Staff and Office Updates
Thank you all for your patience in receiving this belated update. We hope you enjoyed your Christmas holiday and had a wonderful start to the New Year.
Everyone at Veritas started 2024 by getting a refreshing break and having a good time with families and loved ones. We are all be back on deck from the start of February.
Update about Liontown and Chalice from Jodie
Dear Client,
Not the start to 2024 we had hoped for with LTR and CHN both having suffered further price drops early in the new calendar year.
Our view on these companies has always been long term and we encourage you to remember that as you consider the affect the drop in these assets has had on your overall portfolio value.
LTR’s drop in trading price is a direct result of the current lithium price fall that may impact on the shorter term funding available to LTR and hence its timeline for ramping up production. This lithium price fall is predicted by some to last (possibly) until 2026 with prices then predicted to increase significantly as world lithium demand significantly outstrips supply.
Timing for LTR’s supply to hit the market is always going to be affected by market conditions. LTR continue to manage these conditions well, being agile with their plans as they keep the long term future of the company intact. Production will commence as planned this year and the company remains on track to become a world leading provider of Lithium.
There is a similar story with CHN as the price of nickel and PGE resources fall. These prices are also predicted to increase significantly over the following few years.
Importantly we are navigating a period of significant world change and the markets of the past do not reflect the expected future. Such change is inevitably going to be wrought with volatility but we remain confident and excited that the companies you are invested in will have a long term place in the process of that change.
As in the past, we see the biggest challenge through this period to be in cash flow management. We importantly set portfolios in such a way so that defensive assets and income producing assets (that are less volatile) are available to provide your income needs whilst we manage this period of change.
If you feel the need to review your cash flow requirements please do not hesitate to make a time to come in to the office (or video call) and see me.
Regards,
Jodie and the team at Veritas Wealth Solutions.
Government to unveil stage 3 tax cut overhaul
Stage 3 tax cuts have been a topic of discussion since they were announced in 2018. These tax cuts were aimed to provide Australian taxpayers with some relief from “bracket creep”, while making the tax system a bit simpler.
Prime Minister Anthony Albanese will present a revised version of the contentious stage three tax cuts at the National Press Club today in a bid to refocus on “middle Australia” by reducing savings for high-income earners.
The redesign, approved by cabinet on Tuesday and by the Labor caucus on Wednesday, was expected to involve raising the tax-free threshold to $19,000, taxing lower-income earners at 16 per cent while changing the top 45 per cent tax bracket to $190,000.
“I’ll be giving a full exposition of economic policy and our response to provide assistance to middle Australia on cost of living at the National Press Club,” he said yesterday.
“This proposal will be all about supporting middle Australia. We know there are cost-of-living pressures on middle Australia and we’re determined to follow the Treasury advice to provide assistance to them.”
H&R Block director of tax communications Mark Chapman supported the redesign.
“The heavy weighting of the original package towards those on the highest incomes is difficult to justify in the current economic climate and, with the cost of living impacting disproportionately on those low and middle-income taxpayers, this will provide some much needed extra cash in the pockets of hard-working families to pay mortgages, food and fuel bills,” he said.
The cuts were first introduced by the then-Coalition government in 2018 as part of a three-stage package. The first two rounds of cuts benefited low and middle-income households, and the final round, set to take effect in July, would give tax breaks to higher-income earners.
In their original form, the cuts would collapse the 32.5 per cent and 37 per cent tax brackets into a single 30 per cent bracket and the threshold for the top 45 per cent tax bracket would be raised from $180,000 to $200,000.
Mr Chapman said this delivered most of the benefit to those on high incomes, translating into “nothing at all for people earning $45,000, only $875 for people earning $80,000 but a whopping $9,075 for people earning $200,000”.
Radio station 2GB reported on Monday that the government would revamp the cuts, keeping the 45 per cent bracket unchanged but raising the tax-free threshold.
On Tuesday the Australian reported that the 37 per cent bracket would be reinstated but changed from $120,000-$180,000 to $135,000-$190,000.
Sky News said the tax rate for individuals earning between $45,000 and $135,000 would be 30 per cent while income of $19,000-$45,000 would be taxed at a reduced rate of 16 per cent, providing relief to those previously not eligible under the cuts.
The Australian Financial Review said the net effect of the revisions meant those earning up to $150,000 would be better off than they would have been under the currently legislated package, while the benefit for those on the highest incomes would almost be halved.
