Category: Newsletters
YML Insight – Special Edition COVID-19
Federal and NSW Government Stimulus Packages – accessible for a LIMITED TIMEWhat 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.
Insolvency
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 Benefit
SMSFs 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 Business
Data 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.
Is Your SMSF Investment Strategy Compliant?
Once a SMSF trustee has developed and executed a fund’s investment strategy, the Australian Taxation Office (ATO) recommends reviewing a fund’s investment strategy at least annually. A review will be necessary over time anyway due to naturally occurring changes of circumstances. For example, a change in management or members, market changes, government rule changes and investment fluctuations.The ATO is concerned that some trustees are not considering the diversification of their fund’s assets, potentially exposing a fund’s members to risk if more than 90% of a fund’s investments are held in a single asset class.
As of August 2019, the ATO has written to thousands of SMSF trustees to alert them to their obligation to review and diversify their investments for the health of a fund and for the benefit of a fund’s members.
Where a trustee has reviewed a fund’s investments, the ATO requires that the reasons behind investment decisions are provided in a written document for the ATO’s approval.
To be in accordance, under the law, an investment strategy is required to meet Sub-regulation 4.09(2):
”The trustee of the entity must formulate, review regularly and give effect to an investment strategy that has regard to the whole of the circumstances of the entity including, but not limited to, the following:
(a) the risk involved in making, holding and realising, and the likely return from, the entity's investments, having regard to its objectives and expected cash flow requirements;
(b) the composition of the entity's investments as a whole, including the extent to which they are diverse or involve exposure of the entity to risks from inadequate diversification;
(c) the liquidity of the entity's investments, having regard to its expected cash flow requirements;
(d) the ability of the entity to discharge its existing and prospective liabilities;
(e) whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund.”
As a trustee it is important that you carefully and comprehensively review your SMSF’s investment strategy and document clearly your decision-making behind said investment strategy – including objective, method, risk, liquidity vs illiquidity and diversification options.
So long as you can provide evidence to support your investment strategy, the ATO – joint (with ASIC) regulator of SMSFs – may deem your approach compliant and thus no administrative penalties would be meted out to you.
For more information, see also ‘Does your SMSF have an investment strategy?’ in YML Group’s July 2019 newsletter: https://ymlgroup.com.au/does-your-smsf-have-an-investment-strategy/
How can YML help?
Talk to our YML Super Solutions Team today to see how YML Group can assist you with reviewing your SMSF investment strategy. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Deed of Variation – NSW Surcharge Land Tax
In June 2016 the NSW government introduced two surcharges payable by a ‘foreign person’ purchasing and/or owning residential property in NSW:
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Residential property and/or land held in trust wherein any person is deemed to be ‘foreign’ – an individual, a corporation, a trustee ‘not ordinarily resident in Australia’ and who holds a ‘substantial interest’ of 20% or more, including beneficiaries of a trust* – means the trust is liable to pay the surcharge/s. Where this is the case, a trust deed may be varied by drawing up a Deed of Variation to exclude any foreign person/s.
* For a full definition of ‘foreign person’, see https://www.revenue.nsw.gov.au/help-centre/resources-library/g009
Deed of Variation
By now, many discretionary trust deeds have been amended to exclude foreign person/s from benefiting from a trust. Did you amend your trust deed prior to 31 December 2019?
If you have not yet reviewed and considered your trust, it may be time to consult YML Group for an assessment of the ‘foreign’ status of your trust. A Deed of Variation may be used – going forward – to reduce and/or exempt your trust’s surcharge liabilities.
How can YML help?
Talk to our Accountants today to see how YML Chartered Accountants can assist you with your Trust Deed of Variation. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
5 Everyday Examples of IPA in Practice
Enhanced focus and productivity by your employees is achievable with the introduction and integration of Intelligent Process Automation (IPA) – software capabilities – and IPA applications can help mitigate human error in your business transactions with your clientele. How ‘real’ are these benefits of IPA?Here are five examples of IPA in the workplace:
- Human Resources (HR), both in the recruitment industry and in dedicated departments within organisations, use IPA for hiring new employees and for onboarding – domestic and/or remote employee induction.
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- Payroll Processing utilises IPA through the Australian Taxation Office’s (ATO) Single Touch Payroll (STP) software. Accounting departments are increasingly using IPA to perform numerous tasks, including data collection from timesheets, calculations of wages and payment of superannuation, to name but a few applications.
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- Customer Service, a vital department of many retail and service companies, uses IPA functions for slick interaction with customers. One highly-efficient use of IPA is the handling of customer email queries. Thousands of email queries may be sorted and amalgamated according to the level of critical response required. Promotional and other email campaigns may be automatically generated using CRM data analytics.
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- Order Fulfilment in small and large retail businesses is easier and well-regulated via IPA. With reduced human intervention, robotics can handle the fulfilment process and provide systematic updates of orders to customers, accelerating despatch communication.
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- Social Media Management helps businesses grow – new leads, conversions to sale – and there are various IPA software platforms available to make keeping abreast of a target market easier, faster and more comprehensive without the need for 24/7 manpower. Businesses can manage multiple social media channels all at once, providing their audiences with timely, relevant and engaging content.
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IPA, encompassing Robotic Process Automation (RPA), saves businesses time and money, as demonstrated in these five examples of workplace process automation. Where tasks are rule-based, repeatable, manual and repetitive, IPA and RPA are the future of more efficient and smarter workplaces for all stakeholders.
How can YML help?
