organisations/small-business-newsroom/master-your-employer-obligations-in-2025

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Turbocharge your super before 30 June

Thu, 13 Mar 2025 23:02:25 GMT

More than half of us set a new financial goal at the beginning of 2025, according to ASIC’s Moneysmart website. While most financial goals include saving money and paying down debts, the months leading up to 30 June provide an opportunity to review your super balance to look at ways to boost your retirement savings.

What you need to consider first

If you have more than one super account, consolidating them to one account may be an option for you. Consolidating your super could save you from paying multiple fees, however, if you have insurance inside your super, you may be at risk of losing it, so contact us before making any changes. ⁱ

How to boost your retirement savings

Making additional contributions on top of the super guarantee paid by your employer could make a big difference to your retirement balance thanks to the magic of compounding interest.

There are a few ways to boost your super before 30 June:

Concessional contributions (before tax)

These contributions can be made from either your pre-tax salary via a salary-sacrifice arrangement through your employer or using after-tax money and depositing funds directly into your super account.

Apart from the increase to your super balance, you may pay less tax (depending on your current marginal rate). ⁱⁱ

Check to see what your current year to date contributions are so any additional contributions you may make don’t exceed the concessional (before-tax) contributions cap, which is $30,000 from 1 July 2024. ⁱⁱⁱ

Non-concessional contributions (after tax)

This type of contribution is also known as a personal contribution. It is important not to exceed the cap on contributions, which is set at $120,000 from 1 July 2024. ^iv

If you exceed the concessional contributions cap (before tax) of $30,000 per annum, any additional contributions made are taxed at your marginal tax rate less a

15 per cent tax offset to account for the contributions tax already paid by your super fund.

Exceeding the non-concessional contributions cap will see a tax of 47 per cent levied on the excess contributions.

Carry forward (catch-up) concessional contributions

If you’ve had a break from work or haven’t reached the maximum contributions cap for the past five years, this type of super contribution could help boost your balance – especially if you’ve received a lump sum of money like a work bonus.

These contributions are unused concessional contributions from the previous five financial years and only available to those whose super accounts are less than $500,000.

There are strict rules around this type of contribution, and they are complex so it’s important to get advice before making a catch-up contribution.

Downsizer contributions

If you are over 55 years, have owned your home for 10 years and are looking to sell, you may be able to make a non-concessional super contribution of as much as $300,000 per person - $600,000 if you are a couple. You must make the contribution to your super within 90 days of receiving the proceeds of the sale of your home.

Spouse contributions

There are two ways you can make spouse super contributions, you could:

split contributions you have already made to your own super, by rolling them over to your spouse's super – known as a contributions-splitting super benefit, or
contribute directly to your spouse's super, treated as their non-concessional contribution, which may entitle you to a tax offset of $540 per year if they earn less than $40,000 per annum

Again, there are a few restrictions and eligibility requirements for this type of contribution.

Get in touch for more information about your options and for help with a super strategy that could help you achieve a rewarding retirement.

i Transferring or consolidating your super | Australian Taxation Office

ii Salary sacrificing super | Australian Taxation Office

iii Concessional contributions cap | Australian Taxation Office

iv Non-concessional contributions cap | Australian Taxation Office

How to reduce costs and improve profitability

Tue, 11 Mar 2025 06:06:53 GMT

Cutting costs is arguably the quickest and easiest way to improve the profitability of your business. Introducing a cost-control system can bring immediate savings and ensure that you remain competitive in the longer term.

Systematic cost control

Start by identifying your major cost centres. These may be purchasing, production, sales and marketing, finance and administration. Assess your profit and loss statement for the last six months and rank all your expenses from highest to lowest then start working your way down, identifying areas where you could save costs.

Focus on applying cost-saving tactics in areas where you’ll see the most reward, for example:

Can you save on wages by outsourcing some work, or employing someone on a part-time basis rather than full-time?
If insurance costs are high, try searching for a new, cheaper supplier.
Other costs such as long-term fixed rate business loans or fixed price contracts for raw materials are hard to control in the short term. However, make a note of when these are up for renewal and plan to tender out to suppliers.

Comparing actual costs with budgets

Record your actual costs and compare them with the amount allocated in your budget. Try to work out why there is a discrepancy between what you planned to spend and what you actually spend. The larger the cost overrun, the more scope there should be for savings.

Actual costs that are higher than your budgeted costs usually indicate room to reduce costs. Lower costs may indicate good management, but might also reflect a drop in quality or potential problems.

A spreadsheet is an easy way to record and compare costs on a regular basis, such as monthly. Periodically review what you’re doing and how you’re doing it.

Benchmarking your business against other similar businesses may show that your performance is sub-standard. For example, your wastage levels might be higher than the industry average. This is an opportunity to implement cost-saving solutions and to set goals.

Who should be involved?

If possible make each cost the responsibility of one person or manager. Some costs will be easier to control if one person is responsible for that cost throughout the business. Get your employees involved in cost control. Give them an incentive to suggest cost-saving ideas and ask what causes them problems or wastes their time.

Employees are more likely to co-operate with cost-control initiatives if you explain the reasons for changes and they understand the benefits to the business.

Include your customers and suppliers. Once suppliers are aware you’re watching costs, they may start sharpening their pencils, especially if they know the other purchasing options available to you.

Talk to your customers as you may be able to save costs by eliminating unnecessary features or frills.

Some easy savings

There are some costs that can be reduced with little risk of an adverse impact on quality and performance. Some quick savings are:

Carefully checking supplier invoices for overcharging. Common examples are double billing, incorrect charges and missing discounts.
Eliminating unnecessary costs. Get rid of obvious overcapacity such as unused telephone lines and computers on after hours.
Measuring the return on all advertising so you can eliminate what doesn’t work.
Finding alternatives to high-priced suppliers, or negotiating discounts and better payment terms.
Avoiding over-specifying, such as high-quality components for a low-quality product.
Eliminating inefficiency. Identify manual, paper-based systems that could be computerised.
Avoiding making frequent small orders. They waste time and may mean you miss out on bulk buy discounts.

Other saving opportunities

Taking a systematic approach to all your costs should highlight other opportunities to control costs. In many cases, reducing costs will require you to change the way you do things but be aware of the potential to risk to your core business activities:

Reduce payroll costs by outsourcing activities.
Redesign processes to eliminate duplication of effort and time.
Make more use of technology and automation.
Consolidate purchasing with fewer suppliers to get better discounts and build strong relationships.
Agree to long-term supply contracts or annual purchase volumes in return for lower prices and negotiate longer payment terms.
Trim back your product range and increase production runs.
Meet with your business banker to review your finances and reduce interest costs.
Get the most out of your premises by sub-letting spare space.
Cut the cost of communications and travel by using email, internet calls (such as Skype) or teleconferencing whenever possible.

Potential pitfalls

Reducing costs can have a negative effect so before you make any changes, check that your standards will not be compromised, and that your ability to meet objectives will not be harmed.

Almost every cost saving has a potential downside. For example:

Over-dependence on one supplier puts you at risk if the supplier fails.
Production and marketing plans driven by cost-cutting considerations are less likely to be responsive to customer requirements.
Tighter control of financing may leave you with no safety margin when cash flow is unexpectedly poor. Contact your business banker to ensure you have some financing options.
Cutting short-term ‘investment’ costs such as training, advertising, equipment or new product development can lead to long-term weaknesses.

Your employee costs

Reducing costs when it will directly impact on employees is a difficult challenge. For instance, reducing training and meeting times is often counterproductive in the long-term.

Poor work conditions, pay and benefits will also not attract and retain quality employees and will de-motivate employees who do stay. Changing an existing employee’s terms and conditions to the employee’s detriment can be a breach of your legal obligations as an employer, so get expert advice first. It may also damage long-term morale. On the other hand, introducing improved procedures can be difficult and expensive. Employees may be resistant to change and may need extra training.

Speak to your advisers

Finally, you can speak to us.

We typically deal with many businesses and are in a strong position to help you identify and monitor ‘cost culprits’ and suggest ways to lower costs and improve business profits.

Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/business/small-business/moments/manage/cash-flow-tax/reduce-costs
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
© 2025 National Australia Bank Limited ("NAB"). All rights reserved.
Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Granny flats: tax traps and tips

Mon, 10 Feb 2025 02:24:49 GMT

With more older Australians looking to downsize and younger generations looking to get a foot on the property ladder, building a granny flat or a second dwelling in your backyard has become a more affordable solution.

In 2023, CoreLogic analysis of residential properties in Sydney, Melbourne and Brisbane found more than 655,000 sites suitable for constructing a granny flat.i

It has become such a popular option that there are now a host of businesses providing modular buildings as an alternative to designing and building your own.

Before taking the leap, make sure you have checked out local council regulations, restrictions and permit costs. Rules vary from council to council and usually include restrictions on the size and location.

Tax implications

It’s also important to know there are potential tax consequences – particularly capital gains tax (CGT).

While, for some, a granny flat may be considered a secondary dwelling on a property, to be eligible for a CGT exemption, there needs to be a written agreement giving someone the right to occupy a property for life.ii

The agreement can be entered into with any party – including family and friends – and will be exempt from CGT, provided the person with the ‘granny flat interest’ has reached pension age, or requires assistance with their day-to-day activities because of a disability.

Granny flat or investment property?

There are important differences between a granny flat arrangement and building a secondary dwelling on your property as an investment or renting out a room in your home.

A second home on a property that is used for short or long-term rental purposes is considered a commercial arrangement and the rent you receive is assessable income, on which you pay income tax on at your marginal tax rate.

Like most income-producing activities, you are entitled to claim the normal expense deductions against the rental income.

Granny flat arrangements, on the other hand, must not be a commercial arrangement.

Capital gains

Capital gain can be an issue that needs to be considered when setting up a granny flat arrangement. If you don’t follow the rules, you may find yourself with an unexpected tax bill when you eventually sell your home.

Usually, a granny flat arrangement is exempt from CGT provided it is not commercial in nature.

This means if the person living in the granny flat is required to make payments (such as rent) at a market rate, CGT will apply. If the individual only contributes to ongoing household costs (such as electricity and water) however, the ATO is unlikely to consider it a commercial arrangement.

To qualify for the CGT exemption, the property owner must be an individual, one or more individuals must have an eligible granny flat interest in the property, and both parties must have entered into a written and binding granny flat arrangement.

The CGT exemption only applies to creating, changing or terminating a granny flat arrangement.

Other CGT events unrelated to a granny flat arrangement, or outside the arrangement, are subject to normal CGT rules and may be liable for CGT. For example, the sale of a property previously used in a now terminated granny flat arrangement is still subject to the normal CGT rules.

Tips for a successful arrangement

While adding another dwelling to your property may increase the value of your home, it’s essential to get all the parties together to consider possible future scenarios before the written agreement is signed to avoid any potential problems further down the track.

The agreement should cover everyone involved in the arrangement, the circumstances in which the agreement can be varied or terminated and what happens if this situation arises.

It’s also sensible to discuss how any problems or financial conflicts will be resolved, including any implications with Services Australia if receiving the pension and please seek professional legal advice before signing.

We can help explain the tax rules if you’re interested in setting up a granny flat arrangement, so call our office today.

i Untapped granny flat potential in largest capitals could boost housing supply | CoreLogic Australia

ii Granny flat arrangements and CGT | Australian Taxation Office

Thinking about an SMSF? Here’s what you need to know

Mon, 10 Feb 2025 01:32:30 GMT

Some investors find it satisfying to take a do-it-yourself approach to retirement savings – taking on the responsibility for the growth of their retirement savings in a self-managed superannuation fund (SMSF).

While you have total control over how your retirement funds are invested within the confines of the laws, many factors need to be considered first.

Before taking the plunge, weigh up the risks and rewards by understanding the various super and tax laws, check out the costs involved as well as the level of administration required and start considering your investment strategy.

What you need to know

Setting up an SMSF can be a complex and time-consuming process and there are quite a few regulations and rules that you need to be familiar with before setting up an SMSF. Therefore, seeking professional advice can be beneficial to get your SMSF off on the right foot so it qualifies for the tax concessions available through the super system. We can assist to ensure your SMSF is set up correctly in the first instance to ensure you are eligible for the tax concessions and it is easier to administer throughout the year.

The advantages of an SMSF

A SMSF offers several advantages, particularly for individuals who want more control over their retirement savings and investments. Some of the key pros of having an SMSF include:

Investment control - SMSF members have complete control over their investments, you decide where to invest and when assets are disposed. You could also incorporate in property as part of your portfolio.
Estate planning - SMSF members can set up binding death benefit nominations to specify how their superannuation will be distributed after they pass away.
Asset protection - SMSFs can protect members from bankruptcy and litigation, and their superannuation benefits are usually protected from creditors.
Diversification - An SMSF has greater access to investment options and a diversified SMSF portfolio could reduce risk and improve returns over time. Speaking to your accountant or financial adviser can help to ensure you are well-diversified.
Tax advantages - SMSFs have one of the lowest tax rates in Australia. Other tax credits can help to further reduce the tax rate.
Lower costs - Running your own SMSF can have lower ongoing costs, especially for larger funds.
Lump sum payments - SMSF can pay benefits as a lump sum, a pension or a combination if the payment is under the laws and the trust deed.

The disadvantages of an SMSF

While there are several benefits to having an SMSF, there are also some drawbacks and challenges. Here are some of the main things to consider:

Responsibility and learning - Trustees must understand and comply with legal and financial requirements.
Cost - SMSFs can be expensive to set up and maintain, especially for SMSFs with smaller balances.
Time and effort - Running an SMSF requires a significant amount of time, effort, and expertise. Engaging with your accountant or financial adviser for assistance and ongoing support can help to ease the burden.
Risk - SMSFs are not guaranteed by the government, and investment returns are not guaranteed. If you lose money, you won’t have access to the government compensation scheme.

Is an SMSF right for you?

Setting up an SMSF is worth the time for those who want greater control over their retirement savings, however before you start, you need to consider whether you are comfortable taking on the responsibility of making investment decisions and if you will have the time to manage the ongoing administration tasks associated with it.

Get professional help

Establishing and running an SMSF is not something you can do easily without professional assistance. Many of the legal and regulatory requirements are complex and must be adhered to ensure the fund is compliant. These requirements are also regularly updated or changed so you’ll need to keep an eye on any new obligations.

Many trustees need help with the day-to-day running of the fund and to meet its ongoing reporting and administrative obligations.

If you are considering setting up an SMSF, give us a call. We can help you decide whether an SMSF is right for you and assist you with the set-up and administration of the fund if you decide to proceed.

The benefits of automating your personal finances

Fri, 07 Feb 2025 01:25:52 GMT

In today’s fast-paced world, where every minute counts, managing personal finances can feel like another tedious task. However, thanks to the rise of personal finance automation, managing these tasks, can now be handled with minimal effort on your part.

Whether you’re a professional, a business owner or someone who is busy and looking to streamline your personal financial life, it makes sense to automate.

Save time

One of the biggest advantages of automating your finances is the time it saves you. Instead of manually paying bills, tracking spending, or worrying about due dates, automation takes care of these tasks for you.

Prevent late payments and penalties – and mistakes!

One of the most common pitfalls of personal finance management is missing the due date of your bill payments. Whether it’s your rent, mortgage, or utility bills, setting up automatic payments ensures that deadlines are always met, and penalties or late fees are avoided.

Managing your finances manually can often lead to mistakes, whether it’s miscalculating a bill, forgetting to budget for a specific expense, or accidentally double paying an invoice. Automation helps eliminate human errors, ensuring that all your financial tasks are completed accurately.

Keep your finances on track

Automated tools can also track your spending habits, categorise your expenses, and provide insights into your financial behaviour. This can be particularly helpful for budgeting, allowing you to see where your money is going and make informed decisions about your spending habits and saving.

Getting started

The good news is that personal finance automation doesn’t have to be complicated. Here are a few simple tips to help you get started:

Automate your bill payments

Start by setting up automatic payments for your regular bills; such as utilities, rent or mortgage and credit cards. Most service providers offer online payment portals where you can link your bank account, debit, or credit card and set up recurring payments. You can schedule them to occur on specific dates each month, ensuring that everything is paid on time.

You can also use apps like GetReminded to receive reminders when contracts are set to expire such as utility bills and insurance and some even enable comparisons with providers, making it easier to shop around.

Make it easier to get ahead

Budgeting apps like Mint, YNAB, or PocketGuard can enable you to create a spending plan. These apps automatically sync with your bank and credit card accounts, categorising your spending and tracking your progress against your financial goals. Once your budget is set, automate your savings by scheduling regular transfers to a savings account or investment portfolio.

Apps like Qapital or Digit can help you set up automated savings that round up your purchases or take a small percentage of your income and save it for you. Even saving just $20 a week automatically can add up over time, and you probably won’t even miss the money!

Set up alerts and track your progress

Most of the major banks also have apps that can be used for a variety of financial services. Use your banking app or personal finance tool to set up alerts for when your balance hits a certain threshold or when you exceed your budget for a specific financial category. This will keep you informed and allow you to adjust as needed. Additionally, tracking your progress over time will give you a clear sense of achievement and motivate you to stick to your financial goals.

Prepare for tax time

Of course, we are always about being as organised as possible for tax time and finance automation can be your friend when it comes to having to substantiate any tax claims.

The ATO app myDeductions can help you keep your tax records organised. It allows you capture information on the go, making tax time easier. The myDeductions app can record work-related expenses for your car travel, uniform, self-education, bank interest, and dividends. You can also email your records to us!

Personal finance automation is one of the easiest ways to simplify your financial life and give you more time to focus on what matters most to you. Start small, and before you know it, you’ll have a financial system that works for you, not the other way around.

How to financially ease into retirement

Thu, 06 Feb 2025 01:21:45 GMT

Deciding when to retire is a big decision and even more difficult if you are concerned about your retirement income.

The average age of Australia’s 4.2 million retirees is 56.9 years but many people leave it a little later to finish work with most intending to retire at just over 65 years.i

If you’re not quite ready to retire, a ‘transition to retirement’ (TTR) strategy might work for you. It allows you to ease into retirement by:

supplementing your income if you reduce your work hours, or
boosting your super and save on tax while you keep working full time

The strategy allows you to access your super without having to fully retire and it is available to anyone 60 years or over who is still working.

Working less for similar income

The strategy involves moving part of your super balance into a special super fund account that provides an income stream. From this account you can withdraw funds of up to 10 per cent of your balance each year.

As you will still be earning an income and making concessional (before-tax) contributions to your super, this approach allows you to maintain income during the transition to full retirement while still increasing your super balance, as long as the contributions continue.

Note that, generally speaking, you can’t take your super benefits as a lump sum cash payment while you’re still working, you must take super benefits as regular payments. Although, there are some exceptions for special circumstances.

Take the example of Alisha.ii Alisha has just turned 60 and currently earns $50,000 a year before tax. She decides to ease into retirement by reducing her work to three days a week.

This means her income will drop to $30,000. Alisha transfers $155,000 of her super to a transition to retirement pension and withdraws $9,000 each year, tax-free. This replaces some of her lost pay.

Income received from your super fund under a TTR strategy is tax-free but note that it may affect any government benefits received by your or your partner.

Also, check on any life insurance cover you have under with your super fund in case a TTR strategy reduces or stops it.

Give your super a boost

For those planning to continue working full-time beyond age 60, a TTR strategy can be used to increase your income or to give your super a boost.

To make it work, you could consider increasing salary sacrifice contributions into your super then using a TTR income stream out of your super fund to replace the cash you’re missing from salary sacrificing.

In another example, Kyle is 60 and earns $100,000 a year. He intends to keep working full-time for at least another five years. Kyle transfers $200,000 from his super to an account-based pension so he can start a TTR strategy then salary sacrifices into his super.

This will reduce his income tax, but also his take-home pay. So, he tops up his income by withdrawing up to 10 per cent of his TTR pension balance each year.iii

A TTR strategy tends to work better for those with a larger super balance, a higher marginal income tax rate and those who have not reached the cap on concessional contributions.

Nonetheless, it can still be useful for those with lower super balances and on lower incomes, but the benefits may not be as great.

Some things to think about

TTR won’t suit everyone. For example, be aware that you cannot withdraw more than 10 per cent of your super balance each year.

Also, if you start withdrawing your super early, you will have less money when you retire.

The rules for a TTR strategy can be complex, particularly if your employment situation changes or you have other complicated financial arrangements and investments. So, it’s important to seek professional advice to make sure it works for you and that you are making the most of its benefits.

If you would like to discuss your retirement income options, give us a call.

i Retirement and Retirement Intentions, Australia, 2022-23 financial year | Australian Bureau of Statistics

ii, iii Transition to retirement - Moneysmart.gov.au

The hidden drain of decision fatigue

Fri, 24 Jan 2025 00:13:08 GMT

As we kick off the new year, many of us are excited to embrace fresh beginnings, set new goals, and maybe even tackle those pesky resolutions. But if you’re feeling more drained than invigorated, you’re not alone.

In fact, one in every five adults worldwide has experienced general fatigue lasting up to six months, and the condition is so frequent that it even has its own acronym: TATT (Tired All The Time).i

But for all this ubiquity, scientists' understanding of fatigue – what causes it, how it changes our bodies and brains, as well as how to treat it – is incredibly limited. There are some obvious contributors to fatigue. We all know how lousy we can feel after a few late nights and that stress can be a massive drain on our energy levels. Throw in a bit of a sedentary lifestyle and some not great dietary decisions and you can have the perfect storm for not feeling particularly peppy.

However, there is one factor that can contribute to that feeling of exhaustion that you might not even think of when you consider what drains you – and that’s decision fatigue. Understanding this phenomenon and how it can impact your energy levels – and decision making - might just be the key to reclaiming your energy, clarity and get you back on track to living your best life.

What is decision fatigue?

Decision fatigue refers to the mental exhaustion that accumulates from making so many choices throughout the day. It is estimated we make between 33,000 to 35,000 decisions a day.ii In a world filled with endless options—from what to wear and what to eat, to larger life decisions—it’s easy to see how our brains can become overwhelmed.

The science behind decision fatigue

Research indicates that our cognitive resources are limited. Psychologist Roy Baumeister’s research involved participants facing a series of decisions which resulted in lower self-control and poor decisions as their decision fatigue increased.iii This underscores the concept that the more choices we make, the less energy we have left for future decisions.

Science has recently reinforced these findings with a discovery from Paris Brain Institute that the culprit appears to be a brain chemical called glutamate that gradually builds up in the brain and can impede effective decision making.iv

Symptoms of decision fatigue

Recognising the signs of decision fatigue is crucial for taking action and the kind of signs to watch for include indecision, avoiding making decisions, mood swings, mental fog and difficulty concentrating, and even physical exhaustion.

A vicious cycle

The consequences of decision fatigue can create a vicious cycle. When you’re mentally drained, you might resort to unhealthy coping mechanisms, such as choosing fast food over nutritious meals or skipping your workout. These choices can lead to further physical fatigue, compounding your feelings of tiredness. Additionally, the stress you feel when your decision-making is affected can negatively affect your sleep quality, leaving you even more exhausted.

Strategies to combat decision fatigue

Fortunately, there are several strategies you can use to manage decision fatigue and boost your energy and your capacity to make sound decisions:

Limit choices: Simplifying your options can significantly reduce mental strain. Consider planning your meals for the week or curating a small wardrobe to streamline daily decisions.
Prioritise important decisions: Tackle significant choices when your mental energy is highest, typically in the morning. Save less critical decisions for later in the day.
Take breaks: Short breaks throughout the day can help refresh your mind. A quick walk, a few minutes of stretching, or even a short meditation session can recharge your mental resources.
Practice mindfulness: Engaging in mindfulness practices can help reduce stress and improve focus, making decision-making feel less daunting.

While decision fatigue is significant, it’s important to recognise that there are other potential reasons for ongoing tiredness. If you find yourself feeling excessively tired for an extended period, it’s wise to consult a medical practitioner to help identify any underlying health concerns.

Finally, remember, it’s completely normal to feel overwhelmed by the multitude of decisions we face daily but being mindful of the toll they can take is the first step towards reclaiming your energy – because you deserve to feel vibrant and empowered in your decision making.

i Why do some people feel tired all the time - BBC

ii How Many Decisions Do We Make In One Day - PBS North Carolina

iii Ego depletion: Is the active self a limited resource? - APA PsycNet

iv Cognitive fatigue: new insight on biological mechanisms - Paris Brain Insitute

You may be owed money. Here’s how to check

Tue, 14 Jan 2025 23:11:03 GMT

Holidays and gift giving can leave you a little short of cash so it might be cheering to learn that billions of dollars is being held by various government agencies just waiting to be claimed by the rightful owners.

The biggest pot is lost superannuation. The Australian Taxation Office (ATO) is holding more than $17.8 billion worth of super for fund members who have become uncontactable. ⁱ

Next, there is more than $2.3 billion in money from bank accounts and life insurance policies that has not been claimed for more than seven years. These funds are administered by the Australian Securities & Investments Commission (ASIC). ⁱⁱ

Meanwhile, there is more than $241 million in unclaimed Medicare benefits held by Services Australia. In this case, the patients haven’t provided current bank details to Medicare. ⁱⁱⁱ

Finally, all state and territory governments are holding unclaimed money from many different sources including deceased estates, share dividends, salaries and wages, cheques, trust money, overpayments and proceeds of sales.

It is important to know that searching the various government databases is free. It may take some time and involve a search for old paperwork to prove you once held an account, but anyone can achieve it. Beware of businesses that search the databases and then get in touch to offer their services for a fee.

Are you missing super?

It can be easy to lose track of super if you have changed jobs several times and your employers have paid your compulsory super into different funds.

You can end up with a number of super accounts with small amounts in each. The ATO says almost four million people have more than one account. ^iv

The ATO has come up with a “ super health check ” to help you search for any lost accounts and to update your contact details. You can access this tool here.

The health check also allows you to make sure your employer contributions are being made as expected. The ATO has ramped up its audits and reviews of employers to check that compulsory super is being paid to employees.

It says that, while more than 92 per cent of super entitlements are paid without ATO intervention, in the past year alone it has tracked down $932 million of super owed but unpaid to 797,000 employees. ^v

Employers need to pay super in full, on time, and to the right fund, each quarter by the 28th day of October, January, April and July, the ATO says.

How to find money in old accounts

Tracking down long forgotten bank accounts, shares, investments and life insurance policies is possible with ASIC’s simple unclaimed money tool .

Enter your name in the search and keep trying with variations including initials and last name, first and last name and all names.

If you find a record that appears familiar you can lodge a claim using proof that connects you to the account mentioned. ASIC says you can expect a response within 60 days.

Don’t forget to check state and territory governments’ websites for unclaimed money from a host of other sources. Sometimes funds can be found in unexpected places. For example, missing share dividends may be lodged with an agency in the state in which the company is based. You can see a list of the agencies’ websites here.

Finding your Medicare benefits

If you are not receiving the Medicare benefits you’re entitled to, it is likely that your bank account details are either not lodged with Medicare or they are incorrect.

You’ll need to set up a myGov account then link your Medicare account. From there you can check that your details are correct.

It may take a bit of time to find your information and track down proof of old accounts, but it could pay off with an unexpected windfall.

i Total lost (fund-held) and ATO-held super | Australian Taxation Office

ii Unclaimed money | ASIC

iii Check now: Aussies owed $241 million in unpaid Medicare benefits. | Department of Social Services Ministers

iv Trend towards single accounts | Australian Taxation Office

v Super action sees over $900 million super returned | Australian Taxation Office

Three simple steps for financial wellness

Tue, 14 Jan 2025 06:06:27 GMT

If money’s too tight to mention, here’s some small steps that can make a big difference in achieving your financial goals.

How would you rate your level of financial wellness?

Do you think you’re in a good position to meet your immediate and near-term financial obligations? What about your long-term goals?

They’re tough questions, asked in a particularly tough financial environment.

The sharp rise in general living expenses over recent times spurred central banks to raise interest rates in a bid to quell consumer demand. Many households are under increased financial pressure.

Yet, in assessing your level of financial wellness, it’s important to look beyond short-term events.

Sure, they definitely feed into the overall equation. Household budgets are likely to be stretched until economic conditions "normalise".

But also consider whether your financial wellness is on track in terms of your future, longer-term financial goals. This includes your regular investing strategy, both inside and outside of superannuation.

Just doing simple things, like having a household budgeting system, can make an enormous difference.

This three-step framework for financial wellness may help you to identify strategies to improve your financial wellness in order to meet your shorter-term financial obligations, and to keep you on track in terms of your longer-term goals.

Step 1: Take control of your finances

Taking control of your finances largely comes down to understanding everything about your finances – the amount of money you receive in regular and ad hoc income, the amount you need to spend on general living expenses, the money being put towards specific goals (such as a house or car), and what’s left over (your savings).

Consider implementing a budgeting strategy, if you don’t already have one, to track all your expenses and identify where potential savings could be made so you can build momentum towards achieving your short-term and long-term objectives.

Reductions in certain expenses could be used towards paying off high-interest debts, such as outstanding credit card balances, and ensuring you can pay the minimum payments on all debts.

Step 2: Prepare for the unexpected

Having better control over your money will invariably put you in a stronger position to build wealth over time.

Protecting your wealth as it grows is important, and that means preparing for the unexpected.

Households can benefit from setting aside emergency savings to cover modest, unexpected expenses for when an inevitable or unlikely event occurs.

Think of events such as unexpectedly losing your job or a sudden drop in the income you generate from your business activities, and unforeseen spending shocks that can eat into your accumulated savings.

Emergency savings can ensure you have some cushions in place to help reduce the potential impacts of such events on your household budget, financial plans, and goals.

Insurance cover is also an important component of financial wellness and protecting against unexpected or unwanted financial losses. Common types of policies include health, life, disability, trauma, and income protection cover.

Given insurance premiums can be high, striking a balance between risks, costs, and coverages is prudent.

Step 3. Make progress toward your goals

To achieve your long-term financial goals, it makes sense to remove any impediments that will stand in the way of attaining them.

Step 3 of the financial wellness framework focuses on strategies such as paying off longer-term debts, such as your home mortgage. Paying higher-interest debt first will save on interest.

Depending on your life stage and investment trade-offs, you can choose to either pay down lower-interest debt, using money previously allocated to investing, or to rely on your budget and one-time windfalls to accelerate the paydown strategy.

However, having cash on hand may also be important for your peace of mind. Directing more money toward paying debt forgoes liquidity in the short term, so evaluate whether you need cash in the short term.

Also, consider using accounts paying higher interest to save for shorter-term goals, such as buying or paying off a house, vehicles, funding a holiday, or in order to retire early (before you’re able to start accessing your superannuation).

Conclusion

Attaining a high level of financial wellness comes down to a range of strategies, but first and foremost it’s about taking control of your personal finances.

Just doing simple things, like having a household budgeting system, can make an enormous difference in helping you to understand how your money is being allocated, and where you can potentially save on costs.

Having a financial buffer, or war chest, is also important to cater for unexpected events such as a major unforeseen expense, or if you suddenly lose regular income.

Think about having investments that are liquid enough to access if you need extra cash, which can include money you have invested in exchange traded funds or managed funds.

Lastly, always stay focused on your long-term goals and use a range of strategies to achieve them, such as reducing your debts over time.

Taking direct action with your finances will greatly improve your chances of achieving investment success over the long term.

This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

GENERAL ADVICE WARNING: Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) is the product issuer and operator of Vanguard Personal Investor. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee and product issuer of Vanguard Super (ABN 27 923 449 966).

The Trustee has contracted with VIA to provide some services for Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc (collectively, “Vanguard”). We have not taken your or your clients' objectives, financial situation or needs into account when preparing our website content so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for the product before making any investment decision. Before you make any financial decision regarding the product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard's financial products can be obtained on our website free of charge, which includes a description of who the financial product is appropriate for. You should refer to the TMD of the product before making any investment decisions. You can access our Investor Directed Portfolio Service (IDPS) Guide, Product Disclosure Statements (PDS), Prospectus and TMD at vanguard.com.au and Vanguard Super SaveSmart and TMD at vanguard.com.au/super or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This website was prepared in good faith and we accept no liability for any errors or omissions. Important Legal Notice - Offer not to persons outside Australia

The PDS, IDPS Guide or Prospectus does not constitute an offer or invitation in any jurisdiction other than in Australia. Applications from outside Australia will not be accepted. For the avoidance of doubt, these products are not intended to be sold to US Persons as defined under Regulation S of the US federal securities laws.

Why you need an emergency fund

Tue, 14 Jan 2025 02:48:28 GMT

What is an emergency fund?

An emergency fund is a financial safety net, offering you instant access to money when you need to cover the cost of unplanned expenses, like losing a job, unexpected travel or a medical emergency. This involves putting funds aside periodically so you can dip into this cash reserve without needing to resort to high-interest loans or credit cards and get into debt or financial hardship. But how much should you have in emergency savings? There are no hard and fast rules, and you should consider your circumstances. The general guide is to save two to three months’ worth of living expenses. But, if you’re thinking long term, like time off work to care for family, it’s worth considering emergency savings of up to six months.

How to build an emergency fund

Your emergency fund needs to be separate from your everyday spending to ensure it’s available when you need it. Here are a few ways to create and maintain one.

Set a savings goal

To set a savings goal, work out what your living expenses are each month and then multiply that by the number of months you want your emergency fund to cover. When working out your living expenses, make sure to include:

rent or home loan repayments
groceries
transport costs, like petrol or public transport fares
loan and credit card repayments
bills like electricity, gas, internet and phone.

A budget planner can help you create a monthly budget. If you’re not sure exactly where your money’s going each month, you can track your spending by using a budget app.

Open an account and start saving

Your emergency fund should be for emergencies only. Ideally, you want it to be separate from your other accounts, so you’re not tempted to dip into it.

Look for an account with a good interest rate so you can earn a bit extra each month on your savings. This is part of a wider strategy on bucketing your money that can help you save for different goals and needs.

Automate your savings

Now that you’ve set up an account, it’s time to start making regular deposits. Consider setting up a regular deposit so money is automatically transferred to your savings account every time you get paid.

Maximise your offset account

If you have a home loan, consider using an offset account as your emergency fund. That way the money in your emergency savings will also lower the amount of interest you pay on your home loan, while still allowing you to access the money quickly if you need it.

Continuously contribute to your emergency fund

Whenever you find yourself with some extra cash, like a tax refund, consider using it to boost your emergency savings.

Use your emergency fund for emergencies only

Remember, your emergency fund should only be used in an actual emergency. It might be worth setting some rules for yourself around what counts as an emergency to you.

If you think you’ll be tempted to use it for non-emergencies, consider making the money a little harder to access. One option is to hide your emergency fund from view in online banking. This way you won’t see the balance when you log in and you’ll be less tempted to spend the money.

Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/manage-money/budget-saving/emergency-fund
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
© 2024 National Australia Bank Limited ("NAB"). All rights reserved.
Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Say yes - what’s the best that could happen?

Fri, 10 Jan 2025 02:43:43 GMT

As we step into a new year, it’s a good opportunity to think about what we want to embrace and experience in the year to come. Amidst all the resolutions that might be broken before we know it, one powerful and positive way to approach the new year, is to make this the year of saying yes.

Let’s dive into the warmth of possibility, fight the fear and explore the benefits of saying yes, while also recognising that it’s perfectly okay to say no when it counts!

The magic of yes

There’s something magical about the word “yes”. It carries a sense of adventure, curiosity, and openness. When we commit to saying yes, we invite a world of possibilities into our lives. Whether it’s trying a new hobby, attending a friend’s event, or accepting an unexpected invitation, each “yes” can lead to enriching experiences that might just become the highlights of our year.

Be open to growth and learning

Every new opportunity is a chance to grow and learn something new. When we step outside our usual routines, we often discover hidden talents or passions we didn’t know existed. Maybe you’ve always wanted to paint but never picked up a brush. A friend invites you to an art class, and suddenly, you find joy in expressing yourself creatively. Each experience expands our horizons and introduces us to an aspect of ourselves that we may not have known existed.

Cultivate new connections

Saying yes also opens the door to new relationships. Each time we engage with new people, whether in a casual setting or a more structured environment, we have the opportunity to form connections. These relationships can lead to friendships, collaborations, or even just delightful conversations that brighten our days. When you attend that gathering or volunteer for a community event, you never know who you might meet or how they might inspire you.

Build confidence and spark inspiration

Each small step outside our comfort zones is an opportunity to build our confidence. When we say yes to new experiences, we’re essentially telling ourselves, “I can do this!” Even if we stumble along the way, those moments contribute to our sense of self-efficacy. Think about that time you gave a toast at a wedding or tried rock climbing for the first time. The thrill of stepping up to the challenge can leave you feeling accomplished and more willing to embrace future opportunities.

New experiences can also ignite creativity and inspiration. Have you ever noticed how a change of scenery or a fresh activity can spark new ideas? It’s like a reset for our brains. When we engage in activities that are different from our daily routines, we open ourselves up to innovative thinking. So, whether it’s a cooking class, a new fitness routine, or exploring a different neighbourhood, each experience has the potential to inspire new ideas and perspectives.

Finding your balance

While saying yes has its many benefits, it’s equally important to recognise that saying no is perfectly acceptable. Life is a balancing act, and sometimes we need to protect our time and energy. It’s okay to say no to things that don’t align with our values or drain us emotionally. For instance, if you’re feeling overwhelmed with work and social commitments, it’s perfectly fine to decline an invitation.

The key is finding a balance that works for you and to say "no" to the things that aren't right for you and "yes" to the things that are. When considering an invitation or opportunity, take a moment to ask yourself: Does this excite me? Will it bring me joy or growth? If the answer is yes, then lean in and say yes, but if it feels like a burden or something you’re not genuinely interested in, don’t hesitate to politely decline.

Remember, it’s about making conscious choices that support your journey and well-being. Saying no when appropriate, frees you to say yes to the things that truly matter and make space for the right opportunities to come along—ones that truly resonate with us and enrich our lives.

So, let’s step into this new year with open hearts and curious minds. Embrace those invitations, try that new activity, and savour the joy of each experience. Remember, it’s not just about what you say yes to; it’s about the richness of life that unfolds when you open yourself up to what could be. Here’s to a year of embracing new possibilities!

2024 Year in Review: Successfully navigating uncertain times

Tue, 07 Jan 2025 02:41:56 GMT

The many unpredictable events of 2024 could easily have been disastrous for investment markets. Instead, we saw remarkable resilience and growth despite occasional volatility as investors reacted to the extraordinary times.

While economic growth in Australia and overseas was underwhelming, share markets rode out the ups and downs to finish 2024 strongly. 2024 was the ‘super election year’, when almost 2.5 billion people in 70 countries voted.(i)

One result that has captured the attention of governments and analysts around the world is Donald Trump’s return to office in the United States. He has promised massive tariffs, tax cuts and increased spending on defence. All measures are likely to increase inflation and budget deficits which will affect global markets and economies.(ii)

Continuing geopolitical upheaval also marked the year. Tension in the Middle East grew as Israel expanded its campaign and European Union economies came under increased pressure when Ukraine stopped the flow of Russian gas.

The US dollar ended the year on a two-year high but that, and a weakening Chinese Yuan, led to a two-year low for the Australian dollar, which ended the year just below 62 US cents.(iii)

Cost of living falls but interest rates steady

Around the world, interest rates fell during the year but in Australia, after five interest rate increases in 2023, the Reserve Bank (RBA) held steady at 4.35 per cent, believing inflation is still too high.

Nonetheless, the cost of living has fallen significantly, down to 2.8 per cent in the September quarter from a high of 7.8 per cent two years ago and 3.8 per cent in the June quarter.(iv)

Falls in electricity and petrol prices contributed to the easing.

Australia’s economy grew by 0.8 per cent in the three quarters to the end of September – it’s slowest in decades.(v)

House prices mixed across the country

The housing market appeared to cool by the end of the year with average national home values falling by 0.1 per cent in December to a median of $815,000.vi

CoreLogic’s Home Value Index data shows five of the eight capitals recording a decline in values between July and December. These included Melbourne, Sydney, Hobart and the ACT. While in Perth, Brisbane, Adelaide and Darwin, home values increased.

Share markets survive and prosper

Global share markets were unsinkable in a year of stormy economic and political conditions.

The Nasdaq surged more than 30 per cent for the year. The S&P 500 was up 25 per cent - pushed along by the ‘magnificent seven’ tech stocks - and the Dow rose 14 per cent.

Although not quite in the same league, the ASX performed strongly, recording 24 new record highs during 2024. The S&P/ASX 200 closed the year at 8159, up 7.5 per cent, with some analysts predicting 2025 will close around 8800.

Commodities

Gold came into its own as a safe haven for those concerned about events around the globe, reaching an all-time high in October and adding more than 28 per cent for the year.

Oil prices were subdued with investors cautious about a glut, the risks of wider conflict in the Middle East, the war in Ukraine and the change of government in the US. Although there is some optimism for improved growth in China in 2025.

Iron ore prices have continued to decline, now down to about half of the peak US$200 a tonne in 2021.

Looking ahead

Economists’ forecasts vary on the timing of a cut in interest rates in 2025 but some believe there will be as many as four cuts, reducing the rate to 3.35 per cent by year end.

Share price volatility is expected to continue as investors roll with the global political and economic punches and the upcoming Australian Federal Election is likely to introduce uncertainty until the results are in.

If you’d like to review your goals for the coming year in the light of recent and expected developments, don’t hesitate to get in touch.

Note: all share market figures are live prices as at 31 December 2023 and 2024 sourced from: https://tradingeconomics.com/stocks.

i Why 2024 is a record year for elections around the world | World Economic Forum

ii The economy and markets will boom under Trump | AFR

iii Australian dollar now at risk of plummeting to pandemic-era lows | ABC News

iv Consumer Price Index, Australia, September Quarter 2024 | Australian Bureau of Statistics

v Australian economy grew 0.3 per cent in September Quarter | Australian Bureau of Statistics

vi National home values record first decline in almost two years | CoreLogic Australia

Recharging for Success

Mon, 16 Dec 2024 04:13:11 GMT

As a small business owner, you may find it difficult to justify taking time off. After all, your business demands your attention, and you worry what will happen if you step away for a break. However, taking a break from the business can be one of the best decisions you make for your business.

In fact, regular vacations can lead to significant benefits, including process improvement and automation, while also rejuvenating your spirit. Let’s explore how taking time off can be a game changer for you and your business.

Operating at your peak

If you are dragging your heels the impact on your business is profound. Constantly working without breaks can lead to fatigue, irritability, and impact your motivation and productivity. Taking regular time off helps to maintain your mental and physical health, ensuring you return to your business refreshed and ready to tackle challenges with renewed vigour.

Charge your creative batteries

When you're immersed in your work, it can be challenging to think outside the box. A change of scenery—whether it’s a beach, mountain retreat, or a new city—can spark new ideas and perspectives. Many entrepreneurs report that their best insights come during moments of relaxation when their minds are free from the pressures of daily operations. By taking time off, you allow yourself the mental space to brainstorm innovative solutions and strategies that can drive your business forward.

Regular breaks can enhance your decision-making abilities. A fresh mindset can help you see the bigger picture and prioritise what truly matters for your business’s growth. This clarity can help you identify potential pitfalls and opportunities that you might have missed while entrenched in day-to-day operations.

Strengthening your team’s contribution

When you take a vacation, it’s not just beneficial for you; it can also strengthen your team. Delegating responsibilities while you're away empowers your employees, helping them to develop their skills and confidence. It shows that you trust them to handle tasks without your constant oversight. Upon your return, you may find that your team has grown stronger and more cohesive, which can enhance overall productivity. Additionally, allowing your team to see you prioritise work-life balance encourages them to do the same, leading to a healthier workplace culture.

Automate your processes

Planning for a break can give you a reason to consider how automation can improve your business processes. Many small business owners find themselves overwhelmed by repetitive tasks that can easily be automated. As you plan to take some time out, take the opportunity to research tools and technologies that can streamline operations.

For example, investigate customer relationship management (CRM) software to manage client interactions, or explore project management tools to keep your team organised. When you return these solutions can remain in place to save you time and increase your efficiency.

Tips for a stress-free vacation

While the benefits of taking a vacation are clear, the thought of planning one can be daunting. Here are some practical tips to ensure your time off is stress-free:

Communicate clearly: Inform your clients and colleagues about your absence in advance. Setting up an out-of-office message can help manage expectations and redirect urgent inquiries to your team.
Delegate wisely: Identify team members who can handle various responsibilities while you’re away. Provide them with the authority to make decisions and access to necessary resources. Trust is key here!
Unplug and unwind: Resist the urge to check emails or take business calls during your vacation or arrange specific time you are available if needed. Create boundaries so you can fully enjoy your time off.
Reflect and recharge: Use your vacation not just for leisure but also for reflection. Consider what’s working in your business and what changes you’d like to make when you return.

Vacations are not just an indulgence; they can be a crucial component of sustainable business success. From enhancing creativity to preventing burnout and improving decision-making, the benefits of taking time off extend far beyond personal relaxation. So go ahead — book that trip, recharge your batteries, and return ready to lead with renewed energy and vision.

Are you a goal-driven saver?

Thu, 12 Dec 2024 04:18:28 GMT

Characteristics of goal-driven savers

A ‘money mindset’ is a way of thinking about personal finance. Your money mindset can change over time, and it may help explain your spending and savings habits. Understanding this can help you build habits and strategies to better manage your money.

If the following applies to you, you might be a goal-driven saver:

You focus on growing your savings until you reach a specific savings goal, then relax your savings habits.
It’s easy to save money when you have a clear goal in mind.
If you won $1,000, you’d put it towards your savings goal.
If you needed $2,000 for unexpected car repairs, you wouldn’t need to borrow money or use a credit card - you could take the money out of your savings account. However, this would cause you mild financial strain.

About goal-driven savers

If you’re a goal-driven saver, you’re good at saving money as long as you have a clear goal in mind. Once you achieve this goal, you tend to slow down your saving.

You may switch from being an impulsive spender to a goal-driven saver when you’re saving for something in particular. This is usually a mid-term goal you can achieve in around six months, like a holiday. Goal-driven savers can be reluctant to commit to longer-term goals like a house deposit.

When you feel motivated, you work hard to reduce your expenses and increase your income. You also use financial windfalls like tax returns and bonuses to boost your savings.

Build consistent savings habits

Goal-driven savers are already strong savers. You can benefit from creating sustainable savings habits that you can stick to long-term, even when you’re not saving for anything in particular.

You can build consistent savings habits by:

Creating a savings goal in an app, so you can watch your savings grow.
Setting up automated transfers so money goes straight into your savings each payday. People who save first, rather than saving what’s left over at the end of their pay cycle, typically have more savings success.
Asking your employer to deposit part of your pay directly into a separate savings account.
Opening different savings accounts for different savings goals. Most savings accounts are fee-free, so it doesn’t cost you anything to separate your savings.
Building an emergency fund so you don’t have to withdraw from your savings when faced with an unexpected expense.

If you’re ready to start saving for a longer-term goal, look into ways you can improve your chances of being approved for a home loan.

Manage your money

As a goal-driven saver, you need to find ways to stay in control of your money, even when you don’t have a savings goal in mind. Goal-driven savers sometimes turn into impulsive spenders without a goal to work towards, and you may find yourself taking money out of your savings to pay for unplanned purchases.

Can you look at creative ways to boost your savings? Take on an extra shift at work, sell some items you don’t use anymore, or start a side hustle.

Look at strategies like tracking your spending and bucketing your money to build consistent saving and spending habits. You can also consider hiding your savings account in internet banking so you’re not tempted to dip into it.

It’s also a good idea to set aside time each month to review your financial situation and ensure you stay on track.

Source: https://www.nab.com.au/personal/life-moments/manage-money/money-basics/goal-driven-saver

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/manage-money/money-basics/goal-driven-saver

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Avoiding penalties on presents and parties

Thu, 05 Dec 2024 04:26:05 GMT

Christmas can be a tricky time when it comes to tax and there are lots of ways your business might land an unexpected tax bill.

The staff Christmas party isn’t the only potential tax trap, gifts for clients and employees should also be carefully considered.

If you decide to give your employees a Christmas present, the easiest way to avoid tax is to ensure the gift is less than $300 (inclusive of GST) and is classed as a minor benefit by the Australian Taxation Office (ATO).

If your gift meets all the criteria, the ATO will consider it exempt from Fringe Benefits Tax (FBT). Otherwise, the gift will be subject to FBT at the rate of 47 per cent.

To qualify for this exemption, the gift must be given on an infrequent or irregular basis – so no weekly lunches or multiple gift vouchers – and it must not be a reward for service.

Examples of minor benefit exemption non-entertainment gifts could include Christmas hampers, gift baskets, a department store gift card or voucher, skincare and beauty products, sealed bottles of alcohol and flowers.

If you decide it’s all too hard and give your employees a cash bonus instead, you will not have to pay FBT on the amount, but be aware that your employee will pay income tax on it.

Employee gifts that may attract tax

One of the best ways to avoiding tax problems when it comes to employee gifts is to skip any that are classed as entertainment by the ATO. That includes gifts like restaurant meals and tickets to movies or the theatre, sporting events or concerts.

Other gifts classed as entertainment include accommodation, travel and flights that are not for work and annual gym memberships. (These are classified as recreational entertainment.)

If entertainment-type gifts cost less than $300 (inclusive of GST) FBT is not payable, but you are unable to claim a tax deduction for the cost or claim the GST input credits.

Gifts to others

It’s worth remembering the FBT minor benefits exemption for gifts costing less than $300 also applies to any gifts provided to customers and associates (such as employees’ partners).

Entertainment gifts provided to clients over the holiday season are not subject to FBT, but there is no tax deduction allowed and the GST input credit cannot be claimed.

Although you may consider treating yourself (or a family member not involved in the business) to a Christmas gift, you can’t use the tax rules to do it. Private gifts are not tax deductible.

If you operate as a sole proprietor or a partner in a partnership, you can’t be your own employee, so you are not eligible for these employee benefits.

FBT and your Christmas party

If you plan to hold a work Christmas party for employees or clients, keep an eye on the tax rules so that you don’t find yourself facing a hefty tax bill.

You don’t pay FBT on the cost of the food and drink if your party is only for current employees and is held on a working day.

It’s a slightly different rule if the party is held off-site at say, a local club or restaurant. There’s no FBT if the party includes employees and their friends or partners, and the cost per person is under $300 and is considered a minor benefit. But FBT will apply if it costs more than $300 per person.

You don’t pay FBT for any costs relating to clients.

A tax deduction and GST credits can be claimed for the costs relating to employees and any family, but they cannot be claimed for the costs involved with any clients in attendance, as their benefit is not subject to FBT.

If you would like more information about the potential tax traps around Christmas, call us today.

Make festive season conversations matter

Tue, 03 Dec 2024 01:12:29 GMT

It’s more than prawns and pavlova. The festive season brings families together from near and far. If you notice signs that an older family member is experiencing the declines of ageing, be observant and take the opportunity to start a conversation.

As the year flies by, it's easy to miss subtle changes in your loved ones or perhaps when coming together in the festive season after some time apart, you notice signs of decline in an older family member.

While we may want to avoid difficult conversations, waiting until a crisis - such as a fall or confusion over simple tasks - can lead to rushed, emotional decisions that may not be the best for everyone involved.

The festive season presents an opportunity to gently start later-life planning conversations. By addressing potential needs now, future planning becomes a gradual process, and accepting help feels more natural rather than a sudden, overwhelming admission of an inability to cope.

This approach might be the first step to offering your loved one a greater sense of control over their future. Control helps them maintain independence, feel valued, and alleviate some of the daily challenges they may face. It can also reduce pressure on the whole family.

Tips for starting the conversation

The festive season may be one of the few opportunities when the whole family is gathered together, making it an ideal moment to have important family discussions. But how do you bring up a sensitive topic without being the grinch who puts a dampener the festive mood?

Be observant for signs that your loved one may be struggling.
Choose a quiet, private setting to discuss their concerns and preferences.
Encourage them to invite other trusted family members into the conversation.
Ask for their permission to start researching and planning options for their future needs.

The key to success is planning—and planning early leads to the best outcomes.

How we can help

If the thought of having this conversation feels overwhelming, we’re here to help. Our team can provide guidance and act as a neutral voice during what can be an emotional discussion, helping to ease tensions and keep the focus on planning for the future.

Make an appointment to discuss options and actions needed to be taken. Call us on 07 4662 3722.

Surviving the silly season

Tue, 03 Dec 2024 01:03:01 GMT

Ah, Christmas! - the time of year when your bank account shrinks, your social calendar explodes, and your family dynamics resemble a poorly scripted soap opera. As we navigate this festive minefield of shopping, social gatherings, and feasting, it’s common to feel a little frazzled.

In fact, research has found that the holiday season is one of the six most stressful life events we go through, in the same category as moving house and divorce.i

But it does not have to be - before you let the silly season get the better of you, here are some ways to not just survive, but thrive, to make it through the festive chaos and bring in 2025 feeling energised and on track to reaching your goals.

Get organised

Let’s face it, the silly season is a whirlwind. Between work parties, family catch-ups, and obligatory gatherings with distant relatives you only see once a year, it’s enough to make anyone want to retreat to a deserted island.

However, rather than running off to Bora Bora, if you want to survive the silly season relatively unscathed, planning ahead is a must. With the social calendar filling up quicker than you can say cheers, it becomes easy to overcommit and leave yourself feeling a little stretched. Rather than maintaining a constant schedule of parties and social engagements, why not learn the power of saying ‘no’. Choose the events you really want to attend and think about each invitation before you send that RSVP. Remember to allow for some guilt-free ‘down time’ amongst all the festivities.

Shopping shenanigans

Shopping during the silly season can be akin to a scene from an action movie—chaotic, frenzied, and with a distinct chance of an all-in brawl.

Channel your inner Santa Claus and make a list. And yes, check it twice! A good list keeps you focused and reduces the chances of impulse buys—like that life-sized inflatable Santa that seemed like a good idea at the time. (Spoiler alert: it wasn’t.)

Consider shopping online, too. You can sip your coffee in your pyjamas while avoiding the chaos of the shops. Just remember: the delivery cut-off dates are real! Don’t be the person frantically searching for gifts at 9 PM on Christmas Eve.

The present predicament

Let’s talk presents. It’s lovely to give and receive gifts, but when did we all agree that every adult needs a new mug or another pair of socks?

To combat the gift-giving madness, consider doing a Secret Santa among adults. Set a reasonable budget and unleash your creativity. Who doesn’t want a mysterious gift that could range from a novelty toilet brush to a box of chocolates?

Navigating the family dynamics

Family gatherings can be a delightful mix of love, laughter, and the occasional argument that would make for great reality TV. You know the drill—everyone has an opinion, and even the Christmas ham can become a hot topic of debate.

Before the big day, set some ground rules. No politics, no discussing that relative’s questionable life choices, and absolutely no karaoke unless everyone is fully prepared to participate. If tensions start to rise, a little humour can go a long way. Embrace the absurdity of it all. If Uncle Bob starts arguing about the best way to cook prawns, counter with a story about how Auntie Sheila once tried to deep-fry a turkey—because that’s a Christmas classic in its own right.

Don’t try to do it all

If you’re hosting this year, congratulations! You’re officially in charge of managing the chaos. But you don’t have to shoulder the entire load.

