Staff and Office Updates

We are pleased to announce that our Accountant Jessica has returned from maternity leave and is already back hard at work.  Her hours will be 9am – 3pm daily.

On the other hand though we are excited to announce that Allison is pregnant and will be off on her maternity leave on the 21^st of May. Please note that any email queries you would normally direct to Allison, can be sent to admin@veritassolutions.com.au and they will be passed on to the most appropriate person.

2021 Minimum Pension Reminder

As the end of financial year is fast approaching, now is the time for a quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund prior to Wednesday 30th June 2021.

You will find each member’s minimum pension withdrawal requirements in the covering letter that was included with your 2020 financial statements. If you haven’t received your 2020 financial statements as yet from us, you will receive them in the coming months and will still have plenty of time to make sure you take out the required amount for your minimum pension for the 2020-2021FY.

If you have any questions in regards to your minimum pension requirements, please call our office to discuss with one of our accountants.

Indexation of the General Transfer Balance Cap (TBC)

The TBC was brought in by changes to the superannuation laws in July 2017.  It caps the amount of superannuation a person can have in retirement phase across all their superannuation benefits.  Each person was given a TBC of $1.6 million in 2017 and from 1 July 2021 it will be indexed to $1.7 million.

Each person is given a transfer balance account (TBA) once they begin drawing a pension from their super.  If you never had one before 1 July 2021, then your personal TBC will be $1.7 million.

If your TBA has ever reached your $1.6 million maximum, your TBC remains at $1.6 million and you are not eligible for any indexation.

If you are somewhere in between, like the majority of retirees, then you will receive a proportional increase in your TBC.

The ATO will be conducting calculations of your personal TBC, however their calculations will be based on the information they have received from your superannuation funds.  If you have a myGov account you will be able to see the new TBC online or your personal tax agent will also have access to see it. 

The effect of this is that each person will have a different TBC from 1 July 2021 so in order to offer you the most accurate advice we may request that you provide us with the information that the ATO has calculated to confirm our calculations and reduce the possibility of errors.

Contribution Cap Changes for 2021-2022 FY

The concessional contribution cap is set to increase from $25,000 p.a. to $27,500 pa from 1 July 2021.  Concessional contributions include:

employer contributions (including contributions made under a salary sacrifice arrangement)

personal contributions claimed as a tax deduction.

If you have more than one fund, all concessional contributions made to all of your funds are added together and are counted towards your concessional contributions cap.

The non-concessional cap in 2021–22 will increase from $100,000 to $110,000 from 1 July 2021.  Before making a non-concessional contribution for any financial year, you will need to check your personal Total Superannuation Balance and confirm that you can contribute. Please contact our office to discuss this before contributing.

Non-concessional contributions include personal contributions for which you do not claim an income tax deduction.

If you have more than one fund, all non-concessional contributions made to all of your funds are added together and counted towards the non-concessional contributions cap.

How to gain respect in the workplace

Gaining the respect of your colleagues is crucial to professional success. Most of us would agree that being respected by our colleagues is important to us. However, building trust and admiration in the workplace takes hard work. Respect of others is a tricky quality to manifest because it “requires effort as well as self-reflection”. Trying to be liked can perpetuate a focus on doing whatever you think needs to be done for approval, and that can mean not speaking up or doing what is right.

Companies are also starting to appreciate the high value placed on respect, which is now seen as a fundamental part of boosting productivity and worker wellbeing. 70 per cent of employers recognise “workplace dignity”, which includes feeling respected, proud and valued, as vital to company success.

Supporting your colleagues is important. The fastest way to earn the trust and respect of your co-workers is to not “burn them” in front of others. Show that you’re not interested in the political games, but are actually more focused on the outcomes for the organisation. If you have a general demeanour that lets other people know you’re not driven by self-interest, that translates very well into trust and respect at the peer level. You also need to demonstrate that you are not just pushing your own barrow, but focused on the main goal. If you’re willing to put aside what you’re doing to help a team member’s project that is more important for the organisation, then nothing builds respect faster than that. Consistent behaviour is also essential for gaining respect from co-workers.

People want to be treated the same. You need to walk the talk, and when people say what they mean and their behaviour follows through, it will lead to respect.

