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Expert advice on early superannuation access as a result of COVID-19

Posted on April 2, 2020 by admin


Under the coronavirus stimulus package released and revised by the Australian Federal Government on 22 March 2020, individuals in financial trouble due to the negative economic impacts of COVID-19 will be able to access their superannuation funds early. However, while the option is available, it is recommended that individuals only consider withdrawing from their super in the case of absolute emergencies and treat it as a last resort. With the new rules on superannuation, workers whose incomes are reduced by at least 20% due to the COVID-19 outbreak are allowed to take $10,000 out of their super for the 2019-20 financial year and another $10,000 for 2020-21. Individuals will also not need to pay tax on any withdrawn amounts and existing welfare payments will not be affected either. While the introduced early access to superannuation funds may be inviting for newly unemployed workers, it is important to consider whether the temporary relief is necessary and worth foregoing super funds available for long term investment. For example, even when accounting for Australia’s slowing economy in the coming years, $10,000 is predicted to be worth over $65,000 in another 30 years. Especially for younger workers who are less likely to have access […]


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Setting up your myGovID

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If you haven’t set up your myGovID yet, you need to do it before you can lodge your next business activity statement (BAS). AUSkey, including Manage ABN Connections, will be replaced by the ATO’s myGovID and Relationship Authorisation Manager (RAM) from 27 March 2020. After this change, you will no longer be able to access government online services through an AUSkey. Device AUSkeys will be replaced by new machine credentials. Business owners will need to set up a myGovID soon if they haven’t already done so and link it to RAM. Your myGovID is separate from your myGov account and will allow you to prove your identity online. RAM is an authorisation service that uses your myGovID to provide you with access. When linked with your myGovID, RAM will allow you to act on behalf of your business online. Desktop and browser-based versions of myGovID will not be supported as these devices are easily accessible. To set up your myGovID, you will need an email address (that you do not share with anyone else) and a smart device that uses iOS 10 or later on Apple devices, or Android 7.0 or later (not including devices that use Android Go operating […]


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Investing in shares vs property in SMSFs

Posted on March 19, 2020 by admin


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 […]


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

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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 ex-pats 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 […]


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Becoming socially conscious of where you super invest

Posted on February 28, 2020 by admin


Whether you are a newcomer to the workforce or have been working full time for 30 years, you must have come across the concept of superannuation. Chances are, you’ve already been steadily building your retirement funds in one of the 500 Australian superannuation funds but are still unfamiliar with how exactly your super is being managed and where your super fund is investing your money in. With the beginning of a new decade and social issues on the rise, it is time to take a more conscious stance on what you are doing with your super and what causes you are supporting through the employment of your money through your super fund. A recent investigation into Australian super funds by the Australian Centre for Corporate Responsibility (ACCR), released in February 2020, found that 50 of the largest super funds in Australia are proxy voting against local climate-change initiatives. These organisations are instead approaching climate change from a global perspective, whilst ignoring more pressing domestic challenges to reduce carbon emissions.. The lack of support from Australian super funds for localised climate action is growing problematic, as Australia fails to address its appalling record on carbon emissions and is falling behind new-age […]


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What’s tax-deductible for home businesses?

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Running your business from home can have great benefits, such as being able to spend more time with your family, not having to travel, and deciding your work hours. To make the most out of your home business experience, it is important to be aware of what tax deductions you can claim. If your home is also your principal place of business and you have a designated room space for business activities, then you are considered to be running your business from home. However, if you only do some business activities from home, then you may be considered to be working from home and the following tax implications don’t apply to you. You can claim deductions for your home business on expenses that you need to undertake work that produces income. Tax-deductible costs include: Utility expenses of the rooms you use for business. This can include electricity, water and gas bills that have been apportioned between business and private use. Work equipment such as computers and printers. For items costing up to $300, you can claim the full cost of the item. For equipment costing $300 or more, you can claim the decline in value. Cleaning and repairs for work […]


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You can now opt-out of super guarantee as a high income earner

Posted on February 21, 2020 by admin


If you’ve unintentionally been going over your superannuation concessional contributions cap in past years, you may not have to worry about it from now on. As of 1 January 2020, eligible individuals with multiple jobs can apply to opt-out of receiving super guarantee (SG) from some of their employers. You may be eligible to apply if you: Have more than one employer. Expect that your employers’ mandatory concessional super contributions will exceed your concessional contributions cap for a financial year. Employees who are eligible can apply for the super guarantee shortfall exemption certificate when they complete the Super guarantee opt-out for high income earners with multiple employers form (NAT 75067). When you opt-out of SG contributions, you must still receive SGC from at least one employer. If other employers agree to use the SG exemption, then they may provide an alternative remuneration package instead, as to not be disadvantaged. However, the exemption certificate: Does not restrict the employer from making super contributions on behalf of the employee. Does not change the employer’s obligations or an employer’s agreement with their super fund. Cannot be varied or revoked once issued.


