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Covid-19 resources.

Multiple sources of help and explanation the relief packages and programs our Governments have recently. All relate to Covid-19 so that you don't have to hunt for information or miss out.  Your accountant can help with any question you have.

         

Please click on the following links to access a wide range of resources. Once done, click on the X (top right) to close the article and you'll return to this list.
 

 

  • Breakdown of Federal Government Covid-19 support. Click here.

 

 

  • 12 Treasruy Fact Sheets on Covid-19 releif measures. Click here.

 

 

 

 

  

 

 

 

 

 

Stage 2 – Covid-19 stimulus package.

Detail on what the second stimulus package means to your hip pocket, Centrelink payments and staff retention.

 

The announcements for individuals, retirees, households and employers: 

  • Temporary early release of superannuation for those in need
  • Reducing the minimum drawdown rates for superannuation income streams for the 2019/20 and 2020/21 years
  • Reducing the deeming rates by a further 0.25%
  • An additional $750 lump sum for pensioners and concession card holders
  • Additional income support payments for the unemployed
  • Keeping staff employed

NB: There is another article on our site that covers details of Stage 1 of the Government's Covid-19 stimulus package.

 

Release of super funds:

The Federal Government has decided to allow financially stressed people to access $10,000 tax free of their super fund this financial year and $10,000 next financial year. 

Treasurer Josh Frydenberg made the announcement on Sunday as part of a broader $66 billion stimulus package to mitigate the fallout from the outbreak that has killed more than 13,000 people worldwide and is tipped to plunge the global economy into a recession.

“These extraordinary times demand extraordinary measures,” the treasurer said in a statement. “The government is taking unprecedented action to strengthen the safety net available to Australians that are stood down or lose their jobs and increasing support for small businesses that do it tough over the next six months.”

Eligibility: One of the following requirements must be satisfied for the early release of super: 

  • You are unemployed; or
  • You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, 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 per cent or more; or
    • If you are a sole trader – your business was suspended or there was a reduction in your turnover of 20 per cent or more.

If eligible, individuals can apply directly to the ATO via MyGov (www.my.gov.au) and will be required to certify that they meet the eligibility criteria. The ATO will then issue a determination and contact the super fund directly to release the money.

It is anticipated that payments will be available from mid-April. Payments will be received tax free and will have no impact on existing income support payments.

 

Reduction of minimum pension drawdown requirements

As we saw in the Global Financial Crisis (GFC), a temporary reduction to the minimum payment rules will apply for superannuation income streams to assist retirees who would otherwise be forced to sell down assets to meet their minimum pension.
 
For the 2019/20 and 2020/21 financial years, the minimum drawdown rates will be:


  ​

Deeming rates.

Further to the recent decrease in deeming rates announced earlier this month, the Government will reduce deeming rates by another 0.25% from 1 May 2020. The new rates are provided in the table below.

Additional $750 lump sum payment 

Two separate lump sum payments will now be available to eligible social security, veteran and other income support recipients and eligible concession card holders as follows:
 
Payment one – available to those eligible income support recipients and concession card holders at any time between 12 March 2020 and 12 April 2020.
 
Payment two – available to eligible payment recipients and concession card holders on 10 July 2020.
 
The two lump sum payments will be received tax free and will not impact existing income support payments.

The payment will be made automatically from July 13 to about 5 million Australians, including those receiving the age pension, a carers allowance or family tax benefit and Commonwealth senior card holders.
 
For payment one, the qualifying payments and concession cards are as follows:

To be eligible for payment two, the same list applies EXCEPT if you are entitled to the Coronavirus Supplement (explained below).

 
Additional income support for the unemployed and faster access

The Government will introduce the Coronavirus Supplement, a $550 per fortnight payment available for the next six months to eligible payment recipients. Additionally, access to income support will be expanded and the claims process accelerated to ensure timely payments for those in need.
 
