Small Business Ventilation Program

The Small Business Ventilation Program is now open. The Victorian Government is providing $60 million for public-facing small businesses to improve ventilation.

This support has been designed to help businesses implement new guidance on building ventilation to reduce the risk of spreading COVID 19 and to keep customers COVIDSafe. The Small Business Ventilation Guide is also available, which provides simple tips to help businesses improve ventilation.

Eligible businesses can now apply for funding to invest in equipment, undertake works or engage professional services to improve ventilation in areas of the workplace that are accessible to customers.
Under the program, 2 types of support are available:

Applications are open until 11:59pm Friday 24 June 2022, or until funds are exhausted.

Get expert advice

There are different support grants from the government to your business that might be eligible for. If you need help with your grant application, we can assist. We can help you confirm your eligibility for assistance, prepare your funding application, or simply give you advice. We’ll take care of you.

We’re here to support you. If you have questions, contact us here to book a catch up with an RJ Sanderson professional.

This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.

Christmas Parties & Gifts – What can I claim?

It’s the time of the year again!

For business owners, this is when you’re starting to think about Christmas parties and office celebrations. It’s also the time to say thank you to your staff for another year of hard work. But it’s also worth knowing what you can claim and what you can’t.

Fringe Benefits Tax

At Christmas time, additional benefits are typically provided to employees and clients in the form of entertainment and gifts. Businesses do not always understand the Fringe Benefits Tax (FBT) implications of providing such benefits. When these implications aren’t understood, it can result in significant and avoidable costs to businesses.

The two examples below illustrate the importance for businesses to understand the FBT implications before providing benefits to employees.

Example 1: Gift cards provided by an employer

Company A and Company B have 100 employees each. Both businesses provide their employees with a gift card at Christmas time. Company A provided gift cards at a value of $250, and Company B provided gift cards at a value of $300. There were no additional administration fees or charges associated with the gift cards.

Company A

On the basis that the value of each gift card is under $300 and it is provided once a year, this benefit qualifies for the minor, irregular and infrequent exemption from FBT. Accordingly, all gift cards provided to employees would be exempt from FBT.

Company B

On the basis that the value of each gift card is equal to $300 (i.e. not under $300), FBT will be payable on the total value of gift cards.

The calculation of the total cost to each business is outlined below.

Company ACompany B
Number of gift cards provided100100
Value of each gift card$250$300
Total$25,000$30,000
FBT$0$26,604*
Total cost to the business$25,000$56,604

*The FBT calculation is as follows: $30,000 * 1.8868 * 47% = $26,604. Generally, gift cards are not subject to GST and therefore, the Type 2 gross up rate is applied.

As detailed in the example above, FBT nearly doubles Company B’s cost of providing the Christmas gifts.

Example 2: Christmas Party

Company A and Company B invited their employees to their respective annual Christmas parties held at reception venues (off business premises). Both Companies used an external event management provider. In both instances, transport to the venue from the office was organised for employees. The respective Christmas parties were attended by 100 employees.

Company A received an invoice from its event management provider with the following  breakdown of costs:

Food and drinks$20,000
Entertainment$5,000
Transport to the venue from the office$2,000
Management fee charged by event manager$4,000
Total$31,000

Company B received an invoice from its event management provider for the total cost of the Christmas Party, being $31,000 (inclusive of GST). No breakdown of costs was provided by the event management company.

Company A

In determining the taxable value of Company A’s Christmas Party for FBT purposes, it needs to consider the cost of all benefits provided to employees, including Food and Drink, Entertainment and Transport. The management fee charged by the event management company is not considered to be a benefit provided to the employees, so it is not included in the taxable value. On this basis, the per head cost of the Christmas Party is $270 (i.e. ($20,000 + $5,000 + $2,000)/100).

Given the cost per person is under $300, and the benefit is provided once a year, Company A’s Christmas party qualifies for the minor, infrequent and irregular exemption, and will not attract FBT.

