January 2021

Happy New Year and welcome to our January newsletter.  In this quarter’s issue, we have provided articles on the following topics:

If you have any topics you wish to know more about or something you would like us to write about, please contact us at admin@veritassolutions.com.au

Staff and Office Updates

We are very pleased to introduce our new receptionist, Anette Mynott, whom some of you may already have had the pleasure of meeting.  She joined our team in mid-November and is looking forward to staying for the next 10 years or so!

Our accountant, Jessica Bird (nee Jalkanen), has welcomed the arrival of her new baby boy, Finn.  He arrived rather ahead of schedule on her last day of work in November, but both of them are doing very well.

Allison Scholar has, after 7 years of training, attained her black belt in taekwondo with the Korean Martial Arts Academy in Belconnen.

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New Year Financial Health Check – Are you on track for the 2021 financial year?

Whilst many people make New Year resolutions to set personal goals, January is also an important milestone in the financial year.  Reviewing your finances now allows you time to implement new strategies and/or make sure existing plans are running accordingly to schedule.  We have included some items that should be checked or planned for now rather than in June of the financial year when it is often too late to implement.

  • For those working – check your Super Concessional Contributions (this includes Super Guarantee, Salary Sacrifice and personal contributions) to make sure you do not exceed your cap of $25,000 or look at making further contributions to make the most of what is still available. Remember deductible super contributions are only tax deductible in the financial year they are received in your super fund account and often the last quarter or monthly contributions are not received until the next financial year.  Ask your employer or check your super fund account if you are unsure of the amounts that have been paid for this year so far.
  • For retirees – check that you are on track with your minimum pension withdrawal amounts. Scheduled fortnightly and weekly payments can sometimes fall short due to the timing of weeks in the financial year i.e. 25 payments rather than 26.
  • Be proactive – for those that tend to leave paperwork to the last minute start organising your accounts and tax paperwork now. This alleviates stress by not leaving it until the last minute and also helps to get an idea of your current financial and tax position so you can utilise the next few months effectively and then;

Talk to us at Veritas Wealth Solutions to see what you can possibly take advantage of over the next few months or have any questions answered in regards to your financial goals before June 30 arrives.

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JobKeeper Reduction

From 4th January 2021 until 28th March 2021, the JobKeeper rate has been further reduced for those who are still eligible to receive it.

For the December quarter, Tier 1 employees would receive $1200 before tax and Tier 2 employees would receive $750 before tax per fortnight. 

From 4th January, this has reduced for Tier 1 employees to $1,000 before tax and for Tier 2 employees to $650 before tax per fortnight. 

In order to receive the subsidy, employers receiving must prove they have experienced a loss of revenue of at least 30% compared to the same quarter in 2019 and must make a declaration to the ATO to that effect. 

Whether there will be any further extensions to the programme is yet to be to be decided by the authorities.

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A Beginner’s Guide to Superannuation

Superannuation (or super) is money put into a super fund while you are working to provide you with income when you retire.  The Age Pension is designed to provide the most basic needs, so the more you save now, the more enjoyable your retirement will be.  Compulsory super was introduced in 1992 to help relieve the burden on the welfare system.

If you are aged over 18 years old, earn more than $450 per month and are an employee, your employer must pay money into a super fund for you.  This is called the Superannuation Guarantee Contribution (or SGC) and you are guaranteed 9.5% of your gross income to be paid into your super fund (this will increase to 10% on 1/7/2021).  You can also make voluntary contributions, out of your before tax or after tax money.

Super has two phases: accumulation phase, and retirement phase (also known as pension phase).

  • Accumulation Phase – this is when you are contributing to your super.  All the contributions and earnings are locked away (preserved) until you retire.
  • Retirement Phase – when you commence an income stream (pension).  Fund earnings on retirement phase assets are tax free. 

Once your money is inside the super system, it is locked away for decades until you retire or reach another condition of release.  The reward for patience is the earnings on your fund are concessionally taxed at 15%, and you can generally withdraw your savings tax free when you retire.

