Being super smart before the end of financial year

Written by Shereen Churchill (Financial Adviser)

We’re big advocates of the benefits of continually reviewing your situation to make sure you’re making the most of the available opportunities each year. The 30th of June is a key date as it signals the end of a financial year and the beginning of the next.

The importance of making the most of the opportunities prior to 30th June this year is just as important as previous years. This is because legislation changes over recent years have seen the Government cracking down on how much you can get into super. Why? Because its still the most tax effective vehicle for your retirement savings.

There are contribution rules and penalties for getting things wrong, so we always recommend getting personal financial advice based on your personal circumstances and objectives.

Here are 10 ideas that we will be considering with our clients this end of financial year:

  1. If you are considering additional concessional contributions to super this year but may have a higher tax rate in future years, consider delaying extra contributions by carrying forward the concessional contribution cap and enjoying higher tax benefits in the future.
  2. If you are over 60 and resigned from employment, consider whether you can access your superannuation. Also give consideration to your eligibility to commence a retirement phase pension to obtain the tax-exempt status.
  3. If you have significant income or capital gains and have not been salary sacrificing consider claiming a personal tax deduction for super contributions up to the relevant concessional contribution cap. Don’t miss out on saving up to 32% tax this financial year.
  4. If you have an existing salary sacrifice arrangement in place giving you total concessional contributions close to the annual cap ($25,000 for 2021 and $27,500 for 2022), review your salary sacrifice arrangements for the current year to ensure you don’t exceed the cap when your salary sacrifice contributions are combined with your employer SG super contributions. Given the change that enables everyone to make personal concessional contributions, you might want to consider cancelling it entirely.
  5. If you have excess savings or investments that you don’t need access to before retirement, consider transferring this wealth into super. This may reduce tax paid in your personal name and build your wealth for retirement.
  6. If your taxable income is less than $53,564 and you meet the works test, consider making a personal after-tax contribution to super. This may qualify you for a government-contribution of up to $500.
  7. If your spouse earns less than $40,000, consider making an after-tax contribution on behalf of your spouse. This will boost your partner’s super and reduce your tax.  You may receive a tax offset of up to $540.
  8. If your spouse has less super than you, consider splitting up to 85% of a financial year’s ‘taxed splittable contributions’ with your spouse. This will help to even up your member balances or fund your spouse’s insurance premiums (if insurance is held inside their super fund).
  9. If you have a  business with aggregate turnover of less than $5 billion, consider making use of the temporary full expensing of eligible capital assets. The reduction in tax liability frees up cash flow which can be used to sustain and/or expand your business.
  10. If you have an existing transition to retirement income stream (TRIS), give consideration to your eligibility to commence a retirement phase pension to obtain the tax-exempt status.

Whilst these ideas might get you thinking, it is important to consider the full eligibility rules and the appropriateness of the strategy in line with your full situation and objectives. Contact us to find out how these ideas can work for you now and in the future.

This information has been prepared and issued by ITL Financial Planning and is current as at 12 May 2021. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.

 

Written by Shereen Churchill (Financial Adviser)

The 2021-22 Federal Budget was delivered last night, 11 May 2021. The dominant themes from this years’ Budget include continuing to provide for a safer environment, incentives to increase spending by taxpayers to stimulate the economy, a focus on the health issues facings Australians and a focus on addressing the retirement savings gap between men and women.

From a pure financial planning and wealth perspective, the positive news from this year’s Budget is that the changes are minimal and largely positive in nature. Many of the announcements could be regarded as a soft start to an election campaign by the Government, with expected commencement dates of 1 July 2022 – which is later than when the next Federal election will be held.

As is always the case, these measures will need to pass through the legislative process before they become law and may change during that process.

To help you understand the key announcements made by the Treasurer, ITL Financial Planning have put together a written summary of the key areas specific to self-funded retirees, professional families, and successful business owners.

Self-Funded Retirees

For our self-funded retirees, the major announcements were in relation to continued tax relief in the lower and middle income bands, broadening the eligibility to the Downsizer Contribution, broadening  eligibility to make Non concessional Contributions without satisying a work test and, a five year plan to ensure senior Australians will have access to high quality and safe aged care services.

Downsizer Contribution & Work Test Commencement Ages

These measures, which are expected to commence from 1 July 2022, include:

  • Reducing the qualifying age at which a downsizer contribution of up to $300,000 can be made to super, when selling a principal place of residence, from 65 to 60;
  • Deferring the commencement of the work test that needs to be satisfied to make a non concessional contribution to super from age 67 to 75. This will mean that up to the age of 75, you can make an after tax contribution of $110,000 (based on current thresholds that apply from 1 July 2021) each year (or $330,000 if you exercise the bring forward rules) without needing to meet a work test in that year.  However there are still limitations on how much you can have saved in the super system and still be allowed to make these contributions. Furthermore, individuals aged 67 to 74 years will still have to meet the work test to make personal concessional contributions.