Employees who are focused on appearing “nice” are always agreeable, but if it’s respect you’re after, you need to speak up. The ability to disagree with someone respectfully, even if they are more senior, is a great way to gain respect. It’s what people call ‘corporate courage’. People will also respect you if you are “courageously you”, which is really tough. People need to be courageous enough to bring their entire self – strengths and weaknesses – into the picture.

When people are not being themselves, they are faking it until they make it, and putting up boundaries so they can be liked. Calling out bad behaviour when you see it is another important attribute. People admire it, because sometimes they haven’t had the courage to do it themselves.

It’s hard, because being non-conforming is beaten out of us when we are kids, but you really do need to be the change you want to see in the world.

If you are in a senior role that involves managing people, you need to adapt your approach depending on who you are working with to gain their respect. Really good leaders don’t need to tell people what to do. If one of your people is immature or inexperienced, you may need to be more direct or prescriptive with them, but with people who are performing at the right level, you want to set broad parameters for them and work collaboratively.

We unconsciously put people into boxes, so being able to be curious about where they are coming from is important. Once you have established trust with colleagues, it becomes easier to disagree or challenge their view in a healthy way.

If people trust and respect you, there is nothing you can’t say to them.

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.

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.

JobKeeper Reduction

From 4^th January 2021 until 28^th 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 4^th 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.

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.

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.

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

A quick reminder about our COVID-safe environment. Our building has hand sanitiser near the lifts and in our reception area for your safety and convenience.  We request that if you have an appointment booked but are unwell that you please reschedule until a later date.  If you prefer not to meet in person, phone or skype appointments are available.

It is with regret that we announce that our receptionist, Claire, will be leaving our employment in a few days.  We wish her all the best with her future endeavours.

Jessica Jalkanen will be taking maternity leave from the end of November until mid-next year.  Please note that any email queries you would normally direct to Jess, can be sent to admin@veritassolutions.com.au and they will be passed on to the most appropriate person.

JobKeeper Extension

The original JobKeeper stimulus of $1,500 per fortnight per employee/business owner was set to end on 28^th September 2020. The government have recognised that economic recovery is set to take quite some time.  To assist, they have extended the payment until 28^th March 2021. 

You are entitled to the JobKeeper extension until January if your GST turnover has declined by 30% in the September 2020 quarter relative to the same period in 2019 and you already satisfied the original decline in turnover test.  You are entitled to the JobKeeper extension until March if your December 2020 quarter turnover has declined by 30% compared to 2019. There are alternative tests available if your business was not operating in the previous year.

For payments from 28^th September onwards, there are two rates, Tier 1 and Tier 2. 

• JobKeeper fortnights from 28/9/20 to 3/1/21, Tier 1 is $1,200 per fortnight and Tier 2 is $750 per fortnight.
• JobKeeper fortnights from 4/1/21 to 28/3/21, Tier 1 is $1,000 per fortnight and Tier 2 is $650

An employer is entitled to the Tier 1 rate for an eligible employee or business participant if they satisfy the 80 hour threshold.  There are 2 steps to satisfying the 80 hour threshold:

1. Determine the individual’s reference period (for employees – the 28 days that finish on the last day of the pay period that ended before 1 March 2020 or 1 July 2020. For eligible business participants – the month of February 2020)
2. The apply the 80 hour test – your employees total number of hours of work, leave & public holidays was 80 hours or more, or your work as an eligible business participant was 80 hours or more

If you are not entitled to the Tier 1 rate then you will be entitled to the Tier 2 rate.  Before you can claim a payment from 28^th September 2020, you must notify the ATO whether the Tier 1 or Tier 2 rate applies to each of your eligible employees or business participants. 

If you have any questions or need any assistance with JobKeeper, please contact one of our accountants.

The Cost of Not Listening

Listening well doesn’t involve passive acceptance or not speaking up. Among other things, it requires the psychological effort of checking bias and physical factors such as collaborative spaces.

Poor listening skills can lead to the loss of customers or employees. To listen well is to acknowledge the multiple situational, psychological and physical drivers at play. Active listening is not just about listening without speaking up, but asking the right questions and engaging with the answers.

There are many ways to improve your listening skills. Two things stand out when trying to help managers become better communicators with staff who can feel they are not being heard or being brushed off.