Eligibility: The payment categories eligible to receive the Coronavirus Supplement are:

  • Jobseeker Payment (including all the payments that are currently moving to Jobseeker Payment)
  • Youth Allowance Jobseeker
  • Parenting Payment
  • Farm Household Allowance
  • Special Benefit recipients

While the Coronavirus Supplement is available (temporary measure for approximately six months), the Government will expand access to income support (such as Jobseeker Payment) to:

  • Permanent employees who are stood down/lose their job
  • Sole traders/self employed
  • Casual workers
  • Contract workers

The standard allowance income test must be met however the assets test that normally applies to allowances (ie $1 over the asset test threshold results in no payment) will be waived for the Coronavirus Supplement period.
 
Some waiting periods will also be reduced or waived. The standard one week Ordinary Waiting Period, the Liquid Assets Waiting Period (LAWP) and the Seasonal Work Preclusion Period will all be waived.
 
How to apply: The Government is encouraging all applications to be made online or over the phone if internet access is not available. Measures have been adopted to accelerate the claims process such as removing the requirement for Employment Separation Certificates and the need to make appointments with an employment service.
 
The commencement date for the Coronavirus Supplement and the expanded access to income support is 27 April 2020.

 

Casuals and sole traders

If you've found yourself affected by the economic downturn, you'll be able to access a “coronavirus supplement” of $550 a fortnight for the next six months.

That's on top of other benefits — so if you're already receiving payments through Jobseeker (formerly known as Newstart), you can claim both.

Sole traders and casual workers who are currently making less than $1,075 a fortnight will be eligible to receive the full supplement.

In practice, that means if you're a single parent (receiving a maximum fortnightly payment of $612 through Jobseeker), for example, and you meet the criteria, you'll take home about $1,162 a fortnight.

“This means anyone eligible for the maximum Jobseeker payment will now receive more than $1,100 a fortnight, effectively doubling the Jobseeker allowance,” Treasurer Josh Frydenberg said.

Sole traders or casual workers who have had their income or hours reduced by 20 per cent or more as a result of coronavirus will also be able to access to up to $10,000 of their superannuation tax-free.

 

Employers who want to keep staff

Not-for-profits and small businesses with a turnover under $50 million will receive a tax-free cash payment of up to $100,000 to help them retain staff and continue operating.

The Government expects 690,000 businesses employing 7.8 million people and 30,000 not-for-profits will be eligible for measures in the stimulus package.

It doesn't mean extra pocket money if you're an employee, but by linking the payments to staff wage tax withholdings, businesses will be given an incentive to hold on to more of their workers.

“We know that small businesses are enormously resilient but this is really hurting them,” Mr Morrison said.

“Whether it is a coffee shop or mechanic or hairdresser… by providing at a minimum $20,000 and up to $100,000 for small businesses who employ people, [it] gives them a chance to get to the other side.”

Expect more to come…

An important thing to keep in mind is that this is the second suite of measures announced by the Government in just a matter of weeks.  Details about the first stimulus package can be read here.

 

For more information

For more information on these measures and other announcements made by the Australian Government visit treasury.gov.au/coronavirus or speak with your Financial Planner or Accountant.   

 

 

Source:  Several sources and the ATO.

Covid-19 Update – Small Business

Small businesses will be the hardest hit by the ramifications of Covid-19.  The following is more information to help small business owners better understand some of the business support that's now available.

Late last week there was an article added to this site about the Federal Governments stimulus package.

Then 4 Fact Sheets became available to help understand the stimulus package.  Plus more information can be found here .

  1. Cash flow assistance for business
  2. Stimulus payments to households to support growth
  3. Assistance for severely affected regions
  4. Delivering support for business investment
     

This latest update provides more detail on how the stimulus package operates.  For example, Cash flow payment for employers.  'Eligible businesses will automatically receive payments of 50 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April 2020, with refunds to be paid within 14 days.'  Read more detail here.

 

ATO
Treasury
Small Business WA

 

 

PM launches $17.6 billion virus stimulus plan

The Prime Minister has announced a stimulus plan to curb the economic impact of the coronavirus and keep “Australians in jobs and businesses in business”. 

           

The package, aimed to provide an immediate stimulus to the economy, will be worth $17.6 billion, with a projected impact of $22.9 billion.

It includes tax relief for small businesses, a $750 one-off cash payment for welfare recipients and wage assistance to keep apprentices in work.

