How to minimise your superannuation’s risk strategy

By March 27, 2020 Super
How to minimise your superannuation’s risk strategy

While the coronavirus has been causing Australia’s economy to take a recessive turn due to reduced cash flow, there is still no reason to panic about your superannuation investments just yet.

However, if you are a middle-aged worker or a soon-to-be retiree, reviewing your superannuation investment strategy may prove helpful for other future unexpected economic problems. Here are some suggestions on how you can manage your super with a minimised risk strategy:

Build a cash buffer:
Cash will always be a conservative option when it comes to super allocation. For those approaching retirement, investing in cash is a low-return but also a low-risk strategy to protect your savings. Not only should middle-aged workers work towards investing their super funds in cash, but they should also build a physical cash buffer and save on the side without contributing the extra money into super funds. This way, in the off chance that something does go terribly wrong with your super funds, at least you have a cash buffer to help you out.

Financial planner/personal accountant:
If you can spare some extra money to do so, hiring a personal accountant or financial planner will always benefit you in the long run. Unlike super funds which invest your money into outlets deemed profitable by the company itself, a financial planner will help you invest your money into avenues that you personally prefer. While this may mean converting into a self-managed super fund, having sole control of your super funds is never a bad idea.

Pay attention to super fees:
The one thing that you as a super fund holder can choose is the fees you wish to pay a super fund for managing your super. Do your research before committing or switching to a super fund and focus on the fundamentals, such as fees. High fees will obviously negatively impact your retirement savings and while rates may increase at a seemingly minuscule rate, they will add up by the time you can take out your super. Always choose a super fund which is most aligned with your personal values and monetary goals and do adequate market research beforehand.

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How can you apply for GST deference and refunds on imported goods?

By March 27, 2020 Tax
How can you apply for GST deference and refunds on imported goods

Importing goods and services with extra-added GST costs but not sure how you can apply for refunds or deference? The ATO has outlined a series of steps for all Australian businesses to follow when deferring or refunding any GST payments from imported goods to help better manage your cashflow.

Instead of paying GST every time you purchase an imported good, the ATO is now introducing a deferred payment scheme, where you can defer GST payments until the first activity statement lodged after your goods are imported.

An online application for the deferred GST scheme must be submitted for eligible businesses. To be able to apply for the deferred GST scheme, businesses must meet the following requirements:

  • Have an ABN
  • Be registered for GST
  • Lodge your activity statements monthly and online
  • Make your activity statements electronically
  • Comply with customs regulations on imported goods and services

According to the ATO, you can also apply for GST refunds when you return a low-value imported digital good or service. If your purchase possesses a custom value of $1000 or less, there are almost always GST costs attached to the product. While the GST added cost for one product may not be much, these tax payments do add up and it is important to consider applying for a refund when you choose to return these imported items.

When returning an imported good, your overseas supplier should always refund the paid amounts including GST but on the off-chance that they don’t, the ATO is always open to helping out with refund requests for imported GST costs. The ATO encourages contacting them directly for any GST-related problems concerning your business.

With the recent outbreak of COVID-19 and its resulting negative economic impacts on small Australian businesses, it is also worth noting that the ATO has also introduced some tax relief options including GST refunds, whereby businesses can acquire their GST refunds faster by reporting GST monthly rather than the usual quarterly reports.

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CGT exemptions have been scrapped. What does that mean for you?

By March 24, 2020 Tax
CGT exemptions have been scrapped What does that mean for you

Are you an Australian living or working overseas with a family home in Australia? Or you know someone who is? If so, be sure to consider the impacts of the capital gains tax (CGT) on you from 30 June 2020.

Since 1985, the exemption of Australian expatriates from the CGT tax has been available for homes which have never been rented out for more than six years at a time. However, following the scrapping of the CGT exemption under the A$581m federal government plan, Australians working overseas will have to sell their property before the 30th of June 2020 to avoid CGT and still be eligible for CGT main residence exemption.

