We are very pleased to welcome Roshini Suraweera to our team of accountants. Roshini is a qualified member of CPA Australia and is available to contact by email at roshini@veritassolutions.com.au from Monday to Friday.
Ken Wild will be on leave for seven weeks from Tuesday 29th May 2018 and returning to the office on Monday 16th July 2018. Any enquiries including administration or financial advice during that period will be looked after by our qualified and capable staff. This includes Veritas business owner and Certified Financial Planner Jodie Dickson and supporting staff Allison Reid (Associate Adviser) and Tracey O’Brien (Client Services Manager).
Single Touch Payroll
STP is the next step in simplifying your payroll reporting.
The ATO stipulated that mandatory STP reporting commence for businesses with 20 or more employees on 1 July 2018.
All businesses with 19 or less employees can decide to report via STP from 1 July, 2018. However ATO proposed that it will be mandatory for employers with 19 or less employees to commence reporting from 1 July 2019 subject to legislation being passed in parliament.
STP will lead to transparency in payroll reporting and level the ground to ensure that all employees are meeting their employer taxation obligations. Auto reporting, Activity statement compliance efficiencies and validated new hire data are some exciting advantages of STP.
Main changes for employers and the payroll process due to STP reporting are;
You’ll be reporting payroll and super information to the ATO every pay run. This is no longer an end of year process.
Employer may not need to provide employees with payment summaries at the end of a financial year and employees can access that information through myGov account.
There will be some changes to how superannuation is reported to the ATO, but no change to the way superannuation is paid.
Furthermore, your payroll cycle and payment due dates for PAYG withholding and superannuation contributions will not change. Employers can continue to pay employees weekly, fortnightly or monthly.
You need to count the number of employees on your payroll on 1 April 2018 and if you have 20 or more, you will need to update your software when it is ready and start Single Touch Payroll reporting from 1 July 2018. Software providers such as MYOB, XERO and ELMO Cloud are working directly with the ATO to ensure that their clients are ready to go when it becomes mandatory on 1st July 2018.
SMSF minimum pension reminder 2018
A quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund before Saturday 30th June 2018. You can find each member’s minimum pension withdrawal amounts for 2018 in the covering letter we included with your 2017 financial statements. If you have any questions to do with your minimum pension requirements please call our office to discuss with one of our accountants.
Working Holiday Makers
Any employer can hire a working holiday maker, especially if they need labour for a short period of time. Most people believe that working holiday makers are all fruit pickers or farm labourers, but the majority of them work in pubs, clubs and in retail.
In order to employ a working holiday maker in Australia, you must register with the ATO as a Working Holiday Maker Employer before you make your first payment to them. Penalties apply if you fail to register.
You will need to identify the person as a working holiday maker by checking their visa. They will hold either a Working Holiday visa (417) or a Work and Holiday visa (462), which you must verify online using the Visa Entitlement Verification Online service.
Working holiday makers can’t claim the tax-free threshold and they must provide you with their tax file number. If they don’t provide you with a TFN you must withhold tax at the highest rate. You must withhold tax at 15% from the first dollar they earn up to $37,000 regardless of their residency status. Other tax rates apply beyond that amount. Working holiday makers are also entitled to superannuation if they earn above the usual thresholds.
If you would like further information, please contact our office.
Are foreign residents eligible for a CGT discount on Australian Property?
Up until the 8th May 2012, foreign residents were eligible to a 50% CGT discount on the sale of an Australian property. If the property was purchased after 8th May 2012, the discount is not available to foreign and temporary resident individuals (including beneficiaries of trusts and partners in a partnership).
If the property was purchased prior to 8th May 2012, but the CGT event didn’t occur until after this date, the CGT discount is apportioned to the percentage of time the property was owned prior to the 8th May 2012; or if you had a period of Australian residency after that date. Any CGT events that occur prior to 8th May 2012 are not affected.
The 2017 budget also introduced the following changes to the main residency exemption whereby it denies foreign and temporary tax residents access to the CGT main residence exemption from 7:30pm (AEST) on 9th May 2017. This change has been grandfathered until 30th June 2019, and if the CGT event occurs after this date, the individual is able to pro rata the main residence exemption.
Invoice Payments
When paying invoices via EFT please be sure to use the invoice number as a reference description. Also please check the account number and BSB matches the details on our invoice.
Scam Alert!
A new email is doing the rounds, pretending to be from the Australian Taxation Office (ATO). An example is below. This is not a legitimate request from the ATO. If you receive an email like this, do not click on the links, do not provide any personal details and delete it immediately.
We are very pleased to welcome Holly Barnes to our team of accountants. Holly comes to us with 12 months experience, after graduating from University of Canberra in June 2016. She is available to contact by email at holly@veritassolutions.com.au from Monday to Wednesday.
We are also excited to advise that Tracey O’Brien has changed teams in our office. She will no longer be working on accounts and tax but instead, will use her considerable experience with our clients to assist the financial planning team in the administration assistant role.
Watch this space for the introduction to our new accountant in next quarter’s newsletter.
This week the ATO has announced that lodgement due date for self-managed superannuation funds for the 2016-17 financial year will be extended to 30th June 2018 in light of the new complicated super reforms. As 30th June 2018 is a Saturday, the SMSFs can lodge their returns up to Monday 2nd July 2018 without penalty
Currently, if your business is in the building and construction industry, you must report payments that you make to contractors if you pay them for building and construction services and you have an ABN. This is to ensure that the contractors themselves report their income properly to the ATO when they prepare their own income tax returns.
This existing reporting requirement is presently only applied to the building and construction industry, but that is about to change.
Effective from 1st July 2018, this reporting requirement will be applied to businesses in the cleaning and courier industries as well.
Courier services include activities where items or goods are collected from and delivered to any place in Australia, using all methods (car, truck, motorcycle, pushbike, on foot etc). It does not include bus and taxi services, transport of blood or freight transport.
Cleaning services include businesses that undertake any of the following activities on a building, residence, structure, place, surface, transport/vehicle, machinery or equipment and for events:
Interior and exterior cleaning (except sand blasting or steam cleaning)
Carpet cleaning
Chimney clearing and gutter cleaning
Road sweeping and street cleaning
Swimming pool cleaning; and
Park and park facilities cleaning
Businesses in these industries will need to collect details of payments made to contractors from 1 July 2018 and then report to the ATO in their first annual report for the year 1 July 2018 to 30 June 2019 which will be due 28th August 2019. You will need to provide the contractors ABN, name, address, the gross amount you paid them for the financial year including GST, and how much GST is included in the gross amount you paid. You must report the amounts that you actually paid to the contractors (eg don’t include invoices you haven’t paid them for yet).
If you are in these industries, then you will need to put systems in place to ensure correct collection of information.
Transparency of Tax Debts reporting
The ATO will begin reporting tax debts to credit reporting agencies under specific circumstances as soon as new legislation receives Royal Assent.
The measure is designed to support informed decision-making in the business community by making unpaid tax debts visible so credit providers and business can properly assess the credit worthiness of a business. It is also designed to reduce unfair advantage of business that do not pay their tax on time and encourage those businesses to engage with the ATO to manage their debts.
There are 3 criteria that must apply before a debt will be reported:The business must have an ABNThe business must have a tax debt of which at least $10,000 is overdue by more than 90 daysThe business has not engaged with the ATO about the debt, either by arranging a payment plan or disputing the debt
Businesses will be notified 21 days before the tax debt is reported for the first time, in order to provide the opportunity for them to take action to prevent it being reported. Once the tax debt is reported, the ATO will provide regular updates to the credit reporting agencies on the remaining balance.
The easiest way to avoid being reported is to pay all tax debts on time. Alternatively, contact the ATO to set up a payment plan.
What Happens if My SMSF is Deemed to be Non-compliant?
When an SMSF is found to be non-compliant there are a number of penalties that can be imposed, none of which are good news for the super fund or the trustees.
Firstly, the fund will be taxed at the highest marginal rate of 45% as opposed to the standard 15%; as well as the entire fund income being classified as taxable, even if it is in pension phase. The ATO can then charge interest on the tax payable, which can, in some cases, be greater than the original 45% tax charged to the super fund. Excess contributions can also be taxed at a massive 93%.
Secondly, you can be disqualified, suspended or removed as a trustee. This process means that you will no longer be able to be a trustee of a SMSF. On top of this, the assets of the SMSF may be frozen until the non-compliance is revoked.
Lastly, there may be civil or criminal penalties through the courts, depending on the seriousness of the issue.
Here at Veritas Wealth Solutions, we try to ensure that all of our clients remain compliant; however, it does mean that we need your help by providing the appropriate documentation in a timely manner. As a trustee of an SMSF, it is your responsibility to make sure your annual return is lodged to the ATO before the due date, as well as operating the fund in accordance with your trust deed and the superannuation regulations.
If you have any concerns about whether or not your super fund is at risk of becoming non-compliant, please make an appointment to discuss your situation with our qualified staff.