Encourage those who are coming to bring their ‘special’ dish. Not only does it lighten your load, but it also allows everyone to show off their culinary skills (or lack thereof). Plus, you might discover that Aunt Margaret’s “special” potato salad is actually a hidden gem—just don’t ask what’s in it.

Survive and thrive

At the end of the day embrace the chaos, lean into the hilarity of when things don’t go to plan, don’t take it all too seriously and be prepared to step back a little when you need a break from all the festivities.

Here’s to a joyful festive season filled with laughter and the wonderful chaos that is Christmas. We’ll catch you on the other side. Cheers!

i Christmas stress | Relationships Australia

SMSFs: keeping it in the family

Wed, 20 Nov 2024 01:42:16 GMT

Self managed super funds (SMSFs) can offer their members many benefits, but one that’s often overlooked is their potential as a multigenerational wealth creation and transfer vehicle.

Family SMSFs are relatively rare. According to the most recent ATO statistics (2022-23), the majority of SMSFs (93.2 per cent) have only one or two members. ⁱ Just 6.6 per cent have three or four members and only 0.3 per cent have five or six members (the maximum allowed).

Advantages of a family SMSF

An SMSF is sometimes established when two or more generations of a family share ownership or work in a family business. The fund can then form part of a personal and business succession plan, potentially making it easier to pass on ownership and management of assets to the next generation.

With more members, SMSFs also gain additional scale, allowing them to invest in larger assets (such as property). You can add business premises to the SMSF and lease it back without violating the related parties rule and 5 per cent limit on in-house assets. ⁱⁱ

Reduced tax and administration costs are also a benefit of multigenerational funds.

Running a family SMSF means the costs of establishing and administering the fund are spread across more members. This can be particularly helpful for adult children just beginning to save for their retirement.

In addition, more fund members means more people to share the administrative burdens of running an SMSF, which may be helpful as you get older.

A family SMSF does not need to be automatically wound up if you die or lose mental capacity and they can simplify the process of paying out a member death benefit as well as potentially allowing it to be paid tax-effectively. Note that death benefits paid to non‑tax dependent beneficiaries incur a tax rate of up to 30 per cent plus the Medicare levy. ⁱⁱⁱ

More fund members also make setting up a limited recourse borrowing arrangement (LRBA) easier because their contributions reduce the fund’s risk of being unable to pay the borrowing costs. (An LRBA allows an SMSF to borrow money to buy assets)

Funding pension payments

Another advantage of an SMSF with up to six members may be when the fund begins making pension payments to older members.

If younger members are still making regular contributions, fund assets don’t need to be sold to make pension payments, which avoids the realisation of capital gains on assets.

Family SMSFs can also provide non-financial benefits, helping to transfer financial knowledge and expertise between the generations. And, while your children gain a solid financial education from participating in the running the SMSF, they can also provide valuable investment insights from a different perspective.

Risks and responsibilities

It is important to note that a multigenerational SMSF may not be right for everyone.

SMSFs of any size come with some risks and responsibilities. You are personally liable for the fund’s decisions, even if you act on advice from a professional, and your investments may not provide the returns you were hoping for.

Before you start adding your children and their spouses to your fund, it’s essential to spend time thinking about the challenges in running a family SMSF.

Developing an asset allocation strategy catering to different life stages can be complex. Older members may prefer a strategy designed to deliver a consistent income stream, while younger members are usually more focused on capital growth.

Risk profiles are also likely to vary. Typically, younger fund members have a higher appetite for investment risk than members closer to retirement.

Family conflict can also be an issue when relationships are under pressure from divorce, blended families, and personality clashes.

The death of a parent can also create disputes over the distribution of fund assets or forced asset sales. Decisions about the payment of death benefits by the remaining trustees can derail carefully made estate plans and result in expensive legal battles.

Larger families with multiple adult children and partners may also find the six member limit an obstacle, forcing them to look at other options such as running a number of family SMSFs in parallel.

If you would look more information about establishing a family SMSF, call our office today.

i SMSF quarterly statistical report June 2024 | data.gov.au

iii Paying superannuation death benefits | Australian Taxation Office

From hands-on to hands-off: tips for a self-sustaining business

Thu, 07 Nov 2024 01:02:02 GMT

Owning and running a small business can often feel like juggling flaming torches, while riding a unicycle on a high wire—you're constantly managing multiple tasks, with each one demanding your attention essential to the running of the business. There is no room for dropped balls (or dropped flaming torches!) and it’s common to be one person doing the jobs of many. So how do you get some sanity in your life and still manage to have a thriving business?

Managing to decouple yourself from the running of the business can be challenging but has so many advantages. If you are freed up from the day-to-day you can be able to add maximum value to the business (and enjoy maximum flexibility and fun), your team have room to shine, all while adding to the value of your business and making room for growth.

Here are a few tips to help make some changes to move towards a self-sustaining business.

Let it go!

One of the most effective ways to transition your business to run independently is by embracing delegation. This can be the hardest part for many business owners as the business is their ‘baby’ and relinquishing control can be daunting.

Start by listing all the tasks and responsibilities you currently handle. Categorise them into three groups: tasks you can delegate, tasks you should delegate, and tasks only you can handle. Train your team on the tasks you plan to delegate, and make sure to empower them - providing them with the tools and authority needed to succeed.

Encourage others to step in

Building a capable and motivated team is crucial for a self-sustaining business. When your team feels empowered and trusted, they’re more likely to take ownership of their roles and contribute to the business’s success.

Focus on hiring individuals who not only possess the necessary skills but also share your vision and values. Encourage staff to take initiative and make decisions within their scope of responsibility. Recognise and reward their efforts and be patient and supportive as your team adjusts to their new responsibilities.

Decouple yourself by having processes in place

If you want people to step in, you’ll also need to look at how you can make things run more efficiently and easily without you involved. Standard Operating Procedures (SOPs) are vital for ensuring consistency and efficiency in your business operations. By documenting your processes, you provide a clear roadmap for your team to follow, reducing the need for your direct involvement in every task.

Begin by documenting the most critical and frequently performed tasks. Include step-by-step instructions, necessary resources, and common troubleshooting tips. Regularly review and update these procedures to keep them relevant and accurate and encourage your team to provide feedback to make continuous improvements.

Leverage technology and automation to free up time

In today’s digital age, technology can be a powerful ally in making your business run smoothly. Automation tools can handle repetitive tasks, streamline processes, and free up time for more strategic activities.

Invest in software solutions that align with your business needs. For instance, customer relationship management (CRM) systems can automate customer interactions and track sales leads, while accounting software can simplify bookkeeping tasks. Explore options for automating marketing campaigns, inventory management, and even communication tools such as project management software or team collaboration platforms to facilitate information sharing and coordination.

Prioritise your well-being

Stepping back from day-to-day operations can be challenging, especially when it involves relinquishing control. However, prioritising your own well-being is essential for both your health and the long-term success of your business.

Make self-care a priority by setting boundaries and creating a balanced work-life schedule. Engage in activities that help you relax and recharge, whether it’s pursuing hobbies, spending time with loved ones, or simply taking time for yourself.

Transforming your small business to run independently is a journey that requires thoughtful planning and a willingness to adapt. While it can be difficult to step back, the benefits for both your business and your personal well-being are well worth the effort. Embrace the change with confidence, and enjoy the freedom that comes with a thriving, self-sufficient business. Your future self—and your business—will thank you.

Helping the kids without derailing your retirement plans

Thu, 07 Nov 2024 00:59:17 GMT

As parents, the instinct to support our children never truly fades, even when they become adults but when you are looking at giving them a financial helping hand there is a bit to consider.

It’s important to ensure any support you provide is not at the expense of your financial future. It can also be tricky knowing what form your support should take, in order to maximise the benefits for your kids.

Support in a challenging environment

In today’s financial landscape, many young people are struggling to get ahead in the face of skyrocketing housing prices and rising living costs and it’s increasingly common for parents to provide some form of financial assistance. In fact, more than half of parents with a child older than 18 provide financial support.i

So, if you are giving your adult kids a monetary helping hand, or considering it, you are in good company.

Achieving balance

The challenge for most people is the balance between helping your kids get a head start in life and making sure you have enough for a secure financial future.

It’s important to have clear visibility of your own financial situation, of how much you’ll need to fund the retirement you aspire to, and how much you can comfortably spare. If your financial future is secure, you’ll be in a better position to help your children when they need it most, so ensure that any contribution you make to your kids' financial wellbeing is not at the expense of your superannuation and other retirement savings.

Ways of providing support

When we think of support we often think of the ‘bank of mum and dad’ helping with a home purchase and that is quite common, with 40 per cent of new home buyers getting a hand from their parents. ii

If you’re considering this route, you have several options:

Gift funds: If you have the means, you can gift your child a portion of the deposit, however, be mindful of any tax implications.
Going guarantor: Another popular option is to act as a guarantor on your child’s home loan. This means that you’ll use the equity in your own home to guarantee the loan, which can help your child secure better borrowing terms. It’s a significant commitment, so be sure to discuss the potential risks and implications thoroughly.
Co-ownership: In some cases, parents and children can purchase a property together, sharing the financial responsibilities. This arrangement can be beneficial, but it’s crucial to have a clear agreement in place outlining each party’s responsibilities and financial contributions.

Other ways of providing financial support

There are lot of other ways you can help your kids with a range of expenses. Nearly 40 per cent of parents pay for their adult children's groceries and around the same proportion allow their adult children to live at home rent-free, while around a third pay their adult children's bills. One in five fork out for their kid's car-related costs like registration fees and petrol and 20 per cent pay for their kids to take off on holidays.iii

Non-financial support

Financial assistance isn’t the only way to support your children. Often, your time and knowledge can be just as valuable. Encourage them to develop good financial habits, such as budgeting, saving, and investing. You might even consider involving them in family discussions about money management, which can empower them to make informed financial decisions.

Communication is critical

Regular, honest conversations about finances can strengthen your relationship with your children. Discuss their financial goals and challenges openly and encourage them to share their aspirations. These dialogues will allow you to gauge how best to support them and sometimes, just being there to listen can make a world of difference.

Setting clear boundaries is also crucial when offering financial support. Discuss how much you can provide, whether it’s a one-off gift, a monthly allowance, or a loan. By being transparent about your limits, you can prevent misunderstandings and help your children set realistic expectations and become financially independent.

Navigating the complexities of financial support can be challenging, especially when balancing your own needs with those of your children. We can provide assistance and advice tailored to your unique situation and help you create a sustainable plan that allows you to assist your children without compromising your retirement goals.

i Finder Bank of Mum and Dad Report | Finder

ii https://www.apimagazine.com.au/news/tag/deposit

iii Bank of Mum and Dad slightly less generous than before COVID-19 crisis, survey shows | Domain

How does your business measure up?

Thu, 07 Nov 2024 00:57:22 GMT

Cost of living pressures and rising business expenses are squeezing profit margins for many of Australia’s 2.5 million small businesses.

The construction, hospitality and retail sectors are recording the highest level of insolvencies in a decade. More than one-third of small business owners can’t pay themselves and one-quarter use their personal savings to support the business.i

Challenging business conditions

The conditions are “arguably the most challenging in living memory”, according to The Small Business Perspectives report, published by the Council of Small Business Organisations of Australia.

“Small businesses are under colossal pressure, managing spiralling business costs, including rises in energy, rent, insurance, interest rates and complex industrial relations changes,” the report says.

It found that 57 per cent of small business owners experience stress due to financial pressures, 50 per cent experience anxiety and 48 per cent have trouble sleeping.

Running a small business can be so absorbing that it’s difficult to stand back and look at the big picture, to think about how the business is really performing and whether it can remain viable.

Benchmarking your business

Understanding how your business compares with other similar organisations, may provide some comfort when times are tough, knowing that you’re not alone. It can also be a wake-up call, letting you know that your business isn’t matching up to others in your industry and giving you a chance to cut costs, improve productivity or dial up your marketing.

So, benchmarking your business is a way of giving you confidence to continue on an already successful path, or to indicate that your business plan may need some adjustment to redefine your goals and manage any possible risks. Having good data about where you sit in relation to other businesses in the industry may also help when applying for finance or seeking investors.

The Australian Tax Office has crunched the numbers from 1.9 million small business tax returns across 100 industries to provide a set of benchmarks you can use to see how your business measures up.

You can check your performance on a range of measures including gross business income, salary and wages, vehicle operating expenses, interest payments and cost of sales. You can use the ATO app on a phone or tablet to run the numbers, after first gathering your details to input. Alternatively, you can make the calculations manually using the ATO’s instructions.

The ATO’s business viability tool

Another useful ATO tool checks whether the financial position and performance of a business shows it is surviving.

The business viability tool looks at whether a business is returning enough of a profit to meet its commitments and provide a return and that it has enough in the bank or in assets to make it through the times that profits are low.

The tool considers a range of indicators including gross margin, cash flow, your assets and liabilities, liquidity, debtors and creditors and availability of funding.

It might be useful to know that the ATO says the information you enter into the business viability tool is only used for your purposes. The ATO does not record or store any of the information you enter.

The ATO also points out that the business viability tool is not a comprehensive business analysis. If you have any concerns about your business or would like a more detailed analysis, you should speak your accountant or business adviser.

“Seeking advice at the earliest opportunity helps to ensure you address financial issues before they escalate or become unmanageable,” the ATO says.

To make the most of both the benchmarking and business viability tools, you will need to gather quite a few numbers from your current operations to use as inputs. The more up-to-date detail you can provide will lead to a more accurate result.

We can assist you in developing a clear picture of your business’s current position and provide tailored advice to support you in making strategic decisions which work towards achieving your vision for the business. Please give us a call if you would like more information.

i The small business perspective report | Analysis & Policy Observatory (apo.org.au)

Financial literacy for kids

Wed, 30 Oct 2024 06:24:42 GMT

Books can spark our imaginations, transport us to new worlds, and let us explore other times and other minds. They’re also an invaluable tool for learning. Here are some ideas to help kids of all ages learn about money and start developing their financial literacy.

Kids aged 4-6

At this age, many kids will be starting to understand that money – in the form of cards, phones, or notes and coins – can be used to buy things, but how these transactions take place may still be a little mysterious. Money-themed picture books can help to simplify financial concepts in a way that kids can relate to, exploring what money is and where it comes from, spending, budgeting, and saving, and touching on important life skills like delayed gratification, patience, knowing the difference between needs and wants, and setting goals.

Look for Sid and Jan Berenstain’s The Berenstain Bears’ Dollars and Sense and The Berenstain Bears’ Trouble with Money; Cinders McLeod’s 4-book MoneyBunny series, starting with Earn It!; and Sue Graves’ Money Matters series.

Kids 7-12

Once kids start reading for themselves, there is a range of practical activity books that can help them learn about money through games, activities and puzzles – while practising their maths skills too. You’ll also find books that cater to kids’ fascination with becoming a millionaire. David M. Schwartz’s If You Made A Million introduces the concept of interest, while James McKenna, Jeannine Glista and Matt Fontaine’s How To Turn $100 Into $1,000,000 offers financially precocious 10 to 12 year olds an introduction to finance, investing and starting a business, along with true stories of how real people became millionaires. Australia’s own Barefoot Investor, Scott Pape, has Barefoot Kids, with projects, stories, rewards and stickers to get kids earning, saving, investing and giving - many of these books discuss the importance of giving money to charity or other causes.

Teens

Older kids can start learning how to manage money for themselves through pocket money (which they may or may not need to “work” to receive) and part-time jobs. Introduce your kids to the idea of setting savings goals for the things they want, and teach them tricks and tools that make saving easier.

Teaching your children how to manage money will help them to set and achieve goals and live the life they want – even if they don’t make it as a 12-year-old millionaire.

Source: TAL

Harnessing the power of LinkedIn to build your personal brand

Fri, 25 Oct 2024 02:40:09 GMT

Linkedin is a powerful tool to help you establish and maintain your reputation and develop your career and business. So, if you either don’t yet have a presence on Linkedin or suspect you may not be getting the best out of the platform, we’ve got a few tips for you!

Linkedin was created in 2003 as a way for professionals to network and has been around longer than many other social platforms including Facebook, Twitter, Snapchat, and Instagram. Its popularity is one reason why it’s a platform you need to have a presence on. It hosts more than 900 million professional profiles, which means nearly an unlimited supply of network connections and opportunities. ⁱ

What are the benefits of Linkedin?

Establish yourself as the knowledgeable professional you are. One way to think of Linkedin is your digital business card. Unlike a business card, you can say a lot more about who you are, your strengths, expertise and experience.

Expand your network. Linkedin allows you to reap the benefits of engaging with others. It’s a critical tool for professional development and business development as you connect with those who could potentially benefit from what you offer.

Learn and grow professionally. Given Linkedin’s professional focus, it’s a great tool to build your knowledge and keep you up to date with what is happening in your industry. It features business news and educational articles on various topics. With a bit of regular scrolling, it’s possible to do a lot of learning.

How to master Linkedin

Power up your profile – It’s important to have a complete and compelling profile. If you’ve signed up with good intentions at some point and never got around to completing your profile, you are doing yourself a disservice. Linkedin's internal search only ranks profiles that register as "complete," and these can get more than 20 times as many views as incomplete profiles. Here are some things to consider doing:

Add a good-quality photo of yourself and a background image that reflects your personality and profession.
Mention your industry and location in your headline.
Include a summary of who you are, what you do, and what you have to offer. Include a call to action for people to contact you.
Build keywords into your profile so that they will come up if people search for a particular skill set. Also consider customising your unique link address so you can be found easier.
Describe your current position. Sharing samples of your work is a great way to demonstrate your skills and capabilities.
Add your previous work history, education details, and at least four skills or areas of expertise.
Try premium for free for a month.

And finally, when it comes to your profile and presence on Linkedin, there is nothing more powerful than an endorsement from a client or colleague. Be strategic about what you ask for and use on your profile to highlight your strengths and skills.

Connecting with others – This is what Linkedin is all about so make the most of your existing connections. It can be challenging reaching out beyond those to people you don’t know, and the most successful approach is always going to be a personal message rather than the default ‘I’d like to add you to my connections’. Think about why you’d like to connect with them, whether you admire their achievements or work in the same industry sector. Linkedin also offers interest-based and professional groups, which can be a great place to connect with others.

Engaging with others – This is a key component of leveraging Linkedin. If you are on Linkedin but do not engage with others, you are unlikely to generate many new connections. The beauty of social networks is they promote dialogue - so they enable you to demonstrate your expertise and position yourself without overtly ‘selling’ so you can have the conversations you would like to with the people you would like to talk to.

Sharing valuable content - Through sharing articles or insights, you can establish yourself as a knowledgeable professional in your field. Think of what useful information for others would be and provide some commentary on content that you don’t generate or write.

Whether you use Linkedin and/or other channels to build and strengthen existing client relationships and to find and help prospective clients, the principles are the same: focus on the other person and their needs, be yourself and build relationships one at a time. If you do this, you’ll reap the rewards!

i https://news.Linkedin.com/about-us#Statistics

BMO Associates shortlisted for the Rising Stars Awards 2024

Tue, 15 Oct 2024 03:54:14 GMT

BMO Associates Ryan Troe and Jack Staines have been named as a finalists in the Rising Stars Awards. Ryan is a finalist in the Tax and Compliance category, while Jack is up for the Public Accountant category.

The inaugural Rising Stars Awards 2024 hosted by Accountants Daily and Accounting Times brings the accounting industry an unparalleled awards program that identifies the finest young accountants across the nation. This prestigious awards program shines a light on emerging leaders in the profession, at the age of 35 and under, recognising their tremendous efforts from the start of their careers.

The finalist list, which was announced on Tuesday, 15 October 2024, features over 92 high-achieving professionals and businesses across 16 submission-based categories.

Securing a place as a finalist is widely recognised as a remarkable achievement in the accounting industry. It signifies the unwavering determination and commitment of individuals, teams, and firms playing a pivotal role in propelling the industry forward.

Winners will be announced at a black-tie gala at the Fullerton Hotel, Sydney, on Friday, 22 November 2024.

Accountants Daily Editor Miranda Brownlee extended her congratulations to all finalists.

“At a time when the accounting industry is grappling with shortages in skilled professionals, it is critical that we recognise and celebrate the exceptional young professionals rising through the ranks,” said Brownlee.

“Congratulations to all the Rising Stars finalists for this year who are helping drive innovation, delivering outstanding service and expertise and taking the profession to greater heights.”

Jack Staines, Associate at BMO, said that he was humbled to be recognised and proud to be named as a finalist in the Rising Stars Awards 2024.

“BMO’s recognition for our excellent contribution to the accounting industry reinforces the strength of our service and dedication to connecting with the community and engaging with clients,” he said.

Succession planning - More than an exit strategy

Tue, 01 Oct 2024 04:12:07 GMT

Although the day may be a long way off, when it comes to exiting your business, the golden rule is to start planning early.

With a detailed succession plan in place like our ‘Steps Forward’ Program – which follows our “10 Ws to successful succession”, you are the one who gets to decide how – and when – you leave your business.

You also need to ensure the viability of the business does not rely on your profile or name. By planning ahead, you’re able to slowly remove your strong links with the business so that it can function successfully without you.

Current employees and customers need to be locked into the business even if you are no longer going to be involved, otherwise buyers may be reluctant to purchase.

More than an exit strategy

A good succession plan is more than a simple departure blueprint. It should be part of your current business plan and considered when you initially structure your operation. ⁱ

Regularly updating your plan and obtaining a current business valuation helps ensure you are always prepared in the event you need to exit earlier than anticipated.

If you intend to transfer ownership of the business to a family member or employee, your succession planning needs to include decisions such as whether you intend to retain an interest in the business, or ownership of any business-related property.

A strategy for funding your successor’s purchase of the business should also be developed.

Prepare for the unexpected

Unplanned succession events (such as poor health or sudden death), also need to be considered to ensure the business can continue operating with minimal disruption.

One approach that may suit some is to establish a buy-sell agreement in which a partner agrees to sell their interest if specified trigger events (usually death or total and permanent disability) occur, with the other partners agreeing to purchase the interest. These agreements usually outline how the value of the interest will be determined and how it will be transferred, and the payment funded. ⁱⁱ

Buy-sell agreements are generally funded from the proceeds of insurance policies covering each partner, enabling easy repayment of the outgoing partner’s interest in the business.

Take your time

Although internal succession to a family member or employee can be an attractive exit option, transfer of ownership in this fashion usually requires a lengthy timeframe.

Internal succession generally involves a gradual sell down of equity to the new owner and a staged step-down by the original owner from the business.

These arrangements mean you need to ensure your successor has the right skills and capabilities to take over and continue running the business successfully. They may also require you to remain onboard for several years.

Alternatively, you may want an external sale transaction covering the whole business or its assets.

In this case there is usually a faster transition, but the purchaser may still want you to remain with the business for six to 12 months to facilitate a smooth transition.

Preparing for change

Whichever process you select, you will need to invest quite a bit of time before going to market to ensure your business presents as an attractive opportunity to potential purchasers.

Significant issues such as ensuring the current business structure is appropriate need to be addressed. For example, a business held in a family trust will require restructuring prior to any sale. ⁱⁱⁱ

Detailed and accurate information about the business and both its financial and market position need to be compiled. Most potential buyers expect to see financial statements covering at least three financial years.

Prospective purchasers will also expect your employees to be on appropriate employment contracts to ensure they stay on after the sale.

Get good advice

Key to ensuring a smooth exit from your business is getting professional advice early in the process.

We can assist you with preparing your business operations and records and help ensure you are prepared to answer questions or information requests. Issues such as the best tax structure, tax implications of buy-sell agreements and advice on how to take advantage of CGT tax concessions can be reviewed. ^iv We can also provide advice about appropriate pricing for your business, as valuation formulas vary between industries.

If you would like help with developing a succession plan for your business, contact our office today. We’re experienced at working with small businesses and farming families to help with all the intricate details involved in planning and implementing a successful succession plan.

i Develop your succession plan | business.gov.au

ii Sale of a going concern | Australian Taxation Office (ato.gov.au)

iii Small business restructure roll-over | Australian Taxation Office (ato.gov.au)

iv Small business CGT concessions | Australian Taxation Office (ato.gov.au)

The Age Pension and your retirement plans

Tue, 01 Oct 2024 01:59:59 GMT

Most people intend to retire between ages 65 and 66, according to the latest data and, surprisingly, despite growing superannuation balances, the Age Pension is the main source of income for many retirees.i

The intended retirement age has increased significantly in the last two decades, from just over 62 years on average in 2004.

Australian Bureau of Statistics (ABS) figures show that, in 2022-23, a government pension or allowance was still the main source of personal retirement income. This was followed by super, an annuity or private pension.

More than 60 per cent of those aged over 65 years were receiving the Pension in 2021 ⁱⁱ

Am I eligible?

It is important to remember that, while you may not meet the eligibility requirements today, you may qualify later in life.

In 2021, only 44 per cent of people aged 65-69 received either full or part Age Pensions but this increased to 81 per cent for those aged 80 to 84 years. ⁱⁱⁱ

Veterans who have served in the Australian Defence Force may be eligible for pensions or benefits from the Department of Veterans Affairs. ^iv

You are generally eligible for the Age Pension if you:

are over 67 years (depending on when you were born)
are an Australian resident and have lived in Australia for at least 10 years
can meet an income and assets test

What are the income and assets tests?

The Age Pension means tests considers your income and the value of any assets you own. If the value of your income and assets exceed certain limits, your payment will be reduced.

Income includes money from a job (including salary packaging), other pensions or annuities, earnings from investments and any earnings outside of Australia. ^v

Assets are items of value you or your partner own or have an interest in such as investment properties and artworks; caravans, cars, and boats; shares; and business assets. While your family home isn’t included in the assets test, your pension may be affected if you sell it. ^vi

Can I still work?

Singles can earn up to $212 per fortnight without their pension being affected. For every dollar over that amount, their pension will be reduced by 50 cents. Couples can earn up to $372 per fortnight and for every dollar over that amount, 25 cents in the dollar will be deducted from their pension payment. ^vii

If your income in a fortnight goes over a certain amount, you will not receive a pension payment. This cut-off amount is $2500.80 for a single person and a combined $3,833.40 for a couple. There are other higher cut-off allowances for those affected by ill-health.

The Work Bonus may help you earn more from working without reducing your pension. You don’t need to apply for it, the Bonus will be automatically applied to your eligible income - you just need to declare your income. ^viii

What does the Age Pension pay?

There are different rates of pension for singles and couples.

The current maximum basic rate for a single person is $1047.10 per fortnight. A couple would receive 1,578.60 per fortnight. With extra supplements, those on a full

Pension could receive a fortnightly total of $1,144.40 for singles and $1,725.20 for couples. ^ix

Get in touch if you’d some help to work out your eligibility for the Age Pension and other government entitlements.

i Retirement and Retirement Intentions, Australia, 2022-23 financial year | Australian Bureau of Statistics (abs.gov.au)

ii, iii Age Pension guide | SuperGuide

iv Eligibility for benefits and payments | Department of Veterans' Affairs (dva.gov.au)

v Income - Age Pension | Services Australia

vi Asset types - Age Pension | Services Australia

vii Income test for Age Pension - Age Pension | Services Australia

viii Who can get the Work Bonus - Work Bonus | Services Australia

ix How much Age Pension you can get - Age Pension | Services Australia

Selling your investment property? Watch out for tax

Tue, 01 Oct 2024 01:56:45 GMT

If you are considering disposing of a property, it’s important to understand the implications so that there are no surprises when your tax bill arrives.

As with most investment assets, when you dispose of an investment property generally you are liable for capital gains tax. Capital gains tax (CGT) is levied when you make a profit on selling and is part of your income tax, rather than a separate tax. ⁱ

When you dispose of an investment asset, your capital gains and losses must be reported in your tax return. The capital gain or loss is the difference between what it cost you to obtain and improve the property (the cost base) and the amount you receive when you dispose of it. ⁱⁱ

The CGT event is triggered when you enter into the sales contract, not when you settle on the property.

Capital gains must be included in your tax return for the income year the property is sold, while capital losses can be carried forward and used in future years. ⁱⁱⁱ

Under the 6-year rule, you may be entitled to a part or full main residence exemption if you lived in the investment property before renting it out. This rule allows you to continue treating a property as your main residence for up to six years if you use it to produce income. ^iv

Other taxes to check before selling

In most situations, you are not required to add goods and services tax (GST) to the sale price when selling an investment property.

GST does, however, need to be applied to the sale of newly built and redeveloped properties. This may apply even if you are not a business. ^v

In some states (such as NSW ), land tax is levied on investment properties over a certain value, so it’s important to ensure you pay any land tax bills prior to selling.

How CGT works

When it comes to CGT, you pay tax on your net capital gains, which is your total capital gains less any capital losses less any discount you are entitled to on your gains. ^vi

An important factor in the CGT calculation is when you purchased the investment property and how long you have held it.

If you sell within the first year of ownership, 100 per cent of your capital gain will be subject to CGT. If you sell after 12 months only 50 per cent is subject to CGT. For example, if you sell your property two months after purchase and make a capital gain of $10,000, the entire $10,000 is subject to CGT, but if it’s sold after the first year, only $5,000 is subject to CGT.

Property acquired before 20 September 1985 is exempt from CGT as this was the introduction date for CGT.

Calculating your capital gain or loss

Correctly calculating your capital gain or loss requires you to identify all the legitimate expenses contributing to your property’s cost base.

This usually includes items such as the price paid for the property, costs of transfer, stamp duty and selling costs (such as advertising, accounting and agent’s fees).

You can also include the cost of owning the CGT asset (such as rates, land taxes and insurance premiums), but you are not permitted to include amounts already claimed as a deduction (such as depreciation and capital works).

If you acquired your property before 21 September 1999, you can index its cost base for inflation to reduce your capital gain. ^vii

For more information about the tax implications of selling your investment property, call our office today.

i What is capital gains tax? | Australian Taxation Office (ato.gov.au)

ii Cost base of assets | Australian Taxation Office (ato.gov.au)

iii CGT when selling your rental property | Australian Taxation Office (ato.gov.au)

iv Treating former home as main residence | Australian Taxation Office (ato.gov.au)

v GST and property | Australian Taxation Office (ato.gov.au)

vi Calculating your CGT | Australian Taxation Office (ato.gov.au)

vii Indexing the cost base | Australian Taxation Office (ato.gov.au)

BMO boasts 3 finalists for the Women in Finance Awards

Fri, 27 Sep 2024 02:07:52 GMT

BMO ladies named as a finalists in the Women in Finance Awards

Regional Queensland based accounting and business advisory firm, BMO Business Centre has been honored with three of its female team members being named finalists for this year’s national Women in Finance Awards. BMO Partner Michelle McVeigh is one of ten finalists in the Accountant of the Year category, while Associate Helen Ruddy is in the running for Regional Professional of the Year. While Operations and Marketing Manager Chelsea Wyatt is the only Queensland finalist up for the Office Administrator of the Year.

The national awards program, run with the support of principal partner Mortgage Choice, is designed to recognise and acknowledge the leading women influencing the Australian finance industry.

Helen Ruddy, Associate at BMO Business Centre, said that she was humbled and surprised to be recognised and proud to be named as a finalist in the Women in Finance Awards 2024.

“BMO’s recognition for our excellent contribution to the finance industry reinforces the strength of our service and dedication to connecting with the community and engaging with clients,” she said.

Year after year, the Women in Finance Awards recognises the outstanding contributions made by women in financial services and companies furthering diversity and inclusion in the industry across a wide range of sectors.

With only a fifth of the financial planning industry and around a quarter of mortgage brokers being women, the awards amplify the exceptional work being done by this minority.

BMO, which has offices in Dalby, Roma and Charleville is defying this minority with 70% of their team of 50 professionals being female.

The finalist list, which was announced on Tuesday, 24 September 2024, features over 258 high-achieving professionals and businesses across 29 submission-based categories.

Finalists of the Women in Finance Awards are widely recognised as having unwavering determination and commitment to furthering the work of the industry and for playing a pivotal role in propelling the industry forward.

Winners of the Women in Finance Awards 2024, will be announced at a black-tie gala at the Hyatt Regency, Sydney, on Friday, 15 November 2024.

Annie Kane, managing editor of The Adviser, extended her congratulations to all finalists, stating: “Momentum Media, in partnership with Mortgage Choice, is thrilled to announce the finalists of the Women in Finance Awards 2024.

“With cost-of-living pressures impacting the back pocket and home loan rates having hit a 12-year high recently, the support and advice of those in the finance sector is making a critical difference to the financial health of Australians across the nation.

“We’re proud to highlight the exceptional women and companies across the finance sector who are making significant contributions to the financial well-being of Australians amid a difficult economic landscape.

“By celebrating these remarkable achievements, we aim to inspire future generations of women to explore careers in financial services.”

“Congratulations to all the finalists of the Women in Finance Awards 2024. We look forward to celebrating the winners at the awards ceremony in Sydney!”

How to improve your business cashflow

Tue, 03 Sep 2024 23:32:22 GMT

With the cost of doing business continuing to squeeze the bottom line, careful cash flow management has never been more important.

Not only is the ATO paying extra attention to timely payment of tax debts, but once the new payday super rules commence, many small businesses will no longer have access to one of their traditional sources of emergency funding. ⁱ

The government recognises how important cash flow is in small businesses and allocated an additional $23.3 million in the May 2024 Federal Budget to boost the adoption of eInvoicing. This electronic system is designed to help improve cash flow and productivity in smaller operations.

If you don’t have clear insights into your cash flow position and are not careful in managing income and expenses, it’s much harder to pay your bills and meet your tax, super and employer obligations. ⁱⁱ

A cash flow projection or budget helps to ensure there is enough cash available to meet upcoming expenditure. You will be able to understand your likely cash position at any time, identify fluctuations that could lead to potential cash shortages and plan for tax payments and major expenses.

The three main things to consider when creating a cash flow budget are timing, fixed and variable costs, and your income.

While cash flow projection tools can be off-the-shelf digital products or simple templates , we can also work with you to use the ATO’s Cash Flow Coaching Kit to improve management of this critical area. ⁱⁱⁱ

Improving your position

When you have completed a cash flow projection and understand your position, it is time to work on ways to improve it.

One of the most important ways to improve cash flow is to ensure your invoices are paid as quickly as possible. Make sure invoices are sent out as soon as you can and, if possible, ask for immediate payment.

Consider shortening your payment terms, particularly if they are currently longer than 30 days. Some businesses offer an early payment discount or charge interest on overdue accounts to help speed up payments. ^iv

Setting clear payment guidelines for your customers is also valuable and think about taking action with customers who regularly fail to pay on time.

Review your payment cycle

Check suppliers’ payment terms to make sure you are not paying earlier than required (unless there is a discount on offer!).

Using a business credit card with an interest-free payment period can be an easy way to smooth your cash flow.

Separating your personal and business expenses makes tracking your business cash flow and expenses easier and reduces the time required for reconciliations.

Check stock levels

If you sell or supply products, carry out regular reviews of your inventory to ensure you are only holding the stock needed and are not tying up valuable cash flow and possibly increasing storage and insurance costs.

An inventory management system can be helpful to automate ordering and reduce lags between placing and receiving orders, and to identify unwanted or outdated stock.

Also review your pricing and margins to see if it is possible to raise prices without losing business.

Reduce your outgoings

Keeping a close eye on regular expenses and one-off spending helps to keep outgoings to a minimum.

Look for opportunities to save money by streamlining operations and reducing operating costs by cutting energy expenses and reviewing existing service contracts including phone and insurance.

Negotiating better prices with suppliers and more tightly targeting marketing expenditure can also boost your cash flow.

Make your asset work harder

If your business includes expensive assets like vehicles and equipment, ensure they are working hard for you.

Consider leasing or hiring assets to reduce upfront costs, sell assets you no longer need, and review any asset financing to make sure that it is competitive.

While these general tips may help improve your cash flow position, don’t forget we can provide advice tailored to the specific needs of your business. So, call us today if you would like our help.

i Payday superannuation | Australian Taxation Office ( ato.gov.au )

ii Manage your business cash flow | Australian Taxation Office (ato.gov.au)

iii Cash Flow Coaching Kit | Australian Taxation Office (ato.gov.au)

iv Improve your cash flow | business.gov.au

Which business structure is best?

Wed, 14 Aug 2024 05:54:15 GMT

A catchy business name, a trustworthy brand and an engaging website or social media presence are all vital to any small business. But don’t underestimate the effect of the business structure.

Choosing whether to operate as a sole trader, company, partnership or trust depends on many factors including cost, the size of the business, whether you have dependants and family members to share income with, and the degree of financial or legal risk involved in running the business.

Sole trader

Many small operators start out as a sole trader, and some decide to continue with this structure.

On the positive side, it’s easy to set it up and, with fewer business reporting obligations, it’s cheaper to run than other business structures.

There are one or two considerations that, depending on your circumstances, could mean a sole trader structure doesn’t work for you.

One of these is the extent of your liability if things go wrong. When you’re a sole trader your liability is unlimited, meaning your assets are at risk in the case of legal action. Some businesses may consider their risk to be too low to warrant changing the business structure or they may choose to find an insurance product to provide some protection.

Tax is another consideration. Among other issues, as a sole trader, you’re liable to pay tax on all income received by the business and you can’t split profits or losses with family members. ⁱ

Partnership

Two or more people can form a business partnership and distribute business income among themselves.

Like a sole trader structure, a partnership structure can be slightly cheaper to operate because there are minimal reporting requirements.

All partners are liable for all the debts and obligations of the business although there are different types of partnerships that vary liability among the partners.

For tax purposes, each partner reports their share of the partnership income or loss in their own return and pays tax on any income. Partners cannot claim a deduction for any money they withdraw from the business. Amounts taken from a partnership are not considered wages for tax purposes. ⁱⁱ

Company

A company structure has a number of advantages over a sole trader or partnership structure, but it costs more to set up and operate and there are more reporting requirements.

A company is considered a separate legal entity and has its own tax and superannuation obligations, but company directors have a number of legal responsibilities.

Companies pay an annual fee to be registered with the Australian Securities and Investments Commission (ASIC) and they usually cost more to put together the necessary annual accounts and tax return.

On the plus side, you will be able to employ yourself and claim a tax deduction for your wages.

But be aware of the Personal Services Income (PSI) rules . If more than 50 per cent of the income of the business is produced by your personal exertion, it’s considered PSI and you will pay tax at your marginal rate, rather than the lower company tax rate. This rule affects taxpayers with any business structure.

Trust

A trust is the most expensive and complex business structure to operate but it might be the most appropriate for your needs.

There are some pluses and minuses so expert advice from your accountant and lawyer is crucial. You will need help to decide on the type of trust, to set up a formal trust deed and to carry out annual administrative tasks.

On the positive side, there may be tax advantages and there are some protections from financial and legal liability.

On the flip side, all income earned must be distributed to beneficiaries each year otherwise tax is paid at the highest marginal rate. Also, losses can’t be distributed to beneficiaries, it may be difficult to dissolve or change elements of a trust and it may be more difficult to borrow funds.

Ask for guidance

The importance of choosing the best business structure for your needs and understanding the regulatory requirements is crucial to the success of any small business. Check in with us for expert guidance.

i Sole trader | business.gov.au
ii Business structures - key tax obligations | Australian Taxation Office (ato.gov.au)

Preparing your SMSF for the future

Wed, 14 Aug 2024 05:48:03 GMT

What happens to a self managed super fund (SMSF) when a trustee dies or becomes mentally impaired? While these are circumstances that many of us would rather not think about, some time spent planning now could make a big difference to you and your family later.

Australia’s 620,000 SMSFs hold an estimated $933 billion in assets, so there is a lot at stake. ⁱ

But it’s not just about money – control of the SMSF may also be crucial.

The best way to ensure that your wishes are carried out is with a properly documented succession plan and an up-to-date trust deed .

An SMSF succession plan sets out what will happen if you or another trustee dies or loses mental capacity. It makes sure that there’s a smooth transition and is quite separate to your Will.

It’s important to be aware that instructions in a Will are not binding on SMSF trustees, so it’s essential to have a valid (preferably non-lapsing) binding death benefit nomination in place so the new trustees are required to pay your death benefit to your nominated beneficiary.

Your Will cannot determine who takes control of your SMSF or who receives your super death benefit as the fund’s trust deed and super law take precedence. ⁱⁱ

Succession plans also reduce the potential for the fund to become non-compliant due to overlooked reporting or compliance obligations. They can even provide opportunities for death benefits to be paid tax effectively. ⁱⁱⁱ

Selecting successor trustees

Super law requires SMSFs with an individual trustee structure to have a minimum of two trustees, so it’s important to consider what will happen after the death or mental incapacity of one of the trustees.

An alternative to appointing a successor trustee can be introducing a sole purpose corporate trustee structure for your SMSF, as death or incapacity is then not an issue. This structure makes it easy to keep the SMSF functioning and fully compliant when a trustee transition is required. ^iv

Appoint a power of attorney

Good SMSF succession planning also means ensuring your Will is updated to reflect your current family or personal circumstances.

It requires having a valid Enduring Power of Attorney (EPOA) in place to help keep the SMSF operating smoothly if you lose mental capacity. Your EPOA can step in as fund trustee and take over administration of the fund or make necessary decisions about the fund’s investment assets.

Checking compliance

When developing a succession plan, ensure your wishes comply with all the requirements of the SIS Act and will not inadvertently compromise your SMSF’s compliance status.

Your planning process should include a regular review of both the fund’s trust deed and any changes in both the SMSF’s circumstances and membership, and the super legislation and regulations.

Tax is an important consideration when it comes to estate and succession planning as the super and tax laws use different definitions for who is and isn’t considered a dependant.

Your SMSF is able to pay super death benefits to both your dependants and non-‑dependants, but the subsequent tax bills vary based on the beneficiary’s dependency status under tax law.

The problems that can occur, due to the differences between super and tax law dependency definitions, were highlighted in recent private advice ( 1052187560814 ) provided by the ATO. It found that even if a beneficiary was receiving “a reasonable degree of financial support” from a deceased person just before they died, they would not necessarily be considered a death benefit dependant under tax law.

There is also the potential for capital gains tax to be payable if fund assets need to be sold because your super pension ceases when you die. Nominating a reversionary beneficiary for your pension ensures payments continue automatically without requiring any asset sales. ^v

If you would like to discuss or require assistance with drawing up your SMSF succession plan, give our office a call today.

BMO expands down the Warrego

chelseaw@bmo.com.au (Chelsea W) — Wed, 31 Jul 2024 05:15:50 GMT

BMO Business Centre is pleased to announce the acquisition of Condon Noller’s South West Queensland division, effective 31 July. This strategic acquisition underscores BMO's commitment to expanding its service offerings to Western Queensland clients across the Roma and Charleville regions.

Condon Noller has established a strong reputation for delivering high-quality personalised accounting and taxation services and advice. The acquisition will allow BMO to integrate Condon Noller’s expertise, offering clients a more robust portfolio of services.

"We are excited to to announce the acquisition of Condon Noller’s South West Queensland division. Our team is dedicated to maintaining the high standards of service and personal attention that the clients have come to expect from Condon Noller," said Kelvin Tyler, Partner at BMO Business Centre. "This acquisition aligns with our continued growth strategy, sustainability and succession plan, along with our commitment to providing the highest level of service to our clients."

Clients can expect the same dedication to excellence and personalised service, now with the added benefits of enhanced resources and a broader range of services. The Charleville office will continue to be run by Kay Green under the BMO banner, while the alignment timed in well with the retirement of Charleville stalwart, Bernadette Doyle. Roma will continue as a satellite office for clients in that region.

"After considering many different alternatives, we decided to downsize our business in a way that allowed both our staff to grow and our clients to access higher levels of service and a wider range of services. We are pleased to say that they have met a great group of people who have the resources and experience to take over the business and know that our clients will be in great hands with the BMO team," said Matt Noller, Director, Condon Noller.

“We understand that change can bring questions and uncertainties, and we want to assure our new clients that our primary goal is to make this transition as smooth and seamless as possible. Our team is dedicated to maintaining the high standards of service and personal attention to our new and existing clients. We have the drive, resources and team to support you all year round, offering a sounding board for new ideas, a helping hand for building your wealth, and strategies for reducing debt and keeping tax to a minimum,” said Kelvin Tyler.

Photo (left to right) – BMO Partners Michelle McVeigh and Adrian Rasmussen, Condon Noller Director Matt Noller, BMO Partners David Briese and Kelvin Tyler.

Ready, set, goals

Sun, 21 Jul 2024 22:55:05 GMT

Is it time for a mid-year check-in? Making time throughout the year to review and reassess the goals you set at the beginning of the year is just as important as setting the goals themselves. Now is the perfect time to reflect on what you’ve achieved to date and determine whether you’re still on track to achieving some or all of them or whether you might need to readjust the goal posts a little.

You may have set business goals that focus on sales, improving your business cash flow, new product development or streamlining business processes but whatever it may be, you need to ensure each goal is reviewed regularly to help keep you on track for success.

The path to success can change

With the Olympics taking centre stage this month, there are plenty of lessons we can learn and highlighting why reassessing and resetting goals is important. Professional athletes train hard to achieve glory in their respective sports, but as part of their ongoing training, they will also need to factor in what will happen if they sustain an injury, become unwell or their performance plateaus.

The same can be applied to setting professional or personal goals – you cannot always predict what happens on a day-to-day basis. Some things will be completely out of your control – as an example, what would happen if there was a data security breach to your business or you needed to take time off to attend to a family emergency? Situations like this could potentially derail your entire day/week/month which means less time spent working towards achieving your goals.

It's important to keep in mind that circumstances can change in a heartbeat, so it’s crucial that you factor this in and don’t be too hard on yourself, if you’re not exactly where you expected to be at this time of year.

Reflecting and resetting goals

Using the SMART goal strategy (Specific, Measurable, Achievable, Relevant, Time-bound) can help you to define your goals and stay focussed. This method is used by many businesses to help keep projects on track.

If you don’t want to use the SMART strategy, another practical way to help you achieve your goals is by:

Assessing whether your goals are achievable - are you setting unattainable goals? Be realistic about what you are trying to achieve. Think about each of the goals you set at the beginning of the year and why you set them.
Accounting for setbacks – as mentioned previously, life can throw unexpected curveballs, so it’s important to factor this in or have a contingency plan in place.
Choose the right framework - while using the SMART method is popular, it may not be the best tool for your business. There are other goal-setting tools available so do your research to find out what works best for you.
Incorporating ‘Stretch’ targets – stretch goals, KPIs (Key Performance Indicators) or targets are designed specifically to be more challenging. While they may take people out of their comfort zone, they can help to boost results.
Take time out - this generally means having a good work/life balance but the same can be applied in the workplace. Team building activities are a good way to reduce stress in the workplace, increase job satisfaction, and incorporate better collaboration within the workplace.
Refocus your goals - once you have reassessed your objectives and goals you can refocus on each of your priorities. Break down each objective so you can focus on achieving smaller goals to begin with – this will seem less daunting and more than likely set you up for success.

What does success look like?

Success is more than the end result, it's also about the journey you took to get there. You may be in the exact same position in three months but sometimes it takes baby steps to achieve goals. Everyone's path is different, so be flexible and make the necessary adjustments along the way to help set your business up for long-term success.

How to reduce your mortgage interest rate and fees

Sun, 21 Jul 2024 22:50:38 GMT

With interest rates continuing to rise, reducing your mortgage interest rate can be a great way to save money so you’re not out of pocket and can keep or invest more of what you earn. Here’s a four step plan that may help you decrease your interest rate and reduce mortgage repayments.

Step 1: Negotiate a lower interest rate

If you have a mortgage with a variable interest rate, you can renegotiate your rate with your lender. You want to sound confident when you speak to your lender. That means being armed with all the information you need before you pick up the phone. Check your current interest rate and repayments, then compare it to similar loans elsewhere. If you find a better rate, ask your lender to match it or offer you a lower interest rate.

Reviewing fees

When reviewing your fees, look at the comparison rate. This shows the true cost of the loan once fees have been included.

In addition to the comparison rate, check the one off fees such as application fees, monthly fees and annual fees. You may also want to ask which ones can be waived. Don’t forget to stay on top of what’s happening in the market so that if big changes are made to mortgage interest rates, you can jump on it. It’s the small changes you make now, that can have a huge impact over the lifetime of your mortgage.

Switching loans

If your lender is willing to lower your interest rate but that rate is still not competitive with other rates on the market, you may want to consider switching to another lender. If you decide to change, make sure you consider all the pros and cons of refinancing. You should make sure the benefits outweigh any fees you could end up paying. This may include costs for closing your current mortgage and applying for another one.

Step 2: Commit to extra payments

Consider whether you can afford to pay more than your minimum repayments. If you can, put in extra cash where possible, like a bonus or tax refund into your mortgage. This could save you thousands of dollars in interest and shorten the life of your loan.

Step 3: Consider an offset account

If you have a mortgage with a variable interest rate, an offset account maybe can be beneficial. Like a savings or transaction account, you can use it for regular payments. The difference is it’s linked to your mortgage. By having the money sitting in an offset account, it effectively reduces the amount you owe on your mortgage, so you end up paying less interest in the end. For example, if you have a mortgage of $350,000 and you have an offset account with $10,000, you’ll only pay interest on a loan of $340,000.

Step 4: Pay off interest and principal

Paying off both the principal and interest on your mortgage, is another strategy to save money by removing your debt faster. With an interest only loan, your repayments are covering the interest on the amount you borrowed but that’s it. If you’re paying off the principal as well, you’re not only reducing the interest, but you’re also shortening the term of your loan.

Source: MLC

FAQ - Retirement planning

Sun, 21 Jul 2024 22:42:44 GMT

Retirement is a major milestone in life, representing the end of years of hard work and dedication. It’s a time to enjoy the freedom to pursue your passions and interests without being tied to a work schedule.

However, to make the most of your retirement years, careful planning and consideration is key, particularly when it comes to managing your finances and investments.

Here, we address some of the commonly asked questions relating to retirement planning including outlining some steps for growing your money in retirement and how to adjust your investment risk as you near retirement.

Steps for growing your money in retirement

Retirement planning doesn’t end when you stop working; in fact, it becomes even more pressing as you move into this new phase of life. Here are a few steps for retirees to grow their money in retirement:

Assess your financial situation – Before making any investment decisions, review your financial situation. Work out your income, expenses, assets and liabilities to get a clear idea of your overall financial health and retirement readiness.
Create a budget – Develop a realistic budget that will cover your retirement goals and lifestyle. Factor in expenses such as housing, healthcare, travel and leisure activities, and identify areas where you can reduce costs or make adjustments if needed.
Diversify your investments – Diversification is key to managing risk in retirement. Spread your investments across various investment options, such as shares, bonds and real estate, so that you’re not overexposed to any single market or economic downturn.
Consider income generating investments – Look for investments that provide a steady stream of income, such as dividend paying shares, bonds, rental properties or annuities (a form of investment entitling the investor to a series of regular payments).
Monitor and rebalance your portfolio – Regularly review your investment portfolio to ensure it still meets your financial goals and risk level. Rebalance your portfolio as needed and adjust for changes in market conditions or your personal circumstances.
Stay informed and seek professional advice – Keep yourself informed about market trends, economic developments and changes in tax laws that may impact your retirement investments. Consider meeting with a financial adviser or retirement planner to help you develop a retirement strategy that meets your needs and objectives.
Manage withdrawal rates – Be aware of how much you’re withdrawing from your pension each year to avoid going through your savings too quickly. For an account-based pension, the minimal drawdown rate for under 65s is 4%, gradually increasing to 14% when the member turns 95.
Plan for healthcare costs – Healthcare expenses can be a major burden in retirement, so it’s very important to factor them into your financial plan.

By following these steps, you can proactively grow your money and help improve your financial security throughout your retirement years.

Adjusting investment risk when nearing retirement

As you approach retirement, you may need to rethink your investment strategy to reflect your changing financial needs and risk tolerance. Here are some considerations for adjusting your investment risk when nearing retirement:

Consider moving towards capital preservation – As you near retirement, you may want to put capital preservation before aggressive growth. Moving part of your investment portfolio into more conservative assets, such as bonds, can help preserve your retirement savings.
Reduce exposure to shares – While shares historically offer higher returns over the long term, they also come with risk. You may want to consider reducing your exposure to shares as you approach retirement to minimise the impact of market downturns on your portfolio.
Focus on income generation – Shift your investment focus from growth oriented assets to income generating investments that provide a steady stream of cash flow. Dividend paying shares and bonds can help top up your retirement income while offering more stability.
Consider your longevity – Plan for the possibility of living longer than expected and the impact it may have on your retirement savings. Consider an investment that offers protection against inflation and longevity risk, such as annuities or inflation indexed bonds, to help ensure income security throughout your retirement years.

Summary

Growing your money in retirement requires careful planning, prudent decision-making, and ongoing management of your investment portfolio. By following the steps outlined above and adjusting your investment risk as you near retirement, you can improve your financial security, protect your retirement savings, and enjoy a comfortable and fulfilling retirement lifestyle.

Source: MLC

Tax and super changes for the new financial year

Wed, 10 Jul 2024 05:48:17 GMT

The tax cuts introduced from July 1 and other changes may mean it’s time for a review of your current tax, super and investment strategies to make sure you’re maximising the benefits.

Under the changes, the previous 19 per cent tax rate reduces to 16 per cent, while the 32.5 per cent rate drops to 30 per cent. The income threshold at which the existing 37 per cent tax applies increases from the current $120,000 to $135,000.(i)

In addition, the income threshold at which the 45 per cent tax rate applies increases from $180,000 to $190,000.

More income but salary packaging impact

With additional disposable income now available, it might be a good time, depending on your circumstances, to consider contributing more to your super or paying down non-deductible debt such as your mortgage.

If you have a salary packaging arrangement currently in place, it’s worth noting the reduction in the lowest tax rate from 19 per cent to 16 per cent may affect the value of these types of strategies for some taxpayers.

For example, someone packaging $15,000 of debt repayments in 2023-24 saved around $5,000 with the 37 per cent tax rate, but under the new, lower 2024-25 tax rate of 30 per cent, this tax saving is significantly reduced.

Medicare Levy threshold uplift

Some taxpayers will also see changes due to the May 2024 Federal Budget increase to the low-income threshold for the Medicare Levy.

The lift in the existing income thresholds is designed to ensure low-income taxpayers continue to be exempt from the Medicare Levy or pay a reduced levy rate.

For the 2024-25 year, the income threshold exempts people earning $26,000 or less from paying the Medicare levy. After that, the levy increases gradually, with the full 2 per cent levy paid by anyone earning more than $32,500.(ii)

Tax cuts impact businesses

Employers will also feel the impact of the new income tax rates and need to ensure they are withholding the right amount of pay as you go (PAYG) withholding tax from each employee’s pay, starting from 1 July 2024.

Employers should check their payroll software is using the correct, new withholding rates. An easy way to do this is to use the ATO’s online Tax Withheld Calculator.

