Newsletter

Staff and Office Updates

We have finally settled in our new offices in The Boeing Building, 55 Blackall Street, Barton ACT.  With the move came some changes, we have consolidated Jodie Dickson Accounting and Superannuation with Veritas Wealth Solutions with an exciting new Logo.

We are pleased to announce that Allison has welcomed the arrival of a beautiful baby boy named Jared, a brother for Liam.The family are doing well.

On the other hand we are excited to announce that Jessica is pregnant and will be going on maternity leave sometime in November. Please keep in mind that any email queries normally directed to Jessica can be sent to admin@veritassolution.com.au and they will be passed on to the most appropriate person.

As most of you are aware Ken Wild has decided to retire at the end of the year. To say he will be sorely missed is an understatement. We would like to thank Ken for all he has done over the years and we wish him luck in the future.

We are sorry to announce the departure of Roshini and wish her the best for her new venture.

However we are pleased to introduce to you our latest member Snow who has hit the ground running as she started just as lockdown hit. She is already is proving to be a valuable asset and we are very happy to have her as a part of the team.

15 Year Business Rollover Rule

Another way to deposit money in to your super fund is through the sale of your existing business and depositing the proceeds in to your super fund. This money can be tax-free, however, there are rules surrounding the process. The super fund deposit goes against the CGT lifetime cap, as opposed to your concessional or non-concessional caps. The rules are as follows:

• You need to be over 55 and retiring or permanently incapacitated - for the act to be considered retirement, you must demonstrate a significant reduction in the number of hours you work, or a significant change in the nature of your present activities. It doesn’t need to be permanent and everlasting.
• The business/company must have been continuously owned for the last 15 years prior to the CGT event, and it needs to have been active for at least 7.5 years.
• Net assets must be under $6 million.
• The contribution to the super fund must be made within 30 days of receiving the proceeds.
• If contributed to your super fund, you must complete the capital gains tax cap election form prior to the contribution.
• The CGT lifetime cap is currently $1.445 million, indexed annually.
• The contribution will count towards your total superannuation balance and, if in pension phase, your transfer balance cap.

If you believe you may be eligible for this type of contribution, please seek advice from one of our financial advisers to make sure it is right for you. 

Minimum Pension Percentages

As you know, for the 2019-20 and 2020-21 financial years, the ATO reduced the minimum pension withdrawal requirement from superannuation to half of its usual rate to assist in the economic recovery from COVID-19.
 
It was recently announced that this reduction has been extended and will apply until 30 June 2022.

The rates form 1 July 2021 to 30June 2022 are as follows

• Aged under 65 – 2%
• Aged 65 to 74 – 2.5%
• Aged 75 to 79 – 3%
• Aged 80 to 84 – 3.5%
• Aged 85 to 89 – 94.5%
• Aged 90 to 94 – 5.5%
• Aged 95 or over – 7%

 
If you have any questions about your minimum pension requirements for the 2021-22 financial year, please contact our office.

Changes to Superannuation Contributions

Work test removal for voluntary contributions Individuals aged 67 to 74 have had to meet the work test of working 40 hours in a consecutive 30-day period to be eligible to make a voluntary contribution into superannuation

Under the proposal, these individuals will no longer have to meet the work test in respect to making non-concessional contributions (including any bring forward contributions) or receiving salary sacrificed amounts into super. Note the current bring forward rule is proposed to extend to members aged less than 67 only (currently awaiting royal assent). We will need to await details of the Bill to see whether bring forward non-concessional contributions are further extended to age 75. This measure does not include personal concessional contributions, so a work test will still need to be met in respect to these contributions. Existing contribution caps will continue to apply. This proposal will simplify the current contribution rules and have a significant benefit for older individuals for greater flexibility and opportunity in being able to make contributions into super. Status: Not yet law. Proposed commencement date of 1 July 2022.

Downsizer contributions

Reduction in eligibility age The downsizer contribution allows for a one-off tax-free contribution into super of up to $300,000 from the proceeds from selling the family home. Presently the eligibility age (amongst other criteria) for being eligible to make a downsizer contribution into super is age 65. It is proposed to reduce eligibility to age 60; with all other criteria remaining the same. The Government’s intention in doing this is to free up the quantity of larger homes for younger families. A popular strategy of recent years, it has had a significant take up. Reduction in eligibility age will allow greater flexibility for individuals to top up their superannuation. Important note: This could lead to preservation issues and restrictions on accessing it for members if not retired, until age 65.