The proposed tax relief as well as some other enhancements to the super system which will also benefit many self-funded retirees, are outlined under the “professional families” heading. Furthermore, you may be interested to read and inform your children about the Housing Assistance and Childcare announcements, which are also outlined under the “professional families” heading.

Professional Families

For our professional families, the biggest proposals were in relation to tax relief in the lower and middle income bands, enhancements to the super system as well as additional support for Child Care and First Home Owners. Whilst the latter two proposals may not be beneficial to many of you, you may be interested to talk to your children about them.

Tax Relief

The Government remains committed to its next stage of personal income tax reform that will take effect from 1 July 2024. Importantly, the already legislated tax cuts will see 95 per cent of taxpayers face a marginal tax rate of no more than 30 cents in the dollar from 1 July 2024. Albeit, should there be a change in Government, it’s likely the tax cuts will be overturned.

The Government has further extended the availability of the low and middle income tax offset (LIMTO) for an additional 12 months (as it did last year).  Providing a maximum benefit (or tax saving) of $1,080 per person for those on taxable incomes between $48,000 and $90,000 and some benefit either side, before cutting out at a taxable income of $126,000 or above. The benefit of LIMTO is only gained when you lodge your income tax return for the financial year.

The Government also announced changes to the taxation of certain employee share schemes. Refer to the details outlined under the “Successful Business Owners” heading.

Super System Enhancements

The Government inferred (by way of no announcement) that the rate of super guarantee will increase by 0.5% to a rate of 10.0% from 1 July 2021.  It is currently legislated to increase at 0.5% per annum until it reaches a rate of 12.0% from 1 July 2025.

The Government did announce that they will legislate to remove the current $450 of wages per month that must be earned before an employer is obligated to make super guarantee payments for an employee.  Expected to take effect from 1 July 2022, this is also one of a raft of reforms the Government announced targeting women.

Housing assistance

For a number of years, the Government has offered a First Home Super Saver Scheme – allowing prospective first homeowners the ability to access up to $30,000 of their accumulated super savings to be applied towards the purchase of a first home.  Whilst there are a range of conditions that will still need to be met to qualify, the amount that can be accessed will be lifted to $50,000.

Furthermore, the Government announced the following measures to help Australians secure ownership of their first home:

  • Establishing the Family Home Guarantee with 10,000 places from 2021-22 to support single parents with dependants to enter, or re-enter, the housing market with a deposit of as little as 2.0%, and
  • Extending the First Home Loan Deposit Scheme to provide an additional 10,000 New Home Guarantees in 2021-22 to allow eligible first home buyers to build a new home or purchase a newly constructed home sooner with a deposit of as little as 5.0%.

Childcare

The Government announced it will:

  • Increase the childcare subsidies available to families with more than one child aged five and under in childcare from 11 July 2022. This will be facilitated by increasing the potential subsidy percentage for the second or third child by 30%, but capped at 95%. Families must earn less than $353,680 to receive the additional subsidy. This is expected to benefit around 250,000 families.
  • Remove the $10,560 cap on the Childcare Subsidy from 1 July 2022. This cap is currently applicable to families who earn annual adjusted taxable income of more than $189,390. This is expected to benefit about 18,000 families.

The proposed changes to the Downsizer Contribution and the Work Test Commencement age, which will also benefit many professional families, are outlined under the “self-funded retirees” heading.

Successful Business Owners

For our successful business owners, the biggest proposals were in relation to the extension of both the temporary loss carry-back provisions for business with turnover less than $5 billion and the temporary full expensing of eligible capital assets.The Government also announced changes to the taxation of certain employee share schemes.

Temporary loss carry-back provisions for business with turnover less than $5 billion

To support business cash flow, eligible companies will be able to carry back tax losses from the 2019-20, 2020-21, 2021-22 and now, 2022-23 income years to offset previously taxed profits in 2018-19 or later income years. Companies with an aggregated turnover of less than $5 billion can apply tax losses against taxed profits in the previous years noted, generating a refundable tax offset in the year in which the loss is made.

Temporary full expensing of eligible capital assets

Business with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets acquired from 7.30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2023 (an extension of 12 months).

Employee Share Schemes

Under certain arrangements, the taxation of an employee share scheme can be deferred to a point in time after the initial grant of the relevant shares, with a range of events noted that caused the tax to be assessed.  The Government is proposing to remove one of those taxing events, being cessation of employment, to remove any advantages that may have been obtained from terminating employment early.  This has the benefit for employers of being able to offer these remuneration incentives and retain key staff for longer periods of time.

The other major announcements were in relation to tax relief in the lower and middle income bands, enhancements to the super system as well as additional support for Child Care and First Home Owners. Whilst the latter two proposals may not be beneficial to many of you, you may be interested to talk to your children about them. These are all outlined under the “professional families” heading.