SG rate changes for employees

From 1 July 2024, the Super Guarantee (SG) that employers are required to pay into their employees’ personal super accounts increased from 11 per cent to 11.5 per cent of ordinary times earnings. The SG will rise again on 1 July 2025 to reach its final level of 12 per cent.(ii)i

The quarterly maximum super contributions base (MSCB) also rose to $65,070 (up from $62,270) from 1 July. Employers are not required to provide SG contributions for any salary amount paid to an employee above the quarterly MSCB limit.

Super contribution caps rise

From 1 July, there were increases in the annual caps on super contributions before extra tax becomes payable on the contribution amount.

The concessional (before-tax) contributions cap increased to $30,000 (up from $27,500 in 2023-24), while the annual non-concessional (after-tax) contributions cap rose to $120,000 (up from $110,000 in 2023-24).(iv)

The increase in the non-concessional contributions cap means the limit for bring forward contributions now sits at $360,000 over three years (up from $330,000 over three years in 2023-24). The cap on your total super balance remains at $1.9 million, as does the general transfer balance cap.

For 2024-25, the CGT cap amount (or lifetime limit) for eligible business owners wanting to make tax advantaged contributions into their super account is $1,780,000 (up from $1,705,000 in 2023-24).(v)

If you need help navigating the updated tax and super rules in place for the new financial year, call our office today.

(i) https://taxcuts.gov.au/

(ii) https://www.abc.net.au/news/2024-01-25/low-income-earners-extra-tax-relief/103387054

(iii) https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/super-guarantee

(iv) https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/concessional-contributions-cap

(v) https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/contributions-caps#ato-CGTcapamount

Steer clear of these red flags on your return

Tue, 09 Jul 2024 06:25:36 GMT

The Australian Taxation Office has provided a heads-up about the areas it will be focussing on when reviewing tax returns this year.

The ATO says there are three common errors made by taxpayers:

• Incorrectly claiming work-related expenses

• Inflating claims for rental properties

• Failing to include all income

ATO Assistant Commissioner Rob Thomson says while the mistakes are often genuine, sometimes they are deliberate. “The ATO is focussed on supporting taxpayers to get their lodgement right the first time,” he says.

The ATO has also warned that its more lenient pandemic-era approach is over, and that debt collection and unpaid superannuation guarantee charges will be actively pursued.i

Check work-related expense claims

More than eight million people claimed work-related expenses last financial year, but the ATO says taxpayers are still claiming expenses they did not pay for themselves, or for which they have already been reimbursed.

If you claim expenses with no connection to your work, or those covered by a work allowance, your return is likely to face extra scrutiny. It’s also essential to have a record (usually a receipt) to prove the expense.

For those working from home, the ATO has made some changes to the fixed rate of calculating a working from home deduction to broaden what is included, increase the rate, and change the type of records you need to keep.

You now need comprehensive records to substantiate your claim including proof of the actual number of hours worked from home in a calendar, diary, or spreadsheet. You’ll also need proof of the extra running costs you have incurred such as a copy of your electricity or internet bill.ii

The ATO says that copying and pasting your working from home claim from last year may be tempting, but it will likely mean you’ll receive a ‘please explain’.

Another way to attract the ATO’s attention is to suddenly claim a large expense you haven’t claimed in previous years, or to claim a deduction unlike those made by other taxpayers in the same industry.

Take care with rental property deductions

Rental property owners are also coming under the ATO’s watchful eye after data showing that some 90 per cent of rental property owners make mistakes on their tax returns, most often by inflating expenses.

The ATO says that claims for repairs and maintenance are often incorrect. While general repairs and maintenance expenses can be claimed as immediate deductions, capital expenses (such as initial repairs on a newly purchased property or improvements) must be deducted over time as capital works.

An immediate general repair deduction might be the replacement cost for a damaged carpet or broken window. But replacing an old kitchen with a new and improved one is considered a capital improvement.iii

Include all income when lodging

Taxpayers who don’t include all of the income they receive in their returns are also under the microscope.

Failing to declare income (including rental income and any from online platforms like Airbnb, Uber or AirTasker) can result in significant penalties, with the ATO’s data-matching program making it easier to get caught.iv

The ATO is also warning taxpayers against rushing to lodge returns in early July because their interest information may not be available. Many taxpayers are forgetting to include interest from banks, dividend income and payments from government agencies and private health insurers when completing their returns.

Taxpayers are being urged to wait until the end of July before lodging to ensure their income information is pre-filled, making the return process smoother. According to the ATO, lodging in early July doubles the chances of having your tax return flagged as incorrect.

Checking your employer has marked your income statement as ‘tax ready’ and that your myTax information is pre-filled will avoid later amendments and unnecessary delays. Failing to lodge your return on time can also trigger an ATO audit, as can making mistakes in your return.

If you need help with preparation of your income tax return this financial year, contact our office today.

i https://www.ato.gov.au/media-centre/addressing-collectable-tax-debt-tax-institute-s-tax-summit-2023

ii https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/working-from-home-expenses/fixed-rate-method-67-cents

iii https://www.ato.gov.au/media-centre/get-your-rental-right-this-tax-time

iv https://www.ato.gov.au/about-ato/commitments-and-reporting/in-detail/privacy-and-information-gathering/how-we-use-data-matching

How to end the financial year on a high note

Mon, 10 Jun 2024 01:21:52 GMT

As the financial year draws to a close, it's the perfect time to review your financial affairs and set the stage for a successful new financial year. By taking care of essential tasks and implementing strategic planning, you can position yourself for a smooth transition and a strong start for the year to come.

Topping up super

One important item for the To Do list is to top up your super with either concessional (pre-tax) or non-concessional (post-tax) contributions. For example, you could make a voluntary concessional contribution up to the limit allowed and then claim a tax deduction on your personal assessable income for it.

Consider making additional contributions to your own super account or your spouse's account, to take advantage of tax concessions.

If you have unused concessional cap amounts from the previous five years and a super balance less than $500,000 on June 30 the previous year, you may be eligible to make a catch-up (or carry-forward) contribution greater than the annual limit.

Maximising contributions not only helps you build your retirement savings but can also provide valuable tax benefits. But it’s critical to be mindful of your caps and to ensure that you make any super contributions before the end of the financial year to meet the deadline.

Reviewing investments

Reviewing your investment portfolio is a valuable task at any time but particularly now.

For example, you could take a look for any capital gains or losses that could be used strategically to manage your tax liability.

Also, it is worth considering how your portfolio performed over the past 12 months against your goal of capital growth, income, or balance.

You may decide to readjust your goals or your investments to help steer performance in the right direction for the next 12 months.

Of course, if you’re planning any changes, it’s important to check in with us to ensure you're making informed decisions about your investments.

Paying expenses early

Another useful strategy at tax time can be to bring forward any deductible expenses or interest payments before 30 June to reduce your taxable income.

That could include incurring expenses on an investment property, prepaying interest on investment loans, making charitable donations, or claiming eligible work-related expenses.

Make sure you keep detailed records and receipts to support your deductions. The ATO’s myDeductions app is a great place to start for free record keeping and to assist you to be ready for tax time.

Setting up salary sacrifice

As you look ahead to the new financial year, consider whether a salary sacrifice arrangement might be right for you.

Salary sacrifice allows you to divert a portion of your pre-tax salary directly into your superannuation, which effectively reduces your taxable income and boosts your retirement savings.

You will need to think carefully about your living expenses to work out the amount you can afford to contribute to your super, ensuring you do not exceed your concessional (before-tax) contributions cap of $27,500 (which will increase to $30,000 from July 1 2024) to avoid paying any extra tax.

Your employer or payroll department can help you set up a salary sacrifice arrangement.

Checking your budget

This is a good time to revisit your financial goals and how you’re tracking, and then put together a strong budget for the new financial year that will help get you further along the track.

Take the time to review your income and expenses and identify any areas where you can cut back spending or improve your income.

This exercise not only helps you understand your financial habits but also allows you to reallocate funds towards your goals, such as paying down debt, building an emergency fund, or increasing your investment contributions.

Consult with professionals

Don’t forget to check in with your trusted advisers - financial advisers, accountants, or tax professionals - to make sure you are making the most of any opportunities for financial growth and maximising tax savings.

Taking advantage of our expert advice to review your current financial situation and goals, and check that you are making the best decisions for you can make a difference. It provides peace of mind, ensures that you are complying with any obligations and, importantly, puts you in the best position to achieve your financial goals.

The information in this article is general in nature and does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document.

Looking after your most valuable business asset – you!

Tue, 04 Jun 2024 03:45:11 GMT

While running a small business can be incredibly rewarding, it also has its challenges. It’s common to feel that it’s a 24-7 job, one that can take its toll on your physical and mental health so it’s important to look after your number one business asset – that face you see in the mirror every morning.

Most businesses run on pretty tight margins which mean there’s very little extra capacity. If someone takes leave, is away ill or resigns, guess who generally has to step in? If there is a lack of resources for certain roles or tasks, chances are the business owner will get involved.

It is commonplace for small-business owners to be working long hours, struggling to achieve life work balance and feeling that it all rests on their shoulders.

And it’s not just internal pressures within the business that can cause pressure, small businesses often bear the brunt of a turbulent economy. Throw in a series of interest rate rises, increasing inflation and economic uncertainty, and you have good reasons why a number of small business owners might be feeling pressure.

Small business owners and mental health

Given that business performance is so closely linked to an individual’s financial security, personal identity, and sense of self-worth, it’s no surprise that small business owners are particularly vulnerable.

A recent survey confirmed how common it is for small business owners to experience issues with their mental health. In fact, more than half (56 per cent) of small-business operators say running their own business has led to feelings of anxiety or depression.i

Given how common it is to experience these issues as a small business owner, it’s a sad fact that many don’t prioritise their own happiness and health. While 61% acknowledge there is more they can do to improve their wellbeing, one in three (30%) find it difficult to talk about it - and get support.ii

With that kind of gap between acknowledging the importance of self-care and actually making it happen, small business owners need a hand to be at their best. There are a number of ways you can get your wellbeing back on track - and get support to do so.

Prioritising your wellbeing

Running a successful business means checking in regularly and managing the health of the business – looking at factors like revenue, sales, costs etc. Adding in some checks for your health and wellbeing can help you make your wellbeing a KPI.

Think about what good mental and physical health means to you and how you are tracking as far as the general things we all need to do to maintain optimal health. How much sleep are you getting, what are your eating habits like, do you have any time for exercise, have you any unhealthy behaviours or habits you’d like to address?

Prioritise what matters most to you

When you are time poor, something has to give - and often it’s your wellbeing. Place a priority on the things that matter most to you. Try to be ruthless and cut out unnecessary tasks or those that can be delegated or outsourced.

Scheduling ‘me’ time the same way you schedule time for the business can help make self-care happen. Block out time for important activities including breaks away from your desk.

Try to maintain some separation between work and your personal life and ensure you have breaks and tactics to “unplug” mentally and physically from the 24/7 demands of running a business.

Seek support

Support can involve industry groups, networking with peers to discuss issues you have in common or seeking assistance from trusted advisers.

There are also a lot of organisations geared up to provide support. State Governments provide different support programs you can access. The Federal Government also offers NewAccess, a free and confidential, guided mental health coaching program delivered by Beyond Blue to help small business owners.iii

Making your own health and well-being a priority can seem like an impossible notion when you are under the pump but making some tweaks to support your own health can help, not hinder, productivity and business success.

i https://insidesmallbusiness.com.au/management/planning-management/over-half-of-small-business-owners-experience-mental-health-issues

ii https://www.myob.com/au/press-releases/myob-research-finds-mental-health-both-immediate-concern-and-difficult

iii https://business.gov.au/risk-management/mental-health/mental-health-and-wellbeing-support-for-business

Top 10 business tasks to tackle this EOFY

Wed, 22 May 2024 05:58:16 GMT

Talk to your accountant – to help you solve your business problems and find opportunities for growth.
Sign up for business events – networking is such an underrated tool for business growth. You can meet new potential customers, gather some great advocates for your business and also learn and train. Check out your local chamber of commerce or TSBE.
Apply for a grant - Applying for a government grant or program can offer support or funding to help you research, expand or find new ways to improve or grow your business.
Consider changing your business structure – As your business evolves, you may also have to consider a business restructure. Restructuring can help you to be more profitable, improve processes and adapt to the changing needs of your business.
Research the market – Learning about what your customers need and how to get your brand in front of them is a great way to expand your business.
Review your financial position – cashflow is still king. Check your income and expenses regularly, review unnecessary expenses, do another stocktake, is it time for a price increase?
Find new tenders and contract opportunities - Finding new tenders and contracts is a great way to grow your business. There are databases, tools and support networks available to help businesses find, apply for and secure tenders and contracts.
Expand your online presence - Make sure you’re doing everything you can to reach your customers. Maybe you need to add a new section on your website or create a profile on a new social media platform – what worked a few years ago might not be right for today’s digital landscape.
Review your policies and procedures - Make sure you’re running as efficiently as possible by reviewing your policies and processes – on everything from risk management to recruitment.
Hire the right people – As business grows, so should your staff, but ensure you are recruiting the right people for the right job and assess the impacts, costs and obligations involved.

This article has been sourced and adapted from the Australian Government website: https://business.gov.au/news/10-ways-to-grow-your-business-in-2024?utm_source=bga_newsletter&utm_medium=email&utm_campaign=bga_newsletter_20240326&atid=c677bbb71ab8350f

What does the Federal Budget mean for me?

Tue, 14 May 2024 23:46:59 GMT

Treasurer Jim Chalmers has high hopes that his 2024 Federal Budget will rein in inflation earlier than expected, ease cost-of-living pressures and build a stronger economy in the future.

It’s a Budget for the here and now, he says, but also for the decades to come.

More than $8.4 billion has been allocated to quick-fix cost-of-living adjustments along with the previously announced Stage 3 tax cuts and the waiving of $3 billion in student debt.

With a federal election due next year, the Federal Government has announced spending of almost $83 billion on housing, infrastructure, health and a Future Made in Australia project to build a more resilient economy for the future.

The big picture

While Treasury is forecasting a $9.3 billion surplus for 2023-24 after the previous year’s $22.1 billion surplus, the books will look considerably different the following year with a $28.3 billion forecast deficit expected.

That’s against a backdrop of an uncertain global economic outlook with wars in the Middle East and Ukraine as well as slowing growth in China and elsewhere.

“Most advanced economies recorded subdued outcomes during 2023, with around a third of OECD nations recording a technical recession,” notes Treasury in the Budget papers.

“Global inflation has moderated but remains too high, and there are risks it will persist. Tackling inflation remains the primary focus but, as inflationary pressures abate and labour markets soften, the global policy focus will increasingly shift to managing risks to growth.”

There are some bright spots for Australia though.

Treasury is forecasting inflation could return to the target rate of between 2 and 3 per cent earlier, perhaps by the end of the year, the Treasurer says.

Jobs growth is stronger here than in any major advanced economy and real wages are growing again for the first time in almost three years.

Cost of living

This year’s Budget aims to help out those struggling to pay the bills with a range of tax cuts and subsidies.

Every taxpayer will pay less tax as part of the Stage 3 tax cuts announced earlier this year. The average tax cut is $36 a week or an annual $1,888.

More than 10 million households will receive a total rebate of $300 on their electricity bills and eligible businesses will receive $325.

The government says its Energy Bill Relief Plan has kept electricity price increases to two per cent through the year to the March quarter this year. Without it, prices would have increased by 14.9 per cent.

While it won’t provide immediate relief, the government has grocery prices in its sights. It’s taking steps to make a Food and Grocery Code mandatory with penalties up to 10 per cent of turnover for major breaches. It also directed the Australian Competition and Consumer Commission to investigate pricing and competition in the supermarket sector.

Commonwealth Rent Assistance has been increased by a further 10 per cent, there is a $138 million boost to emergency relief funding and financial support services, and the freeze on the deeming rate for income support recipients has been extended. The deeming rates are used by Centrelink to predict earnings from super and investments over the 12 months ahead. The lower deeming rate will remain at 0.25 per cent and the upper rate will remain at 2.25 per cent until 30 June 2025.

Anyone with a student debt will welcome a change to the indexation rate for the Higher Education Loan Program (HELP). The government says it will cut $3 billion in student debt for more than three million Australians.

Health

Medicines can be a big cost for many people and a new $3 billion agreement with community pharmacies is expected to help. The government is expecting the deal to deliver cheaper medicines and better patient health.

There will be a one-year freeze on the maximum patient co-payment and a five-year freeze for pensioners and other concession cardholders. This change means that no pensioner or concession card holder will pay more than $7.70 (plus any applicable manufacturer premiums) for up to five years.

Almost half of Australians live with a chronic health condition and the Budget provides more than $141 million for research and services for conditions including bowel and skin cancer, diabetes and dementia.

The government is also providing an extra $411 million to the Medical Research Fund to continue research for low-survival cancers.

And, in a strengthened mental health package, the government has committed more than $888 million over eight years to improve access to services and support.

Aged care

Providing further support for the recommendations of the Royal Commission into Aged Care Quality and Safety, the Budget allocates $2.2 million to develop a new Aged Care Act. The Act is expected to establish a new Support at Home program and improve the standard of in-home aged care.

An extra 24,100 Home Care Packages will also be made available to reduce waiting times and wait times for the My Aged Care Contact Centre will be reduced.

Meanwhile, the government has allocated funding to beef up the regulatory capabilities of the Aged Care Quality and Safety Commission.

To support fair wages for care workers, the government has committed to fund a further increase in the award wage for direct and indirect aged care workers. The government is also providing $87.2 million for initiatives to attract nurses and other workers into aged care.

Housing

With housing affordability affecting millions of Australians, the government has allocated $6.2 billion in the Budget on a range of initiatives.

There’s a further $1 billion for states and territories to deliver new housing, more student accommodation, an increase in funds for homelessness services and more concessional loans for community housing providers.

The Build to Rent market will receive a boost with a plan to allow foreign investors to purchase developments with a lower foreign investment fee.

The government is also supporting 20,000 new fee-free TAFE places for courses in the construction sector.

Infrastructure

The government aims to stimulate the economies of the states and territories with funding for a number of major infrastructure projects.

There’s $21.6 billion for Queensland over 10 years for projects including the Sunshine Coast rail line and Bruce Highway works; $20.8 billion over 10 years for NSW for various road upgrades; $19.2 million in Victoria for the North East Link and other projects.

Attracting investment

Aiming to shore up Australia’s economic fortunes, the government has created a comprehensive package of projects to lift our manufacturing industry and position us to take advantage of net zero.

The Treasurer says the world’s commitment to net zero by 2050 will demand “the biggest transformation in the global economy since the industrial revolution”.

He believes Australia’s energy, resources, regions, researchers and workers can all play a part in creating a “renewable energy superpower”.

To that end, the Budget includes $13.7 billion in production tax incentives for green hydrogen and processed critical minerals, $1.7 billion to develop new industries using green metals and low carbon fuels and $566 million to map the geological potential of the entire country to get a better picture of our critical minerals and groundwater.

There will be major work on attracting new investment by reforming investment settings and regulatory processes.

The government says it will make it simpler to invest in Australia to entice more capital both from overseas and at home. It will work with business, governments, unions, communities and other experts during 2024 to come up with the best approach.

Supporting women and families

With escalating rates of family violence and an alarming increase in the incidence of violence against women, the Budget includes funding to support a range of programs.

More than $925 million will be spent over five years to provide support for victim survivors leaving a violent intimate partner relationship and a program to strengthen accountability for systemic gender-based violence in higher education.

The government will invest more than $56 million over four years to improve access to sexual and reproductive healthcare for women including training GPs to provide better menopause care.

A newly released national gender equality strategy will drive government action on women’s safety, sharing, economic equality, health, leadership and representation.

In a move to take the pressure off parents, superannuation will be paid on government funded Paid Parental Leave (PPL) for parents of babies born or adopted on or after 1 July 2025.

Looking ahead

The stimulus provided by this Budget will bring some relief in the short term, but our economy will be relying on the big ideas, such as the Future Made in Australia project, to provide the resilience we need in an uncertain global economy.

Treasury is forecasting slow global growth and only 1.75 per cent growth in Australia this financial year and 2 per cent next year along with a significant deficit.

But the Treasurer is confident he has delivered “an inflation-fighting and future-making Budget” with “responsible relief that eases pressure on people and directly reduces inflation”.

It’s one that will “forge a new economy and a new generation of prosperity”, he says.

If you have any questions about the Budget measures announced, please don’t hesitate to contact us.

Information in this article has been sourced from the Budget Speech 2024-25 and Federal Budget Support documents.

It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.

Federal Budget 2024-25: Tax Implications

Tue, 14 May 2024 23:30:39 GMT

Major tax cuts were the centrepiece of the Albanese government’s third Federal Budget, even though the changes have already been announced and legislated.

Small businesses can breathe a sigh of relief, with the popular $20,000 instant asset write-off hanging on for another year and a valuable bill rebate on the way to help with the burden of high energy bills.

Tax cuts for everyone

From 1 July 2024, all 13.6 million Australian taxpayers will receive a tax cut, with the average taxpayer’s tax bill being $1,888 (or $36 a week) lower.

Under the new rules, the lowest tax rate reduces from 19 per cent to 16 per cent, with the 32.5 per cent marginal tax rate reducing to 30 per cent for individuals earning between $45,001 and $135,000.

The current 37 per cent marginal tax rate will be retained for people earning between $135,001 and $190,000, while the existing 45 per cent rate now applies to income earners with taxable incomes exceeding $190,000.

Low-income earners (under $45,000 p.a.) are the biggest winners from the changes. A single taxpayer with a taxable income of $40,000 who pays $4,367 in tax in 2023 24, would have received no benefit from the original Stage 3 tax plan, but now receives a tax cut of $654.

Boost for tax compliance

On the revenue side, the Budget includes savings of $2.5 billion in tax receipt measures through a crackdown on the shadow economy, fraud, and tax avoidance.

Taxpayers can expect the ATO to continue its recent tougher stance, with technology upgrades to enable better identification and blocking of suspicious activities in real-time and a new compliance taskforce focussed on recovering lost revenue and stopping fraudulent refunds.

Foreign residents will pay an additional $600 million over the next three years due to strengthening of the capital gains tax rules applying to this group.

Law change for old tax debts

However, one controversial measure, labelled ‘robotax’ by the media, may be abandoned, according to the Budget papers.

The ATO had been calling in historical tax debts, some accrued more than a decade ago, saying it had no choice under current laws. But the government now intends to change the tax law to give the ATO discretion about whether to collect the individual, small business, and not-for-profit debts.

Instant asset write-off retained

The deadline for the $20,000 instant asset write-off will be extended to 30 June 2025, allowing small businesses with annual turnovers of less than $10 million to immediately deduct eligible assets.

In addition, $23.3 million will be spent boosting adoption of eInvoicing to help improve small business’ cash flow and productivity.

Relieving energy bill pressure

Direct relief for small business energy bills will come in the form of a $325 rebate, while there will also be new funding for reforms to help businesses find their best electricity contract.

Assistance for smaller entities

With trading conditions remaining difficult, small business will receive $641.4 million in new targeted support. This includes $10.8 million to extend both the NewAccess for Small Business Owners program providing free mental health support and the free phone-based Small Business Debt Helpline.

An additional $25.3 million will be provided to expand the Payment Times Reporting Regulator and help improve payment times.

Nuisance tariffs abolished

From 1 July 2024, 457 nuisance tariffs will be abolished by the government to cut business compliance costs.

New funding to expand the government’s Digital ID system is designed to lower the administration burden for small businesses storing identification data on their customers and employees.

Anti-money laundering crackdown

The Budget includes $168 million over four years to pay for reforms to Australia’s anti-money laundering and counter-terrorism financing regime. Tighter rules are expected to result in lawyers, accountants and real estate agents being required to undertake due diligence on their customers and report any suspicious activities.

Information in this article has been sourced from the Budget Speech 2024-25 and Federal Budget Support documents.

It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.

Managing Risk when Growing Your Business

Thu, 09 May 2024 05:31:20 GMT

It’s a risky business being in business for yourself, so knowing how to identify and manage risk is an important part of running a thriving business.

Anything that impedes a company's ability to achieve its financial goals is considered a risk, and there are many issues that have the potential to derail a successful business. Some of these can ruin a business, while others can cause serious damage that is difficult to recover from.

However, taking risks is an essential part of growing a business - it’s how you thrive and expand. The key to achieving the rewards that come with risk and avoiding the devastation that can occur, is identifying and actively managing your business risk.

Assessing your tolerance for risk

The first step is to think about what level of risk you are comfortable with. A range of factors influence your appetite for risk including your individual circumstances, financial resources, specific industry dynamics, economic conditions, and business goals.

It's important to acknowledge the relationship between risk and reward. High-risk activities may provide the potential for significant returns when you are going for growth but are also associated with greater uncertainty and the potential for larger losses.

Not all risk is equal

Some types of risk are best managed through insurance while others can be managed through thoughtful decision making and risk mitigation.

Risk taking is often associated with innovation and entrepreneurship and there are countless examples of reckless business behaviour that paid off - and as many examples that did not pay off. To expand, evolve and stay relevant in a changing marketplace, businesses may need to take calculated risks. This can encompass the development of new services or targeting a different client base, employing staff, developing new products, the adoption of emerging technologies, or exploring new markets.

Taking calculated risks involves some planning - conducting research, gathering supporting data and considering possible outcomes before making a decision. Informed, calculated decisions have a greater chance of success and doing your homework is a great way to mitigate risk in business.

Managing business risk

There are many ways to manage business risk, depending on the type of risk. Threats come in many shapes and forms and can include strategic, compliance, operational, environmental, and reputational, but one of the most fundamental risks is that of the business no longer being financially viable. All the above can impact a businesses’ bottom line so when considering your strategies, it’s a good idea to identify the risks that could affect your business’s ability to meet its financial obligations.

Setting up and maintaining a cash reserve is critical for small businesses, particularly ones with narrow margins. Half of all small businesses hold a cash buffer of less than one month which may not be adequate. i A cash reserve is a great risk mitigation strategy as it can help you get back on your feet when faced with an adverse event.

Keep an eye on cashflow

Growing a business can put pressure on cashflow, and managing your cashflow is a powerful way of managing your business risk.

If you have not already done so, creating, and maintaining a cash flow forecast helps you anticipate and cash shortages. Monitoring your cash flow over time gives you visibility of your financial situation and an understanding of any seasonal ebbs and flows.

Some things you can do to manage your cashflow include being responsive with invoicing and chasing overdue payments. Negotiate payment terms that support your cashflow requirements and consider offering incentives for early payments or penalties for overdue invoices.

For many businesses, one of the leading causes of cash flow shortfalls is overstocking, which increases the amount of cash you have locked up in your stock. Effective inventory management and working with suppliers to reduce lead times can assist with cashflow.

We can help you develop solid cash flow management and provide expert advice to make growing your business less of a risky proposition.

i https://www.jpmorganchase.com/institute/research/small-business/report-cash-flows-balances-and-buffer-days

More money in your pocket

Wed, 08 May 2024 04:24:33 GMT

More money in your pocket, by paying off your mortgage faster

For most of us, our mortgage is our biggest financial burden - and one that’ll be with us for decades. However, it’s important to remember that the life of a home loan doesn’t need to be as long as the contract suggests; you’re free to pay it off faster and take that financial load off your shoulders sooner.

Chipping away at your mammoth mortgage takes a committed plan, so here are some savvy ways to be debt-free earlier than originally planned.

Consider making fortnightly payments

If you're paying your mortgage off monthly, consider switching to fortnightly repayments. It may seem like a trivial move, but by paying half the monthly amount every two weeks you can actually make the equivalent of an extra month's repayment each year. This small move will compound over the life of your loan, reduce the interest paid and allow you to pay off your principal sooner.

Case study

Peta and Alex have a new home loan of $500,000 at a variable interest rate of 6.66% per annum and they’ve chosen to repay principal and interest over a 30-year term. Their monthly repayments at that rate would be $3,213 (not including additional fees and charges).

But if the couple decide to make fortnightly repayments of half their original monthly repayment ($1,607) they would be paying more off their mortgage by the end of the year, i.e., less interest therefore saving them money.

In the long term, they’d pay off their loan more than six years sooner and save around $160,000 in interest (if their interest rate remained the same for the life of the loan).

Make a lump sum payment

A one-off lump sum payment like a redundancy cheque or inheritance as well as semi regular additional payments such as a tax return or work bonus – especially during the first few years of a typical mortgage – could carve years (and cash) off your mortgage and help you get debt-free faster.

It’s important to note that placing a lump sum payment on your mortgage won’t lower your repayments. However, it will help you save on the interest component and lower the total amount of time left on your home loan.

Look at refinancing

By giving your existing mortgage a health check, you could find there is a better rate, or even a better bank, out there for you. Just because you signed on the dotted line for 20, 25 or 30 years doesn’t mean you need to stick with the same lender.

Refinancing could get you a lower interest rate which would ease the hip pocket, but if you can manage to keep making the higher repayments moving forward, you’ll end up reducing the life of your loan.

If you have at least 20% equity in your home and a great credit score, you'll have more bargaining power. Carefully read the fine print to be aware of hidden costs like annual fees or ‘honeymoon’ interest rates that could change after an introductory period, application fees, valuation fees and break fees.

Get into an offset account

You don’t need to keep your savings and your mortgage separate, in fact, they work better together. By putting your savings or even salary in an offset account with a redraw facility, you can reduce the amount of interest you pay but still have access to your funds if you need them.

Ultimately, the more money you keep in your offset account, the bigger the savings and the faster your loan will be paid off.

To work out how you could be mortgage-free sooner while shaving thousands off your home loan talk to us today.

NOTE: Interest rates, fees, regular repayments, and the potential savings will vary depending on your unique circumstances. All calculations have been calculated using the moneysmart.gov.au mortgage calculator.

Sandwich Generation

Wed, 08 May 2024 04:20:31 GMT

Caught in the middle: help for the sandwich generation

If you are feeling a bit like the meat in the sandwich you are not alone. The ‘sandwich generation’ is a growing social phenomenon that impacts people from all walks of life, describing those at a stage of their lives where they are caring for their offspring as well as their elderly parents.

The phenomenon is gathering momentum as we are tending to live longer and have kids later. It even encompasses royalty - Prince William has been dealing with a sick father while juggling school aged kids (as well as a partner dealing with serious health issues).

A growing phenomenon

The number of people forming part of the sandwich generation has grown since the term was first coined in the 1980’s, as we tend to live longer and have kids later. It is estimated that as many as 5% of Australians are currently juggling caring responsibilities which has implications for family dynamics, incomes, retirement and even the economy. i

Like many other countries, the number of older Australians is growing both in number and as a percentage of the population. By 2026, more than 22 percent of Australians will be aged over 65 - up from 16 percent in 2020. ii It is also becoming more common for aging parents to rely on their adult children for assistance when living independently becomes challenging.

The other piece of bread in the sandwich is that as a society we are caring for kids later in life. The median age of all women giving birth increased by three years over two decades. iii And with young people staying in the family home well into their twenties, we are certainly supporting our children for longer. Even after the kids leave the nest, it's also common for parents to become involved in looking after grandchildren.

Taking its toll on carers

While we want to support our loved ones, when that support is required constantly and intensively for both parts of the family, it can mean that something has to give and that ‘something’ is often the carer’s well-being.

Even if you are not part of the sandwich generation but being squeezed at either end – caring for kids or parents, acting as a primary care-giver often requires you to provide physical, emotional, and financial support. It’s common to feel it take a toll on your own emotional and physical health, and sometimes your finances as you sacrifice some of your savings or paid work to help your loved ones.

Support for caregivers

It can be difficult to acknowledge you need assistance but there are a number of ways you can access help.

Deciding what to get help with

It can feel like there is not enough hours in the day and that’s overwhelming. Try to think about what you really need to do and where your time is best spent and consider if you can get assistance with tasks or duties you don’t have to do. This may mean outsourcing things like buying a healthy meal instead of cooking or getting a hand with gardening or lawn mowing.

Think about what others could assist with to lighten and share your load.

Accessing support

There are also support networks out there that exist to take off some of the pressure. Reach out to local support networks via Carers Australia for help identifying mainstream and community supports.

You or your loved ones may also be entitled to government support, under the National Disability Insurance Scheme (NDIS) or My Aged Care . These programs provide funding and resources to help pay for essential care; from domestic assistance with cleaning and cooking, to home modifications, to 24-hour care for those who require more support.

The importance of self-care

It’s vital to take some time out for yourself and make your own wellbeing a priority. Don’t feel that it’s selfish to take care of your own needs as that’s an essential part of being a carer. Resources like respite care and getting support when needed is an important gateway to self-care.

Managing your finances

Caregiving can put financial pressure on the whole household and has the potential to impact retirement savings. The assistance of a trusted professional can help, and we are here if you need a hand.

Raising kids as well as supporting parents to live their best lives as they age is becoming more common and can be a challenging time of life. While the act of caring is the ultimate act of kindness - the most important thing to remember is to be kind to yourself.

i https://info.careforfamily.com.au/blog/sandwich-generation
ii https://www.sydney.edu.au/news-opinion/news/2023/10/09/confronting-ageing-the-talk-australia-has-to-have.html
iii https://www.abs.gov.au/

Loud Budgeting

Wed, 08 May 2024 04:11:32 GMT

What’s all the noise about loud budgeting?

Loud budgeting is a trend that may have started as a joke but is being embraced by those who want to share their financial goals and priorities and in doing so, also improve their chances of achieving them.

It was comedian and writer Lukas Battle who bought the term “loud budgeting” to the world in a TikTok post, presenting it as an alternative to “quiet luxury” as loud budgeting represents a move away from spending to impress or conform.

As is the way with trends, the idea resonated with people, was picked up and run with by a growing group of budgeters. The spirit of the trend is about saying a loud “no” to what doesn’t align with your values. But there’s more to it than that, and there is also a right way to go about loud budgeting that will enable you to keep your finances on target – and your friendships intact.

The benefits of loud budgeting

But before we look at how to get it right, let’s explore why loud budgeting can be such a powerful tool to put you in control of your financial journey.

The fundamental reason it works is because talking transparently about your finances and sharing your reasoning behind how you want to spend your money gives you power and lets you decline invites in a way that is less likely to offend others.

Being open about your challenges can create a sense of community and inclusion. By sharing and acknowledging that it is normal to have limited spending capacity and that it can be a juggle to manage our short-term spending with our long-term savings goals, helps everyone understand each other’s pressures.

Once things are out in the open you are also more accountable. When you have shared your financial hopes and dreams with others, you are more likely to do what is required to stay on track and get support from those who care about you.

Making it loud - and successful!

Think of your goals

Before you start sharing your financial goals with others you must be clear on what they are. Think about what is important to you and what you are working towards. Don’t just have figures in your head - do a proper budget of what you have coming in, what you need to save to meet your targets and what you have left over to spend, so you can make educated decisions.

What matters to you

When you have decisions to make about how to spend your money it can help to think about what is important to you and make intentional choices. That ensures you are not living unnecessarily frugally, but being selective about what you choose to spend your money on, taking into consideration what matters most to you.

Eye on the prize

It’s important to keep your eye on the prize (or prizes) whatever form they may take. Looking to the longer term, this can be smaller goals, like saving up for a special occasion or bigger ones, such as a home deposit. It could also be prioritising payments such as mortgages, student loans and other kinds of debt. Check in from time to time to track your spending and savings against your goals.

Careful communication

Being careful in your phrasing will help make sure feelings aren't hurt when you decline an invitation. Part of loud budgeting is not saying ‘no’ outright – it's about explaining what’s going on for you and offering an alternative that works for you. For example, if you’re invited out for a dinner that you know will blow the budget, you could say “I’m trying to get enough together for a deposit to buy a place so I’m on a tight budget at the moment, can we catch up for a BYO barbeque at my place instead?

Making financial choices that are in line with how you want to live your life and prioritising long-term goals over temporary indulgences is a great way to set yourself up for a fantastic future. So why not speak up and try making your budgeting loud?

New Increased Super Contribution Caps

Sun, 14 Apr 2024 23:51:59 GMT

As the end of financial year gets closer, some investors are thinking about the most effective ways to boost their super balance, particularly with an increase in the caps on contributions from 1 July.

The concessional contributions cap, which is the maximum in before-tax contributions you can add to your super each year without paying extra tax, is increasing to $30,000 from $27,500 in the new financial year. i

The cap increases in line with average weekly ordinary earnings (AWOTE).

It is also useful to be aware of payment and reporting timelines. For example, your employer can make super guarantee contributions up until 28 July for the final quarter of the financial year and salary sacrifice contributions up until 30 June.

Any amounts showing on the ATO website for your account are based on when your fund reports to the ATO.

Carry forward unused amounts

If you haven’t made extra contributions in past years, you may have unused concessional cap amounts.

These can be carried forward, allowing you to contribute more as long as your super balance is less than $500,000 at 30 June of the previous financial year.

You can carry forward up to five years of concessional contributions cap amounts.

Getting close to exceeding the cap?

If you’re worried about going over the cap, you may wish to stop any further voluntary contributions based on an assessment of the extra tax you will pay.

For those with two or more employers, you may opt out of receiving the super guarantee from one of the employers.

Meanwhile, if special circumstances have caused you to exceed your cap, it’s possible to apply to the ATO for some or all of the contributions to be disregarded or allocated to the next financial year.

But, if all else fails and you have exceeded the cap, the excess contributions will be included in your assessable income and taxed at your marginal rate less a 15 per cent tax offset. The good news is that you can withdraw up to 85 per cent of the excess contributions from your super fund to pay your tax bill. Any excess contributions left in the fund will be counted towards your non-concessional contributions cap.

Timing is everything

The upcoming Stage 3 tax cuts, which commence on 1 July 2024, may affect the value of your concessional contributions. For some, tax benefits may be greater if contributions are made before the tax cuts begin.

Please check with us about your circumstances to make sure you make the most effective move.

Non-concessional cap also increased

The non-concessional contributions cap is the maximum of after-tax contributions you can make to your super each year without paying extra tax. ii

The non-concessional cap is exactly four times the amount of the concessional cap so it increases from $110,000 to $120,000.

If you exceed the cap, you may be eligible to use the ‘bring forward rule’, which allows you to use caps from future years and possibly avoid paying extra tax. It means you can make contributions of up to two or three times the annual cap amount in the first year of the bring forward period. iii

If your total super balance is equal to or more than the general transfer balance cap ($1.9 million from 2023–24 and 2024-25) at the end of the previous financial year, your non-concessional contributions cap is zero for the current financial year.

We’d be happy to help with advice about how the changes in contribution caps might affect you and whether you are eligible for the bring forward rule.

i, ii Understanding concessional and non-concessional contributions | Australian Taxation Office (ato.gov.au)
iii Non-concessional contributions cap | Australian Taxation Office (ato.gov.au)

Occupational Burnout in the Workforce

Thu, 28 Mar 2024 01:10:30 GMT

We all know how hard it is to find good employees and also how important it is to hold onto our good team members. While some workforces shrink it can often be our good people that get loaded up in the workplace. Not kept in check this can leave to employees burring out.

Burnout can be described as a severe state of physical and emotional exhaustion, and in the workplace, it can arise from prolonged job stress and inadequate support. It progresses through stages: exhaustion, cynicism, and reduced accomplishment. Ignoring burnout can lead to employees having decreased productivity, increased absenteeism, turnover, and mental health issues.

Where we have good relationships with our team, we can begin to see the early signs before it becomes a problem. However, it can also present in different ways including absenteeism, performance, behaviour.

The good news is that it can be prevented. Firstly, through good open communication and that includes listening. Secondly, we need to set our team members realistic goals and provide adequate resources and training. As managers you need to be role models of good behaviour and promote a fair but achievable work life balance.

No one needs an employee that is not functioning at their best, treat and manage team members well and your business will only prosper from it.

Navigating FBT and Your Obligations

Thu, 28 Mar 2024 01:02:39 GMT

Businesses looking to attract and retain staff often provide employee benefits, on top of salary, as a way to sweeten the deal.

Many of these benefits (but not all) can have potential tax consequences – known as fringe benefits tax (FBT) - so it is important to weigh up the effect on your business.

FBT is separate to income tax and is calculated on the value of the benefit provided to the employee. Employers must work out the amount of FBT they owe each year and lodge a return.

It is worth noting that the FBT year is not the same as the financial year. It runs from 1 April to 31 March.

What to report

Most fringe benefits must be reported to the ATO. Some examples of benefits include: the use of a company car outside of work; free parking; gym membership; payment of school fees; tickets or vouchers for concerts, meals or movies; and living accommodation.

Some benefits do not need to be reported and do not incur FBT.i These include a number of benefits provided to employees working in remote areas, such as living assistance.

Other fringe benefits that are exempt from tax include work-related items such as portable electronic devices, computer software, protective clothing and tools of trade.

If the taxable value of an employee’s fringe benefits for the FBT year (1 April to 31 March) is less than $2,000, no reporting is required.

In adding up the fringe benefits, the ATO says you will need to make sure you include the employee’s part of any benefits they share with other employees as well as the value of any benefits provided to the employee’s associates, such as their partner.

Doing the numbers

For each employee, you’ll need to calculate their ‘reportable fringe benefits amount’ (RFBA) by multiplying the total taxable value of the benefits provided by an ATO ‘gross-up rate’.

The Type 1 gross-up rate is used where a GST credit entitlement is applicable to the benefit. The Type 2 gross-up rate is used where there is no GST credit entitlement applicable to the benefit. (For the FBT year ending 31 March 2023, the Type 1 rate is 2.0802 and the Type 2 rate is 1.8868.)

This calculation grosses up the pre-tax income the employee would have had to earn to buy the benefits themselves.

FBT and salary sacrifice

Benefits provided to employees through salary sacrificing may also attract FBT.

Under a salary sacrificing arrangement, an employee agrees to forgo part of their salary in return for benefits of a similar value, such as more super or a car. As a result, the employee pays less income tax and the employer pays FBT on the benefits provided.

Extra super contributions made under a salary sacrificing arrangement are not subject to FBT and are treated differently. They are considered employer contributions and are taxed in the super fund.

Claiming deductions

Employers can claim income tax deductions for the FBT they are required to pay. You can also claim an income tax deduction and GST credits for the cost of providing the fringe benefits.

The ATO provides some suggestions for reducing FBT liability. For example, employers do not incur an FBT liability if you give an employee a benefit they would have been able to claim as an income tax deduction if they had paid for it. Your FBT liability can also be reduced if the employee contributes towards the cost.

Fringe benefits can be a valuable and strategic tool in your recruitment and retention toolbox. We can help you understand and comply with the reporting requirements and be clear about the impact of FBT on your business.

i Fringe benefits tax - a guide for employers | Legal database (ato.gov.au)

Understanding the New $3m Super Tax

Thu, 28 Mar 2024 00:47:03 GMT

Understanding the New $3m Super Tax

The much-debated tax on superannuation balances over $3 million is inching closer and those who may be affected should ensure they have considered the implications.

Although it is not yet law, the Division 296 tax should be taken into account when it comes to investment strategy and planning, particularly in relation to any end-of-financial-year contributions into super.

Tax for higher account balances

The new tax follows a Federal Government announcement it intended to reduce the tax concessions provided to super fund members with account balances exceeding $3 million.

Once the legislation passes through Parliament and receives Royal Asset, Division 296 will take effect from 1 July 2025. Division 296 legislation imposes an additional 15 per cent tax (on top of the existing 15 per cent) on investment earnings of a super account where your total super balance exceeds $3 million at the end of the financial year.(i) The extra 15 per cent is only applied to the amount that exceeds $3 million. Given the complexity of the new rules, it is important to seek professional advice so you can make informed decisions.

How the new rules work

A crucial part of the new legislation is the Adjusted Total Super Balance (ATSB) , which determines whether you sit above or below the $3 million threshold.

When assessing your ATSB, the ATO will consider the market value of assets regardless of whether or not this value has been realised, creating a significant impact if your super fund holds property or speculative assets. The legislation also introduces a new formula for calculating your ATSB for Division 296 purposes.

The legislation outlines how deemed earnings will be apportioned and taxed, based on the amount of your account balance over the $3 million threshold.

Negative earnings in a year where your balance is greater than $3 million may be carried forward to a future financial year to reduce Division 296 liabilities. If you are liable for Division 296 tax, you can choose to pay the liability personally or request payment from your super fund.

Strategic rethink may be needed

For many fund members, superannuation remains an attractive investment strategy due to its favourable tax treatment.(ii)

But those with higher account balances need to understand the potential effect of the Division 296 tax. For example, given the new rules, you may need to consider whether high-growth assets should automatically be held inside super.

Holding long-term investments that may be more difficult to liquidate, such as property, within super may be less attractive in some cases, because the new rules create the potential to be taxed on a gain that is never realised. This could occur where the value of an asset increases during a financial year but drops in value by the time it is actually sold.

For some, holding commercial property assets (such as your business premises) within your SMSF may be less attractive.

It will also be important to balance asset protection against tax effectiveness. For some people, the asset protection provided by the super system may outweigh the tax benefits of other investment vehicles, such as a family trust.

Division 296 will require more frequent and detailed asset valuations, so you will need to balance this administrative burden with the tax benefits of super.

Estate planning im plications

Your estate planning will also need to be revisited once Division 296 is law.The tax rules for super death benefits are complex and should be carefully reviewed to ensure you don’t leave an unnecessary tax bill for your beneficiaries. If you still have many years to go before retirement and hold high-growth assets in your fund, you will need to closely monitor your super balance.

If you want to learn more about how Division 296 tax could affect your super savings, contact our office today.

i https://treasury.gov.au/sites/default/files/2023-09/c2023-443986-em.pdf
ii https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/understanding-concessional-and-non-concessional-contributions

Managing Cash Flow & Avoiding Bad Debt in Business

Thu, 28 Mar 2024 00:35:51 GMT

Getting paid on time is essential for managing cash flow and establishing a profitable business. And while staying on top of unpaid invoices helps, there may be times when a customer can’t or won’t pay. Here’s how to handle it.

Debt Management

Even thriving businesses can fail if they run into problems managing cash flow. In fact, the Australian Securities and Investments Commission (ASIC) cites this as a major cause of companies going under. To reduce the likelihood of overdue payments becoming bad debts, it’s essential to establish clear payment terms. You’ll also need tight credit control and systems that motivate your customers to pay promptly. Putting debt management policies and procedures in place can also help when a customer or client suddenly runs into payment issues of their own.

Read on for ways to create a healthy cash flow model and protect your business from bad debt.

6 steps to tighter credit control

Tight credit control is your first line of defence in maintaining your company’s financial health. Here’s how to avoid or limit your exposure to bad debts:

Draw up new terms of trade and, like all business documents, have it checked by your accountant and lawyer. Require customers to sign your terms of trade before extending credit terms.
Complete a credit assessment and reference checks before you offer credit to new customers.
Set reasonable but fair credit limits and instruct your staff to notify you if a customer wishes to exceed an agreed credit limit.
Approve additional credit extensions in advance.
Include clear payment conditions in your terms of trade agreement and implement your terms to new customers. Make sure your terms of trade specify when you’ll start to charge interest on overdue amounts and the rate of interest you’ll charge.
Remember that if you do sell on credit, you need to factor possible payment delays into your cash flow forecast.

Your payment terms

Structure your payment terms to encourage prompt payment. For example, you could offer a five per cent discount for payments made within 30 days, or charge interest on outstanding balances. Be firm – don’t allow the discount if the payment is late, even if it’s only a day late, especially for new customers. If you know your customers well and value them highly, you might make exceptions occasionally as part of fostering those business relationships.

Make your payment terms clear and state that you expect to be paid on time, every time. And, always make contact if payment is late – you'll be more likely to be front of mind when customers schedule payments. You’ll then find that a customer juggling payments is more likely to prioritise you over a business whose systems are more relaxed. Many businesses ‘pay the ones that make the most noise’. Within reason, make sure this is you.

Prevention's easier than collection

Good systems are the best way to avoid bad debt. Here are our top tips:

Send out your invoices and statements on time, preferably as soon as the job is complete. Larger businesses have set payment cycles, so prompt invoicing means you’re less likely to miss the next payment cycle.
To ensure your overall business health, keep up-to-date records of what each customer owes you and note any customers approaching their credit limit.
Follow up immediately once payment is noticeably overdue and try to uncover the problem. You don’t want to appear desperate for the money, but small invoices can often be missed, especially if your client is a large business.
Judge each case on its own merits. That might involve allowing a debtor an extra month to pay their invoice while they work through cash flow problems. Alternatively, writing off late payment penalties could be in your best interests if you’re chasing another large order from someone. However, if doing so places you in danger of not being able to pay your own bills, then it’s not in your best interest.

Dealing with overdue payments

Your approach to overdue payments will vary depending on the customer and how late the payment is. However your first step should always be to find out why the payment is late. Some common reasons include:

An issue with your product, service or invoice. Once sorted with the customer, this eliminates any further excuse for not paying.
An accounting or payment system glitch – which can also usually be resolved quickly and amicably.
A customer with temporary or long-term cash flow problems. This can be trickier, but if you negotiate an agreed repayment schedule in writing it may enable them to trade out of the current tight spot.

To protect yourself, stick to your terms of trade. Stop supplying customers who haven’t paid their accounts on time and customers in excess of their credit limit.

If cash flow issues become a problem in your business due to late or overdue payments, one solution offered by lenders is invoice and debtor finance, which provides access to funds based on the amount owed to you by debtors.

Tips for debt recovery

If all else fails, seek debt advice from a collection agency or your lawyer about the most effective way to recover the money you’re owed. Before doing so, contact your customer by phone or in person one last time. Let them know you plan to pursue debt recovery services.

Once you hand the debt over to a third party, there’s a strong possibility the customer will realise you’re serious. Typically this means they’ll pay up straight away – in full or in agreed instalments. Most of the time, a letter from a lawyer or agency is enough to do the trick.

If not, and you need to engage a debt collection service, compare costs beforehand, as fees vary. Services are likely to charge a flat fee or a percentage of the debt recovered, or a combination of both – plus any additional charges. Also, consider the amount of money you’re owed. In some cases, it might be better to write off small amounts to preserve your business relationship.

Resolving disputes

Sometimes it’s worthwhile trying to resolve disputes using an intermediary, who'll listen to both sides of the story. Contact the fair trading agency in your state to see if they can act as an informal negotiator. If you can’t resolve the dispute, then your next step may be to get legal advice or lodge a claim with the Small Claims Tribunal .

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Managing your Financial Health

Wed, 27 Mar 2024 23:53:25 GMT

Understanding financial health.

Financial health is an important part of our lives. When we take care of our financial health we can better manage financial stress and achieve our financial goals.

Financial health is made up of three components:

The ability to meet everyday commitments like paying your bills and making loan repayments
The resilience to cope with and recover from unexpected financial events, like your car breaking down or losing your job
Putting yourself in a position to plan for the future and pursue your goals.

When we maintain good financial health we’re in a better position to handle life's ups and downs.

How we can help

We can help you build your financial health and better understand your finances.

Start saving

Once you know what you’re spending your money on, you can focus on saving. You can do this by setting up a savings goal using an app. If you’re just getting started, we can help you reach your savings goals.

Understand credit and your creditworthiness

If you’re considering credit, it's important to understand what credit means, the different types of credit and how to manage it.

It’s also important to be aware of your credit rating and your creditworthiness. The better your creditworthiness, the more ways you’ll have to get ahead financially.

Use your credit card effectively

Credit cards can be confusing, so make sure you understand how they work. It’s also important to know about your credit card limit, fees and interest. You should set up a notification to let you know when you’re approaching your limit.

Buying a home

Buying your first home is a huge step. Use a borrowing calculator to estimate how much you could afford and what your repayments would be. If you already have a home loan, here are some practical tips to help you pay off your home loan quicker.

What to do when you’re experiencing financial hardship

If you’re experiencing financial difficulty, there are ways to get back on top. We know it can be hard to pick up the phone – you might feel awkward, embarrassed or stressed. But we understand that sometimes things are outside your control, such as illness or suddenly losing your job.

We’re not here to judge – we’re here to help.

Source: NAB

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/manage-money/money-basics/financial-health

How to create a memorable event

Wed, 07 Feb 2024 06:24:00 GMT

If you’ve ever been thrown in the deep end to help organise an event, whether it be the school cake stall, your sister’s wedding or a workplace training day, you’ll know that putting on an event can be a a huge ask! Getting it right can bring great results – like raising lots of money for charity or watching a newlywed couple experience their day. For businesses it can mean attracting new customers, rewarding existing customers, and keeping your team positive.

So what is the key to successful event management? It comes down to five Ws.

Who – Think about your audience and tailor the event to suit their interests and current trends. If your event is for families make sure it is child friendly. If it’s for older people make sure the catering and music will suit the crowd.

What – What is going to draw the interest? Use a theme, music, decorations, guest speakers. Food is also important. Do up a contact list for every supplier and entertainer so that you have phone numbers quickly at hand if something goes wrong.

Where – Get the venue right. Indoors or outdoors? Remembering your climate variables – weather, insects, wind and dust. Think about access, parking and atmosphere. I.e. don’t have a huge space for an event with 40 people as it will feel empty.

When – Get the time of year right. For example, don’t hold a big fundraiser just before Christmas when people are already cash-poor. When is also about getting the timing right DURING the event. Have a detailed run sheet about what is to happen when. Start your run sheet from the set up to the pack down. Brief your MC very carefully so they know what is to be happening when.

Why – Don’t forget WHY you are doing the event and make it special. Use theming, special touches to make a difference. When the event is over be sure to thank those who helped and those who came along to support it. Write a personal note or put an advert in the local paper as a special touch.

How – Be prepared. Set up early, have your checklists and consider what could go wrong! You must be prepared for anything – a technical glitch, a clash of events, bad weather or a food shortage. Risk management – consider worst case scenarios and brainstorm how you would handle them. I.e. bad weather? Have a wet weather plan. Technical hitch? Have the sound person’s mobile number handy, know the location of the nearest back up microphone. Band doesn’t arrive? Have a playlist ready to plug into the speakers. Some things are just out of our control, so just do your best, keep calm and find a way for the show to go on!

Need help with your next corporate event, training day, board meeting or auction? We can assist with venue hire and catering. Check out our conference centre here and contact me for availability and a quote today.

The post How to create a memorable event appeared first on BMO Accountants .

Investing mistakes to avoid

Wed, 07 Feb 2024 05:52:00 GMT

Investing successfully and improving your investment portfolio can be as much about minimising mistakes as trying to pick the ‘next big thing’. It’s all about taking a calm and considered approach and not blindly following trends or hot tips.

Let’s delve into some of the most prevalent investment mistakes and look at the principles that underpin a robust and successful portfolio.

Chasing hot and trending shares

Every so often there are industries or shares that are all over the media and you may begin to worry that you are missing out on something. Jumping on every trend is like trying to catch a wave; you might ride it for a bit, but you’re bound to wipe out sooner or later. That’s because the hot tips and ‘buy now’ rumours often don’t pass the fundamentals of investing test.

The key is to keep a cool head and remember that the real winners are often the ones playing the long game.

Not knowing your ‘why’

What would you like your investment portfolio to achieve? Understanding your motivations and goals will help you to choose investments that work best for you.

If you want to build wealth for a comfortable retirement, say 20 to 30 years down the track, you can afford to invest in riskier investments to play the long-term game. If you have already retired and plan to rely on income from your portfolio, then your focus will be on investments that provide consistent dividends and less on capital growth.