Company B

As Company B was not provided with a breakdown of costs for the Christmas Party, the total value of the invoice becomes the taxable value for FBT purposes. Accordingly, the cost per person is $310. As the cost per person is greater than $300, the minor benefit exemption does not apply, and the benefit is subject to FBT in full.

The calculation of the total cost to each business is outlined below.

Company ACompany B
Food and drinks*$20,000
Entertainment*$5,000
Transport to the venue*$2,000
Management fee$4,000
Total costs$31,000$31,000
Costs subject to FBT$27,000$31,000
Number of employees attended100100
Cost per person$270$310
FBT$0$30,309**
Total cost to the business$31,000$61,309***
*Costs subject to FBT.
** The FBT calculation is as follows: $31,000 * 2.0802 * 47% = $30,309. Christmas party costs are subject to GST, therefore, the Type 1 gross up rate is applied.
*** The above calculations assume that the Actual Method for valuing meal entertainment is used. In some circumstances it might be more advantageous to use the 50/50 Split method. However, business’ total annual meal entertainment expenditure has to be considered in order to determine which valuation method produces the lowest taxable value.

As demonstrated above, FBT essentially doubles the cost of Company B’s Christmas party, highlighting the importance of understanding the FBT rules and its implications when providing various benefits to employees. With proper planning, costs can be significantly reduced particularly where benefits are exempted from FBT.

To help you identify and analyse your entertainment expenditure, we have provided some notes on the FBT, GST Input Tax Credits (GST ITC) and income tax deductibility implications associated with festive season celebrations.

Giving gifts to clients and employees

The table below summarises the tax treatment of gifts provided to clients and employees (or their associates).

Gifts

RecepientGifts – Not Entertainment
(e.g. hamper, bottle of wine)
Gifts – Entertainment*
(e.g. movie/theatre tickets, restaurant voucher)
ClientNo FBT
Deductible
GST ITC available
No FBT
Not deductible
No GST ITC
Employee or Associate
(e.g. Spouse/ Partner/ Family Member)
<$300 (GST incl)$300 or more
(GST incl)
<$300
(GST incl)
$300 or more
(GST incl)
No FBT
Deductible
GST ITC available
Subject to FBT
Deductible
GST ITC available
No FBT
Not deductible
No GST ITC
Subject to FBT
Deductible
GST ITC available
*This assumes the entertainment is not meal entertainment or if it is meal entertainment, that the actual method is used. If the entertainment constitutes meal entertainment and the 50/50 split method or register method are used, the costs must be included as per the method requirements. Please note that the application of the minor benefits rule is limited for income tax exempt businesses in relation entertainment benefits.

Christmas parties/year-end functions

The correct tax treatment of costs associated with Christmas functions can be confusing as it depends on whether the employer is concessionally taxed for FBT and income tax purposes, and the method chosen by the employer to value meal entertainment for FBT purposes (there are three methods: 50/50 split, actual or register) and whether benefits are provided to employees, associates or clients.

The table below summarises the treatment for an ordinary business taxpayer (i.e. it does not apply to income tax exempt businesses). To allow the calculation to be made accurately and be substantiated in the event of a tax office audit, taxpayers need to keep all necessary documentation on file such as attendance lists and receipts.

Entertainment costs (e.g. Christmas party costs) are only tax deductible, and GST ITC are only available to the extent that the costs are subject to FBT. Where event costs are exempt from FBT, there should be no income tax deduction nor any GST ITC entitlement.