Talk to our YML Innovation Team today to see how YML Group can assist you with your IPA strategy. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
How a Mortgage can improve your Financial Position / How a Mortgage can grow your Wealth
A mortgage strategy can have a positive impact on your ability to maintain cash flow, sustain your home mortgage and provide investment opportunities for you. Setting up a mortgage need not mean impairing your wealth accumulation – in fact, your mortgage, managed well, can enable you to acquire assets, increase your tax deductions and improve your general financial status.To start, you’ll want to align your mortgage strategy with your future property and financial goals. Considering your goals, you can take three steps towards creating a bespoke mortgage strategy:
| 1. Plan your lifestyle – Decide your property and investment goals. |
| 2. Create a strategy – With qualified professional advice, determine the steps needed to manage your mortgage to reach your goals in Step 1. |
| 3. Choose who will help you to execute your mortgage strategy – Find a lender, agree a suitable interest rate and communicate regularly as your circumstances change. |
Your mortgage strategy will profoundly affect your wealth growth, so you may want to consider these options:
Offset Account/s
An offset account is a practical device – a transactional account linked to your home loan – to help reduce the amount of interest paid and the term of a variable home loan. It is often included as a feature with most standard variable mortgages, so it is likely you will have one at your disposal.
The balance in your offset account is ‘offset’ against the mortgage balance and interest is charged only on the lowered mortgage balance. You have financial flexibility by being able to withdraw from the offset account at any time, whilst still paying down your home loan.
Budget Management
Managing your money is essential to the success of your mortgage strategy. You will need to stay abreast of your expenditure and keep a record of your remaining balance to enable you to more easily make investment decisions and still pay off your mortgage debt. A budget can be created and managed with your lender to show your financial position at any time.
Interest Claims
When you borrow money to pay for business expenses and for investment costs, you may be able to claim a tax deduction for the interest paid on the borrowed money. By borrowing money pre-tax for tax-deductible purchases, you can save money. Seek advice to ensure your interest claims are permissible tax deductions.
Manage Your Risk
Managing your financial risk is as important as managing your money. By managing your cash flow and ensuring you maintain a balance of funds, you can help mitigate any potential financial loss at times of investment insecurity.
Your offset account can offer a buffer through the redraw of equity in your home if needed. Fixed interest rates on your loans can provide certainty through difficult times. Restructuring your home loan and/or changing lenders can keep investment opportunities open to you by enabling you access your wealth for future growth.
Wealth Growth
These aforementioned options to help grow your wealth, implemented with expert advice, may allow you to hold on to your investment property/ies (avoid selling and incurring the associated costs), minimise your debt, optimise tax deductions where applicable and, ultimately, enable you to acquire more assets and to secure a more stable financial future.
As it can be highly impractical to design your own mortgage strategy, you are encouraged to solicit a mortgage lender or advisor. Call YML Group’s Finance Team for an appointment.
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.
ATO is Auditing Rental Property Expense Claims
Owners earning an income from their primary and/or investment property must look at their tax obligations and ensure they understand the basics. Keeping accurate income and expense records is a great way to start. Use these records to ensure you make the most of your investment by declaring all rental income and only deducting appropriate expenses.Whether you are a seasoned rental property owner or you are new to the game, tax law can be complex and the Australian Taxation Office (ATO) is focussed on auditing those investors with impermissible income and/or dubious claims.
Rental Income
Firstly, the ATO looks for evidence that your property is genuinely a rental. Only the periods of time that your property is available for rent may be considered generating assessable income. This stands to reason if the rental property is also your home where periods of personal use may not be claimed. Where the rental property is an investment or secondary property, you must report all rental income derived from it during periods it is let on a commercial and/or non-commercial (family/friends) basis.
Expense Claims – Don’t make a mistake!
Do you want to avoid an ATO audit? It’s important to stay abreast of the changes in tax law and to adhere to the ATO’s strict guidelines for how to treat rental income and related expenses. So long as you can substantiate an expense and it is permissible, you can claim it.
Generally, costs such as advertising your rental property, loan interest and related fees, council rates, strata levies for sinking funds (apartment/villa), building insurance and other relevant insurances may be tax-deductible.
Expenses incurred in your acquisition of the property, expenses incurred by a tenant such as utility usage (electricity, gas, water), and especially costs paid during periods when a property is not available for rent may not be claimed as tax deductions.
Travel expenses, in particular, may not be claimed since 1 July 2017 when the ATO excluded travelling to and from a property – unless a business run by you is being carried on within it – from the permissible expenses list.
Depreciation
Repairs to a rental property may be tax-deductible. Improvements, however, may be depreciated. For example, if you fix a broken oven, it is a repair expense, but if you replace a broken oven, that may be deemed a capital improvement.
Depreciation may be a valuable tax-time tool for rental property owners. You can claim depreciation of a building and its built-in components over a number of years. Consider using a Quantity Surveyor to ascertain the value of a building’s construction and its parts, making it easier to create a depreciation schedule for your rental property.
ATO Audit
The ATO would check that your rental property is available for rent by investigating rental property websites and other means of confirming that you are declaring any and all rental income. An ATO audit would require you to give proof of rental listing/s, advertising materials and evidence (photos) of a property’s rentable condition.
Finally, remember to keep invoices, receipts and bank statements for all expenditure on your rental property. This is your most basic tenet for best practice rental property investing.
The ATO’s 2019 guide for rental property owners: https://www.ato.gov.au/uploadedFiles/Content/IND/downloads/Rental-properties-2019.pdf
How can YML help?
Talk to our Accountants today to see how YML Chartered Accountants can assist you with your rental property investment. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