In order to prepare an accurate tax return and support the claims you make, you need to keep careful records. The records you need to keep depend on your personal circumstances. If you are not sure, it is better to keep too many records than not enough.
You should keep enough documentation:
To provide written evidence of your income and expenses;
To ensure that you are able to claim all of your entitlements;
In case the ATO requires you to prove the information in your tax return; and
To minimise the cost of managing your tax affairs.
Types of records you should keep:
Income received – Example: payment summary, interest income, dividend statements, statements from managed funds, government benefits & pensions, and rental property income;
Expenses related to income received – Example: car – kilometres travelled or log book, receipts for other travel, uniform & dry cleaning receipts, invoices for self-education and rental properties expenses;
Contracts for the purchase and sale of an asset – shares and real estate – Example: contract notes, corporate actions, purchase & sale documents, holding statements, tax statements, dividend reinvestment statements;
Receipts for donations
We recommend that you keep a copy of your documents, either electronically or paper, for at least 5 years from the date you lodge your tax return.
The New Year is the perfect time to think about what you want to achieve in the next 12 months and beyond. It’s also a great opportunity to think about whether your circumstances have changed, or will be changing, and how this might impact your financial situation. You are more likely to achieve your goals, whether they be financial or personal, if you have a plan. As the saying goes, fail to plan – plan to fail.
Sorting out your finances doesn’t have to be complicated, as even small savings can add up over the year.
Here are some tips to help you get started.
Write down your financial goals and current spending
Make a note of where you’d like your finances to be this time next year. Now jot down your income and expenses for the last month. How much is left over? Are your goals realistic? It’s only by taking a close look at your current financial situation that you can begin to take control of it.
Most banks can show you how you spend your money. Make use of this feature to see where you spend each month to help you work out where you can make cuts to meet your goals.
Make a list of your lifestyle wants and needs
If you want to save or invest more money this new financial year, you may need to consider whether there is anything that you’re willing to sacrifice to get ahead. Do you really need to update your smartphone again? Do you have to buy a coffee everyday? It all adds up.
Build a budget
To get the most from your money, build a budget and stick to it. However finding the right balance is key. If you make your budget too restrictive you’ll likely break it. Alternatively, if you make it too light you might miss out on some financial benefits. And don’t worry if you’re not a fan of spreadsheets; there are a range of digital tools to help you organise your finances. Look at moneysmart.gov.au for a range of budget planners, calculators and apps available.
Track your spending
Once you have a budget, it’s important you stick to it. That means tracking your expenses. A great way to do this is to use a digital money tracker such as the TrackMySpend app from moneysmart.gov.au.
Review your regular expense plans
Review your plans and regular outgoings to ensure you’re getting the best possible value for your money. There are a range of websites that provide direct comparisons of different suppliers offering mobile phone, internet, pay TV and utilities plans.
Sort out your super and consider the caps
If you haven’t sorted out your super yet, now is a good time to do it. If you have multiple super accounts, finding and consolidating them in the one account could help you cut down on fees and grow your money faster with compound interest.
Before consolidating your super you must consider a few important points, such as weighing up benefits and insurance options, comparing the fees and checking potential tax and preservation implications. In addition, if you intend to claim a tax deduction for certain personal contributions, ensure your ‘Notice of intent to claim a deduction for personal contributions’ is made and is acknowledged by the existing fund before combining.
To boost your balance, consider setting up additional regular contributions. Depending on your income, you may even qualify for government co-contributions.
Before you decide to invest more in super, you need to be aware that restrictions and caps apply to different contribution types. Penalties may apply if you exceed the relevant cap or contribute to super when you were not eligible to contribute. You also need to consider that amounts contributed to super generally can’t be accessed until you reach your preservation age and retire or meet another condition of release. Therefore, unless you’re saving for your retirement, you’ll need to consider other options.
Review your insurance cover
Make sure you are getting the best deal with your current general insurance policies such as House and Contents and car insurance. Update your home and contents cover if you have made changes to your home or purchased new items. Review regularly the home value covered, building prices can go up significantly year on year and you want to make sure the cover will not leave you grossly underinsured. It is easy to get quotes online or over the phone to check if your policy is cost competitive for the features you need.
For personal insurance, it is important to make sure the cover you have is adequate for your current situation. This should be reviewed every few years or if a major life event has occurred, for example, marriage, a new child or increase in debt obligations. The majority of Australian’s are underinsured for temporary or permanent disability and death. Considering the average family debt is now over 200% of household income that puts most Australian families into significant distress if something unexpected occurs (hence the need also to build an emergency fund!).
Pay off debt
If you’re paying off multiple debts with a range of interest rates, you should consider the appropriateness of prioritising paying down the debt with the highest interest (while continuing to meet your repayment obligations in relation to your other debts). Alternatively, you may be able to combine your debts with a debt consolidation loan. If you can continue to make the same level of repayments, this may significantly reduce the amount of total interest payable and help you pay off your debt sooner, however you must be disciplined in your repayments. Often consolidation, due to longer loan terms, can be more expensive over the long run if you continue to pay minimum repayments.
For those with large credit card debts and find them difficult to manage, cut them up, pay them off. There are alternatives to using credit cards, Visa/Mastercard debit cards most banks offer on transaction accounts, prepaid Visa/Mastercard gift cards and newer payment providers such as Apple Pay, Google Pay and PayPal which you can set up using your own funds.
Start building an emergency fund
Having approximately three months of living costs put into a high interest savings account that is not easily accessible is a great buffer to have when something nasty strikes. Building an emergency fund should be on everyone’s money goals list. It provides peace of mind knowing you don’t have to borrow funds or incur additional stress during a time that may already be difficult.
Review your investments
Review your investments regularly. Check that your asset allocation and level of risk are appropriate for your age and plans. A financial adviser can help you understand and manage your portfolio more effectively.
Continue your financial education
Improving your financial knowledge is something we should all do and understanding the financial world will empower you to make better decisions for you and your family.
Moneysmart.gov.au has excellent resources available for all phases of life and are trying to improve the financial literacy of our children by providing excellent teaching resources. The more we can help children understand the basis of finances, the better prepared they will be when they become independent adults.
Get financial advice – how we can help
Financial advice is about far more than just making money. It’s about creating new opportunities to help you achieve whatever you desire in life. Our financial planners can help you work out what’s important to you and help you develop a plan that aligns your financial decisions to your lifestyle goals. Whilst there are many things you can do yourself, receiving advice from a professional can help you stay on track and assist with the more technical complexities involved in financial planning. We believe in having long term partnerships with our clients to help them navigate the financial ups and downs of life and have expertise in assisting clients with money management, growing wealth (including superannuation), retirement planning, taxation and estate administration services.
Please contact our office on 02 6162 1522 to make an appointment to discuss how we can help you with your financial goals.
Gift Vouchers Now Available @ Veritas – Help your children and friends reach their financial goals
Gift vouchers are now available from Veritas Wealth Solutions for an initial consultation session (usually 60 – 90 minutes) with Certified Financial Planner Ken Wild (a cost of $220). An initial consultation will help your children and friends plan for their future in setting financial goals and developing plans on how to achieve them.
Please contact our office if you would like to organise a voucher.
Disruption and the future of Energy
The following link is something we found could be of interest to all.
It is with regret that we advise that Rose Geary, our financial planning assistant, has decided to pursue other opportunities and has left our employment. We wish her well in her new career direction. Any queries that you would have directed to her can be sent to Allison Reid at allison.reid@veritassolutions.com.au.
Monica Morabito has also decided to leave our team in order to focus on her family. She will remain with us until the end of October. After then, any questions you may have can be directed to Allison Burman at allison@veritassolutions.com.au.
Watch this space next quarter to be introduced to our new team members.
Simple Fund 360
As many of our SMSF clients know, we have been converting our accounts processing from desktop to cloud software using the same provider. The new software has lots of new features which we will begin using to provide you the best service available.
If you haven’t been sent a bank data authority email as yet, be prepared to receive an email or letter (it’s definitely legitimate!) with some forms attached which we would like you to sign. The forms allow your bank to directly transfer the transaction history to the cloud software, which will allow us to speed up the process of preparing your end of year accounts.
These forms do not allow us to transact on the accounts, we simply get a list of what has gone in and out – like a standard bank statement but in electronic form. If you have any questions though, please don’t hesitate to contact our office for further information.
Scam Alert!
If you get a phone call from a person from Microsoft who tells you there is something wrong with your computer, do not give them any personal information and do not give them access to your computer. Microsoft will never call you to advise you have an issue, they would expect you to call them. If the call is legitimate, they will provide a reference and when you call the main line, you can speak to anyone about it using the reference they give you. Most likely, the scammers will hang up when you insist on a reference number.
