April 2020

Hello and welcome to our April 2020 newsletter. In this quarter’s issue, we have provided articles on the following topics:

Staff Updates

Lots of changes have happened in the previous 6 months and we are going to start with the obvious Coronavirus response. Our office is only open for limited hours with minimal staff, 10am until 4pm Monday, Wednesday and Friday until further notice. The majority of the time we will be working hard from home and are available easily via email. Our office phone will be answered by Tracey, and she can pass on phone messages to whomever you wish to speak to. We can arrange an appointment in the office if you do wish to meet face to face, however if you are unwell we ask that you please reschedule.

We are pleased to announce that Jessica Jalkanen has joined our team on a full time basis after being part time for many years.

Conversely, Allison Burman has returned from maternity leave on a part time basis, working Tuesday, Wednesday and Thursday. We would also like to congratulate her on her recent marriage and advise that she will be known as Allison Scholar going forwards.

For those who don’t know yet, we have welcomed a new receptionist, Claire Robertson-West, who began working with us in December.

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Reducing Minimum Pension Payments for 2019/20 and 2020/21

The Government is helping retirees to manage the impact of volatility in financial markets on their retirement savings by temporarily reducing superannuation minimum drawdown requirements. This will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements. The reduction applies for the 2019-20 and 2020-21 income years. The new minimums are as follows:

Age Minimum Reduced minimum (2019-20 and 2020-21)
Under 65 4% 2%
65-74 5% 2.5%
75-79 6% 3%
80-84 7% 3.5%
85-89 9% 4.5%
90-94 11% 5.5%
95+ 14% 7%

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Economic Stimulus Package

The government announced a stimulus package in March 2020 to help boost the economy in this difficult time. There are many parts to the package but some of the more relevant ones are briefly explained below:

Tax free cash payments to pensioners
Welfare recipients and concession card holders will receive two payments of $750 which will be tax free and not count as income. The first payments will be made from 31st March 2020 onwards and the second from 13th July 2020.

Reduction in super pension minimum withdrawals
The minimum drawdown for superannuation pensions has been halved for 2020 and 2021. This is also what was done for the GFC in 2008.

Deeming rates reduced
Many people will receive an increase in their social security payments as the government has reduced the lower deeming rate (for financial investments up to $51,800 for single pensioners and $86,200 for couples) will be cut from 1% to 0.25%. The upper rate has also decreased from 3% to 2.25%. The extra money will begin being paid from 1st May 2020.

Early release of Superannuation for Financial Hardship
Eligible individuals will be able to access up to $10,000 of super in 2020 and $10,000 of super in 2021. You can apply for release from mid-April and are eligible if you satisfy one or more of the following criteria:

  • You are unemployed; or
  • You receive an job seeker payment, youth allowance, parenting payment, special benefit or farm household allowance; or
  • On or after 1 January 2020 you were made redundant, or had your working hours reduced by 20% or more, or you are a sole trader and your business has been suspended or turnover reduced by 20% or more.

Individuals will not need to pay tax on this money released. If you are affected, you can apply online through the myGov website and your application will be handled by the ATO. There will be separate arrangements for SMSF but at this time the details have not been released.

Payments for employers to retain staff
SMEs with turnover under $50 million will receive a tax free payment from $20,000 up to $100,000, equal to the amount withheld from salary and wages. The payment will be made as a credit against activity statements lodged and will begin from 28th April.

Employers who have been adversely affected by the various virus containment attempts can apply for a Jobkeeper payment of $1,500 per employee to help the employer keep them employed. The employer must demonstrate a decline in turnover, provide information to the ATO on all eligible employees although the ATO will likely use the STP data to assess this, and ensure that each eligible employee receives at least $1,500 per fortnight before tax. Self-employed people will be able to access this as long as the turnover test is met.

Increase in instant asset write-off threshold
The instant asset write-off threshold will be increased from 12th March 2020 until 30th June 2020 to $150,000 and applies to new or second-hand assets installed during these dates. Businesses with annual turnover of less than $500 million are eligible.

Accelerated depreciation
Businesses will be allowed to deduct an additional 50% of an asset cost if purchased from 12th March 2020 until 30 June 2021. Businesses with a turnover of less than $500 million that are purchasing new depreciable assets are eligible. Second hand assets are not eligible purchases.

Tax Relief
The ATO is considering relief for certain tax obligations to eligible businesses, including payment deferrals for up to 4 months. If you need assistance in liaising with the ATO please contact our office.

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Mental health in a remote workforce

Remote working is a growing trend we have been seeing in the global workforce, even before staff were recently asked to work from home. It has substantial advantages such as increased productivity, cost savings, reduced absenteeism, better work-life balance and less stress associated with work.

