What’s happening across our client base
Lockdown continues and this one seems to be tougher than those that we have endued before. Our client service with telephone and online continues albeit with the office being physically closed. Our conversations with clients cover wide ranging topics and here are just a few.
Hardship Grants from Government have been available and procured for many eligible clients with our guidance.
The booming share and property markets have been extraordinarily good for investors at a time when interest rates have not much more to fall and inflation is low.
However, there are shortages of supply particularly in steel and timber. Labour is also in short supply and salaries are rising. Other countries of the world are receiving high demand for their locally manufactured product reducing the availability of their exports to our importers.
If interest rates cannot go down then presumably they can stay the same or go up. Rising interest rates generally have a negative influence on capital markets.
Good businesses have used these times to innovate with new ways of doing business. The use of the “zoom“ meeting has significantly reduced internal costs of travel and maybe improved overall communication. The use of on-line ordering with home delivery is becoming a common method of shopping. Strategic reviews of business models continue.
Tax rules to encourage investment and 100% write-offs continue. Corporate tax rates are reducing to 25% this year which sounds great for the reinvestment of after-tax profits but may not be as good for recipients of fully franked dividends.
New rules surrounding tax residency will start to affect our clients. Many families find themselves with a next generation member living in another country and no longer being a resident for Australian Tax purposes. Non residency affects income tax rates on Australian assets and can even extend to State Land taxes. Leaving certain assets in a Will to non-residents can be a taxable event. Changes in residency can be a Capital Gains Tax event.
Compulsory employer superannuation contributions (SGC) are now at 10%. Grey areas exist in relation to sub-contractors and whether SGC contributions are required because of fitting within the SGC definition of employee when they are not an employee for any other purpose.
We look forward to a return to the post COVID world – suspecting life will be different to what it was.
Mental Health Support for Business Owners
Running a business can be an isolating experience. And, with COVID-19 lockdowns and disruptions to trade, the pressure can be intense.
NewAccess for Small Business Owners is a free and confidential mental health program developed by Beyond Blue to give small business owners the support they need. Whether you’re just feeling stressed, or completely overwhelmed about everyday life issues, they can help.
Understandably, a lot of small business owners are reporting that COVID-19 has negatively affected their mental health.
NewAccess is designed to appeal to people who might not otherwise seek support for their mental health and to provide support early, preventing symptoms from potentially getting worse.
Coaches of the NewAccess for Small Business Owners program all have a small business background and are trained in Low-intensity Cognitive Behavioural Therapy - a structured, evidence based psychological treatment. Put simply, it allows us to recognise the way we think, act and feel.
The program is open to small business owners (under 20 employees) who are not currently seeing a psychologist or psychiatrist. The program starts with an initial assessment, then works with you over five sessions to tackle unhelpful thoughts and behaviours, using an individual plan that you develop with your coach. Together you will develop an understanding of what is causing distress and then work on practical tools and strategies that can be used in day-to-day life.
For more visit:
COVID-19 business grants and programs
|The COVID-19 Disaster Payment has been expanded and increased on 28 July 2021. Eligible Victorian workers and sole trader business owners in lockdown in a Commonwealth hotspot from 6 August who lose work and do not qualify for Victorian Government support programs will be able to access:Payments of $750 pw (up from $600 pw) to individuals who lose 20 or more hours of work a week during the period of the lockdown
Payments of $450 pw (up from $375 pw) to individuals who lose between 8 and 20 hours of work, or a full day of work, during the period of the lockdown
There is no liquid assets test to receive these payments.
The payment will be available from day one of any lockdown, with claims made from day eight in arrears, with a weekly payment then made for the duration of the Commonwealth hotspot declaration.
The vast majority of Victorian microbusinesses not registered for GST will also be eligible for the COVID-19 Disaster Payment.
Micro-businesses and sole trader business owners can obtain assistance with their application by making an appointment with the Business Victoria Concierge Service on 13 22 15.
The Victorian Government has assumed responsibility to fund payments in areas that are not declared a Commonwealth hotspot.
The COVID-19 Disaster Payment is non assessable income and non exempt income for tax purposes. This applies to assessments for the 2020-21 income year onwards.
In addition, the Business Continuity Fund provides $5,000 grants to businesses that remain impacted by capacity limits due to public health restrictions.
Businesses located in the CBD will receive an additional $2,000 ($7,000 in total).
All recipients must have received or been eligible for previous Business Cost Assistance Program Round Two (or extension), and no application is necessary (i.e. eligible recipients receive the payments automatically).
Divorce and Superannuation
New legislation will help prevent superannuation assets from being hidden during divorce proceedings.
From 1 April 2022, the Australian Taxation Office (ATO) will be able to release details of an individual’s superannuation information to a family law court.