Another common scam involves callers who identify themselves as working for the ATO or Centrelink and advising you have a debt that can only be cleared with a ‘release fee’ or a ‘fine’ that can only be paid using iTunes gift cards. These phone calls sound legitimate but be sceptical! Ask for a reference number so you can call the main ATO or Centrelink phone number and call them back. These are also not legitimate. You will never be asked by the ATO or Centrelink to pay a debt using gift cards. There are also scammers pretending to be from Telstra advising they are trying to catch a hacker who will try to get you to buy iTunes gift cards.
The final warning for this quarter, are unknown numbers who call you and ask is this “your name”. When you say “yes” they record your voice and use it to agree to contracts over the phone such as contracts with Telstra for a new phone. As the voice print they use to say “yes” is your voice, it is very difficult to prove that you were not the individual who entered the contract. When answering calls from unknown numbers, if they ask if it is you, reply with “it is, who is this?”. Try not to say yes to them.
Important Macquarie Cash Management Updates
Adviser Initiated Payments
Are you having trouble using online banking and need to organise a payment from your cash management account? We now have the ability to initiate a payment on your behalf. This may be handy if you are having trouble with internet access or do not like to use online banking.
How does it work?
Our office can setup a Bpay or an Electronic Funds Transfer (also known as Pay Anyone) payment on your behalf. When the payment information is submitted, your mobile phone will receive a SMS with the details of the transaction and the code needed to approve the transaction. You would then call our office and verbally tell us the code and we then authorise the payment. You will receive an email and SMS confirmation of the payment. The authorisation code cannot be sent via email or SMS. We must talk to the individual that is sent the code.
We can set up future and recurring payments too if you need them.
What information do we need?
First and foremost, Macquarie Bank need your mobile number and email address to be up to date on their system. You can call Macquarie on 1800 806 310 to check your details and update them if necessary. This can take up to 48 hours to update on their system.
Once that information is up to date our office would need the following details from you to setup the payment transaction:
Amount to be paid
Bpay or Account details to where the payment is going – Account name, BSB, Account Number or Biller Code & Bpay Reference number
Note: we do not have authority to transact on your super fund cash accounts. This feature only allows our office to setup the payment and approve it with your permission.
Nominate a linked bank account for large fund transfers
Macquarie have a daily limit of $20,000 per day for electronic fund transfers. This limit can be increased by calling Macquarie when the need arises. However for regular large payments we would recommend you add a Nominated linked bank account. Once linked to your Macquarie CMA, there is no daily limit for electronic banking transfers to your nominated account. To add a nominated account you can do this over the phone by calling Macquarie on 1800 806 310.
Two factor authentication starting from 3rd October
Macquarie Bank have implemented two factor authentication to verify your internet banking transactions. This will start on the 3rd October for older bank accounts, new accounts opened more recently (e.g. within the last 18 months) will already have this in place.
How does this work?
When you request a payment transfer, to confirm your identity, the bank will send a secure code to your registered mobile number before you can make a transaction.
What you need to do?
You will need to make you have registered for two-factor authentication (2FA). Follow this link https://www.macquarie.com/cmaregister to find out more on how to do this. The step by step user guide available here is also worth reading as it provides good detail on how to best use the Macquarie online banking system.
Super Reforms – Concessional Contribution Changes from 1 July 2017
From 1 July the concessional cap has been reduced to $25,000 per annum. Concessional contributions are made up of Employer contributions (minimum rate is currently at 9.5% of salary), salary sacrifice (if available) or personal contributions claimed as a tax deduction.
Defined Benefit funds – Major change to what is included as a concessional contribution
For public service employees who are members of a defined benefit fund such as the CSS, PSS or Military Super, the amount of super that is allocated to your concessional cap is more complicated from 1 July. It now includes notional taxed contributions plus productivity payments and any salary sacrifice/personal deductable contribution amounts you have made.
CSS, PSS & Military super all offer estimators to work out your new concessional cap amount. Unfortunately for CSS & PSS, this estimator appears to be only available behind a member online services login and there is no access to the general public, making it difficult for financial advisers to assist their clients. We encourage all clients who are in the accumulation phase of their life to login and check their concessional cap estimate, particularly if you are making additional salary sacrifice/personal deductible contributions. You will need to check that you will not go over the newly reduced $25,000 cap.
The Commonwealth Superannuation Corporation who manages these funds has put out some excellent fact sheets. These are available on each scheme’s website under “Super Changes”.
Travel Deduction Changes for Residential Rental Property
From 1 July 2017, travel costs for individual investors inspecting, maintaining or collecting rent for residential rental properties will no longer be deductible. Travel costs will also not be recognised in the cost base of the property for CGT purposes.
This is an integrity measure to address concerns residential investment property owners are not correctly apportioning travel deductions or are claiming travel costs that are for private travel purposes.
Veritas Wealth Solutions would like to extend our congratulations to team member, Tracey Whittaker, who married her long-term fiancé in a surprise ceremony during a recent trip to the USA. Going forward, she will now be known as Tracey O’Brien. Please note that her email address has not changed.
From 1 July 2017 the ATO is simplifying GST reporting for small businesses with a GST turnover of less than $10 million.
Simpler BAS Reporting aims to make BAS preparation easier and quicker as small businesses will only need to report:
G1 – Total sales
1A – GST on sales
1B – GST on purchases
Simpler BAS will not change how other taxes are reported (PAYG tax withheld or PAYG income tax instalments), reporting frequency or record keeping requirements.
Demystifying shares for new investors (and a refresher for seasoned ones)
We regularly have clients investing in shares directly or via a self-managed superannuation fund for the first time so we have outlined below what to expect when you purchase you shares.
If you purchase shares via a broker whether it be an online or full service traditional broker, generally you will be CHESS registered. CHESS (Clearing House Electronic Subregister System) automatically manages the transfer of funds and legal ownership between buyers and sellers.
If you hold a CHESS account you will receive a Holder Identification Number (HIN) which will start with an “X”.
Any personal contact changes, for example address changes, will need to be updated via your broker and you will receive letters from CHESS confirming any changes made to your CHESS account. These details cannot be changed via the share registry when you are CHESS broker sponsored.
Shares that have been purchased without using a CHESS account (known as broker sponsored) are known as an “Issuer sponsored” trade, often occurring via an “initial public offering” (IPO) or some other off market change of ownership. An issuer sponsored transaction will receive a Security Reference Number (SRN) which will start with an “I” and all details are managed by the company’s nominated subregister.
CHESS (HIN’s) vs Issuer (SRN’s)
A broker sponsored account will consolidate all your shareholdings under one number making it much easier to keep track off. Issuer sponsored shareholdings receive a different number for each company that you invest in.
What is a Contract Note?
When you buy or sell shares you will receive a contract note confirming the trade. This document should be kept for your records. Do not throw it away! It will be needed 20 years later when you decide to sell and need to calculate your capital gains tax liability. These documents are even more important when your Estate is being administered as the Executor will need all the information possible to make an informed decision on how best to wind up your assets and implement your wishes.
What is a share registry?
The share registry manages the list of all the owners of shares in that company. It will handle most of the dealings you will have with the company you have invested in.
The share registry requires certain information from all shareholders:
Tax file number relating to the shareholder (personal or entity)
Bank account details to deposit your dividends (Note: Broker sponsored holdings will typically automatically send the TFN & Bank Details on their records to the share registry. You usually receive confirmation of this a few days after the welcome documents when you make your first investment with a particular company)
Communication preferences so they know how to send you information
You can manage your share registry details online with all the major share registries, such as Computershare, Link Market Services, Boardroom and Advance.
What paperwork will I receive?
When you make your first investment with a company you generally will receive a Welcome Letter and forms to complete asking for TFN, Bank account & communication options or website login information to update this electronically. Going forwards, you will receive:
Dividend/Distribution Statements when they are declared by the company
Tax Statements (if applicable)
Company Reports including Annual Reports
Company announcements including information regarding the AGM or corporate actions
Holding statements recording your trading activity whenever a transaction is made.
You can update the communications options with all share registries to receive correspondence by email. However certain changes and notices will always be sent via post. For example changes verifying updates made to personal contact details via the broker or issuer are sent via mail to the registered address.
Records Management
Important paperwork to keep:
Contract Notes for all transactions
Corporate Action purchase/sell papers if you have taken the offer
Holding Statements
Tax Statements
Dividend Statements if you are utilising a Dividend Reinvestment Plan
These can be in electronic format, preferably PDF, if you wish to save filing space at home. This information should be kept for at least 5 years after your tax return is lodged once the asset has been sold. For example if you sold some shares in 2016/17 financial year, then the contract notes verifying the buy and sell transactions should be kept until July 2022.
Keep your details up to date
Key information you need to keep up to date includes your Settlement Bank Account linked to your Broker account and your personal contact information eg Address, Email and Phone numbers
Further Reading
If you’d like to do some more in-depth reading on the topic, the ASX website has further details here: ASX First-Time Investor Education
Need some help?
Veritas Wealth Solutions can assist and guide you through the whole share trading process. We are seasoned administrators for all types of investments and well versed on the paperwork and systems needed to manage your portfolio efficiently.