Firstly, the likelihood that the first thing a person says is what they mean is about a one in nine chance because we speak at about 125 words a minute but think at about 900. Secondly, it is important to seek further detail by saying “what else?”, or “tell me more”.

Embrace the silence and allow the speaker to gather their thoughts. It may help to get to the heart of the matter. By doing this, managers can increase their listening productivity immediately.

Real listeners will check their own biases about the conversation or the speaker at the door, and attempt to moderate their own mood and interest levels before engaging.

Thereafter, it’s about the practicalities: a good space to speak and listen in, and eliminating the distractions of technology.

Good habits include resisting the temptation to express agreement or disagreeing too early, having empathy, and ultimately drawing out the specifics of the conversation.

Active listening shouldn’t have to equate to passive acceptance, whether by a student or business leader. Answering a question is one thing; engaging with it takes it to the next level.

Tips for active listening

1. When in a meeting, turn off all your devices to avoid distractions.
2. Drink a glass of water every half hour. A hydrated brain is a listening brain.
3. Take visual notes/mnemonics. Graphics stick better than verbatim notes.
4. Be comfortable with silence. Allow people to pause and continue.
5. You can direct the conversation if needed. Listening doesn’t mean allowing people to repeat themselves ad nauseam

Super Fund Trustee Responsibilities

Being a super fund trustee and in charge of your own superannuation can be exciting but it comes with a whole host of responsibilities that it is important you understand.  The consequences for getting it wrong can be severe.  The ATO can impose penalties, direct you to rectify the error and undertake education, disqualify you from being a trustee or director of any super fund in the future, remove the complying status of the fund which has adverse tax consequences or prosecute you which could lead to imprisonment.

You can find a summary of your responsibilities in the SMSF Trustee Declaration that you signed when you became a trustee, but we have summarised some of the duties below. 

It is your responsibility, as trustee, to ensure the fund is maintained for the sole purpose of providing retirement benefits for members.

As a trustee, you must:

• act honestly and exercise skill and care in operating the fund while acting in the best interests of the members
• keep records of decisions and ensure that money and assets are kept separate from your personal assets. 
• provide access for all members to information and documents as required, and you must take action to protect the fund’s assets
• be aware of the conditions in the legislation and trust deed which allow the super fund to accept contributions from members and pay benefits to members
• not enter a contract that would prevent you from properly performing your duties as a trustee.

The law requires you to have an investment strategy which considers the circumstances of the fund, including investment risks and returns, investment diversity and expected cash flow requirements and the insurance needs of the members.

There are several investment types that, as trustee, you are prohibited from investing the super funds money in.  You cannot:

• Give financial assistance to a member or a member’s relative, either directly or indirectly;
• Acquire assets from members or related parties, with the exception of business real property, listed securities, certain in-house assets, acquisitions made under mergers, or acquisitions from another SMSF as a result of a relationship breakdown);
• Borrow money except under limited recourse borrowing arrangements
• Acquire an in-house asset if the total in-house assets of the fund exceed 5% of the total market value of the fund’s assets (in-house assets are loans to or investments in related parties of the fund); or
• Purchase investments that are not made on an arm’s length (commercial) basis.

As trustee, you have a responsibility to maintain records for the appropriate time, appoint an SMSF auditor each year and take action on any suggestions from the audit each year, lodge the super fund tax return by the due date and notify the ATO of any membership, trustee or contact detail changes within 28 days.

If you would like to brush up on your knowledge and understanding, the ATO have free courses available here.

2020 Tax Time Changes

There have been a significant number of changes to the 2020 tax rules and we have summarised the most relevant here:

Net Medical Expenses  
From 1 July 2019, there is no longer a tax offset available for net medical expenses for disability aids, attendant care or aged care.

No Deductions for Vacant Land
From 1 July 2019, you can  no longer claim a deduction for the cost of holding vacant land (interest, land tax, rates etc), unless the land is used to produce income, or the land is vacant due to an exceptional circumstance in the last 3 years (eg fire, flood or building defects)

CGT changes for foreign investors
The CGT main residence exemption can only be claimed for disposals that occurred before 30 June 2020. From 1 July 2020, foreign residents are no longer entitled to the exemption.

