Spotlight on the new mandatory superannuation fund performance test

Spotlight on the new mandatory superannuation fund performance test

If you measure from last year's COVID lows, Superannuation has provided many fund members with stellar returns since then. As always, some funds performed better than others. Now, recent government reforms, along with the new mandatory performance test, make it easier to find out how your fund compares with others. However, we recommend looking looking beneath the simplicity of the pass / fail result the new test gives, as it may not tell the real story about your fund.

You may have noticed recent media reports naming 13 super funds that failed a performance test conducted by the super industry regulator, the Australian Prudential Regulation Authority (APRA).

While the news may have come as a shock to members of those funds, it’s important to understand the aims and limitations of the new test.

Background to super reforms

Under the federal government’s Your Super, Your Future reforms passed in June, super funds that fail to meet an annual performance test must notify their members about their underperformance. Funds that fail the test for two consecutive years won’t be able to accept new members until their performance improves or they merge with another fund.

The government has also made it easier to compare funds. As of July 1, anyone can jump onto the ATO’s new YourSuper comparison tool, which ranks funds by fees and investment returns. For now though, the tool only compares MySuper funds which are the default products for employees who don’t choose a fund.

While it’s hard to argue with any initiative that aids transparency and protects people from poorly performing super funds, caution is needed when interpreting the super tool.

Compare like with like

When you compare super funds, it’s important to compare like with like. Awarding funds a simple pass or fail does not take into account a variety of factors such as the risk and return trade-off in investment options and whether the fund is a lifecycle product that reduces risk as a member ages.

Conservative options with a higher percentage of cash and fixed interest investments tend to deliver more modest returns in the long run but with a smoother ride along the way. Whereas balanced and growth options with a higher allocation to shares may deliver higher returns in the long run but with more volatility.

That means a fund may underperform in the short term but still provide members with their desired level of risk and returns. Working out the most appropriate option for you will also depend on when you plan to retire and how much longer your money will be invested in the market. Generally, the shorter your time frame, the more conservative you are likely to be.

The YourSuper comparison tool also doesn’t consider the value of insurance offered by funds or other member services.

The value of advice

While the government’s super reforms are aimed at those who may not be engaged with their super or understand how their savings are being managed, you don’t need to go it alone. This is where our expertise can assist, ensuring your choices are tailored to your circumstances and guiding your decision.

In fact, a recent study by Russell Investments quantified the value of advice. It found that financial advisers added an estimated 5.2 per cent in value to their clients’ portfolios in the tumultuous period from the beginning of the pandemic through to the market’s stunning recovery by mid-2021.i

The report broke down this figure of 5.2 per cent into five key elements:

• Preventing behavioural mistakes, like switching to cash and crystallising your paper losses after a market fall (2 per cent)

• Advising on appropriate asset allocation (1.1 per cent)

• Optimising cash holdings (0.6 per cent)

• Tax-effective investing and planning (1.5 per cent)

• Expert wealth management knowledge derived from years of market experience – priceless.
The report found the beneficial impact for an investor who started 2020 with a portfolio worth $250,000 and stayed in the market until 31 May this year – rather than switching to cash when markets were volatile in March 2020 – was as large as $40,000.

The bottom line

It’s important for all investors to understand how their super is performing. Even more important though, is having a financial plan that takes into consideration not just your choice of super fund, but all your personal goals and circumstances.

If you would like to discuss your super in the context of your overall investment strategy, give us a call.

i https://russellinvestments.com/us/resources/financial-professionals/value-of-advisor

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Responsible investing on the rise - a new boom?

Responsible investing on the rise - a new boom?

For many people, there’s much more to choosing investments than focusing exclusively on financial returns. Returns are important, but a growing number of people also want their investments align with their values. Here's what you should know.

Everyone’s values are different but given the choice, most people would wish to make a positive difference to their community and/or the planet. Or at least to do no harm.

Indeed, four out of five Australians believe environmental issues are important when it comes to their investment decisions.i

As a result, there has been a surge in what is called responsible investing. Also known as ethical or sustainable investing, responsible investing includes investments that support and benefit the environment and society, rather than those whose products or way of conducting business have a negative impact on the world.