Concluding thoughts

Overall, the changes are positive for self-funded retirees, professional families and successful businesses. Many of the measures will not take effect until 1 July 2022 and as indicated earlier, most will require the passage of relevant legislation through Parliament.

This information has been prepared and issued by ITL Financial Planning and is current as at 12 May 2021. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information in this document regarding taxation and legislative change is based on policy announcements which are yet to be passed as legislation and may be subject to future change.  This information contains material provided directly by third parties (mainly BT, a part of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac). It is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not consider your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ, and you should seek independent professional tax advice. 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 or further refinement.

Written by Shereen Churchill (Financial Adviser)

2020 has certainly been a year like no other.  From extreme weather conditions to a global pandemic, together we have faced more uncertainty than ever before. Against this backdrop, a retirement income review has been handed to Government, the next Intergenerational Report is due, and we have had several mini budgets full of COVID stimulus measures. These events have all strongly shaped the 2020-21 Federal Budget, which was delivered last night, 6 October 2020. The dominant themes from this years’ Budget include the provision of tax relief, encouraging job creation, rebuilding our economy, and securing Australia’s future. From a pure financial planning and wealth perspective, the positive news from this year’s Budget is that the changes are minimal and largely positive in nature.

As is always the case, these measures will need to pass through the legislative process before they become law and may change during that process.

To help you understand the key announcements made by the Treasurer, ITL Financial Planning have put together a written summary of the key areas specific to self-funded retirees, professional families, and successful business owners. BT’s Bryan Ashenden provides an overview for all Australians via video.

Self-Funded Retirees

For our self-funded retirees, the major announcements were in relation to tax relief in the lower and middle income bands as well as additional payments for those in receipt of age pension and/or carer payments.

Additional payments for eligible social security recipients

Two separate $250 payments will be made to eligible Australians in receipt of certain income support payments including the age pension, carer payment and family tax benefits, and also health care cardholders.

An individual may be eligible to receive both $250 payments however, they can only receive one $250 per round (even if they qualify per round in multiple ways). The payments will be exempt from taxation and not count as income for Social Security purposes.

Proposed tax relief and enhancements to the super system will also benefit many self-funded retirees. These changes are outlined under the “professional families” heading.

Professional Families

For our professional families, the biggest proposals were in relation to tax relief in the lower and middle income bands, enhancements to the super system as well as additional payments for those in receipt of Family Tax Benefit Payments and/or carer payments.

Tax Relief

You may not be a low or middle income earner, but you will still benefit from having more of your income taxed in a lower tax bracket.

The Government has announced Australian taxpayers are set to benefit immediately as planned tax cuts in Stage 2 of the Personal Income Tax Plan have been brought forward from 1 July 2022 to 1 July 2020.

Key highlights of this measure include the following:

  1. The top threshold of the 19% personal income tax bracket will increase from $37,000 to $45,000.
  2. The top threshold of the 32.5% personal income tax bracket will increase from $90,000 to $120,000.
  3. The Low Income Tax Offset (LITO) will increase from $445 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000. The LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
  4. The Low and Middle Income Tax Offset (LMITO) will be retained for the 2020-21 financial year.

Importantly, the already legislated tax cuts will see 95 per cent of taxpayers face a marginal tax rate of no more than 30 cents in the dollar from 1 July 2024.

Super System Enhancements

This year’s Federal Budget has made enhancements to the super system to ensure your super is working harder for you. These are summarised below:

  1. From 1 July 2021, you will keep your super fund when you change jobs, stopping the creation of unintended multiple super accounts and the erosion of your super balance.
  2. Creation of the YourSuper comparison tool to help you decide which super product best meets your needs.
  3. By 1 July 2021, MySuper products will be subject to an annual performance test. If a fund is deemed to be underperforming, it will need to inform its members of its underperformance by 1 October 2021.
  4. Importantly, the rumoured changes to super guarantee (SG) arrangements have not eventuated so this means that from 1 July 2021, the rate of SG will start its gradual half percent increase per annum from the current 9.5% up to 12% by 1 July 2025.

Proposed social security payments will also benefit professional families. These are outlined under the “self-funded retiree” heading.

Successful Business Owners

For our successful business owners, the biggest proposals were in relation to the temporary loss carry-back provisions for business with turnover less than $5 billion and the temporary full expensing of eligible capital assets.

Temporary loss carry-back provisions for business with turnover less than $5 billion

To support business cash flow, eligible companies will be able to carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years. Companies with an aggregated turnover of less than $5 billion can apply tax losses against taxed profits in the previous years noted, generating a refundable tax offset in the year in which the loss is made.

Temporary full expensing of eligible capital assets

Business with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets acquired from 7.30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022.

Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets.