Actual Method50/50 Split MethodRegister Method
Employee or AssociateEmployee, Associate, ClientEmployee, Associate, Client
Under $300

Entertainment Function
< $300 per head (GST inclusive)
on or off business premises
Minor Benefit for employee and associate costs – exempt from FBT.
Not deductible.
No GST ITC.
Include all GST inclusive costs. 50% subject to FBT and 50% exempt. The portion subject to FBT is deductible.
GST ITC available.
Include all GST inclusive costs. Register percentage subject to FBT is deductible.
GST ITC available.
Client
No FBT on client costs.
Not deductible.
No GST ITC.
The portion of costs not subject to FBT is not deductible.
No GST ITC.
The portion of costs not included for FBT is not deductible.
No GST ITC.
EmployeeEmployee, Associate, ClientEmployee, Associate, Client
Over $300

Entertainment Function
< = or > $300 per head (GST inclusive)
on business premises
Exempt Benefit for employee costs, no FBT.
Not deductible.
No GST ITC.
Include all GST inclusive costs.
50% subject to FBT and 50% exempt.
Include all GST inclusive costs.
Associate
FBT is payable on associate costs and is deductible.
GST ITC available.
The portion subject to FBT is deductible.
GST ITC available.
Register percentage subject to FBT is deductible.
GST ITC available.
Client
No FBT on client costs.
Not deductible.
No GST ITC.
The portion of costs not subject to FBT is not deductible.
No GST ITC.
The portion of costs not subject to FBT is not deductible.
No GST ITC.
Employee and AssociateEmployee, Associate, ClientEmployee, Associate, Client
Over $300

Entertainment Function
= or > $300 per head off business premises
Employee and associate costs are subject to FBT.
Deductible.
GST ITC available.
Include all GST inclusive costs.
50% subject to FBT and 50% exempt.
The portion subject to FBT is deductible.
GST ITC available.
Include all GST inclusive costs.
Register percentage subject to FBT is deductible.
Client
No FBT on client costs.
Not deductible.
No GST ITC.
The portion of costs not subject to FBT is not deductible.
No GST ITC.
The portion of costs not subject to FBT is not deductible.
No GST ITC.
*This assumes the entertainment is not meal entertainment or if it is meal entertainment, that the actual method is used. If the entertainment constitutes meal entertainment and the 50/50 split method or register method are used, the costs must be included as per the method requirements. Please note that the application of the minor benefits rule is limited for income tax exempt businesses in relation entertainment benefits.

The tax treatment for income tax exempt employers

The FBT treatment of entertainment costs for income tax exempt employers (who are taxable for FBT purposes) is similar to that of an income tax paying employer where the 50/50 split or register methods are chosen. However, where the actual method is used, FBT is generally payable on costs relating to the employee and any associate(s) regardless of the cost or location of the function (i.e. the minor benefit and food and drink consumed on premises exemptions are not available to income tax exempt employers). Under this method, the costs relating to the entertainment of clients should be exempt from FBT.

RJS recommendations

We recommend businesses take the following steps:

  • Consider the type of entertainment benefits to be provided to employees. Is there any scope to do things differently for a better FBT outcome?
  • Where applicable, ensure that internal communication takes place between various parts of the business (for example, human resources and finance teams) before fringe benefits are provided to employees.
  • Consider the FBT implications of providing benefits and relevant record-keeping requirements; and
  • If you are unsure, please contact a member of our employment taxes team before providing employee benefits to discuss various options and ensure that benefits are provided in the most efficient manner from an FBT perspective.

This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.

More SMEs are seeking business advice from their accountant

Research said more SMEs are now seeking business advice from their accountant and consider them as their most trusted adviser.

The proportion of small and medium enterprises (SMEs) that seek business advice from their accountant is rising, according to the latest SME Growth Index research by ScotPac.

Business owners are still most likely to turn to colleagues, suppliers or trading partners for advice, the research found. Obtaining advice from those unqualified, unfortunately tends to have inherent risk associated with it.

Despite the tendencies for small to medium businesses to seek advice from colleagues, suppliers or trading partners, the number of SMEs who consider their accountant as their most trusted adviser is on the rise. In fact, the demand for accountants has increased by 22% since 2015.

Upward trend ‘reassuring’

“A potential concern,” says the research report, “is that SMEs’ business strategy could be adversely affected by relying on [unqualified advisors].”