Millennials driving growth in sustainability

The trend toward responsible investment is growing rapidly. According to the Responsible Investment Association of Australasia (RIAA), Australians invested $1.2 trillion in responsible assets in 2020.ii While money flowing into Australian sustainable investment funds was up an estimated 66 per cent in the year to June 2021.iii

Responsible investing is particularly popular among millennials, now in their late 20s and 30s and beginning to get serious about building wealth. Many in this group are getting a foot on the investment ladder via exchange-traded funds (ETFs). A recent survey of the Australian ETF market found 28 per cent of younger investors had requested more ethical investments.iv

More sustainable investment options

As awareness of responsible investing grows, so does the availability of sustainable investment options, beginning with your super fund.

Most large super funds these days offer a sustainable option on their investment menu. While relatively rare even 10 years ago, the availability and performance of sustainable options has grown strongly over the past three to five years.

According to independent research group, SuperRatings, the top performing sustainable options now surpass their typical balanced style counterparts in some cases.v

If you run your own self-managed super fund (SMSF) or wish to invest outside super, there is a growing number of managed funds that actively select sustainable investments, or ETFs that passively track an index or sector.

There were 135 sustainable funds in Australia and New Zealand in 2021, so there is plenty of choice.iii

How to screen

So how do you find the ethical investments that best suit your values?

There are several methods used with the most common being negative screening. This is where you exclude investments in companies engaged in unwelcomed activities such as gambling, tobacco, firearms, animal cruelty, human rights abuses or fossil fuels.

Positive screening is the opposite, where you actively seek out investments in companies making a positive contribution. Some examples might be companies involved in renewable energy, health care or education.

Another criterion is to look at companies that monitor their environmental, social and governance risks. This cuts across all industries and is more about the way the company conducts its business.

Environmentally they may monitor their carbon emissions or pursue clean technology, socially they may be active in ensuring a safe workplace and on the governance front they may pursue board diversity or anti-corruption policies.

Greenwashing on the rise

As the popularity of responsible investing grows, so do concerns about the practice of so-called greenwashing. This is where a company or fund overrepresents the extent to which its practices live up to their promises. The Australian Securities and Investments Commission (ASIC) recently announced a review into the use of greenwashing in Australia, prompted in part by the demand for such funds.iii

Another trend is impact investing in companies or organisations helping to finance solutions to some of society’s biggest challenges. This might include investments in areas such as affordable housing or sustainable agriculture.

Solid returns

While some investors are driven by their values alone, many more want value for their money. The good news is that it’s possible to have it both ways.

The RIAA survey found super funds that engage in responsible investments outperformed their peers over one, three and five years. Clearly responsible investing is a trend that is gaining momentum, with the financial performance of sustainable investments attracting a wider following.

If you would like to discuss your investment options and how they might fit within your overall portfolio

i https://www.canstar.com.au/investor-hub/ethical-investing/

ii https://responsibleinvestment.org/resources/benchmark-report/

iii https://www.morningstar.com.au/funds/article/australias-sustainable-funds-market-is-growin/214505

iv https://www.betashares.com.au/insights/millennials-on-top-betashares-investment-trends-etf-report-2020/

v https://www.lonsec.com.au/2021/07/21/media-release-stellar-fy21-returns-as-super-funds-deliver-for-their-members/

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Your SMSF: Wind it up or pass it on?

Your SMSF: Wind it up or pass it on?

Now that new legislation allows a maximum of six members in an SMSF, some fund trustees may be wondering if this could be an easy way to ensure a smooth transfer of their super to the next generation.

The simple answer is yes, but before you start adding your children and their spouses to your fund, it’s essential to develop a detailed SMSF succession plan to head off any potential problems.

Why make a SMSF succession plan?

Most SMSF trustees understand the concept of estate planning and the importance of deciding how you want your assets distributed when you pass away. But many overlook the importance of a succession plan.

Although your estate plan will cover who gets your assets when you die, your Will doesn’t determine who receives your super, or who takes control of your SMSF. The issue of control is also important if you become seriously ill or lose mental capacity.

