Superannuation and Pension Payment ChangesTo apply for early release of your super, you must satisfy any one or more of the following requirements:
- you are unemployed; or
- you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- on or after 1 January 2020:
- you were made redundant; or
- your working hours were reduced by 20% or more; or
- if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.
How to Apply
- If you are eligible, you can apply for early release of your super directly to the Australian Taxation Office (ATO) through the myGov website, from mid-April 2020.
- The ATO will issue you with a determination and if you’re successful, direct your super fund to release your super payment.
- Your super fund will then make the payment to your nominated bank account.
- Important: To ensure you receive your payment as soon as possible, your super fund will need to have your up-to-date bank details and proof of identity documents. Payments can only be made to an Australian financial institution in your name.
Temporary Reduction of Minimum Pension Payments
To provide retirees with more flexibility in managing their retirement incomes, the Government has announced it is reducing the minimum pension payment requirement for account-based pensions and similar products by 50% in both 2019-20 and 2020-21.
All account-based pension holders are eligible. To request to reduce the amount of your pension payment, you will need to get in touch with us so we can check with your respected superannuation provider about their processes.
The amount by which you can reduce your pension payment will depend on your age:
|Age||Minimum annual pension payments||New minimum annual pension payments for 2019-20 and 2020 -21|
|65 – 74||5%||2.5%|
|75 - 79||6%||3%|
|80 - 84||7%||3.5%|
|85 - 89||9%||4.5%|
|90 - 94||11%||5.5%|
Self-Managed Super Funds with Direct Property
The ATO has announced that it will allow SMSFs that have a lease agreement in place with a related-party business tenant to temporarily reduce rent due to the business and economic impact of Coronavirus / COVID-19.
The following has been provided from the ATO on their website in regards to SMSF Rent Relief COVID-19 Temporarily Reducing Rent:
Question: My SMSF owns real property and wants to give my tenant – who a related party is – a reduction in rent because of the financial impacts of the COVID-19. Charging a related party, a price that is less than market value is usually a contravention. Given the impacts of the COVID-19, will the ATO act if I do this?
Answer: Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of the COVID-19 and we understand that you may wish to do so as well. Our compliance approach for the 2019–20 and 2020–21 financial years is that we will not act where an SMSF gives a tenant – who is also a related party – a temporary rent reduction during this period.
We understand that during the extreme business and economic conditions relating to COVID-19, many businesses would have already stopped paying their SMSF landlord rental under their current lease agreement to help ensure their survival of their business. This announcement on the ATOs approach to SMSF rent relief is welcomed and provide some minor, but potentially important relief for SMSFs trustees that have a rental agreement in place with a related party business or company.
How can YML help?
Talk to our YML Super Solutions Team today to see how YML Group can assist you. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website
Economic Stimulus Package – JobKeeper PaymentUse the link to register your interest now. The payments do not start until 01/05/20 but they will be backdated to 30/03/20 and will last for up to 6 months. Payment from the Government to your business is $1,500 per fortnight per eligible employee for you to keep the employee employed (even if you have to stand them down). This is only for full time, part-time, sole trader and casuals (that have been employed for 12 months).
Note that the JobKeeper Payment is more than the JobSeeker Payment that the employee would need to apply for if you needed to terminate the employee.
For more detailed information, please refer to JobKeeper Payments – Information for Employers.
How can YML help?
Talk to our YML Chartered Accountants Team today to see how YML Group can assist you. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.
EOFY Removal of Main Residence CGT Exemption for Non-residentsExpatriate Australians are currently listing their Australian family homes for sale in reaction to the Australian Government’s upcoming scrapping of the Capital Gains Tax (CGT) exemption which has been applicable on the Australian family home for over 35 years.
Changes to tax law made by the Australian Government will see the end of the main residence exemption from CGT for all non-resident Australians, regardless of how long they have been living and working overseas. Australians currently offshore have until 30 June 2020 to sell their main residence – held since prior to 9 May 2017 – and thereby benefit from the current CGT exemption.