Mr Chapman said, “those on higher incomes (say, $200,000) will now only benefit by $4,546 (which is still quite generous) as opposed to $9,075”.
“With the cost of the tax cuts package overall expected to remain the same, this means that the tax savings have been distributed much more widely,” he said.
“They are now focused on low and middle-income taxpayers, who were previously not well served by the tax cuts, have been suffering from increases in the cost of living and are far more numerous than the high-income earners.”
Macquarie Bank Changes to Cash & Cheque Services
As a digital bank, the Macquarie Bank is focused on transitioning to completely digital payments as a safer, quicker and more convenient way to bank.
What’s changing?
Between January 2024 and November 2024, they will be phasing out their cash and cheque services across all their banking and wealth management products, including super and pension accounts. They will also be switching off their automated telephone banking service used to make payments over the phone.
| Date | Customers won’t be able to: |
| From January 2024 | Order a cheque book for a new cash management account (including for any Wrap accounts that may be linked to your cash management account). |
| From March 2024 | Make a payment using the Macquarie’s automated telephone banking service. |
| From May 2024 | Deposit or withdraw cash or cheques over the counter at Macquarie branches. Order a cheque book on an existing account. Customers can continue to withdraw cash from their transaction account via ATMs across Australia and overseas without fees. However, cash deposits and branch withdrawals will no longer be available. |
| From November 2024 | Write or deposit cheques (including bank cheques). Deposit or withdraw cash over the counter at NAB branches. Make super contribution or payment via cheque. |
From November 2024, all payments to and from your Macquarie accounts will need to be made digitally. You can make payments securely from you Macquarie accounts via Macquarie Online Banking or the Macquarie Mobile Banking app.
If you’re not already banking digitally, now is a good time to start. If you encounter any problems or issues please feel free to contact us.
Borrowing from the Business and Div 7A
Business owners of private companies often borrow money from their own companies for all sorts of reasons. However there is an area of the tax law that seeks to sanction against situations in which private companies dole out money to those within a business, in a form other than salary or dividends that needs to be understood by business owners. This is known as Division 7A.
What is Division 7A?
Division 7A exists as an integrity measure, and deals with benefits such as payments, loans, or even debt forgiveness made by private companies. The Division 7A law prevents private companies making tax-free profit distributions to shareholders (and their associates).
Such transactions can include:
– amounts paid by a private company to a shareholder (or associate), including transfers or uses of property for less than market value
– amounts lent to the same without a specific loan agreement constructed in conformity with prescribed legislative requirements (unless the relevant loans are fully re-paid by lodgment day*)
– debts that the business forgives.
Through applying the Division 7A rules, such loans, debt forgiveness or other payments are treated as assessable unfranked dividends to the shareholder (or associate), and taxed accordingly in their hands.
Who does it apply to?
“Private companies” are covered by Division 7A. The rules thereby apply to the shareholders of such companies (typically, the principals of the business) and their “associates”. This last term is widely defined and can include family members and related entities. Employees may be affected if they are shareholders (although fringe benefits rules may also apply in preference).
If you find yourself in circumstances where there is a possibility of Division 7A provisions applying, and the tax consequences that go along with it, consult this office.
What commonly triggers Division 7A?
Most commonly, Division 7A applies where there is a loan by the company to the business’s owners (that is, shareholders). A loan will generally be treated as a dividend if a company lends money to a shareholder (or associate) in an income year and the loan is not fully repaid by the lodgment day* of the same income year.
Another example, which is not all that uncommon, is where an asset of the company is made available for use of the shareholders — a holiday house owned by the company is a typical example. Where shareholders of the private company use that holiday house for free over a certain period, this will likely trigger Division 7A as a “payment”, as this use is viewed as having a commercial value. That value is deemed to be a distribution to shareholders that would otherwise be tax-free were it not for the Division 7A provisions.
What can be the consequences?
Any loans, payments and debt forgiveness from the business to its shareholders (or associates) may be deemed to be an assessable dividend that should be taxed in the hands of the shareholder (or their associates) typically at their marginal tax rate, under the Division 7A rules. The dividend is “unfranked” meaning that there are no franking credits available to the recipient (unless the Commissioner exercises his discretion to the contrary).
But one important aspect of Division 7A, broadly speaking, is that there needs to be “profits” from which the business can make payments. This is referred to as a “distributable surplus”.
In general terms, provided there is a sufficient distributable surplus in the company, all payments made by a private company to a shareholder (or their associate) to which Division 7A applies are treated as dividends at the end of the income year.