Legacy pension conversions Capped defined benefit income streams (complying life expectancy)

Complying lifetime and market linked income streams) cannot be commuted and are very inflexible, especially on death of the member. These pensions can only be commuted into other types of defined benefit pensions (usually, market linked income streams). Reserves are generally attached to such pensions that can only be drip fed out at less than 5% of their value or an amount of less than the member’s concessional contribution cap (to avoid excess contribution charges). It has been proposed to allow members to exit these legacy pension products (including their associated reserves) during an amnesty period of 2 years via a full commutation. Applies to pensions initially commenced prior to 20 September 2007 (even if commuted to a market linked income stream post this date). There is no proposed requirement for these commuted legacy products to be to be put into an account-based pension; they may remain in accumulation or withdrawn as a lump sum, providing full flexibility with respect to such benefits.
First Home Super Saver Scheme the FHSSS is designed to assist first home buyers in saving for their deposit to purchase their first home. The proposal will increase the maximum releasable amount of voluntary contributions from $30,000 to $50,000 (gross of contribution tax). Voluntary contributions could be made from 1 July 2017 of up to $15,000 per year. These amounts contributed previously will count towards total amounts that can be released under this measure. Status: Not yet law. Proposed commencement date of 1 July 2022.

Contribution of COVID-19 early release amounts Until 31 December 2020

Individuals could withdraw amounts from their superannuation fund under the temporary COVID-19 early release provision of up to $10,000 (where authority had been obtained from the ATO). Where this had occurred, the Government has announced an incentive to re-build individual’s superannuation benefits. A re-contribution of COVID19 early release amount can be made back into the fund. The amount of the contribution cannot be greater than the amount release under COVID19 early release and the amount must have been released in financial years 2019-20 and 2020-21. What’s New 8 Such contributions are excluded from the non-concessional contribution cap and an election must be made to do this (ATO form currently being developed). The individual cannot claim a personal tax deduction for this contribution

Staff and Office Updates

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

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

2021 Minimum Pension Reminder

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

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

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

Indexation of the General Transfer Balance Cap (TBC)

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

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

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

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

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

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

Contribution Cap Changes for 2021-2022 FY

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

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

personal contributions claimed as a tax deduction.

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

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

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

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

How to gain respect in the workplace

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

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

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

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

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

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

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

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

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

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

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

Staff and Office Updates

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

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

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

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

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

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

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

JobKeeper Reduction

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

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

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

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

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

A Beginner’s Guide to Superannuation

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

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

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

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

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

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

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

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

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

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

The role of health in predicting future economic movement

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

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

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

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

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

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

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

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

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

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

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

Staff and Office Updates

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

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

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

JobKeeper Extension

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

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

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

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

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

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

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

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

The Cost of Not Listening

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

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

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

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

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

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

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

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

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

Tips for active listening

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

Super Fund Trustee Responsibilities

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

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

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

As a trustee, you must:

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

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

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

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

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

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

2020 Tax Time Changes

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

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

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

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

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

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

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

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

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

Bias and Investments

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

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

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

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

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

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

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

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

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

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

• Market and sequencing risk
• Inflation risk
• Longevity risk

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

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

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

Staff and Office Updates

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

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

Home Office Deductions

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

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

There are 3 methods to claiming home office deductions:

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

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

2020-21 Super Contributions Caps

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

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

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

Temporary Reduction in Minimum Pension Requirements

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

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

Passwords: Staying Safe In A Digital Era

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

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

The top tips for keeping your digital identity safe include:

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

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

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

Increased Age Limits for Super Contributions

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

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

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

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

Importance of Binding Death Benefit Nominations

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

How to make a valid binding death benefit nomination

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

The nomination must:

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

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

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

The role of binding death benefit nominations in estate planning

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

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

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

Staff Updates

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

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

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

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

Reduction in Minimum Pension Requirements

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

Economic Stimulus Package

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

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

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

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

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

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

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

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

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

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

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

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

Mental Health in a Remote Workforce

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

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

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

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

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

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

Superannuation Guarantee Amnesty

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

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

Why is it important to upgrade your SMSF Trust Deed?

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

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

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

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

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

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

Staff Updates

Our long term receptionist Nadia is no longer with us as she has moved to QLD to be closer to her sons and granddaughters.  We wish her all the best for the future and enjoy the much warmer weather. Thank you for the 5 and half years you were with us! 

Please welcome our new receptionist Arlene who started at the end of August with us and we hope you enjoy working at our firm and you are here for a long time to come.

Our senior accountant Allison Burman had a beautiful baby boy Liam on the 29th July and mum and bub are doing very well.