Timing the market

Timing the market involves buying and selling shares based on expected price movements but at best, you can only ever make an educated guess and then get lucky. At worst, you will fail.

As the world-renowned investor Peter Lynch wrote in his book Learn to Earn : “Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves”. ⁱ

Putting all the eggs in one basket

This is one of the classic concepts of investing but it’s worth repeating because, unless you are regularly reviewing your portfolio, you may be breaking the rule.

Diversifying your portfolio allows you to spread the risk when one particular share or market is performing badly.

Diversification can include different countries (such as adding international shares to your portfolio), other financial instruments (bonds, currency, real estate investment trusts, exchange traded funds), and industry sectors (ensuring a spread across various sectors such as healthcare, retail, energy, information technology).

Avoiding asset allocation

While diversification is key, how do you achieve it? The answer is by setting an asset allocation plan in place and reviewing it regularly.

How much exposure do you want to diversify into defensive and growth assets? Within them, how much should be invested in the underlying asset classes such as domestic shares, international shares, property, cash, fixed interest and alternatives.

Making emotional investment decisions

The financial markets are volatile and that often leads investors to make decisions that in hindsight seem irrational. During the COVID-19 pandemic, on 23 March 2020 the ASX 200 was 35 per cent below its 20 February 2020 peak. ⁱⁱ By May 2021, the ASX 200 crossed the 20 February 2020 peak. Many investors may have made an emotional decision to sell out during the falling market in March 2020 but then would have missed the some of the uplift in the following months in.

Seeking out quality and trustworthy financial advice can help to minimise investment mistakes. Give us a call if you would like to discuss options for growing your portfolio.

i From the Archives: Fear of Crashing, Peter Lynch – From the Archives: Fear of Crashing – Worth
ii Australian Securities Markets through the COVID-19 Pandemic – Australian Securities Markets through the COVID-19 Pandemic | Bulletin – March 2022 | RBA

The post Investing mistakes to avoid appeared first on BMO Accountants .

Tax changes – what it will mean to me

Wed, 07 Feb 2024 05:51:00 GMT

Prime Minister Anthony Albanese has announced proposed changes to address ongoing cost of living pressures with all 13.6 million Australian taxpayers receiving a tax cut from 1 July 2024, compared to the tax they paid in 2023-24. ⁱ

Now is the time to assess what it means to your hip pocket and what implications it may have for end of financial year planning as a result of the new rules, due from 1 July 2024.

The Federal Government has recently announced changes to the third stage of a series of tax reforms introduced by the previous Coalition government almost six years ago which were designed to deliver tax cuts to most, simplify the tax system and protect middle income earners from tax bracket creep.

The proposed changes

The new rules will see the current lowest tax rate reduced from 19 per cent to 16 per cent and the 32.5 per cent marginal tax rate reduced to 30 per cent for individuals earning between $45,001 and $135,000.

The current 37 per cent marginal tax rate will be retained for those earning between $135,001 and $190,000, while the existing 45 per cent rate will now apply to income earners with taxable incomes exceeding $190,000.

In addition, the low-income threshold for Medicare levy purposes will be increased for the current financial year (2023-24).

A single taxpayer with a taxable income of $190,000 paid $59,967 tax in 2023-24. Under the revised rules, they will now pay $55,438 tax, a tax cut of $4,529. While still a reduction in tax paid, this compares with the $7,575 tax cut received if the original Stage 3 tax cuts had proceeded.

On the other hand, low-income earners will receive a bigger tax cut under the revised rules.

A single taxpayer with a taxable income of $40,000 who paid $4,367 in tax in 2023‑24, would have received no benefit from the original Stage 3 tax plan, but will now receive a tax cut of $654 under the revised rules.

Implications for investment strategies

For high-income earners, the key take-away from the government’s new changes to the tax rules is you will now receive a lower amount of after-tax income than you may have been expecting from 1 July 2024.

This reduction makes it sensible to revisit any investment strategies you had planned to take advantage from your larger tax cut to ensure they still stack up.

For example, the smaller tax cut for some may impact the effectiveness of property investment.

Investment strategies such as negative gearing into property or shares, however, may become more attractive. Particularly for investors close to the new tax thresholds and looking for opportunities to avoid moving onto a higher tax rate.

Timing expenditure and contributions

Investors considering repairs or maintenance for an existing investment property should revisit when these activities are undertaken. Depending on your circumstances, this expenditure may be more suitable in the current financial year given the difference in tax rates starting 1 July 2024.

Selling an asset liable for CGT also needs to be reviewed to determine the most appropriate financial year for the best tax outcome.

Other investment strategies that may need to be revisited include those involving making contributions into your super account.

If you are considering bringing forward tax-deductible personal super contributions, making carry-forward concessional contributions, or salary sacrificing additional amounts before 30 June, you should seek advice to ensure the timing of your strategy still makes sense.

If you would like help with reviewing your investment strategies or superannuation contributions in light of the new rules, contact us today.

i https://treasury.gov.au/sites/default/files/2024-01/tax-cuts-government-fact-sheet.pdf

The post Tax changes – what it will mean to me appeared first on BMO Accountants .

SMSFs: What happens if you exceed your super caps

Wed, 07 Feb 2024 05:48:00 GMT

The rules around making some types of super contributions have been relaxed in recent years, so it’s worth exploring the different opportunities available to you before making a large contribution. ⁱ

What are contribution caps?

Given the tax-effective environment of Australia’s super system, there are annual limits on how much you can contribute each financial year.

The two main types of contributions are concessional (before-tax) and non-concessional (after-tax) contributions.

Concessional contributions include employer Super Guarantee contributions, salary sacrifice and personal tax-deductible contributions, with the general contributions cap for 2023-24 being $27,500. In some situations , you may be permitted to contribute more if you have unused cap amounts from previous financial years.

If you’re a SMSF member, you may be able to make a concessional contribution in one financial year and have it count towards your concessional cap in the following financial year.

Non-concessional contributions cap

If you use after-tax money to make a super contribution, this is classes as a non-concessional contribution and there is no tax payable when the contribution is paid into your super account.

The general non-concessional contributions cap in 2023-24 is $110,000 provided you meet all the eligibility criteria, such as your Total Super Balance being below your personal limit. Your personal cap may be different.

If you’re age 55 or older, the once-only downsizer contribution cap is $300,000 per person ($600,000 for a couple). These contributions from the sale of your main residence don’t count towards your annual non-concessional cap.

Exceeding your contribution caps

There are different rules for super contributions that exceed the annual caps, depending on the type of contribution.

If you go over the annual concessional cap, your contribution is counted as personal assessable income and taxed at your marginal tax rate, with a 15 per cent tax offset to reflect the tax already paid by your super fund. Your increased assessable income may also affect any Medicare levy, Centrelink benefits and child support obligations.

The excess contributions can be withdrawn from your super fund, but if you choose not to withdraw them, the excess is counted towards your non-concessional contributions cap.

If you don’t or can’t elect to release excess contributions, you could end up paying up to 94 per cent in tax. ⁱⁱ

Exceed your non-concessional cap

Contributions exceeding your annual non-concessional (after-tax) cap are taxed at 45 per cent plus the 2 per cent Medicare levy. This is in addition to the tax already paid on this money.

Before the ATO applies this tax, you are given the opportunity to withdraw the excess non-concessional contributions, plus a notional amount to reflect the investment earnings.

You pay tax on the notional earnings just like personal income, less a 15 per cent offset.

Withdrawing excess contributions

Like most things to do with tax and super, the process for withdrawing excess contributions is fiddly.

If you have an excess concessional contribution, the ATO sends you a determination letter with details of what you need to do, plus an income tax notice of assessment.

You have 60 days to decide whether to have the excess concessional contribution refunded by the super fund and tax deducted by the ATO, or to pay the tax personally and leave the contribution in your account.

Refunding excess non-concessional contributions

For excess non-concessional contributions, the ATO assumes you wish to have your excess contributions and notional earnings refunded in order to avoid paying 47 per cent on them.

The default process is the ATO automatically issues a release authority to your fund and directs it to deduct the additional tax owing and return the leftover amount to you.

If you wish to nominate a specific fund from which the refund should be paid, or leave the excess in your account and pay the tax personally, you must make an election within 60 days of the initial notice.

Call us today to assess how the super contribution caps may affect you.

i https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/restrictions-on-voluntary-contributions
ii https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/concessional-contributions-cap

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Measure it, manage it – business milestones to success

Tue, 23 Jan 2024 23:31:00 GMT

“If you can measure it, you can manage it.” – Robert Kaplan

Running a healthy small business is no mean feat, and business owners have certainly had some challenges thrown at them over the past few years.

However, small businesses are renown for being agile, resilient, and proactive. If you are working hard to achieve the success you aspire to, now might be a good time to have a think about what success means to you and how you can measure it.

After all, how can you achieve your goals if you don’t have a clear idea of what success looks like and a way to measure how your business is performing in relation to achieving your business goals?

How do you define success?

Success can be something that’s very hard to quantify and your definition of what makes a successful business will generally be quite different to someone else’s. Every small business owner will have their own individual idea of what success means to them based on their values and objectives for the business.

Common measures of success

Surprisingly, while financial measures are most commonly used to measure business success, business owners often look to ‘softer’ measures, which often relate back to why they went into business in the first place. Many small business owners are motivated strongly by the desire to provide quality goods and/or services and running a business that is a good place to work – both for the owner and the employees.

This is reflected in a report conducted by National Australia Bank which found that only 11 per cent of participants ranked large turnover as a measure of success. ⁱ One in 3 (32%) rated high profits as an important measure but this was well behind other things such as good financial management (58%), positive word of mouth (56%), productive staff (49%) and happy staff (45%).

Crunching the numbers

That’s not to say that tracking the financial health of your business is not important. Clearly, it’s critical, and there are many metrics that can be used to determine what financial shape your company is in.

The most common measure to track how your business is tracking financially is profitability. While it’s possible for companies to survive for a time without being profitable, operating on the goodwill of creditors and investors, to prosper, a company must eventually attain and maintain profitability. It’s a good measure of how successful your company is.

It’s important to acknowledge that no single metric will provide you with the full picture of your company’s financial and health. There are many financial metrics you can use to track your businesses’ health and progress. Metrics you may wish to look at are liquidity which measures a firm’s ability to ride out short-term difficult patches, and solvency which informs how readily longer-term debt can be supported. Companies can have high debt but still perform well if they have used their debt to purchase assets such as equipment or other companies so calculating your debt compared to your assets can be of benefit.

Coming back to your, unique goals

Given that there are so many aspects of business success you can monitor, it comes back to how you define success. That means working out what you want to achieve, what business success means to you and then coming up with the financial and nonfinancial drivers of that objective.

The next step once you have come up with your drivers is to determine how best to assess these. For example, if one of your main objectives is customers who are pleased with your products or services, customer satisfaction surveys will be a good tool to determine how you are tracking and where there is room for improvement. Or if your focus is on improving your turnover, you can look at measures to track your sales volumes, lead conversions and other matrix that support revenue.

You must also regularly re-evaluate your metrics, as well as your business goals as these change over time.

Whatever you want to achieve in your business we wish you a successful 2024.

i https://business.nab.com.au/part-1-moments-that-matter-understanding-australian-smes-24841/

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Out with the old in 2024

Thu, 18 Jan 2024 22:40:00 GMT

A New Year is a chance to start afresh and move into the year ahead with confidence and optimism that it’s going to be a great one! Part of setting yourself up for a wonderful year can sometimes be letting go things in your life that are not so beneficial for you and may be holding you back from living the life you want.

“You must create space in your life to let new things in. Sometimes the things you’re holding onto are the very things that are holding you back.” – Unknown

Letting go of something that no longer serves you can be challenging at the time, but in doing so you are not just removing negative habits, thought patterns or physical things that you do not need any more, you are also opening your arms to new possibilities.

Why do we hang on?

It can be easier said than done to let go, though. We are all creatures of habit and tend to gravitate towards the ‘known’.

We tend not to like letting go of the familiar to venture into the unknown, but just because things are comfortable or familiar does not mean they are working for you.

As we move through life, we change and it’s common to find that some of our beliefs, habits, or existing goals, may not work for us anymore. If that’s sounding familiar it might be time to let go.

Liberate yourself

It can be tricky to identify what needs to go, but it’s important to trust your gut. Think about what you are hanging onto that is not serving you well any more – be that a goal that no longer suits where you now see your life going, a job you once enjoyed but that is now not making you happy, or a way of thinking or behaving that does not help you move your life in the direction you want it to take.

Everyone is different, but with a bit of self-examination you can decide how to best lighten your load for the New Year.

Breaking those bad habits

We all have habits and behaviours we know are not serving us well as we move through life. You might recognise that you are prone to procrastination and it’s interfering with your ability to get things done. Making a conscious effort to address this and develop the discipline to work through a to-do list could be the best move you make to start the new year afresh.

Or you might decide now is the time to address your spending habits and get on top of your finances – ditching the unnecessary purchases and being more mindful in your spending.

Lightening the load

If your emotional baggage is starting to feel like a literal weight on your shoulders, it is time to actively address some of these emotions and lighten the load. Be it past failures, or even previous successes, unresolved anger, hurt and regret, this baggage can weigh us down.

Talking to a trusted friend or seeking professional help can help you identify what’s going on and unpack some of that baggage.

Cutting through the clutter

Of course, letting go might be more about your physical environment rather than your emotions and habits. It’s easy to accumulate ‘stuff’ but often harder to let it go.

It can be a wonderful start to a brand-new year to go through your things and get rid of anything that is not serving a purpose, letting go things that are not useful or don’t give you joy.

Letting go is a process not a destination, once you’ve made your decisions about how you intend to move into the New Year, make the commitment to create space in your life, allowing you to grow, achieve your goals and move forward with your life in a positive way.

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Understand cash flow before you invest in property

Mon, 15 Jan 2024 23:58:00 GMT

Understanding cash flow

Understanding cash flow can be the difference between a solid long-term investment and a costly mistake, writes Michael Sloan. So do your research – and get good advice before you buy.

What is negative cash flow?

Oftentimes investment properties generate negative cash flow. That means, you must put money in each year to cover the difference between the total cost of the property (interest repayments, rates, insurance, maintenance, etc.) and the total income (rent and tax breaks). Investors are happy to do this because they expect a long-term profit. Over time the rental increases that go in hand with inflation should mean this ‘top-up’ is no longer needed.

Unfortunately, some investors don’t know what the cash flow of their property is before they buy. They don’t realise something’s wrong until their cash flow dries up and they get the bad news from their financial advisor. So seek advice from your accountant before you buy, not after. Always do the numbers first.

Miscalculating cash flow

It’s easy to miscalculate cash flow. Your estimated rental income might be over-optimistic, and you might also assume full occupancy (52 weeks a year). You might also underestimate maintenance costs or insurance.

Investors who get the cash flow of their property wrong can quickly run into problems. They either have to raise extra cash to prop up their property each month (potentially putting them under great financial stress), or sell. Selling property under pressure is never ideal and these investors can lose a lot. Sadly, this is a common mistake.

Work out your cash flow

To understand the cash flow on a potential investment property, get your accountant to do the numbers for you (if they can’t, get a new accountant). The number one rule is: ‘Don’t buy a property without knowing what the cash flow is’.

Make sure your accountant has all the costs of holding the property, including rates, body corporate fees, insurance and property management fees. They can work out the interest, estimate depreciation and give you an idea of the cash flow for the property. Have the property inspected and if possible see if you can check body corporate records, if needed. This could help you find out about any big maintenance or structural repairs planned.

If buying that property will put strain on your finances, then find a property with better cash flow. Also, when doing your figures, factor in possible interest rate rises and potential vacancies.

When the company selling you a property provides a cash flow report, don’t take it as gospel. The figures can always be manipulated, so get your accountant to work through them.

Your key to staying financially safe? Understand the cash flow before you buy.

A tip about tax

If you think you’ll have a net rental loss (i.e. your deductions, including interest, depreciation and capital allowances exceed your rental income), you can improve your cash flow by applying to the Australian Tax Office (ATO) for a PAYG withholding variation. If the variation is approved, you may be able to reduce the tax taken out from each wage packet, rather than waiting till the end of the year to get a tax refund.

Speak to us for more information.

Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/home-property/invest-property/cash-flow
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
© 2022 National Australia Bank Limited (“NAB”). All rights reserved.
Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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How will you use your super?

Wed, 10 Jan 2024 00:04:00 GMT

We spend decades watching our super balances grow but for those thinking about retirement in the next few years, it can be confusing to work out how best to use your super.

Here are some of the considerations for the popular options.

Easing into retirement

You can keep working and receive regular payments from your super when you have reached your super preservation age (55 to 60, depending on your date of birth) and are under 65.

Using a transition-to-retirement income stream allows you to reduce your working hours while maintaining your income. To take advantage of this option you must use a minimum 4 per cent and a maximum 10 per cent of your super account balance each financial year.

A transition-to-retirement strategy is not for everyone, and the rules are complex. It is important to get independent financial advice to make sure it works for you.

Pros

Cons

Taking a retirement pension

This is the most common type of retirement income stream. It provides a regular income once you retire and you can take as much as you like as long as you don’t exceed the lifetime limit, known as the transfer balance cap .

Pros

Cons

Withdrawing a lump sum

You can choose to take your super as a lump sum or a combination of pension and lump sum payments, once you have met the working and age rules .

Pros

Cons

Access to SMSF funds

There are a number of additional issues to consider for those with self-managed super funds (SMSFs). For example, you will need to carefully check your Trust Deed for any rules or restrictions for accessing your super and consider how your fund can meet pension requirements if it holds large assets that are not cash, such as a property. It essential to consult a financial planner to understand your circumstances.

The process of choosing the best approach for your retirement income can be daunting so let us walk you through the options and advise on the most appropriate strategies.

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9 tips for improving your profits

Wed, 10 Jan 2024 00:01:00 GMT

There are many advantages to running a small business. You have the flexibility and independence to make your own decisions, you can turn your vision into a reality and then reap the rewards.

However, there are financial risks and it can be difficult to make a profit, particularly when times are tough and there is strong competition for customers’ dwindling dollars.

In fact, many small business owners are currently taking home less than the average full-time adult wage, according to the Small Business Matters report by the Australian Small Business and Family Enterprise Ombudsman.

If the way you have always run your business isn’t creating the returns you want, it may be time to try doing things differently.

There are lots of areas to explore to improve profits. The good news is that many don’t require extra expenditure, just a different way of doing things, or a new mindset about your core clients and products.

Here are nine ideas that could boost your profit margin and help improve the return you receive from all the hours you put into your business.

1. Go digital

Consider whether it’s time to add some digital solutions to improve the efficiencies within your business. Many manual tasks related to payroll, regulatory requirements and business reporting are ripe for automation. Introducing new software or technologies can see a big reduction in the time required to complete these necessary – but largely unprofitable – tasks within your business.

2. Understand your cash flow

Preparing a cash flow budget and automating your invoicing and collection processes can improve your cashflow and profits.

3. Collect what you’re owed

Taking steps to enhance your post-sale credit control may lose you a few customers, but these are usually the ones increasing your servicing costs by failing to pay on time.

4. Keep on top of essential reporting

Ensure all your business reports (such as BAS, Taxable Payments Annual Report, Single Touch Payroll and tax returns), are up-to-date and lodged online to save time and keep on top of your obligations. It’s also important not to forget your Super Guarantee records and payments, or you risk paying the Super Guarantee Charge .

5. Improve your visibility

Consider whether an enhanced social media presence could spread your message further. Check if your website and Google ranking are properly optimised. If Google cannot find you, potential customers are unlikely to know you exist.

6. Keep your customers close and sell them more

Think about the potential for selling more to your existing customers. Upselling – or the old ‘Would you like fries with that?’ – can add to your bottom line without the costs associated with finding and selling to new customers.

Check your customer ‘churn’ rate to identify how long customers stay with you. Experts estimate it costs between five to 25 times more to acquire a new customer than to keep an existing one. Develop strategies to reduce your churn rate, as increasing retention rates by five per cent can increase profits by 25 to 95 per cent. ⁱ

7. Review pricing and products

Analyse your offer to see if unprofitable products need to be eliminated. Review your pricing by working out how much margin you need to cover your expenses and develop a pricing strategy .

8. Be ruthless about expenses

Audit your business expenses and identify any that can be eliminated or reduced by switching to cheaper suppliers or options (such as leasing and refinancing). Try negotiating if you are paying for recurring monthly services. Smarter spending on fixed costs is an easy way to gain extra dollars in profit.

9. Set aside time to plan ahead

Evaluate what is working in your business and what isn’t. Write a detailed business plan for the year ahead so you and your team know where you are headed and what is needed to get there. Consider outsourcing resource-intensive tasks (such as IT or marketing) to free up time so your employees can spend more time generating profits.

Call us today for some help with improving your business’s bottom line.

i https://hbr.org/2014/10/the-value-of-keeping-the-right-customers

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2023 Year in Review

Wed, 10 Jan 2024 00:00:00 GMT

Australia’s economy stubbornly defied predictions during 2023, dashing any hopes that we might begin to return to some kind of normal.

Some had expected an end to the Reserve Bank’s continued cash rate rises during the year. Instead, inflation has been a stubborn foe and we saw five rate rises. On a positive note, superannuation funds bounced back after losses in 2022 with SuperRatings reporting the median balanced option can expect returns of 9.6% in 2023. ⁱ

The big picture

Global economic forecasts for 2023 were also beset by a number of wild cards during the year. While many economists were predicting recession in the United States and Europe and a rebound in China, the year ended differently with no recession in the US, Europe struggling but doing better than expected and China still battling some headwinds.

October brought concerns of a wider Middle East conflict, the International Monetary Fund saying that an escalation of the conflict could be far-reaching, affecting tourism, trade, and investment. ⁱⁱ

Inflation and interest rates

In Australia, economic growth slowed a little on 2022’s result but still delivered a better return than forecast. The economy grew by 2.1% although a larger-than-expected increase in the population is putting extra pressure on housing and prices, keeping inflation higher. ⁱⁱⁱ It was the eighth quarter in a row of economic growth.

The rising cost of living is proving harder to tame than hoped or expected despite continuing cash rate rises.

Consumer prices rose 1.2% during the quarter and 5.4% over the year. On a CPI basis, rents rose 7.6% in the past twelve months, which was the largest annual increase since 2009. ^iv The Reserve Bank continued its battle to get inflation under control, raising the cash rate five times to finish the year at 4.35%.

Sharemarkets

Global sharemarkets ended 2023 on a more positive note. In the US, welcome news from the Federal Reserve of an end to rate hikes saw stocks and bonds soar in the final weeks of the year. During the year, the Dow Jones index increased by 13.7% and the Nasdaq by 43.4%. There was mixed news in Asian markets with a jump of 28.2% on the Nikkei 225 but China’s Shanghai Compositive fell 3.7%. ^v

Australia’s sharemarket may not have experienced the heady double-digit returns of some global markets but it ended the year with a gain of almost 8%, marking its best performance since 2021. ^vi

Commodities

Despite big falls from the peaks of 2022, commodity prices remain high across the board.

Iron ore, Australia’s biggest export, rose more than 21% as the Chinese government continues to create strong demand by stimulating property and infrastructure development.

Oil prices saw some spikes during the year but steadied by December. However, the World Bank notes that conflicts in the Middle East and Ukraine, could cause a major oil price shock, pushing global commodity markets into uncharted waters. ^vii

As the US dollar gathers strength and Australia’s high inflation figures persist, the Australian dollar is under pressure. It ended the year where it began after recovering from a slide in the second half of the year.

Property market

While rising interest rates usually dampen property prices, by year’s end we saw a remarkable turnaround for some cities in another result that upended forecasts.

CoreLogic’s national Home Value Index rose 8.1% in 2023, up from the 4.9% drop in 2022 with a patchy performance across the country. ^viii

House prices rose at more than 1% every month on average in Perth, Adelaide, and Brisbane in the second half of the year. While Melbourne values dropped in November and December, Sydney and Canberra prices barely moved, and Hobart and Darwin prices fell slightly.

Looking ahead

As floods and storms ravage the eastern states and bushfires break out in the west, another tumultuous Australian summer might be mirrored by a chaotic year for the economy both in Australia and overseas.

The RBA expects economic growth to remain subdued but resilient in 2024, and is confident that inflation will continue to fall slightly throughout the year. ^ix

Worldwide, China’s spluttering economy and the outcome of the US presidential election may cause ripple effects across the globe, meanwhile markets will be nervously watching the ongoing conflicts overseas which have the potential to create broader economic challenges.

Whatever the year ahead brings, we are here for you.

i https://www.afr.com/policy/tax-and-super/super-balances-grow-almost-10pc-thanks-to-tech-rally-20240103-p5euwb
ii https://www.imf.org/en/Blogs/Articles/2023/12/01/middle-east-conflict-risks-reshaping-the-regions-economies
iii https://www.abs.gov.au/media-centre/media-releases/australian-economy-grew-02-cent-september-quarter
iv https://www.abs.gov.au/articles/11-things-happened-australian-economy-during-september-quarter
v https://www.businesstoday.in/markets/story/global-market-performance-heres-how-global-equity-markets-major-currencies-performed-in-2023-411391-2023-12-31
vi https://www.abc.net.au/news/2023-12-29/asx-markets-business-live-news-dec29-2023/103271578
vii October 2023 Commodity Markets Outlook: Under the Shadow of Geopolitical Risks [EN/AR/RU/ZH] – World | ReliefWeb
viii https://www.corelogic.com.au/news-research/news/2023/australian-home-values-surge-in-2023
ix https://www.rba.gov.au/speeches/2023/sp-ag-2023-11-13.html

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Catch up on super to boost retirement savings

Tue, 09 Jan 2024 22:16:00 GMT

If you’ve had an irregular or interrupted income in the past, you might’ve missed out on opportunities to contribute to super. If you don’t fully utilise your concessional cap, and you’re eligible, you may be able to make ‘catch up’ on concessional contributions.

What is a ‘catch-up’ concessional contribution?

It used to be a case of ‘use it or lose it’. If you couldn’t contribute the maximum annual concessional (before-tax) contribution amount to your superannuation, the opportunity was lost.

This meant many people, women in particular, had a lower super balance for their retirement. This was typically a result of their working life being interrupted by things like studying, starting a family or taking care of parents. This could also be the outcome from working in casual or part-time jobs.

Can I make concessional contributions?

An annual cap of $27,500 applies to concessional contributions. This is the most you can contribute in one year.

Concessional contributions include:

If your concessional contributions in a year are less than the annual cap, the ‘unused’ amount can be carried forward for the next five financial years. After five years, that unused amount will expire.

For example, if you only have total concessional contributions of $10,000 out of the available $27,500 in the 2022/23 financial year, the unused amount of $17,500 can be carried forward for the next five years. If you’re eligible, this could enable you to make a greater concessional contribution in a future year.

If you’re aged between 67 and 75 you’ll need to meet a work test to make concessional contributions – you need to have done at least 40 hours of paid work in any consecutive 30-day period that financial year.

Can I make catch-up contributions?

So you have an unused amount that you have carried forward from an earlier year, and you want to make a ‘top-up’ carry-forward contribution. What now?

You will need to look at your ‘total super balance’ (TSB). Your TSB prior to 30 June must be less than $500,000 for you to be eligible to make the catch-up contribution using your carried forward amount.

Your total super balance at a particular time is broadly the total of the:

You can find your balance by contacting your fund or funds, and you’ll also find the latest balances reported to the Australia Taxation Office through the MyGov online service .

How you can benefit

The rules were designed to give people with an irregular income or work pattern the same opportunities for a comfortable retirement as those with a regular income. But they could also help people who don’t contribute the maximum amount annually, and find themselves in a position to invest more in a later year.

When you get back to earning a regular income or have the capacity to invest more, you may be able to make additional top-up contributions to help you ‘catch up’. This could make a real difference when you’re able to access your super as a lump sum or retirement income stream.

What to do next

From the start of the 2023/24 financial year, you can start by keeping track of your contributions in any year, particularly if you don’t make use of the full concessional contribution limit.

You can also keep track of any ‘catch-up contributions’ you make in a given year. Having these records will make it easier to see how you can best catch up in the future.

Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/work/plan-retirement/boost-savings
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
© 2022 National Australia Bank Limited (“NAB”). All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Catch up on super to boost retirement savings appeared first on BMO Accountants .

Retirement income and tax

Tue, 09 Jan 2024 22:14:00 GMT

How much tax you pay on retirement income depends on your age and the type of income stream.

For most people, an income stream from superannuation will be tax-free from age 60.

How super income streams are taxed

Types of super income streams

Income from super can be an:

What is taxable and what is tax-free

Part of your super money is taxable, made up of:

Part is tax-free, made up of:

If you’re age 60 or over

Your entire benefit from a taxed super fund (which most funds are) is tax-free.

If you’re age 55 to 59

Your income payment has two parts:

If you’re age 55 or younger

You can usually only access your super if you experience permanent incapacity. If this happens, you’ll be taxed the same as people aged 55 to 59.

If accessing super for a different reason, such as severe financial hardship, your income payment has two parts:

Tax on other types of super funds

Defined benefit super fund

If you’re with a defined benefit super fund, you’ll get a statement from your fund before becoming eligible for your benefit (super money). This will tell you how much of your benefit is taxable and how much is tax-free.

Untaxed super fund

Some government super funds don’t pay regular tax on contributions. These are known as ‘untaxed funds’. If you’re a member of an untaxed fund, you pay tax when you access your money. Check with your fund to find out more.

Self-managed super fund (SMSF)

If you’re part of an SMSF, how you access your money depends on the ‘trust deed’ (rules).

Tax on transition to retirement income streams

With a transition to retirement (TTR) income stream, you can access your super while working. To get one of these pensions, you must have reached your preservation age (between 55 and 60).

You can take out up to 10% of the balance each financial year. You can’t withdraw it as a lump sum.

You pay the same amount of tax as on other super income streams, according to your age. Investment returns on TTR pensions are taxed at up to 15%, the same as a super accumulation fund.

Tax on non-super income streams

With an annuity bought with money from outside super, you get a fixed income for a set period of time. This pension income, less a deductible amount, is taxed at your marginal tax rate.

The deductible amount is the part of your original money (capital) coming back to you with each pension payment.

Get help if you need it

Find out more about tax on super on the Australian Taxation Office (ATO) website.

Services Australia’s Financial Information Service offers free seminars on topics such as retirement income and pension options – or feel free to contact us for more help.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/retirement-income/retirement-income-and-tax
Important note: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Retirement income and tax appeared first on BMO Accountants .

Spark up your life and others by being a connector

Thu, 21 Dec 2023 04:53:00 GMT

We all know them. The people who seem to know everyone and effortlessly make connections within their network. While it’s wonderful to know a ‘ connector ’, we can also develop those qualities and become a connector ourselves.

Malcolm Gladwell coined the phrase in his book “ The Tipping Point ”, describing connectors as the social equivalent of a computer network hub, who “link us up with the world…people with a special gift for bringing the world together”.

Their network is extensive – they tend to be acquainted with over 100 people across many social, professional, and economic circles, and they actively introduce those who move in different circles.

The notion that a few influential people make the word go around is not new. In the 1960s, psychologist Stanley Milgram conducted “the small world” experiment, sending letters to 160 people in Nebraska with the details of a Boston stockbroker, instructing them to send the letter to someone who might get the letter one step closer to the stockbroker. Not only did most of the letters reach the stockbroker in six steps (rising to the six degrees of separation theory), just three people were responsible for half of the letters being successfully delivered. Those three, well-connected people would certainly be considered connectors.

Why is connection important?

The saying goes “no man is an island” and that’s never been truer. We live in a world that is growing ever more connected and isolation can be crippling. Our mental well-being and our physical health both benefit from being socially connected with others, while it can also help us achieve success in our endeavours.

Just think about the last time you achieved a significant goal – whether it’s a personal achievement or a business milestone and it’s likely that at some point you drew upon the help of someone else or others.

Ways to foster connections and benefit from them

So, for those of us who make not be so socially inclined, what can we learn from those among us who forge strong connections and are responsible for the spread of ideas and making things happen and how can this help us in our careers, businesses and in our personal lives?

Here are some tips that will help you to help others as well as make the most of any opportunities that come your way.

Networking is quite distinct to connecting

Whereas networking is often viewed as a means to an end, connecting is more altruistic – driven by a genuine interest in purposeful engagement to assist others. In your interactions, don’t just look to what is in it for you or even for mutual benefit – be the hub and actively seek out connections on behalf of others.

Foster quality connections over quantity

It’s easier to foster many connections, particularly via social media, but be conscious of the quality of those connections. To be able to purposefully connect with others in a way that offers real value, you need to engage with people. That takes time and genuine curiosity: ask questions, find out what makes them tick and then you can meaningfully assist them.

Being open to different things

One of the reasons connectors are so successful is they have contacts in diverse areas within many different communities, often through hobbies and interests. If you’d like to expand your network and horizons the first step might be to follow where your interests lead and explore your passions.

Get out of your comfort zone

To be a connector or get the benefit from connections you may have to move out of your comfort zone. That might mean putting yourself in a new environment, being willing to break the ice in a social situation or reach out when you don’t know what the response may be – and risk rejection or embarrassment.

Connectors are not all extroverts and they come from all walks of life. You don’t have to be anyone other than yourself and in fact being authentic in your interactions will stand you in good stead.

What steps are you going to take today to increase your connectability and benefit from the connectors you know?

The post Spark up your life and others by being a connector appeared first on BMO Accountants .

Prioritising mental health: How small business owners can make a difference

Thu, 21 Dec 2023 04:02:00 GMT

In today’s modern business landscape, small and medium enterprises (SMEs) are the backbone of the economy.

However, lost amid the grind to balance books, meet customer demands, and stay afloat, there’s an often-overlooked factor: prioritising mental health.

The wellbeing of both business owners and their employees is paramount, not only for personal happiness but also for the overall productivity and success of the business.

The weight on small business owners

Running a small business can be exceptionally rewarding, providing a sense of achievement, financial independence, and the opportunity to create something meaningful.

However, it also comes with high stress, financial pressures, long hours, and the blurred lines between work and personal life.

All these aspects can have a profound impact on an individual’s mental health.

MYOB’s workplace mental health report last year revealed almost a third (31%) of SME owners and operators consider mental health to be an immediate concern, but almost one in three (30%) find it difficult to talk about.

The ripple effect

The mental health of business owners doesn’t exist in a vacuum; it also affects their employees.

Staff members are likely to feel the ripple effects of the stress and anxiety that a business owner experiences, particularly in businesses with close-knit teams.

Furthermore, employees also face their own stressors, from job security to work-life balance, and the pressures of each role.

Neglecting mental health can lead to a decrease in overall job performance, morale, and employee satisfaction. It can increase absenteeism and even lead to higher turnover rates.

These factors not only affect the individuals involved but also the bottom line of the business.

Building a supportive environment

Recognising the importance of mental health is the first step, but creating an environment that supports these challenges is crucial for small business owners.

1. Open dialogue: Cultivate a workplace culture where mental health is not a taboo subject. Encourage open conversations about stress, anxiety, and other mental health issues. When leaders are open about these topics, it allows employees to feel comfortable doing the same.

2. Access to resources: Provide resources for support, whether it’s counselling services, mental health days, or informational material about managing stress and mental health concerns.

3. Flexible work arrangements: Work-life balance is a significant factor in overall mental health. Consider flexible schedules, remote work options, or even reduced hours during slow periods to help employees balance their personal and professional lives.

4. Training and development: Invest in mental health training for yourself and your team. Understanding how to recognise signs of mental health struggles and how to approach these conversations can be crucial.

5. Regular check-ins: Implement regular check-ins with your team, not just about work but their overall well-being. These meetings can help identify issues before they become severe and show your team that you care.

Leveraging external support

Thankfully, awareness around mental health has been growing, and there are numerous resources that small business owners can utilise.

Smiling Mind delivers a Small Business Program to support the wellbeing of small business owners.

The Small Business program is free to access via the Smiling Mind app, offering users guidance on topics such as stress management, managing work/life balance, managing isolation, supporting growth and building resilience.

Beyond Blue offers a variety of mental health resources, including a dedicated section for small business owners called Heads Up, which is a joint initiative by the Mentally Healthy Workplace Alliance and Beyond Blue, providing tailored strategies for small businesses to create mentally healthy workplaces.

The financial angle

While business owners might shy away from investing in mental health, there are financial implications for not doing so.

According to research, every dollar spent on creating a mentally healthy workplace can, on average, result in a return of $2.30 for the organisation.

This return is seen through increased productivity, improved morale, and reduced absenteeism.

A 2020 Productivity Commission report examining the effect of mental health on people’s ability to participate and prosper found that:

In total, mental illness, on a conservative basis, is costing Australia about $200-220 billion per year. To put that in context, this is just over one-tenth of the size of Australia’s entire economic production in 2019. The cost is between $550 million and $600 million per day.

People with poor mental health are more likely to be less productive, which has an overall effect of reducing productivity.

Keeping the conversation open

The journey towards prioritising mental health in the workplace is ongoing.

It requires a shift in mindset, continued efforts to build supportive environments, and making the best use of available resources.

As small business owners, creating successful businesses while also safeguarding the mental well-being of those who contribute to that success needs to be paramount.

Going forward, when it comes to making businesses better, mental health considerations should always be part of every conversation. Business health can only be stronger with healthy minds.

Source: MYOB October 2023
Reproduced with the permission of MYOB. This article by <author name> was originally published at https://www.myob.com/au/blog/prioritising-mental-health-for-small-business-owners/
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Prioritising mental health: How small business owners can make a difference appeared first on BMO Accountants .

Making sure your deductions don’t get personal

Thu, 21 Dec 2023 04:01:00 GMT

It can be easy to overlook your personal use of business assets when it comes to completing your business and self managed super fund tax returns but be warned, the ATO is taking an interest in this area.

The ATO’s Small Business Random Enquiry Program found around 16 per cent of small businesses were either carelessly or deliberately overclaiming expenses in their tax returns.

If business assets are used for a mix of business and private use – such as vehicles and phones – the amount claimed must reflect only the business-related portion of the expense.

The ATO is urging taxpayers to remember this rule when claiming business-related deductions, including those for work-from-home expenses (such as internet and mobile phone usage ), and work vehicles .

Rental properties under the spotlight

Holiday home rentals are also an area where many taxpayers are failing to follow the tax rules.

Deductions for holiday home expenses can only be claimed to the extent they relate to producing rental income, so you need to apportion your expenses if the property is only genuinely available for rent part of the year.

Apportionment is also required if you use the property for private purposes during the year, only use part of it to earn rent, or if it is used by family or friends at various times during the year.

Expenses relating solely to the rental of the property (such as agent commissions and advertising costs), don’t need to be apportioned.

Avoiding mistakes

To ensure you don’t invite attention from the ATO, review your treatment of business asset expenses annually, in case your private usage has changed .

New or additional private usage of the asset means you need to recalculate the percentage of business used to determine the correct deduction claim.

Proper business records explaining all relevant transactions need to be kept to support your claims.

Common taxpayer errors

The ATO says there are some common errors when it comes to claiming deductions.

Taxpayers are not permitted to claim any deductions against business income for expenses relating to an asset entirely used for private purposes.

An example is an asset (such as a boat or plane) purchased and used for private purposes.

Deductions can only be claimed for the relevant percentage of business use. For example, if the private use component represents 60 per cent, only 40 per cent of the expense amount can be claimed in your return.

FBT and deemed dividends

Some small businesses also misunderstand the implications of purchasing an asset (such as a motor vehicle), that is used by an employee or the associate of an employee for personal purposes.

When this occurs, the benefit must be reported in the business’s fringe benefit tax (FBT) return and the resulting FBT liability paid.

Fixing lodgement mistakes

To avoid finding your business in the ATO’s spotlight, check you have correctly apportioned all expense claims before lodging your business or SMSF return.

You also need to consider whether the rules for private company benefits and FBT apply to any of your business assets. If you make a mistake with a deduction claim, you will need to amend or lodge an income tax or FBT return to correct your tax position. There are time limits on both business and super amendments.

We can help you to correct any mistakes and to deal with the ATO to ensure your tax reporting is smooth and worry-free.

The post Making sure your deductions don’t get personal appeared first on BMO Accountants .

The five cash flow hurdles inhibiting Aussie businesses

Thu, 21 Dec 2023 04:00:00 GMT

A smooth and reliable level of working capital is essential to the success of any business and with the current economic challenges it’s becoming harder for businesses to maintain this.

Recently released data from accounting platform Xero shows one-third of Australian small business owners are unable to pay themselves due to cash flow challenges and 27% are being forced to dip into their personal savings to mitigate rising costs.

Inflation has greatly impacted Australian businesses’ cash flow over the past six months. Rising costs and changing consumer behaviour have seen a shrinking profit margin for many businesses, putting a strain on working capital, but conversely, it is also during periods of growth that we see small businesses really struggling with their cash flow.

Top 5 cash flow hurdles

1. Lending Restrictions

It’s a tough time for any small or medium business owner to obtain bank finance with access to working capital becoming harder to come by. Banks have tightened lending criteria making it difficult to obtain loans or raise credit limits.

2. Slow Paying Customers

Many large companies have invoice terms as high as 60 days, which is a long time to wait to be paid after you have delivered your goods or services to your customers. Please consider this when signing contracts and adjust your cashflow forecasting accordingly.

3. Rapid Expansion

Businesses that grow too quickly can find themselves struggling to maintain cash flow. A combination of increased overheads like materials, staff and expanded equipment sees them drain their cash supply to meet orders. Without a cash flow injection these businesses may have to turn away orders as they wait to get paid from the last.

4. Seasonal income

Businesses that raise most of their income in one part of the year can find they run out of funds if they don’t diligently manage their expenses. Businesses making seasonal goods such as beachwear, Christmas items or seasonal rural products are examples of this.

5. Lack of customer credit checks

Many Australian businesses experience cash flow problems because a major customer goes bankrupt, exposing them to bad debt.

Do your due diligence when it comes to customer credit checks and set reasonable limits for customers with poor credit history. Avoiding defaults and late payments could stop your business from going broke.

It’s important for business owners to realise that profit and cash flow are not the same thing. You can have a profitable business on paper and not have a dollar in the bank.

Speak to us if you need help with your business’s cash flow.

This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s).

The post The five cash flow hurdles inhibiting Aussie businesses appeared first on BMO Accountants .

How fringe benefits tax works

Thu, 21 Dec 2023 03:57:00 GMT

What is fringe benefits tax?

Fringe benefits tax (FBT) is a tax paid by employers on certain benefits provided to their employees, or to their employees’ family or other associates.

FBT is separate to income tax. It’s calculated on the taxable value of the fringe benefit.

As an employer, you must self-assess your FBT liability for the FBT year (1 April to 31 March). If you have an FBT liability, you must lodge an FBT return and pay the FBT you owe.

What is a fringe benefit?

A fringe benefit is like a payment to an employee, but in a different form to salary or wages.

There are different types of fringe benefits. Examples include:

The following are not fringe benefits:

Who receives fringe benefits?

FBT applies to fringe benefits provided to your employees, or to your employees’ families or other associates.

For FBT purposes, an employee includes a:

If you’re a sole trader or a partner in a partnership, you are not an employee. Benefits you provide to yourself are not subject to FBT.

Your clients are not employees. Benefits you provide to clients, such as entertainment, are not subject to FBT.

Who pays FBT?

The employer pays FBT.

This is the case even if the benefit is provided by a third party under an arrangement with the employer.

How much FBT do you pay?

To work out how much FBT to pay, you ‘gross-up’ the taxable value of the benefits you’ve provided. This is equivalent to the gross income your employees would have to earn, at the highest marginal tax rate (including the Medicare levy), to buy the benefits themselves.

The FBT you pay is 47% of this ‘grossed-up’ value of the fringe benefits.

Example: FBT on a gym membership

Jenni runs a small consulting firm. She provides her employee, Anton, with a gym membership that costs $1,100 (including $100 GST).

This is a fringe benefit. Jenni works out the FBT as follows:

Taxable value of the benefit ($1,100)

× the gross-up rate (for a GST-inclusive fringe benefit the rate is 2.0802)

× the FBT rate (47%)

= FBT of $1,075.46.

Jenni must prepare and lodge an annual FBT return, and pay her FBT liability.

She may also need to calculate and report Anton’s reportable fringe benefits amount in his end-of-year payment information.

As the gym membership is subject to FBT, Jenni can claim:

Can you claim deductions and GST credits?

As an employer, you can claim:

What do you need to do?

As an employer, you need to:

FBT – a guide for employers

Fringe benefits tax – a guide for employers is an additional resource to help you meet your FBT obligations as an employer. It explains:

Talk to us if you’d like more information about FBT.

Source: ato.gov.au Jan 2023
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Business/Fringe-benefits-tax/How-fringe-benefits-tax-works/.
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post How fringe benefits tax works appeared first on BMO Accountants .

Gifting from the heart

Tue, 19 Dec 2023 06:13:00 GMT

“Everyone can experience the joy and blessing of generosity; because everyone has something to give.”
– Jan Grace

For many of us the festive season is a joyous time of hanging up decorations, wrapping presents and spending time with loved ones. For others it can be one of the hardest times of the year.

So, amongst all the festive preparations, there are many ways you can make an impact and spread the joy this festive season to make a difference to the lives of others.

In fact, there are so many ways to help and so many wonderful causes, it can be easy to feel a little overwhelmed. Here are some ways you can help and a few things to keep in mind to maximise the outcome of your generosity.

Plan your giving

Just as you might make your festive shopping a little easier by making a list of what you are buying, it’s helpful to approach your gifting to others in the same way and make a plan.

It’s important to consider what cause (or causes) you want to contribute to.

Then evaluate how much you are comfortable contributing. Don’t just think about a cash donation – you can also donate goods, your time, or your expertise to worthwhile causes.

Selecting a recipient for your gift

When selecting worthy causes, it can be helpful to think about your interests and passions. Whether it’s protecting our environment, diversity and inclusion, supporting important medical research, overseas aid organisations, or those doing it tough in your local community, there is a lot to select from.

Find an organisation that aligns with your values, both in the cause it supports and the way it supports that cause. It’s worth confirming the status of the charity you are considering donating to as there are scams out there. Try Australian Charities and Not-for-profits Commission or for overseas charities, charitynavigator.org .

You can claim a tax deduction for donations of $2 or more, as long as these donations are made to an organisation that has been endorsed by the Australian Taxation Office (ATO) as a deductible gift recipient (DGR) so it’s worthwhile checking the DGR status of your selected charity – and keeping receipts for tax time.

Not just cash

If you would prefer to donate items rather than cash, the festive season offers lots of opportunities. Many department stores and supermarkets have food drives where you can purchase items to be distributed to those in need. You could consider inviting your family, friends, and neighbours to join you in donating non-perishable food items to a charity in your area – just make sure the goods you are donating are not expired or damaged.

If Christmas to you means happy memories of children’s smiles as they unwrap presents, it can be very satisfying to donate to a toy drive, either by donating gently used toys or purchasing new ones to be distributed to those who would otherwise be going without this Christmas.

If you’d like to help a furry friend over the festive season, you can donate pet food, treats, toys, collars, leashes, clean bedding, and other supplies to a local animal shelter or animal rescue group to help unhoused animals. You could even think about adopting a pet and adding a new member to your household this festive season.

Or you could also consider giving the gift of your time to a worthwhile cause.

Spend time to help others

Many charities need a little extra help during the festivities, and they rely on a legion of volunteers to help. If you aren’t in a position to make a financial contribution this year, consider volunteering your time and expertise if you have any special skills that would benefit a charitable organisation.

You may also consider giving the gift of life and donating blood or plasma. During the holiday season, donations of blood products tend to decrease due to more people travelling and being unable to donate so it’s the perfect time of year to donate if it’s not something you do regularly.

However you choose to spread joy and support others that are not so fortunate this festive season, know that you are making a difference to the lives of others.

The post Gifting from the heart appeared first on BMO Accountants .

Financial wellbeing is a gift worth giving yourself

Wed, 06 Dec 2023 04:36:00 GMT

The festive season is a time of joy and celebration but, for some, it can also lead to a financial hangover in the New Year.

Overspending on gifts, parties, and decorations can quickly add-up, leaving us with unwanted debt in the New Year.

In 2022, Australians spent more than $66.7 billion during the pre-Christmas sales in preparation for the festive season. The rising cost of goods and services mean that even though many are trying to curb their spending, it is expected that we will spend a little extra this year.

5 ways to rein in Christmas spending

Tackle any debt now

With many household budgets feeling the pinch due to rising housing, power, petrol and other costs, debts may already be increasing. But if you are feeling burdened with debt, don’t decide to leave it until after Christmas. The time to tackle it is now before it gets out of hand.

One option to consider, is to consolidate your high interest debts into a single more manageable loan. This approach can simplify repayments and potentially reduce interest rates, making it easier to eliminate debt over time. But it is important to do your calculations carefully to make sure it is worthwhile for you and then to be vigilant about watching spending.

Another option is to take a cold, hard look at your expenses. Is there something that can be cut back, and that money diverted to repaying debt? Any reduction of your debt load will help, no matter how small. Some people like to implement the snowball method in tackling their debts: while continuing to make the minimum repayments on all your debts you pay a little extra on the smallest debt to pay it off faster. Getting rid of debts can help to inspire you to continue.

Taking control of Christmas spending and debt is crucial for starting the New Year on a positive financial note. So, start planning early, know what you can afford to spend and prioritise your financial wellbeing for a debt-free and stress-free holiday season.

If you are struggling with post-Christmas debt or need assistance to manage your finances, we are here to help. Contact our team of financial experts today to discuss strategies to regain control of your financial future. Make this Christmas season a time of joy and financial empowerment.

i Pre-Christmas spending forecast to tread water as uncertainty looms for discretionary retailers | Australian Retailers Association

The post Financial wellbeing is a gift worth giving yourself appeared first on BMO Accountants .

Returning to work after retirement

Wed, 29 Nov 2023 01:30:00 GMT

Employers are desperate for workers and cost of living pressures are making it tough to live on a pension. That’s a perfect mix of conditions to send some retirees back to work. But it’s smart to get good advice before you take the leap.

With unemployment rates at historic lows and employers facing a shortage of skilled workers, an increasing number of retirees are choosing to re-enter the workforce. According to recent data from the Australian Bureau of Statistics (ABS), approximately 45,000 more individuals aged over 65 are actively working compared with a year ago. ⁱ

Some retirees may have been forced to return to work to financially support themselves. National Seniors research found 16 per cent of age pensioners re-entered the workforce after initially retiring, while another 20 per cent said they would consider returning to work. ⁱⁱ

Declining superannuation returns combined with rising inflation and cost of living pressures may be some of the reasons why retirees could soon be returning to work.

Things to consider

Returning to work after retirement raises several important financial and logistical considerations for retirees including the effect on the Aged Pension and superannuation.

If you receive an Aged Pension and are planning to return to work, you will need to let Centrelink know you are receiving additional income within 14 days. The extra income may mean that your pension is reduced if it exceeds Centrelink’s income threshold. It’s essential for retirees to be aware of these thresholds and how their earnings may affect their pension to plan their finances effectively.

Eligible age pensioners should also consider the Work Bonus incentive. This incentive encourages age pensioners to return to work with no or less impact on their age pension. Under the Work Bonus, the first $300 of fortnightly income from work is not assessed as income under the pension income test. Any unused amount of the Work Bonus will accumulate in a Work Bonus income bank, up to a maximum amount. The amount accumulated in the income bank can be used to offset future income from work that would otherwise be assessable under the pension income test.

Effect on superannuation

Returning to work after retirement can have implications for your superannuation, particularly if you’re receiving a pension from your super fund. You can continue taking your pension from super, but you will still have to meet the minimum pension requirements.

So, even though you may not need that pension income, you have to withdraw at least the minimum, which depends on your age and your super balance. This minimum pension rate is set by the government. Failing to meet these requirements can have tax implications and may affect your pension’s tax-free status.

You can convert your super pension phase back into the accumulation phase if you wish to stop taking the minimum pension. However, be aware of the tax differences. In the accumulation phase, any income and gains are taxed at 15 per cent whereas they are tax-free in the pension phase.

Don’t forget that if you retain your pension account, then you will have to open a new super accumulation account to receive employer contributions because you cannot make contributions into a super pension account.

Other investments

If you have personal investments outside super and have been receiving a pension, your lower income may mean that you are not paying tax on any gains from them. But extra income from a job may mean you move up a tax bracket and any investment income and capital gains will then be assessed at the higher rate.

Returning to work after retirement can have far-reaching implications on your finances, particularly with regard to your Aged Pension and superannuation. It’s vital to carefully seek appropriate advice to ensure a smooth transition back into the workforce, allowing you to make informed decisions that align with your financial goals and overall well-being.

If you would like to discuss your options, give us a call.

i Retirees in demand as employers continue to face tight labour market – ABC News
ii A working retirement – choosing to return to work – National Seniors Australia

The post Returning to work after retirement appeared first on BMO Accountants .

Your guide for claiming business expenses

Wed, 29 Nov 2023 01:26:00 GMT

You can claim tax deductions for expenses you incur while running your business if they’re directly related to earning business income (also known as assessable income).

Take Rubi for example. Rubi is a sole trader who works as an IT consultant. As part of her work, she travels to deliver seminars and workshops.

Rubi follows the 3 golden rules for claiming a tax deduction when she travels for business purposes.

Rubi uses the myDeductions tool to store receipts of all her airfares, accommodation, public transport costs, ride-sharing fares, car hire fees and other costs such as fuel, tolls and car parking. She also records her meal costs if she’s away overnight.

Rubi also keeps a travel diary to note which expenses were for business purposes and which expenses were private, such as sight-seeing. There are some expenses Rubi can’t claim, such as entertainment, traffic fines, and expenses related to earning non-assessable income .

As an employer, Rubi meets her superannuation and employer obligations by reporting her employees’ salaries or wages and paying any tax withheld amounts on time. This allows her to deduct the salaries, wages, and super contributions she’s paid during the year.

By the time Rubi is ready to lodge her tax return, her tax agent has everything they need to verify her deductions.

Be like Rubi and perfect your record keeping to correctly claim your business expenses and make tax time easier.

To check your record keeping skills, you can use this record keeping evaluation tool .

Remember, we can help you with your tax and super.

Source: ato.gov.au August 2023
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Business/Small-business-newsroom/General/Your-guide-for-claiming-business-expenses/ .

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Your guide for claiming business expenses appeared first on BMO Accountants .

How to start a conversation about money

Wed, 29 Nov 2023 01:25:00 GMT

Why it’s so important to talk about your finances

According to this research ¹ , one in two Australians don’t sit down regularly to look at their finances and one in three say that money is a source of conflict in their relationship.

To put conversations about money back on the table, Australians should sit down for at least 45 minutes one Monday each month, either individually, with their partner or other family members, to get familiar with their financial situation.

Having regular discussions about money can help you manage your finances, reduce financial stress and improve your financial wellbeing.

To help, leading Australian psychotherapist Lissy Abrahams created a conversation guide to get people started.

Tips for starting a conversation about money

Follow these simple steps to help you start a conversation about money.