With the removal of CGT exemption past June 2020, Australian expats who own property in Australia will be required to pay CGT dating all the way back to when they first bought the property. That is, if an ex-pat was to have bought their property in 1985, they would have to pay an accumulation of their tax owing in CGT from 1985 to 2020. The only way to avoid such hefty tax payments would be to sell your property on or before the 30th of June or to re-establish Australian residency before selling the property.

Understandably, the new change will impose a sizable cost on Australian expats and has come as a result of the influx of speculative foreign investors as well.

As every situation is unique, taxation planning customised to every taxpayers specific circumstances are advised. In order to avoid the accumulated CGT payments, Australian expats need to be aware of their financial standings and be ready to make a quick decision regarding the selling or keeping of their Australian property.

Seeking out tax advice from knowledgeable tax specialists, employing organised bookkeeping services and detailed financial statements written up by accountants in preparation for making such an important decision regarding your Australian property is heavily recommended to ensure the new CGT laws don’t cause you financial problems.

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Investing in shares vs property in SMSFs

By March 23, 2020 Super
Investing in shares vs property in SMSFs

Shares and property are two popular investment options for those with a self-managed super fund (SMSF). However, they both have very different attributes and choosing the one that will achieve the best outcome for an SMSF depends on your personal goals and situation.

While the price of shares can vary drastically, property is a relatively stable asset, making it appealing to those who want more security and predictability. Property prices are also negotiable unlike shares, and you can generally borrow money at a lower rate for property purchases.

It may seem hard to find the perfect investment property, but older and undercapitalised properties can be renovated for profit. However, returns from property rentals can be dented due to factors such as land tax, utilities and rates, maintenance and tenancy vacancies.

Shares are more dynamic and volatile than property. One advantage is the accessibility of investing in shares, as you can enter the share market with a few thousand dollars – much less than what you need to invest in a property.

Maintaining a portfolio of quality shares that pay tax-effective dividends may be a good way to fund retirement. With the right portfolio allocation, shares also have the potential to provide a better, stronger income than property rentals, as long as that income is sustainable and increasing.

Property can generally be used as a wealth-creation tool, while shares can create a reliable retirement income. For those who can afford to put more money into investments, it may be a good idea to consider investing and diversifying in both. If you’re unsure about which investment option is right for you, seeking financial advice may be the best option.

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What to consider before taking out a business bank loan

By March 22, 2020 Money
What to consider before taking out a business bank loan

Many businesses, whether they are only just starting up or have been in the market for a number of years, will need a bank loan at one time or another. However, before you apply for a bank loan, it is important to think things through to ensure that you know if you should get one, if you are getting it at the right time and how you can make the most out of a loan.

Here are some questions business owners should ask themselves before beginning their bank loan application:

How likely is it that I qualify for the loan?

If you believe that your business won’t qualify for a bank loan, then you will only hurt your credit rating if you apply for a loan you won’t get. Being rejected for a loan can also make it more difficult for a business to borrow in the future.

Will the loan help the business grow?

Instead of using the loan for aspects like routine operating expenses that don’t generate much revenue, owners should consider putting the borrowed money into parts of the business that will generate more revenue and help reduce future borrowing needs.

How much do I need?

Before making requests of the bank, try to make an accurate estimate of how much cash you’ll really need. You can do this by creating a cash flow forecast with projections of your monthly income and expenses.

Are my personal finances in order?

Until a business reaches a substantial size, many banks will rely heavily on the owner’s personal financial statements and credit scores to determine the business’s creditworthiness. This may involve bankers looking at your personal information like student loans, personal credit card debt and mortgage payments.

Do I have adequate documentation for the loan?

When applying for a business loan, you will need a lot of documentation. Requesting a loan when an owner is not fully prepared makes the business look unprofessional.

Do I have adequate cash flow to repay the loan?

When a business owner applies for a loan, their banker will require the owner’s estimated financial projections for the business. It is important for owners to include their debt repayment plan in those projections.