Congratulations also to another one of our accountants Holly Barnes who travelled down to the Mornington Peninsula in mid-September to compete in the Australian National Amateur Dressage Championships. Holly and her horse Bella finished up as overall champion at Advanced level.

Default tax return

If you have an overdue tax return lodgement the ATO may issue a default tax assessment. This is usually only issued after they have contacted you in regards to your overdue tax obligations. A default assessment is an assessment of what the ATO deems your net assessable amount due based on your taxable income. The income that they use is generally what has been reported to them from your employer and other income sources. Other ways in which the ATO calculates your default assessment includes previously lodged returns, income from financial institutions, salary/wages reported from your employer, GDP (gross domestic product) growth rate, and annual tax statistics. The default assessment will not incorporate any deductions that you may be eligible for, other than those currently reported to the ATO. There is also an administrative penalty of 75% of the tax-related liability that gets applied to each default assessment issued. This penalty can also been increased to 95% for those taxpayers whom have a pattern of non-compliance. On top of this penalty, the ATO can also apply another penalty for failing to lodge on time.

What should you do if you receive a default assessment?

If you have received a default assessment warning letter, it is imperative that you lodge all overdue tax obligations prior to the date advised in the warning letter. You should seek tax advice to ensure that your tax affairs are tended to in a timely manner to help reduce any penalties and fines imposed.

If you do not manage to lodge your returns before the ATO issues a default assessment, the only way to reverse that is to lodge an objection form with the ATO.   You have two years from the date of the assessment to lodge that objection.

Cryptocurrency and tax

The term cryptocurrency is used to describe a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on a blockchain. Cryptocurrency generally operates independently of a central bank, central authority or government.

If a self-managed super fund (SMSF) is transacting with cryptocurrency SMSF trustees and members need to be aware of the tax consequences relating to digital currency. These vary depending on the nature of your circumstances & anyone involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions. Essentially the date of each transaction, the value of the cryptocurrency in Australian dollars at the time of the transaction, the purpose of the transaction and the details of the other party involved.

Software such as Coin Tracking can help to track your trades and generate capital gains reports. If you hold any digital currency as an investment, you’ll be taxed on the capital gains you make when you sell it for fiat or another crypto. However, if you hold your cryptocurrency for more than a year before selling or trading it, you may be entitled to a 50% CGT discount. Even if the market value of your cryptocurrency changes, you won’t make a capital gain or loss until you actually dispose of your holdings. If there is a capital loss, capital loss can be used to reduce capital gains made in the same financial year or a future year, including investments outside of cryptocurrency.

Any profits you make mining bitcoin or any other cryptocurrency will form part of your assessable income. If you trade crypto for profit, you’ll need to include those profits as part of your assessable income for tax purposes. If your business pays for goods and services using cryptocurrency, or receives payments for goods and services in cryptocurrency, these transactions are subject to GST and if you operate a crypto exchange service, income tax applies to the profits you make and your transactions will be subject to GST. There are situations you may be eligible for the personal use asset exemption and Cryptocurrency transactions are exempt from CGT.

If you lose your private key or your crypto holdings are stolen, you may be able to claim a capital loss.

Instant Asset write-off increased and extended

The threshold has increased to $30,000, and has been extended to 30 June 2020.

The instant asset write-off now also includes businesses with a turnover from $10 million to less than $50 million.  These businesses can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed ready for use from 7:30pm (AEDT) on 2 April 2019 until 30 June 2020.

Businesses with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:

• $30,000 from 7:30pm (AEDT) on 2 April 2019 until 30 June 2020
• $25,000 from 29 January 2019 until before 7:30pm (AEDT) on 2 April 2019
• $20,000 before 29 January 2019

Taxable payments Annual Report

There are several industries that are required to complete a TPAR when lodging their tax return.  If your business is currently in the building and construction industry, cleaning industry or courier industry, you must report payments that you make to contractors for those services.  This is to ensure that the contractors themselves report their income properly to the ATO when they prepare their own income tax returns.

From 1^st July 2019, the reporting requirements have been expanded to include road freight, information technology, security, investigation and surveillance services.

Businesses in these industries will need to collect details of payments made to contractors from 1^st July 2019 until 30^th June 2020, and provide the TPAR to the ATO by 28^th August 2020. 

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 amount you paid them.  Only report the amount you actually paid to the contracts, don’t include invoices that you have received but not yet paid.

When does an SMSF need an Actuarial Certificate?