“So it’s reassuring that, while starting from a low base…accountants are trending upwards as most trusted advisor.”
In 2015 accountants were listed as key trusted advisor by 9% of SMEs, in 2017 by 9.3%, and in 2021 by 11.2%.

Influence of COVID-19 pandemic

More Australians relying to accountants to seek business advice is partly due to the extra reliance businesses have placed on their accountant during the COVID-19 pandemic, especially with regard to government grants and support.

In a separate question about how SMEs deal with cashflow issues, almost one in five SMEs (18.6%) chose to get on the front foot by applying pandemic recovery advice from their accountant.

“This external advice from accountants, bookkeepers, brokers and the like, has no doubt been crucial to the four out of 10 SMEs who say they have restructured in the past 12 months.

“It is also notable that the key pain points raised by SMEs in this round of research were new taxation imposts (43.7%) and supply chain disruptions (26.7%) — problems that mostly require external professional advice if they are to be successfully navigated.”

Growth vs non-growth businesses

Significantly, ScotPac’s research found growing businesses are almost twice as likely to have an accountant as their main trusted advisor compared to no-growth SMEs (14% versus 8.3%).

Similarly, no-growth SMEs were almost twice as likely to rely on a family member for advice compared to their growing counterparts (7.7% versus 4.3%).

Get expert business advice

One of the common misconceptions about accountants is that they’re just number-crunchers who only do taxes.
We have the qualifications and commercial experience to be your trusted business advisor.

We can help your business overcome its challenges, identify new opportunities, manage risks, and improve its profitability.

We’re here to support you. If you have questions, contact us here to book a catch up with an RJ Sanderson professional.

Debtor finance lender ScotPac’s SME Growth Index is Australia’s longest-running in-depth research on small business growth prospects. The September 2021 round surveyed the owners, CEOs or senior financial staff of 1255 SMEs (turnover of $1 million to $20 million) in a range of industries across Australia.

This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.

Reprieve extended for SMSFs that give or receive COVID relief

ATO to continue to go easy on SMSFs that provide or accept relief due to COVID-19

The Australian Taxation Office has extended the reprieve for SMSFs who effectively break SMSF laws by giving or receiving COVID-19-related relief.

Due to the virus’s ongoing financial impacts, fund trustees or related parties may still have “to provide or accept certain types of relief, which may give rise to contraventions under the super laws”, the ATO says.

In recognition of this, the ATO says it’ll effectively ignore SMSFs’ failure to comply with those laws in 2021–22.

This compliance relaxation, which applied in 2019–20 and 2020–21, covers the following types of relief:

Rental relief

The rental relief (including rental reductions, waivers and deferrals) must be:

  • offered on commercial terms (having regard to relevant state and territory COVID-19 support measures)
  • properly documented
  • supported by evidence provided to your SMSF’s auditor.

The ATO says a rental deferral offered by the fund or a related party will not cause a loan or investment to be an in-house asset in the current and future financial years.

Loan repayment relief

The loan repayment relief must be:

  • offered on commercial terms (having regard to the terms or relief offered by commercial lenders)
  • properly documented
  • supported by evidence provided to your SMSF’s auditor.

If the SMSF has a limited recourse borrowing arrangement in place with a related party and the lender offers loan-repayment relief, the ATO says it will accept that the parties are dealing with each other at arm’s length.

In other words, the repayments will not be treated as non-arm’s length income (NALI) and taxed at the maximum rate of 45%.

In-house asset relief

Funds that exceeded the 5% in-house asset threshold at 30 June 2021 must prepare a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022.

That said, the ATO will not punish any breaches — for example, if markets don’t recover and the plan can’t be executed; or if markets recover and the plan turns out to be unnecessary.

SMSF residency relief

If SMSF members are stranded overseas due to COVID-19 for more than two years, their fund is at risk of breaching the SMSF residency rules.