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Business loan vs business credit card

By March 19, 2020 Business
Business loan vs business credit card

Business loans and business credit cards are the most popular financing options, but there are key differences between the two that you should consider to help you make the right choice for your business.

Business loan:
A business loan is a lump sum of money that you borrow. They can be a good option for your business if you require funding for a larger one-off purchase, such as buying new equipment or machinery, real estate, business acquisition, capital investment or refinancing existing debts.

Business loans typically range from $5,000 to $50,000 and can be paid as a lump sum or through multiple set payments. Depending on your bank, you can generally make repayments in monthly or quarterly instalments that are tailored to you and your cash flow.

To get your business loan approved, there is usually a strict approval process you must pass, which can include details such as your business’s financial position and a financial spending plan.

In terms of extra costs, a business loan generally comes with signup fees and late repayment fees. The interest rate for a loan is often lower than a credit card and can be a monthly or annual rate, which typically ranges between 3-10% p.a for secured loans.

Business credit card:
A business credit card is a suitable option if you want funds for short-term needs. Business credit cards are also generally more flexible than a business loan. They usually allow for a limit of up to $50,000 and are often used for working capital, emergency money and smaller ongoing expenses.

In terms of fees, business credit cards typically have a higher interest rate than personal credit cards, however, you only need to pay interest on each month’s expenses. The interest rates are higher than a business loan and can vary between 10-20% p.a. Fees such as annual fees and late repayment fees will apply to business credit cards.

A business credit card also comes with bonus features, such as bonus points for spending, free deliveries, frequent flyer points, complimentary insurance and a reputable company credit score with good use.

Business credit cards can be beneficial in the sense that it offers flexible funding and continuously available money, however business owners should be confident that they will be able to manage the minimum monthly repayments to avoid overdue fees.

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What deductions can you claim on your website?

By March 18, 2020 Tax
What deductions can you claim on your website

Most businesses nowadays have some sort of website, but designing, creating and maintaining a website for your business can be complicated. Many businesses use website services to develop and design their website for them if they don’t have the expertise or time to do it themselves.

Often, this can be an expensive venture. Not only is there a fee to create the website, but there are often the continual costs of tweaks, maintenance and upgrades after the website are already up and running. small businesses can claim deductions for website development costs.

Businesses that incur the cost of developing a website before they begin running their business can typically claim 20% of the cost each year over five years upon starting up.

Businesses that are already up and running with an aggregated turnover of less than $2 million can use the simplified depreciation rules:

  • If the cost of the website development is less than the instant asset write-off threshold of $20,000, you can claim a deduction for the full expense amount in the income year they acquire the expense.
  • If the website costs are equal to or more than the instant asset write-off threshold, owners can allocate it to a general small business pool for accelerated depreciation deductions.

However, it should be noted that you cannot use the simplified depreciation rules if you choose to allocate expenditure on the software to a software development pool.

You can also claim an outright deduction for specific running and maintenance costs, such as server hosting fees, domain name and registration fees in the same income year the expenses are incurred.

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SMSF: Deductible expenses

By March 14, 2020 Super
SMSF Deductible expenses

One of the downsides of running a self-managed super fund (SMSF) are the fees, but making sure you know what SMSF expenses are deductible can help you make the most out of your money.

Many expenses required for running an SMSF can be deductible unless they are related to gaining non-assessable income, such as exempt current pension income. Expenses that may be deductible include:

Management and administration fees:
These can include costs involved in preparing trustees’ minutes, postage fees and stationary, or other fees required for the running of an SMSF. If your fund earns both assessable and non-assessable income, then the costs can be apportioned. If the costs are completely incurred for the purpose of SMSF management and administration, such as obtaining an electronic service address to meet data standards requirement for the fund, then no apportionment is necessary.

Audit fees:
SMSFs require financial and compliance audits every year before lodging an annual tax return. The costs of getting an audit are deductible as they are associated with meeting lawful SMSF obligations. However, if your SMSF gains both assessable and non-assessable income, your audit expenditure must be apportioned accordingly.