Businesses with aggregated annual turnover of less than $50 million can also apply full expensing to second-hand assets.

Businesses with aggregated annual turnover of less than $10 million can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies. The provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.

Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.

Qualifying business will benefit from improved cash flow, with any capital investment brought forward to benefit the greater economic recovery.

The other major announcements were in relation to tax relief in the lower and middle income bands and enhancements to the super system. These last two proposals are outlined under the “professional families” heading.

Concluding thoughts

Overall, the changes are positive for self-funded retirees, professional families and successful businesses. As indicated earlier, these measures will need to pass through the legislative process before they become law and may change during that process.

This information has been prepared and issued by ITL Financial Planning and is current as at 7 October 2020. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not consider your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ, and you should seek independent professional tax advice. 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 or further refinement.

Today marks 10 years for ITL Financial Planning. To be honest, I wasn’t sure I’d get to this point when I started. I remember paying myself a monthly salary of $2,000 but having mortgage repayments of $3,500 and three kids five and under. So I feel an enormous amount of gratitude as ITL Financial Planning celebrates 10 years of being in business so please indulge me as I give my thanks to the many who been an important part of the last decade.

Holidays were limited to short camping trips in the early years (by both time and money). I remember the “joys” of answering client calls while simultaneously trying to pitch a tent. We still love going camping, but gee it’s great having a team that can look after clients without me so our family can now go on holidays and relax.

Making a decision to buy an office before anyone even knew I was starting out on my own was a huge risk, but investing in the ability to share an office and now many mutual clients with The Brian Group (both excellent accountants and friends) made a massive difference.

My decision to recruit Shereen nearly six years ago (who was twice as expensive as the person she replaced) remains my best investment decision ever that I don’t think I’ll ever top. We would not be where we are today without her. I am blessed to count her as my business partner. Courtney has been our rock for over four and a half years and we couldn’t have got through the mountain of work changing licensees without Luna who joined the team early last year. While it was just me at the beginning, we are very much a team now and it isn’t about any one person anymore.

A big thank you to our clients. We genuinely have the best clients and love being able to help them. While I’m just as passionate as ever about markets, the most memorable moments have not been about telling clients how good their returns have been. The biggest joys have been the phone calls telling clients that their insurance claims have been paid or telling the widow that financially, everything is sorted and under control and they don’t have to worry about money. I am thankful to be a part of these moments.

I am also grateful to my family who continue to be my biggest supporters. Thank you to my amazing wife Robyn and our three daughters. From the first year where we committed to buying nothing new for a year so we could make ends meet, I am grateful that our business now gives us the opportunity to be involved in areas we are passionate about, like enabling us to foster additional children and share our home with others.

As I look ahead to the next 10 years, running a financial planning business is no less daunting. Regulators and licensees are still struggling to figure out how we can become a true profession that can provide personal advice efficiently, honestly and fairly. We are remaining disciplined in focussing on those clients that we know we can deliver the most value to and keeping client numbers to those we can maintain our best levels of service to and maintain close relationships with. It might mean we grow slower, but the plan for ITL was never to become big, just a great business that cares about each client and punches above its weight in delivering excellent advice. I am thankful this is a vision we achieve every day and we will strive to continue to do for the next decade and beyond.

Written by Shereen Churchill (Financial Adviser)

We’re big advocates of the benefits of continually reviewing your situation to make sure you’re making the most of the available opportunities as and when they become available. The COVID-19 Stimulus Package signals the need for a review.

The Government is acting decisively in the national interest to support households and businesses and address the significant economic consequences of the Coronavirus (COVID-19).

While the full economic effects from the virus remain uncertain, these actions seek to provide timely support to affected workers, businesses and the broader community. The Government’s economic response targets three areas namely:

  • Supporting individuals and households
  • Support for businesses
  • Supporting the flow of credit

 

Below is a report of issues that may impact some of our clients, but please note that:

  1. The summary is not an exhaustive list of all the stimulus measures and benefits available; but rather those which we believe will benefit some of our clients;
  2. The situation is changing daily, and individual State Governments are also undertaking their own measures;
  3. If, on or after 1 January 2020 you meet any of the following criteria, you should contact us as soon as possible to discuss those particular stimulus measures which may be available to assist you:
    1. made redundant, or;
    2. your working hours were reduced by 20 per cent or more, or;
    3. you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more, or
    4. your business is in financial distress.

 

Supporting individuals and households

Government Payments to support households

  • Two separate $750 payments to social security, veteran and other income support recipients as well as eligible concession card holders will be made.
  • The payments are available to those who are eligible payment recipients (for example; Age Pensioners, Veteran Service pensioners and Disability Support Pensioners) and concession card holders (for example; Pensioner Concession Card (PCC) holders, Commonwealth Seniors Health Card holders, Veteran Gold Card holders and Family Tax Benefit recipients) at any time between 12 March and 13 April 2020 inclusive, and again on 10 July 2020.
  • In the case of the second payment, the $750 payment is not payable for those who are receiving an income support payment that is eligible to receive the Coronavirus supplement.
  • The first payment will be paid automatically from 31 March 2020 and the second automatically from 13 July 2020.
  • The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.
  • The complete list of eligible income support payments and concession card is available here: https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Payments_to_support_households.pdf.