“Each measure is temporary, each measure is targeted, and each measure is proportionate to the challenges we face,” Treasurer Josh Frydenberg told media in Canberra. 

Prime Minister Scott Morrison confirmed that the government plans to spend $11 billion before June 30 this year, with the remainder to be injected into the economy before the end of the next financial year.

“This plan is about keeping Australians in jobs. This plan is about keeping a business in business, particularly small and medium-sized businesses, and this plan is about ensuring the Australian economy bounces back stronger on the other side of this and, with that, the Budget bounces back with it,” Mr Morrison told media. 

Under the plan, the government is lifting the threshold for the instant asset write-off from $30,000 to $150,000, and expanding it to businesses with an annual turnover up to $500 million, up from $50 million. It has also announced a 50 per cent accelerated depreciation deduction above existing deductions, which will be available to June 30, 2021.

Additionally, businesses with turnover up to $50 million will receive a tax-free cashflow boost for employers worth up to $25,000, designed to help pay wages. 

It has also set up a coronavirus regional and community fund aimed to assist those in the most impacted areas such as tourism and export. 

 

 

Maja Garcia Djurdjevic
12 March 2020
mybusiness.com.au

 

 

Statistical picture of Australia – Update

The data contained on this website can help with many day to day decisions.

       

Please click on the following link to see all this interesting information. The areas covered are:

  • Overview
  • Markets
  • GDP
  • Labour
  • Prices
  • Money
  • Trade
  • Government
  • Business
  • Consumer
  • Housing
  • Taxes
  • Climate

 

Access all this data here.

 

 

tradingeconomics.com/australia

Understanding the dangers with downsizing and super

There are often upsides and downsides in any piece of legislation, especially when it comes to superannuation.

       

That's the case with the Federal Government's “downsizer measure” announced in the 2017-18 budget, which came into effect on 1 July, 2018.

On the surface, there are significant upsides for individuals and couples wanting to top up their superannuation accounts either in retirement, or just before.

The measure allows individuals aged 65 years old or older, who meet specific eligibility requirements, to contribute up to $300,000 into their superannuation using the proceeds from selling their home. Couples can contribute up to $600,000, and a downsizer contribution can still be made even if one's total super balance is higher than the Government's mandated $1.6 million pension transfer balance cap.

There are various rules around the legislation, including that the home sold must have been owned for at least 10 years, and contributions into superannuation need to be made within 90 days of receiving the proceeds from the sale.

The downsizing data

To put some context around this article, we contacted the regulator of the downsizer legislation, the Australian Tax Office (ATO).

Since coming into effect 18 months ago, neither the Government nor the ATO has published data on how often the home downsizing measure has been accessed. However, the ATO has advised that, as of 17 January, 2020, it had received $2.19 billion in downsizer superannuation contributions on behalf of 9,429 individuals.

The ATO says downsizer contributions have been reported for every state and territory, with 55 per cent of contributions having been made by women. The average superannuation contribution has been approximately $232,000.

But the regulator adds that, as its data is based on individual contributions, and there can be multiple superannuation contributions made for the same home, for example from a husband and wife, it does not have data on the number on homes sold since the legislation was introduced.

Based on the aggregated numbers, the downsizer measure is proving popular for some retirees. Adding more than $200,000 in additional contributions into superannuation by freeing up equity from a home, and which will generate tax-free income for those in pension phase, can go a long way to funding one's needs in retirement.

Yet, it's also important for individuals and couples considering the downsizer measure to fully understand the potential downsides of downsizing.

A potential pension trap

Having enough money in retirement to maintain a comfortable lifestyle is obviously an aspiration for most Australians.

Longevity risk – the risk of running out of money in retirement – is a clear danger for many.

Yet, while the home downsizing measure may seem attractive for those aged over 65 wanting to get more into their superannuation or pension account to offset longevity risk, it also presents potential financial risks.

Those risks primarily relate to eligibility for a full or part Age Pension, because a large cash injection into a superannuation account may result in a breach of the assets test rules.