By putting a detailed succession plan in place, you can ensure a smooth transition in the control of your SMSF and the payment of your super death benefits to your nominated beneficiaries. It also reduces the potential for the fund to become non-compliant and provides opportunities for death benefits to be paid tax effectively.

Whether to wind up your fund

Traditionally, most two-trustee SMSFs were wound up as members got older and became less keen on undertaking the myriad tasks involved in keeping a super fund compliant.

Super law requires SMSFs with an individual trustee structure to have a minimum of two trustees, so many funds are automatically wound up after the death or incapacity of a trustee.

But the introduction of six-member SMSFs provides families with more flexibility to use their fund as a tool for intergenerational wealth transfer.

Adding your adult children to an SMSF means they can take over some of the administrative burden as you age. It can also simplify the transfer of assets to younger family members.

There are potential downsides that need to be considered, however, as the trustees in control of your SMSF after your death, are the ones making decisions about the distribution of your super death benefits.

Appointing a power of attorney

Ensuring you have a fully documented Enduring Power of Attorney (EPOA) in place in the event of serious illness, death or loss of mental capacity is an essential element in a good SMSF succession plan.

Having an EPOA makes it much easier to keep a fund operating smoothly, as the attorney can step in as trustee and take over administering the fund, together with making decisions about fund investments and payment of death benefits.

Developing an effective succession plan

With a carefully constructed SMSF succession plan, you can reduce the potential for disputes and ensure a smooth transition of control to the next generation.

It’s important to remember any instructions you leave in your Will about payment of your super benefits – or control of your SMSF – are not binding on the fund’s trustees after your death.

That’s why it’s essential to have a binding death benefit nomination (preferably non-lapsing).

Part of your regular succession planning should be to review your SMSF’s trust deed and check it includes the necessary powers to achieve your estate planning goals. These powers include the ability to provide income streams to beneficiaries and appoint the executor of your Will to take your place as fund trustee.

Tax and your SMSF

Tax is also a vital consideration in estate and SMSF succession planning.

Super and tax laws use different definitions of who is and isn’t considered a dependant and how the benefits they receive are taxed, so this needs to be carefully managed.

An SMSF can pay super death benefits to both your dependants and non-dependants, but the tax implications vary. Super benefits generally have both tax-free and taxable components, so talk to us before nominating a beneficiary to ensure your super will be paid tax-effectively.

Nominating a reversionary beneficiary for your super benefit can also be tax effective. A reversionary pension means your beneficiary (usually your spouse), automatically receives your super pension so fund assets won’t need to be sold to pay the benefit. Asset sales can create a CGT bill.

If you would like to discuss your SMSF succession plan, give us a call today.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


How GST impacts the sale of a business property

How GST impacts the sale of a business property

Selling your business property is a major financial transaction that you'll want to get right. Focusing on the sale price may seem like common sense, but this can be a costly mistake. Many owners forget to factor GST into their thinking. But if you do, you could find yourself left with a big tax bill to pay.

There are also valuable opportunities to claim GST credits on your transaction costs, so it’s important to retain all your paperwork in order to satisfy the ATO when tax time rolls around.

GST and commercial property

In general, if you sell business property such as a shop or factory and are registered - or required to be registered - for GST, you must apply GST to the sale amount and include it in your business activity statement (BAS). For example, if you sell an office suite for $1,100,000 (GST inclusive), you need to pay $100,000 to the ATO for GST.

If you are unregistered but liable for GST and fail to make your sales price GST inclusive, you will be forced to pay the GST liability from your own pocket.

As a vendor, you can claim GST credits on any costs involved in selling your business property, such as the GST included in the fees you pay to your real estate agent. If there are settlement adjustments for costs such as council and water rates when you sell, these must be included in your BAS.

The eligibility rules for claiming your credits include that:

  • GST was paid at settlement,
  • Both you and the purchaser are GST registered,
  • Tax invoices are available for the goods and services you are claiming, and
  • Your deduction claim is lodged within four years.

Going concern sales

One way around the GST requirement is if you sell your enterprise and business property as a 'going concern'. These sales are GST-free, but to qualify the ATO will require the business to continue operating into the foreseeable future and be appropriately resourced.