There are two types of contributions that can be made, and there are also limits to those contributions to prevent people from abusing the tax free environment.

  • Concessional (before-tax) contributions are amounts paid into your super fund that have been claimed as a tax deduction by you or your employer.  They are ‘concessional’ because they have only been taxed at 15% rather than your marginal rate.  The current cap is $25,000 per year and includes any SGC, salary sacrifice or personal contributions that you claim a deduction for.
  • Non-Concessional (after tax) contributions are amounts paid into super where no deduction has been claimed (eg straight out of your bank account).  No tax is paid on these contributions by the fund (as tax was paid outside the fund), and the annual cap is $100,000, although you can access the bring-forward rule to contribute up to $300,000 in any 3 year period so long as you are under 65.

There are a few different types of super fund that you can choose to invest in.  You can choose a retail or industry fund, you can choose a wrap product or in some circumstances you can create your own super fund, known as a self-managed super fund. 

  • Retail and industry funds choose which investments to buy with your super money and they take care of all of the administration and tax. You just get a report twice a year telling you what has happened during the period.
  • A wrap product gives you the control over what you invest in, within some limits, but the trustee takes care of the tax and administration. You are responsible for the investing so if you don’t make any decisions it will stay in cash and earn very little!.
  • A self-managed super fund gives you control over everything – what you invest in, within the legislation requirements and the cash in the super fund but you also have the responsibility of proper administration, tax and record keeping.

If you would like advice on any aspect of the above please contact our office and speak with one of our financial planners.

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The role of health in predicting future economic movement

In the face of the pandemic, many governments around the world chose to sacrifice their economies in order to protect the lives of their citizens. Can we expect health to play a bigger role in predicting future economic movement?

As at the end of December, COVID- 19 has claimed the lives of more than 1.8 million people around the globe.

Every death is devastating, but the short-term impact of the pandemic on physical health in Australia has been comparatively small (notwithstanding a large outbreak in Melbourne), largely due to early intervention, including stringent border control and widespread social distancing measures such as closing down gyms, restaurants, cinemas and other businesses.

The economic impact of the lockdown in Australia is predicted to be more pervasive than the health one, however. The Federal Treasury estimated that 1.5 million Australians came out of work during the first half of 2020, and that household consumption was about 16 per cent lower. It also predicts a drop in business investment of approximately 18 per cent.

While this longer-term fall-out remains to be seen, the swift policy response to epidemiological modelling has prompted some economists to question the role of health in predicting future economic movement. Meanwhile, the pandemic has shone a light on the relationship between health and productivity. Through COVID-19, we’ve been able to see that avoiding poor health outcomes can compromise productivity, which is being reflected in unemployment rate.

However, decisions to lock down economies due to COVID-19 are a value judgement. Australia and other places like Taiwan basically want to keep the virus at bay until a vaccine becomes available, but countries like Sweden have decided to not pursue a strong economic shutdown, and they’ve obviously had a larger proportion of their population die.

Economists like to say that all decisions have got to be financial in the end. However, striking the balance between the short and long term, and between the interests of older and young people, are value judgements. Lockdowns represents a trade-off between physical health and broader public wellbeing that is widely associated with a functioning economy.

The economic lockdown presents a trade-off, and that high unemployment and the potential impact on mental health and domestic violence are some of the costs. However, the government is attempting to mitigate that cost by introducing support functions, such as telehealth for mental health and more funding for suicide prevention. The idea has been to get the immediate danger under control, and then work to minimise the cost of that decision.

Mental health problems arise from things like not having interaction with other people or being turfed out of jobs, and there isn’t a good substitute for that. Economic recovery and support for people out of work and for industries that have closed down will rightly come to the fore and the health effects will be there all the time in the background, but public policy attention will shift more to the economy.

It is an important signal, not only to politicians, economists and health people, but also to the population at large that we have to be prepared for the unseen. We need to build into future plans this awareness that we can’t just assume an automatic fix for everything.

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