Make a date to discuss financial matters

Talking about finances doesn’t have to be boring. Find one Monday a month and pop it in your diary. When the day arrives cook a nice meal then turn off your devices for 45 minutes. Make sure you jot things down so you can go back to them later.

Set some boundaries around the conversation about money

At the start of the conversation set some boundaries. These include being:

Take a trip down memory lane to your childhood

Often our financial beliefs and behaviours are shaped from a very young age. From witnessing how our parents talked and/or fought about money and their spending habits, we’ve absorbed many messages about money.

Typically, we either adopt their behaviours or go the opposite way. Understanding this about yourself, your partner, or other family members, helps you understand your similarities and differences around money matters so you can create healthy financial plans together.

To understand how your attitudes are shaped by your childhood, ask questions like:

Talk about your current attitudes towards money

Financial knowledge and skills are learned and continually need to evolve depending on your life stage. It’s important to find ways to navigate this.

To understand more about how you feel about money matters, ask questions like:

Assess your current situation

Even though it may feel awkward or initially confronting, it’s important to know your numbers. Remember, there’s no right or wrong. If you are doing this with a partner or family member, expect to have different financial ideas and spending habits. Be curious about these differences as it’s about finding your way forward.

To understand more about your current situation, ask questions like:

Plan for the future

Whether it’s a holiday, saving for a home deposit, buying a new car, or paying off debt, create exciting goals to work towards. This’ll keep you motivated and in alignment with your goals.

Get started

If you need help getting this conversation started, give us a call.

1) Our research was conducted by NAB Economics and based on responses from 2,050 Australians weighted to the population, conducted from August to September 2022.

Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/manage-money/money-basics/start-a-conversation-about-money
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
© 2023 National Australia Bank Limited (“NAB”). All rights reserved.
Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page .

The post How to start a conversation about money appeared first on BMO Accountants .

Secured vs unsecured loans: what’s the difference?

Fri, 24 Nov 2023 04:23:00 GMT

Choosing the right financing option for your business can be difficult; you have to consider your assets, cash flow, time in business and business goals. Learn about secured and unsecured loans to help you decide which one suits best.

What’s the difference between secured and unsecured loans?

The main difference between a secured loan and an unsecured loan is whether the lender requires security.

A secured loan may use property, inventory, accounts receivables or other assets as security. If the loan can’t be met, the lender may rely upon these assets to clear the outstanding balance, interest or fees.

An unsecured loan for your business doesn’t require physical assets (such as property, vehicles or inventory) as security. Instead, your lender will often look at the strength and cash flow of your business as security.

What is a secured loan?

Secured loans:

It’s important to remember though, that the amount a bank will loan isn’t one-to-one with an asset’s value. For example, putting forward a $50k vehicle as security won’t result in a $50k loan.

What is an unsecured loan?

Unsecured loans:

Which business lending option works best for you?

As with many decisions, the right one depends on your individual circumstances. A good starting point is to decide what your business goals are and the time frame in which you want to achieve them.

The potential faster process of unsecured lending may make it more suitable to businesses growing rapidly or requiring quick access to funds. A secured loan may suit a business wanting a larger amount of money they can pay back over a longer period, and generally at a lower interest rate.

How to set up a business loan

Once you’re clear on what you want to achieve, we can talk you through which borrowing option may work best for your business.

To find out more speak to us today.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Secured vs unsecured loans: what’s the difference? appeared first on BMO Accountants .

How to conduct a SWOT analysis for a small business

Fri, 10 Nov 2023 01:11:00 GMT

Conducting a SWOT analysis periodically allows you to consider all of your business’s strengths, weaknesses, opportunities, and threats as you fine-tune your business strategy.

SWOT 101

A Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis typically consists of a grid to help identify these important components:

The SWOT analysis template, which you can download for free, provides you with an easy way to break down an issue based on your business’s specific strengths, weaknesses, opportunities, and threats.

Use the template to analyse a single issue. We recommend identifying the issue and presenting it as a short, easy-to-understand sentence such as:

Once the issue being assessed has been defined, the SWOT analysis template can be used to consider various criteria. Criteria for consideration could be resources, quality control and business capability, competitors, market demand, political effects, partnerships, and even legislative effects. This is along with any relevant strengths, weaknesses, opportunities, and threats, of course.

Identify some of the most important criteria where businesses are either strong or weak. Identify criteria that may pose either an opportunity or a threat. These considerations should prompt you to think about your business’s strengths, weaknesses, opportunities, and threats as they relate to the issue being analysed. These prompts may surprise you, revealing insights you might not have considered otherwise.

After conducting your SWOT analysis, you’ll have a set of objective insights that you can use to make smarter strategic decisions.

How to use the swot analysis template

Using a SWOT analysis template is easy. Here are a few steps you can follow:

Step 1

Define the issue that you’re assessing.

Step 2

Determine if your business is strong or weak. Enter your strengths and weaknesses accordingly.

Step 3

Determine whether an opportunity or threat exists. Again, if you think of any other external factors that could pose either an opportunity or threat, add them to your analysis.

Step 4

Analyse your strengths and weaknesses. Ask yourself:

Step 5

Analyse your opportunities and threats. Ask yourself:

Spending time analysing your strengths, weaknesses, opportunities, and threats is a worthwhile activity that aids in decision-making and strategic planning.

Use a SWOT analysis template whenever you have a decision to make – or when you want to ensure your business is taking advantage of its strengths and opportunities while minimising its weaknesses and threats.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post How to conduct a SWOT analysis for a small business appeared first on BMO Accountants .

Reverse mortgage and home equity release

Fri, 10 Nov 2023 01:06:00 GMT

If you’re age 60 or over, own your home and need to access money, releasing equity from your home may be an option.

There is risk involved and a long-term financial impact. Get independent financial or legal advice before you go ahead.

How home equity release works

‘Equity’ is the value of your home, less any money you owe on it (on your mortgage).

‘Home equity release’ lets you access some of your equity, while you continue to live in your home. For example, you may want money for home modifications, medical expenses or to help with living costs.

Ways to access equity in your home include:

The amount of money you can get depends on:

Your decision could affect your partner, family and anyone you live with. So take your time to talk it through, get independent advice and make sure you understand what you’re signing up for.

Get independent advice

Before making the decision to apply for any home equity release, consider how it will affect:

If you are borrowing to invest, it puts your whole home at risk — not just the portion you are investing.

Talk to someone qualified and independent who can help you make an informed decision:

Reverse mortgage

A reverse mortgage allows you to borrow money using the equity in your home as security.

If you’re age 60, the most you can borrow is likely to be 15–20% of the value of your home. As a guide, add 1% for each year over 60. So, at 65, the most you can borrow will be about 20–25%. The minimum you can borrow varies, but is typically about $10,000.

Depending on your age and lender policy, you can take the amount you borrow as a:

How a reverse mortgage works

You stay in your home and don’t have to make repayments while living there. Interest charged on the loans compounds over time, so it gets bigger and adds to the amount you borrow. The interest rate is likely to be higher than on a standard home loan.

You repay the loan in full, including interest and fees, when:

You may be able to make voluntary repayments earlier, if you wish. You may also be able to protect a portion of your home equity from being eroded by the loan. For example, to ensure you have enough money left to pay for aged care.

What a reverse mortgage costs

The cost of the loan depends on:

Over time, your debt will grow and your equity will decrease (see the case study below).

Use the reverse mortgage calculator

See how much a reverse mortgage would cost over different time periods, such as 10 or 20 years.

Your lender or broker must go through reverse mortgage projections with you, showing the impact on your home equity over time. Get a copy of this to take away, and discuss it with your adviser. Ask questions if there’s anything you’re not sure about.

Negative equity protection

Reverse mortgages taken out from 18 September 2012 have negative equity protection. This means you can’t end up owing the lender more than your home is worth (market value or equity).

If you took out a reverse mortgage before this date, check your contract. If it doesn’t include negative equity protection, talk to your lender or get independent advice on what to do.

Home sale proceeds sharing (home reversion)

‘Home sale proceeds sharing’ (or home reversion) allows you to sell a proportion (a ‘share’ or ‘transfer’) of the future value of your home while you live there. You get a lump sum, and keep the remaining proportion of your home equity.

How home sale proceeds sharing works

The provider pays you a reduced (‘discounted’) amount for the share you sell. How much you get for the share depends on your age.

Terms and conditions vary. The provider may offer a ‘rebate’ feature. This means you (or your estate) get some money back if you sell your home (or die) earlier than expected. The amount you get back depends on when you sell your home and how much you got for your sold share. You may also have the option to buy back the sold share later, if you wish.

For example, suppose your home is currently worth $500,000 and you sell a 20% share of the future value. Depending on your age, the provider may offer you $37,000 to $78,000 to buy that share today. When you sell your home, the provider receives their share of the proceeds. Say in 20 years time you sell your home for $800,000. The provider gets 20% of the sale price ($160,000), minus any rebate (if applicable).

What home sale proceeds sharing costs

It’s not a loan, so you don’t pay interest. You pay a fee for the transaction and to get your home valued (as a guide, around $2,000). You may also have to pay other property transaction costs.

Home sale proceeds sharing costs you the difference between:

The more your home goes up in value, the more the provider will receive when you sell it.

Get the provider to go through projections with you, showing the impact over time. Get a copy of this to take away, and discuss it with your adviser. Ask questions if there’s anything you’re not sure about.

Equity release agreement

An equity release agreement allows you to sell a portion of the value of your home. You get a lump sum or instalment payments in return. You live in your home and pay fees for the portion you’ve sold. A bit like paying rent on it. Your proportion of equity reduces over time, to cover the fees you pay.

How an equity release agreement works

One option is for one or more investors to buy portions of your home’s equity through a property investment fund. You pay fees which are periodically deducted from the remaining equity in your home. The investor’s share of your home’s equity goes up over time, and yours goes down.

For example, suppose your home is currently worth $500,000. You sell 20% of your home’s equity in return for a lump sum of $100,000. The fee charged by the fund may vary, depending on your circumstances and the agreement. If the fund charges an initial fee of $30,000, it may take $130,000 of your equity to cover both the lump sum and periodic fee.

Additional amounts of equity are deducted each time the periodic fee falls due (such as every 5 years). The fee is a set percentage of the fund’s equity in your home. So, as the fund’s share of equity increases, the fee goes up.

When the equity release agreement ends, and your home is sold, the fund gets their share of the proceeds. That is, the proportion of your home’s equity they have accrued. You or your deceased estate get the remainder of the proceeds, if any.

The proportion of home equity you keep will reduce over time, and could even go down to zero.

Check your agreement to see what happens if your equity goes down to zero. Make sure you can continue living in your home, until sold by you or your deceased estate.

What an equity release agreement costs

It’s not a loan, so you don’t pay interest. Instead, you pay fees such as:

Get the fund to go through projections with you, showing the impact on your home equity over time. Get a copy of this to take away, and discuss it with your adviser. Ask questions if there’s anything you’re not sure about.

Home Equity Access Scheme

The Home Equity Access Scheme (formerly the Pension Loans Scheme) is provided by Services Australia and the Department of Veterans’ Affairs. It lets eligible older Australians get a voluntary non-taxable fortnightly loan from the Government. You and your partner can use the loan to supplement your retirement income.

How the Home Equity Access Scheme works

The loan is secured against real estate you, or your partner, own in Australia. You can choose how much you offer as security.

You can choose the amount you get paid fortnightly. Your combined pension and loan payments cannot exceed 1.5 times the maximum fortnightly pension rate.

From 1 July 2022, you can get an advance payment of your loan (that is, a lump sum). This is in addition to, or instead of, your fortnightly loan payments. Taking up this option may reduce the fortnightly loan payment you get for the next year (26 fortnights).

There is a maximum amount of loan you can borrow over time. This is based on your (or your partner’s) age and how much you offer as security for the loan.

What a Home Equity Access Scheme loan costs

You must repay the loan and all costs and accrued interest to the Government. You can make repayments or stop your loan payments at any time.

All loans have a negative equity guarantee. This means you won’t repay more than your home is worth (equity). Exceptions may apply.

For more information about the Home Equity Access Scheme, visit Services Australia or the Department of Veterans’ Affairs .

Consider other options

If you need money, other options to consider include:

If you’re considering any of these options, contact us today for more information.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/retirement-income/reverse-mortgage-and-home-equity-release
Important note: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. Past performance is not a reliable guide to future returns.

The post Reverse mortgage and home equity release appeared first on BMO Accountants .

Signs of a well-run small business

Fri, 10 Nov 2023 01:05:00 GMT

Is your business running efficiently, or is it running off the rails? It is often said that small business owners are so busy working in the business that they don’t work on the business. But, with economic conditions softening, it is a good time to take action.

According to the ATO, simple habits like managing your cash flow effectively and apportioning your private and business expenses accurately help ensure you are running your business efficiently.

Findings from the ATO’s Small Business Random Enquiry Program show that businesses operating well and complying with their tax obligations tend to keep good records and conduct thorough reconciliation processes. They also take time to understand their tax and super obligations.

Using digital tools

In a digital world, technology helps businesses to streamline many processes and reduce overheads.

Digital tools can also increase the efficiency of your business systems, products and services and help track and manage customer data and employee records.

Introducing digital tools can support business growth. Don’t forget that some of the associated costs (such as hardware purchases and subscription fees) are tax deductible.

Good cash-flow management

Over the years, the ATO has noted effective business owners tend to use cash flow projection or budgeting tools.

With cash flow problems often the reason that small businesses fail, clear insights into your cash flow position and careful management of income and expenses is essential.

Having a good handle on your cash flow position makes it easier to meet financial commitments such as tax and employee super payments and allows you to check whether you are trading profitably, or just working to pay your bills.

Cash flow projection or budget tools can be off-the-shelf products, or talk to us about how we can work with you to use the ATO’s Cash Flow Coaching Kit .

Careful tax management

Well-run businesses also declare all their income – including cash income – in their tax returns.

Businesses omitting income by depositing it into private accounts or mortgages, or not declaring cash sales and incorrectly recording director’s fees and drawings are not on top of their tax obligations.

The same goes for failing to account correctly for private use of the business’s assets or funds.

With the ATO returning to a tougher stance after the COVID disruptions, these practices are likely to attract attention.

The ATO’s online Record Keeping Evaluation Tool can be helpful in assessing how well your business is maintaining its required business records.

Lodging paperwork on time

The ATO considers late tax returns to be an early indicator of a small business not actively engaged with the tax system and a red flag for a poorly run operation.

If your business has run off the rails a bit, it’s worth noting there is currently an tax amnesty in place (until 31 December 2023), for small businesses with overdue income tax returns, fringe benefits returns or business activity statements.

These returns and statements must have been originally due between 1 December 2019 and 28 February 2022.

Eligible businesses had an aggregated turnover of less than $10 million at the time the original lodgement was due.

Getting advice from trusted sources

Seeking professional advice is another key indicator of a well-run business and is particularly important at the moment to help navigate the uncertain business environment.

Over the years, the ATO has commented how small businesses that have regular contact with a tax professional are more likely to be reporting their tax position correctly.

The ATO itself also provides assistance and information to small businesses, including online tools such as the Employee or Contractor? tool, Tax Withheld Calculator and the Home Office Expenses Calculator .

To simplify making super contributions for your employees, check out the Super Guarantee Charge Statement and Calculator and the Small Business Superannuation Clearing House .

Properly managed small businesses seek advice from their accountant in relation to a range of issues. We can work with you to improve your business operation as a whole, not just to meet your tax obligations.

The post Signs of a well-run small business appeared first on BMO Accountants .

Thought to register a trade mark for your new business?

Tue, 07 Nov 2023 23:25:00 GMT

A new business is an exciting and challenging journey. Getting set up correctly from the start will help you on the path to success.

You’re ready. You’ve worked out what registrations you need, you have an ABN, sought a trusted adviser, and checked if you need to register for GST or PAYG instalments. You’ve chosen a business name, have your website and social media accounts up and running and it’s time to hit go.

But wait – have you thought about trade marking your business name? Or worse, has someone else beaten you to it?

Trade marks are intellectual property. Other types of intellectual property include:

While you don’t need a registered trade mark to apply for an ABN, registering a trade mark for your business name, logo, or other sign means you have exclusive rights to use your trade mark in Australia. Use TM Checker , IP Australia’s free trade mark checking tool, to see if a name already exists.

A registered trade mark is a licensable and saleable asset. It also provides a legal avenue to stop others from using it on similar goods and services. A 5-minute check can help save you a lot of disappointment and work.

Check out IP Australia for more information and get your trade mark sorted today.

Source: ATO – August 2023
Reproduced with the permission of the Australian Tax Office. This article was originally published on /Small-business-newsroom/General/Thought-to-register-a-trade-mark-for-your-new-business-/?SmallBusNewsroomLanding.

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Thought to register a trade mark for your new business? appeared first on BMO Accountants .

Managed investment trusts

Tue, 07 Nov 2023 23:23:00 GMT

Check the income to declare, when to report a loss, and deductions you can claim for managed investment trusts.

Types of managed investment trusts

Managed investment trusts include:

Trust income and credits

You must show any income or credits you receive from any trust investment product on your tax return. Your distribution advice or statement from the trust will show the information you need to complete your tax return, including:

You can also claim credits for tax:

Trust losses

If a trust makes an overall loss in an income year, the loss is retained in the trust – there is no amount of net income available for distribution.

However, in some cases you are required to report a loss on your tax return. This happens if you are eligible to use the averaging provisions available to primary producers and the trust has made a loss from its primary production activities but has an overall net income amount, part or all of which it distributes to you.

Your distribution advice or statement from the trust will separately identify your share of any primary production loss (which is needed for averaging purposes) and your share of other income.

For information on Trust loss provisions, see Trust loss provisions .

Trust income deductions

Tax deductions for managed investment trusts can include:

If you made a prepayment of $1,000 or more in relation to your managed investment, there are special rules which may affect the amount you can deduct .

You can’t claim a deduction for:

Capital gains from a trust

Distributions from trusts can include different types of amounts. The following two are relevant for capital gains tax (CGT) purposes:

Non-assessable payments mostly affect the cost base of units in a unit trust (including managed funds) but can in some cases create a capital gain.

The trustee should advise you whether the CGT discount, the small business 50% active asset reduction, or both, have been taken into account in working out the trust’s net capital gain.

Speak to us or your tax agent if you have any questions regarding this topic.

Source: ato.gov.au
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Individuals/Investments-and-assets/Managed-investment-trusts/

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Managed investment trusts appeared first on BMO Accountants .

Setting financial goals as a couple

Tue, 07 Nov 2023 23:20:00 GMT

Step one: what are your financial pain points?

When you start making plans, chances are you’ll both come across financial pain points. In other words, the areas that need some attention and possible alterations. These might include:

While it’s normal to have pain points like these, it’s important to recognise them for what they are and work on solutions.

Step two: separate individual goals from couple goals

While you’ll both have personal savings goals, it’s a good idea to talk about what these are and why they’re important to you.

This will help you work on them, without compromising the goals you have as a couple. Examples of couple goals include:

Step three: create an action plan

With a better grip on your financial pain points and the goals you both want to achieve, it will be easier to start making practical plans.

Just like working with wedding planning list, setting out a clear timeline can help you visualise your goals, and importantly, make sure you’re staying realistic about how and when you’ll achieve them.

It could be worth talking to us. We can help you set up the timelines and look at ways of boosting your goals.

Keeping motivated is important, but this often takes incentive. You could set up a separate bank account, that has good interest rates and bonuses. You might also want to consider a term deposit. These savings products offer fixed, competitive interest rates and you can choose a term to suit your needs.

You may also consider whether you want a joint account when opening a new savings account as a couple.

When you hit your milestones, there’s no harm in rewarding yourself. A nice dinner or weekend away can remind you that your couple goals are worth achieving.

Using an online budget planner will help you find out where you can save money, as well as how much. MoneySmart’s savings goals calculator is also a great tool to keep you on track.

Step four: get things moving

You may have already opened up a savings account, but have you thought about applying for a personal loan?

With the right repayment plan in place, personal loans can help you achieve those bigger financial goals, such as paying for the costs of starting a family, moving overseas, or even paying off the engagement ring.

If you’re looking at property instead, it’s best to start the conversation with your lender soon, so you can figure out how much you can afford and where you want to live.

When you apply for a home loan, you’ll want to be prepared. Banks and lenders take into consideration a lot of factors before they decide to approve applications. But the more organised you are, the easier it will be to get things moving.

For more budgeting tips, call us today.

Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://business.nab.com.au/ <insert direct link>
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
© 2023 National Australia Bank Limited (“NAB”). All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Setting financial goals as a couple appeared first on BMO Accountants .

Trusts and the new super tax rules

Fri, 13 Oct 2023 00:59:00 GMT

Ensuring you’ve structured your finances tax-effectively is always a concern, but with new tax rules for super on the horizon, many people with large balances are considering alternative vehicles to save for retirement.

Unsurprisingly, this has sparked a renewed interest in an old favourite – trusts.

Trusts have always been popular in Australia, with the government’s Tax Avoidance Taskforce (Trusts) estimating more than one million were in place in 2022.

Separating ownership using a trust

The popularity of trusts for business, investment and estate planning purposes is due to both their flexibility and inherent benefits, particularly when it comes to managing your tax affairs.

At their heart, trusts are simply a formal relationship where a legal entity holds property or assets on behalf of another legal entity.

This separation means the trustee legally owns the assets, but the beneficiaries of the trust (such as family members) receive the income flowing from the assets.

A common example of a trust structure is a self-managed super fund (SMSF), where the fund trustee is the legal owner of the fund’s assets, and the members receive investment returns earned on assets held within the SMSF trust.

Which trust is best?

There are many different types of trusts, with the appropriate structure depending on the financial goals you’re trying to achieve.

For small businesses and families, the most common trust is a discretionary (or family) trust. These vehicles are very flexible and can be used with immediate and extended family members, family companies or even charities.

In a discretionary trust, the trustee has absolute discretion on how both the income and capital of the trust are distributed to various beneficiaries.

This gives the trustee a great deal of flexibility when it comes time to allocate income to family members paying different marginal tax rates.

Advantages of a trust structure

Discretionary trusts offer tax, asset protection, estate planning and property holding benefits.

They can also assist with the accumulation of assets for younger generations within your family and provide opportunities for the discounting of capital gains .

For small businesses and farming operations, a discretionary trust can be used to provide valuable asset protection. If your business goes bankrupt or a beneficiary is divorced, creditors are generally unable to access assets or property held within the trust as it is the legal owner of the assets.

Building wealth outside super

With new tax rules for super fund balances over $3 million being introduced, trusts also provide a useful tool to consider for continued wealth accumulation.

Unlike super funds, trusts don’t have annual contribution limits, restrictions on where you can invest or borrowing limits. Money can be added and removed from the trust as necessary, providing significant financial flexibility.

Discretionary trusts can also be used with vulnerable beneficiaries who may make unwise spending decisions. The trustee can decide to provide a spendthrift child or a family member with a gambling addiction regular income, but not large capital sums.

Holding ownership of assets within a trust is useful for estate management, as the assets will not be part of a deceased estate, avoiding the possibility of a Will being challenged.

Trusts aren’t always the solution

Although trust structures provide many benefits, there are also tax issues that need to be considered. For example, any trust income not distributed to beneficiaries is taxed at the top marginal rate .

Distributions to minor children are taxed at higher rates and a trust is unable to allocate tax losses to beneficiaries, as they must remain within the trust and be carried forward.

Trusts can be expensive to set up, administer and dissolve when they are no longer needed and the trustee’s actions are restricted by the terms of the trust deed.

If a family dispute arises, running a trust can become difficult, and making changes once it is established must be done with professional care and advice.

If you would like to find out more about trusts and whether one is appropriate for your business or family, call us today.

The post Trusts and the new super tax rules appeared first on BMO Accountants .

Rental investor? How to get your tax return right

Thu, 05 Oct 2023 05:01:00 GMT

With Treasury estimating the government misses out on billions in potential tax revenue from rental property deductions and the ATO recently warning extra care is needed when lodging returns with this type of income, rental investors can consider themselves well and truly in the tax man’s sights.

In fact, the ATO’s Random Enquiry Program (REP) showed 9 out of 10 returns reporting net rental income needed adjustment, leading ATO second commissioner Jeremy Hirschhorn to note: “This is startling and clearly something we need to address”.

So, if you’re a rental property investor, it’s time to ensure you’re getting your deductions right.

Deductions under the microscope

Rental property investors can claim a wide range of deductions for expenses associated with maintaining and financing their property interests. These include interest expenses, capital works and other deductions required to maintain the property.

It’s clear from the REP, however, many rental property investors need to learn a little more about what is deductible and also when they can claim a deduction for the amount.

Although some expenses can be claimed immediately (such as management fees and council rates), other expenses (such as borrowing costs and capital works) must be claimed over a number of years .

Red flags for the ATO

Common mistakes rental property investors are making include failing to include rental income for short-term arrangements and insurance payouts, overclaiming deductions, and claiming for improvements to private properties.

Rental income must be the gross amount received and must be reported in the same financial year the tenant pays .

Another common mistake is claiming an immediate deduction for initial repairs when purchasing. Existing damage must be claimed over several years as a capital works deduction and is also used to work out your capital gain or loss on selling.

Improvements such as renovating a bathroom, are a building cost and must be claimed at 2.5% annually over 40 years from completion, while damaged detachable items costing more than $300 should be claimed as a depreciating asset.

Tips to get your tax return right

When completing your return, it’s essential to apportion both your rental income and deductions in line with your ownership share of the property.

If there is a mortgage over the property and the loan is also used for private purposes (such as a buying a new car or taking a holiday), your interest expenses must be apportioned. This needs to continue for the duration of the loan , even if you repay the personal expense.

Deductions also need to be split to reflect any private use. This also applies if you only use part of the property to earn rent.

Ensure your deductions are in order

Borrowing expenses (such as loan establishment fees and title searches costing over $100) must be deducted over five years . In the first year, these expenses should be apportioned for the number of days of ownership.

Purchase costs (such as conveyancing fees and stamp duty outside the ACT) cannot be claimed but form part of your capital gains tax (CGT) calculations.

Ask the previous owner for details of any capital works deductions claimed so you can correctly calculate your own deductions. Alternatively, hire a qualified professional to estimate previous construction costs.

Although payments to a body corporate administration fund are fully deductible in the year incurred, payments to a special purpose fund for capital improvements or repairs are not immediately deductible .

Don’t forget CGT

It sounds obvious, but it’s essential to have evidence of all your rental income and expenses when lodging a claim. This needs to be retained while you own the property and for five years after selling.

Another tip is to ensure you calculate your capital gain (or loss) correctly when selling.

You are not permitted to include amounts already claimed as a deduction, including depreciation and capital works.

Capital gains must be included in your tax return for the income year the property is sold, while capital losses can be carried forward .

Please don’t hesitate to call if you have any questions regarding the preparation of documentation for your next tax return.

The post Rental investor? How to get your tax return right appeared first on BMO Accountants .

Are you getting the Age Pension you’re entitled to?

Tue, 26 Sep 2023 04:50:00 GMT

If you receive the Age Pension, recent changes to means testing for retirees could put more money in your pocket. These changes impact the assessment of certain lifetime income streams that began on or after 1 July 2019 (including any that you take up now).

Lifetime income streams

There are two main types of lifetime income streams:

1. lifetime superannuation pensions, which are purchased from a super fund; and

2. lifetime annuities, which are purchased from a life company with either your super or savings.

Once purchased, the payments from these income streams will last for the rest of your life.

Your rate of Age Pension is calculated using both an income test and an assets test. Not surprisingly, the test resulting in the lowest rate will apply.

Lifetime income streams are different to many other types of investments, such as bank accounts, account based pensions and investment properties, where generally 100% of the asset is assessable.

Certain lifetime annuities receive more favourable treatment from the assets test.

Under the social security assets test, generally 60% of the purchase price of certain lifetime annuities will count as an asset through to age 84, or for a minimum of five years.

From then on, only 30% of the purchase price counts as an asset. Under the social security income test, 60% of any payment you receive from this type of income stream is assessable as income for social security purposes.

Don’t miss out on the Age Pension if you don’t have to

Those most likely to benefit from these changes are retirees who receive a part Age Pension because of the assets tests and who have purchased a lifetime income stream on or after 1 July 2019.

If you were getting a reduced Age Pension because of the assets test, then investing in a different type of structure on or after 1 July 2019 – like a lifetime income stream – could change your Age Pension outcomes.

In addition to benefiting from a lifetime income stream, they could actually get an increase in Age Pension as well.

Find out if you’re eligible for more Age Pension

It’s important to speak with a financial adviser about your personal circumstances before making any financial decisions. In some cases, the difference can be significant.

While every situation is unique, take the example of a retiree who was able to boost their initial annual Age Pension entitlement from around $14,500 to $19,000 by investing part of their savings in a lifetime annuity.

That extra $4,500 worth of Age Pension could make a significant difference to their retirement income and how long their retirement assets last. It’s not necessarily a dollar or two here and there. It could mean thousands a year in increased Age Pension for a retiree – simply from how they choose to structure their assets.

Lifetime annuities as a source of income

Using the income generated from a lifetime annuity to complement other sources of income (such as the Age Pension) is a common approach for retirees. Its generally seen that a lifetime annuity complements other sources of income in retirement. It’s rare to see 100% of anyone’s income coming from one source.

Making the means test work for you

Here’s how using part of your savings to purchase an eligible annuity as your lifetime income stream might look: Working with your financial adviser, you’d calculate your total spending requirements once you retire, including both essential and discretionary spending.

Then you work out where that number sits relative to the maximum rate of Age Pension. Let’s take a couple who are eligible for the maximum rate of Age Pension – about $36,000. If they can get by on $36,000, they might not need another layer of income. But if they worked out that their essential spending was more than $36,000 – say it’s $40,000 – then they could buy $4,000 worth of additional income a year to get them up to $40,000 through a lifetime annuity to cover their basic living costs for life.

Because an annuity can offer either a fixed or inflation linked payment, you have the peace of mind of knowing your income will be stable for the rest of your life – no matter how long that is. This is particularly valuable when you want certainty of income without some of the risks associated with other types of market-linked investments.

Essentially, it’s allocating resources to buy a very secure lifetime income stream, that sits on top of the maximum rate of Age Pension you are eligible for. So, no matter what happens, you can always afford what you need throughout your retirement.

Important notes: Age Pension benefits described above will not apply to all individuals. Age Pension outcomes depend on an individual (or couple’s) personal circumstances and may change over time. While lifetime income streams may immediately benefit some Age Pension eligible retirees who are assessed under the assets test, in later years, if assessed under the income test, any ongoing Age Pension benefits may be reduced. For market-linked lifetime annuities, only the first year’s monthly income amount is guaranteed. After the first year, monthly payments will move up or down annually adjusting to the changes in your chosen market-linked indexation payment option. In periods of strong market performance, any Age Pension benefits may reduce to reflect the higher income received. Consult your financial adviser about potential impacts on your personal circumstances and whether a lifetime income is right for you.

Source: Challenger

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Retirement planning for small business owners

Tue, 26 Sep 2023 04:40:00 GMT

When you run your own business a good retirement plan can bring real peace of mind. Read more about your options – and why it’s never too early to start.

Planning your retirement

When you’re busy running your own business retiring could be the last thing on your mind. But planning your retirement well in advance can make it easier to enjoy the future you want.

Will you sell your business?

Many business owners plan to sell their business to fund their retirement – but it’s important to be realistic. It isn’t always easy to find a buyer who’s prepared to pay the price you want, particularly if you’re hoping for a quick sale. And, even if you intend to keep on working well beyond retirement age, unforeseen circumstances such as poor health or a change in market conditions could force your hand, so it’s important to be prepared.

Allow plenty of time

If possible, you should give yourself at least three years to plan for the sale of your business. Most buyers will want to see three years of financial statements and you’ll also need time to work on increasing the value of your business. This could include everything from keeping your equipment up to date and making sure your premises are always clean and well-maintained to boosting your sales with a strong online presence. Remember that a buyer is investing in the future of the business so they’ll want to see positive yet realistic forecasts.

In the meantime, it’s also important to protect your business with the right insurance. Appropriate Income Protection, Total and Permanent Disability (TPD), Trauma and Business Expenses insurance can help prevent debt from accumulating if you’re unable to work and enable you to pay someone to keep your business up and running if you can’t.

Succession planning

Passing your business on to a family member or employee may sound straightforward but, again, you should allow plenty of time to work through the process and clarify all the details. For example, do you intend to retain any interest in the business? Who will own any property, such as the business premises? And, if your successor plans to buy the business from you, can you be sure they’ll have access to the money when you want it?

A good succession plan will cover all this and more to ensure you can make the transition with minimum disruption and maximum benefit. And it’s important to talk to a professional adviser about how you can best structure your business to protect your assets and minimise tax.

Saving money for retirement

Personal superannuation isn’t compulsory for small business owners so you might be tempted to put investing in your business ahead of your savings. This can be risky as there’s no guarantee your business alone will provide enough money for you to live comfortably in retirement.

Building your business and your superannuation investment simultaneously can help to mitigate the risk. Many business owners choose a self-managed superannuation fund (SMSF) as this may provide benefits such as a lower tax rate, more investment options and flexibility when it comes to drawing an income. However, a SMSF isn’t right for everyone so you need to discuss your strategy with a professional adviser.

Planning to live longer

In general, Australians are living longer, which means you could spend decades in retirement. Ideally, you’ll have enough savings to cover your expenses well into your nineties.

Financial security in retirement could underpin many of the decisions you make about your business so it’s important to think about the lifestyle you want. As a general rule, if you own your own home, you’ll need 70-80 per cent of your pre-retirement income to maintain the same standard of living. The age pension and other government supplements provide a safety net but, at the moment, these are set at about 28 per cent of the average wage, and this is very unlikely to increase.

The most successful retirement planning is long term. Your spending and your needs are sure to change as your retirement progresses so your plan must be adaptable enough to evolve. And it’s never too early to take action. Once you have your retirement goal in mind you can work out the steps that will help you take control of your retirement and enjoy the lifestyle you want.

Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/business/small-business/moments/future/planning
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
© 2023 National Australia Bank Limited (“”NAB””). All rights reserved.
Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.”

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Why young investors are more risk averse

Tue, 26 Sep 2023 04:38:00 GMT

The ranks of young Australian investors have swelled over the last two years. And many have very different investment objectives and strategies to older investors.

Young Australian investors aged 18 to 24 are likely to be more risk averse than their older counterparts and least likely to tolerate moderate or high variability in their investment returns.

These are among the key findings from the just-released ASX Australian Investor Study 2023 , which also found that the main investment goal for 36% of “next generation” investors over the next 12 months is to build a sustainable income stream.

The ASX study findings are based on a survey of 5,519 Australian adults conducted by Investment Trends in November 2022.

Interestingly, only 17% of retirees (aged 65 and over) listed building a sustainable income stream as their main goal over the next year. Their biggest focus (nominated by 20% of the retirees who participated in the ASX study) is to protect their existing investments and income against markets falls.

Only 9% of next generation investors nominated this as their main goal, with maximising capital growth the top consideration for 19% of respondents in this young adult age band, followed by achieving a balance between capital growth and investment (nominated by 14%).

Profiling the next generation investors

The ASX’s study found that almost 10% of Australia’s 10.2 million investors fall into the next generation age category, and 63% of these have only started investing in the last two years.

The Next Generation Investor

Source: ASX Australian Investor Study 2023

While many next generation investors are focused on building sustainable income, the ASX study found that returns are less motivating for younger investors than for older demographics when making investment decisions.

Next generation investors rate risk (33%) and their personal circumstances (29%) above returns (25%) as their most important considerations. They also consider whether funds can be accessed at any time if their money is tied up (20%).

This makes sense given younger people typically will want to access their funds over the shorter term for lifestyle purposes, including for travel or to use investments as a deposit to buy a home.

Next generation investors are least likely to tolerate moderate (16%) or high variability in returns (10%).

The majority understand the cyclical nature of investing, with 29% saying a fall of 20% in their portfolio balances is a risk they understand could happen and another 36% saying if this happened, they would be concerned but would wait to see if the situation improved.

But the ASX study notes that the apparent financial conservatism of next generation investors is at odds with their level of investment in cryptocurrency assets.

“This product at present could be seen as a relatively risky investment, yet 31% of next generation investors hold it in their portfolios. Their median holding is $2,700, representing 6% of their total portfolio (compared to 3% for all investors). It possibly appeals to their excitement about new technologies or a desire to do things differently to their parents.”

Less likely to be diversified

Another key finding from the ASX study is that next generation investors report the lowest level of investment diversification among all age groups and are the least knowledgeable about diversification.

Portfolio diversification by age

Source: ASX Australian Investor Study 2023

Next generation investors on average have investments in 3.1 products, with one-third holding ETFs.

The ASX study points out that their diversification level is most likely due to the short amount of time in which they have been able to invest and their generally low incomes given many are at the start of their careers.

The low levels of diversification among next generation investors may also be counter-effective against their relatively high level of risk aversion.

As such, this suggests many young investors may benefit by learning more about the role of diversification in mitigating risk and in helping to stabilise returns when investing across a range of asset classes.

The ASX study found that social media is an emerging source of investment information for younger investors, with 43% also typically consulting their family and friends, 22% the ASX website, and 21% online broker websites.

Source: Vanguard June 2023

Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

2023 Vanguard Investments Australia Ltd. All rights reserved.
Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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Small business risk and cyber security: Are you prepared?

Mon, 04 Sep 2023 23:04:00 GMT

We’re all now only too aware of the risk of cybercrime after the well-publicised data hacks of Medibank Private and Optus.

Although these crimes involved large organisations, email scams, cyberattacks and online scams also represent a major risk for small businesses, particularly if you don’t have the funds or knowhow to strengthen your digital security.

Simple scams, big costs to business

According to the government’s Australian Cyber Security Centre (ACSC), small businesses in particular are at increasing risk of cyberattack, with 43 per cent of all Australian cybercrime now targeting these entities. A cybercrime is reported every seven minutes on average.

Cyberattacks often involve fairly straightforward scams. The ACSC highlights the example of a small construction business that received an email from a supplier saying they had changed banks and providing new account details. The construction firm didn’t call their supplier to check and twice paid an invoice for over $70,000.

The supplier was unaware one of its email accounts had been hacked and was sending out fraudulent bank account details. No funds were recovered.

New tools and training to counter threats

To counter growing cyber risks, the government allocated funding to upskill small business owners and employees in the May Federal Budget.

Run by the Council of Small Business Organisations of Australia, the new $23.4 million Cyber Wardens program aims to build small business cyber resilience by training 60,000 non-technical employees.

Cyber Wardens will help other employees prevent digital threats in a similar way to workplace safety officers.

ACSA has revamped its Cyber Security for Small Business Guide and accompanying video. One of its key recommendations is for small businesses to create a cyber emergency plan and test it using the ACSC’s Exercise in a Box tool.

The ATO is also emphasising the importance of business cyber security and has released a checklist of tips for businesses, such as turning on automatic updates.

Covering your risk with cyber insurance

Aside from the obvious inconvenience resulting from a cyberattack, small businesses also face other considerable risk exposures.

There is a mandatory reporting obligation under the Notifiable Data Breaches scheme requiring a business to report data breaches to the government and its customers if the breach is likely to result in data being misused.

The financial losses resulting from a cybercrime can also be considerable, making cyber insurance a worthwhile investment for many small businesses.

These policies cover a wide range of cyber-related financial risks, including losses suffered by third parties (such as customers), cyber extortion, public relations expenses, system and business interruption expenses, and data breach notification costs.

Cover for business continuity

Expenses resulting from a cyberattack are not the only potential risks a small business can face, making appropriate insurance cover invaluable if the worst happens.

While most small businesses have traditional business cover for building, contents, theft, commercial vehicle and general property, other business risks such as business interruption are often overlooked.

Management liability insurance protects the company and the people managing it against the risks and exposures of running the business, such as allegations of misconduct or legislative breaches.

It can also be worth considering key person insurance to compensate your business for financial losses arising from the death or extended incapacity of an important staff member. The lump sum payout can be used to offset costs such as recruiting a successor, or losses such as a decreased ability to transact business in the event of losing a key person.

Public liability insurance covers you and your employees for potential liabilities to third parties if your product or service cause bodily injury or property damage, while professional indemnity protects against liability for damages and legal costs arising from claims due to acts or omissions.

In a constantly evolving risk landscape, taking proactive steps within your business can work to reduce the likelihood of a cyberattack or limit damage should the unfortunate occur.

Source: Australian Cyber Security Centre

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How to boost your super with a lump sum

Mon, 04 Sep 2023 23:03:00 GMT

If you’re lucky enough to have received a windfall, perhaps an inheritance or a retrenchment payout, your first decision will be what to do with it.

Assuming you have decided against a shopping splurge, finding the best place to invest a lump sum is all about the effect on your tax bill and how soon you will need access to the funds.

For those interested in investing their lump sum for a longer term, superannuation is one approach because of its tax benefits.

But be aware that, while super can be a tax-effective investment, there are limits on how much you can pay into your super without having to pay extra tax. These are known as contribution caps .

Different types of contributions

There are two types of super contributions you can make – concessional and non-concessional – and contribution caps apply to both.

Concessional contributions are paid into super with pre-tax money, such as the compulsory contributions made by your employer. They are taxed at a rate of 15 per cent.

Non-concessional or after-tax contributions are paid into super with income that has already been taxed. These contributions are not taxed.

So, the tax you pay depends on whether:

Investing after-tax income

There are many different types of after-tax contributions that can be made to your super including contributions your spouse may make to your fund, contributions from your after-tax income, an inheritance, a redundancy payout or the proceeds of a property sale.

Based on current rules, the annual limit for non-concessional or after-tax contributions is $110,000. You can also bring-forward two financial years’ worth of non-concessional contributions and contribute $330,000 at once but then you can’t make any further non-concessional contributions for two financial years. Note that are certain limitation on these types of contributions.

It is also useful to note that, under certain conditions, there are some types of contributions that do not count towards your cap. These include: personal injury payments, downsizer contributions from the proceeds of selling your home and the re-contribution of COVID-19 early release super amounts.

The Downsizer scheme allows the contribution of up to $300,000 from the proceeds of the sale (or part sale) from your home. You will need to be above age 55 but there is no upper age limit, the home must be in Australia, have been owned by you or your spouse for at least 10 years, the disposal must be exempt or partially exempt from capital gains tax and you have not previously used a downsizer contribution.

Giving your super a boost

A review of your super balance and some quick calculations about your projected retirement income might inspire you to give your super a boost but not everyone has access to a lump sum to invest.

A strategy that uses smaller amounts could include any amount from your take-home pay. These contributions will count towards your non-concessional or after-tax cap.

Alternatively, you add to your super from your pre-tax income using, for example, salary sacrifice. These types of concessional or pre-tax contributions attract a different contribution cap: $27,500 per year, which includes all contributions made by your employer.

If your super fund balance is less than $500,000, your limit may be higher if you did not use the full amount of your cap in earlier years. You can check your cap at ATO online services in your myGov account.

The rules for super contributions can be complex so give us a call to discuss how best to maximise your benefits while avoiding any mistakes.

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The 1% rule – tiny changes add up to a BIG difference

Mon, 04 Sep 2023 23:00:00 GMT

Personal transformation can be challenging. We all have habits we’d like to break and behaviours we’d like to do more of. But when we do some self-examination and think about what is involved in navigating change, it can seem overwhelming to get to where we need to be, whether that is personally or professionally.

That’s where small incremental change can be a powerful tool.

The power of one per cent

Just a tiny shift of something like one per cent, does add up. A compelling example of the power of one per cent incremental change is the story about Sir David Brailsford and the British Cycling Team. The team hadn’t produced a rider able to win the Tour De France in its entire history. Brailsford felt that by improving in achievable one per cent increments in a lot of areas, the team could produce a cyclist who could win the Tour de France in five years.

They made one per cent improvements in obvious areas such as nutrition, bike aerodynamics, weight, and seat comfort as well as in areas others didn’t think about. They located a pillow that provided slightly better sleep and travelled with it and another gain was made through adjustments to sleeping posture. Then, someone found a massage gel that worked marginally more effectively, and so on. These minuscule one per cent gains added up to a win in two and a half years instead of the predicted five years, and the team went on to win six races since 2012.

Why incremental change works

While you may not be gearing up to win the Tour De France, you can apply this powerful method of incremental improvement to your own life, to improve your health, relationships, finances, career, or business.

Too often we convince ourselves that impressive results demand massive action and fail miserably as we have bitten off a lot more than we can chew. However, making tiny adjustments to your life are much easier to manage and much more likely to be sustained than a huge shift.

It’s also common to think of a big win or achievement as a single event but the reality is that it’s generally the result of a series of tiny moments that each propel us one step further toward our goal.

The one per cent rule is so effective, as it can be scaled. The method works because you are making many small tweaks and building on those tweaks as they become habits.

Applying incremental change to transform your life

The starting point is to think of an area of your life you want to improve. Then think of small ways you can tweak your life to achieve that objective. The tweaks obviously don’t have to literally be as tiny as one per cent, but the objective is a series of minor changes, which built upon on a regular basis, really add up.

For example, if you are wanting to improve your health you don’t have to overhaul your lifestyle to reach your health goals, go for small, achievable changes. Try drinking an additional glass of water when you wake up, take some fruit to work to snack on, take the stairs instead of the lift at work, or get off the train one stop early to walk a little further home.

Or if you are wanting to further your career, try spending 10 minutes per day on expanding your network, incorporate some small productivity tweaks into your daily routine like not checking your emails constantly, and commit to self-growth by asking a single question every day to improve your knowledge. Building upon little, easy tasks like these can help you on your path to success.

Reaping the benefits

It is important to build though. One small tweak alone will not make an enormous difference. The challenge is to continue to make one per cent changes, without dropping the changes you’ve already made.

The key to this method, is to be consistent; it takes around 60 days to establish a habit so make sure you hang in there. You might have to even put a pause on adding any more changes to your routine as you adjust at various points along the way but just make sure you persevere to establish the changes you’ve already made.

There is no better time than the present to get started, so make the first micro change to your life today and watch each one per cent improvement add up to success.

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How super contributions and withdrawals are taxed

Thu, 27 Jul 2023 06:52:00 GMT

How much tax you pay on your super contributions and withdrawals depends on:

If you inherit someone’s super after they die, the person’s super fund pays you a super death benefit. You may have to pay tax on some of this benefit.

Because everyone’s situation is different, it’s always best to get advice about tax matters. Contact the Australian Taxation Office (ATO) or us.

How super contributions are taxed

Money paid into your super account by your employer is taxed at 15%. So are salary-sacrificed contributions, also known as concessional contributions.

There are some exceptions to this rule:

If you make contributions from your after-tax income — known as non-concessional contributions — you don’t pay any contributions tax.

See tax on contributions on the ATO website for more information about how much tax you’ll pay on super contributions.

To avoid paying extra tax on your super, make sure you give your super fund your Tax File Number.

How super investment earnings are taxed

Earnings on investments within your super fund are taxed at 15%. This includes interest and dividends less any tax deductions or credits.

How super withdrawals are taxed

The amount of tax you pay depends on whether you withdraw your super as:

Everyone’s financial situation is unique, especially when it comes to tax. Make an informed decision. We recommend you speak to us to get financial advice before you decide to withdraw your super.

Super income stream

A super income stream is when you withdraw your money as small regular payments over a long period of time.

If you’re aged 60 or over, this income is usually tax-free.

If you’re under 60, you may pay tax on your super income stream.

Lump sum withdrawals

If you’re aged 60 or over and withdraw a lump sum:

If you’re under age 60 and withdraw a lump sum:

If you have not yet reached your preservation age:

See the super lump sum tax table on the ATO website for more detailed information.

When someone dies

When someone dies, their super is usually paid to their beneficiary. This is called a super death benefit.

If you’re a beneficiary, the amount of tax you pay on a death benefit depends on:

See super death benefits on the ATO website for detailed information or contact us today.

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BMO paving the way for a bright future!

Fri, 21 Jul 2023 06:00:00 GMT

BMO Business Centre has announced they are setting their sights on the future and growth of BMO through appointing three new Associates. The management team will grow with the exciting addition of Helen Ruddy, Jack Staines and Ryan Troe. The succession planning of BMO has been a long-standing and ongoing mission for the partners; Adrian Rasmussen, Kelvin Tyler, Michelle McVeigh and David Briese. With the initial addition of Oliver Holcombe as an Associate in 2021, the team is eager and ready to have Helen, Jack and Ryan jump aboard.

Speaking fondly of the BMO Team, Partner Michelle McVeigh paid tribute to all the individual team members and how each role within the firm is valuable.

“We have young graduates from High School undertaking their accountancy degree, we have a skilled administration team who help us service our clients, we have senior accountants and ultra-efficient casually employed mums, some working remotely, and we also have the Associates who will help keep our business progressing to the next era,” Mrs McVeigh said.

BMO partner of 25 years, Adrian Rasmussen, said the future is looking bright for BMO.

“While none of the Partners are retiring anytime soon, it is crucial to start planning for the future today, not just for us as individual partners in the business, but also for the firm as a whole, and for our valued client base. We also need to ensure our core BMO values are not just maintained, but are continually improving.

Helen, Jack and Ryan all have a rich history with BMO. Helen has been with the BMO team for over 10 years, while Jack and Ryan both joined the team in 2016. It is fair to say these three have the experience and knowledge to exceed in their newly appointed roles,” Mr Rasmussen said.

Helen comes with a background in accounting and agribusiness-banking roles based at Miles and St George. With a Bachelor of Commerce under her belt and qualified CPA status, Helen brings with her strong qualifications in accounting and taxation.

“Having grown up at Drillham, I have a good synergy with farming enterprises and enjoy helping them to achieve results for their business. I’m really excited to take on this role and help drive BMO to bigger and better things,” Mrs Ruddy says.

Jack made the move straight from school to Dalby and completed his study whilst working full time as a part of BMO’s Professional Pathways Program. He has completed a Bachelor of Commerce through USQ, is now studying for his CPA and enjoys working with primary production and manufacturing clients with their tax and BAS preparation.

“We are dedicated to providing our clients with outstanding service and working alongside them to help them achieve their business and personal goals. This won’t change, but it gives us a

great opportunity to learn further from the partners and become great leaders at BMO,” said Mr
Staines.

Ryan came to BMO in 2016 as a graduate of Our Lady of the Southern Cross College, with excellent accounting results and retail experience. Ryan is another shining example from BMO’s Professional Pathways Program, graduating from USQ with a Bachelor of Commerce in 2019, which he impressively completed in just three and a half years and has since completed his
CPA qualifications.

“I have recently finished my CPA qualifications and will now step up to the associate role. It will be a great learning experience and I look forward to enhancing my skills moving forward, while continuing to work closely with my clients across various industries,” Mr Troe said.

The three newly appointed Associates are ready to step into their roles to work hard, learn and pave the way for BMO’s future. The BMO partners have no immediate plans to retire but are extremely excited for the new transitions and believe this is an integral part of succession planning and business development for BMO.

BMO Partner Kelvin Tyler said it was vital for BMO’s Management team to develop a good understanding of each team members’ aspirations and abilities to draft a succession plan that outlines who is eager and ready to be promoted, and when that time will be.

“Upskilling, mentoring and developing our Associates into engaging leaders, so they are confident, compassionate and have the ability to demonstrate a range of key skills required by today’s modern accounting adviser, is valuable.

Promotion is also retention. Loyalty, intelligence, and empathy are skills and qualities that build confidence and trust within your team. As modern leaders we must continue to listen and learn,” Mr Tyler said.

The Associates were announced at an internal team meeting celebration at BMO.

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AI – a smart move for small business

Sun, 16 Jul 2023 23:46:00 GMT

There has been a lot of media coverage about recent breakthroughs in artificial intelligence (AI) and new applications suitable for small business, but how exactly can a small business utilise AI and reap the benefits?

Artificial intelligence has come a long way from being the realm of science fiction to forming an integral part of our daily lives. The term ‘artificial intelligence’ was coined back in the mid 1950’s, when a number of academics and professionals in the field of technology first proposed a study of the term. ⁱ In that same year, the first AI program was developed.

Once considered to be exclusive to big business with deep pockets, the technologies that use AI are now cheaper, more accessible and are being widely embraced by small businesses. You may already be using AI without realising it.

Not just for big business

A recent study from Deloitte and Stanford University found that around a quarter of small businesses are currently using AI in some form or another including chatbots, predictive analytics and marketing automation. ⁱⁱ

While that adoption may seem a little slower in the context of large enterprises’ use of AI which sits at around 40%, many small businesses have the edge on the bigger players when it comes to embracing innovative technologies.

The benefits

The beauty of AI is its ability to do tasks that human beings either find tedious or take a long time doing. Used wisely AI can save time, reduce costs, and improve customer service. Some areas of the business where AI can play a powerful role include:

Administration: AI can help small businesses reduce the time spent on administration tasks, eliminate duplication, and minimise human error, ultimately freeing up resources for other activities. AI can be used for time and task management, bookkeeping activities, scheduling meetings, managing emails, and generating reports. Another area where AI is making an impact is in data analysis, which can be time-consuming, especially when dealing with large data sets. AI-powered analytics tools can make it easier for small businesses to extract insights from data and make more informed decisions.

Sales and client support: One of the most common applications of AI is the use of chatbots to answer frequently asked questions. These can include questions on available products, delivery dates, the status of orders and more, freeing up your resources to focus on more complex enquiries. AI also has the potential to assist with lead generation, marketing automation, client engagement and sales forecasting.

Supply chain enhancements: AI’s capacity for data crunching makes it ideal for identifying supply chain trends and making predictions to assist in the optimisation of a supply chain.

How to incorporate AI into your small business

These are just a few examples of some of the most common ways AI is being utilised by small businesses. For your business to get the most out of AI, the first step is to identify your specific business needs and then choose the applications that can help you meet those needs. Take advantage of the wealth of online resources available to familiarise yourself with the potential AI offerings.

It’s important to also recognise the potential risks of using AI. Some review of the information generated by AI is needed as mistakes can occur. Also consider security risks and take the appropriate steps to keep your customers’ details and information about your business secure.

When it comes to implementing AI within your business consider the business case for its deployment (it’s easy to get carried away when it comes to new technology) and how it will be managed, what resources will be required including internal processes that need to be refined before you get going.

The real beauty of AI is in freeing up the humans in the business to do what they do best, so think about how you can utilise AI to make the best of the people in your firm, reducing onerous admin tasks and freeing up resources for the mission-critical stuff.

i http://www-formal.stanford.edu/jmc/history/dartmouth/dartmouth.html
ii https://aiindex.stanford.edu/report/

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Managing the costs of raising children

Sun, 16 Jul 2023 23:44:00 GMT

It is a special feeling to welcome a new child or grandchild into the world and watch them grow. Sharing their joy as they reach new milestones is priceless.

Of course, there is a real cost – raising a child is expensive, particularly now as the cost-of-living spirals higher. Estimates vary widely from the few studies completed but it is fair to say that over a child’s lifetime families can spend hundreds of thousands of dollars on living, medical and schooling expenses for their children.

So, having a financial strategy in place to cover the costs and taking advantage of government support where available can make a big difference.