 

Reduction in Income stream drawdown rates

  • There will be a temporary 50% reduction in the minimum annual amount that you’re required to withdraw from your super income stream.
  • Minimum annual amounts are set on 1 July of each year based on your pension balance and age.
  • The reduction in the minimum drawdown rates will apply for the duration of this financial year and for the 2020/21 financial year.
  • Opportunity: You might have alternative sources of income or cash that you can live on.
  • Consideration: You might wish to retain as much as possible in your tax-effective pension.

 

Reduction in social security deeming rates

  • As of 1 May 2020, the upper deeming rate will be 2.25 per cent (currently 2.5 per cent) and the lower deeming rate will be 0.25 per cent (currently 0.5 per cent).
  • On average, this will result in the receipt of around $105 more from the Age Pension in the first full year that the reduced rates apply.

 

Supporting businesses

Boosting cashflows for employers

  • The Government is providing up to $100,000 to eligible small and medium-sized businesses and not- for-profits (NFPs) that employ people, with a minimum total payment of $20,000.
  • Small and medium sized business entities and NFPs with aggregated annual turnover under $50 million and that employ workers will be eligible.
  • Eligibility will generally be based on prior year turnover.
  • Under the scheme, employers will receive a payment equal to 100 per cent of the business’ salary and wages withheld, with the maximum payment of $50,000 and a minimum payment of $10,000.
  • The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
  • Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
  • Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
  • The payments will only be available to active eligible employers established prior to 12 March 2020.
  • Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020.
  • Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgements. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (300 per cent) in the March 2020 activity statement.
  • An additional payment is also being introduced in the July-October 2020 period: Eligible entities will receive an additional payment equal to the sum of all the Boosting Cash Flow for Employers payments they have received as above. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments.
  • The cash flow boost provides a tax-free payment to employers and is automatically calculated by the ATO. There are no new forms required.

 

Increasing the instant asset write-off

  • The Government is increasing the instant asset write-off (IAWO) threshold from $30,000 to $150,000 and expanding access to include all businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
  • The higher IAWO threshold provides cash flow benefits for businesses that will be able to immediately deduct purchases of eligible assets each costing less than $150,000.
  • The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.
  • The IAWO is due to revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.

 

Backing business investment

  • The Government is introducing a time limited 15-month investment incentive to support business investment and economic growth over the short-term, by accelerating depreciation deductions.
  • The key features of the incentive are:
    • Benefit– deduction of 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
    • Eligible businesses– businesses with aggregated turnover below $500 million.
    • Eligible assets– new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (i.e. plant, equipment and specified intangible assets, such as patents) acquired after announcement and first used or installed by 30 June 2021.

 

Support for individuals, households and businesses

JobKeeper payment

The JobKeeper payment consists of payments to help businesses subsidise the cost of paying employees throughout the COVID-19 pandemic. If a business has had to stand employees down, this payment will help keep them connected with their employees.

Key info for employees

  • Ultimately, it will be up to your employer to register and apply for the payment.
  • If they do, the payment will provide $1,500 per fortnight for each of their eligible employees, before tax.
  • Your employer will work out if you are an eligible employee.
  • You’ll be considered an eligible employee if:
    • You’re currently employed by them – even if you were stood down or have been rehired;
    • On 1 March 2020 you were employed by them;
    • You’re either full-time, part-time or a long-term casual who has been with them on a regular basis for longer than 12 months as at 1 March 2020;
    • You’re at least 16 years of age;
    • You’re an Australian citizen, holds a permanent visa or certain other visa categories; and
    • You’re not receiving a JobKeeper payment from any other employers.
  • Although the payment is made directly to employers, you’ll be able to receive the payment in several ways if your employer receives the JobKeeper payment for you.
  • If you would normally earn $1,500 or more in income per fortnight before tax, you’ll continue to receive your regular income in line with your current arrangements.
  • The JobKeeper payment may subside part of your wages.
  • If you would normally earn less than $1,500 per fortnight before tax, your employer will be required to pay you a minimum of $1,500 per fortnight before tax. It will be your employer’s decision to pay superannuation guarantee on any amount you receive above your normal wage as a result of the JobKeeper payment.
  • If you were employed on 1 March 2020, ceased employment and have now been re-engaged by that employer, you will receive a minimum of $1,500 per fortnight before tax.
  • There is little that you may have to do as an employee. Your employer is required to notify you if they are receiving the JobKeeper payment. However, if you have multiple employers, you’ll need to notify the relevant employer that they are your primary employer. You may have some additional obligations if you end up in receipt of an income support (such as JobSeeker).