For those who choose to sell – and finalise a sale – prior to the deadline, these expat homeowners may claim an exemption on the tax payable on any capital gain from the sale of their main residence.
For those who choose not to sell - or do not finalise a sale – prior to the deadline, consider that the new law will apply retrospectively to a property, meaning tax will be payable on the accumulated capital gain for the entire time a property was owned.
You will need to consider your intention to return to Australia to live. You will need to assess your personal situation about living in your main residence or selling it, and the possible tax consequences of both scenarios.
Foreign residents for tax purposes are affected by the change of law:
- for property held prior to 7:30pm (AEST) on 9 May 2017
- you can only claim the CGT main residence exemption for disposals that happen up until 30 June 2020 and only if you meet the other requirements for the exemption
- disposals that happen from 1 July 2020 are no longer entitled to the CGT main residence exemption unless you satisfy the life events test (https://www.ato.gov.au/General/Capital-gains-tax/International-issues/Foreign-residents-and-main-residence-exemption/)
- for property acquired at or after 7:30pm (AEST) 9 May 2017
- the CGT main residence exemption no longer applies to disposals from that date unless you satisfy the life events test
Urgently entreat professional guidance on the tax implications for you (and your family) of a possible sale of your main residence in light of the impending removal of the main residence CGT exemption for non-residents.
How can YML help?
Talk to our Accountants today to see how YML Chartered Accountants can assist you with your CGT obligations. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Annualised Salaries – New Rules from 1 March 2020The Fair Work Commission earlier this year – on 12 February 2020 – announced its new determinations for annualised salaries or annualised wage arrangements concerning a number of awards. New rules came in to effect on 1 March 2020 and started from the first full pay period thereafter.
An annual salary must at least cover a full-time employee’s minimum pay entitlements under an industry award and meet the National Employment Standards (NES) – the 10 minimum entitlements that must be provided to all employees. The onus is on employers to ensure that full-time employees receive an annual salary no less than they would be paid under an award.
Therefore, an employer and an employee may agree that an annual salary covers such entitlements as: Minimum weekly wages, Penalties, Overtime, Allowances and Annual Leave Loading.
An annual salary agreement should be outlined and the specifics detailed in writing and this written document copied, signed and kept by both employer and employee. The Fair Work Commission offers a template for use by employers – LINK TO PDF ATTACHMENT
Furthermore, employees must sign their acknowledgement of hours worked, start/finish times and breaks taken. It is important that employers create a record, either written and/or digital, for each pay cycle.
An employee’s annual salary must be reconciled: every 12 months from commencement, as well as when an arrangement ends or when an employee’s employment terminates.
Summary of Changes by Category
Awards impacted by New Rules
Note, for best practice, it is critical that employers read the annual wage arrangement clause pertaining to each award as each award has its own criteria.
Category 1 – Effective date 1 March 2020
- Banking, Finance and Insurance Award 2010
- Clerks - Private Sector Award 2010
- Contract Call Centres Award 2010
- Hydrocarbons Industry (Upstream) Award 2010
- Legal Services Award 2010
- Mining Industry Award 2010
- Oil Refining and Manufacturing Award 2010 (clerical employees only)
- Salt Industry Award 2010
- Telecommunications Services Award 2010
- Water Industry Award 2010
- Wool Storage, Sampling and Testing Award 2010
Category 2 – Effective date 1 March 2020
- Broadcasting and Recorded Entertainment Award 2010
- Local Government Industry Award 2010
- Manufacturing and Associated Industries and Occupations Award 2010
- Oil Refining and Manufacturing Award 2010 (non-clerical employees)
- Pharmacy Industry Award 2010
- Rail Industry Award 2010
- Horticulture Award
- Pastoral Award 2010
- Health Professionals Award 2010
Category 3 – Effective date delayed pending further submissions
- Marine Towage Award 2010
- Restaurant Industry Award 2010
- Hospitality Industry (General) Award 2010
How can YML help?
Talk to our Accountants today to see how YML Chartered Accountants can assist you with your employee salary agreements. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
FBT 2020 – What do you need to consider?The FBT year in Australia is from 1 April and ending 31 March the following year, so now is the time to ensure that you are up-to-date with the latest FBT developments in the areas of focus for the ATO.