An SMSF can have two types of accounts within the fund: an accumulation account (for contributions and/or rollovers) and pension account(s) (used to pay the member a regular income stream or lump sum). The tax treatment for each account is different and sometimes there’s a need for an actuarial certificate to determine the tax implications.

An actuarial certificate will determine the percentage of income that will be exempt from tax for a SMSF.

An actuarial certificate is required in the following circumstances:

• A two member SMSF where one member is drawing a pension and one member is in accumulation.
• A single member SMSF where the member is drawing a pension and making contributions throughout the year (eg. Transitioning to retirement).
• A two member SMSF where both members are drawing a pension and one member makes a single large contribution and starts a new pension with the amount.
• A two member SMSF where one member passes away and the death benefit (either a lump sum or pension) is started several months later.
• The SMSF is paying a defined benefit pension.

When is it not needed:

• The most common situation where an actuarial certificate is not needed is when all members of the SMSF are in pension mode all year.
• When all members of the SMSF are in accumulation mode all year.
• When assets of the fund have been segregated (ie different bank accounts and investments).
• When the SMSF has a taxable loss as there would be zero tax anyway.

When preparing the accounts for an SMSF, we need to make the decision whether to commence a new pension from contributions made, or to leave them in accumulation and get an actuarial certificate.

When pension members make a large contribution to the SMSF we will generally commence a new pension with this amount. The difficulty we face is when members make several contributions during the year with the intention that the amounts will be treated as a single contribution amount. In practice we would need to turn each deposit into a new pension.

If you intend on making large contributions into your SMSF, we strongly suggest that you seek advice to ensure that you do not breach the contribution caps and that the best outcome can be achieved for your fund.

Staff Updates

We are very happy to welcome Roshini Suraweera back from Maternity leave on July 2^nd for 3 days per week working Tuesdays, Wednesdays & Thursdays. Roshini can be reached via her email address: roshini@veritassolutions.com.au .

Allison Burman will be leaving us later this month to have her baby and will return sometime in the New Year, she will be missed by all. This serves as a reminder that any email queries that you would usually direct to Allison can be sent to admin@veritassolutions.com.au and they will be passed onto the most appropriate person.

ATO targets for 2019

For the 2018/2019 personal income tax returns, the ATO has indicated that they are paying close attention to work related deductions, in particular, if you are claiming more than $2,000 to $5,000 in any one area. If you have legitimate claims in this area, it is important that you make sure each claim is backed up with receipts or written evidence. The importance of accurate record keeping is high with these deductions.

The type of records that you will need to keep is written evidence for any claims over $300. If it is under $300, then you still need to be able to show how you calculated the claim; however, you won’t need written evidence to support it. If the claim is over $300 the evidence must be provided for the whole amount claimed and not just the amount over $300. This $300 amount does not include car and meal allowances, award transport payments allowances, or travel allowances. These are subject to their own rules.

The ATO has also indicated that they will be paying close attention to rental properties and Airbnb’s in personal tax returns. They now have the ability to check rental income and expenses through real estate agents, so it is very important to make sure your claims are accurate and are supported with written evidence. They will be taking particular care when evaluating the income earned on each property, especially in circumstances when no income has been included for the property.

If you have any concerns regarding these issues in respect to your personal taxes, or you would like further information, please don’t hesitate to contact our office.

How your Dividends are taxed

Recent research shows that 36% of the adult Australian population own investments listed on the stock market, some investing as individuals and some through Self-Managed Super Funds. The most common way for companies to pay returns to shareholders is by way of a cash dividend.

Significantly, whether you hold shares in a private company or a public listed one, the rules about how you are taxed on any dividends you receive as a shareholder are the same.

Dividends are paid out of profit, which have already been subject to Australian company tax which is currently 30% (or 27.5% for small companies). Recognising that it would be unfair if shareholders were taxed again on the same profits, shareholders receive a rebate for the tax paid by the company on profits distributed as dividends.

These dividends are described as being ‘franked’. Franked dividends have a franking credit attached to them which represents the amount of tax the company has already paid. Franking credits are also known as imputation credits.

The shareholder who receives a dividend is entitled to receive a credit for any tax the company has paid. If the shareholder’s top tax rate is less than 30% (or 27.5% where the paying company is a small company), the ATO will refund the difference.

Superannuation Funds pay tax at 15% on their earnings whilst in the accumulation phase, so most super funds will receive refunds of franking credits every year.

Dividend reinvestment plans

This is where the shareholders are given the opportunity to reinvest their dividends in additional shares in the paying company. If you reinvest a dividend in this way, your income tax liability on the dividend is calculated in exactly the same way as if you’d received a cash dividend. That means you may have an income tax liability – and no cash to settle it with because the cash was all reinvested. That needs to be borne in mind when you consider whether a dividend reinvestment plan is right for you.