You’ve made it through the financial year and navigated the new superannuation laws that took effect on 1 July 2017 but there is one thing you should always think about and that’s your investment strategy. There is no better time than right after a financial year ends to review your self-managed super fund’s (SMSF) investment strategy and its performance.
As a trustee you are required to review your investment strategy regularly to ensure it continues to reflect the purpose and circumstances of your fund and its members. An SMSF investment strategy must take into account the following:
The risks involved in making, holding and realising the SMSFs investments, their expected return and cash flow requirements of your SMSF.
The diversification and composition of your SMSF investments.
The liquidity of your SMSF investments, with regard to expected cash flow requirements.
The SMSF’s ability to pay current and future benefits to the members.
Whether to hold insurance cover for each member of your SMSF.
An important requirement for you as trustee of your SMSF is to have an investment objective and a strategy to achieve that objective before you start to make decisions about how you want to invest your SMSF’s money.
Whatever assets you choose for your SMSF to invest in, there must be a clear and obvious retirement purpose in the choices you make. Of equal importance is that the investment objective and strategy is not set in stone. Trustees can choose to change the investment objectives they have set for their SMSF at any time.
At the same time looking at current broader economic risks should form part of your decision making. Looking ahead to the 2018 financial year these include whether United States President Donald Trump can succeed on his economic promises, the looming threat of North Korea and the United Kingdom’s pending ‘Brexit’. Domestically, slow wages growth, rising housing costs and a potential interest rate rise from the Reserve Bank of Australia could all weigh in on the economy.
So as an SMSF trustee, your best defence against this uncertainty is to have a clearly defined, well-rounded and long term investment strategy. Not only is your SMSF legally required to have an investment strategy, it is key to guiding you and your fund through uncertain times.
A crucial aspect of an investment strategy is to consider the diversification of your SMSF’s assets. Diversification of your retirement savings across different assets and regions is fundamental to protecting your fund from volatility in financial markets over the long-term.
While it is important to keep track of events that affect financial markets and your superannuation savings, keep in mind that superannuation is for the long-term and that sometimes, short-term decisions can do more harm than good. A good investment strategy that keeps members disciplined and focused on the long-term is essential.
With any decisions you make as a trustee in relation to your fund’s investments strategy and asset allocation, the important things to keep in mind are:
Try to avoid taking undue risks with your underlying investments, which increases the likelihood of short-term losses. For example, think twice before moving from relatively stable shares to speculative shares even if you think a short-term win will come to your SMSF.
If the fund is considering payment of an income stream, ensure the cash flow from the asset allocation is sufficient to pay the required amount.
If there is a relatively long timeframe before benefits become payable from the fund, the potential capital growth of the investment should be considered.
Consider the effects of inflation and protect against the reduction in the real value of the fund’s investments.
All trustees and members of SMSFs have a range of attitudes towards risk and how they see their funds’ investments performing over time. When it comes to the fund’s investment strategy and asset allocation it is important to carefully consider its overall risk profile or tolerance, including the impact of asset allocations on the overall investment portfolio.
Your investment strategy does need to be reviewed at least once a year and this will be evidenced by your approved auditor. It is also important to review your strategy whenever the circumstances of any of the members change or as often as you feel it is necessary. The following practical tips will help you keep on top of your obligations:
Put your investment objective and strategy in writing.
Set an investment objective that you can achieve with the underlying investments you are comfortable to invest in.
There is no template for an investment objective and strategy, but make sure they reflect how you intend to invest your SMSF’s money.
The investments you actually make must be contemplated by the investment strategy you have set.
Additionally, document your actions and decisions, as well as your reasons, and keep them as a record in order to demonstrate that you have indeed satisfied your obligations as a trustee in this important area.
How can we help?
The financial advisors at Veritas Wealth Solutions can help you formulate, execute and review your investment strategy and needs from inception to retirement as well as answering any questions or concerns you may have. Please feel free to call our office to arrange a meeting to discuss your particular requirements in more detail.
A quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund before Friday 30th June 2017. You can find each member’s minimum pension withdrawal amounts for 2017 in the covering letter we included with your 2016 financial statements. If you have any questions to do with your minimum pension requirements please call our office to discuss with one of our accountants.
Are you Salary Sacrificing into Super?
If you have a salary sacrificing arrangement at work to put extra into your super fund, please note that the concessional contributions cap has reduced to $25,000 from 1st July 2017. Take the time to review your arrangements now so you can provide adequate notice to your employer if you need to adjust the amounts to remain under the new reduced cap.
If you are a contributing member of a defined benefit fund eg CSS, PSS, Military Super, the type of contributions allocated towards the concessional contributions cap have changed. If you need assistance with calculating whether you are still able to continue making additional concessional contributions please call our office.
Scam Alert!
If you receive an email from tax@ato.gov.au asking you to download an attachment or provide information, beware. It is yet another scam. Delete the email immediately and do not click on the link.
Our office has also received emails claiming to be special newsletters with hot stock tips. These are also scams and do not provide accurate market information.
If you are unsure about an email you have received, please contact our office for more information.
Important Considerations Leading up to 30 June 2017
By now most people are well aware of the changes announced to superannuation in last year’s budget which have now been enacted by law. These changes limit the amount of tax concessions available to retirees when total superannuation benefits exceed $1,600,000. Importantly, total superannuation benefits means all amounts held in super including any defined benefit income streams. The calculation to determine the capital backing these defined benefits is simply the annual income multiplied by 16. So if you receive $50,000 in a PSS pension for example, that’s an amount of $800,000 that counts towards your $1.6M cap.
These changes are simple in concept (but as always, difficult in execution) and basically limit the amount of capital a person can transfer into pension phase to $1,600,000 and thus attract the 0% tax rate that applies to pension accounts. For individuals with more than $1,600,000 in super, all is not lost. You still have full access to your benefits (once meeting a condition of release) and the tax rate on the excess over $1.6M is still attractive at 15% on income and 10% on capital gains for assets held for more than 12 months.
The changes also remove tax concessions received by a super fund on assets used to pay a Transition to Retirement Income Stream. These funds will be required to pay tax on earnings from the assets backing these pensions from 1 July 2017.
Fortunately there is some transitional relief for Capital Gains accrued on assets up to the 30th June 2017 where these assets were supporting a pension on 9th November 2016 and your super balance exceeds $1.6M (for balances under $1.6M capital gains will remain tax free and no relief will be required).
The new provisions also limit the amount of contributions a member can make from 1 July 2017. If you have $1.6m in super at the end of the previous year, you will be unable to make any further non-concessional contributions, whilst those with less than that can contribute $100,000pa or $300,000 over 3 years under the bring forward rule. Of course it gets more complicated when your balance is not $1.6m but the non-concessional contribution would cause it to exceed that amount. We could write an entire article on those provisions alone.
There are also some changes to the concessional contributions rules with the limit reducing to $25,000pa. If your super balance is less than $500,000, any unused cap will be able to be carried forward for use in a later year although this does not commence until 1 July 2018. In addition, fund members who are employees and could not previously make personal concessional contributions will be able to do so with the removal of the 10% test from 1 July 2017 (provided still that total contributions are under the concessional cap).
So what are the important things to do before 30th June 2017?
Utilise the current non-concessional and concessional caps to get as much into super as possible. This includes considering borrowing funds short term if cash will not be available to you until after 30th June 2017 (ie from the delayed sale of an asset, administration of an estate etc).
Look at your super balance and that of your spouse. If one of you is close to $1.6M and the other is well under, consider a withdrawal and re-contribution (assuming you are eligible to contribute) to even out balances.
If you have significant taxable proportions consider utilising the current contribution caps to affect a withdrawal and re-contribution for estate planning purposes.
If receiving a Transition to Retirement income stream, consider if it is worthwhile continuing that income stream once the tax concessions are gone or if it can be transferred to an Account Based Pension instead (i.e has condition of release been met).
Wait to make any contributions under the CGT Cap (sale of business proceeds). This can affect your ability to contribute other amounts prior to 30 June 2017.
For SMSF members who have made contributions from 1 July 2016 that will be turned into pension immediately, make sure you take a bit more pension than the amount listed on your SMSF accounts cover letter to cover the minimum pension withdrawal requirement for the additional pension.
Importantly, if you believe you have greater than $1.6M in super benefits, including your defined benefit pension, contact us ASAP to discuss any pre 30th June action that may be advantageous.
ATO Data Matching Program – Online Selling & Uber Drivers
As many of you know, the ATO gathers data from numerous sources to match against the information that you provide on your annual tax return. The most common ones are the banks for interest income, the share registries for dividend information and the health funds for private health insurance information.
Right now, the ATO are focusing on online selling, in particular, taxpayers who have sold $12,000 or more of goods and services online for the 2016, 2017 and 2018 income years to ensure that people who are considered to be conducting a business are reporting their income appropriately. To this end, the ATO will be collecting data from eBay Australia and New Zealand Pty Ltd and it is likely that additional providers, such as Gumtree, will be required to provide information in future years.