Increased incentives for Affordable Housing
There is an additional 10% CGT discount for Australian resident individuals who provide affordable rental housing to people earning a low to moderate income.  This will apply to CGT events occurring on or after 1 January 2021 and the rental must have been provided for a minimum of 3 years.

JobKeeper Payments
For an employee, these will be included on your income statement as salary and wages.  For an employer, these payments to the employee are deductible like wages, however this means the income you receive from the ATO will be assessable income.

Working from Home
With many more people working from home due to COVID-19, a lot of people are incurring additional personal expenses such as heating, lighting, equipment.  The ATO have released a ‘shortcut method’ for claiming working from home expenses, where you claim 80c for each hour, and this covers all phone, internet and other costs.

Early Release of Super
Eligible individuals could access $10,000 of super before 30 June 2020 and can access a second $10,000 until 31^st December 2020. You do not need to pay tax on these amounts.

If you have any questions about any of the above items, or other changes, please don’t hesitate to contact our office.

Bias and Investments

Many behavioural studies have shown there are several traits and biases that can stop us from making reasonable decisions about everything from what to eat to how to invest. When implementing investment plans, understanding these biases and considering whether they are negatively impacting decisions can be beneficial. In general, people have asymmetric risk profiles and fear losses more than the expectation of gains by at least a 2:1 margin[1]. Interestingly, and perhaps not surprisingly, this ratio increases substantially as people approach retirement.

American psychologist and economist, Daniel Kahneman, who won a Nobel Prize for his work challenging the prevailing assumption of human rationality in modern economic theory has stated, ‘If you have an individual whose objective is to maximise wealth at a certain future point in time, then loss aversion is very bad because loss aversion will cause that individual to miss out on many opportunities.’

This loss avoidance trait stands in contrast to a basic investment principal, that investors need to accept higher risk (and higher potential for near-term losses) in order to achieve higher returns over the long term, particularly during market sell-offs. When faced with losses, rational decision-making can become impaired by the emotional desire to avoid more losses.

There are a wide range of cognitive biases that can impact retirement plans, some are listed below:

Confirmation bias
Confirmation bias is the natural human tendency to seek information that confirms an existing point of view or hypothesis. This can lead to overconfidence if investors keep seeing data that appears to confirm the decisions they have made. This overconfidence can result in a false sense that nothing is likely to go wrong, increasing the risk of being blindsided when something does go wrong.

Information bias
Information bias is the tendency to evaluate information even when it is useless in understanding a problem or issue. Investors are exposed to an array of information daily, and it is difficult to filter through this and focus on the relevant information. In general, investors would make superior investment decisions if they ignored daily share price movements and focused on prices compared to the medium-term prospects for the investments. By ignoring daily share price commentary, investors would overcome a dangerous source of information bias in the investment decision making process.

Loss aversion bias
Loss aversion is the tendency for people to strongly prefer avoiding losses than obtaining gains. The loss aversion effect can lead to poor and irrational investment decisions, where investors refuse to sell loss-making investments in the hope of making their money back. Investors fixated on loss aversion can miss investment opportunities by failing to properly consider the opportunity cost of their investments.

Anchoring bias
Anchoring bias is the tendency to rely too heavily on, or anchor to, a past reference or one piece of information when making an investment decision. For example, if you were asked to forecast a stock’s price in three months’ time, many would start by looking at the price today and then make certain assumptions to arrive at a future price. That’s a form of anchoring bias – starting with a price today and building a sense of value based on that anchor.

How do we try and overcome the biases when building retirement portfolios?

We have a greater focus on absolute rather than relative performance. Our portfolios have been constructed to manage risks, including:

• Market and sequencing risk
• Inflation risk
• Longevity risk

Varying investment strategies can assist in controlling for these risks and they include a yield component (generating a certain level of income from investments that have differing risk return characteristics), a capital growth component (designed to generate long term capital growth, with limited focus on income) and a risk control component (critical for retirement portfolios and is designed to reduce some of the market risks in the yield and capital growth components). It is important to note that the risk control part of the portfolios will not eliminate these risks but aims to mitigate them. Asset allocation and diversification are also important ingredients in managing the overall volatility of the portfolios.