Yet, while remote working can benefit both employer and employee, the situation can change when telecommuting is a necessity, not a choice. Extroverts may experience mental health difficulties as they are forced to go without the camaraderie of the office. In fact, they are the least likely to be productive at home. Even introverts may find extended periods of isolation challenging to their state of mind.

If organisations and leaders are genuinely interested in the wellbeing of their remote employees, they can start with positive messaging. This can be done through sending messages as often and appropriately as possible, scheduling informal chats, prioritise phone calls over emails, formal weekly meetings or daily “stand-ups”, make use of technology such as video conferencing, document sharing platforms and group chat to keep employees in the loop. To really be effective, communication needs to be followed up with real and meaningful actions.

Employers also need to both acknowledge any stress on the part of the employee and impart a sense of confidence about the future.

Telecommuting makes it harder to maintain boundaries with home life, something that can affect mental health so organisations can encourage remote employees to practice a few basic strategies. These include:

  • Setting up a “home office” conducive to working effectively. It should be somewhere work can easily be packed away in the evenings or on the weekends.
  • Sticking as closely as possible to normal work hours and routines, including getting dressed for work.
  • Scheduling normal breaks throughout the day for coffee and lunch or, if possible, a short walk to help maintain mental health.
  • Keeping in touch with a manager to continue to set and review goals; and importantly, to acknowledge and celebrate wins and successes.
  • Using apps such as Todoist and Toggl to stay productive as well as mental health apps like Mindfulness or Headspace.

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Superannuation Guarantee Amnesty

This long awaited bill has finally passed parliament, providing a one-off amnesty to encourage employers to self-correct superannuation guarantee non-compliance dating from 1st July 1992 to 31st March 2018. It will allow employers to claim tax deductions for payments of SG charge or contributions made during the above period, and remove the administrative component and penalty that is generally applied when non-compliance is correct. Employers will still have to pay the amount owing to their employees superannuation funds, but avoid the penalties involved.
The amnesty period starts from 24th May 2018 and will end 6 months from royal assent which has yet to be given.

We encourage all employers to check that you don’t owe outstanding superannuation for employees.

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Why is it important to upgrade your SMSF Trust Deed?

The Trust Deed is one of the most important documents for a SMSF. It stipulates all the rules which govern the operation of your fund. Whilst legislation typically specifies what trustee ‘must not’ do, the governing rules of a fund specify what trustees are ‘allowed’ to do.
The superannuation legislative environment has evolved significantly with three major updates effecting the operations of SMSF’s in the last 15 to 20 years:

  • 1999 – Conversion of ‘excluded funds’ to ‘SMSF’s, change in preservation and in-house asset rules
  • 2007 – ‘Simpler Super’ reforms
  • 2017 – ‘Sustainable Super’ reforms

It can be dangerous for an SMSF to have an old trust deed with irrelevant and invalid clauses. With the amount of changes to superannuation, it’s essential that your SMSF has a good quality trust deed which is reviewed regularly. Some of those changes reflect developments in best practice. Others reflect changes in the law.

Following is a list of key areas that older deeds may lack in and the reasons why we believe these deeds should be updated, especially in light of the recent 2017 Superannuation reforms.

  • Flexible Pensions – Many older SMSF deeds have inflexible pension payment provisions which do not contain appropriate powers that permit SMSF trustees to pay newer forms of pensions that comply with superannuation law
  • Reversionary Beneficiary Pensions – Old deeds may not allow for reversionary beneficiary pensions to be paid on a member’s death.
  • Transition to retirement pensions – Transition to Retirement Pensions (TTR) are a subset of Account Based Pensions and can be commenced once a member reaches preservation age.
  • Death Benefit Payments & Binding Death Benefit Nominations – A major reason to update your SMSF trust deed is to better manage your benefits when you die. When this happens, the trustee of your fund must pay your death benefits to either your estate or a dependent (as defined under SIS)
  • Member Benefit Guardians & Estate Planning – Another estate planning measure, which a new deed will allow you to implement, is the appointment of a death benefit guardian
  • Commutation Authorities – Under the new Superannuation Reform legislation, trustees must be able to comply with the new forms of commutation authorities and have the power to pay the various taxes
  • Limited Recourse Borrowing Arrangements – Many old SMSF deeds contain clauses which prohibit SMSF’s from borrowing or at best general clauses which allow it as long as it’s consistent with the superannuation law
  • Other Operational Mechanisms – There are a several operational mechanisms which old deeds may not be able to cater for. Generally most new deeds will provide for Segregation, Contribution/Income reversing, Contribution splitting etc.

If you think your Trust Deed needs updating, please contact our office for assistance.

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