The Federal Court has recently confirmed that the ATO’s stance that Uber drivers are conducting a business is valid so they have released some guidance. Uber drivers must keep records, have an ABN and be registered for GST, pay GST on the full fares received, lodge BASs and declare ride sourcing income on their tax returns. As the ATO will be receiving data directly from Uber it is not worth trying to hide this information, and failure to comply will result in penalties.
If you are unsure if you are conducting a business or indulging in a hobby or you are an Uber driver in need of GST help, please contact our accountants for assistance.
It is with pleasure that we advise that Jessica Jalkanen, who went on maternity leave in late 2016, has returned to work this month on a part time basis and will be available to answer any queries you may have.
Have your details changed?
To ensure that all your correspondence is going to the right place and that you are kept up to date with the latest information, if you have moved house or changed your phone number or email address, please email admin@veritassolutions.com.au with the new details.
Superannuation reforms now legislated
The following changes to superannuation law have now been legislated and passed through parliament after much debate.
The introduction of the $1.6 million transfer balance cap – this affects those with superannuation pension account balances exceeding $1.6 million as at 30th June 2017. The account balances referred to includes all superannuation pension accounts – pensions from defined benefit funds (which require a special calculation), self-managed super funds, industry funds, retail funds and the like all get added together to work out your balance.
The concessional contributions cap has been reduced to $25,000 from 1 July 2017. The Government will also include notional (estimated) and actual employer contributions in the concessional contributions cap for members of unfunded defined benefit schemes and constitutionally protected funds. This will affect CSS, PSS and Military super members who are currently making additional contributions via salary sacrifice. Many will no longer be able to make additional concessional contributions from 1 July 2017.
Also 1 July 2017, the 10% test has been removed, meaning all individuals can claim a tax deduction for personal superannuation contributions up to the new cap rather than having to utilise salary sacrifice. It will depend on your personal circumstances to which method will suit you best but it does provide more flexible options to be able make extra contributions. If you chose to make personal contributions and wish to claim a tax deduction you will need to make sure you complete the required declaration form with your super fund. If your super fund is not notified they will treat the contribution as a non-concessional contribution by default.
Individuals with a balance of less than $500,000 in superannuation will be able to carry forward unused concessional contributions caps for up to 5 years from 1 July 2018.
The non-concessional contributions cap has been reduced to $100,000 from 1 July 2017 and is no longer available to those with account balances totalling more than $1.6 million in superannuation.
Transition to retirement pensions (TTRPs or TRISs) will no longer have tax exempt status in the super fund from 1st July 2017, with earnings on those accounts taxed at 15%.
If you would like further details on these changes or are unsure if this affects you, please contact our office to discuss.
Macquarie Bank Cash Management Account – Important Changes Starting in February
Macquarie will be introducing the following new fees to their CMA product which a majority of our SMSF clients and many personal clients use, starting from February 1, 2017.
A $10 fee for any withdrawal requests received by paper, email or fax for less than $20,000. A free service is available for online transfers up to $20,000 using your internet banking account.
All cheque requests going forward will be issued as bank cheques, incurring a $10 fee each. There will be no change to cheque books. You won’t be charged a fee for any cheques issued from your cheque book although the $30 fee to purchase a cheque book remains.
To help you avoid these fees, there are several options that allow you to make payments and view transactions free of charge, including:
electronic funds transfers (up to $20,000 a day)
unlimited transfers to nominated bank accounts
BPAY® payments (subject to BPAY® biller code limits) free of charge via online and mobile banking.
With just a couple of clicks, you can set up online banking at macquarie.com.au as well as download the Macquarie Mobile Banking app onto your smartphone (iOS or Android) to view your balances and transact on the go, wherever and whenever you want.
Did you know your contact details can keep your accounts safe?
To keep your account secure, Macquarie Bank need your current mobile number and email address.
Macquarie Bank sends secure codes via SMS or email confirmations to verify changes or transactions on your account, so it’s important they have your most up to date mobile number and email address. That way, Macquarie Bank staff can contact you to confirm payments and transactions or alert you if something looks suspicious when and as it happens.
Updating your contact details is easy – simply call Macquarie Bank on 1800 806 310 or call our office and our staff can assist with the necessary documents.
Letters from the Australian Business Register (ABR)
We have been informed that the ABR is reviewing their data online and Self-Managed Super Fund trustees may receive an email or letter informing you that your ABN details are out of date. If you receive such a letter from the ABR, please forward it to our office and we can review the register and confirm your details online.
Do you rent your place with Airbnb?
With Airbnb becoming more popular, the number of homes being listed in Canberra alone more than doubling in the past year, it is important to remember that the money you earn from renting out a room in your house is rental income.
This rental income needs to be declared in your tax return for the relevant financial year to avoid penalties and fines from the ATO. Airbnb is one area the ATO are using data matching technology to catch out undeclared income.
If you are renting out a room you can only claim expenses related to the part of the house being rented out and you need to apportion the expenses accordingly. This is generally done based on the floor-area used solely by the renter, plus a reasonable amount based on the renter’s access to common areas. Common expenses that can be apportioned include:
interest on loans for the property
council rates
gas/electricity
property insurance
cleaning and maintenance costs
Expenses can only be claimed for when the room is available to rent. If you use the room for personal reasons between renters (eg as an office or for storage) you cannot claim deductions during this time.
Also note that CGT may apply if you sell the property used to earn rental income, even if the property is your main residence.
Deceased Estate Administration
Estate planning has long been an area of expertise amongst financial planners, with much effort being put in to establishing thorough Wills and Binding Death Benefit Nomination to ensure the desired outcome in the event of a persons death. This estate planning process provides executors with instructions on what to do when a loved one dies, but doesn’t tell them how to go about administering an estate.
At Veritas Wealth Solutions we are sadly often faced with clients who have lost a loved one, be it a spouse, parent, sibling or family member and consequently we have become experienced in all facets of estate administration. The truth about estate windup is that most of the process requires taxation or financial planning expertise rather than legal expertise, whether it is the sale and distribution of assets, notification to various organisations including the ATO and Centrelink, or preparing tax returns for the deceased, the estate or the resulting testamentary trusts.
Importantly, there are many decisions that are made during the administration of an estate that can affect the tax outcome and the long term wealth of the beneficiaries. Ensuring the estate is wound up in the most tax effective manner and that appropriate structures are utilised is the main focus for us at Veritas.
We are also experienced in the administration of Superannuation Death Benefits and effective application of both Binding and Non-Binding Death Benefit Nominations. Not everyone with Superannuation dies with a Death Benefit Nomination in place and this isn’t necessarily a bad thing. In many cases the most effective distribution of assets can be achieved when the executor has flexibility over the method of distribution (there are of course situations when BDBNs are absolutely recommended).
Being an executor can be a stressful time, especially trying to deal with the administration of the estate whilst grieving for the deceased. At Veritas Wealth Solutions we can make this process much simpler by taking over most of the required tasks to ensure a smooth windup of estate assets.
Hopefully most clients have a thorough estate plan prior to death, however many executors may still be faced with complex and extensive administration of assets. If you have a loved one die and require assistance with the windup and administration of the estate please do not hesitate to contact the team at Veritas Wealth Solutions.
As most of you know, on 3rd May 2016, the treasurer announced a lifetime non-concessional contributions (NCC) cap of $500,000 which messed up countless retirement plans. In a welcomed backflip due to parliamentary opposition, this proposal has been scrapped. In place is a reduction in the annual NCC cap to $100,000 from 1st July 2017 (subject to legislation).
This means the NCC cap for this current financial year remains at $180,000, and there is no need to try to calculate how much you have contributed from 2007. If you are under 65, the 3 year bring forward rule is still available.
It isn’t all good news though, because from 1 July 2017, individuals with a balance in superannuation of more than $1.6 million at 30 June of the previous financial year will no longer be eligible to make non-concessional contributions. An individual will also not be able to make NCC that mean their balance would exceed the $1.6 million threshold.
Transfer Balance Cap of $1.6 million
Effective from 1st July 2017, the $1.6 million cap on superannuation in pension phase accounts will commence. This applies to both current retirees and individuals yet to retire, and applies to each individual. Individuals with pension balances of more than $1.6 million will need to take action to avoid penalty tax on any earnings on the excess. There are two choices:
You can transfer the excess above $1.6 million into an accumulation account within your existing super fund; or
You can withdraw the excess above $1.6 million out of the super system.
This measure has yet to be legislated, but it is likely that it will become law.
Work Test to Remain in Place
The Coalition intended to remove the over-65 work test (must work 40 hours in 30 days in order to contribute to super) but have decided to retain it.
Transition to Retirement Pensions
The Coalition still intends to remove the tax exempt status of earnings supporting a transition to retirement pension, subject to legislation. This means that earnings in the pension fund will be subject to 15% tax.