Consider that the family home is an exempt asset when calculating entitlements for the Age Pension, while all other assets outside of the home including superannuation are taken into account.

Under what's known as the taper rate, Age Pension entitlements are reduced by $3 per fortnight for every $1,000 in assets over the Government's asset test thresholds.

The current assets test limits are shown in the table below.

Full Age Pension Homeowner Non Homeowner
Single $263,250 $473,750
Couple $394,500 $605,000
     
Part Age Pension Homeowner Non Homeowner
Single $574,500 $785,000
Couple $863,500 $1,074,000

Source: Department of Human Services, limits effective 20 September 2019

 

The problem is that, in the current environment of record low interest rates and forecasts of lower investment returns for longer, some retirees could find that they are actually worse off.

Once an individual or couple breach the limits for the full Age Pension, their fortnightly payments will gradually reduce using the taper rate. Those on a part pension could find their payments cease altogether if they move above the maximum thresholds.

So, even with a higher superannuation balance as a result of their home sale, their total income stream could be less than what they received when they qualified for a full or part Age Pension.

Look before you leap

Average superannuation account balances at retirement already put many Australians close to the Age Pension assets test thresholds.

Using the data provided by the ATO, where the average downsizer superannuation contribution has been around $232,000, it's likely that some of the individuals and couples that have taken up the measure will have breached the maximum assets test levels.

What's most important for individuals and couples considering the downsizer measure is to review your personal circumstances to determine if it is going to work for you financially.

Do the numbers stack up? Keep in mind that any additional tax-free superannuation income earned in pension phase may be completely offset by a loss of Age Pension income if you breach the assets test rules.

For those wanting to downsize, how your home proceeds are reinvested, to maximise investment returns in retirement, is key.

It's therefore essential to seek out professional financial advice before proceeding, especially with respect to social security means testing.

 

 

Tony Kaye
Personal Finance Writer, Vanguard Australia
18 February 2020
vanguardinvestments.com.au

 

 

New laws mean 65-year-olds should hold off on large contributions

Following confirmation from the government that legislation to extend the work test exemption to age 67 will be passed by the end of the financial year, SMSF professionals should hold off on large contributions for 65-year-old clients to extend their ability to contribute to super for longer.

           

Addressing the SMSF Association National Conference 2020 on the Gold Coast on Tuesday, BT head of financial literacy and advocacy Bryan Ashenden said the extension of the exemption would mean clients could trigger the bring-forward rule and make up to $300,000 worth of contributions up to age 67.

As a result, it may be worth holding off on triggering the bring-forward for 65-year-old clients to maximise their ability to contribute up to the non-concessional cap until they reached age 67, Mr Ashenden said.

“Instead of doing the $300,000 bring-forward, maybe we would only do a $100,000 contribution this year because we know the government is going to get the legislation through to bring in that work test deferral, which means no work test requirements and the ability to use your bring-forward until you turn 67,” he said.

“So, if [a client] is currently 65, we might be better off to only do a $100,000 contribution now instead of $300,000 because next financial year we could then do the other $300,000.”

While relying on rules which were not legislated yet was not ideal, Mr Ashenden said the consequences for clients who missed out on additional contributions through not utilising the new rules could be significant.

“You have to be careful because if you used the $300,000 this year, you’re not going to have that ability to get the $300,000 down the track unless you can utilise the work test exemption in a future year, which means you would have to go back to work,” he said.

“It’s important to remember because if you trigger it this year, if you turn around to your client who has turned 65 in this financial year and say based on current rules you could make a contribution of up to $300,000, and then the rules change to say it’s different from 1 July next year, you’ve knocked them out of the ability to get an extra $200,000 into super.”

The comments come following confirmation from assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume earlier at the SMSF Association National Conference that legislation to extend the work test exemption to age 67 would be passed before the end of the 2019 financial year.

 

 

Sarah Kendell
20 February 2020
smsfadviser.com

 

A resource hub for our clients.

We provide 24/7 access to many extra tools and resources to help you build on what we offer concerning your tax and other financial affairs. *

           

Latest News. 7-9 individual articles every month and all chosen for their relevance. Our website is a great place to stay informed.