To be eligible for this concession, the business sale must be for payment, the purchaser must be registered for GST, and both you and the purchaser must agree in writing the sale is for a ‘going concern’.

In this situation, although there is no GST liability on the sale, both you and the purchaser may be able to claim GST credits on any related expenses.

It’s worth noting that in a going concern sale, a purchaser may pay less stamp duty, as this is normally calculated on the GST-free price, rather than GST-inclusive price.

Using a margin scheme

If you are eligible, you may also be able to use a margin scheme to reduce the amount of GST owed on your property sale.

Under the margin scheme, the 10 per cent GST payable on the sale amount is calculated on the sale margin (which is usually the sale price less the amount for which the property was originally purchased), rather than the full sale price.

Although it can be worthwhile using the margin scheme, the rules around eligibility are complex, so talk to us before reaching an agreement with your purchaser.

If you are considering trying to avoid the GST issue, remember the ATO regularly receives data relating to purchases and sales of properties around Australia and matches this against activity statements. If you fail to report a sale in your BAS, the ATO will likely catch you out.

Tools to help

To make things a little easier for vendors, the ATO has a GST property decision tool that helps determine the GST implications of property-related transactions.

The online tool asks a series of questions to work out the GST classification of a property transaction and establish eligibility for the margin scheme.

The ATO’s property decision tool requires you to enter information on the date you acquired the property, planned settlement date, amount you paid to acquire the property, past transactions for the property and whether GST was applied, and whether you are registered for GST.

Call us if you are planning to sell a business property and would like to know more about the GST implications.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


How to develop resilience for hard times - financial, or otherwise

How to develop resilience for hard times - financial, or otherwise

Resilience is increasingly in the spotlight these days when it comes to desirable personal qualities. In many ways it trumps intelligence. People who have it are better at handling setbacks, navigating obstacles and weathering hard times - financial, emotional, or otherwise. The good news is that resilience is like a muscle. You can easily strengthen it through training. We take a closer look…

Resilience is not a quality we’re born with. It usually starts to develop early in childhood and with practice, can continue to develop as we get older.

Australia has encountered some catastrophic events in recent years – the ongoing drought, the country in and out of lockdowns (as a result of COVID-19), bushfires, followed by floods, and then the mouse plague – we’ve seen it all.

When situations like this occur, it brings so much uncertainty as we’re not sure what’s going to happen in the future, and this is where we can appreciate how strong and capable we are by being resilient.

What is resilience and why is it important?

Resilience, in a nutshell, is the ability to be able to cope with certain challenges, overcome obstacles and recover quickly when a stressful situation arises.

The reason being resilient is so important is because it allows you to look at each obstacle you are presented with, take a step back, process the situation, and gain some perspective. This enables you to recognise and understand that you are able to overcome certain situations and life will continue to go on when certain challenges are thrown your way – no matter how big or small.

Preparing yourself for these types of situations not only continues to build on and strengthen your resilience, but can also improve your overall health and wellbeing.

How can you strengthen your resilience muscle?

There will be times when life is running smoothly and then you’re thrown a massive curveball - this is where your resilience muscle will kick in.

How you view adversity and stress is critical, as this will have a major impact on how you react and cope with disruptions in life. It also sets the tone for how quickly you bounce back and recover from these situations.

Here are a few strategies that can help you strengthen your resilience:

  • Foster a positive mindset – negative thoughts can impact how you react to stressful situations
  • Exercise – daily exercise releases endorphins and increases serotonin which has a positive effect on your mood
  • Personal control – spend time focusing on what you can control and set goals
  • Talk to friends and family – sharing your problems can help ease the burden and they can always provide some advice that may help you
  • Keep a journal – writing down your feelings can be a good way to express yourself and de-stress if you don’t want to share your feelings with others
  • Learn from your mistakes – making mistakes is a part of everyday life and drawing on past mistakes can help you to reassess decisions you make in the future

Resilience in the truest sense

Whilst Australia has experienced some of the worst disasters with bushfires and floods in recent years, it's also brought out the best in most and shown that overall Australian’s are a resilient bunch.