Removal of 10% test for Concessional Contributions
In order for an individual to claim a tax deduction for a concessional contribution to their super fund, they must be self-employed or have earned less than 10% of their income from an employer. This requirement will be removed from 1 July 2017, allowing all individuals under 75 to claim tax deductions for personal super contributions.
In the absence of legislation to give effect to all these measures, we recommend you seek advice before acting. If you have any questions on how these proposed changes will impact you or what opportunities they may create, please contact our office.
Spring clean your finances
Spring is a great time of year to review your finances. Whether it be checking your mortgage provider is offering a competitive rate, reducing your household costs or just time to rethink about consolidating those multiple superannuation accounts.
Here at Veritas we can assist with superannuation reviews and understanding your insurance needs. Remember switching super may also close valuable insurance cover so it is always best to understand the full consequences before rolling your benefits into another fund.
Do your kids need help with budgeting? Or help in setting goals? Don’t forget we also have gift vouchers available that can be useful presents for your children. We can help them on the path to financial success with our financial coaching and planning expertise.
As announced in the 2016 Budget, there was a change to the personal income tax rates, increasing the 32.5% tax threshold from $80,000 to $87,000. This change applied from 1 July 2016.
Employers need to take note as this means new tax tables and payroll software updates will apply from 1 October 2016. The updated tax tables can be downloaded from www.ato.gov.au/taxtables or contact your payroll software provider for the relevant updates.
Beware scammers and be safe online
We have had quite a few clients call up about scammers doing the rounds pretending to be from the ATO so we thought it was a great time to provide resources to help you if you receive an unexpected call requesting personal information.
www.scamwatch.gov.au provides up to date information about current (and old) scams occurring in the community.
Never divulge any personal information to someone who calls you or knocks on your door. If in doubt hang up and contact the organisation they propose to be from directly or check their website to see if they are aware of any scams.
www.staysmartonline.gov.au provides great resources on how to keep your personal and financial information safe when using the internet.
Some basics on how to protect yourself online
If you are unsure about the sender, delete the message—don’t reply or try to unsubscribe to the email or SMS as it will confirm your address and you may receive more spam.
Never send your personal, credit card or online account details out in an email.
Don’t access banking and other online accounts from an email link—use a bookmarked link or type the address into your browser.
Always check the website address carefully, scammers often set up fake websites with very similar addresses.
Always read the terms and conditions carefully, ‘free offers’ often have hidden costs.
Check the business name at www.asic.gov.au (Australian businesses only). You can also search for the business name or scheme through a search engine.
Install software that protects your computer from viruses and unwanted programs and keep it up-to-date.
Like to know more? Use the search terms “stay safe online”. This will provide additional resources for you to read.
Important changes to the Centrelink Age Pension in 2017
From 1 January 2017, there are some important age pension changes that could impact your benefits and warrant some pre-emptive action.
What’s changing?
The lower asset threshold that determines your eligibility for the full age pension will increase. This threshold varies, depending on your relationship status and whether or not you own a home. It’s also indexed periodically by the Government. To find the current thresholds visit www.humanservices.gov.au.
In addition, the age pension payable will be reduced by $3, for every $1,000 you hold in assets above this threshold. The current reduction amount, known as the ‘taper rate’, is $1.50 per $1,000. This will lower the asset test upper threshold after which no pension is payable.
How will these changes impact your entitlements?
Your age pension entitlements are assessed under both an income and assets test. The impact of these assets test changes on your entitlement to age pension will depend on a range of factors.
If we look at the current and new asset test thresholds for a homeowner couple for example, the lower threshold will increase from $296,500 to $375,000 on 1 January 2017. This means more people will be eligible to receive a full pension under the asset test assessment. However, the income test may override the asset test (depending on the type of assets and income) and reduce their pension payment.
In contrast, the asset test upper threshold after which no pension is payable will reduce from $1,175,000 to $818,000* for a homeowner couple on 1 January 2017, resulting in many pensioners losing entitlement to pension altogether.
What to do next?
The thresholds in the above example apply exclusively to home-owning couples and the dollar values would be different if you are single and/or not a home-owner. The best way to determine how you may be affected is to make an appointment with your adviser to review your financial position and determine if any strategies can be implemented to improve your entitlement to the pension going forward. The earlier you do this, the more you may be able to take advantage of any suitable strategies.
To find out how the changes could impact you and discuss strategies that may assist you, contact our office to make an appointment with one of our advisers.
* Actual cut-out thresholds are dependent upon the rate of pension payable and therefore the cut-out thresholds that will apply at 1 January 2017 are not yet known. We have assumed some indexation of the current maximum rate of age pension.
Asset Test comparison
Family Situation
Current
1 January 2017
Lower Threshold
Upper Threshold
Lower Threshold
Upper Threshold
Homeowner
Single
$209,000
$793,750
$250,000
$543,780
Couple
$296,500
$1,178,500
$375,000
$817,870
Non-Homeowner
Single
$360,500
$945,250
$450,000
$743,780
Couple
$448,000
$1,330,000
$575,000
$1,017,870
Information for current threshold valid for 20th September to 31 December 2016
Staff Updates
As most of you know, Ken has returned from his extended leave and is back on deck and hard at work. If you have any queries, please don’t hesitate to contact him.
It is with great pleasure that we advise that on 12th August 2016, Jessica Jalkanen gave birth to a very healthy baby boy, weighing in at 4.19kgs (just under 9 pound 3). Jaxon Thomas Brown and Jess are both home and doing very well.
From 1st August 2016, Jessica Jalkanen is taking maternity leave. Any email queries that you usually direct to Jess can be sent to Allison Burman (allison@veritassolutions.com.au), or alternatively you can call the office on 02 6162 1522.
Ken Wild has been enjoying his extended leave but we are sure that he is looking forward to returning to work at the beginning of August. For queries in the meantime, please continue to contact Allison Reid, Rose Geary or Jodie Dickson.
A Will is not enough – where will your Super go?
Superannuation is managed by Trustees and regulated by trust deeds and superannuation law. When you die, your superannuation balance does NOT form part of your estate nor is it automatically covered by your instructions specified in your Will. The Trustees of your superannuation fund, whether it be a self-managed fund, retail or industry fund, have the power to exercise their discretion in dealing with a deceased members benefits.
We recommend all members put in place a Binding Death Benefit Nomination (BDBN) with your fund(s), preferably non-lapsing (if available). If a BDBN is in place, a trustee no longer has discretion about how to pay your death benefits as they are bound to what is specified in the nomination in the proportion you have stated. Unfortunately, when no nomination is in place, or the nomination is non-binding, the Trustee has complete discretion on how the benefits will be allocated.
All clients with industry and retail funds should check their latest member statement to make sure a binding death benefit nomination is in place. If not, this form should be readily available from the funds website to complete.
Our Self-Managed super fund clients should have in place Non Lapsing Binding Death Benefit Nominations. If personal circumstances have changed recently, please contact the office so we can prepare a new form for signing. If you do not have a copy of your nomination, we can email/mail a copy to you as you should have these with your personal records. Please let us know.
Estate planning is a complex area so we recommend you seek specialist advice to assist with understanding taxation consequences and to make sure your intentions will be followed through. Please contact our office if you need any further information or assistance.
Insurance in a SMSF
If you are thinking of getting insurance in a SMSF, there are a few things you should consider first:
The benefit of insurance is that it provides protection for the members of the super fund that are listed on the policy. It may also be more tax effective for the super fund to be claiming the expense than yourself personally. There are also cash flow benefits of using the money within the super fund to pay for the insurance, rather than from your personal income.
The disadvantages of insurance is that the premiums you pay from the super fund may be higher than you would pay personally, and there may be tax payable on some of the benefits paid. Also, using the super fund’s cash to pay for the insurance will reduce the member’s retirement balance. In some cases the member may have the option to contribute money into the super fund to pay for the insurance, however this contribution will count towards their contribution caps.
The types of insurance products that SMSF can purchase include life insurance, standard income protection and Total and Permanent Disability (TPD) insurance with own occupation definition.
Making an insurance claim through your SMSF can be a complicated process, with a requirement to meet a “condition of release” according to the SIS Act in order to access the insurance payout. In some circumstances it may be more appropriate to hold some types of cover outside of the fund, thereby removing the requirement to meet the difficult “condition of release” from super.
If you would like more information for whether getting insurance in your SMSF is right for you, please feel free to make an appointment with our financial advisor.
ATO target areas
Each year the ATO targets specific items which they consider to be at high risk of being claimed as incorrect deductions. Individuals’ tax deductions are being scrutinised this year, with the ATO reminding people that they are entitled to claim a deduction if the 3 golden rules apply:
Make sure you spent the money yourself and were not reimbursed
Make sure it’s related to your job
Keep a record to prove it
The ATO are focusing on deductions for phone and internet, car and travel expenses and self-education, however if they are work related expenses then you are entitled to claim what you are owed, but no less and no more.