Bonus shares

In some cases, companies will issue bonus shares to shareholders. These are not generally assessable as dividends unless the shareholder is given the choice between a cash dividend and a bonus issue in the form of a dividend reinvestment plan.

Instead, the bonus shares are taken to have been acquired for CGT purposes at the same time as the original shares to which they relate. This means that the existing cost base is apportioned over both the old shares and the bonus shares, leading to an overall reduction in the cost base of the original parcel of shares.

Motor vehicle deductions for 2019

The Australian Taxation Office has determined that the rate for work-related car expenses for the income year 1 July 2018 to 30 June 2019 is 68 cents per kilometre. This is an increase from 66 cents per kilometre from previous years.

Cents per kilometre method:

Your claim is based on a set rate for each work-related kilometre you travel and is limited to 5,000 kilometres. While there is no written evidence required, you must be able to reasonably show how you came up with the number of work-related kilometres. The ATO can ask how you calculated your claim and how the use of your car was work related.

Log book Method:

If you travel more than 5,000 kilometres per financial year for work, and intend to claim car expenses, the ATO requires you to keep a logbook to support that claim.

Using the logbook method, your tax deduction claim is based on your car’s “business use percentage”. To work out your business use percentage, you need to keep a logbook for your car for a typical consecutive 12-week period.

Your logbook must include every trip you take – not just your business-related trips.
The logbook must include the following details:

• date for each journey
• start and finish odometer readings for each journey
• total number of kilometres for each journey
• reason for each journey
• start and finish dates for the logbook period
• start and finish odometer readings for the logbook period

Keep receipts for all expenses related to your car, including:

• petrol
• registration
• insurance
• servicing
• interest on loan costs
• other running costs

As with all tax deductions, you must have spent the money and haven’t been reimbursed by your employer, the claim must be directly related to earning your income and you need to be able to prove that the expense was incurred.

Making Downsizer Contributions

If you are over 65, you can make non-concessional (after-tax) contributions of up to $300,000 from the proceeds of selling your home. You can make a ‘downsizer’ contribution even if you’re otherwise unable to contribute because of your age, work, or the amount you have in super.

How does it work?

If you are over the age of 65 and exchange contracts for the sale of your primary residence on or after 1 July 2018, you could be eligible to make after-tax contributions of up to $300,000.00 from the proceeds of selling your home. If you have a partner, you are able to take advantage of this by making a combined total of up to $600,000 to super.

Who is eligible?

• You must be 65 years or older at the time you make the downsizer contribution.
• Your contributions must come from the proceeds of the sale of your home (exchange must be on or after 1 July 2018).
• You must not have previously made a downsizer contribution to your super from the sale of another home.
• You or your partner must own your home for 10 years or more prior to the sale.
• Your home must be in Australia and cannot be a caravan, houseboat or other mobile home.
• The capital gain or loss must be either exempt or partially exempt from capital gains tax under the main residence exemption.
• You must make your downsizer contribution within 90 days of receiving the proceeds of sale (usually the settlement date).

Things to consider:

Age Pension: Downsizer contributions are added to your super balance, which means they are included in the assets and income tests used to determine eligibility for the age pension and Department of Veteran Affairs benefit. The family home is not counted in these tests, so making downsizer contributions could mean you miss out on the age pension. Please note that your super balance (including downsizer contributions) is also used to determine eligibility for residential aged care and home care services.

Transfer Balance Cap: You have a limit of $1.6 million on the amount of savings you can move from super into an income stream. If your total superannuation balance is more than $1.6 million, then any downsizer contribution you make must stay in your accumulation account. Earnings in accumulation in super are taxed at 15%, whereas they are not taxed in a retirement income stream.

Who can benefit?

• If you are an older member who wants to boost your income in retirement by unlocking capital in your family home.
• If you are a self-funded retiree who would like to put more into super and has a level of income and assets that means you’re not eligible for the age pension or the other government benefit.
• You are an older member with a total superannuation balance over $1.6 million and want to take advantage of the 15% tax on earnings offered by super. This can help you put more into your super and pay less tax than you would outside super.

How to make the contribution:

If you decide to make a downsizer contribution, you will need to complete the ATO form available ‘here‘ . By submitting the form, you are confirming that you have met all the eligibility criteria, as outlined above. Remember, all downsizer contributions must be made within 90 days of receiving your sale proceeds.