Taking care of the basics

The first step is to update your Will to nominate guardians for your children in case the worst happens. You may also consider life insurance and income protection to ensure your family is protected.

Next, a savings and investment plan will help you navigate the years ahead with more certainty. Adding small amounts of money regularly to an account for education and other expenses can help to ease financial stress. The MoneySmart savings goals calculator shows what can be achieved. You could consider fee-free high interest savings accounts or your mortgage offset account as a way to save cash for short-term needs.

Meanwhile, some longer-term investments such as shares, exchange traded funds or listed investment companies may provide financial support for later expenses. They can offer the possibility of capital growth and diversification for a relatively low cost.

Super splitting

Keeping an eye on the future also means thinking about your superannuation. If one partner is staying at home to care for the children, the other partner can split their super contributions with them. You will need to check if your fund allows it, whether they charge a fee and complete some paperwork.

There are also some tax considerations, so it is important to make sure you understand the implications for you.

Government support

Take the time to discover the government payments and supports available for families.

A recent change to Parental Leave Pay and Dad and Partner Pay sees these two payments combine into one payment that is available to both parents for up to two years after the child’s birth.

You will need to meet income and work tests and claim within certain timelines.

Even if you are not eligible for parental leave pay, you may still be able to apply for both the Newborn Upfront Payment and the Newborn Supplement.

Then there is the Family Tax Benefit, a two-part payment to help with the cost of raising children. To receive the benefit, you must have a dependent child or a full-time secondary student aged 16 to 19 who is not receiving any other payment or benefit such as a youth allowance, care for the child at least 35 per cent of the time and meet an income test.

Grandparent gifting

Grandparents who are keen to help out their families financially can gift money to their children or grandchildren. Be aware that Centrelink has gifting rules for those receiving an age pension. You can give $10,000 in one year or up to $30,000 over five years without your pension being affected. If you give more, the amount will be treated as though you had retained it in your own accounts.

However, gifts and inheritances are generally not considered as income for tax purposes. The ATO says neither the donor nor the receiver will pay tax on a gift if:

Tax may apply in some cases where property or shares are gifted.

The joys of raising a little one are many, and having a plan to manage the financial implications can let you enjoy the journey. Get in touch with us to create a plan to secure your family’s future.

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Keeping cashflow positive

Sun, 16 Jul 2023 23:43:00 GMT

Managing a healthy cash flow is often tough for small businesses and it is particularly the case right now in the challenging economic conditions.

In this climate, recent changes to rules and regulations may both help and hinder cash flow. Here are some to keep an eye on.

Minimum wage rise

The Fair Work Commission’s recent increase to the national minimum wage will add costs for some employers.

The 5.75 per cent increase must be paid to employees who are not covered by an award or registered agreement. The new minimum wage of $882.80 per week or $23.23 per hour must be paid from 1 July 2023. ⁱ

Changes to employee super

The Superannuation Guarantee – the amount that employers must pay to their workers’ super funds – has increased again from 1 July 2023.

You now need to pay 11 per cent of an employee’s ordinary time earnings. This amount will increase by 0.5 per cent in 2024 and a further 0.5 in 2025 bringing it to 12 per cent. ⁱⁱ

Payment of the superannuation guarantee payments to your employees should be made at least four times a year. The payments must be made in full by the quarterly due dates, which are 28 days after the end of each financial quarter

However, some employers – often those with cashflow issues – have been dragging the chain on payments. As a result, billions of dollars in super are owing. The Australian Taxation Office says that, in 2019-2020, $3.4 billion in employees’ super went unpaid. ⁱⁱⁱ

The solution will potentially have a big effect on small business cashflow.

From 1 July 2026, employees’ super must be paid at the same time they receive their wages.

The federal government is calling it ‘payday super’ and Treasurer Jim Chalmers says more frequent super payments will make payroll management smoother and employers will have fewer liabilities building up.

And to strengthen the system, the ATO will receive extra funds to help it detect unpaid super payments earlier.

New PAYG and GST instalment rates

The Federal Budget delivered a potentially positive boost for small business cashflow with a change to the quarterly Pay As You Go (PAYG) and goods and services tax (GST) instalment payments. ^iv

These payments are available to small businesses with an annual turnover of up $10 million for GST instalments and an annual turnover of up to $50 million for PAYG instalments.

The ATO adjusts the amount each year depending on increases or decreases in Australia’s gross domestic product (GDP) in the previous year. That would have meant a 12 per cent increase to instalment payments because GDP has performed strongly in the last 12 months. But the government has decided to cut the increase to 6 per cent for this financial year.

Instant write-offs

In another bonus for cashflow management, the new rule for instant asset write off is good news if you are considering any big purchases this financial year.

The instant asset write-off allows eligible businesses to claim an immediate deduction for the cost of assets including: tools, computers and office equipment, freestanding office furniture, and vehicles.

Instant asset write-off can be used for any number of assets purchased for use during the year, if the cost of each individual asset is less than the threshold of $20,000. It can also be used for second-hand assets.

However, there are some exclusions. These include some assets that are leased out, plants including grapevines, assets used in research and development activities, and capital works such as new buildings and structural improvements.

Assets valued at $20,000 or more, which can’t be immediately deducted, can be depreciated at 15 per cent in the first income year and 30 per cent each income year after that.

Get in touch with us for more information on the new rules and regulations or to help improve your cashflow management.

i https://www.fairwork.gov.au/pay-and-wages
ii Super guarantee percentage | Australian Taxation Office ( ato.gov.au )
iii Introducing payday super | Treasury Ministers
iv Small Business Support – helping small business manage tax instalments and improve cashflow | Australian Taxation Office ( ato.gov.au )

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Small businesses and SMSFs: keep an eye on the rules

Sun, 16 Jul 2023 23:41:00 GMT

As digital tools continually evolve, it is more important than ever to make sure you understand your tax obligations and comply with them. The Australian Taxation Office has been expanding and improving its data matching programs. Data matching compares data from a range of private and government organisations with the information you have provided to the ATO.

Today there are some 26 different data matching programs covering a wealth of transactions including various insurances (health, landlord, income protection); electoral rolls, bank accounts and credit cards, real estate, online sales platforms, international travel and crypto assets. So, if you leave out income from your tax return or inflate deductions, your chances of getting caught are much higher.

Investment properties

The ATO says that, while 87 per cent of taxpayers who own rental properties use a registered tax agent to lodge their return, a review has found that nine in ten rental property owners are getting their returns wrong. It is crucial that you provide us the right information to prepare your return correctly because you are responsible for what you include in your tax return, even when using an agent.(i)

For example, the new landlord insurance data-matching program provides information about any insurance payouts that might have been made during the year. These must be reported as income.

Along with the new landlord insurance data matching program, a review of investment loan data will also get underway. We can guide you to ensure we are capturing all the relevant information to submit a complete tax return.

Side hustles

The ATO is also looking into the income earned from side hustles or the sharing economy.

It is now requiring platforms that provide taxi services and short-term accommodation, such as Uber and Airbnb, to report their data. All other electronic distribution platforms will have to begin reporting their data to the ATO from 1 July 2024.

The ATO says the data will give it a clear picture of the people earning income on the platforms and will be matched against their tax returns and activity statements.

Small business obligations

Businesses are also under growing scrutiny from the ATO using a combination of sophisticated data matching and a requirement for further reporting.

The Single Touch Payroll (STP) program, first introduced five years ago, underwent some major changes last year, known as STP phase 2. Now, all businesses are required to use STP each time they pay their employees to report salaries, amounts withheld and superannuation guarantee liability information.

The ATO recommends you discuss your current payroll processes with your tax or payroll provider to make sure you are complying with Phase 2 reporting. “If you don’t have a tax or BAS agent, consider engaging one,” the ATO says.(ii)

And, in a move to ensure employees receive their super on time, the Federal Government will introduce what it calls ‘payday super’.

From 1 July 2024, all employers will be required to pay the superannuation guarantee amount to their workers’ super funds on each payday rather than quarterly as is currently the case.

Self managed super funds

When it comes to self managed superannuation funds, tax and regulatory performance is generally strong, according to the ATO.

Nonetheless it is a massive sector providing more than 1.1 million people with their retirement income. With an estimated total asset value of $868 billion, it is not far behind the industry funds sector, which holds just over $1 trillion in assets.

The SMSF sector’s importance and value to individuals brings it under close attention from the ATO, which is scaling up its compliance activities because it is seeing indicators of “heightened risk” that put retirement savings at risk or take unfair advantage of the favourable tax environment.(iii)

In particular, the ATO is chasing down fraud and investment scams, illegal early access to super funds by members and failure to lodge annual SMSF returns.

With increasing ATO focus on taxpayers and businesses to comply with their obligations, we are here to guide you through the changing rules and regulations and answer any questions.

(i) https://www.ato.gov.au/Media-centre/Media-releases/ATO-expands-data-matching-to-ensure-fair-play/

(ii) https://www.ato.gov.au/Business/Single-Touch-Payroll/Expanding-Single-Touch-Payroll-(Phase-2)/Employer-STP-Phase-2-checklist/

(iii) https://www.ato.gov.au/Media-centre/Speeches/Other/SMSF-compliance—What-s-on-the-regulator-s-radar-/

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The importance of SMSF succession planning

Sun, 16 Jul 2023 23:36:00 GMT

Preparing for loss of capacity or death is vital for SMSF members. It’s important to ensure your trust deed is watertight.

There are more than 600,000 self-managed superannuation funds (SMSFs) in Australia, managing close to $900 billion of assets on behalf of over a million Australians.

Each SMSF’s trust deed is legally required to set out the rules for establishing and operating the SMSF including its objectives, who can be a member of the SMSF, and whether benefits can be paid as a lump sum or as an income stream.

But what happens when a member becomes incapacitated, or dies?

Has the SMSF’s trust deed been worded in a way that will make it possible to give effect to the wishes of an incapacitated or deceased member, to the extent those wishes are consistent with superannuation laws?

If you’re a member of an SMSF, it’s important to ensure that you have ticked all the right boxes when it comes to succession planning.

And, to do this, it’s worthwhile considering obtaining tailored professional advice from an SMSF specialist.

Preparing binding death benefit nominations

SMSF members generally have a degree of ability to choose who will get their residual super benefits when they die, by making and giving the SMSF’s trustee a binding death benefit nomination.

This directs the fund’s trustee to pay the benefit to either a legal personal representative or one or more eligible dependants of the member.

However, depending on the wording of your SMSF trust deed and the nomination itself, it is possible that a binding death benefit nomination given by a member will expire after just three years (or any shorter period specified in the trust deed) under Regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (Cth). In that scenario, assuming the member is still alive, their death benefit nomination would then need to be renewed and there would be no death benefit nomination in place unless and until they do so.

But the High Court ruled last year that it is possible for a validly made binding death benefit nomination to last indefinitely if a trust deed’s wording is structured in such a way that effectively avoids the three-year automatic expiry.

This is a prime example of why it may be worthwhile getting professional advice around the wording in your trust deed covering death benefit nominations as well as your nomination form, including whether they are aligned with your preference as to how often (if at all) death benefit nominations need to be updated in order to be legally effective.

Preparing for loss of capacity or death

Another key aspect for SMSF trustees to consider and plan for is who would take control upon a member’s loss of capacity or death.

For example, problems can arise where someone wanted their super money to go to a child from a previous relationship, but where a second spouse controlling the fund was able to frustrate the wishes of the deceased.

It’s certainly worth asking how your wishes will be honoured if you lose capacity or die. Who will or could be running the fund in this situation? As there are a range of legal factors and restrictions that shape who would be eligible to operate the SMSF or make decisions on your behalf, good quality expert legal and financial advice on these matters can go a long way to avoiding inconvenience, confusion and conflict in future.

Reversionary pension nominations

SMSF trust deeds can generally specify that a superannuation income stream that a member of the SMSF is receiving will automatically transfer to an eligible dependant beneficiary previously nominated by the member upon the member’s death. This nomination is typically referred to as a reversionary pension nomination.

For some SMSF members they can be very important, particularly for people who have a high tax-free component or who are expecting a life insurance payout upon their death.

Some SMSF trust deeds are worded in a way that gives priority to a reversionary pension nomination over a binding death benefit nomination, which can lead to unexpected or unintended outcomes after a member’s death.

Reversionary beneficiary nominations are not necessarily needed or suitable for everyone with an SMSF, but for those wanting to implement them it’s important to ensure they’re permitted under the terms of the trust deed and enforceable in the future.

Getting succession planning advice

SMSF trust deeds can be complex documents, and it’s vital to ensure that yours is structured to ensure it is best placed to conform to your wishes in the event you’re incapacitated or die.

Consider giving us a call or consulting a licensed financial adviser or other relevant qualified professional who specialises in SMSF.

Source: Vanguard

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer and the Operator of Vanguard Personal Investor. We have not taken your objectives, financial situation or needs into account when preparing this article so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for any financial product we make available before making any investment decision. Before you make any financial decision regarding Vanguard products, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard’s financial products can be obtained at vanguard.com.au free of charge and include a description of who the financial product is appropriate for. You should refer to the TMD before making any investment decisions. You can access our IDPS Guide, PDSs, Prospectus and TMDs at vanguard.com.au or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This article was prepared in good faith and we accept no liability for any errors or omissions.

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Does personal services income apply to you?

Sun, 16 Jul 2023 23:34:00 GMT

If over half the income you’ve received from a contract is a reward for your personal efforts or skills (rather than from the use of assets, the sale of goods, or from a business structure), then your income could be classified as personal services income (PSI).

You can receive PSI in almost any industry, trade or profession. For example, as a financial professional, IT consultant, construction worker or medical practitioner.

PSI rules help keep a level playing field among individuals. They do this by preventing PSI from being diverted or split with other individuals or entities in an attempt to pay less tax.

If you earn PSI, it’s important to check whether these rules apply to you. If you’re a personal services business (PSB) for a particular income year, then the PSI rules won’t apply for that year, although you’ll still need to report your PSI in your income tax return and keep certain records.

You can self-assess as a PSB if you either:
• meet the results test for at least 75% of your PSI, or
• meet one of the other PSB tests and less than 80% of your PSI is from the same entity and its associates.

The other PSB tests are the Unrelated clients test, the Employment test, and the Business premises test.

If you can’t self-assess as a PSB, then the PSI rules will apply.

The PSI rules can affect the deductions you claim and how you report your PSI in your tax return.

Remember, registered tax agents and BAS agents can help you with your tax.

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Setting yourself up for success in the new financial year

Tue, 06 Jun 2023 23:36:00 GMT

The start of a new financial year is the perfect time to get your financial affairs in order. Whether it’s tidying up your paperwork, assessing your portfolio or dealing with outstanding issues, there are plenty of practical actions you can take.

Here are some strategies for starting the new financial year on the right foot.

Tidy up your paperwork

Dealing with the paperwork is the task most of us love to hate. But taking a day to trawl through the ‘To Do’ pile and the growing mountain of filing could be a good investment in yourself. What’s more, you might identify some savings.

Set your budget

A lot can happen in a year, so it makes sense to review your budget to ensure it still works towards your goals in the new year. This will help you track your changing expenses and ensure you’re not overspending. And if you haven’t got a working budget, now’s a great time to start. There are plenty of budgeting apps and tools available online that can help you get started.

Assess your portfolio

Another important step to take as you start the new financial year is to assess your investment portfolio.

Some important questions include:

Check your insurance

Now is a good time to examine your insurances closely and to consider whether they match your needs and risks. It is also a good reminder to take note of policy renewal dates so that you can shop around to make sure you get the best price.

Understand Federal Budget changes

Keeping up to date with the commentary about Federal Budget initiatives may be useful.

The measures aimed at easing the cost of living will provide a boost to some. They include energy bill relief for concession card holders and energy saving incentives. Meanwhile those with chronic health conditions will benefit from a number of changes announced in the budget.

The Budget also included support for families with cheaper childcare and a more flexible Paid Parental Leave scheme, and incentives for some types of new home building projects.

Review your superannuation

A review – at least annually – of your super account is vital to make sure that:

You might also consider a salary sacrifice strategy, where you ask your employer to make extra super contributions from your pre-tax salary. These additional contributions are taxed at 15 per cent within the super fund, plus an additional 15% if Division 293 tax applies to you (income over $250,000).

Meanwhile, it is not too late to top up your super balance for this financial year using either concessional contributions (from your pre-tax income) or non-concessional contributions (after-tax income). Don’t forget the caps on payments, which are $27,500 for concessional contributions and $110,000 for non-concessional.

It is a good idea to get some expert advice regarding your super contributions, we can assist with the best ways to manage your contributions.

So, set yourself up for a fresh start to the year with some simple strategies to help you achieve your financial goals.

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Get your SMSF shipshape for EOFY

Tue, 06 Jun 2023 23:34:00 GMT

If you have an SMSF, it’s essential to get your fund in good shape and ready for June 30 and the annual audit.

It’s particularly important this year, because the ATO is focussed on fixing a number of issues when it comes to SMSFs. These include high rates of non-lodgement and problematic related party loans by SMSF members operating small businesses.

Check your paperwork is up-to-date

Review all the administrative responsibilities of your SMSF to identify any incomplete ones. These include updating the fund’s minutes to record all decisions and actions taken during the year, lodging any required Transfer Balance Account Reports (TBARs), and documenting decisions about benefit payments and withdrawals.

Although it’s easy to forget, SMSFs are required to keep all contact details, banking details and electronic service address up-to-date with the ATO.

Make contributions and payments early

If you want a super contribution counted in the 2022–23 financial year, ensure the fund’s bank account receives payment by 30 June.

Minimum pension payments to members also need to be made by 30 June to meet the annual payment rules and ensure the income stream doesn’t cease for income tax purposes.

Ensure contribution administration is ready

If your SMSF receives tax-effective super contributions for salary sacrifice arrangements, ensure the fund has all the necessary paperwork before the arrangements commences.

Check you have appropriate evidence (and trust deed authority) to verify any downsizer contributions. From 1 January 2023, SMSF members aged 55 and over are eligible to make a downsizer contribution of up to $300,000 ($600,000 for a couple).

Lodge your annual return on time

Non-lodgement of the annual return is a major red flag for the ATO, particularly for new SMSFs.

Ensure your annual return is prepared and lodged on time to avoid coming under the tax man’s microscope for potential illegal early access or non-compliance.

Consider implications of new tax rules

The planned new tax on member balances over $3 million could create significant issues for some SMSF members, so trustees should review the potential implications ahead of EOFY.

Funds with large, lumpy assets such as business real property should consider the implications and liquidity issues of members implementing strategies designed to limit the impact of the new tax.

Value the fund’s assets

SMSF rules require all fund assets to be valued at market value at year-end, including investments in unlisted companies or trusts, cryptocurrency, and collectible assets. The ATO is monitoring this area, so trustees should organise appropriate valuations as soon as possible.

Ensure valuations can be substantiated if there are audit queries and the process is undertaken in line with valuation guidelines.

Reassess your investment strategy

Review the fund’s investment strategy to ensure it covers all relevant areas, including whether investment asset ranges remain relevant to your investment objectives. Deviations from strategic asset ranges must be documented, together with intended actions to address them.

Review your NALE

Non-arm’s length expenses (NALE) and income are key interest areas for the ATO, so check the fund complies with the rules.

Pay particular attention to all SMSF transactions involving related parties and ensure their arm’s length nature can be fully substantiated.

Get your auditor onboard

Trustees are required to appoint their auditor at least 45 days before lodgement due date, so ensure you have this organised.

Prepare for earlier TBAR reporting

From 1 July 2023, SMSFs will be required to report TBARs more frequently. All TBAR events will need to be submitted 28 days after the quarter in which the event occurred, so ensure you have systems in place to meet the new requirement.

All TBAR events occurring in 2022-23 will need to be reported by 28 October 2023.

Ensure trustees have a director ID

SMSF with a corporate structure must ensure all trustees have a director ID number. Although this was a requirement from 1 November 2022, many SMSF trustees are yet to apply.

Holding a director ID is an essential part of the SMSF registration process and directors must apply via the Australian Business Registry Services website.

If you would like to discuss EOFY tasks for your SMSF or your personal super contributions, call our office today.

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BMO shortlisted for the Australian Accounting Awards

Thu, 11 May 2023 06:40:00 GMT

The Australian Accounting Awards stands out as the foremost event highlighting the wide-ranging expertise and proficiency of accounting professionals and firms throughout the country, while also acknowledging their accomplishments and exceptional commitment to the industry.

Revealed on Thursday, 11 May 2023, the list of finalists has more than 285 exceptional achievers across 34 submission-based categories. BMO has been well represented by being named a finalist in three categories along with BMO Partner Michelle McVeigh also been named a finalist in the Mentor of the Year individual category. The locally owned firm with around 50 professionals will be going for top honors in Regional/Suburban Firm of the Year, Wellness Program/Initiative of the Year and Boutique Firm of the Year (20 employees or more).

Earning a finalist spot is widely regarded as an astounding accomplishment within the accounting sector. It highlights the unwavering determination and loyalty of every individual and firm involved in driving the industry forward.

Accountants Daily Editor Philip King said: “I’d like to thank everyone who put in the work to make an awards submission and acknowledge those who have been selected for the finals.

Getting that far is quite an achievement and I hope you can join us on awards night.

This year, 2023, is special for the Australian Accounting Awards as it marks our tenth anniversary.”

We’ll be pulling out all the stops to make sure it’s an event to remember.”

Michelle McVeigh, Partner at the BMO Business Centre said that she was humbled to be recognised both individually and as a firm and proud to be named as a finalist in the Australian Accounting Awards 2023.

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Federal Budget 2023-24: Focus on tax

Tue, 09 May 2023 22:39:00 GMT

Tax measures were less central to this year’s Federal Budget than they have been in recent years.

While there were some new tax measures, the Budget this year was more about the first surplus in 15 years and various spending measures.

After highlighting the gloomy outlook for the global economy, Treasurer Jim Chalmers emphasised Australia’s future as an “energy superpower”, with small business to be a key beneficiary.

Tax support continues for business

Over 2 million eligible small businesses will also enjoy welcome cashflow relief, with the government halving the increase in quarterly tax instalments for GST and income tax in 2023-24. Instalments will only increase by 6 per cent, instead of the expected 12 per cent.

While businesses may enjoy the extra cashflow, the government is also increasing efforts to reduce tax avoidance and minimisation. There will be greater scrutiny of GST returns as the ATO will receive extra resources over the next four years to promote GST compliance.

The ever-popular instant asset write-off received another year of life, with small businesses permitted to immediately deduct eligible assets costing up to $20,000 from 1 July 2023 to 30 June 2024.

Energy incentives for small business

The new Small Business Energy Incentive will provide businesses with annual turnovers under $50 million with a bonus 20 per cent deduction on expenditure supporting electrification and more efficient energy use.

Up to $100,000 of total expenditure will be eligible, with the maximum bonus tax deduction being $20,000 per business.

The assets or upgrades must be first used or installed ready for use between 1 July 2023 and 30 June 2024.

Super payments crackdown

The days of businesses having access to employee super payments for a quarter are over, with employers required to pay their employees’ super at the same time they pay their wages from 1 July 2026.

The ATO picked up an additional $27 million in 2023-24 to improve its data matching capabilities and $13.2 million for a new compliance system to identify in near-real time instances of under or unpaid super. There will also be new unpaid super recovery targets set for the ATO in 2023-24.

The Budget also confirmed legislation for the new tax on earnings from super balances exceeding $3 million will be introduced to Parliament. From 1 July 2025, these earnings will attract an increased concessional tax rate of 30 per cent.

New tax incentives for housing

Businesses in the residential housing sector are now eligible for some attractive incentives, with the Budget providing two new perks.

The capital works deduction (depreciation) rate will be increased from 2.5 per cent to 4 per cent a year for eligible new build-to-rent projects, while the withholding tax rate for eligible fund payments for build-to-rent developments will be reduced from 30 per cent to 15 per cent.

Support measures for smaller business

The Budget unveiled several support measures, including timely relief for businesses’ electricity bills. From July 2023, an estimated one million eligible small businesses will receive up to $650 in assistance.

Over $23 million will also be invested to help small businesses train in-house cyber wardens to deal with cyber security attacks.

A further $392 million Industry Growth Program will be available help support small to medium sized businesses and start-ups develop new products and services.

Other tax measures

The Budget also included changes to the Petroleum Resources Rent Tax (PRRT). These will collect an additional $2.4 billion over four years by limiting to 90 per cent the proportion of PPRT assessable income that can be offset by deductions.

Tobacco excise taxes will also increase, rising by 5 per cent each year for three years from 1 September 2023.

The government is also getting behind the OECD’s push for a minimum 15 per cent tax rate for multinationals.

Despite strong lobbying, the planned third tranche of tax cuts legislated to come into effect next year survived the Budget process and as expected, the low and middle income tax offset was not extended beyond 2021-22.

Information from this article has been sourced from: https://budget.gov.au/

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What to consider when choosing an investment option?

Wed, 19 Apr 2023 05:32:00 GMT

Choose investments that are right for you.

When it comes to choosing an investment option when you join a super fund, there are several key questions you should ask yourself:

All investments are designed to make a return and are subject to different levels of risk, depending on the asset class. This means that as well as making money, there’s also a chance that you could lose it. You might also think of risk as the possibility that your investments don’t achieve your financial objectives. As a general rule, the bigger the potential investment return, the higher the investment risk and the longer the suggested investment timeframe.

Consider your age when determining how long you expect your money to remain invested (that is, your investment timeframe). This will help determine the most appropriate investment mix and asset allocation for your circumstances. If you are young, you may be able to invest your money for longer and can therefore weather the short term fluctuations that can occur when investing in higher risk options such as shares. If you are older and need to access your money sooner, it may be more appropriate to protect your money by investing in lower risk options such as fixed interest.

With so many options available, knowing what to choose may feel overwhelming. While your fund can explain the different investment options available to you, speaking to a financial adviser can help you choose options that may suit your personal circumstances and financial objectives.

Source: CFS

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Illegal early SMSF access on ATO’s radar

Wed, 19 Apr 2023 05:31:00 GMT

Since the Albanese Government announced its intention to double the tax on investment earnings for super account balances over $3 million, there has been lots of talk about taking money out of self managed superannuation funds (SMSFs) to avoid the tax hikes.

As SMSF trustees have more control of their super assets compared to those invested in a large superannuation fund, accessing your money, and moving it out of the super system can sound like an attractive idea.

But as good as it might sound, gaining early access to your super savings is illegal and it is an activity the Australian Taxation Office is increasingly keen to stamp out.

Trustee disqualifications rise

According to ATO assistant commissioner Justin Micale, nearly 300 SMSF trustees have been disqualified for illegally accessing their retirement savings in the first half of 2022-23, more than in the entire 2021-22 financial year. The ATO crackdown has seen $2 million in administrative penalties issued and an additional $4 million in tax collected. ⁱ

Illegal early release is one of the major areas of focus for the ATO’s SMSF enforcement team. “We are seeing an increasing number of trustees taking advantage of their direct access to their superannuation bank account and they are using these savings to pay for items such as business debts, holidays, renovations and new cars,” Micale told an SMSF industry conference. ⁱⁱ

In an attempt to stamp out early access, the ATO is checking funds that fail to lodge annual returns, while SMSF auditors are being encouraged to report SMSF loans or breaches of the payment standards – even if the money is repaid to the fund.

Legally accessing your retirement savings

The ATO scrutiny is part of a broader campaign to remind SMSF trustees of their responsibility to ensure if they access their super early, they do it within the super laws.

Generally, you can only access your super when you reach your preservation age and retire, or turn 65 even if you are still working. For anyone born after 30 June 1964, the preservation age is age 60 .

To access your super legally, you must satisfy a condition of release. There are only very limited circumstances where you can legally access your super early and the eligibility requirements often relate to specific expenses or terminal illness.

It is illegal to access your super for any reason other than when it is allowed by the superannuation law.

Illegal early access schemes

Currently, a spate of illegal early access schemes are encouraging trustees to withdraw their super early to pay for personal expenses such as credit card debt, holidays, or buying property.

According to the ATO, promoters of these schemes usually charge high fees and commissions and request identity documents. This often leads to identity theft (which involves using your personal details to commit fraud or other crimes) and can take years to clear up. Your super savings could even be stolen.

The best way to protect yourself from illegal access schemes is to halt any involvement with a scheme or the person approaching you. Do not sign any documents or provide your personal details and contact the ATO immediately.

Protecting your SMSF

Keeping your fund details updated with the ATO is one of the best ways to help reduce the risk of fraud and illegal access to your SMSF.

Trustees should ensure their SMSF’s membership details are recorded correctly and the ATO is notified of any changes. This includes details such as the fund’s bank account, electronic service address, trustees, members and contact details.

Regular updates ensure that, when someone initiates a rollover request from an SMSF the ATO’s SMSF Verification System (SVS) can verify the fund and member details. If the receiving SMSF does not have a ‘registered’ or ‘complying’ status, it won’t be able to receive the rollover.

To further reduce the risk of fraud, the ATO sends trustees emails and text alerts when changes are supplied about key details relating to a fund.

If you need help understanding the super and tax rules governing your SMSF, call our office today.

i https://www.afr.com/policy/tax-and-super/ato-disqualifies-hundreds-over-self-managed-super-scams-20230113-p5ccd4
ii https://www.ato.gov.au/Media-centre/Speeches/Other/SMSF-compliance—What-s-on-the-Regulator-s-radar-/

The post Illegal early SMSF access on ATO’s radar appeared first on BMO Accountants .

Risk management key to building a strong business

Wed, 05 Apr 2023 05:00:00 GMT

Running a small business can be difficult enough without having an unforeseen event disrupt or cripple your operations.

Imagine a trusted employee is found to have embezzled hundreds of thousands of dollars over a number of years. Can the business withstand the financial hit? What is the effect on their colleagues? And how will you deal with the betrayal?

It is often said that many small business owners are too busy working in the business to find the time and resources to work on the business. But protecting your business from disasters is worth setting aside some time for.

Pinpointing the threats

Identifying risk and working out your options for dealing with them, not only helps form a risk management strategy that might see you through disaster, but can improve and strengthen your operations in the meantime by minimising some risks. It might also be appropriate to engage others in the task such as employees, contractors, clients, suppliers, investors, financial supporters, insurers, government agencies and your local community.

Many risks are common to all businesses, while others are specific to your industry and operations. Some examples to consider are:

Don’t forget to check your various insurances. Insurance is one of the most important ways to deal with many business risks so make sure that your cover is appropriate for your needs.

Put together a plan

With a list in hand of the risks your business faces, the next step is to assess each one to work out the likelihood of it happening and the possible consequences. Some risks are preventable, and others may be easy to eliminate by, for example, installing an alarm system or buying extra personal protective equipment (PPE).

It could be useful to chart them on a risk analysis matrix or a risk analysis template to highlight areas that may need your focus.

Finally, you will need to work out your response to each. Can the risk be avoided or reduced or are you prepared to accept it? The plan should include strategies to treat each risk, timeframes for each strategy, an outline of who is responsible for each part of the plan and the resources required.

With all of the hard work completed, regular monitoring and review of your risk management strategy is essential to ensure it is effective and relevant. This includes ensuring any changes needed are implemented and carrying out regular risk assessments to update your plan.

Investing in risk management can help small businesses thrive in a competitive marketplace, allowing them to focus on growth rather than worrying about potential risks. So, take the time to develop a risk management plan to make sure that your business is prepared for whatever the future may bring.

Contact us for help in identifying and mitigating your business risks.

The post Risk management key to building a strong business appeared first on BMO Accountants .

What are some ways to invest $10k

Tue, 04 Apr 2023 06:02:00 GMT

Save it. Invest it. Pay down debt. When it comes to deciding how to invest $10k, there are plenty of options to consider.

Whether you’ve won the lottery or received an inheritance, $10,000 is a significant amount of money. So, what should you do with it? Save it. Invest it. Pay down debt. Add value to existing asset. The answer will depend on your individual circumstances so it’s a good idea to get some advice first.

Getting started

With any financial decision, think about your goals and timeframe to make smarter choices when deciding where and how to invest.

If the idea of losing money, even a small amount, causes you sleepless nights, then you’re probably not the type of investor who will enjoy taking risks with their money. Or, if you’re likely to need access to money in the short term, it’s perhaps not sensible to put it into a fixed term account where you might be penalised for making a withdrawal.

Save your $10k

Savings accounts and term deposits

Good for short term savings or emergency funds, many financial institutions offer savings accounts and term deposits. They’re typically a lower risk option and may offer promotional and/or higher interest rates if deposits are made regularly and/or withdrawals are restricted. Every household should have some funds they can call on immediately if the unexpected happens.

Invest your $10k

Exchange Traded Funds (ETFs) or passive investing

Sometimes used to dip your toe into the world of investing, ETFs are a type of investment fund that typically hold assets like shares and bonds. They aim to track or outperform a specified index, such as the ASX 300.

ETFs are typically one of the lower cost investment strategies, offering exposure to a wide range of asset classes. But because performance is tied to the index it is tracking, your money will go up and down in the same way.

Managed funds (active or passive investing)

For those thinking about how to invest over a longer time horizon, managed funds can be an effective option, offering professional investment expertise and a good level of diversification.

You can usually choose to invest into one or more asset classes like shares, property and bonds, with the benefit of a professional investment manager making the important investment decisions about what underlying assets to buy and when. You generally pay an annual management fee for their expertise.

Shares

Australians seem to enjoy dabbling in the share market – it makes for good barbeque chatter. But those who do, know it’s not for the faint hearted and you should be prepared to experience periods of both ups and downs.

Shares (also called stocks or equities) allow you to buy a slice of a public company. A share has a listed share price that changes daily, so if you have $10,000 and a company’s share price is $1, you could buy 10,000 shares.

There are several reasons people invest in shares.

However, investing in shares comes with added risk as growing your money is linked to one company. This is why many people have a share portfolio where they invest into several different companies and maybe across different industries, even countries.

Pay down debt with your $10k

When the world is booming, it’s a great place to be. Good job. Nice house. Regular holidays.

But there will also be hard times and the recent COVID-19 pandemic has brought this home to many.

When thinking about how to invest $10k, it might be best not to invest at all. Instead, consider paying down some debt to give yourself some breathing space for times when household finances come under strain.

Think about prioritising your debt and address this first. Where are you paying the highest interest rate or fees – typically credit cards or personal loans?

While a home loan might be your largest debt, it’s also considered ‘good debt’ because you have a valuable asset sitting underneath it. If you have an offset account linked to your home loan, any money you have sitting in here will also be helping reduce the amount of interest you’re paying.

Spend your 10k

Spending money on existing assets can reap long term rewards. You’re investing for the future by improving their value.

Think about the difference spending $10,000 on home improvements could make – a new kitchen, updated bathroom, landscaped garden. Even some simple repairs could make a difference to the market value.

But as with all investment decisions, it’s a good idea to get some advice. After all, the aim is to add value and you don’t want to overcapitalise. Adding a swimming pool is a classic example of something that looks beautiful but may not significantly change the value of your home.

Source: BT

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How to get super ready for EOFY

Mon, 03 Apr 2023 06:12:00 GMT

Superannuation has dominated recent headlines, with proposed changes announced by Treasurer Jim Chalmers. While the details of these changes still need to be released, it’s worthwhile turning our focus to superannuation balances as we approach the end of financial year.

There are lots of different ways to top up your super, but if you want to take advantage of the opportunity to maximise your contributions, it is important not to wait until the last minute.

One of the simplest ways to boost your retirement savings is to contribute a bit extra into your super account from your before-tax income. When you make a voluntary personal contribution , you may even be able to claim it as a tax deduction.

If you have any unused concessional contribution amounts from previous financial years and your super balance is less than $500,000, you can also make a carry-forward contribution. This can be a great way to offset your income if you have higher-than-usual earnings this year.

Another easy way to boost your super is by making tax-effective super contributions through a salary sacrifice arrangement. Now is a good time to discuss this with your boss, because the Australian Taxation Office requires these arrangements to be documented prior to commencement.

Non-concessional super strategies

If you have some spare cash and have reached your concessional contributions limit, received an inheritance, or have additional personal savings you would like to put into super, voluntary non-concessional contributions can be a good solution.

Non-concessional super contributions are payments you put into your super from your savings or from income you have already paid tax on. They are not taxed when they are received by your super fund.

Although you can’t claim a tax deduction for non-concessional contributions because they aren’t taxed when entering your super account, they can be a great way to get money into the lower taxed super system.

Downsizer contributions are another option if you’re aged 55 and over and plan to sell your home. The rules allow you to contribute up to $300,000 ($600,000 for a couple) from your sale proceeds.

And don’t forget you can make a contribution into your low-income spouse’s super account – it could score you a tax offset of up to $540 .

Eligible low-income earners also benefit from the government’s super co-contribution rules. The government will pay 50 cents for every dollar you pay into your super up to a maximum of $500 .

Your tax bill can benefit

Making extra contributions before the end of the financial year can give your retirement savings a healthy boost, but it can also potentially reduce your tax bill.

Concessional contributions are taxed at only 15 per cent , which for most people is lower than their marginal tax rate. You benefit by paying less tax compared to receiving the money as normal income.

If you earn over $250,000 , however, you may be required to pay additional tax under the Division 293 tax rules.

Some voluntary personal contributions may also provide a handy tax deduction , while the investment returns you earn on your super are only taxed at 15 per cent .

Watch your annual contribution limit

Before rushing off to make a contribution, it’s important to check where you stand with your annual caps. These are the limits on how much you can add to your super account each year. If you exceed them, you will pay extra tax.

For concessional contributions, the current annual cap is $27,500 and this applies to everyone.

When it comes to non-concessional contributions, for most people under age 75 the annual limit is $110,000 . Your personal cap may be different, particularly if you already have a large amount in super, so it’s a good idea to talk to us before contributing.

There may even be an opportunity to bring-forward up to three years of your non-concessional caps so you can contribute up to $330,000 before 30 June.

If you would like to discuss EOFY super strategies or your eligibility to make contributions, don’t hesitate to give us a call.

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Productivity – the key to thriving when times are tough

Mon, 03 Apr 2023 05:57:00 GMT

Productive businesses are like cacti – able to survive and grow in tough conditions using minimal resources. So, let’s look at how your business can emulate those prickly plants and thrive in what is shaping up to be a challenging environment for businesses.

With high inflation, rising rates and even talk of a possible recession on the cards for Australia, it can be a tricky time to be running a small business.

It can be beneficial during tough times, or even in anticipation of challenging times on the horizon, to focus on increasing productivity – doing more with less resources. Some species of cacti can do without water for up to two years – they are masters at doing a lot with a little, but as a business it can be hard to ensure you are running a lean machine without losing output, sacrificing quality or profits.

Here are a few ways you can improve your business’s productivity and run a lean, but productive, machine:

Maintain and keep the focus on growth

Just like the cactus that manages to keep growing with minimal resources, your business should also focus on growth. It’s important that the processes you are putting in place to enhance productivity and remove unnecessary costs do not constrain growth.

Make sure you set goals for achievable growth milestones and review them regularly against progress.

Empower and motivate employees to improve their output

One of the best ways to improve productivity is to involve the team. Share your goals and aims and get everyone in on the journey with you. Equally, working together to set achievable goals and targets for individuals will improve buy-in as well as productivity, as people tend to work more efficiently when they’re involved in the decision-making process and focused on achieving clear objectives within agreed timeframes.

Innovate to make the most of existing resources

Innovating does not mean you have to reinvent the wheel – there are a lot of existing systems and applications out there that can help you to be more productive as a business. Seek out technology solutions that remove mundane, repetitive tasks and support collaboration and automation. Review your processes and try to streamline how things are done and promote efficiencies.

Orient to the provision of customer value

Productive businesses tend to be focused on business processes that deliver customer value. Orienting and pivoting to the provision of customer value will help you uncover inefficiencies like outdated procedures and unnecessary steps.

The process works best when employees at every level are encouraged to suggest changes to improve the way things are done. If an employee can identify a shortcut that makes their work faster without sacrificing results, support them to implement it.

Outsource certain tasks

Using third party providers can enhance productivity as you can pay for services as you need them and avoid making major investments in infrastructure, software, or personnel.

Another advantage of outsourcing is you’re able to increase the efficiency of your business by getting expert help without having to hire experts full-time.

Implement lean financial practices

Running a lean business means reducing or removing unnecessary costs so it’s a clever idea to review your cash flow to see whether you can reduce your costs anywhere in the business. Review your suppliers and ensure you are getting the best deals from utilities providers.

Part of your lean implementation can also be to cut down on liabilities by not keeping excessive amounts of stock . You can do this by implementing good inventory management practices and forecasting to match supply and demand.

While for many businesses it’s important to project an image of success with big fancy offices, lavish workspaces can incur excessive costs that that eat into profits. With working from home becoming more common, it might be worth reviewing your office space requirements while looking for ways to reduce ongoing costs.

Operating your business in the most productive manner and with minimal outlay and overhead costs isn’t about penny-pinching – it’s a mindset shift that will enable your business to be sustainable in the long term, not just responding to adverse economic conditions.

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Think you’ll never fall for a scam? Think again!

Mon, 03 Apr 2023 05:55:00 GMT

It’s no secret that scammers are getting more sophisticated. As this is an ever-evolving space, scammers are constantly developing new ways to part you with your hard-earned cash – and they cast their net wide.

While it’s easy to think “it will never happen to me”, people who never expected to be victims of scams are actually among the most vulnerable to being taken advantage of. While the stereotype is that older people are the most likely to be scammed, Gen Xers, Millennials, and Gen Zs are actually more likely than seniors to report losing money to fraud. ⁱ

The reality is scammers don’t discriminate and people of any age or demographic who believe they are too smart to be tricked may be less careful and more likely to suffer a loss. ⁱⁱ And the losses are considerable. Australians were expected to lose around $4 billion to scams in 2022. ⁱⁱⁱ

Here are some scams to be aware of that are doing the rounds:

Texts or calls from a trusted brand

One of the most common scams at the moment is where a criminal pretends to be a trusted brand or government agency getting in touch to collect personal information or demand a payment. You may be contacted by email, social media, phone call, or text message and they will often direct you to an official looking website.

It’s easy to be taken in via text message as it can appear to be from a legitimate sender as the scammer uses ‘alpha tag’ technology to register a mobile number with a word or acronym – the ATO (Australian Tax Office) for example.

Beware of clicking on links and if you get a text message or call that doesn’t seem right, you can find the official contact details on the company’s website and call them to verify the scam.

Buying and selling

Scammers prey on consumers and businesses that are buying or selling products and services.

As a buyer you may pay the money and never receive the goods you have paid for. To protect yourself be on the alert for scams – if the advertised price looks too good to be true, it probably is. For rental properties or holiday accommodation, only use reputable online booking agents.

As a seller, you may be tricked into believing the buyer has paid in full or even paid over your advertised amount, including sending falsified payment receipts to support their claim. The buyer may then request a refund for overpayment. To protect yourself, don’t accept a mobile payment from someone you don’t know and never accept or refund a deposit for more than the selling price.

False billing scams request you or your business to pay invoices for services or supplies you did not order so always double check and query demands for payment if in doubt.

Tugging on the heart strings

Dating and romance scammers often make their approaches on social media or dating sites and will go to great lengths to gain trust. Protect yourself by never giving money or goods of value to someone you have never met in real life.

Scammers also appeal to our emotions by impersonating genuine charities to ask for donations after natural disasters or major events. To avoid being scammed approach charity organisations directly and check an organisation’s credentials on the Australian Charities and Not-for-Profits Commission (ACNC) website to see if they are a genuine charity. ^iv

Attempts to gain personal information

These include when a scammer gains access to your personal information by using technology.

Consider using multifactor authentication, a security measure that requires one or more proofs of identity to grant you access to any applications you use regularly and change passwords regularly, making sure to choose secure passwords.

Taking a little extra care to be aware and alert to the possibility of being scammed could save you a lot of heartache. Of course, we are here to help if you think something may be a little suspect.

i https://consumer.ftc.gov/consumer-alerts/2022/11/fraud-reports-and-losses-not-just-grandparents-story
ii https://www.finrafoundation.org/sites/finrafoundation/files/exposed-to-scams-what-separates-victims-from-non-victims_0_0.pdf
iii https://www.news.com.au/finance/money/costs/australia-to-cop-4-billion-scam-loss-in-2022-according-to-scamwatch/news-story/890e469b4b05a6c950e3cb6b4f83f56c
iv https://www.acnc.gov.au/charity/charities

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Star ratings for Aged Care help make family choices easier

Wed, 08 Mar 2023 06:30:00 GMT

Moving into aged care can be a challenging time, both for those making the move and families supporting their loved ones. It’s understandable that everyone wants to find the most suitable accommodation and the appropriate standard of care, however, it can be confusing to make that choice.

A new star rating system for aged care is giving existing and potential residents and their families helpful insight into the quality and staffing levels of an aged care facility.

Four key performance areas covering residents’ experience, staffing levels, compliance and quality measures are each given an individual star rating. These ratings are then combined to provide an overall rating which is made public on the My Aged Care website .

For many people this will be the most consistent measure of whether aged care accommodation meets independent requirements for a good, average or poor facility.

A one-star rating indicates significant improvement needed; two stars indicates improvement needed; three stars indicates an acceptable quality of care; four stars indicates a good quality of care and a five star rating indicates an excellent quality of care.

There has been one round of ratings revealed since the system was launched in December 2022, with about one-third of the 2,700 aged care facilities in Australia receiving four or five stars, two thirds receiving three stars and one-in-10 receiving one or two stars.

How care is measured

Staffing levels in aged care are always of interest. With no staff ratios in aged care, the focus is on ‘care minutes’ provided by registered nurses, enrolled nurses and personal care workers.

A new funding model – in place from 1 October 2022- requires aged care facilities to meet a minimum average care minute target of 200 minutes a day, including 40 minutes registered nurse time. This target will become mandatory from 1 October 2023, and increase to 215 minutes, including 44 registered nurse minutes, from 1 October 2024.

Quality measures

The five crucial areas of care that go into determining the quality star rating include pressure injuries, physical restraint, unplanned weight loss, falls and major injury, and medication management.

The data is collected quarterly, with zero-star ratings given to providers who fail to report on each area.

The compliance rating, which is the responsibility of the existing Aged Care Quality and Safety Commission, provides information on the extent to which a residential aged care service is meeting its responsibilities.

A service that receives a one star compliance rating (which would occur if it was sanctioned or found to be punishing anyone who complained to the Commission) will receive an overall one star rating, regardless of how they perform in other sub-categories. Services that receive a two star compliance rating (if they were issued a compliance notice under the current system) cannot receive an overall star rating higher than two stars, regardless of how they perform in other sub-categories.

Resident experiences

A resident’s experience of a facility carries the highest weighting towards the overall star rating.

To understand the lived experience of residents, 12 questions are asked, for example – ‘do staff treat you with respect’, do you feel safe here’, ‘do you get the care you need’, and ‘are the staff kind and caring’. Responses can vary from never to always.

At least 10 per cent of older Australians living in residential aged care will be interviewed face-to-face about their overall experience at their residential aged care home by a third-party vendor each year.

Anyone currently living in or considering a facility with a low rating should feel empowered to ask what management is going to do about improving things.

Be informed

The star ratings are a recommendation of the Aged Care Royal Commission to better inform people living in or considering moving into residential aged care and to provide greater transparency in an effort to lift the overall standards.

They will become an increasingly important tool in the planning and decision-making process.

Give us a call to help you or a loved one plan for current and future needs.

The post Star ratings for Aged Care help make family choices easier appeared first on BMO Accountants .

Time to refinance? Considerations for mortgage holders and businesses

Mon, 06 Mar 2023 21:48:00 GMT

With the cost of living continuing to rise, it can feel increasingly hard to make ends meet in terms of your personal finances, and it can also be challenging either as a salaried employee or running a business in an inflationary environment. One way of combatting inflation is to reduce the escalating cost of borrowing by reviewing your current arrangements.

A new record has been set for refinancing, with more than $19.5 billion of loans changing lenders in late 2022. ⁱ If you’re feeling like it’s time you reviewed your borrowing arrangements – either from a personal or business perspective, here are a few things to consider.

Tips for mortgage holders

With rates on the rise, it makes sense to shop around for the best deal. That could mean replacing your existing home loan with another loan from either your current lender or a different financial institution.

If you are refinancing with your current lender, the process can be simpler as your lender already has all your information and it can be easier to renegotiate than switch to a different provider. You may also incur lower or fewer fees by sticking with your current lender, but this will vary according to providers and loans. External refinancing is generally a little more complex but gives you the opportunity to compare providers.

Things to consider when comparing providers and loans include:

Interest rates

Seeking out a lower interest rate is usually the first thing on people’s minds when they review loans and providers. But it’s important to weigh up other factors as well.

Timing

Fixed rate and introductory period loans can be lower to start with but generally revert to a standard variable rate after a predetermined period so it can make sense to review your situation before the fixed rate ends.

Loan term and payment frequency

Adjusting your loan term and home loan repayments could potentially save you money over the life of the loan.

Access to more loan features

Features such as an offset facility or splitting your loan may be appealing. Some lenders also offer cashback deals, although it is important to weigh up what the loan offers rather than be swayed by the promise of a cash give away.

Tips for small businesses

For businesses it also might be time to review your borrowing arrangements.

If you have a loan and your financial situation and credit score have improved over the course of your loan repayments, you might also be in a position to take advantage of a lower rate and more favourable terms than your current loan.

Some things to consider as a business include:

Consolidating existing debts

If you have multiple debts incurring high interest repayments it can also be beneficial to combine them into one loan at a lower rate.

Changing the loan amount or the term of the loan

It’s common for businesses to refinance to take advantage of the equity built up in their business and that may mean increasing their borrowings. If expenses are increasing or you are seeking greater cashflow you can refinance your loan amount to be repaid over a longer term and decrease your monthly repayments.

Removing a secured asset

If your home or another personal asset is being used as collateral for your loan and your business is now in a position to borrow without it, you may wish to consider switching.

There are also other ways of accessing finance as a business, including having an overdraft or invoice finance where money is loaned against unpaid invoices, that you may wish to explore.

It’s important to evaluate each method of borrowing or accessing finance and review your situation on a regular basis to ensure your arrangements suit your needs and that you are not paying too much in the way of fees and interest. If you are considering changing providers to seek a better deal, make sure you weigh up all the pros and cons of making the switch and the various deals on offer.

i https://www.theadviser.com.au/broker/43888-all-time-high-november-housing-refinancing-hits-19-5b-abs

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How to tap into a world of exporting possibilities

Mon, 06 Mar 2023 02:00:00 GMT

Selling your goods or services overseas can seem like a big leap – but it could be good for business.

Exporting can provide your business with benefits such as improved productivity, increases in sales and profits, new customers and potential growth opportunities.

In fact, exporting is associated with a higher likelihood of a business surviving. A study has found that exporters are larger, more productive, more skill- and capital-intensive and more innovative. The study also found that exporters tend to be robust during an economic shock. For example, Australian exporters were more resilient to the shocks of the pandemic than non-exporters. ⁱ

That is because exporters were able to spread their business across different markets, taking advantage of markets that were growing while others were floundering.

We often think of exporters as massive mining companies or manufacturers. But small businesses make up 62 per cent of the more than 56,000 Australian businesses that sell to international markets. ⁱⁱ

Online selling provides a platform

The growth in online sales is helping many small businesses to become exporters.

Despite online sales growth slowing a little in 2022, there has been an eyewatering expansion in online sales over the past 5 years. In 2016, global online sales were worth US$1.9 trillion or 8.7 per cent of retail sales. ⁱⁱⁱ By the end of 2023, online sales are expected to reach US$6.51 trillion or 22.3 per cent of total retail sales. ^iv

While traditional exporting usually means selling to another business overseas such as a distributor, wholesaler or a retail store, online exporting provides more options including selling directly to consumers as well as experimenting with different business models and export methods. You might need to engage some extra help in logistics, social media, foreign language customer service and e-commerce website design.

You could join one of the major platforms such as Amazon, Etsy or eBay. For a fee, these types of platforms can give you a ready marketplace and may suit smaller businesses that are inexperienced in online selling.

What are the risks?

It pays to keep your eyes wide open when it comes to exporting. Success rests on being prepared and knowing the risks.

You will need to understand your potential customers by researching your target markets and looking into local regulations. One of the biggest risks is movements in the Australian dollar. When our dollar is low against other currencies, it is good news for you and your customers. You will still earn the same profit, but your product or service will be relatively cheaper for your customers. That might lead to an increase in demand and help you to win a bigger market share from competitors in other countries.

On the other hand, when the Australian dollar is strong and performing well against other currencies, goods and services are relatively more expensive for those in other countries.

Know the rules and regulations of the countries you are exporting to andwhat documentation is needed for your goods to clear customs, as this will vary between countries.

Another risk – a big spike in demand – might appear to be in the ‘good problem to have’ category but may cause business failure. Consider how your business could handle a large increase in overseas orders while still meeting demand for your Australian market.

Meeting the costs

Make sure you have enough working capital to fund a push into export markets. The costs involved can include hiring consultants to provide advice on aspects of e-commerce, website building, customs and export rules and specific markets, and you may need extra capital to increase production.

Export Finance Australia (EFA) provides small to medium businesses with loans to help with the finance needed to secure export contracts or purchase orders. EFA also provides approved export businesses a guarantee to help access finance from their bank.

All state and territory governments also offer support for exporters based in their jurisdictions.

If you would like to discuss how to prepare your business for exporting, give us a call.

i https://www.austrade.gov.au/news/publications/australian-state-of-exporters-report-2022
ii https://www.exportfinance.gov.au/resources/article/taking-on-export-opportunities-five-top-tips-for-australian-smes/
iii https://www.austrade.gov.au/ecommerce-guide/guide/introduction-to-online-exporting
iv https://www.shopify.com/au/enterprise/global-ecommerce-statistics .

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Transitioning into retirement: What you should know

Mon, 13 Feb 2023 04:44:00 GMT

Deciding on your retirement funding options in retirement comes down to what makes the most sense for you.

If you’re close to retirement, chances are you’ve already spent time thinking about how to tap into your superannuation when you retire.

Broadly speaking, you have a few options when you retire, as long as you’ve reached the minimum ‘preservation age’ when you’re allowed to access your super.

That’s a little bit complicated, because there’s currently a staggered range of preservation ages depending on when you were born. If you were born after 1 July 1964, your super access age is 60.

You can check out your personal preservation age on the Australian Tax Office website .

Deciding on your retirement funding options comes down to what makes the most sense for you.

Leaving your super alone

There’s actually no legislation that says you must start drawing out your super savings when you retire.

In fact, if you don’t need your super to fund your living expenses, you can simply leave it where it is.

You can keep investing your super, and even add money into your account if you pick up some work income, and make concessional contributions up to $27,500 per year (which are taxed at 15 per cent), or personal non-concessional contributions up to $110,000 per year using after-tax money.

You can contribute to your super at any time generally up until the age of 74 (excluding a home downsizer contribution), and by not starting a pension you’re not forced by the government to start withdrawing regular payments.

The government also allows people aged 60 and over to add up to $300,000 into their super account if they sell their principal place of residence, subject to a range of conditions. Legislation to lower the eligibility age to age 55 was passed in the Senate on 28 November.