Farmers in rural and remote areas across the country suffered greatly due to the drought, and like many businesses in the city during the COVID-19 outbreak, farmers and their families had to ‘pivot’ and look for other opportunities to earn money.

This is when the ‘Buy From The Bush' campaign was developed. It’s a great initiative where gifts, homewares, and arts and collectables amongst other things can be purchased online, which helps small businesses in rural areas that are struggling financially throughout this period.

Throughout this period, it showed us that in the face of adversity resilience is a vital skill for us all and having the support around you is key when faced with difficult challenges.

Focus on a positive mindset

Remember, having a positive mindset helps us achieve a better outlook on life, we smile more, we laugh more, and we try to resolve things more simply.

Two quotes come to mind when it comes to a positive outlook – you must keep in mind ‘there is always light at the end of the tunnel’ and ‘always look on the bright side of life’.

Most importantly, we must remind ourselves that challenging times won’t last forever.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Decision making your way to the best outcome

Decision making your way to the best outcome

Some decisions merit deeper thought than others. Compare for instance, where to invest your life savings vs where to go for lunch. What you may not realise is that we humans have two distinct modes of thinking. One is often better suited to life's big decisions, the other to our more everyday choices.

Throughout our lives, making a decision is something we do thousands of times a day. Our first thought occurs as soon as we wake, and our final thought when we drift off to sleep. Researchers have found on average, that most people will have approximately 6,200 thoughts per dayi. Having so many thoughts requires us to make thousands of decisions.

Deep thinking vs shallow thinking

Two types of methods can be used when it comes to decision-making and while neither is right nor wrong, it’s important to understand the difference between the two and choose the method that works best for you and the situation. After all, if we all thought the same way, life would be pretty boring right?

Deep thinking requires effort and mindfulness and someone who is considered a deep thinker will usually look at the whole chain of events throughout this thought process. They will explore different pathways to reach different outcomes and have a greater understanding of the consequences based on that specific decision.

Contrary to deep thinking is shallow thinking, and these decisions are instinct-driven – they are made immediately. This type of thinker is decisive and won’t necessarily spend time exploring different pathways to reach an outcome or consider the consequences of their decisions as much as a deep thinker would.

Can you learn to become a deep thinker?

Some may say, with so much technology and information on hand, shallow thinking is now far outweighing the deep thought process and we are losing the ability use these creative thinking skills to make certain choices. Our attention span is limited; we are distracted easily therefore, our thought process is constantly being interrupted, meaning we spend less time thinking about the outcomes of the choices we are making.

There are several steps you can implement to learn how to become a deep thinker. Firstly, you must fully understand the situation in detail – what is being asked and what impact it will have – only then, can you spend time creating a constructive environment to make decisions. In creating a constructive environment, you will need to determine whether other people should be included in this process.

By including others, you have the opportunity to take into account other people’s ideas. This is a fantastic way to explore ideas that you may not have previously considered and give the process the time and attention it deserves. Once you have reviewed all options, you can determine the risks and impacts of each, then decide what the best outcome is likely to be.

Alternate ways to make decisions

Some decisions won’t be as complex or require the same level of creative thinking to make the right choice. Some alternate options could be as simple as – sleep on it. While this may seem like a ‘no brainer’, this can be one of the most effective ways to make a decision. While you are sleeping, your subconscious is still hard at work.

Talk to friends, relatives, or colleagues whose opinion you value - they can offer a different perspective if you are unsure about your decision.

Schedule a specific time in the day to help you focus – do you do your best thinking in the morning, afternoon, or evening. Remember, to focus completely, you need to remove all distractions during this time - turn off your email notifications and put your phone on silent.

If the decision is work-related, try delegating tasks as this could help reduce stress if work is piling up.

Change your environment – going for a walk or meditating can help you relax which then allows you to free space in your mind and shed new light on the way you think.