For the FBT year ended 31 March 2020, the FBT rate remains at 47% in line with last year’s FBT rate.
FBT applies to benefits, given to employees in lieu of or in addition to salary or wages, received and this tax is paid directly to the ATO by employers. Benefits received may include such items as vehicles, car parking, housing and private loans.
The ATO has identified two concerns - employers’ failure to identify and report FBT on qualifying items and employers’ incorrect application of exemption provisions when reporting taxable value on items – in areas of concern for the ATO. Let’s delve further…
Where an employer is required to lodge a FBT return, what do you need to know about:
Some employers claim a FBT rebate despite being ineligible to do so. You need to check that you are a rebatable employer and if you are not, then you should ensure you are eligible to receive a FBT rebate before making a claim.
To ensure that an employer reports employee contributions as income on their income tax return and does not overstate the employee contribution amount in order to reduce an FBT liability, the ATO focuses on finding accurate declarations on both the FBT return and the employer’s income tax return.
It is necessary for an employer to verify that a FBT exemption applies to the provision of a motor vehicle to an employee for private use. In addition to supplying this verification to the ATO, the ATO is looking for an employer to keep sufficient records to support an exemption.
An employer will need to look carefully at the complex rules of FBT car parking (slight increase in car parking threshold 2019) and will need to be aware of the Practical Compliance Guideline 2018/3, applicable to car and residual benefits claimed in 2020 and later FBT years. If an employer provides an employee with an eligible vehicle to perform work duties, then this guideline may be applicable.
Living Away From Home Allowance (LAFHA)?
An employer pays a LAFHA to an employee to compensate an employee for additional expenses incurred and for the fact of being away from home whilst employment duties require an employee to live away from their usual residence.
It is important to only claim FBT for eligible employees and to obtain declarations from those eligible employees. Claiming for invalid circumstances or keeping insufficient records of the accommodation and meal components is also closely looked at by the ATO.
The ATO’s LAFHA reasonable total food and drink expenditure for one adult in Australia increased in 2019 by just under 7.5% from 2018. It would behove an employer to check the ATO’s LAFHA guidelines for 2020.
It pays to understand how FBT applies in these areas. To minimise your FBT liability, at YML Group we can prepare and lodge your FBT return and/or calculate any employee contribution.
Our fee for the preparation and lodgment of an FBT return is from $550 + GST and for the calculation of an employee contribution is $270 + GST per item.
How can YML help?
Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with FBT. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.
YML Insight – Special Edition COVID-19Federal and NSW Government Stimulus Packages – accessible for a LIMITED TIME
What you need to know NOW
Federal Government – SMEs / Employers
Tax-free Payments for Employers
The Government will support employers with a credit equal to 100% of a business’s PAYG withholding amounts from salaries and wages, even for those employers who are not required to withhold tax.
If your business has employees working since 1 January 2020 and your business has an annual turnover of up to $50 million, then upon assessment of your BAS in these two quarters, an entitlement – at least $20,000 and up to $100,000 maximum tax-free – will be credited to eligible employers and refunded by the ATO.
Wage Subsidy for Apprentices/Trainees
The Government will support jobs with a wage subsidy of 50% of an apprentice’s or trainee’s wages during the period of 1 January 2020 to 30 September 2020.
If your business has fewer than 20 employees and has been employing an apprentice/s or a trainee/s prior to and including 1 March 2020, you may be eligible to receive up to $21,000 during this nine-month period.
Claims for this subsidy may be made from 2 April 2020 and must be made no later than 31 December 2020.
Loan Guarantee Scheme
For all businesses with an annual turnover of up to $50 million and affected by COVID-19, an eligible loan through participating banks/lenders will be guaranteed to 50% of the loan by the Commonwealth.
A loan up to $250,000 for a term of up to three years may only be used for working capital and no repayments will be required for the first six months. Loans must be granted by a bank/lender within six months of 1 April 2020.