The varying portfolios can assist in managing the risks that impact retirees, however it is important to note that none of these strategies provide a guaranteed outcome. The range of products that offer certainty of income or capital protection such as annuities has increased in recent years, in recognition of Australia’s aging demographics and demand for greater certainty in retirement.

[1] Gachter, Johnson, Herrmann (2010). Individual – level loss aversion in riskless and risky choices. Columbia Business School

Staff and Office Updates

With the ACT returning to normal, our office hours have changed back to our standard hours of 9am to 5pm Monday to Friday.  Some of our staff will be working part of the week from home, however we are always contactable by email.

In trying to be COVID-safe, our building has hand sanitiser near the lift and in our reception area and we request that you use it upon entering our office. We are happy to have face to face appointments however if you are unwell, we request that you please reschedule until a later date. If you would prefer not to meet in person, phone appointments are also available.

Home Office Deductions

During the pandemic, a lot of employees have been asked to work from home in order to help stop the spread of the virus.  As you are using some of your own resources, the ATO allows a deduction for home office expenses. 

There are some costs you can’t claim, for example, tea, coffee and milk which you may have been provided with at work and anything your employer paid for directly. You also can’t claim occupancy expenses such as rent, mortgage interest, water and rates.

There are 3 methods to claiming home office deductions:

1. Shortcut method
   Operating from 1 March 2020 to 30 June 2020, this method is temporary and designed to make claiming home office deductions easy for those who have never done it before. You can claim 80 cents per hour for each hour you worked from home.  This amount covers all your work from home expenses such as phone, internet, depreciation of equipment and furniture, and electricity and gas for heating, cooling and lighting.  If you use this method, you cannot claim any other expenses for working from home. You must keep a record of the number of hours you worked from home.  This could be a timesheet, roster, diary or documents that set out the hours you worked.
2. Fixed rate method
   You can claim 52 cents per hour which covers your expenses for decline in value of furniture, electricity and gas for heating, cooling and lighting, and the cost of repairs for your home office equipment.  You must keep records of either your actual hours working at home, or a diary for a representative 4 week period to show your usual pattern.  You need to have a dedicated work area such as a home office.  This doesn’t include phone, internet, computer consumables and stationery or decline in value of equipment, so these items can be claimed separately.  You must keep receipts or written records of expenses, phone accounts identifying work related and private calls and a diary that shows small expenses and work related internet use.
3. Actual cost method
   If you don’t have a dedicated work area, you will generally only incur minimal additional running expenses that you can claim.  You must keep a record of the number of actual hours you work from home, keep a diary for a representative 4 week period to show your usual pattern, calculate your decline in value of assets and keep receipts, work out the cost of your cleaning expenses by adding receipts, then multiply it by work related percentage (the floor area of your work area divided by the whole area of the house), work out the cost of heating, cooling and lighting by calculating the average units used per hour and multiplying that by your actual hours worked and determine your work related phone and internet use.

You may choose the method that gives you the best outcome each year.  For the 2020 financial year you may also use a combination including the shortcut method.

2020-21 Super Contributions Caps

For the 2020-2021 financial year, the $25,000 concessional contribution cap has remained the same. Your concessional contributions are made up of employer contributions (including any salary sacrifice arrangements), and any personal contributions that you claim a deduction for in your personal tax return. The $25,000 cap is for your total concessional contributions, regardless of if they go in to one super fund or multiple.

If your super balance was less than $500,000 on 30 June 2020, and you did not contribute the full $25,000, you can carry forward the unused portion of your concessional cap to 20/21, up to the value of $22,000. Therefore, if you did not make any concessional contributions in the 19/20 financial year, you may have the option of contributing up to $47,000 in the 20/21 financial year. If you think this is an option you would like to take up this financial year, please talk with one of our financial advisors to make sure you are eligible.

The non-concessional (after tax) contributions have also remained steady for 20/21, with the cap remaining at $100,000. Also unchanged, is the need to satisfy a work test for those aged 65-74 before making the contribution. To satisfy a work test you need to have worked a minimum of 40 hours during a consecutive 30 day period, through gainful employment. Unpaid work does not count towards a work test.

Temporary Reduction in Minimum Pension Requirements

In response to the COVID-19 pandemic, the minimum pension withdrawal requirement for those super funds in pension phase has been lowered for the 2019-20 and 2020-21 financial years, to give people the option to boost their superannuation balances. As a result, the minimum pension withdrawal requirement has reduced by 50%.