However, the ATO says it will not investigate any breaches, “provided there are no other changes in the SMSF or your circumstances affecting the other residency conditions”.

Get expert advice

The right investment strategy is one that moves you toward your lifestyle potential without losing sleep at night. Let an RJS Strategic Wealth Panner guide you to a strategy that will meet your goals.

Contact us for a complimentary consultation at info@rjswm.com.au or on (03) 9794 0010.

For more information on our services, CLICK HERE.

This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individual’s personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

SMSF non-arm’s length income (NALI) and expenses clarified

ATO clarifies ‘nexus’ between SMSF non-arm’s length income and expenses

If you are in a qualified profession or trade, it is important that to be aware of the Australian Taxation Office’s Self-Managed Super Fund (SMSF) rules that may impact you.

Under Australian tax law, all Self-Managed Super Fund (SMSF) dealings must be at ‘arm’s length’.

That is, individuals and entities must deal with each other on a commercial, unrelated-party basis.

Arm’s length dealings help ensure the purchase and sale price of SMSF assets, for example, reflect the fair market value of the assets.

SMSF dealings that result in more income than would be expected in an arm’s length transaction or arrangement is deemed to be non-arm’s length income (NALI).

Examples include a trustee loaning money to their SMSF at 0% interest or leasing commercial premises from their SMSF at above market rates.

NALI is used by some individuals to try to increase their superannuation savings in a way that’s not caught by the super contribution caps and to minimise their tax liability.

The federal government penalises it by taxing the non-arm’s length component of a fund’s income, including any capital gains, at the top marginal rate of 45% (rather than the usual concessional rate of 15%).

ATO clarification

Recently, the Australian Taxation Office (ATO) clarified its interpretation of amendments made to the NALI laws on 2 October 2019 (and which were backdated to 1 July 2018).

Those amendments were designed to ensure that where an SMSF incurs non-arm’s length expenses to earn or produce income, that income is considered NALI.

(These expenses include losses, outgoings and expenditure, and can be of a capital or revenue nature.)

Some SMSF trustees, though, remained unsure about whether services they provide to their fund in their individual capacity, for example, are considered arm’s length.

In late-July the ATO clarified that SMSF income (encompassing ordinary or statutory income, private company dividends, and trust distributions) is NALI where:

…the fund incurred expenses in deriving the income that are less than (including nil expenses) those which the SMSF would otherwise have been expected to incur if the parties were dealing on an arm’s length basis.

Depending on the circumstances, these non-arm’s length expenses can end up ‘tainting’ all of an SMSF’s income, including pension income (if applicable).

Examples of NALI

The ATO clarified its position on the ‘nexus’ between non-arm’s length expenditure and income in a law companion ruling (LCR 2021/2).

The ruling provides more than a dozen examples of when SMSF trustees’ dealings are and are not at arm’s length.

Here’s one of them, involving an SMSF trustee carrying out duties in her individual capacity:

Trang is the trustee of her SMSF and a plumber who runs her own business. She undertakes a complete renovation of the bathroom and kitchen of her SMSF’s investment property, which is rented out at a commercial rate. She schedules time in her work calendar to undertake the work and uses the tools of her trade to undertake all the plumbing work. Trang does not charge the SMSF for the work undertaken. Because the fund’s (nil) expenditure on the renovation is not at arm’s length, the rental income from the property is subject to the NALI penalty tax rate. And if Trang disposes of the property, any capital gain will also be taxed at 45%.

Here’s one of them, involving a trustee incurring non-arm’s length expenditure to acquire an asset

Trang is the trustee of her SMSF and a plumber who runs her own business. She undertakes a complete renovation of the bathroom and kitchen of her SMSF’s investment property, which is rented out at a commercial rate. She schedules time in her work calendar to undertake the work and uses the tools of her trade to undertake all the plumbing work. Trang does not charge the SMSF for the work undertaken. Because the fund’s (nil) expenditure on the renovation is not at arm’s length, the rental income from the property is subject to the NALI penalty tax rate. And if Trang disposes of the property, any capital gain will also be taxed at 45%.