Instant Asset Write-Off (IAWO)
From 12 March 2020 until 30 June 2020, the Government:
- is increasing the IAWO from $30,000 to $150,000 for each qualifying asset – used or installed for use during this time period;
- is expanding the eligibility of the new IAWO limit to businesses with an annual turnover of up to $500 million; and
- will continue to apply the luxury car limit to car purchases.
Backing Business Investment (BBI)
From 12 March 2020 until 30 June 2020, a 15-month period, the Government:
- is introducing an immediate 50% depreciation of installed cost of qualifying depreciable assets purchased and used by businesses whose annual turnover is up to $500 million; and
- the other 50% of the installed cost falls under existing depreciation rules for qualifying depreciable assets.
A moratorium on insolvency laws for trading businesses will be introduced and changes made to attempt to mitigate the number of businesses collapses. Changes will include:
- a temporary increase of the debt thresholds at which creditors can a) issue a demand and b) initiate bankruptcy proceedings – both will increase to $20,000.
- a temporary increase in the time in which affected companies will have to respond to demands – an increase to six months.
- a temporary relief for directors from personal liability during insolvent trading.
NSW Government – SMEs / Employers
The NSW Government’s stimulus package includes:
- a waiver of payroll tax for three months ending on 30 June 2020 for businesses with payrolls of up to $10 million.
- bringing forward by one year an increase of the payroll tax threshold to $1 million (from $900,000), effective 1 July 2020.
- a waiver of a range of fees and charges for small businesses.
Federal Government – Workers / Welfare Recipients
Superannuation Savings Access
Individuals experiencing “financial stress” due to lowered income or lost income will be allowed to access their superannuation savings up to twice, as outlined:
- in 2019-20, access capped at up to $10,000;
- from 1 July 2020, further access capped at up to $10,000;
- with no tax payable on withdrawn amounts; and
- with no effect on Centrelink or Veteran Affairs payments.
Jobseeker Payment for Sole Traders / Individuals
Those individuals who work as a sole trader or who are self-employed may become eligible for Centrelink’s Jobseeker Payment (formerly Newstart Allowance), a payment being increased by the Government by up to $550 extra per fortnight for all current and newly-eligible recipients.
The extra $550 maximum extra amount, paid by Centrelink, will be in effect for up to six months only.
New applicants for the Jobseeker Payment must make an online declaration to Centrelink about any reduction in income or suspension of work.
One-off $750 Cash Payment + Extra $750 Cash Payment
To help boost the household economy, from 31 March 2020, the Government will provide $750 as a one-off payment to all eligible welfare, income support, veteran affairs and concession card holders to help boost the economy.
From 13 July 2020, the Government will provide an extra $750 payment to all eligible welfare, income support, veteran affairs and concession card holders. This second round will only be available to those people not receiving the up to $550 extra per fortnight in their Jobseeker Payment.
The ATO will automatically make these payments via Centrelink to eligible recipients.
ATO Support Measures for Employers and Individuals
The ATO is offering, on a case-by-case basis, administrative relief for some tax obligations, such as:
- Significantly-affected taxpayers may be able to defer tax payments by up to four months.
- Payment dates for activity statements and income tax may be deferred.
- GST refunds may be accessed sooner with a change from quarterly to monthly reporting.
- PAYG instalments may be varied to NIL for the March quarter BAS with a refund for any instalments paid for the previous two quarters.
- Interest and penalties incurred on or after 23 January 2020 may be remitted.
- Low interest payment plans may be entered into.
You’re not alone. YML Group is continuing to provide information and advice needed for you to steer your business through the COVID-19 disruption. Together we can review your business strategy and help you to move forward better-prepared by benefiting from the Federal and NSW Governments’ stimulus packages.
How can YML help?
Talk to our Accountants today to see how YML Chartered Accountants can assist you with your ‘COVID-19’ business strategy. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Managing your Money through this Crisis!The most likely outcome of the efforts to contain the current health emergency is a near total shutdown of the world’s economy over the coming months. This is likely to lead to a near total collapse of many businesses, particularly those that have high financial leverage or high fixed costs. Only governments can prevent these businesses from failing. The potential financial and social consequences are very concerning.