At this stage, there is no information available as to whether or not it will be an incremental increase over a number or years, or if it will go back up to the normal rate from the 2021-22 financial year. If you are unsure of your minimum pension withdrawal requirement, please refer to the cover letter of your super fund accounts, or alternatively, contact our office to discuss your minimum requirements.

Passwords: Staying Safe In A Digital Era

As working and socialising online becomes more common, it is more important than ever to protect your digital identity. 

Most people know that using the same password or a variation of it is a risk, however two thirds of people do it anyway. People are afraid of forgetting their passwords and want to be in control of their login details so try to memorise them but about a quarter of us need to reset our passwords each month because they are forgotten. More than half of us have not changed our passwords in over a year.

The top tips for keeping your digital identity safe include:

• Use different passwords for each account
• Keep your anti-virus and anti-malware software up-to-date
• Always log off if you leave your device when someone else is around
• Don’t tell anyone your passwords
• Change your passwords periodically
• Use a combination of upper and lower case letters, numbers and symbols
• Avoid using obvious personal information such as your spouse or children’s names, pets or birthdates
• Don’t use sequential numbers or letters such as 12345 or qwerty and don’t use the word ‘password’
• Do not click links from emails and enter your passwords into websites, even if it looks legitimate. Always navigate to the website from the browser and then enter your password
• Try to choose multiple and random words that are uncommon, or a phrase that has meaning to you personally.

Trying to remember or keep track of passwords is challenging so it is no surprise that we reuse the same password for multiple accounts. A password manager does all the remembering for you, except for your log in to the password manager! There are many options available such as LastPass, Avast Passwords and Dashlane.

If you suspect an account has been compromised, immediately change your passwords.

Increased Age Limits for Super Contributions

For contributions made from 1 July 2020, the age limit of 65 has been increased to 67.  If you are under 67 years of age, you are able to make employer or personal concessional and non-concessional contributions to your super fund without having to pass the work test.  Previously you had to be under 65.

People under 67 years of age may also access the bring forward provisions in relation to non-concessional contributions.

The age limit for spouse contributions was 70 years of age, however this has increased to 75 years, aligning it with other voluntary contributions. 

These age limit increases apply from 1^st July 2020 onwards.  If you have any questions about your eligibility to contribute, please contact our office.

Importance of Binding Death Benefit Nominations

A binding death benefit nomination is a legally binding nomination that directs the trustee who to pay your superannuation benefit to in the event of your death. In order for a nomination to be binding, it must be ‘valid’.

How to make a valid binding death benefit nomination

To make a valid nomination you must follow the procedures explained below.

The nomination must:

• be made to the trustee in writing and clearly set out the proportion of the benefit to be paid to each person nominated. It may also include the type of benefit payment (such as a lump sum and/or an income stream)
• each person nominated must be a dependant under the SIS Act (a spouse or child) or your Estate
• be signed by the member in the presence of two witnesses over 18 years of age and who are not nominated as beneficiaries
• contain a signed witness declaration
• be sent to the trustee (a nomination will not be valid until it’s received by the trustee)

Once you have made the nomination, it will be valid for three years from the date it was signed, or non-lapsing depending on the superannuation trust deed options. You can renew, change, update or revoke a nomination at any time.

If the nomination is valid, the trustee must follow it, even if your circumstances have changed. For example, if you nominate your spouse and you separate, but have not yet obtained a divorce, the nomination remains valid and binds the trustee unless the nomination has been amended, revoked or has expired.

The role of binding death benefit nominations in estate planning

Providing certainty– One of the biggest benefits you receive from having a binding death benefit nomination in place is peace of mind. This is especially the case if you have multiple beneficiaries (eg children from previous marriages) who may have a claim on your death benefit. In this case, you can nominate with reasonable certainty who you wish to receive your death benefit or, if being paid to more than one beneficiary, who receives what proportion.

Ease and speed – If your beneficiary needs quick access to your benefit, a binding death benefit nomination may allow a more timely distribution of your assets and your beneficiary won’t have to wait for the trustee or the deceased estate to determine the distribution.

If you would like to speak to someone about a binding death benefit nomination for your super fund, please contact our office.