See all the ATO’s examples

During the 2019–20 income year, Armin sells commercial property to himself (as trustee of his SMSF) for $200,000 — $600,000 less than its market value. The SMSF leases the property to a third party. Because of the non-arm’s length expenditure the fund incurred in acquiring the property, the rental income from the property is subject to the NALI penalty tax rate. And if Armin disposes of the property, any capital gain will also be taxed at 45%.

Commercial-property leases

If you’re leasing your SMSF’s commercial property to a related party, you need to be careful not to fall foul of the NALI laws.

For example, the rent and/or terms of the lease must be commercially sound, be in writing, and the trustees must ensure the related-party tenant complies with the arrangement.

Overcharging to get around contribution limits and boost your fund’s super balance or — if the tenant is struggling financially — undercharging can land you in trouble with the taxman.

Similarly, trustees need to be wary of bringing forward rent as this may inadvertently create a prohibited borrowing by the fund.

Get expert advice

Clearly, given the financial impact of the non-arm’s length provisions, it is possible that if this issue is not considered by auditors then the financial statements of a super fund could be materially misstated.

SMSF auditors may consider requesting trustees issue a representation letter stating if, and how, they have considered the non-arm’s length tax issues when preparing their fund’s financial accounts.

SMSF auditors might also consider stating in their engagement letter, or other method of reporting to trustees, that they have taken the trustees declaration about this issue into account when auditing the fund.

We’re here to support you. If you have questions, contact us here to book a catch up with an RJ Sanderson professional.

This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.

Federal Budget 2021 – 22: Personal Income Tax

Extension of low- and medium-income tax offset (LAMITO)

Date of effect: 1 July 2021

As announced in the last Federal Budget, individuals with a taxable income of up to $126,000 will receive a tax offset in 2020–21 and 2021–22.

This offset has been extended for another year, until 30 June 2023.

The amount of the offset will vary according to your income, as follows:

Taxable IncomeOffset
$37,000 or less$255
$37,001 to $48,000$255 plus 7.5 cents for each dollar above $37,000 (maximum of $1,080)
$48,001 to $90,000$1,080
$90,001 to $126,000$1,080 less 3 cents for each dollar above $90,000

The offset will be applied automatically when your tax return is submitted. Depending on your circumstances, you may get a tax refund.

Click here to find out what the experts say about personal income tax change

Personal income tax rates unchanged

Personal income tax rates remain unchanged from those announced in the 2020–21 Federal Budget.

Click here to find out what the experts say about personal income tax change

Medicare levy surcharge and private health insurance thresholds unchanged

The income thresholds at which the Medicare levy surcharge is applied and at which private health insurance rebates decrease will continue unchanged for another two years.

Click here to find out what the experts say about personal income tax changes.

Expert insights

Get a Budget breakdown from our experts — an accountant, financial planner, and economist — and find out what the changes and opportunities are for you.

We’re here to support you. If you have questions on new schemes or how to build a resilient business, contact us here to book a catch up with an RJ Sanderson professional.

This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.

Federal Budget 2021 – 22: Home Ownership

  • First Home Loan Deposit Scheme (New Homes)
  • Family Home Guarantee
  • First Home Super Saver Scheme

First Home Loan Deposit Scheme (New Homes)

Date of effect: 1 July 2021

The government will make an additional 10,000 places available under the scheme to help eligible first home buyers who have at least a 5% deposit, enabling them to build or buy a new home sooner.

Under the scheme, the government guarantees 15% of the home loan, which also helps buyers avoid the often-significant expense of lender’s mortgage insurance.

Click here to find out what the experts say about home ownership changes.

Family Home Guarantee

Date of effect: 1 July 2021

This initiative gives single parents with dependants the opportunity to build a new home or purchase an existing one with a deposit of 2%, subject to the person’s ability to service the loan.