 

Key info for employers

  • The measure is available to eligible employers including businesses structured through a company, partnership, trusts, as well as sole traders. Not for profit businesses, including charities, will also be eligible.
  • If your business has been impacted by COVID-19, and you meet the eligibility criteria, you may access $1,500 per fortnight per eligible employee, from 30 March 2020.
  • The subsidy will be available for a maximum period of six months.

Who is an eligible employer?

  • To be considered an eligible employer a business must meet one of the following criteria:
    • The business has a turnover of less than $1 billion and turnover will be reduced by more than 30% relative to a comparable period a year ago, or
    • The business has a turnover of $1 billion or more and turnover will be reduced by more than 50% relative to a comparable period a year ago.
  • However, an employer will not qualify if their business is subject to the Major Bank Levy.
  • In order for a business to receive the JobKeeper payment, it is also a requirement that employees will need to have been employed by the business as at 1 March 2020 and the employer will need to confirm that each eligible employee is currently engaged in order to receive the JobKeeper payment.
  • Refer to the “key info for employees” section for employee eligibility criteria.

How does the JobKeeper Payment work?

  • Businesses will be responsible for identifying which of its employees are eligible for the JobKeeper payment and provide monthly updates to the ATO.
  • A fortnightly payment of $1,500 will be made to the business for each eligible employee, essentially as a wage subsidy.
  • Businesses are required to take certain steps with the payments they receive.
    • For each eligible employee who earns less than $1,500 per fortnight, their salary will need to be increased to this level.
    • Any additional salary topped (by the JobKeeper Payment) will not be subject to superannuation guarantee, but an employer can choose to pay super on this amount if they wish.
    • For employees earning $1,500 or more per fortnight already, the JobKeeper payment essentially subsidises the wages that would have been paid, which can free up some cash flow for the business.
  • Employers can register their interest in receiving the JobKeeper payment online via ato.gov.au from 30 March 2020.
  • The first payment will be made to businesses in early May 2020.

 

While the COVID-19 situation is changing rapidly, it is important to consider how individuals, households and businesses can boost their immunity to the financial impacts. A professional financial adviser in conjunction with a business tax adviser, can potentially assist you in understanding what you may be eligible for now, to cushion the financial impact on your situation.

 

Contact us to find out how we can help you and your family and/or business take steps for financial success into the future.

 

This information has been prepared and issued by ITL Financial Planning and is current as at 8 April 2020. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.

Written by Shereen Churchill (Financial Adviser)

We’re big advocates of the benefits of continually reviewing your situation to make sure you’re making the most of the available opportunities each year. The 30th of June is a key date as it signals the end of a financial year and the beginning of the next.

The importance of making the most of the opportunities prior to 30th June this year is just as important as previous years. This is because legislation changes over recent years have seen the Government cracking down on how much you can get into super. Why? Because its still the most tax effective vehicle for your retirement savings.

There are contribution rules and penalties for getting things wrong, so we always recommend getting personal financial advice based on your personal circumstances and objectives.

Here are 10 ideas that we will be considering with our clients this end of financial year:

  1. If you have close to $1.6m in super, it could be worth bringing forward contributions or you might miss out.
  2. If you are over 60 and resigned from employment, consider whether you can access your superannuation. Also give consideration to your eligibility to commence a retirement phase pension to obtain the tax-exempt status.
  3. If you have significant income or capital gains and have not been salary sacrificing consider claiming a personal tax deduction for super contributions up to the relevant concessional contribution cap. Don’t miss out on saving up to 32% tax this financial year.
  4. If you have an existing salary sacrifice arrangement in place giving you total concessional contributions close to the $25,000 per annum cap, review your salary sacrifice arrangements for the current and next financial year to ensure you don’t exceed the cap when your salary sacrifice contributions are combined with your employer SG super contributions. Given the change that enables everyone to make personal concessional contributions, you might want to consider cancelling it entirely.
  5. If you have excess savings or investments that you don’t need access to before retirement, consider transferring this wealth into super. This may reduce tax paid in your personal name and build your wealth for retirement.
  6. If your taxable income is less than $53,564 and you meet the works test, consider making a personal after-tax contribution to super. This may qualify you for a government-contribution of up to $500.
  7. If your spouse earns less than $40,000, consider making an after-tax contribution on behalf of your spouse. This will boost your partner’s super and reduce your tax.  You may receive a tax offset of up to $540.
  8. If your spouse has less super than you, consider splitting up to 85% of a financial year’s ‘taxed splittable contributions’ with your spouse. This will help to even up your member balances or fund your spouse’s insurance premiums (if insurance is held inside their super fund).
  9. If you have a small or medium business with turnover less than $500 million, consider making use of the $150,000 instant asset write-off. The reduction in tax liability frees up cash flow which can be used to sustain and/or expand your business.
  10. If you have an existing transition to retirement income stream (TRIS), give consideration to your eligibility to commence a retirement phase pension to obtain the tax-exempt status.