The ATO are also focusing on the so-called sharing economy. Uber drivers, people who let out rooms on Airbnb or storage on Spacer and many other apps connecting people who need with others who have are being warned to declare every cent of income earned in this way. If you are going about something in a business-like way, then everything from the first dollar is considered taxable income. Uber drivers are also required to pay GST on every dollar, but this has not filtered through to other services as yet. If you are unsure of what your obligations are or you need help with your bookkeeping, record keeping or tax return preparation, please contact our office and have a chat with one of our accountants.
These targeting measures are designed to catch out those people making false and fraudulent statements so if you do make an honest mistake then you have nothing to fear. Simply alert your accountant or the ATO to get it sorted out. If you are unsure what you are entitled to claim, check the ATO Website or contact our office for more information.
A few interesting facts about retirement
Given the financial demands of everyday life, planning your retirement may be a relatively low priority. You may also think that you have plenty of time to plan. But before you put off planning for your retirement any longer, here are some key facts you should consider.
Your retirement could last 30 years or more
A male currently aged 65 has a future life expectancy of 19 years and for females currently aged 65 it’s 22 years. But these are just the averages and they are increasing steadily. As these trends continue, your retirement could stretch to three decades, or maybe even longer.
You shouldn’t rely on the age pension
The full single rate age pension only provides around 25% of average weekly male earnings. What’s more, qualifying for the age pension may become more difficult in the future, given our population is ageing.
You shouldn’t rely on an inheritance
Your parents may end up spending all their savings and may even need to downsize their home to help make ends meet. So, if you’re relying on an inheritance to fund your retirement, you could be disappointed.
You might not have enough super either
With some of your money going into super through compulsory employer contributions, you’re off to a good start. But assume that those employer compulsory contributions will mean you have enough super to get you through your retirement and you could be in for a nasty surprise. Research conducted by Rice Warner Actuaries revealed that Australia has a shortfall in super of close to $1 trillion, which means many Australians may not have enough super to fund their retirement.
So what can I do?
Start planning now
Thankfully, with a bit of preparation, it’s possible to plan for a long and comfortable retirement. Strategies like salary sacrificing into super, making lump sum contributions or using a transition to retirement strategy (pending the election result), are all smart strategies to consider to boost your super, and some of them generally have tax benefits too. It’s also possible to use your super to start a pension that pays you a regular income. Some pensions even guarantee to pay you an income for the rest of your life, negating the risk of outliving your savings.
Talk to a retirement planning expert
The best way to see how your retirement savings are currently tracking, and find out what you could do now to increase your super for retirement, is to call our office and speak to our financial adviser, Ken Wild. He can help you set realistic goals and put a plan in place to achieve them.
The company tax rate for businesses with annual turnover of less than $10 million will be reduced to 27.5% for the 2016-17 financial year. It is proposed that by 2027, the company tax rate will have reduced to 25% for all companies.
The small business entity turnover threshold will increase from $2 million to $10 million from 1 July 2016 so more can access the reduced company tax rate and other income tax concessions, including the $20,000 instant asset write off. Note that the turnover threshold has not increased for access to the small business capital gains tax concessions.
Individuals and Families
The threshold at which the 37% marginal tax rate commences will increase from $80,000 to $87,000 from 1 July 2016. The maximum tax saving is $315 per year.
The low-income thresholds for Medicare levy and surcharge have been increased for the 2016 financial year. If you would like more details on these thresholds, please contact our office.
The Private Health Insurance rebate will not be indexed for the next 3 years.
GST and Other Taxes
Tobacco excise will be increased by 12.5% annually for the next 4 years, taking the excise on a cigarette to almost 69% of its average price.
GST will be applied to low value goods that are imported by consumers from 1 July 2017. Overseas suppliers that have Australian turnover of $75,000 or more will be required to register for, collect and remit GST for goods supplied to Australians.
Superannuation
Concessional contributions cap has been reduced to $25,000 for all taxpayers from 1 July 2017.
Individuals with a super balance of less than $500,000 will be allowed to make additional concessional contributions over the cap, where they have not reached their cap in previous years effective from 1 July 2017. The amounts are carried forward on a rolling basis for 5 consecutive years but only unused amounts accrued from 1 July 2017 can be carried forward.
The current restrictions for people aged 65 to 74 from making super contributions will be removed from 1 July 2017. People under 75 will no longer have to pass the work test to contribute.
From 1 July 2017, the ‘10% rule’ will be abolished and all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions.
A lifetime non-concessional contributions cap of $500,000 has been introduced, effective from 7.30pm on 3 May 2016 (immediately). The lifetime cap takes into account all non-concessional contributions made on or after 1 July 2007. This replaces the existing annual cap of $180,000 per year. Contributions made before commencement cannot result in an excess, but contributions after commencement will need to be removed or they will be subject to penalty tax.
From 1 July 2017, a balance cap of $1.6 million on the total amount of accumulated superannuation an individual can transfer into tax-free retirement phase will be introduced. If an individual has more than $1.6 million, they can maintain the excess in an accumulation phase account where earnings are taxed at 15%. Members already in pension phase with balances above $1.6 million will be required to reduce their retirement balance to $1.6 million by 1 July 2017 by converting excess into accumulation phase accounts. Amounts over the balance cap will have a tax levied, in a similar method to excess non-concessional contributions.
Super funds will no longer be able to claim a tax exemption for earnings of assets supporting a Transition to Retirement Pension as of 1 July 2017.
The ability to treat superannuation income stream payments as lump sums will be removed from 1 July 2017.
The Div 293 tax income threshold (when high income earners pay additional contributions tax) has been reduced from $300,000 to $250,000 from 1 July 2017.
Superannuation Changes – What Do They Mean for You?
Whilst we have sympathy with the intention to limit the largesse of the super system for the truly well off, some elements of the measures proposed change the ground rules quite considerably and will have an immediate adverse impact on many retirees and near retirees in particular.
There is some element of retrospectivity also with the changes to the tax treatment of in particular transition to retirement pensions and the immediate restriction on after tax (non-concessional) contributions to $500,000 per person over their lifetime. This cap also seems low in today’s world where many Australians have assets in excess of that but would not see themselves as “rich”.
There are also some equity issues. For example a couple with $2.5m combined pension assets split 50/50 will pay no tax on the earnings of their pension accounts. Another couple with $2.5m split $2m and $500,000 will pay tax of $3,750 and now with the changes to the contribution caps are most unlikely to be able to adjust the account balances to rectify the situation.
The ability of the self-employed who have not had the benefit of compulsory employer contributions to catch up as they near retirement is impacted by the changes to both contribution caps also. Some offset to that is the very sensible rule change removing the token work test for the over 65’s and allowing contributions to be made until 75.
We also foresee a number of administrative issues arising, for example, with the tracking of non-concessional contributions from the start date of 1 July 2007. Records will not be easily obtained from fund managers and the like who held super investments that were later closed upon rollover to a new scheme. Innocent mistakes are likely to be made where contributions were overlooked and then penalties may be imposed.
All of the changes have some way to run, of course, with an election and having to be passed into law so the outcome may be many months away. This means something of a hiatus in terms of planning for many people as we await the outcome. We will be monitoring developments and when the outcome is clearer we will be able to advise on what strategies to employ for the future within the new legal framework.
Ken Wild will be on extended leave for all of June and July 2016. If you foresee any issues arising during that period that you would like to discuss with Ken before he takes leave, please make contact with our office to schedule an appointment as soon as possible so we can put in place the appropriate strategies or actions.
In Ken’s absence please contact the following staff members if any unexpected issues arise:
Many of you will have already had the pleasure of dealing with her, but we would like to extend a very warm welcome to our team to Rose Geary. Rose joined us towards the end of the 2015 year as part of our Client Services team assisting Ken to deliver great outcomes. She comes to us well qualified, possessing a Bachelor of Commerce and Law and previous experience in a financial services environment.
Team Subtractions
With sadness, we advise that Maureen Wild will be moving on to pursue other opportunities after many wonderful years as a valued member of our team. Maureen’s last day will be Wednesday 27th April 2016 and while we will miss her expertise and smiling face, we wish her well in her future endeavours.
SMSF Minimum Pension Withdrawal Reminder
A quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund before Thursday 30th June 2016. You can find each member’s minimum pension withdrawal amounts for 2016 in the covering letter we included with your 2015 financial statements. If you have any questions to do with your minimum pension requirements please call our office to discuss with one of our accountants.
Changes to Motor Vehicle Deductions for the 2016 Financial Year
The number of methods available for calculating your motor vehicle deductions has been reduced from four to two. The two methods that you can use for the 2015/2016 financial year are the log book method and the cents per kilometre method.
Log Book Method:
The log book method remains the same as previous years where you can claim the business use percentage of the vehicle. The expenses that you can claim under this method include the running costs and decline in value. You cannot claim capital costs (eg, the purchase price of the car, principal costs on money borrowed to buy it, and any improvement costs). The log book must be kept for a minimum of 12 consecutive weeks and is valid for the next 5 years.