We at YML understand and appreciate that being an investor is distressing at these times as we see large changes to our portfolio values every day. Our message is to remain calm, to not get sucked into this emotional roller-coaster and to remember that we are investing for the longer term. Although very harsh this time round, pull-backs in the markets are normal and anticipated.
We remain of the view that selling shares and crystallising losses is often very costly as timing the movements of values is almost impossible. Selling should only occur to meet urgent cash needs or required pension payments. Although we don’t know how far the markets will fall, what we are sure of is that when sentiment and fear about the virus and state of the world change, stock prices are likely to rebound sharply, and we would not want to miss those gains.
Important in these times is that we at YML remain focused on the uninterrupted management of your funds, also that we be available to talk with you if you wish and take what action is required swiftly. Our investment philosophy and approach to portfolio design has always been:
- To be mindful of the investor’s risk profile and invest accordingly.
- To understand our client’s financial objectives and the relevance of their portfolio.
- To diversify across different asset classes including international funds, to reduce risk.
- To invest in larger cap and quality companies with low debt and sound fundamentals.
- To hold high levels of fixed income and dividend-paying securities, particularly for clients in pension or requiring regular income.
- We are holding onto what cash there is to take advantage of future buying opportunities.
- Our investment in to international ETFs and managed funds are unhedged and therefore have benefitted from the weakening Australian dollar.
- We do not directly hold any airline or hospitality shares.
- Portfolios generally hold listed Hybrid securities which on average have fallen in capital value of between 5% and 9% while equities have fallen over 25%.
- Because of the exposure to income generating securities, portfolios are receiving between 3% and 6% yields, cushioning falls.
This last week Warren Buffet said… “I can’t predict what interest rates, businesses or the stock market will do in the future, however that doesn’t mean I can’t do well investing over time”.
We appreciate the opportunity of managing your money and look forward to working closely with you and your investment needs as we navigate what lies ahead.
Please do not hesitate to contact me, Mark Raymond, on (02) 8383 4400, should you have any queries.
How can YML help?
Talk to our YML Financial Planning Team today to see how YML Group can assist you with managing your portfolios. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Limitations to the Superannuation Death BenefitSMSFs are limited in the way they may pay a Superannuation Death Benefit and as a trustee, you must take in to account the limitations and how to apply the rules.
Firstly, death benefits can only be paid either to dependants of a deceased member or to the estate of the deceased.
Second, the law limits the group of dependants who are eligible to receive a pension on the death of a deceased member.
Finally, trustees must pay a death benefit as soon as possible after the death of a member. Additionally, each death benefit interest can only be paid to each dependant as either:
- a maximum of two lump sums (an interim and a final lump sum), or
- a pension or pensions in retirement phase, or
- a combination of both.
Given the account-based nature of death benefit pensions that can be paid by a SMSF trustee, a SMSF member is generally afforded the flexibility to nominate to convert a death benefit pension into a lump sum payment. This process is generally referred to as the commutation of a pension, although it may be subject to specific restrictions found in a trust deed.
A partial commutation is where a beneficiary requests to withdraw a lump sum amount less than their total pension entitlement, allowing their death benefit pension to continue. This is common where members withdraw their required minimum drawdown as a pension with any additional income needs met by accessing multiple lump sums from their pension account. This strategy allows the death benefit pension to continue without breaching the superannuation death benefit rules, despite payments in excess of the maximum two lump sum limit.
A full commutation will result in the death benefit pension ceasing at the time a member decides to withdraw their entire pension entitlement as a lump sum. Despite the number of lump sum death benefits previously received, the law allows a beneficiary to roll over the lump sum resulting from a full commutation to another superannuation fund for immediate cashing as a new death benefit pension.
However, where a lump sum resulting from the full commutation of a death benefit pension is paid out of the superannuation system, further clarity is being sought from the ATO to ascertain whether or not this will be treated as an additional lump sum death benefit that would count towards the maximum two lump sum cashing limit. Until further clarity is provided by the ATO, caution needs to be exercised before a death benefit pension is fully commuted and paid to a dependant, especially where a dependant has previously received a lump sum death benefit.