The recently enacted laws are designed to ensure that there is procedural and economic fairness in divorce proceedings to prevent the under-reporting of superannuation assets. While a spouse’s superannuation information can be obtained now through legal action, if it is not provided willingly, it is often expensive and time consuming to obtain factual information through subpoenas or court orders.
From April 2022, when a couple have entered into divorce proceedings, if one of the parties believes the other is not being forthcoming about the value of assets held in superannuation, they can apply to a family law court registry to request their former partner’s superannuation information held by the ATO. They will then be able to seek up-to-date superannuation information from their former partner’s superannuation fund.
What happens to superannuation in a divorce?
In a divorce, superannuation is treated like any other asset and included in the division of assets in a property settlement or financial agreement. Depending on how the total assets of the couple are split, the superannuation balances of each individual may remain intact with each party taking their respective entitlement from the asset pool, or split between the couple.
For superannuation to be split, there must be:
- An order from the Family Court or Federal Magistrate Court; or
- A superannuation agreement (a financial agreement that deals with superannuation interests)
If a superannuation account is split, it does not convert into cash unless the receiving spouse is aged 65 or over, or has reached preservation age and has retired. In most cases, the superannuation is immediately rolled over into the receiving spouse’s superannuation account and remains there until they are legally able to access it.
The tax-free and taxable components of the super payment to a receiving spouse will be calculated immediately before the payment is made with the relevant payment retaining the tax components of the account the funds are being transferred from.
For self-managed superannuation funds (SMSFs), generally SMSF cannot acquire assets such as residential property from a related party but there is an exemption when the acquisition is a result of marriage breakdown. Where a property like a residential rental property is involved, the superannuation rules allow an in-specie rollover under a court order or financial agreement rather than forcing the former couple to sell the property. For example, where a couple have an SMSF together, it’s common for one member to step down when they divorce (until that point it’s important to remember that the trustees are legally obliged to act in the best interests of all members). This same member might then set up their own SMSF and utilise the exemption to receive the residential rental property as an in-species rollover.
Capital gains tax relief is also available where property is transferred to a spouse’s superannuation fund as a result of divorce proceedings so that any potential capital gains tax does not apply on transfer. Instead, the spouse or former spouse who receives the asset will effectively ‘inherit’ the transferor’s cost base of the asset for CGT purposes. That is, when the property is transferred, the tax implications are generally the same as if the receiving spouse or their superannuation fund owned the property from the time it was acquired.
The superannuation divide
On average, women earn 14.2% less than men based on full time earnings. If you take overtime into account, the gap is 16.8%. When part-time work is taken into account, this figure blows out to 31.3%. And, the COVID-19 pandemic has only worsened the pay gap.
Given that 93% of all primary carer leave is taken by women, it’s not surprising that there is a divide between the superannuation balances of men and women on retirement. While the gap is diminishing over time reflecting the positive shifts in work participation and the earning potential of women, it is currently estimated to be around 42%. That is, when a woman retires, she retires with around 42% less superannuation than a man.
While the situation is much better in SMSFs, a gap remains. Over the five years to June 2019, the average member balances of women increased by 28% to $654,000, however the average balance of a male was $784,000.
The Federal Budget proposal to remove the $450 threshold on superannuation guarantee payments (the minimum amount someone needs to earn in a month before an employer is required to pay superannuation guarantee) will help reduce the superannuation divide, but this is not intended to commence until 1 July 2022.
Where couples have significantly different superannuation account values but are of a similar age, there are practical reasons why they might look at evening out any gap.
Where one spouse is close to or likely to reach their transfer balance cap (between $1.6m and $1.7m), redirecting superannuation contributions to the spouse with the lower balance means that together, they maximise their tax-free income in retirement. Together, the couple can accumulate between $3.2 and $3.4 million tax-free.
You can make a contribution to your spouse’s superannuation fund up to their non-concessional cap (currently up to $110,000 depending on their superannuation balance). If they are under 67 years of age, you might also be able to use the bring-forward rule and contribute up to 3 years’ worth of non-concessional contributions in one year (up to $330,000 depending on their superannuation balance).
If your spouse is not working or a low income earner (assessable income less than $40,000), there is also a tax offset of up to $540 available on contributions you make on their behalf.
If your spouse is under 65 and not retired, you can split your superannuation with them. Up to 85% of your concessional superannuation contributions from your employer or salary sacrifice each year, can be directed to your spouse’s fund.
Actively addressing the value of each spouse’s superannuation account might also help to manage some of the issues that can occur when a spouse dies. While superannuation will pass to the beneficiary nominated in the death benefit nomination or estate, this does not always occur in the most practical or tax effective way. The superannuation rules in this area are complex, particularly when there have been family breakdowns in the past. It’s important to seek advice to ensure your superannuation is managed in a way that delivers the best possible outcome for your beneficiaries.