Starting on 1 July 2021, 10,000 guarantees will be made available over four financial years.

Click here to find out what the experts say about home ownership changes.

First Home Super Saver Scheme

Date of effect: 1 July of year after Royal Assent is granted

Introduced in the 2017–18 Budget, this scheme allows people to save money for their first home inside their superannuation fund.

They can make voluntary concessional (before-tax) and non-concessional (after-tax) contributions to their super and apply to have a maximum of $15,000 of contributions from any one financial year earmarked for release under the scheme.

Previously, the maximum amount of contributions that could be released across all years was $30,000.

That amount will be increased to $50,000.

Click here to find out what the experts say about home ownership changes.

Expert insights

Get a Budget breakdown from our experts — an accountant, financial planner, and economist — and find out what the changes and opportunities are for you.

This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individual’s personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

Are you losing out on your super

Earlier this month we came across a report on some research by money educator and expert Vanessa Stoykov showing 10% of Australians don’t trust superannuation funds.

While that figure may seem modest, it’s nonetheless concerning.

After all, super is compulsory for most workers and is the vehicle that will fund retirement in many cases. Australians generally have a keen eye on the value of their home, the value of their bank account and investments and the level of their income. However we often see people with their eye off their superannuation.

Equating to over $2.7 trillion in assets owned by over 15 million members, it is certainly possible that an Australian’s superannuation nest egg will be one of the largest assets in their lifetime. And perhaps worth including on the list of assets to actively keep an eye on.

It is certainly possible that Australians’ distrust of super funds stems from the Productivity Commission’s inquiry into superannuation a few years ago. Focused on products and their return, the findings were alarming.

  • Ending up in an underperforming MySuper (default) product = 10 years’ lost pay

Due to the power of compound interest, a worker who ends up in the median bottom-quartile MySuper product would retire with a balance significantly lower than if they were in the median top-quartile product.

Cost to member at retirement: $502,000 or 45% less

.

Losing out on super

  • Paying for an unsuitable insurance policy = 2.5 years’ lost pay

The premiums that come out of members’ accounts erode their retirement balances.

The effects are worse for members on low incomes or who work intermittently, who continue to have premiums deducted from their accounts while not contributing to their super.

Cost to member at retirement: $85,000 or 14% less

  • Being a member of a high-fee fund = 2 years’ lost pay

Australians pay over $30 billion a year in fees on their super (excluding insurance premiums). An increase in fees of just 0.5% can cost a member tens of thousands of dollars.

Cost to member at retirement: $100,000 or 12% less.

  • Unintentionally holding multiple accounts = 1 year’s lost pay

According to the Australian Taxation Office, as at 30 June 2018, about six million Australians held two or more super accounts.

These accounts are created when workers change jobs or industries and don’t close their old account or roll over their existing balance.

These erode members’ balances by $2.6 billion a year in unnecessary fees and insurance.

Cost to member at retirement: $51,000 or 6% less

Interestingly, the superannuation inquiry did focus on what we believe is most important; the lifetime impact of:

  • a default superannuation and fund selection compared to a recommendation from a financial planner that is ideal for an Australian’s financial circumstances, goals, and possibilities;
  • having a set and forget view on superannuation as opposed to the ideal strategy strategically implemented. Crafted for the individual to make the most of this it, and
  • not considering superannuation as a piece of a far bigger financial puzzle which is ultimately designed to create financial security.

“Many members simply default, and rely on their fund to manage their super for them (whether out of trust, a lack of interest or an inability to compare products themselves).”

As a result, rates of switching between funds and products are modest.

Default arrangements are necessary in a compulsory super system to protect members who do not make their own investment decisions.

The downside is that these policy settings have created an ‘unlucky lottery’ for members by failing to ensure they are placed in the most appropriate funds for them.

When you really look at it, it is no wonder 10% of Australians do not trust their super funds.