Keep in mind that if you do leave your money in a super accumulation account, all investment earnings will continue to be taxed at the 15 per cent rate.

But that rate is still likely to be lower than what you would pay if you decided to withdraw your super and invest it into another asset, such as an investment property, where the rental income would be taxed at your full marginal tax rate.

Leaving all your money in super after you’ve retired means you can’t withdraw money as a regular pension income stream. To do that you generally need to roll at least some of it over into an account-based pension.

However most super funds will let you withdraw lumps sums whenever you like if you’ve met all release conditions and have the money transferred into your bank account. A minimum amount of $6,000 generally must be left in your account.

You should also be mindful that if you leave money in your super account or account-based pension and die that there may be tax consequences for non-dependant beneficiaries (see below).

Starting a pension stream

On the other hand, if you want to use all of your super to have a regular income stream once you retire, you’ll need to roll it over into a pension account.

You’ll need to contact your super fund manager to do this or, in the case of a self-managed super fund, ensure the trust deed allows for the payment of a pension income stream.

Your basic options are to either roll your super over into a pension product offered by your current super fund or to transfer it over to another pension product provider.

Most account-based pension products enable monthly, quarterly, half-yearly or annual payments, which will continue until your account balance runs out.

Be aware that once you start up a pension you’re required to withdraw a set percentage of your account balance every financial year, which increases as you age.

The minimum pension account withdrawal amounts have been temporarily reduced by 50 per cent for the 2022-23 income year. You can see them on the ATO’s website .

There are a range of advantages from setting up a pension income stream versus keeping your super money in accumulation mode.

Most importantly, if you’re aged over 60 and retired, your pension payments are tax-free and so are any investment earnings generated inside your pension account.

You can use your own pension income stream to supplement the government Age Pension if you’re eligible to receive it. And you’re also able to withdraw lump sums from your pension account at any time.

Upon your death, non-dependants who receive money left in a pension account will need to pay tax on the taxable component. The amount of tax payable may be reduced by tax offsets.

Doing both

If you’re wanting total financial flexibility in retirement, you could consider leaving part of your money in super, rolling over some of it into an account-based pension, and also withdrawing lump sums whenever you need to.

There are a range of benefits from adopting a combination of your options, although there may also be potential tax consequences for both you and your beneficiaries.

Managing the combination of a super accumulation account, an account-based pension, an Age Pension entitlement (if eligible), potential investment earnings outside of super, and irregular lump sum payments, can be highly complex.

Using the services of a licensed financial adviser is a worthwhile consideration as you weigh up all of your retirement options.

Call us today if you’d like more information about transitioning into retirement.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
The information in this article does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Subject to law, Capstone Financial Planning nor their directors, employees or authorised representatives gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of the information contained in this document. Principal Wealth Management Pty Ltd trading as BMO Financial Solutions ABN 53 109 336 601 is a Corporate Authorised Representative (CAR 277821) of Capstone Financial Planning Pty Ltd ABN 24 093 733 969 Australian Financial Services Licence (AFSL) No. 223135.

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Making the most of your super limits

Mon, 13 Feb 2023 04:43:00 GMT

Getting more money into superannuation is a proven way of building wealth to spend in retirement.

Ongoing contributions from your employer over the course of your working life, and potentially extra contributions made by you, can make a huge difference to your super balance over the long term as your account balance continues to grow.

Best of all, super contributions are only taxed at 15 per cent up to prescribed annual limits. And, when you finally reach retirement age, your super can be converted into a tax-free pension income stream. You can also pull out your super money tax-free after retirement via one or more lump sum payments.

But how much extra money can you put in each year, and what’s the best way of doing it?

Know your super limits

The starting point to making extra super contributions is to know exactly how much you’re allowed to put in.

At the start of July 2022, the minimum guaranteed amount of super that all employers must pay their workers aged 18 and above into a registered super fund account was lifted from 10 per cent of their ordinary wage to 10.5 per cent.

Employers must also pay super at the same rate to any employees aged under 18 who work more than 30 hours a week.

At the same time, the total amount of money that can be put into super each year at the “concessional” 15 per cent tax rate – including employer contributions – was increased from $25,000 to $27,500 last year.

And the amount that can be directed into super using after-tax money was increased from $100,000 per year to $110,000. These are known as non-concessional super contributions.

Ways to boost your super contributions

Salary sacrificing: The simplest way to get more money into your super is to let your employer know, and to arrange for them to make the extra contributions to your super fund on your behalf directly from your pay during each payment cycle.

Instead of paying your normal rate of tax on these extra contributions you’ll only pay the 15 per cent concessional contributions rate (which is automatically deducted).

You can generally specify with your employer that you want a set percentage rate (of your salary) or a fixed dollar amount to be “sacrificed” into your super fund on top of the mandatory 10.5 per cent in super they have to pay.

Thanks to compounding investment returns, even small extra amounts paid every pay cycle from your before-tax earnings will go a long way towards increasing your retirement nest egg over time.

One-off payments: In addition to salary sacrificing, it’s also possible to add money into your super fund using other money you’ve accumulated over time.

You’ve probably already paid tax on this money at your normal tax rate, so the Tax Office allows you to deposit it into your fund at any time during the financial year and then claim a deduction for the tax you’ve paid above the 15 per cent super tax rate.

You first need to check with your super fund if it allows after-tax contributions and then lodge a ‘Notice of intent to claim or vary a deduction for personal contributions’ form when you lodge your next tax return. After-tax contributions can be used in conjunction with pre-tax contributions, including those made by your employer.

Catch-up contributions: You may also have scope to make extra concessionally taxed (15 per cent) super contributions under “catch-up legislation” introduced from the start of the 2019-20 financial year.

This allows you to carry over any unused annual concessionally taxed contributions (that is, if the total payments into your super fund including your employer’s payments are less than the $27,500 maximum annual limit) on a rolling basis for up to five financial years.

In other words, if $20,000 in concessional contributions were made into your account in 2020-21, you may be able to take advantage of your unused gap from last financial year and roll it over into your 2022-23 contributions.

You can make catch-up contributions at any time, and then claim a tax deduction in your next tax return.

You’re able to check what’s available to you in catch-up contributions by logging into the myGov website, navigating to the Australian Taxation Office, selecting Super and “Carry forward concessional contributions” under Information. We do recommend checking this information with your accountant. To take advantage of this option your overall super balance must be below $500,000.

Non-concessional contributions: Non-concessional contributions are after-tax personal contributions you make into your super fund, which can’t be claimed as a tax deduction.

They’re completely separate from your annual concessional contributions and are subject to their own annual limits.

Typically, non-concessional contributions are made using the proceeds from larger asset sales such as from a home or investment property.

The non-concessional contributions limit is currently $110,000 each financial year. However, under what’s known as the “three-year bring forward rule”, you can make a $330,000 non-concessional contribution in one financial year.

You’re then unable to make further non-concessional contributions for the next three financial years.

If you have more than $330,000 to contribute in total, you could make use of the annual $110,000 limit before 30 June next year. Then, from 1 July, you could use the three-year bring forward rule to contribute up to another $330,000.

The main advantage of making non-concessional contributions is to have more of your money inside the super system that can generate tax-free earnings in retirement.

Downsizer contributions: The “downsizer measure” enables individuals aged 60 years and above to add up to $300,000, and couples up to $600,000, into their super from the proceeds of their principal place of residence.

A downsizer contribution forms part of the tax-free component in your super fund. It can be made in addition to non-concessional super contributions and doesn’t count towards your personal super contribution limit.

There are a range of conditions around downsizer contributions, and it’s prudent to check these with your accountant.

Exceeding the limits

It’s important to be aware of all the super contributions boundaries.

Excess concessional contributions are included in assessable income and taxed at your marginal tax rate.

The Tax Office applies a 15 per cent tax offset to account for contributions tax already paid by your super fund.

You then have the option of withdrawing up to 85 per cent of any excess concessional contributions from your super fund to help pay your income tax liability.

If you don’t you could be taxed heavily and any excess concessional contributions not released from your fund are counted towards your non-concessional contributions cap.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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6 retirement mistakes and how to avoid them

Mon, 13 Feb 2023 04:35:00 GMT

Retirement is a phase of life most of us look forward to. It’s a chance to pursue other interests, travel and maybe do some part-time work or volunteering.

Thanks to more than 30 years of compulsory superannuation, we are retiring with more savings than previous generations but that also brings its challenges.

According to the government’s Retirement Income Review, the average age of retirement in Australia is around the ages of 62 to 65. ⁱ On average men and women can expect to live to 85 and 88 respectively.

To make the most of your retirement your savings need to last. The best way to achieve that is to have a plan that will help you avoid some common and preventable retirement mistakes.

Mistakes people make

While it’s impossible to predict what financial challenges lie ahead, these six common retirement mistakes remain the same:

1. Not knowing your living costs

When you earn a regular income, you may be less focussed on keeping a track of your living costs. When the regular income stops at retirement, you can be unaware of whether your investment income and/or pension payments will support your lifestyle costs. Know what your living costs are before you retire to help manage expectations.

2. Not looking at your super until just before retiring

Investing too conservatively when you’re working could mean you don’t have enough super to fund your retirement. Review your super account regularly to ensure it is appropriate for each stage of your life.

3. Underestimating the impact of inflation

Australia’s rate of inflation hovered below 3 per cent per year between June 2012 and early 2020. Since the onset of the global pandemic in March 2020, inflation has jumped to more than 7 per cent. ⁱⁱ The cost of living may require you to reassess your retirement planning.

4. Not understanding your government entitlements

If you’re age 66 or older, you may be eligible for a full- or part-Age Pension. However, if you are not eligible for the Age Pension, you may still be eligible for other entitlements including the Seniors Card, Pensioner Concession Card, income tax offsets or pensioner stamp duty exemption/concession.

5. Trying to time the financial markets

“We haven’t the faintest idea what the stock market is gonna do when it opens on Monday — we never have,” said legendary share investor Warren Buffett. Say you invested $10,000 in the ASX 200 index by trying to time the market and missed the 40 best days between October 2003 to October 2022, your investment would be worth $9,064, whereas if you remained fully invested it would be worth $46,099. ⁱⁱⁱ Trying to time the markets is never a good idea.

6. Being asset rich and cash poor

You may have built up a strong balance sheet of assets, but in retirement you need income. For many Australians, their family home could be their biggest asset. You may have other assets but are they generating enough income? This could include rent from an investment property, share dividends or managed fund distributions. If the income is insufficient, downsizing into a smaller home could free up enough money to live on.

Start Planning

Whether it’s due to lack of time or awareness, too many people tend to make these same mistakes when entering retirement which can lead to unwanted financial surprises. Financial advisers, accountants and other financial professionals can help set you on the right path by navigating the complexities of superannuation, investments, constant rule changes and other factors that affect your retirement. A good retirement plan, implemented correctly, can set you up for life.

A phase of life you have looked forward to for so long deserves careful planning. So please get in touch if you would like to review your retirement income needs.

i Retirement Income Review Final Report, July 2020 page 63 Retirement Income Review Final Report ( treasury.gov.au )

ii https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release

iii From 31 Oct 2003 to 04 Oct 2022, Fidelity Australia Timing the market | Fidelity Australia

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Stepped vs level premiums: which is best?

Thu, 09 Feb 2023 06:05:00 GMT

These days, most people hold some form of life insurance in their super account. While this is a welcome safety net, the level of cover held this way is often inadequate.

A Rice Warner study back in 2020 found that life cover within superannuation only met about 65-70 per cent of actual need. ⁱ

With the impact of Covid since that time, that figure is growing. ⁱⁱ

Holding the appropriate level of life insurance, whether inside or outside super, and reviewing it regularly as your circumstances change has never been more important. After all, how would your family cope if the unexpected happened? How would the mortgage be paid? What about the school fees?

While life insurance should be considered a non-negotiable part of your financial plan, there is flexibility and potential cost savings in the way you pay for it.

Stepped vs level premiums

The regular and ongoing payments you make for life insurance cover are known as premiums.

You can choose either a stepped premium, or a level premium, or a combination of the two.

A stepped premium is where the amount you pay each year increases while a level premium generally stays the same each year.

While stepped premiums are always cheaper at the outset, over time the total cost of the stepped premium will outstrip that of the level premium. Ironically, the time when you consider cancelling the policy because it is becoming too expensive is likely to be just when you need life insurance cover the most. That is, when the demands on your income from your mortgage, childcare and private school fees are at their highest and the loss of your income would hurt the most.

The earlier, the better

The younger you are when you take out a life insurance policy, the lower the premiums. This is the case whether you opt for stepped or level payments.

Say you are a male non-smoker seeking $1 million of life insurance cover. When comparing stepped and level premiums, it is estimated that if you are aged 30 when you start the policy, a level premium is about 60 per cent more expensive than a stepped policy at the outset. This jumps to 120 per cent more if you are aged 40 when starting the policy and 170 per cent higher if you are 50. ⁱⁱⁱ

But at some stage there will be a breakeven point where you start to make substantial savings with a level premium. This is particularly the case if you hold on to the policy till aged 65.

It’s a personal decision

There are many reasons why you might choose a level premium, not least because it allows you to have certainty when it comes to budgeting.

But for many, the lure of cheaper premiums at the beginning can steer you to favour stepped premiums. Also, if you do not plan on holding life insurance for an extended period, but perhaps just until your children become independent or the mortgage is paid, then stepped premiums might work out best.

Some insurers can offer you a combination of stepped and level premiums which might help with your cash flow.

If you would like to know more, or would like to discuss your life insurance needs, give us a call.

i https://www.insurancenews.com.au/life-insurance/super-reforms-reveal-scale-of-underinsurance

ii https://www.choosi.com.au/life-insurance/articles/do-australians-have-enough-insurance

iii https://www.insurancewatch.com.au/stepped-vs-level-premiums.html

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Guide to business grants

Fri, 03 Feb 2023 01:36:00 GMT

It’s been a tough few years for many businesses, with the pandemic and natural disasters, especially small business owners.

Finding funds and expertise for business development can be challenging for smaller organisations. Even larger firms can find it difficult to put together the cash and know-how to keep a business expanding.

That’s where a grant of funds or professional support can help.

What can I get a grant for?

You will find grants supporting all aspects of business operations offered by state, territory and federal government agencies and departments that cover many different business needs.

Some grants are available for several years while others are just a short-term funding opportunity so be sure to check the closing dates.

Some examples include:

Digital solutions

An effective online presence can make or break a small business but knowing where to start might be holding you back.

There’s a Federal Government program that helps small businesses access digital tools to create websites and sell online, use social media and business software and ensure online security and data privacy.

The Australian Small Business Advisory Services program provides seven hours of support with a digital solutions advisor to businesses with fewer than 20 full-time employees.

Recovering from natural disasters

Businesses affected by the floods or Black Summer bushfires can apply for support from the AusIndustry Entrepreneurs’ Program .

Under the program, a facilitator identifies ways to improve your business systems, operations and strategies.

Each state affected by a recent disaster also provides grants and loans to small businesses such as the Queensland governments low interest Disaster Assistance Loans of up to $250,000.

New ideas

If you have a business idea but you just need a little help to get it across the line, the AusIndustry Entrepreneurs’ Program is an option.

The Program’s Accelerating Commercialisation service provides advice and funding to get novel products, processes or services to market.

Selling overseas

Exporters or those interested in starting to sell overseas can find useful information, advice and financial support from government agencies.

Export Australia provides small to medium businesses with loans to secure specific export contracts when traditional lenders can’t help. Export Finance Australia will give approved export businesses a guarantee to help access finance from their bank or there’s a Small Business Export Loan that covers up to 80 per cent of the costs to secure an export contract.

State and territory governments also offer exporters support such as the Going Global Export Program in New South Wales for businesses in the health and medtech, technology, and food and beverage sectors or the Export Fundamentals Program for South Australian businesses looking to expand or to start exporting.

Regional and rural support

Various levels of government offer funds and professional support to small businesses operating in country areas. For example, there is a three-year payroll tax exemption to interstate businesses relocating to regional Tasmania.

In NSW, the state government will match funding for projects in regional areas that are time-sensitive and strategically significant. While in Victoria, a government program provides incentives to regional hospitality and tourism businesses to take on trainees and to develop and retain jobs in other sectors.

Employment

Wage subsidies are available when you employ certain eligible individuals such as long-term unemployed, apprentices and trainees or people with a disability.

Where to find information

To find information about government grants, visit the business.gov.au website. It outlines the business grants and programs offered by agencies from every level of government across Australia.

Each state and territory government has a database of their grants and programs. And, check your local council’s website for opportunities.

How to apply

Firstly, read the requirements to make sure you are eligible, you will then be steered through a series of questions.

Remember to provide as much relevant information as possible to help your chances.

If you would like to discuss how to make the most of a business grant in your business, give us a call.

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Using equity to buy an investment property

Fri, 03 Feb 2023 01:35:00 GMT

When it comes to investing in real estate, equity is a key concept to wrap your head around. The Successful Investor’s Michael Sloan explains what equity is, and how you can use it to your advantage.

What is equity?

Equity is the difference between the current value of your home and how much you owe on it.

For example, if your home is worth $400,000 and you still owe $220,000, your equity is $180,000.

The great thing is, you can use equity as security with the banks. This means you can borrow against your equity to fund life’s big purchases, such as:

You can use also use equity to buy an investment property and get into the real estate game.

Total equity and useable equity

Banks will typically lend you 80% of the value of your home – less the debt you still owe against it. This is considered your useable equity.

Since the bank is lending you money against the value of your home, they won’t lend you the full amount. Put simply, if house prices dip, they don’t want an outstanding loan that’s worth more than your property.

Keep in mind that it’s possible to borrow more than 80% if you take out Lenders’ Mortgage Insurance (LMI).

How much could you borrow for an investment property?

Using the example above, let’s say your home is valued at $400,000 and your mortgage is $220,000. Here’s the breakdown of sums:

This means your useable equity would be $100,000.

Using the ”rule of four”

When it comes to actually buying an investment property, it can be hard to know where to start.

But a simple rule of thumb is to multiply your useable equity by four to arrive at the answer.

For example, four multiplied by $100,000 means your maximum purchase price for an investment property is $400,000.

Why four and not five?

If you’re buying an investment property worth $400,000, the bank will lend against your future property just as they would against your existing home.

The banks will lend 80% (or $320,000) in this scenario, but the property costs $400,000. This leaves an $80,000 gap, which is your house deposit.

However, you also have to budget for purchase costs such as stamp duty, legal fees and more. This is approximately 5% of the purchase price – around $20,000 on a $400,000 property.

Therefore, the total amount of funds needed to purchase a $400,000 investment property is now $100,000 – an $80,000 deposit plus $20,000 costs.

Final tips

Even if you have plenty of equity, it’s not always a given that you can borrow against it. The bank will consider several factors including:

Remember to play it safe. If you don’t have any funds outside your home equity, then it’s risky to use every cent of your usable equity to invest in property.

You always need a buffer – back up funds in case things don’t go to plan. Even if it means you can’t invest for a while, it’s important to keep yourself protected.

Ultimately, using equity to buy an investment property can be a smart move. But before you get serious, it’s best to talk to your banker or broker.

Before you decide which strategy is best for you, call us today.

Source: NAB

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/home-property/invest-property/equity-to-invest

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

© 2022 National Australia Bank Limited (“NAB”). All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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The new flexible workplace

Fri, 03 Feb 2023 01:34:00 GMT

After experiencing the highs and lows of working from home during the pandemic, more employees are seeking flexibility in their working lives and employers are looking for new ways to adapt.

While most businesses are operating again since the Covid-19 shutdowns, it has been far from business-as-usual. Apart from problems with transport disruptions and rising prices, severe staff shortages have been a constant concern.

An Australian Bureau of Statistics survey in mid-2022 found almost a third of businesses were finding it tough to recruit staff. ⁱ Most in demand were building trade workers, clerical workers, labourers, sales staff and hospitality workers. Engineering trades and information communications and technology professionals were also hard to find. Meanwhile the dire shortage of teachers, nurses and aged care workers threatens the smooth viability of the health, education and care sectors.

Flexibility is key

With no quick fix in sight and predictions that population growth and increasing demand will make it even more difficult to find staff, business owners need to find ways to adapt to keep their operations afloat with such a shortage of workers.

Pay rises and more flexible working conditions are becoming more common, a trend that translated into the highest annual rate of wages growth in a decade during the September quarter 2022. ⁱⁱ

But salaries are not the only issue.

More than money

In addition to better pay, a survey carried out last year found almost a quarter of Australian workers are also planning to change jobs for three other reasons: to progress their careers, or in the search for greater work-life balance.

These days more people are seeking more balance via flexible working conditions including different starting and finishing times that help parents of school-age children and shorter working weeks that allow staff to pursue other interests or meet family needs.

Working from home during the Covid-19 shutdowns gave many workers and employers an insight into a different and more flexible way of getting the job done.

Before the pandemic, only around 8 per cent of employees worked from home, according to a Productivity Commission research paper . During the shutdowns, a majority of mostly office-based workers were working from home.

Work from home here to stay

Today, many firms are testing their working from home policies to see what works best for them. A recent study by HR research and advisory group, Gartner predicts that nearly half of all employees will work remotely in the future.

What’s more, most employees want to work from home, at least some of the time, according to the Productivity Commission’s research. About three-quarters of workers surveyed believed they were just as productive working from home as from the office.

The biggest plus for employees was avoiding the dreaded commute. On the other hand, workers were concerned about the consequences for their careers in the longer term. It’s about finding the right balance that suits both employer and employee.

Businesses can successfully implement flexible working by providing the right tools for employees to work from home a few days a week, be clear on expectations when working remotely and continue to build team culture even when working remotely.

Weighing up productivity and costs

Some firms surveyed by the Productivity Commission anticipated an increase in co-ordination costs to manage a remote workforce. They also worried that working from home may reduce knowledge sharing and creativity and that workers may slack off.

Yet some business owners also see a silver lining, believing workers may be more productive at home because they have better control over their time. Firms also saw benefits in being able to tap into a bigger pool of labour and in saving office rent.

Flexible working conditions are also important to frontline or customer-facing workers who can’t work from home.

Gartner says its research has found frontline workers want control over their work schedule and paid leave. Frontline workers also want a say in what they work on, who they work with and the amount they work, says Gartner.

Finding new ways to attract staff and then keep them will be on the minds of many employers in 2023. In an uncertain world, one thing is certain – new ways of working will be established as we settle into a post-pandemic world. If you would like to discuss your business plan, give us a call.

i https://www.abs.gov.au/media-centre/media-releases/almost-third-employing-businesses-unable-find-suitable-staff

ii https://www.abs.gov.au/articles/12-things-know-about-australian-economy-right-now

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2022 Year in Review

Wed, 18 Jan 2023 23:38:00 GMT

Inflation dominated the economic landscape

The year began optimistically, as we finally began to emerge from Covid restrictions. Russia threw a curve ball that reverberated around the world and suddenly people who hadn’t given a thought to the Reserve Bank were eagerly waiting for its monthly interest rate announcements.

2022 was the year of rising interest rates, surging inflation, war in Ukraine and recession fears. These factors created cost-of-living pressures for households and a downturn in share and bond markets.

Super funds suffered their first calendar year loss since 2011. Ratings group Chant West estimates the median growth fund fell about 4 per cent last year. ⁱ

The big picture

Even though investors have come to expect unpredictable markets, nobody could have predicted what unfolded in 2022.

Russia’s invasion of Ukraine in February led to a global economy and investment markets shake up. It disrupted energy and food supplies, pushing up prices and inflation.

Inflation sits around 7 per cent in Australia and the US, with the Euro area around 11 per cent. ⁱⁱ

As a result, central banks began aggressively lifting interest rates.

Rising inflation and interest rates

The Reserve Bank of Australia (RBA) lifted the cash rate from 0.1 per cent in May to 3.1 per cent in December, ⁱⁱⁱ quickly flowing through to mortgage interest rates.

Australia remains in a better position than most, with unemployment below 3.5 per cent and wages growth of 3.1 per cent running well behind inflation. ^iv

Australia’s economic growth increased to 5.9% in the September quarter ^v before contracting to an estimated 3 per cent by year’s end. ^vi

Volatile share markets

Investors endured a nail-biting year.

Global shares plunged in October only to snap back late in the year on hopes that interest rates may be near their peak. The US market finished 19 per cent lower, due to exposure to high-tech stocks and the Federal Reserve’s aggressive interest rate hikes. Chinese shares were down 15 per cent as strict Covid lockdowns shut down much of its economy.

Australian shares performed well by comparison, down just 7 per cent.

Energy and utilities stocks were strong due to the impact of the war in Ukraine on oil and gas prices. The worst performers were information technology, real estate and consumer discretionary stocks due to cost-of-living pressures.

Property slowdown

After peaking in May, national home values fell sharply as the Reserve Bank began increasing interest rates. The CoreLogic home value index fell 5.3% in 2022, the first calendar year decline since the global financial crisis of 2008.

Sydney (-12 per cent), and Melbourne (-8 per cent) led the downturn. Bucking the trend, prices edged higher in Adelaide (up 10 per cent), Perth (3.6 per cent), Darwin (4.3 per cent).

Rental returns outpaced home prices, as interest rates, demographic shifts and low vacancy rates pushed rents up 10.2 per cent in 2022. Gross yields recovered to pre-Covid levels, rising to 3.78 per cent in December due to strong rental growth and falling housing values.

Despite the downturn, CoreLogic reports housing values generally remain above pre-COVID levels. At year end, capital cities combined were still 11.7 per cent above March 2020 levels, while regional markets were 32.2 per cent higher.

Looking ahead

While the outlook for 2023 remains challenging, there are signs that central banks are nearing the end of their rate hikes.

Issues for investors to watch out for in the year ahead are:

If you would like to discuss your investment strategy in the light of prevailing economic conditions, please get in touch.

Note: all share market figures are live prices as at 31 December 2022 sourced from: https://tradingeconomics.com/stocks .
All property figures are sourced from: https://www.corelogic.com.au/news-research/news/2022/corelogic-home-value-index-australian-housing-values-down-5.3-over-2022

i https://www.chantwest.com.au/resources/another-strong-month-for-super-funds-as-recovery-continues/

ii https://tradingeconomics.com/country-list/inflation-rate

iii https://www.rba.gov.au/statistics/cash-rate/

iv https://www.rba.gov.au/snapshots/economy-indicators-snapshot/

v https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release

vi https://www.rba.gov.au/publications/smp/2022/nov/economic-outlook.html

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Get set for eInvoicing

Tue, 17 Jan 2023 01:11:00 GMT

The rollout of electronic invoicing (or eInvoicing) is gaining momentum in Australia – and globally – as a new and more efficient way to deal with the paperwork involved in sending and receiving business invoices and procurement documents.

For small business owners, the arrival of eInvoicing might sound like yet another task to add to your ever- expanding to-do list. But rather than being another bureaucratic box to tick, it has the potential to save you and your business both time and money.

What is eInvoicing?

eInvoicing is a process to streamline invoicing. It’s different to sending an email or PDF through your current software, as it involves directly exchanging a standardised format eInvoice via software used by both the buyer and supplier.

Australia has adopted the international Peppol eProcurement framework as its common standard for automated digital exchange of invoice and procurement information.

The Commonwealth appointed the ATO as Australia’s Peppol authority and it is responsible for developing and administering the local framework and authorising approved service providers. Although it sets local standards, the ATO can’t view the contents of any eInvoices being transmitted between businesses.

Currently it’s not compulsory for businesses to use eInvoicing, but the trend is well underway in the public sector. The Commonwealth made it mandatory for all its agencies to adopt the framework by 1 July 2022 , with several state governments also committing to its introduction.

Benefits of eInvoicing

Once a business implements eInvoicing, it no longer needs to print, post or email paper-based or PDF invoices. Purchasers no longer need to manually enter or scan invoices into their software.

Businesses connect via a secure network and can immediately transact with their registered trading partners through approved access points to exchange invoices and other procurement documents. Once the sender creates an invoice, the information is sent directly and securely to the receiver’s software for approval and payment.

According to the ATO, eInvoicing is “a more efficient, accurate and secure way to transact with your suppliers and buyers than current systems using PDF and email”. Experts estimate its introduction could save the Australian economy $28 billion over 10 years. ⁱ

The benefits for small business include a reduction in the cost and time involved in invoicing and better control of your invoicing process without the need for repetitive manual entry and chasing lost or inaccurately addressed invoices.

Other advantages include greater visibility of the delivery status of your invoices and reduced risk of fake or compromised invoices. As Peppol is an international framework, it also enables and simplifies exchange of procurement documents and invoice information across borders.

How to get ready to switch

Making the switch to eInvoicing can be fast and easy for a small business, as your current accounting software (such as MYOB or Xero) could already be eInvoice enabled.

If you don’t use accounting software, some software providers offer free and low cost options. Alternatively, you can connect your software to an add-on eInvoicing product or purchase accounting software offering eInvoicing tools.

Enterprises without business management software may be able to use an eInvoicing web portal, as some providers offer services to small businesses that send or receive few invoices.

If you would like more information or help to get started, give us a call.

Planning for a seamless transition

An important step in moving to eInvoicing is to identify and understand your current invoicing and purchase order processes, including the number of invoices sent and received, how often this occurs and your top suppliers and buyers.

You can then talk to eInvoicing service providers and your current software providers to review your options.

It’s sensible to also discuss the transition with your trading partners. You can check the Peppol Directory for registered users and the business documents they can receive. ⁱⁱ

If you do move to eInvoicing, you may need to alter some of your internal processes to accommodate its standardised approach. The ATO offers an eInvoicing Value Assessment Questionnaire you can work through to determine whether it would be of value for your business. ⁱⁱⁱ

i https://www.ato.gov.au/business/eInvoicing/eInvoicing-for-government/

ii https://directory.peppol.eu/public/locale-en_US/menuitem-search

iii https://www.ato.gov.au/uploadedFiles/Content/SBIT/e-invoicing/In_detail/eInvoicing%20value%20assessment%20questionnaire.pdf

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Time to take stock of your business

Fri, 30 Dec 2022 01:58:00 GMT

It’s a new year and the summer holidays are in full swing, but after three years of constant change many business owners are relishing the chance of some much-needed downtime. To relax, but also to think.

A new calendar year can give you the perfect opportunity to decide what improvements you can make to your business. So why not take advantage of time away from the daily grind to work ON your business rather than just IN it.

With a number of economic challenges on the horizon, it seems more important than ever to plan for your business’ future.

So where do you start? The first thing is work out where your business is right now. If you don’t know your current situation, you can’t plan adequately for the future.

SWOT analysis

A good tool to use is a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal issues within a company while opportunities and threats tend to be external influences.

A company’s strengths and weaknesses are generally found in the areas of personnel, finance, manufacturing and marketing.

Opportunities and threats tend to be a product of changes in the economy, technology, legislation or society that impact on your business.

In your internal analysis, look at your company’s current financial situation. With interest rates on the rise, look at what is good debt versus bad debt and minimise the latter. Good debt is where you have borrowed for new equipment or other ways to increase productivity; bad debt is where you borrow just to keep your business afloat.

With the current higher interest rates, consider new ways to service your loans. Shop around and see what other financial institutions are offering. If you can get a better rate elsewhere, see if your current bank can match it before you make the move.

Also on the internal front, look at your company’s pricing, particularly as inflation continues to rise. Are your higher costs being reflected in your prices?

Staff shortages

If you are suffering from staff shortages, consider ways that you can make working in your business more attractive to potential employees and to retain your existing workforce.

With many people still working from home, you may want to consider whether your premises are too big for your current needs and whether hot desking where desks are used by different people at different times may be an option.

Another consideration should be a comprehensive look at those areas of your business that are performing well and those that are lagging. Perhaps focus on those that deliver actual profits and downsize the poorer performers.

Small businesses often run into trouble because larger clients are slow to pay. The Australian Supplier Payment Code which was introduced back in 2017 is a voluntary initiative to ensure small businesses are paid within 30 days of sending a correct invoice. Ideally, make sure your customers are party to this code to ensure prompt payments.

You could also take advantage of this quiet time to look at your current marketing and how you can make 2023 a more profitable year. Digital marketing came into its own during Covid. How much have you adapted your business to this strategy? And what about your levels of data security. Is your database protected?

Plan for the future

Once you have looked at the business and areas that may cause concern, the next stage is to plan ahead.

Again, there is an acronym that can be applied to this stage: SMART, which stands for Specific, Measurable, Achievable, Relevant and Timely.

Your plans should be Specific, with identifiable goals rather than generic ones. These goals need to be Measured, so create a target figure. Your goals should also be Achievable, or you could set yourself up for failure. Your plan should be Relevant to your company and fit in with the business model. And lastly, it should be Timely so set a realistic timetable in which to achieve it.

Once you have set out a plan with the goals clearly identified, the next stage is implementation. How will you go about the task? Who will be involved in the goals?

Finally, you need to monitor your progress. With the rapid pace of change in today’s business environment, the goal posts may move.

If you would like to discuss your business plan further to make sure you have covered all aspects, give us a call.

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Sustainable investing on the rise

Wed, 28 Dec 2022 02:00:00 GMT

Sustainable investing isn’t new and is becoming more mainstream. From climate change to gender diversity, more people are aligning their money with their values.

In 2021, Australia’s sustainable investment market increased 20 per cent to a record $1.5 trillion. The Responsible Investment Association Australasia (RIAA) 2022 benchmark report found sustainable investments represents 43 per cent of total professionally-managed funds.

In addition to traditional shares and fixed interest sustainable investments offer a wide range of assets, including property, alternatives such as forestry, infrastructure, private equity and cash.

Most big super funds offer a sustainable investment option and some offer this as their default option. You can also buy sustainable managed funds, including a growing list of exchange-traded funds (ETFs).

What are sustainable investments?

Focus on people and planet

Sustainable investing is also known as ethical, responsible and ESG (environmental, social, governance) investing, with the focus on people, society and/or the environment.

Sustainable investments are selected using a variety of screening methods, including:

The term ESG investing is used when a fund or company commits to sustainable investing in these three areas:

The report found gender diversity and women’s empowerment are also gaining popularity.

Sustainable investing is not all warm and fuzzy. Performance still matters.

Performance gains

Initially, sustainable investing often came at the expense of returns but that is no longer necessarily the case.

The report compared the performance of what it terms responsible investment funds and mainstream investments funds (on average and net of fees) over the past 10 years to December 2021.

Responsible multi-sector growth funds consistently outperformed mainstream funds and their benchmark over 1, 3, 5 and 10 years. Responsible Australian share funds generally outperformed or were on par with mainstream funds. Only responsible international share funds disappointed, underperforming mainstream funds across all timeframes.

Watch out for greenwashing

Increased demand for sustainable investments has led to a rapid increase in the number of products available. The rush to cash in on the trend has sometimes led to what is known as ‘’ greenwashing ”. The Australian Securities and Investments Commission (ASIC) describes greenwashing as the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

ASIC warns investors to review the product terms. For example, a fund might describe itself as ‘’no gambling” but may invest in companies that earn less than 30 per cent of revenue from gambling. Look for a clear explanation of how the product will achieve its aims and don’t rely on vague language like “considers”, “integrates” or “takes into account”.

Australian companies lifting their game

It’s not just super funds and managed funds taking sustainable investing more seriously, Australian listed companies are also adapting to changing investor preferences and regulatory environment. A recent analysis of ESG reporting by Australia’s top 200 listed companies, PwC found a 13 per cent increase in companies declaring a commitment to net zero emissions. However, only 55 per cent of those disclosed a transition plan or activities that will enable them to reach net zero.

There was also a 10 per cent increase in companies disclosing climate risks and opportunities, and a 30 per cent increase in companies disclosing a gender diversity policy.

For investors seeking sustainability along with financial returns from their investments, momentum and choice is growing. So please get in touch if you would like to discuss your investment options.

i https://responsibleinvestment.org/wp-content/uploads/2022/09/Responsible-Investment-Benchmark-Report-Australia-2022-1.pdf

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Buying shares for kids: a gift that keeps on giving

Thu, 08 Dec 2022 23:53:00 GMT

Many parents and grandparents worry about how to help the children in their lives achieve financial independence. But the value of long-term investment can seem like a dry and complicated idea for kids to get their heads around.

In fact, many young people would like to know more about money, according to a Young People and Money survey by the Australian Securities and Investments Commission MoneySmart website. The survey found more than half of the 15-21-year-olds surveyed were interested in learning how to invest, different types of investments and possible risks and returns. What’s more, almost all those young people with at least one investment were interested enough to regularly check performance.

One way to introduce investment to children may be to begin a share portfolio on their behalf. The child can follow the progress of the companies they are investing in, understand how the market can fluctuate over the short- and long-term, as well as learn to deal with some of the paperwork required, such as filing tax returns.

How to begin

Setting up a share portfolio doesn’t need to be onerous. It’s possible to start with a minimum investment of around $500, using one of the online share trading platforms. Then you could consider topping it up every year or so with a further investment.

Deciding on which shares to buy comes down to the amount you have available to invest and perhaps your child’s interests.

If the initial investment is relatively small, an exchange traded fund (ETF) may be a useful way of accessing the hundreds of companies, bonds, commodity or theme the fund invests in, providing a more diversified portfolio.

ETFs are available in Australian and international shares; different sectors of the share market, such as mining; precious metals and commodities, such as gold; foreign and crypto currencies; and fixed interest investments, such as bonds. You can also invest in themes such as sustainability or market sectors such as video games that may appeal to young people.

Alternatively, buying shares in one company that your child strongly identifies with – like a popular pizza delivery firm, a surf brand or a toy manufacturer – may help keep them interested and excited about market movements.

Should you buy in your name or theirs

Since children cannot own shares in their own right, you may consider buying in your name with a plan to transfer the portfolio to the child when they turn 18. But be aware that you will pay capital gains tax (CGT) on any profits made and the investments will be assessable in your annual income tax return.

On the other hand, you could buy the shares in trust for the child. While you are considered the legal owner the child is the beneficial owner. That way, when the child turns 18, you can transfer the shares to their name without paying CGT. Your online trading platform will have easy steps to follow to set up an account in trust for a minor.

There is also some annual tax paperwork to consider.

You can apply for a tax file number (TFN) for the child and quote that when buying the shares. If you don’t quote a TFN, pay as you go tax will be withheld at 47 per cent from the unfranked amount of the dividend income. Be aware that if the shares earn more than $416 in a year, you will need to lodge a tax return for the child.

Taking it slowly

If you are not quite ready to invest cash but are keen to help your children to understand share investment, you could consider playing it safe by playing a sharemarket game , run by the ASX.

Participants invest $50,000 in virtual cash in the S&P/ASX200, a range of ETFs and a selection of companies. You can take part as an individual or a group and there is a chance to win prizes.

Another option, for children able to work independently, is the federal government money managed website. This is pitched at teens and provides a thorough grounding in savings and investment principles.

Call us if you would like to discuss how best to establish a share portfolio for your child, grandchild or a special young person in your life.

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11 tips for reducing costs in small business

Thu, 08 Dec 2022 23:51:00 GMT

Small businesses across the country will be looking for ways to reduce costs amid cost of living and rising price pressures.

Economic challenges are expected to continue into the 2024 financial year, from inflation and supply chain lags to higher interest rates and reduced consumer spending.

Businesses will need to keep a close eye on their income and expenses to maintain positive cashflow, Small Business Loans Australia founder, Alon Rajic says.

“As Australian businesses continue to face the repercussions of the last two years, a significant proportion will have challenges, particularly without a savings buffer or strategy to help meet their expenses,” said Rajic.

Small Business Loans Australia research set out to find out if fast-rising interest rates and inflation would impact small business’ ability and motivation to invest in themselves. Specifically, more than a quarter (29 percent) of respondents had not planned to invest in their business at all this financial year.

Three quarters of respondents (76 percent) admit their cashflow will be impacted by interest rate rises and inflation over the next year, it also found.

Specifically, 30 percent believe their cashflow will be impacted because it will be harder to collect customer payments, while 26 percent say it will be harder to attract sales. A further 20 percent say both issues will impact cashflow.

But before you take any extreme actions like reducing staff hours or letting workers go, here are 11 straightforward tips to begin minimising business costs today.

1. Take a systematic approach

The best starting place is to consider your key cost centres, such as purchasing, sales, finance, and administration, for example.

Go over your profit and loss statement for the past 12 months and rank your expenses from highest to lowest and comb through each one in search of cost saving potential.

Make sure you go back and look over your budgets and forecasts and see how you’re tracking.

Also, benchmark your business against industry standards. For example, your waste levels could be higher than the industry average, or others in your industry could be introducing sustainable business measures, which could be bringing them savings.

2. Uncover hidden costs

Costs aren’t always easy to spot in business, but they can add up quickly.

Hidden costs could be the rising cost of insurance policies, unused subscriptions, permits and industry memberships you pay each month even though you never enjoy any of the perks they offer.

Sit down and go through your bank account and track the expenses to see where you can make savings or do without.

Also, be sure to double check supplier invoices for any overcharging, double billing or discounts that haven’t been applied.

3. Sell off unwanted equipment

If you’re no longer using tools and equipment, don’t let them sit in the garage or stockroom gathering dust. Conduct an audit and convert what you can back into cash wherever appropriate.

Selling used or unwanted items brings in some extra cash, you’ll be able to put that money back into keeping the business running.

4. Negotiate with suppliers

Taking half a day out to shop around for lower prices could end up making you more money than you realise.

Call your bank and see if they will offer you a better deal on your business loans, and shop around energy providers to see how you might reduce your utilities overheads.

Start with your biggest expenses and work your way down the list.

5. Separate personal and business expenses

Put simply: don’t make personal purchases from the business credit card.
Separating out your expenses will mean you can account for them easily and it’s a great way to make sure you don’t miss out on tax deductions.

It can also make sure you aren’t mistakenly claiming for personal expenses, which will be frowned upon by the Australian Taxation Office.

6. Reduce spending

After all, a penny saved is a penny earned.

And that means it’s much easier to hold onto the cash you already have.

Set a budget, and follow it, and analyse where your money is being spent and where you can cut costs.

Even simple things like packing your lunch and purchasing a coffee
machine for the office can add up over time — that five dollars a day for takeaway coffee will wind up being around $1,300 over the course of a whole year.

7. Conduct a tech audit

Technology costs can add up, but if you’ve implemented tech a year ago that you’re no longer using, it can be a huge waste.

Go through your licenses and subscriptions that you don’t need or use to see what you can be culled.

It may be that you’re also hemorrhaging money due to inefficiencies in your systems — for example, if you’re wasting time and resources on manual data transfers between multiple software solutions.

A business management platform should include a broad variety of built-in features, allowing you and your staff to accomplish all your core business processes, such as accounting, payroll, inventory management and more.

8. Improve staff productivity

Employees not pulling their weight in the business can reduce efficiency and become a costly liability.

Assessing and improving staff performance can be a great way to reduce costs before resorting to reducing staff hours.

Set ambitious but achievable goals your staff can get behind and consider what business management tools you might need to help track productivity and performance.

9. Realign marketing budgets with performance

The sole purpose of marketing is to drive interest in your business’ products and services.

When times are tough, taking a close look at your marketing performance should be a regular occurrence to determine whether you’re getting value for money.

For instance, doubling down on your customer service may drive word of mouth outcomes that effectively boost the effectiveness of other marketing activities, or a targeted letter could deliver a new favourite customer.

Whether your analysis results in less spend or more, auditing your marketing budgets will help you gain a better understanding of where and when sales are coming in, and where your money is spent.

10. Reduce your space

Do you really need that shopfront or office space anymore?

We all learnt the virtues of running a virtual business over the past few years, so if you’re still leasing an office space, now could be the time to consider whether there are more cost-effective alternatives.

11. Seek out an expert

If you’re finding it challenging to cut costs, consider hiring an expert to suggest other cost reduction strategies.

The right advisor can help you audit your existing systems and processes, business and sales strategies, and make suggestions on how to sustain and grow your operations.

Don’t leave the hard decisions until too late. If you’re facing challenges as a result of the current high-cost environment, now’s the time to get active.

Source: MYOB November 2022

Reproduced with the permission of MYOB. This article by Nina Hendy was originally published at myob.com

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post 11 tips for reducing costs in small business appeared first on BMO Accountants .

9 ways to teach kids the value of money at Christmas

Mon, 05 Dec 2022 23:51:00 GMT

What’s the meaning of Christmas in your household? While it can sometimes feel like spending a small fortune on gifts and food is non-negotiable, it’s not the only option. And, if you have kids, the holidays are a great time to teach them about the value of money – while having a heap of fun along the way!

Lavishly decorated homes, piles of presents under the tree and children waiting excitedly for Santa are much-loved Christmas traditions in Australia.

But if the idea of consuming your own bodyweight in food doesn’t hold the same excitement for you this year, it could be time to re-evaluate what really matters.

After all, if there ever was a year to embrace the ‘true meaning’ of Christmas, surely it’s this one?

What’s the real meaning of Christmas anyway?

From the celebration of Yule and the winter solstice in Scandinavia, to the Roman festival of Saturnalia, and the later Christian tradition, this is one holiday with a rich history.

Many of our traditions are rooted in values like giving to the less fortunate or needy, and giving thanks for what we have.

Are we losing sight of the value of the holidays?

But since the mid-1800s , the focus has shifted sharply onto Santa and the exchange of gifts. So much so that it’s become a major economic driver for our economies.

Teaching the value of money at Christmas

There’s no two ways about it, Christmas celebrations can get expensive.

For kids, the meaning of Christmas can get lost in the excitement of receiving piles of presents or gorging on Christmas goodies. But there are lots of ways to save your cash and shift the focus back onto healthier values. Here are nine ideas to get you started.

1. Include the whole family in your plans

We often leave our kids out of the budgeting, thinking ‘they don’t need to know’ about the finances, or doing the Christmas shopping without them. But there’s real value in allowing them to observe and participate in your discussions about the Christmas finances.

Not only do they learn how to apply budgeting skills in a real-world situation, they’ll experience the finite nature of money first-hand; and learn to allocate it accordingly.

So make a time to sit down as a family and talk through your Christmas spending. Set a spending limit for each gift recipient to help you stay on track. Remember that spending less on your immediate family means you’ll be able to give more generously to others – another valuable Christmas lesson for kids.

2. Put the kids in charge

Giving kids control over their finances from a young age can help set them up for better money management down the track.

At Christmas, you can involve your kids by having them write a list of everyone you need to give gifts to, along with the agreed budget. Then brainstorm together to come up with gift ideas and take them shopping. They’ll learn how to compare prices, stick to a budget and even save money if you find a good price!

3. Get saving

If you start early enough, you can teach your kids the value of saving up for major expenses like Christmas. If they have regular pocket money, get them to put some aside each week or month to spend on special gifts.

Talk about what they’ll do with any money they receive as presents. How much will they spend and save? If they don’t have a savings account, now is a good time to set one up.

4. Start with giving

Giving your time or money without expecting anything in return is the perfect way to embrace the spirit of the holidays. And for kids, this is a chance to switch the focus onto giving, rather than receiving. Here are some options.

Instead of buying gifts for family and friends, you could give the gift of learning to a child in need through The Smith Family’s charity gift range. Or volunteer your time to help sort, pack and deliver toys and gifts to kids in need! What could be more Christmassy than playing Santa?

If donating cash is more your thing, The Salvation Army runs an annual Christmas appeal to help families in need.

Or if you’re keen to volunteer your time, you could help wrap Christmas gifts in the lead up to the big day, or serve Christmas lunch at a local homeless shelter. Seek Volunteer has lots of opportunities listed, or contact your local charities.

The major retailers also run food drives and in-store Christmas promotions where you can purchase Christmas presents for people in need.

5. Prioritise family activities

There’s no shortage of great events and activities you can do with your family and friends to really bring Christmas to life. Look out for local Christmas carols or concerts, or take a trip to see the best Christmas lights in town. Have a games night, or movie marathon on Christmas eve, and focus on spending quality time together. Your kids will thank you!

6. Make your own gifts

What could embody the spirit of giving more than creating your own beautiful handmade gifts? This is the perfect activity to do with kids (or without!).

If you’re feeling keen, try substituting regular gift giving with handmade gifts in your family. It’s bound to end in lots of laughter and your kids will be so proud when you open their beautiful presents.

Baked goods, photo albums, scrapbooks, drawings, paintings, jewelry, soaps… even face masks are on the list this year. Not only will you save money, giving will feel more meaningful when you’ve put time into it.

7. Make your own decorations

Making your own decorations helps everyone get into the spirit and celebrate the meaning of the holidays. Again, this activity can be adapted for any age. From paper wreaths to a hand printed Christmas tree , bon bons or a gorgeous front door wreath , there are endless options for all ages and abilities.

8. Explore other traditions

Just like Australia, many other countries have developed their own unique Christmas traditions. You can add an element of fun to your preparations by learning about traditions from a different culture. Have your kids choose some to adopt as part of your family celebrations.

9. Assign everyone tasks

Much like budgeting, the whole family will benefit from being involved in preparations for the big day. If your kids are old enough, ask them to help with the menu and even cook a special dish or dessert for the big day.

They can also help set or clear the table, wrap gifts and place your handmade decorations around the house. It’s all about participation and learning to enjoy the festivities, as much as the presents.

Whatever Christmas means for your family, and how you choose to celebrate (or not), is completely up to you. There’s certainly a rich tapestry of traditions to draw from. So why not take a look at your Christmas plans and embrace the spirit of giving and gratitude this year.

Source: Money and Life

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Christmas gifts that won’t blow your budget

Mon, 05 Dec 2022 23:49:00 GMT

Christmas is a wonderful time of year in Australia, filled with summer foods, decorations and of course, gift giving. Here are a few ideas to help you stretch your Christmas gift budget further, so you can enjoy more family time, without the financial hangover.

Overspending at Christmas time is commonplace in Australia, with many people taking on debt that they have no way to repay.

Add to that, global supply issues have worsened in recent months, which means we’re likely to face shipping delays and product shortages this Christmas. The ARA says that could lead to higher prices at the register.

So if you’d like to avoid a budget blowout and have a more ‘conscious’ Christmas this year, here a few alternative ideas to help you celebrate.

1. Buy local

If you want to avoid price rises and shipping delays this silly season (not to mention helping the planet) one of the best things you can do is buy locally. By purchasing from small businesses, artisans and producers in your local area, you’ll help to create jobs and keep more of the money in your community.

Local suppliers often also have different and unique products for sale that aren’t available from national chains. So look out for your local Christmas market, craft fair or farmers market, or choose gifts from a small businesses nearby.

2. Get creative

If you enjoy making things, this is for you. What could embody the spirit of giving more than creating your own beautiful handmade gifts? This is the perfect activity to do with kids (or without!).

Baked goods, scrapbooks, drawings, paintings, jewellery, soaps, candles, even face masks can all be made. Not only will you save money, giving will feel more meaningful when you’ve put your own time into it.

3. Give an experience

Even better than material goods, why not give the gift of an experience? Experiences are more memorable, offering the recipients a chance to connect and enjoy themselves. The possibilities are endless, so you’re sure to find something that suits. You could go traditional with restaurant vouchers, movie tickets, zoo or aquarium passes, or more unusual, like hot air ballooning, art or cooking classes or even a weekend away.

4. Give your time

If you can’t afford an elaborate gift, you still have something everyone needs – time! Giving your time without expecting anything in return is the perfect way to embrace the spirit of the holidays. Perhaps you could gift an elderly relative with some help around the house, offer to babysit your sister’s kids for a night, finish a DIY project for your mum, or stock someone’s freezer with enough meals for a week. There are lots of thoughtful and creative options that will keep your budget intact.

5. Make a donation

If the people you love truly don’t need anything, perhaps they’d appreciate you donating a gift on their behalf. Here are a few options:

Give the gift of learning to a child in need through The Smith Family’s charity gift range .

Help end global poverty with a gift from Oxfam’s charity gift shop .

Support equality for girls around the world through Plan International’s Christmas Appeal .

Remember, less is more

Aussies are a generous lot, and we’re each planning to spend $726 on gifts alone this Christmas! Now we all want to give people the world, but perhaps it’s worth taking that more literally this year. In most cases, one simple gift is enough and can even be more appreciated. You’ll be doing them, the environment, and your budget a big favour.

Of course, if you’d prefer to focus on spending time together rather than doing the Christmas shopping, that’s ok too! Discuss how you feel with those closest to you and let them know you’ll be prioritising time together over physical gifts. It could help you start the new year in a better financial position than ever.

Source: Money and Life

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The advantages of investing early

Mon, 28 Nov 2022 05:21:00 GMT

You may have heard it said, “No risk, no reward.” But did you know that time can actually decrease your risk while increasing your reward?

Investing: Risky business?

When some people think of investing, they focus on the potential for great rewards—the possibility of picking a winning share that will increase in value over time.

Other people focus on the risk—the possibility of losing everything in a market crash or on a bad stock pick.

Who’s right? Well, it’s true that all investing involves some risk. It’s also true that investing is one of the best ways to build your wealth over time.

In fact, there’s typically a direct relationship between the amount of risk involved in an investment and the potential amount of money it could make.

Different types of investments all fall along this risk-reward spectrum. No matter what your goal is, you can find investments that could help you reach your goal without taking on unnecessary risk.

Time is on your side

Here’s the secret ingredient that can make investments less risky: time.

But there’s a catch.

If you invest in just a handful of investments or only within the same industry, time won’t necessarily make your portfolio any safer.

The reason it works for diversified investment portfolios is they incorporate a range of asset classes (i.e. bonds), regions and markets and over time, there tend to be more “winners” than “losers.” That is the investments that gain money offset the ones that don’t do as well.

The more time you have, the more you benefit from compounding

Not only can the passage of time help lower your investment risk, it can potentially increase the rewards of investing.

Imagine you place one checker on the corner of a checker board. Then you place two checkers on the next square and continue doubling the number of checkers on each following square.

If you’ve heard this brainteaser before, you know that by the time you get to the last square on the board—the 64th—your board will hold a total of 18,446,744,073,709,551,615 checkers.

While there’s no guarantee you can double your money every year, the principle behind this – known as “compounding” – is important to understand that when your starting amount is higher, your increases are higher too. And over time, it can add up to be a material increase.

For example, if you earn 6% on a $10,000 investment, you’ll make $600 in the first year. But then you start the second year with $10,600—during which your 6% returns will net you $636. This is a hypothetical example that does not take into consideration investment costs or taxes.

In the 20th year of this example, you’ll earn more than $1,800—and your balance will have increased more than 200%.

A note: reinvesting is key

If you take your earnings out of your account and spend them every year, your balance will never get any bigger—and neither will your annual earnings. So instead of making more than $20,000 over 20 years in the hypothetical example above, you’d only collect your $600 every year for a total of $12,000.

If you instead leave your money alone, your “earnings on earnings” will eventually grow to be larger than the earnings on your original investment – and that’s the power of compounding!

Understanding long-term investing can be confusing, that is why we are here to help. Contact us today to find out more.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post The advantages of investing early appeared first on BMO Accountants .

Saving for education

Mon, 28 Nov 2022 05:13:00 GMT

Education is the gift that keeps on giving. If you are considering a private school this article is for you as we discuss how to save for your child’s education.

Education is the gift that parents can give their children that keeps on giving.