As a SMSF trustee you need to be aware of the restrictions placed on the payment of death benefits to eligible dependants of a deceased member. Trustees who ignore these limitations risk breaching superannuation standards and potentially being liable to be fined by the Regulator.
How can YML help?
Talk to our YML Super Solutions Team today to see how YML Group can assist you with your SMSF death benefit payments. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Should you pay principal + interest on your investment property?It makes sense to pay principal + interest when you’re paying off a home loan. Home loan interest rates are currently very low and building up equity in your home increases your asset value over time. However, when it comes to investment properties, there are two ways you can go with loans to fund your investment.
Paying interest-only on a property investment loan frees up your cash flow, possibly providing you with the funds for additional investments or to pay down other debt. Yet, interest-only loans aren’t for everyone. You’ll need to stay focussed and balance your cash flow to minimize debt exposure.
Consider switching to a principal + interest loan for an investment property. Comparing a number of banks’ interest rates shows it’s a good time to pay off some of the principal as well as paying off the interest.
Major and minor banks are now offering investor loans with principal + interest repayments at nearly 1% lower than an interest-only investor loan. This means you could easily be paying more of the principal of your investor loan.
To best understand how paying interest-only versus paying principal + interest can affect your tax deductibility, let YML Group calculate the savings for you.
To determine why a principal + interest investor loan might rather be in your best interest in today’s economic climate, consult YML Group for expert financial advice.
How can YML help?
Talk to our YML Finance Team today to see how YML Group can assist you with your mortgage strategy. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Business Intelligence (BI) in Small BusinessData analytics is fast becoming a most vital instrument in a small business’s digital toolbox. Business intelligence (BI) utilises data and the analysis of data, both internal and external, to develop ways for an organisation to improve its overall market share within its industry.
A business’s data can be collected easily in today’s technological environment, but interpreting the data in a way that delivers commercial advantages to a business can be harder to do. BI software and all its practices of analysing collected data may inform business decisions, enhance customer communication and generate marketing approaches.
BI software is available from a myriad of software providers and once it has been integrated in to your business’s digital mix, there are ways to specifically apply it to your business. BI provides custom dashboards, predictive – ‘what if?’-style – analyses and, importantly, reports that can interact with your other digital programs.
Here are a few examples of BI-in-action in small business:
Local Restaurant Chain
Head office management of logistical and marketing operations was difficult due to disparate sources of data
- When a new self-service BI platform was introduced in to the stores, a centralised view of operations of all stores was possible. This meant management could now track large-scale operational effectiveness, whilst enabling speedier reporting, greater access in-store to helpful data and a more effective and individualised strategic approach store-to-store. Supply chain stabilisation was possible when disparate data was finally consolidated via a BI method.
Manual marketing reporting took too long to complete and was untimely, limiting insightful marketing communications
- BI solved this company’s problem by delivering a centralised and automated reporting process from digitally-extracted data. The existing marketing analytics team was able to better inform the marketing strategy team, providing timely information on customer behaviour. The company was able to be reactive to its various types of customers and thereby improve customer service and customer retention.
Restrictive access to in-the-field manual sales and operations data hindered growth
- BI came to the rescue through automation of the company’s customer relationship management (CRM) platform. Mobile dashboards provided to the company’s sales representatives gave the salesforce critical information they could use to enrich customer relationship-building and to use as a competitive advantage. With their mobile, interactive dashboards, the company’s IT team and the salesforce cooperated more effectively to improve CRM. This, in turn, created a more collaborative environment, benefiting both customers and company operational logistics.
Small businesses do not usually have the same financial resources as big business, but BI is affordable and achievable on a relative scale. When your business’s data is accurately and optimally analysed, you may find you have far greater ability to make data-based decisions that can propel your business towards a more profitable future.
How can YML help?
Talk to our YML Innovation Team today to see how YML Group can assist you with your Business Intelligence strategy. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.