Educational Videos. All are relevant, interesting, educational and interesting. Videos that are changed three times a year to ensure you and your family are able to lean about many issues related financial issues and topics.

Calculators. A good comprehensive range of calculators to help you better understand and manage your personal and family financial issues. Four of the more popular are: Pay calculator, Budget Calculator, Loan Calculator, and Superannuation Calculator

Client Portals. Portals are quite common on many sites and can be used to store your data, pay bills, log onto investment systems.

Ask us a question at any time. If you have a question on any related topic then don’t hesitate to use a form on our site to ask.

Your information is private and confidential and should be treated that way. Using Secure File transfer means your information is encrypted when sent in either direction over the Internet.

Many sites also have a message window feature that displays messages of interest or that cover topics and deadlines you should be aware of.

 

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* Not all are on every website.

 

 

Investing with small amounts

A question that comes up for many people saving for retirement is how best to invest when they only have small amounts of money available at a time.

         

For some, it might be because they are early in their investing journey, just out of school or starting in the workforce. Others might be raising their sights to investing after paying for an education. Some are thinking about retirement as they close in on paying off their home.

The common thread is that large sums of money aren't available for investing in one go. Rather, the hope is to put away something every month and watch it grow.

So how best to proceed?

The first step is setting goals by knowing where you want to end up. Planning sounds dull but it is critical to have clarity around where you are, where you want to be and how long you have to get there. Your plans should also include contingencies for when things go wrong.

Then, make sure you focus on building an emergency fund.

Former heavyweight champion Mike Tyson has a famous line: “Everybody has a plan until they get hit. Then, like a rat, they stop in fear and freeze.”1

Getting 'hit' could mean a job loss, a medical emergency or any other unplanned essential spending. It can derail the best of plans. An emergency fund protects from this risk. It should be kept safe from market risk and easy to access quickly.

It's also important to continue to make debt repayments. The higher your debt, the less is left over each month to save. In retirement, debt payments directly reduce your spending power. Many financial advisers over the years have said the first task they work on with many new clients is:

  • understanding where the money goes (i.e. budgeting)
     
  • getting debt under control because only as debt is manageable, is it realistic to start thinking about investing.

This is when the critical step of moving from being a saver to investor can occur.

When there are only small amounts spare each month, the single most critical thing is to find investments that have low fees.

Fees eat away at investments and this is especially true when your monthly contributions are low.

Exchange traded funds are a great low-cost investment that can be purchased with as little $500 to start with. And, depending on the ETF you buy, they can offer the benefit of instant road market diversification as well.

They come with one main caveat however – watch your brokerage costs. At $500, $10 of brokerage means the ETF will need to rise 2 per cent just to break even. If your next purchase is $100, that $10 brokerage means you need a 10 per cent gain to recover your funds.

That can get expensive over time.

An alternative for people with regular small amounts to put away can be unlisted managed funds. Minimum investments in managed funds are higher than ETFs—often between $2000 and $5000. But they have the benefit that some managed funds allow fee-free regular contributions that are often as low as $100.

Ultimately the decision is a balance of how much you have to start with and how often you intend make further small contributions.

Once the vehicle is decided, the next decision is asset allocation, or how much of your investments are allocated to an asset class like stocks, property or bonds.

One of Vanguard's most closely-held tenets is that diversification is one of the most important predictors of investing success. Investing in managed funds and ETFs offers a wide range of diversification at very low cost, allowing small investors to access professionally managed, well diversified portfolios in a single investment.

Some people procrastinate about starting on the investing journey because they don't have a sizeable pool of savings but ultimately you are better off investing small amounts over the long term, than not at all.

 

Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
24 February 2020
vanguardinvestments.com.au

 

1. https://www.sun-sentinel.com/sports/fl-xpm-2012-11-09-sfl-mike-tyson-explains-one-of-his-most-famous-quotes-20121109-story.html

 

Expected GDP by country 2010 to 2100

This animated chart is simply amazing but some world events could have a negative impact.  Even so, it's fascinating to see how the world might change into the future.

Simply click on the image and see how global economies are expected to change between 2010 and 2100.  

             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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