But if you are considering private schools it is a gift that comes with a significant – and usually rising – bill attached.

Cue visions of stately buildings, sweeping playing fields, uniformed students—and steadily rising school fees.

One in three Australian children attend a non-government school ¹ and education is the second largest expense for many families, with some spending a third of their household budget on school fees ² . Private school education costs are outpacing both inflation and wages growth ³ .

A cursory internet search found that a private school in New South Wales charges almost $37,000 a year for a year 12 place.

And even if you were sending your child to a private school, fees aren’t the only thing you need to plan for. Other items to consider include is the cost of textbooks, contributions to the increasingly prevalent compulsory laptop program, school uniforms and an endless list of ‘back to school’ items you’ve never heard of.

So savvy parents start planning early. But what’s the best way to save for your children’s education? And how can you avoid the trap of redrawing your mortgage, or worse?

The first step to successfully funding your children’s education expenses is planning.

And the first question to ask is – how much will you need?

The costs of education vary dramatically depending on both your choice of school and how early you choose a fee-paying school. There is an enormous difference between sending a child to a private school from kindergarten and going private for high school only. Some schools also offer day-care and pre-school places, potentially adding up to five extra years of fees.

Once you understand how much you need, the next question is how long you have—and how much you can add to your savings pool as you go. The longer the time frame before school fees become due, the more time there is to invest and compound your earnings. The more you can save along the way, the faster you will reach your goal.

It’s also important to think about your risk tolerance as higher returns are possible only with higher risk.

The next step is to select an appropriate savings vehicle for your money.

There are three basic ways to hold and grow the money you save for your children’s education: you can save regular amounts into a bank account, but given record low interest rates that is looking less attractive, you could build an investment portfolio – a basket of shares for example – or buy a managed fund or a more specialised product like an investment bond.

Saving your money in the bank might seem the safest option, but with school fee growth outpacing inflation it can actually mean you go backwards. Still, it remains a good option if your timeframe is tight or your risk tolerance low.

For people paying off a mortgage it can make sense to use an offset account to park savings. An offset account effectively earns interest at an equivalent rate to your mortgage. You can then redraw the funds when it is time to pay the school fees.

Managed investment schemes are another option for growing your savings over the years before school begins. Many people opt for making regular contributions to managed funds or exchange traded funds allowing their savings to compound over time.

Managed investments can be terrific for providing diversification, which can reduce your risk of capital loss by spreading your investments over different asset classes and over hundreds or thousands of individual investments. They also come with the flexibility of withdrawing funds whenever you need them.

But as with every investment, do your research as some of these products come at a high cost, with fees varying wildly.

Investment bonds are another option for saving but they are a peculiar beast so extra research may be required to understand what you are investing in and any specific restrictions or conditions.

As you make these decisions, keep two principles in mind—watch your costs and stay on track.

Remember that lower-cost investments usually outperform their higher-cost counterparts ⁴ , and starting early will give you – and your children – the best chance of success.

1 https://www.abs.gov.au/statistics/people/education/schools/2021

2 https://edstart.com.au/blog/record-low-wage-growth-impact-on-family-budget-and-school-fees /

3 https://edstart.com.au/report

4 https://intl.assets.vgdynamic.info/intl/australia/documents/articles/The-Case-for%20Low-Cost-Index-Fund-Investing_May%202022.pdf

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Saving for education appeared first on BMO Accountants .

Do you run part or all of your business from home?

Mon, 28 Nov 2022 05:12:00 GMT

If you’re a sole trader or in a partnership, you may be able to claim the business-use portion of running expenses (the costs incurred using your home’s facilities) and occupancy expenses (what you pay to own or rent your home).

For example, Georgia is a sole trader and runs a hairdressing business from her granny flat. She keeps detailed, accurate and complete records – including all hours she has run her business from home, depreciating assets and equipment and how she works out business versus personal use. This means she has a few methods to choose from to calculate running expenses she can claim for the 2021–22 financial year. These are the:

As Georgia’s home salon has the character of a place of business, she also calculates occupancy expenses, including mortgage interest, council rates and house insurance premiums, based on the proportion of the floor area and time it was used for business.

If your business is a company or a trust and you run part or all of your business from home, you should have a genuine, market-rate rental contract (or similar agreement) with the owner of the property. This will determine which expenses you pay for and can claim as a deduction.

Find out more about claiming home-based business expenses at the ATO’s web content page, which includes a handy fact sheet. Remember, we can help you, call us today.

Source: ato.gov.au September 2022

Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Newsroom/smallbusiness/General/Do-you-run-part-or-all-of-your-business-from-home-/ .

Important:

This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

The post Do you run part or all of your business from home? appeared first on BMO Accountants .

Relationship break-up entitlements when you’re in a de facto

Thu, 10 Nov 2022 00:02:00 GMT

If you’ve recently split from your partner or are simply wondering what might happen if you do, you’ll need to keep your financial wits about you. A division of assets and debts, whether they’re held separately or together, may be on the cards.

Here are some of the things to be aware of when it comes to de facto splits and your finances.

How does the law define a de facto relationship?

A de facto relationship, according to Australian family law, is where two people of the same or opposite sex live together on a genuine domestic basis as a couple. You can’t be married to each other or related by family.

If we break up, do we have to go to court?

Not all de facto couples have to divide property of the relationship (that’s your assets and debts) when they break up. However, depending on your situation, this may be the case and can be formalised between the two of you without any court involvement.

If you can’t agree though, you can apply to a court for financial orders regarding the division of property and possibly superannuation, while spouse maintenance might also be payable in some circumstances.

This must be done within two years of you splitting from your former partner, otherwise you’ll need special court approval to make an application.

When can orders about the division of property be made?

The family law courts can order a division of any property you and your de facto own (regardless of whether you own it together or separately) if they’re satisfied of one of the following:

What does ‘property of the relationship’ include?

Property includes all assets and debts held in joint or separate names and may include things you acquired before or even after the relationship ends. This could include things like:

How is superannuation affected?

Under superannuation splitting laws, if you separate, it’s possible you’ll get some of your ex-partner’s super or that they’ll get some of yours.

However, because super is held in a trust and differs from other types of property, there are rules around when these assets can be accessed.

What this means is, splitting super doesn’t necessarily convert it into cash as it’s still subject to certain rules, which may mean that you mightn’t be able to access the money for a long time.

Other things to think about:

Speak to your financial adviser as we can help you understand the long-term outcomes of different settlement options.

Source: AMP

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What are some investment options outside of super

Tue, 01 Nov 2022 23:23:00 GMT

When it comes to investing, you have two options – inside or outside of super.

Super, being a longer-term investment designed to fund your retirement, comes with a number of advantages such as being lightly-taxed (which can mean, more money to invest in your financial future) but does have some constraints including not being able to access your super, generally, until you have reached retirement.

While super is a popular option for many, there are also a number of investment options to consider outside of super – you just need to find a mix that fits your needs.

Managed Investments

While you’ve probably heard of managed funds, there are other types of managed investments such as managed accounts and Exchange Traded Funds (ETFs). The main appeal of managed investments is that they take the hard work out of selecting which assets to buy and sell and when to do it – a professional investment manager can do so for you. Like all other investments, however, there are risks associated with the above. In addition to the risks that apply to investing generally, for managed investments specifically, risks also include the possibility that the investment manager may not perform as expected against their respective benchmarks.

Here are the types of managed investments you could consider:

Managed funds – investment vehicles where the money contributed by a large number of investors is pooled and managed as one overall portfolio by a professional investment manager. Investors purchase units in the fund, which entitles them to an interest in a pool of assets with the unit holders.

Managed accounts – these are similar to managed funds, except that instead of owning an interest in a pool of assets, a portfolio of assets is bought specifically for you (which makes you the beneficial owner of all the assets in your portfolio). This also means they can be more tax efficient.

Exchange Traded Funds – ETFs are listed on the share market, which means they can be bought and sold like shares. They also allow you to invest in a range of asset classes or sectors.

Cash investing

It’s no surprise that many may be tempted to stash their cash in an account – doing so gives you the ability to access your money at short notice. Your money can also usually be accessed with low, or potentially zero fees applying to withdrawals (except in some cases, for example, early access to term deposits). Keep in mind though, in the investment world, lower risk can mean lower returns, and the key downside of cash is that your money won’t generate capital growth (so unless you earn more than the rate of inflation, after tax, and reinvest those returns, inflation can lower the purchasing power of your money).

Investing in shares

As an investment, shares have lower and fewer upfront costs, which is why they’re quite popular among investors. There are no ongoing costs and depending on the share you choose to invest in, shareholders can earn regular income through dividends as well as enjoying the potential for long-term capital growth. Having said that, it’s important to understand that share prices rise and fall and the payment of dividends and the return of capital are not guaranteed.

As mentioned above if you aren’t sure which shares to add to your portfolio, remember you can choose managed funds, managed accounts or ETFs where you pick the type of portfolio that suits your investment goals.

Investing in property

Over time, a well-located property could generate long-term growth and income returns. Another major appeal of owning property is its perceived stability relative to the share market, where values can vary as a consequence of how easy it is to buy and sell shares. A property investment, on the other hand, can give you a tangible asset that delivers a sense of investment security as well as capital growth.

Keep in mind, however, that the upfront costs of property can be significant, with stamp duty, legal fees and optional costs, such as pre-purchase pest and building inspections, potentially adding roughly 5% extra onto the property’s purchase price. And while the tenant too wears some of the property costs, related to direct usage, it’s the landlord who generally pays the majority of costs such as repairs, maintenance and insurance, which is why property is generally regarded as a longer term investment.

Source: BT

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How to save for retirement in your 40s

Tue, 01 Nov 2022 23:22:00 GMT

By the time you’re in your 40s you’ll potentially be earning more money than you may have previously – but you may also have unexpected or unwelcome expenses, like divorce. At this age you might also put retirement planning on the backburner in favour of more pressing financial commitments, such as your home loan and kids’ school fees. Use these potential life changes as the impetus to re-evaluate your assets and income and look at how you can maximise savings for your retirement.

Calculate how much you’ll need for retirement

Keep tabs on how much you’re likely to need in retirement by checking the retirement standards published quarterly by the Association of Superannuation Funds of Australia (ASFA). Calculate this against your own super balance to give you an idea of how soon you’ll be able to say goodbye to the 9 to 5.

Set realistic financial goals

While your financial goals in your 20s and 30s may have been idealistic, as you get closer to retirement, they should become realistic. It’s time to develop a clear plan for your savings, with achievable short, mid and long-term targets working toward your overall retirement goal.

Live within your means

Your 40s are typically peak earning years. It’s important to consider funnelling some of this cash into actively saving for your retirement.

Become more mindful around spending on big-ticket items as well – before a splurge, try taking a day (or a week) to give yourself time to think about how much you really need the item. You’ll be surprised at how often you decide it’s not essential to your life, and the money you save can be added to your retirement savings instead.

Review your investments

Your super might be ticking along, but what about other investments? It’s not too late to start saving and investing. Work out what style of investor you are so you have a better understanding of how comfortable you are with risk. Then talk to a financial adviser about creating a portfolio that suits you, which might include property, shares and other investment classes.

Aim to be debt free

Entering retirement with debt means juggling repayments with a high interest rate, which will eat into your retirement income.

To enter retirement debt free, look at paying off your home loan before you retire. Preparing for retirement in your 40s might mean getting a better deal on interest rates or creating a budget that allows you to make extra contributions to your home loan, above your minimum monthly repayments.

Make sure you pay off your credit card balance in full each month so you don’t accumulate interest. Be cautious about borrowing money that you won’t be able to pay off in a short period of time.

TIP 1: Not all debts are the same. It’s a good idea to understand which are ‘good’ and which are ‘bad’, and which you should be paying off first.

TIP 2: Do you have an emergency fund in place? Here’s why you need one, and how to build one – fast.

Update your insurance

Whether there’s an unexpected emergency or you suffer an ongoing illness, having the right kind of insurance can help create peace of mind when you need it most.

Review your private health insurance to make sure it’s still right for your needs, particularly if your circumstances have changed or you have a growing family. Income protection and life insurance help to protect you and your family if you can’t work due to injury or illness, so you can continue to pay the bills without dipping into your savings.

Plan for your kids’ futures

Your kids mean the world to you – we get it. But their education doesn’t have to come at the expense of your retirement. As part of your retirement planning, consider setting up a separate savings account to fund things like your kids’ education fees, so you don’t have to dip into your retirement fund. As an alternative, aggressively paying down your home loan may give you access to a re-draw facility which could assist with education costs down the track.

Show your children how and why you’re cutting back on discretionary spending (meals out, trips to the movies) to make their long-term goals (like getting a job) a priority. They’re never too young to develop a healthy understanding of finances and budgeting.

Source: AMP

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Federal Budget 2022-23: From a tax perspective

Tue, 25 Oct 2022 22:35:00 GMT

Quiet on the tax front, for now

For once, tax measures took a back seat in a Federal Budget, with the second version for this year being billed as a “solid and sensible Budget suited to the times”.

The October 2022 Budget resisted the recent trend to continually tinker with our tax system, but it seems likely this steady-as-she-goes approach won’t last long, with the new Treasurer, Jim Chalmers, repeatedly referring to the need for tax reform in the days prior to delivering his first Budget.

Tax was not entirely forgotten, however, with the ATO to extend many of its tax compliance programs, a new focus on multinational corporate tax and higher fines for tax breaches.

ATO compliance focus

The ATO was a big winner in the Budget, receiving extra funding to help it achieve higher levels of tax compliance.

The tax regulator will receive $80.3 million to extend its current Personal Income Tax Compliance Program for two years from 1 July 2023. This program will focus on overclaiming tax deductions and incorrect reporting of income.

The ATO also received additional funding for its Shadow Economy Program and Tax Avoidance Taskforce, with additional compliance activities in these areas expected to raise $3.7 billion over four years.

Tax penalty increases

Fines for breaches of the tax and financial laws will rise from 1 January 2023.

The current fine of $222 per penalty unit will rise to $275 per penalty unit , with fines to be indexed in line with the CPI again from 1 July 2023. This increase is expected to raise an additional $31.6 million over four years.

Multinational tax measures

The Budget included measures designed to close tax loopholes and ensure multinationals pay their fair share of tax in Australia. The multinational tax integrity package is expected to raise around $1 billion over 4 years.

The government also intends to focus on working with other countries to reform the international corporate tax system to “better address the challenges arising from digitalisation and globalisation”.

Electric vehicle buyers

More small businesses may be tempted to go electric with their vehicles, with the $345 million Electric Car Discount to exempt eligible electric vehicles from fringe benefits tax (FBT) and the 5 per cent import tariff.

On an electric car valued at about $50,000, the new FBT exemption will save an employer up to $9,000 a year. For individuals using a salary sacrifice arrangement, the saving could be up to $4,700 a year. As an additional sweetener, customs duties of up to $2,500 are also being removed if the vehicle was previously subject to an import tariff.

Supporting small business well-being

Small businesses have not been forgotten entirely, with the Budget providing $15.1 million in additional funding to extend the small business mental health and financial counselling programs, NewAccess for Small Business Owners and the Small Business Debt Helpline.

Almost $63 million in new grants will also be available to small and medium-sized businesses so they can improve their energy efficiency and reduce their energy usage by investing in energy efficient upgrades.

Lower eligibility age for downsizer contributions

The super system was given a break from its endless reforms, with only a minor tweak to the existing rules.

The Budget included a measure to allow more people to make downsizer contributions into their super accounts by reducing the minimum eligibility age from the current 60 to 55 years of age . Older Australians will also be encouraged to downsize by exempting their home sale proceeds from pension asset testing from the current 12 months to 24 months.

End of tax offsets and low-income payments

A noticeable absence from the Budget was new tax offsets and payments to lower-income earners.

There was no extension of the previous Low and Middle Income Tax Offset (LMITO), which means eligible taxpayers will no longer receive the offset when lodging their annual tax return. The Coalition’s one-off $420 cost-of-living offset was also not renewed.

Information in this article has been sourced from the Budget Speech 2022-23 and Federal Budget Support documents.

It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change.

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Mortgage vs Super

Thu, 13 Oct 2022 23:28:00 GMT

With interest rates on the rise and investment returns increasingly volatile, Australians with cash to spare may be wondering how to make the most of it. If you have a mortgage, should you make extra repayments or would you be better off in the long run boosting your super?

The answer is, it depends. Your personal circumstances, interest rates, tax and the investment outlook all need to be taken into consideration.

What to consider

Some of the things you need to weigh up before committing your hard-earned cash include:

Your age and years to retirement

The closer you are to retirement and the smaller your mortgage, the more sense it makes to prioritise super. Younger people with a big mortgage, dependent children, and decades until they can access their super have more incentive to pay down housing debt, perhaps building up investments outside super they can access if necessary.

Your mortgage interest rate

This will depend on whether you have a fixed or variable rate, but both are on the rise. As a guide, the average variable mortgage interest rate is currently around 4.5 per cent so any money directed to your mortgage earns an effective return of 4.5 per cent. ⁱ

When interest rates were at historic lows, you could earn better returns from super and other investments; but with interest rates rising, the pendulum is swinging back towards repaying the mortgage. The earlier in the term of your loan you make extra repayments, the bigger the savings over the life of the loan. The question then is the amount you can save on your mortgage compared to your potential earnings if you invest in super.

Super fund returns

In the 10 years to 30 June 2022, super funds returned 8.1 per cent a year on average but fell 3.3 per cent in the final 12 months. ⁱⁱ In the short-term, financial markets can be volatile but the longer your investment horizon, the more time there is to ride out market fluctuations. As your money is locked away until you retire, the combination of time, compound interest and concessional tax rates make super an attractive investment for retirement savings.

Tax

Super is a concessionally taxed retirement savings vehicle, with tax on investment earnings of 15 per cent compared with tax at your marginal rate on investments outside super.

Contributions are taxed at 15 per cent going in, but this is likely to be less than your marginal tax rate if you salary sacrifice into super from your pre-tax income. You may even be able to claim a tax deduction for personal contributions you make up to your annual cap. Once you turn 60 and retire, income from super is generally tax free. By comparison, mortgage interest payments are not tax-deductible.

Personal sense of security

For many people there is an enormous sense of relief and security that comes with having a home fully paid for and being debt-free heading into retirement. As mortgage interest payments are not tax deductible for the family home (as opposed to investment properties), younger borrowers are often encouraged to pay off their mortgage as quickly as possible. But for those close to retirement, it may make sense to put extra savings into super and use their super to repay any outstanding mortgage debt after they retire.

These days, more people are entering retirement with mortgage debt. So whatever your age, your decision will also depend on the size of your outstanding home loan and your super balance. If your mortgage is a major burden, or you have other outstanding debts, then debt repayment is likely a priority.

All things considered

As you can see, working out how to get the most out of your savings is rarely simple and the calculations will be different for everyone. The best course of action will ultimately depend on your personal and financial goals.

Buying a home and saving for retirement are both long-term financial commitments that require regular review. If you would like to discuss your overall investment strategy, give us a call.

i https://www.finder.com.au/the-average-home-loan-interest-rate

ii https://www.chantwest.com.au/resources/super-members-spared-the-worst-in-a-rough-year-for-markets

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ATO focus on rental properties

Thu, 13 Oct 2022 23:27:00 GMT

Rental property owners are now one of the ATO’s top targets after it found nine out of ten tax returns reporting rental income and deductions contained at least one error. ⁱ

The tax office estimates it’s missing out on around $1.5 billion due to over-claiming of rental property expenses and omission of rental income.

Growing interest in rental property tax

Around 2.2 million individuals have an interest in a rental property in Australia. In a recent media release the ATO warned these taxpayers they are under the spotlight as rentals are “an area that’s easy to get wrong, and needs extra care when lodging”. ⁱⁱ

It’s urging property owners to carefully review their rental property records and ensure they understand the income they need to declare and what expenses can be correctly claimed as a deduction.

Declare all rental income

These days the ATO receives rental income data from a range of sources, including sharing economy platforms, rental bond authorities, property management software providers and land title authorities.

This allows the ATO to spot rental income being charged to a tenant but not declared. Landlords must include all rental income, whether it’s from short-term rental arrangements or from rental-related sources like insurance payouts and retained bond money.

Get your expense claims right

Although landlords can deduct many expenses relating to a rental property, claims need to stay within the rules.

Some expenses can be claimed immediately (such as management fees, council rates and insurance premiums), while others (loan interest, borrowing expenses and capital works) must be claimed over time.

Major capital works (such as replacing the property’s roof or existing kitchen) need to be claimed over a number of years.

Depreciating assets (such as a new dishwasher or oven) are claimed over their effective life, although items costing under $300 can be claimed immediately.

If you refinance your rental property loan or draw down on it for private expenses like a holiday, the loan interest relating to the private expense cannot be claimed as a deduction.

If you refinance your rental property loan or draw down on it for private expenses like a holiday, the loan interest needs to be apportioned proportioned between rental and private for the rest of the loan period.

Claiming for private usage

Special care is needed if you use your property for certain periods, stop renting it out for a time, or allow family or friends to stay at cheaper rates.

You can’t claim deductions for these periods as the property is not being used to produce rental income. Normal annual expenses must be apportioned to either omit these non-income periods or reduced if renting out the property for cheaper rates.

Deductions also can’t be claimed if you pretend your property is available for rent when it isn’t, or if you place unreasonable restrictions on a potential tenant resulting to the unlikelihood of the property being rented out.

Common mistakes

According to the ATO, the most common tax error relates to apportioning expenses . If you don’t split your expenses – or do it incorrectly – you may find your return being queried or adjusted.

Another mistake is claiming for all the cost of purchasing your property. Costs such as conveyancing fees and stamp duty are used when working out if you need to pay capital gains tax (CGT), not as deductions.

Claims for capital works and capital allowances are also a danger area. Repairs directly related to wear and tear and damage while the property is rented can be claimed in the financial year the expense is incurred, but initial repairs for damage when purchased are not immediately deductible.

Failing to keep detailed records covering the income and expenses for your rental property is also a recipe for trouble. The ATO requires landlords to keep records for five years from when your return is lodged.

Don’t forget other taxes

While the ATO is focussing on income and deduction claims for rental owners, they are not the only tax obligations landlords need to keep in mind.

When you sell your rental property , you may be liable for CGT and detailed records of all your expenditure will be needed to correctly calculate the cost base for the property.

If you are not registered for GST , or if the rental income is from a residential premises, you can include any GST in the rental expenses you claim. GST-registered landlords follow different rules.

You will also need to make PAYG instalment payments if you earn $4,000 or more in rental income. The ATO will inform you if this occurs.

The tax rules around a rental property are complex. If you would like help in this area, contact our office today.

i https://www.ato.gov.au/Media-centre/Media-releases/Tax-time-focus-on-rental-property-income-and-deductions/

ii https://www.ato.gov.au/misc/downloads/pdf/qc70095.pdf

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Crackdown on GST fraud

Thu, 13 Oct 2022 23:25:00 GMT

The ATO is cracking down hard on GST frauds after finding a significant number of taxpayers falsely claiming GST refunds.

The Serious Financial Crime Taskforce and Australian Federal Police (AFP) have executed numerous warrants against suspects, with a GST fraudster recently jailed for three years.

The ATO has warned it has zero tolerance for these types of fraud and has put in place a strategy to identify and pursue individuals suspected of inventing fake businesses to claim false refunds.

Falsely claiming a GST refund

GST refund fraud involves claiming a tax refund or other benefit by providing false information to the tax office. It involves more than careless or accidental mistakes, and is undertaken in a deliberate or deceitful way.

In the recent spate of GST frauds, individuals have invented fake businesses and lodged a fraudulent Australian Business Number (ABN) application. They then submit fictitious business activity statements (BAS) in an attempt to gain a false GST refund.

Detailed information about how to undertake these types of frauds has been circulating as online advertising and content, particularly on social media.

Rules for claiming GST credits

It’s important to understand the rules in this area. Registering for an ABN and applying for GST refunds when you do not own or operate a business – or are ineligible – is fraud.

You can only claim GST credits on the business portion of a purchase and cannot claim GST on private expenses (such as food or entertainment). Discounted prices must be used when claiming GST credits, even if the discount does not appear on an invoice.

GST credits can be claimed upfront for purchases under hire purchase agreements entered into after 1 July 2012 only if your business accounts for GST on a cash basis.

Purchases that do not include GST in the price (such as bank fees and stamp duty), GST-free items (such as basic food), imported goods if you are not the importer, and purchases between entities within a GST group are all ineligible for GST credits.

Warning signs for GST fraud

The ATO has made it clear if you are not operating a business, you do not need an ABN and should not be lodging a GST return. The tax regulator has significant data matching capabilities enabling it to detect patterns in taxpayer behaviour that highlight potential tax frauds.

Backdating your business registration so you can apply for a refund is another red flag and will highlight you as a potential high risk in the tax office’s systems.

A key point to remember is the ATO does not offer loans or administer COVID-19 disaster payments. Advertisements offering a way to get these types of loans from the ATO by registering fake businesses are a “rort” .

If you are caught

The ATO is urging anyone involved in a GST fraud to come forward on a voluntary basis, rather than face tougher consequences later.

If you are involved in a fake GST arrangement, the first step is to contact the ATO or your accountant so they can assist you to work through various self-help options . You may be able to correct your situation by revising your BAS, cancelling your ABN and GST registration, and setting up an arrangement to repay the GST refund.

Taxpayers caught engaging in GST fraud are liable to repay the entire fraudulently-obtained refund, regardless of whether they paid someone to lodge a BAS on their behalf. Making false declarations can also impact your eligibility for other government payments.

Fraud and compromised IDs

Selling or sharing your myGov credentials may result in other people accessing your personal information and using it for their financial gain.

If you have become involved in a GST fraud because your identity was compromised, you should contact the ATO immediately so additional controls can be placed on your tax account.

Taxpayers who have given their myGov details to a criminal should contact the ATO so it can assist them to protect their identity from being used to commit further crimes, including future tax crimes undertaken in their name.

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Building an investment portfolio with pocket change

Wed, 21 Sep 2022 00:57:00 GMT

The concept of investing in shares or other investment products can put a lot of people off. It can be difficult to understand, the share market is intimidating, and investment brokers generally only deal with people who have a lot of money to invest.

Micro-investing came about as a way to help more people get into investing without all the complexities that usually come with it. There are quite a few providers in Australia now, and they’re all app-based with very low minimum investments (or no minimum at all). Micro-investing is often referred to as ‘pocket investing’, because all you need is a phone and some spare change to get started. It’s become popular with younger people in particular as an alternative to high-interest savings accounts.

Here’s how it works.

A new approach to investing

Micro-investing is simply an investment platform that allows people to invest small amounts of money into specific investments (usually exchange-traded funds or managed funds) while taking care of all the admin involved with investing.

While each provider does things differently, this is what they have in common:

One of the golden rules of investing is to take advantage of the compounding effect to grow your money faster. In other words, you’ll earn market returns not just on the money you invest but also on the growth that money generates.

If you invest regularly and also reinvest the regular dividends you’ll earn from your investments, then compound interest will be even more powerful.

Investing regularly also allows you to use a strategy called dollar-cost averaging. This is a way of reducing market timing risk by investing regularly over a long period of time rather than investing a one-off lump sum. The price of investments listed on the share market will constantly go up and down, so investing regularly helps you take advantage of these price fluctuations.

Investing is never risk free

Just because you’re investing with smaller amounts doesn’t mean you won’t be exposed to the same risks as other investors. Your money is still invested in the share market, and that means you will see your balance move up and down as a result of market volatility from time to time. That’s why it’s important to choose a portfolio with a level of risk you’re comfortable to accept. Generally speaking, the higher the potential return, the higher the risk of losses.

As with any type of financial product, it’s important to do thorough research and understand any fees and costs that apply. Read the Product Disclosure Statement before making any financial decisions so you know what you’re getting into.

If you have any questions about investing, your financial adviser is the best person to speak to. They can help you work out what makes sense for your particular financial situation and what type of investments will help you meet your financial goals.

Source: Colonial First State

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How to turbocharge your investment returns

Wed, 14 Sep 2022 01:23:00 GMT

If you’d invested $10,000 into the whole Australian share market back in 2002, your initial investment amount would have grown to almost $50,000 by 30 June 2022.

It’s a huge gain. Around 385 per cent to be precise. And, to achieve it, all that you would have needed to do is reinvest all the Australian company dividends you’d received over the last 20 years back into the Australian share market.

You could have achieved similar returns by investing through a managed fund or an exchange traded fund (ETF) that tracks the broad Australian share market.

Yet, as good as that all sounds, you could have done much better if you had added to your initial $10,000 investment by making regular monthly investment contributions.

How much better? Just by adding $250 per month your Australian share market investment would have surged to more than $180,000. That represents a 1,729 per cent total return.

In other words, for $60,000 in total additional contributions over 20 years, your end investment would have been worth over $130,000 more than if you had made no extra contributions.

The numbers obviously get larger if you had made higher regular monthly contributions.

By adding $500 per month to the initial $10,000 amount your investment would have compounded by 3,074 per cent to more than $317,000.

That’s a $130,000 total investment ($10,000 plus $120,000 in other contributions) over 20 years to achieve an investment worth $270,000 more than if you had just left your initial investment to grow on its own.

Here’s how those numbers would have looked based on the actual performance of the All Ordinaries Accumulation Index (which measures the Australian share market) from 1 July 2002 to 30 June 2022.

The benefits of regular contributions

Source: Vanguard. *Assumes the reinvestment of income distributions only.

It’s only when you compare the results side by side that the full picture becomes much clearer.

An initial contribution amount combined with a regular investment savings strategy and the reinvestment of distributions over time will deliver much higher long-term results.

In the example used above, there would have already been a significant gap after just five years (in 2007) between investors who had not made additional contributions versus those that had.

And you can see that gap would have kept on widening over time. After 20 years, any investors who had followed a $250 per month regular contributions plan would have ended up with more than three times the amount of money than investors who had made no additional contributions.

A $500 per month contributions plan would have increased the differential to more than six times.

Understanding dollar-cost averaging

There’s another major advantage in making regular investment contributions, which brings into play a well-known portfolio strategy called dollar-cost averaging.

You may not realise it, but you’re probably already undertaking this strategy (indirectly) if you’re a member of a super fund.

Here’s how dollar-cost averaging works. Every time your employer makes a contribution into your super fund account it’s automatically invested by your fund according to the default investment strategy that you’ve chosen.

Maybe you’ve selected a “high-growth” super option, a “balanced” option, or a “conservative” option.

Behind the scenes your super money is most likely being directed into different managed funds, which invest into shares, bonds, cash, and other types of assets.

While the amount of super your employer pays doesn’t change, your investment purchasing power does change every time you receive a new super contribution.

That’s because the prices of the managed fund units your super fund is investing into does change every day.

If those managed fund unit prices have risen since your last contribution, then your super fund will be purchasing fewer units than last time.

Likewise, if the managed fund unit prices have fallen in value, your super fund will be purchasing more units than last time.

This strategy works in exactly the same way if you make regular contributions at set intervals outside of your super to buy units directly in other managed funds and ETFs.

You’ll automatically buy more units when market prices are lower and fewer units when prices are higher.

Over the total period that you keep investing, your average entry cost into specific assets will potentially be lower than if you’d try to guess the best time to buy in.

As your unit balance grows over time, your corresponding distributions via company dividends and other payments will also keep on growing. That’s the magic of compounding investment returns.

Just like your super contributions, it’s all really about sticking to a disciplined, non-emotional approach to investing that’s not affected by what’s happening on financial markets at any point in time.

Making regular contributions, and taking advantage of dollar-cost averaging, really adds up.

They’re a powerful combination in helping you to focus on achieving your investment goals, ideally through an appropriately diversified portfolio, to give you the best chance of investment success over the long term. Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

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Unpaid super from your employer

Wed, 14 Sep 2022 01:20:00 GMT

If you think your employer isn’t paying your super contributions, follow the steps below:

Please see below the ATO’s approach to unpaid super.

If your employer doesn’t pay the minimum amount of super into the correct fund by the due date, they may have to pay the super guarantee charge (SGC).

We may investigate an employer’s super guarantee compliance on our own initiative or in response to an employee enquiry. If we determine that your employer (or former employer) has not complied with their SG obligations for you, or we reasonably suspect this to be the case, we may disclose details of this to you.

From 1 April 2019, the law allows us to disclose an employer’s non-compliance to affected employees even if they haven’t lodged an enquiry with us.

We prioritise the collection of unpaid SGC debts. We’ll work with employers who engage with us to address their debt. For those that don’t engage, we’ll take stronger action . This can include:

If you’ve chosen to report your employer, we’ll keep you updated throughout the investigation. If we establish there is an SGC debt, we’ll inform you of the recovery actions we’re taking.

If we commence an investigation into your employer and you haven’t lodged an enquiry with us, we may notify you of the review. If you receive this notice, you don’t need to take any action; we will advise you of the outcome when the investigation is complete.

Any SGC we collect from your employer is distributed to your super fund.

Source: ato.gov.au
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Individuals/Super/Growing-your-super/Unpaid-super-from-your-employer/

Important:

This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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Start your life together on the right financial foot

Fri, 02 Sep 2022 02:06:00 GMT

Before you say ‘I do’, talk about your finances with your partner.

Not getting married, but in a relationship? See relationships and money for useful tips.

If COVID-19 has impacted your wedding plans, the ACCC’s explains your rights when it comes to cancellations and refunds.

Manage the wedding whirlwind

The average Australian wedding costs $36,000. According to a Moneysmart survey, 82% of couples dipped into their savings to pay for their wedding. Another 60% got a loan and 18% used their credit card.

Common wedding costs include:

To stay on top of costs:

The more you pay up-front, the less likely it is that you’ll get into debt.

Save for your big day

Once you’ve got an idea of how much you can afford to spend on your wedding, work out how much you’ll need to save to pay for it.

The sooner you start and the more you save, the less likely you’ll get into debt.

Use our savings goals calculator

Work out how much you’ll need to save each week in the lead-up to the wedding.

Opening a separate, high-interest savings account or a term deposit is a good way to save. A separate account means you’ll be less tempted to use the money for other things.

For saving tips, see simple ways to save money .

Get on the same (financial) page

Talk about spending habits, debts and financial responsibilities with your partner. Doing this before you get married can help you manage your money day to day.

Also sit down and work out your financial goals. Be clear about what you want and when, so you can work together to get there.

Do a budget (together)

Creating a budget might not sound romantic, but it will give you a clear picture of your regular expenses.

It’s also a great way to help you reach your shared savings goals, including your wedding and honeymoon.

Use our budget planner

Work out your monthly expenses and see where you can save.

Work out how you’ll pay for things

If the two of you have different saving and spending habits, or earn different incomes, work out how to manage your money. Decide whether you want a joint bank account, separate accounts, or both.

Getting a joint bank account can make it easier to share your money and pay bills. However, you’re both responsible for making sure your expenses are covered.

Some people have separate bank accounts rather than a joint account. Then they work out who is responsible for different bills and payments. Or they transfer a set amount each payday into a joint account to cover shared bills.

Every couple is different, so talk to each other about what you think will work best for you.

For more tips, see handling money in a relationship .

Understand the legal changes

Marriage is a legal agreement, so you’ll need to review or update your legal and financial documents.

Update or do your will

Getting married cancels your will (unless your will clearly shows that you were planning the marriage). See our tips on wills and powers of attorney .

Check your insurance

Update your insurance policies to reflect your new status as a married couple. This is particularly important for life insurance .

Update your super

You may want to change your beneficiary details, and look at how you can grow your super together .

Change your personal details

If you take your spouse’s surname, you’ll need to let the Australian Taxation Office know. You may also need to change it on other documents, such as bank accounts and bills.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/getting-married

Important note: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. Past performance is not a reliable guide to future returns.

Important : Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Start your life together on the right financial foot appeared first on BMO Accountants .

Six ways to pay off your mortgage faster

Fri, 02 Sep 2022 02:05:00 GMT

Paying off your mortgage early will save you money and take a financial load off your shoulders. Here are some ways to get rid of your mortgage debt faster.

Switch to fortnightly payments

If you’re currently paying monthly, consider switching to fortnightly repayments. By paying half the monthly amount every two weeks you’ll make the equivalent of an extra month’s repayment each year (as each year has 26 fortnights).

Make extra payments

Extra repayments on your mortgage can cut your loan by years. Putting your tax refund or bonus into your mortgage could save you thousands in interest.

On a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years go towards paying off interest. So anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan.

Ask your lender if there’s a fee for making extra repayments.

Smart tip: Making extra repayments now will also give you a buffer if interest rates rise in the future.

Find a lower interest rate

Work out what features of your current loan you want to keep, and compare the interest rates on similar loans. If you find a better rate elsewhere, ask your current lender to match it or offer you a cheaper alternative.

Comparison websites can be useful, but they are businesses and may make money through promoted links. They may not cover all your options. See what to keep in mind when using comparison websites .

Switching loans

If you decide to switch to another lender, make sure the benefits outweigh any fees you’ll pay for closing your current loan and applying for another.

Switching home loans has tips on what to consider.

Make higher repayments

Another way to get ahead on your mortgage is to make repayments as if you had a loan with a higher rate of interest. The extra money will help to pay off your mortgage sooner.

If you switch to a loan with a lower interest rate, keep making the same repayments you had at the higher rate.

If interest rates drop, keep repaying your mortgage at the higher rate.

Use our mortgage calculator

See what you’ll save by making higher loan repayments.

Consider an offset account

An offset account is a savings or transaction account linked to your mortgage. Your offset account balance reduces the amount you owe on your mortgage. This reduces the amount of interest you pay and helps you pay off your mortgage faster.

For example, for a $500,000 mortgage, $20,000 in an offset account means you’re only charged interest on $480,000.

If your offset balance is always low (for example under $10,000), it may not be worth paying for this feature.

Avoid an interest-only loan

Paying both the principal and the interest is the best way to get your mortgage paid off faster.

Most home loans are principal and interest loans. This means repayments reduce the principal (amount borrowed) and cover the interest for the period.

With an interest-only loan, you only pay the interest on the amount you’ve borrowed. These loans are usually for a set period (for example, five years).

Your principal does not reduce during the interest-only period. This means your debt isn’t going down and you’ll pay more interest.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/home-loans/pay-off-your-mortgage-faster

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Tax and your online side hustle

Fri, 02 Sep 2022 02:03:00 GMT

With money becoming tighter as inflation rises, many people are looking to make some extra income from a ‘side hustle’.

As we move towards a cashless society and transact more online, it’s becoming easier for the ATO to follow the money trail. Whether you rent your caravan on Camplify, or even if you simply sell household items on Gumtree, the tax man will be paying attention.

Not all online income needs to be declared, but it’s important to understand the difference between an online hobby and a business. Otherwise, you could find yourself with an unexpected tax bill.

Business or a hobby?

Even with a well-paying day job, many people have an online side hustle for fun or to earn extra cash.

Whether your online activity is just a hobby or a business makes a big difference.

Income earned from hobby activities is non-assessable for tax purposes, while income from a business is assessable and must be declared in your tax return. This could include revenue from an eBay shop, rental income through platforms such as Stayz, and fees from work sourced from Airtasker.

There is no legislative definition of ‘carrying on a business’, but the ATO provides a series of questions to help you decide.

For example:

Every ‘yes’ means you are more likely to be carrying on a business.

Side businesses and tax

Where your side activities are a business, you must declare all your secondary income, regardless of how much or how little you make each year.

If your side hustle is considered a business for tax purposes, it means your business-related costs are tax deductible and you may be able to access the various business tax concessions on offer.

For side businesses where your annual turnover exceeds $75,000 , you need to register for GST. This tax needs to be added to all your taxable sales and paid to the ATO every quarter.

With online activities that remain a hobby the income is non-assessable and you do not have compliance obligations, but you can’t claim a deduction for your costs.

ATO surveillance and data-matching

Although some taxpayers think their online hustle will go unnoticed, the ATO has vast data-matching powers to help it identify any unreported income – wherever it is earnt.

In recent years the tax regulator has made it clear online generated revenue is an important target for its non-compliance surveillance activities.

The ATO receives and collates information from a wide range of third-party sources, including banks, payment systems and online selling platforms providers such as eBay, Amazon Commercial Services, Airbnb and Uber. More than 600 million transactions are reported to the tax office each year.

The ATO also has the power to collect information for its data-matching projects to address concerns about specific industries, issues or tax risks, and one of its ‘special purpose acquisition data’ programs covers online selling.

Under its online selling data-matching program, the ATO tracks the activity of registered online sellers and obtains details of businesses with annual trading activity in goods and services of $12,000 or more.

Get professional assistance

If your side hustle is successful and becomes more than a spare time activity, it makes sense to talk to an accounting professional well before tax time. We can help you decide whether your activities will be considered a hobby or a business.

A business must substantiate any tax deductions it claims, so you need to keep detailed records of all your business-related activities and ensure you lodge your business activity statements (BAS) and tax returns.

We can also help you work through your tax obligations such applying for an ABN, registering for GST, and establishing a proper recordkeeping system for your income and expenses. You may also need help with preparing and lodging your quarterly BAS.

If you need assistance with your growing online side business or meeting your tax obligations, call our office today.

The post Tax and your online side hustle appeared first on BMO Accountants .

Preparing your kids for financial success

Wed, 17 Aug 2022 06:11:00 GMT

Teaching good financial habits, such as saving and budgeting, is one of the best ways to prepare children to have a secure financial future. Helping kids establish sound money management skills and strong financial acumen is important, regardless of wealth level.

Younger children (under age 11)

A great way to begin to teach younger children about money is to explain its value and its function in the world. Kids often focus on rewards-based systems, where they earn a reward for good behaviour or academic achievement. Use this time to teach them how to earn money as a reward and divide it into 3 categories: spend, save, and give. For example, spending may be related to buying a fun treat or toy, saving could be taught as a way to buy something they really want in the future, and giving is how you help those in need.

Activity: “Money jars”

Tip: Sometimes when sharing the concept of saving with your child, it can be helpful to explain you’re “paying yourself for something fun in the future” and relating it back to an age-appropriate concept they can understand. You can make tweaks to this activity along the way. For example, if your child puts extra money into their Saving jar, you could provide a few additional dollars to help them understand compounding interest—how saving money can help them earn more over time. If they receive money as a gift for a holiday or celebration, bring out the money jars for a refresher. Repetition and reinforcement become important in learning any discipline, especially money management skills.

Preteens and young adults

Parents often associate the tweens and teens as the years their kids desire more independence and more options. In this case, tying money management and financial literacy to something relevant in their lives can help keep them engaged. For example, many young people are interested in gaming, so try to relate investing to playing a game. Before they start the investing game, provide them with an overview of the concepts of shares, bonds, and cash, and how they operate differently, like different players in a game. The different players in the game all act together to form an investment strategy. Depending on a child’s age, engagement, and appetite for these discussions, consider introducing the concept of building model portfolios. Review model portfolios that show different asset allocations, and then have each family member choose a portfolio. Once a family member chooses a portfolio, discuss what stood out to them about the portfolio. This will help reinforce the importance of asset allocation and diversification.

Activity: Investment simulators

University graduates and beyond

At this stage, they may be ready to digest more advanced topics. Discuss the importance of goals-based investing by asking them to think about the next big purchase they want to make—are they saving for a car, a down payment for a home, or even setting aside money for future retirement? Ask: What is their time frame for that investment? When do they want to reach that goal? This helps teach the importance of time horizon as it relates to investing; the longer a person has to save and invest, the greater the likelihood for success in reaching their goals. Depending on their current situation, they may also have student loans to pay back. Budgeting may become a critical topic at this time, and sitting down with them to create that budget can be helpful. This is another important component of financial literacy and money management, and attaching it to an important life stage can make it all the more relevant.

Summary:

It’s never too early or late to start talking about money with your children — start as soon as you are comfortable to and make learning as relevant to their age and life stage as possible.

If you’d like more investment tips and guides, call us today.

Source: Vanguard May 2022

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important: Any information provided by the author detailed above is separate and external to BMO Accountants. BMO Accountants does not take any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to BMO Accountants in any way. Note: BMO Accountants does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Preparing your kids for financial success appeared first on BMO Accountants .

Do you know what counts as business income?

Wed, 17 Aug 2022 06:08:00 GMT

You may receive your business income in the form of:

When calculating your business’s assessable income, it’s important that you include all income from your everyday business activities in your tax return, for example:

It’s also important to include other business income that’s not part of your everyday business activities, for example:

You don’t need to include payments that aren’t assessable income, for example:

You need to keep accurate and complete records to prove the income you report and the expenses you claim as deductions.

Remember, registered tax agents like BMO can help you with your tax, call us today.

Source: ato.gov.au July 2022 Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Newsroom/smallbusiness/General/Do-you-know-what-counts-as-business-income-/ .

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to BMO Accountants. BMO Accountants does not take any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to BMO Accountants in any way. Note: BMO Accountants does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Do you know what counts as business income? appeared first on BMO Accountants .

Five investing tips for beginners

Wed, 17 Aug 2022 06:01:00 GMT

Here are five investing tips for those who are just beginning their investment journey.

1. Evaluate where you’re at financially

Before beginning your investment journey, it’s important to sit down and map out your financial position and goals so that you know where you are and exactly what you’re working towards.

Start by looking at your savings, income, living expenses and personal debts – this will paint a clear picture of your financial position and what funds you have available to invest.

A common misconception when it comes to investing is that you need a large sum of money to start building your portfolio. Research recently revealed that seven-in-10 Australians believed they needed more than $1,000 to start investing, while three-in-10 believed they needed more than $10,000. ⁱ Not so, you’ll be surprised to know there are investment options that start from just $500.

2. Create clear goals

It’s important to plan your goals clearly when you invest to give yourself the best chance of success.

Without a plan, it’s easy to get distracted by daily headlines or rattled by short-term share market bumps. You may end up trying to time the market, chasing unrealistic investment returns and missing out on long-term gains. Make sure your goals are clear, you have a plan and you know where you’re heading.

Write down your financial goals in weeks, months and years. Keeping your goals front of mind will help you create an investment plan and stick to it.

3. Diversify your assets

Diversification is an investment strategy that lowers your portfolio risk and helps you get more stable returns.

Diversification lowers your portfolio’s risk because different asset classes do well at different times. An important decision for every investment portfolio is how much to allocate to different types of investments. This mix of investments such as shares, bonds, property or cash is referred to as your asset allocation.

What this essentially means is that if one business or sector fails or performs badly, you won’t lose all your money. Having a variety of investments with different risks will balance out the overall risk of a portfolio.

4. Do your research

A national survey recently revealed where Australians seek their investing information. Gen Z (47%) and Millennials (36%) sought the opinion of friends and families the most, while Gen X looked to the media (21%), and social influencers (11%) for information. ⁱⁱ

While talking to a financial planner is the most effective way to manage your personal finances, there are other ways to do your own initial research as a jumping-off point. Beginner investors can consider reputable podcasts, seminars and investment company websites for general information.

Having the right information at hand before you begin investing will allow you to make considered decisions.

5. Keep your eyes on the prize

While it’s tempting to impulse buy a new outfit or order takeaway three times a week, make sure to exercise some financial discipline. A useful way to stay on top of your spending is to create a realistic budget. If you know you will buy a coffee every single day, add this to your budget – you need to be transparent and honest with yourself about where your money is going.

Above all, stay focused on your end goal and what you’re hoping to achieve. This will be the biggest motivating factor for you to maintain your discipline.

To discover more tips about investing – call us today.

Source: Vanguard

i & ii- Vanguard Australia

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important: Any information provided by the author detailed above is separate and external to BMO Financial Solutions and Capstone Financial Planning Pty Ltd. Neither BMO Financial Solutions or Capstone Financial Planning Pty Ltd take any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to BMO Financial Solutions or Capstone Financial Planning Pty Ltd in any way. Note: BMO Financial Solutions and Capstone Financial Planning Pty Ltd do not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post Five investing tips for beginners appeared first on BMO Accountants .

How do SMSFs invest?

Mon, 15 Aug 2022 04:16:00 GMT

As Australia’s system of compulsory superannuation celebrated its 30th anniversary in July, this is a good time to take a closer look at one of super’s biggest success stories – the number of people deciding to take control of their retirement savings with a self-managed super fund (SMSF).

There are now almost 607,000 SMSFs worth a combined $894 million, with 1.1 million members.

While one of the benefits of running your own fund is the flexibility to chart your own course, concerns have been raised over the years that SMSFs are too heavily invested in cash and shares and not as well diversified as large public funds. The latest figures show these concerns are largely unfounded.

Comparing SMSFs and large funds

SMSF administrator, SuperConcepts recently surveyed 4,500 funds to find out how SMSF trustees invest and identify any emerging trends. ⁱ They also wanted to see how SMSFs compare with large APRA-regulated funds including – industry, retail, public sector and corporate funds – in terms of their investments.

The table below shows the overall asset breakdown as at 31 March 2022.

Source: SuperConcepts

Several differences stand out:

At first glance, these differences conform to the stereotype of SMSFs being too dependent on cash, Australian shares and property.

However, the preference for cash may come down to a higher proportion of SMSF members in pension phase (45 per cent of SMSFs are partly or fully in pension phase according to the ATO). The more members a fund has in pension phase, the more cash and liquid investments it needs to cover benefit payments.

Also, the differences are not so stark when you group assets. For instance, cash and fixed interest combined amount to 22.7 per cent for SMSFs and 27.0 per cent for APRA funds. Similarly, local and international shares (56.4 per cent for SMSFs, 55.5 per cent for APRA funds) and property and other (20.9 per cent vs 17.5 per cent ).

It’s likely that the differences within these broad asset groupings are driven by access to different markets, and SMSF trustees being more comfortable picking investments they know such as local shares and property.

What’s more, while big funds can invest directly in large infrastructure projects with steady capital appreciation and reliable income streams, SMSF investors may be pursuing a similar strategy but with real property instead.

Top 10 SMSF investments

Whether it’s the familiarity factor or ease of access, the top 10 investments by value held by SMSFs in the SuperConcepts survey were all Australian shares. As you might expect, the major banks dominate the top 10, along with market heavyweights BHP, CSL and Telstra.

Another thing the top 10 have in common, apart from being household names and easy to access, is dividends. Just as SMSFs in retirement phase hold higher levels of cash to fund their daily income needs, high dividend paying shares are prized for their regular income stream.

Use of ETFs and managed funds

While SMSFs hold large sums in direct Australian shares, diversification improves markedly when you add investments in Australian and international shares held via ETFs and managed funds.

The SuperConcepts survey found almost one third of SMSF investments by value are held in pooled investments. The highest usage is for international shares and fixed interest, where 75 per cent of exposure is via ETFs and managed funds.

As it’s still relatively difficult to access direct investments in international shares, it’s not surprising that global share funds account for eight of the top 10 ETFs and managed funds.

This latest research shows that the diversification of SMSF investment portfolios is broadly comparable to the big super funds. After 30 years of growth and a new generation taking control of their investments, the SMSF sector has well and truly come of age.

If you would like to discuss your SMSF’s investment strategy or you are thinking of setting up your own fund, give us a call.

i https://www.superconcepts.com.au/insights-and-support/news-and-media/detail/2022/06/19/superconcepts-relaunches-quarterly-smsf-investment-patterns-survey

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Tech tips to get more hours in your day

Mon, 15 Aug 2022 04:15:00 GMT

Life just seems to get ever busier as the years roll by and our most precious commodity is often our time. We could all do with a few more hours in the day and technology continues to play a vital role in bringing efficiencies into our daily lives.

In fact, research indicates that technology saves the average person around two weeks a year – or almost two and a half years of our lifetimes. ⁱ The main time savers are the things most of us are generally already using – self-service checkouts, online banking and shopping, and mobile traffic updates. It’s certainly worth ensuring you are making the most of these time savers and spending the least amount of time on mundane tasks by setting up online shopping lists and automating bill paying.

Then to take your time saving efforts even further, there are a myriad of applications that have sprung up to help you create efficiencies in your professional and personal life. Let’s look at the best ways to stop wasting your precious time and then look at specific applications that may be of benefit.

Taming the email beast

Email is certainly nothing new. Once prized as a valuable communication tool, email is now singled out as a black hole for lost time. What is relatively new is the number of email management applications you can turn to for help. Such applications are indispensable if you use multiple inboxes, or if you have so many unread emails that you can’t organise them on your own. A good example is Clean Email which deletes thousands of old emails and organises new incoming messages automatically. It’s also becoming more common to only check and respond to email a few times a day rather than on a continual basis as it can be a constant distraction.

Avoid distractions and stay focussed

When it comes to distractions it can be hard to stay on target 100 per cent of the time, however if you find that you are spending too much time on online diversions, apps like Freedom and the aptly named Selfcontrol block irrelevant content.

There is also a growing trend away from multi-tasking that suggests it’s more effective to focus on one thing at a time, giving each task your undivided attention before moving on to the next. If that’s an approach that you find challenging, there are a number of apps that have sprung up to help you keep focussed. If you find you jump from one thing to another and end up with a stack of half-finished tasks, apps like Focuskeeper provide discipline and the motivation to complete tasks.

Save time by being aware of time

One way of saving time is to become more aware of where your time is being spent so you can reduce wasted time. While it can be a little disturbing to find out how much time you spend checking your social feeds, apps like RescueTime are great for keeping you on target. RescueTime tracks what you’re working on and suggests the best times for uninterrupted work and when you’re losing focus and trying to tackle too many tasks the prompts help you to prioritise.

Get organised and outsource

Making the most of your time is all about getting organised. Apps that help you to break down your hectic life into tasks and ‘to-do’ lists also help you to prioritise and make sure nothing gets dropped. Remember the milk allows users to manage tasks, share lists and allocate them to others so it’s a useful tool to keep your whole household or team at work organised.

It’s important to put a value on your precious time and sometimes that means getting a hand with all the low-value tasks in your life that get in the way of what you really need to do. There are heaps of apps like Fivver or Airtasker that can help you to outsource all sorts of annoying, time-consuming jobs.

Is it time to start exploring how technology can help you to be more efficient and reclaim some of those lost hours? The challenge will then be deciding what to do with all that extra time on your hands!

i https://www.thelondoneconomic.com/tech-auto/modern-technology-saves-brits-the-equivalent-of-two-weeks-every-year-111552/

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Australians inherited an estimated $150 billion in 2024, an increase of more than 70 per cent in a decade, according to a JBWere report. i

Your future just got a super boost – are you ready?

With the new financial year comes a fresh wave of superannuation changes that could make a real difference to your retirement savings.

New financial year, new super rules

With a new financial year underway, now’s the time for small business employers to check they’re across the latest changes to super obligations - from Superannuation Guarantee (SG) increases to updated balance contribution caps.

How the $3m super tax may affect you (and what to do next)

As the federal government moves to introduce a new 15% tax on superannuation earnings above $3 million (known as Division 296 tax), concerns and debates have emerged about the broader implications for investment strategies, retirement planning, and even the property market.

With more than 947,000 trusts operating across Australia, it’s no surprise the ATO continues to keep a close eye on how these structures are managed. Trusts remain central to many wealth and succession plans, but their complexity means they also attract compliance scrutiny. ⁱ

Australians inherited an estimated $150 billion in 2024, an increase of more than 70 per cent in a decade, according to a JBWere report. ⁱ