Cents per Kilometre:
Previously, the rates for claiming a deduction of cents per kilometre were based on the engine size of your vehicle. In order to simplify this, the ATO has replaced these variable rates with a single rate of 66 cents per km regardless of the engine size of your vehicle.
Exceeding Your Maximum Pension Withdrawals for TRIS
A Transition to Retirement Income Stream (TRIS or TTRP) is a special type of pension that allows a member to access their superannuation benefits while still working once they have reached preservation age. There are specific restrictions which state that the maximum allowable withdrawal is 10% of the member’s balance. When a member has a TRIS and they exceed this maximum pension withdrawal limit within the financial year, they have breached the super laws and regulations that the super fund must abide by. The trustees of the fund need to be aware that the following may apply:
The fund may become non-compliant and the trustees penalized.
The TRIS will cease for tax purposes from the start of that financial year, meaning that the fund will not receive any current exempt pension income for year (will have to pay more tax!)
As the TRIS has ceased, any payments made during the year are not considered pension withdrawals and will be counted as super lump sums for income tax purposes and Superannuation Industry (Supervision) (SIS) Regulation purposes.
These lump sum payments will then be included in the member’s assessable income and may be taxed at the taxpayer’s marginal tax rates, without the benefit of any tax offsets. These payments are treated as early access to member benefits which is a breach of the SIS payment standards.
If you are unsure if you can withdraw certain amounts from your SMSF, please contact our office to discuss with one of our accountants before making the withdrawal.
The Hidden Influences of Your Brain – Part 2
In last quarter’s newsletter, we followed Mark & Meg as they purchased a car and discussed a number of hidden decision-making biases that they were exposed to. This quarter we will look at some common investment errors that result from underlying behavioural biases.
While Mark & Meg are a married couple and share the family income and expenses, they have quite different risk preferences and perspectives on investing. Both had assets before they met so have continued to manage their investments separately. Mark is a self-directed share investor, managing a portfolio of individual stocks. Meg mostly prefers to invest in managed investments.
Mark buys Ivoprotein Industries Ltd
Mark is considering a new investment opportunity that he recently read about, Ivoprotein Industries. It’s a small listed company that has developed a gene-based therapy that reduces appetite and can help the overweight. It has received FDA approval in the US and has signed up a distribution agreement with a major pharmaceuticals company. Sales are growing rapidly (albeit off a small base) and, given the global obesity epidemic, the potential market size is huge. Ivoprotein’s share price has risen from 5.5c just 18 months ago to 48c today.
What behavioural biases can you spot?
There is a collection of biases that are likely to predispose Mark to buy Ivoprotein. Firstly, there is a lot to like about Ivoprotein, and a lot to be excited about. An innovative new product; high sales growth; high share price growth; an expanding market opportunity (pun intended); a salient and easily understood investment story. These characteristics are likely to engage the reward pathways in the emotional centres of Mark’s brain making him feel good about the stock. In the complex and uncertain world of share market investing, feeling good about something can be an easy shortcut when deciding what to buy. However, unfortunately, good feelings don’t necessarily predict good performance!
Secondly, as we saw with assessing Audi’s maintenance record, we are subject to a range of information processing errors. These may lead Mark to extrapolate Ivoprotein’s share price growth, sales growth and commercial successes into the future. However, due to a phenomenon called “regression to the mean”, other things being equal, Mark should expect Ivoprotein’s stellar run to revert to closer to industry average performance for equivalent biotech stocks.
Thirdly, based on the success rate of other promising biotech companies like Ivoprotein, we would expect there to be a very small chance that Ivoprotein will go on to become a highly profitable global drug company. However, just like the small chance of winning the lotto, we tend to weight these small probability events more heavily in our decision-making process than we should.
The effects that lead Mark to buy Ivoprotein are common to many “growth” stocks, and have far-reaching implications for investment markets and strategies. We will explore these in later posts.
Meg sells Australian Equities Fund
While Mark watches the stock market daily, Meg tunes in to financial matters only occasionally. There are too many other things going on in her life, and it isn’t a passion of hers. However, it seems to her that whenever she reads something about financial matters it is bad news: there is a war starting somewhere or a central banker causing market to fall. Meg is going to sell some of her Australian Equities Fund to help pay for her new car. To reduce her risk, she’s wondering whether she should convert more of her fund to cash.
What behavioural biases can you spot?
Like Mark, Meg is subject to both emotional and information processing biases. A major cause of Meg’s thinking is likely to be her “loss aversion”. Loss aversion means, in part, that we fear losses roughly twice as much as we enjoy equivalent gains. Every piece of negative news increases Meg’s anxiety, making her increasingly predisposed to sell as the market falls. Of course, selling after market falls is the opposite of the conventional wisdom – meaning that Meg is at risk of selling at the worst time and being under-invested during a subsequent market rebound.
Meg is also subject to the “availability bias”. In theory, a fully rational investor should process all available relevant information before making an investment decision. Clearly this is not realistic, particularly for Meg given her competing priorities. We are therefore likely to act on information that comes to our attention. In Meg’s case, the information she relies on is what is presented to her via mainstream news channels. As a result, it has been filtered to reflect perceived news-worthiness, perhaps biasing it towards sensationalist (negative) events.
Mark sells Tintop Resources Ltd
Like Meg, Mark needs to free up some cash to help purchase the new car. He also needs to fund the acquisition of Ivoprotein. To do this he is thinking of selling his investment in Tintop industries. Mark bought Tintop for $2.33 a few months back. Since then it’s done well – rising to $2.81, netting him a healthy 20% gain. “I’ll lock in my profit,” Mark says to himself.
What behavioural biases can you spot?
While it may be completely necessary for Mark to sell something to fund his car purchase and other investments, choosing Tintop suggests Mark may be subject to the “disposition effect” which is the tendency to sell winners (ie investments on which we have made a gain) and hold onto losers. It is a function of two underlying effects: “mental accounting” and “loss aversion”.
Traditional finance theory suggests that a fully rational investor should view each investment in the context of its contribution to overall portfolio risk and its contribution to achieving their long-term financial goals. However, many investors consider each investment in isolation. This is a form of mental accounting. Given the complexities of investment markets and our finite brain capacity it serves a useful purpose. It simplifies investment decisions to a manageable level. However, it leaves us exposed to making individual stock selection decisions that do not improve overall portfolio performance.
We discussed part of the “loss aversion” effect with Meg’s decision to sell some of her Australian Equities Fund. Mark is experiencing a different aspect of it. Mark’s gain makes him feel good. However, the bigger the gain, the less additional satisfaction he derives. Conversely, were that gain to evaporate, his positive feeling would diminish rapidly. Studies suggest that investors consciously or subconsciously envision this scenario, and anticipate the regret they would feel if they didn’t sell when they had the chance. With diminishing pleasure from further gains, and large potential regret from not selling, off-loading Tintop may feel like a natural thing for Mark to do.
Unfortunately the disposition effect leads to bad outcomes for investors – leading them to sell stocks (winners) that continue to rise, and to hold stocks (losers) that continue to fall.
The Duties of a Company Director – Part 2
In last quarter’s newsletter, we discussed the basic duties required of Company directors. The following are further requirements that directors must fulfil in order to comply with the Corporations Act 2001.
Your annual statement
Each year within a few days after your company’s review date ASIC will send your company an annual statement.
The annual statement sets out the company’s details recorded in ASIC’s register, such as the names and addresses of its directors and secretary, registered office, principal place of business, ultimate holding company (if any), share details and members’ details.
If these details are correct and no other changes have occurred that require you to notify ASIC, then within two months after the review date you need to pay the annual review fee shown in the invoice that accompanies the annual statement, and the director(s) need to pass a solvency resolution.
If any details on the statement are no longer correct, you must update them. You have 28 days from the statement’s issue date to do so.
Pass a solvency resolution
The company’s directors must pass a solvency resolution within two months after the company’s review date, unless the company has lodged a financial report with ASIC within twelve months before the review date.
A positive solvency resolution means that the directors think that there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. You don’t have to lodge notification of a positive solvency resolution with ASIC, payment of the company’s annual review fee is taken to be a representation by the directors that the company is solvent.
A negative solvency resolution means that the directors think that there are not reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. If the directors pass a negative solvency resolution ASIC must be notified within seven days after the resolution has been passed.
Changes in your company’s details
ASIC must be informed of certain changes to your company, some of the common changes are listed below. The Corporations Act requires officeholders to inform ASIC of these changes within a certain time period otherwise late fees may apply.
Change of place you keep your Company Registers
Change of officeholders or details of officeholders
Resignation of director or secretary
Change of registered office
Change of company name
Issue of new shares
Change to members (shareholders)
Changes to ultimate holding company
Division or conversion of shares
Negative solvency resolution
Solvency resolution not passed
Change of company review date
If you would like further information about the duties and responsibilities of a director, please contact our office. Further details can also be found on the ASIC website.