Financial security is a journey, not an event. If you have kept your eye off your superannuation, are concerned about its performance, or wonder if you will have enough to live a comfortable retirement, get in touch with one of our Strategic Wealth Planners today for some impartial advice on 1300 27 28 29 or book an appointment here.

 

This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individual’s personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

Diversified investors weather COVID-19 storm; macro investment outlook bright

Despite COVID, a recession and a 37% drop in the Australia S&P/ASX 200 stock market index between February and March 1, many commentators agree 2020 was not as bad for diversified investors as many had feared.

And the year ended with a bang. The S&P/ASX 300 index — comprising the ASX 200 plus 100 smaller-cap companies — gained almost 14% over the December quarter.

This pushed its return for the 2020 calendar year into positive territory, at +1.7%.

Among the reasons cited for the better-than-expected outcome in 2020 are:

  • the federal government’s economic support package (most notably JobKeeper);
  • debt forbearance schemes that saved borrowers from foreclosure;
  • record-low cash rates, which have helped borrowers service their loans; and
  • Australia’s handling of the pandemic, which resulted in fewer lockdowns than elsewhere.

Australian shares outperformed international shares in the December 2020 quarter, reversing the trend of the previous quarter.

Markets worldwide rallied hard in November following news of the positive results of the Covid vaccine phase-3 trials and the outcome of the US election.

Cyclical sectors and industries that had previously suffered relatively weak performance outperformed significantly, while technology stocks underperformed.

2021 Outlook

Heading deeper into 2021, there are reasons for optimism, including:

  • the rollout of COVID vaccines worldwide, which may help developed countries reach herd immunity in the second half of the year
  • untapped economic stimulus funding by governments worldwide and high saving rates, which may boost consumer confidence and potentially encourage consumer spending
  • a more predictable and stable US administration led by Joe Biden.

That said, the Australian economy may experience some turbulence in the months ahead, including after March 28, when JobKeeper is scheduled to end.

However, the combination of improving global growth and low interest rates bodes well for growth assets generally this year. Time will tell.

If you have any questions or concerns about your finances, or would like some advice or a second opinion, get in touch with Strategic Wealth Planners today.

*The Market Herald , 2020, Trading in a pandemic: how the S&P/ASX200 fared during 2020

This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individual’s personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

JobKeeper Deadlines are Nearing

Employers have until 31 October to enrol for JobKeeper 2.1 and submit their ‘Check decline in turnover’ form. 31 October is also the ATO’s deadline for meeting wage commitments to employees on JobKeeper for the fortnight 28 September to 12 October.

And that’s not all! 14 November is the deadline to lodge a business’s monthly declaration to remain eligible for JobKeeper payments. The monthly declaration applies to September through to 31 October. Eligible businesses must confirm a 30% or more reduction in turnover for the period. The declaration must also confirm the payment tier being claimed for each employee.

The new 2-tiered payment rates will be determined by the employer, so it is important to fully understand the new system.

Tier 1 will pertain to employees working 80 hours or more in the four weeks of pay periods before 1 March 2020 or 1 July 2020.

Tier 2 applies to all other eligible employees and business participants. Click here to find out who is eligible.

The following can be used as a basic guide for those making the JobKeeper declaration:

  1. Identify the turnover period.
  2. Evaluate the basis test or comparison (some businesses will use the G1 label from activity statements where appropriate and suitable)
  3. Work out the GST turnover for the periods with shortfall percentages applying. Determine if it has declined by 30% or more.

Note: the turnover test must be based on actual sales in the relevant quarter not projected sales. This is a change from the previous JobKeeper scheme.

Want to know more?

With JobKeeper 2.0 now in effect, and new Government stimulus measures constantly being announced, our team are working hard to update our tools and information for you.

Below are some articles that also relate to this topic, and may help you make well-informed financial decisions:

  1. JobKeeper 2.0: Changes from September
  2. $800m Federal Budget 2020 Plan to Push Business Digital

This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.