Whilst these ideas might get you thinking, it is important to consider the full eligibility rules and the appropriateness of the strategy in line with your full situation and objectives. Contact us to find out how these ideas can work for you now and in the future.

This information has been prepared and issued by ITL Financial Planning and is current as at 8 April 2020. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.

 

Written by Shereen Churchill (Financial Adviser)

On 2 April 2019, the Morrison Government delivered the 2019/20 Federal Budget which focused on “a plan for a stronger economy and securing a better future”.

From a pure financial planning and wealth perspective, the positive news is that the changes are minimal and largely positive. This is a very welcome outcome.

As is always the case, these measures will need to pass through the legislative process before they become law, and may change during that process. With the election to occur in May 2019, it is possible that these proposals will become law if the current Government is successfully returned. However, should the election be a Labor victory, Bill Shorten’s budget reply speech (which he will make tonight), will become of greater importance. We will provide a wrap up of Shorten’s reply speech post the election, should Labor win.

To help you understand the key announcements made by the Treasurer, ITL Financial Planning have put together a written summary of the key areas specific to self-funded retirees, professional families and successful business owners. BT’s Bryan Ashenden provides an overview for all Australians as well as for SMSF members via video.

Self-Funded Retirees

For our self-funded retirees, the major announcement was in relation to improving the ability to contribute to super and for longer.

From 1 July 2020, if you are aged 65 or 66, you will be able to make additional contributions to super even if you’re no longer working. Bring-forward arrangements, which currently allow those aged less than 65 years on 1 July to make up to three years’ worth of non-concessional contributions (currently capped at $100,000 a year) to their super in a single year, will also be extended to those aged 65 and 66. This is a welcome change for all clients looking to boost their income in retirement. It is also intended to provide an alignment to the qualification age for the age pension, which is progressively rising to age 67 (from 1 July 2023).

In addition, from 1 July 2020 there will be an increased ability to make spouse contributions to super. Currently, this is only an option provided your spouse hasn’t turned 70. The existing age limit will be increased to allow you to make contributions on behalf of your spouse, up to age 74.

Proposed tax relief will also benefit many self-funded retirees. These changes are outlined under the “professional families” heading.

Professional Families

For our professional families, the biggest proposals were in relation to tax relief in the lower and middle income bands. You may not be a low or middle income earner, but you will still benefit from having more of your income taxed in a lower tax bracket.

The Government has announced they will:

  1. From 2018-19, increase the Medicare levy low income thresholds for singles, families, seniors and pensioners.
  2. From 2018-2022, further reduce tax via the non-refundable low and middle income tax offset (LMITO). This measure will increase LMITO from a maximum of $530 to $1,080 per annum. LMITO will benefit anyone with income up to $126,000 and automatically be received on assessment of your lodged individual tax return. This offset will cease to apply from 1 July 2022.
  3. From 1 July 2022, ensure those benefiting from LMITO continue to do so when it ceases 1 July 2022, by increasing the upper threshold of the 19% personal income tax bracket as well as make changes to the low income tax offset (LITO).
  4. From 1 July 2024, the 32.5% tax rate will be reduced to 30%. This closely aligns the middle income tax rate with the company tax rate.

Proposed improvements to contributing to super and for longer will also benefit professional families. The proposed super changes are outlined under the “self-funded retiree” heading.

Successful Business Owners

For our successful business owners, the biggest proposal was in relation to the extension of the instant asset write off.

Small business owners will also gain the benefit of a further 12 month extension (until 30 June 2020) of the ability to claim an instant asset write off for eligible assets purchased, and an increase in the write off up to $30,000 (increased from the current level of $20,000) from 3 April 2019. In addition, this measure will be extended to medium businesses with aggregated annual turnover of less than $50 million.

The reduced tax liability resulting from the tax deduction frees up cash flow for small and medium business owners which can be used to sustain and/or expand their businesses.

The other major announcements were in relation to improving the ability to contribute to super and for longer as well as tax relief in the lower and middle income bands. These last two proposals are outlined under the “self-funded retirees” and “professional families” headings respectively.

Concluding thoughts

Overall, the number of changes announced in this year’s Federal Budget are small compared to prior years. For many, this is important as it allows a continued focus on the significant changes to superannuation which took effect from 1 July 2017. As indicated earlier, these measures will need to pass through the legislative process before they become law, and may change during that process. Furthermore, should the election be a Labor victory, Bill Shorten’s budget reply speech (which he will make tonight), will become of greater importance. We will provide a wrap up of Shorten’s reply speech post the election, should Labor win.