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Taking a super pension

Posted on February 13, 2020 by admin


Once you have met your preservation age (between 55 and 60 depending on when you were born), you can choose to take a super pension. There are six main types of super pension: Account-based pension: this is the most common type of pension. It is a regular income stream bought with money from your super when you retire. Transition to retirement pension (TTR): you can use this pension if you have reached your preservation age but are below 65 years old and still working, Defined benefit fund: with this pension, you are paid a guaranteed income stream for life, however, it is not commonly used. Annuities: this is a series of payments you receive at fixed intervals for a defined period or the remainder of your life. Annuity payments are purchased with a lump sum. Reversionary pension: this is an income stream you set up with your superannuation that automatically reverts to someone else (generally your partner) when you die. Death benefit pension: this is where your dependents receive your death benefits as a pension when you die. This is only available from some super funds. The standard conditions of release for super pension withdrawals are: Retirement. Turning 65 years […]


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Do you have to pay tax on super death benefits?

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When someone dies, their superannuation usually gets transferred to their beneficiary as superannuation death benefits. Depending on who the beneficiary is, the benefits may be taxed in some circumstances. If you are a beneficiary, the amount of tax you pay depends on factors such as: If the benefit is paid as a lump sum or pension. Your age and the age of the deceased at the time of their death (for income streams). Whether the benefit is paid from an untaxed superannuation scheme or a taxed scheme. Whether you’re a dependent for tax purposes. Someone who is tax-dependant will: A spouse of the deceased. An underage child of the deceased. Someone who was financially dependent on the deceased at the time of their death. Someone who was in an interdependency relationship of the deceased at the time of their death. Lump sum payments Lump sum super benefits paid to tax-dependant beneficiaries are not taxed, whereas those who are not tax-dependent will need to pay more tax and will only be able to receive the benefit as a lump sum. Not all super death benefits paid to a non-tax dependant are subject to tax. There are tax-free components that are made […]


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When a trustee goes bankrupt…

Posted on February 6, 2020 by admin


SMSF members need to be aware of the rules that govern their fund, including what to do when one member becomes bankrupt. A requirement of an SMSF is that each individual trustee of the SMSF must be a member of the SMSF. In the case of corporate trustees, every member must be a director. This means all members are connected and held accountable for one another. If one member enters bankruptcy, they will be categorised by the ATO as a “disqualified person”, meaning they can no longer act as trustee of the SMSF. Where a disqualified person continues to act as an SMSF trustee or director, they will be committing an offence that is subject to criminal and civil penalties. The ATO provides a six-month grace period to allow a restructure of the SMSF so that it either meets the basic conditions required or can be rolled over into an industry fund. During the six-month grace period, the ATO requires: The bankrupt to remove themselves as trustee. The bankrupt to inform the ATO in writing. To be notified within 28 days if there is a change in trustee. The bankrupt to notify ASIC of the resignation as a director (if […]


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Expert advice on early superannuation access as a result of COVID-19

April 2, 2020

Under the coronavirus stimulus package released and revised by the Australian Federal Government on 22 March 2020, individuals in financial trouble due to the negative economic impacts of COVID-19 will be able to access their superannuation funds early. However, while the option is available, it is recommended that individuals only consider withdrawing from their super in the case of absolute emergencies and treat it as a last resort.

With the new rules on superannuation, workers whose incomes are reduced by at least 20% due to the COVID-19 outbreak are allowed to take $10,000 out of their super for the 2019-20 financial year and another $10,000 for 2020-21. Individuals will also not need to pay tax on any withdrawn amounts and existing welfare payments will not be affected either.

While the introduced early access to superannuation funds may be inviting for newly unemployed workers, it is important to consider whether the temporary relief is necessary and worth foregoing super funds available for long term investment. For example, even when accounting for Australia’s slowing economy in the coming years, $10,000 is predicted to be worth over $65,000 in another 30 years.

Especially for younger workers who are less likely to have access to other savings, the choice to give up future savings for current comfort is a difficult one. Experts instead are recommending Australians to apply for the other payments and benefits made available to vulnerable Australians through the coronavirus stimulus package, such as added $550 fortnightly supplements to Australians on JobSeeker payments and other welfare recipients and pensioners.

Experts also predict that the Australian Government will introduce more stimuli for increased cash flow in the Australian economy and more payments for unemployed, struggling and vulnerable Australians in the case of COVID-19 becoming more of a serious economic issue. Hence, withdrawing funds from your superannuation account should be considered a last resort and not for the sake of unnecessary temporary relief.

In addition to being allowed early access into individual super funds, superannuation minimum drawdown rates will also be temporarily reduced by 50% for account-based pensions and others similar until 2021.

The Government has also reduced the upper and lower social security deeming rates by a further 0.25 percentage points, with upper at 2.25% and lower at 0.25% which will come into effect on 1 May 2020.