ASIC annual fee:
The Australian Securities and Investments Commission (ASIC) annual fee required for your SMSF may also be tax deductible for corporate trustees – special purpose companies whose sole purpose is to act as a trustee of a regulated super fund.

Investment expenses:
Certain expenses relating to investment can also be tax-deductible for assessable income. If the investment-related advice covers non-assessable income, the fee can be apportioned. Some investment-related expenses include:

  • Interest expenses
  • Management fees or retainers paid to investment advisers
  • Bank fees, rental property costs, brokerage expense or other expenditure related to your investment portfolio
  • Investment adviser fees.

SMSF expenses that are not tax-deductible include:

  • Fines for non-compliance
  • Legal fees that are capital in nature
  • Expenses incurred to gain assets backing tax-exempt income streams.

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What does the coronavirus stimulus package mean for businesses?

By March 13, 2020 Business
What does the coronavirus stimulus package mean for businesses

Amidst the chaos of the COVID-19, better known as the coronavirus, and concerns for Australia’s weakening economy, the Morrison government most recently released a “coronavirus stimulus package” largely targeted at stimulating the Australian economy through cash payments and tax relief for small to medium-sized businesses.

Worth more than $17 billion, the stimulus package is planned to be spread across this financial year as well as the next, with half of the package scheduled for release into the economy before June 30th. In order for an immediate boosting effect on the economy, some changes have already been implemented and here’s a breakdown for you below:

  • Businesses can access an expanded instant asset write-off, from $30 000 to $150 000. This is to encourage immediate spending by businesses to improve cash flow.
  • Small businesses with an annual turnover of less than $50 million can claim tax deductions. Such tax deductions can go up to $30 000 for company vehicles, tools, office equipment and the like.
  • Small to medium businesses will receive cash payments between $2000 and $25 000 to help pay wages and increase the ability to employ extra staff. 700 000 small businesses will be given these cash payments, making up a significant portion of the package.
  • Businesses hiring apprentices will also benefit from the support package – with $1.3 billion in support payments aimed to keep hundreds of thousands of apprentices employed.
  • Larger businesses can also claim tax deductions. Up to $150 000 can be tax deducted for businesses with an annual turnover rate of up to $500 million.
  • Cash payments of up to $500 will also be paid to welfare recipients and pensioners to encourage more spending.

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How to manage your money through your bank

By March 9, 2020 Money
How to manage your money through your bank

Gone are the days of your visits to the bank to check on your credit balances. With banks consistently improving their client services and moving to easily accessible platforms such as the web and apps, there are more and more opportunities for you to self-organise your money with the services your bank provides. Here are some tips on how to manage your money through your bank.

Sign up for online banking:
Online banking is the new norm for money management within your bank accounts and has certainly made life easier for all of its users. Online banking is a viable option for anyone with a computer, laptop or phone and condenses all the information you need into one easily navigable web page.

You can access your bank account wherever and whenever you prefer, not to mention make payments, transfers and check for your cash movements within your accounts with a few quick button clicks.

Take note of automatic transfers:
With automation processes on the rise, your bank services can largely be automated as well. No longer do you need to personally visit a bank or go online to make a payment – for regular money transfers and payments between bank accounts (such as bills), you can automate them through your bank! Simply set up a time and frequency you’d like to make your transfers and your bank’s IT system will handle it all for you.

Make use of online and mobile budgeting tools:
Most banks nowadays also provide you with customised budgeting tools, detailing your expenditures, comparisons with your earnings, your patterns of cashflow and other personalised statistics for you.

All this accurate information can help you with your budgeting struggles, as you can easily set limitations on yourself based on your recorded spending habits and budget accordingly. You can even use third-party apps which securely link your bank accounts to their platform to track your monetary movement in even more detail.

Turn on your notifications:
A simple tip is to have notifications go off on your phone whenever money enters or leaving your bank accounts can be effective in helping you manage your money. Simply being reminded via consistent notifications on how much your daily coffee costs, that new subscription service you signed up for, or when your bills are paid can make a huge difference in how you manage your money.

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