 

This information has been prepared and issued by ITL Financial Planning and is current as at 3 April 2019. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. 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 or further refinement.

We’ve worked with BT Panorama to provide you with the following “how to” videos, which are designed to help you manage your accounts and billers, make payments and deposits as well as get the most out of the rich market and portfolio reporting it offers. Click on the videos below that interest you. If there are additional “how to” videos that you would find helpful, please contact us and we will aim to bring these to you.

1. Managing accounts and billers  (3:14)

2. Making deposits and payments (3:35)

3. Accessing market news and information with BT Panorama (2:53)

4. Accessing investment reports for your account (2:40)

5. Accessing performance reports for your account (1:34)

Please contact us if you are unsure what the appropriate benchmark is for your portfolio.

 

At ITL Financial Planning, our vision is to be best practice in everything that we do for our clients, giving them peace of mind and financial freedom. We want to be one of the best financial planning businesses in Australia. This means we want to focus on attracting and retaining good quality clients. We specifically don’t want high volumes of clients, if we were to grow too big, we’d lose the heart and soul of the business, which is relationships.

We also believe that part of being best practice in everything that we do for our clients, is to have a clear succession plan. So, I’m very excited to be able to announce ITL’s succession plan. Shereen has become an equity partner (from 1 July 2018) following her tremendous input into the business over the last 3.5 years.

We’re both very confident in this decision with our complementary skill set, aligned values and strong focus on the business vision. We feel these same things benefit our clients as well as helping to resolve any uncertainty if something were to happen to me as the current sole owner.

Shereen and I will shortly receive the results from the recent Coredata survey and will publicising these. We will also be taking the team offsite in late July to analyse these results and as a team plan how we can continue to improve our advice and services of value to our clients.

We both look forward to the many years ahead, continuing to serve our clients.

Written by Shereen Churchill and Nick Lloyd (Financial Adviser)

We’re big advocates of the benefits of continually reviewing your situation to make sure you’re making the most of the available opportunities each year. The 30th of June is a key date as it signals the end of a financial year and the beginning of the next.

The importance of making the most of the opportunities prior to 30th June this year is just as important as previous years. This is because legislation changes over recent years have seen the Government cracking down on how much you can get into super. Why? Because its still the most tax effective vehicle for your retirement savings.

There are contribution rules and penalties for getting things wrong, so we always recommend getting personal financial advice based on your personal circumstances and objectives.

Here are 10 ideas that we will be considering with our clients this end of financial year:

  1. If you have close to $1.6m in super, it could be worth bringing forward contributions or you might miss out.
  2. If you are over 60 and resigned from employment, consider whether you can access your superannuation. Also give consideration to your eligibility to commence a retirement phase pension to obtain the tax-exempt status.
  3. If you have significant income or capital gains and have not been salary sacrificing consider claiming a personal tax deduction for super contributions up to the relevant concessional contribution cap. Contribution caps are currently (until 1 July 2018) a use it or lose it opportunity so don’t miss out on saving up to 32% tax.
  4. If you have an existing salary sacrifice arrangement in place giving you total concessional contributions close to the $25,000 per annum cap, review your salary sacrifice arrangements for the current and next financial year to ensure you don’t exceed the cap when your salary sacrifice contributions are combined with your employer SG super contributions. Given the change that enables everyone to make personal concessional contributions next year, you might want to consider cancelling it entirely.
  5. If you have excess savings or investments that you don’t need access to before retirement, consider transferring this wealth into super. This may reduce tax paid in your personal name and build your wealth for retirement.
  6. If your taxable income is less than $51,813 and you meet the works test, consider making a personal after-tax contribution to super. This may qualify you for a government-contribution of up to $500.
  7. If your spouse earns less than $40,000, consider making an after-tax contribution on behalf of your spouse. This will boost your partner’s super and reduce your tax.  You may receive a tax offset of up to $540.
  8. If your spouse has less super than you, consider splitting up to 85% of a financial year’s ‘taxed splittable contributions’ with your spouse. This will help to even up your member balances or fund your spouse’s insurance premiums (if insurance is held inside their super fund).
  9. If you have a small business with turnover less than $10 million, consider making use of the $20,000 instant asset write-off. The reduction in tax liability frees up cash flow which can be used to sustain and/or expand your business.
  10. If you have an existing transition to retirement income stream (TRIS), consider the viability of continuing the TRIS given the loss of the tax-exempt treatment and the reduction in the concessional cap. Also give consideration to your eligibility to commence a retirement phase pension to retain the tax-exempt status.

Whilst these ideas might get you thinking, it is important to consider the full eligibility rules and the appropriateness of the strategy in line with your full situation and objectives. Contact us to find out how these ideas can work for you now and in the future.

This information has been prepared and issued by ITL Financial Planning and is current as at 9 May 2018. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.