No right or wrong

Remember, there is no right or wrong when it comes to making decisions. Whether they are personal or business-focused, by applying some of these methods, you may alleviate stress and reach a better outcome when you next make a decision.

i https://www.newshub.co.nz/home/lifestyle/2020/07/new-study-reveals-just-how-many-thoughts-we-have-each-day.html

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Not feeling yourself? You could be languishing

Not feeling yourself? You could be languishing

Feeling a bit lacklustre as the days roll by? Hitting the snooze button more than usual? It’s a feeling that can be difficult to put your finger on, but it has a name, languishing.

Whether it’s feeling exhausted and unmotivated, or restless and eager to do more, we can be off kilter from time to time. It’s no surprise that many are feeling this way, as we continue to deal with ongoing uncertainty and snap lockdowns due to the pandemic. Knowing this is normal is important, particularly in the current circumstances, but we can also make changes to improve our overall wellbeing.

Flourishing vs languishing

Often, we think of good mental health as the absence of mental health issues, but as the diagram below shows, there is a spectrum between high mental health and low mental health.

While flourishing sits at the top, languishing is at the bottom.

Source: Dual continua model ( Keyes & Lopez , 2002)

You’re kicking goals at work, your relationships with family and friends are harmonious, you’re growing as a person – these are examples of flourishing. On the flipside, languishing can see you struggling to get out of bed in the morning, disengaged from your work, feeling negative about your relationships, or frustrated at not getting to where you want to be.

Called “the dominant emotion of 2021”, languishing has been described as if “you’re muddling through your days, looking at your life through a foggy windshield.”i

Moving towards flourishing

The pandemic has reminded us of how little control we have over external circumstances. While lockdowns are likely to remain in our near future and the way we work and socialise are impacted as a result, there are ways we can improve our outlook.

Take time out

Working from home and remote schooling has become a reality for many of us, meaning we are busier than ever. Scheduling in some time-out is crucial to being able to switch off and feel more refreshed. Even if it’s just a day spent not checking your email and doing something restorative, you’re prioritising self-care.

Start small

When you’re languishing, it can be difficult to get motivated, it’s not likely to be the time you embark on a new fitness regime, study or career move. However, starting small can make changes in your life while building motivation for you to make further changes.

Whether it is going for a morning walk each day, reading a book the whole way through or getting to one of those tasks on your to-do list, you’re taking a step towards flourishing.

Cut out the noise

Back-to-back Zoom calls, the 24/7 news cycle, pings of social media, the distraction of everyone being at home together – no wonder it’s hard to focus.

Tap into your ‘zone’ or flow, by switching off from external noise where possible to concentrate on one task at a time. When you’re in the state of flow, time flies by as you’re engrossed in an activity that takes your full attention.

Reach out for help

It’s also worth acknowledging when you need a helping hand. It may be delegating at work so you’re not feeling overloaded or having someone to talk to if you’re struggling through the day.

Mental health issues are on the rise due to the pandemic and there is no shame in asking for help – more than ever, Australians are reaching out for mental health support in these turbulent times to help stay on track.ii

i https://www.nytimes.com/2021/04/19/well/mind/covid-mental-health-languishing.html

ii https://www.lifeline.org.au/resources/news-and-media-releases/media-releases/

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Understanding Aged Care Payment Options

Understanding Aged Care Payment Options

When the time comes to investigate residential aged care for yourself, or a loved one, the search for a facility and how to pay for it can seem daunting. The system is complex, and decisions are often made in the midst of a health crisis. This brief guide explains fee structures and payment options.

Factors such as location to family and friends, reputation for care or general appeal are just as important as the sometimes-high price of a room and other fees in residential aged care.

Even so, costs can’t be ignored.i

Accommodation charges

The first thing to be aware of when researching your residential aged care options is that there are separate costs for the accommodation and the care provided by the facility.

The accommodation payment essentially covers your right to occupy a room. You can pay this accommodation fee as a lump sum called the Refundable Accommodation Deposit (RAD), or a daily rate similar to rent, or combination of both.

The daily rate is known as the Daily Accommodation Payment or DAP, and is effectively a daily interest rate set by the government. The current daily rate is 4.04 per cent. If the RAD is $550,000 then the equivalent DAP is $60.87 a day ($550,000 x 4.04%, divided by 365 days).

A resident can pay as much or as little towards the RAD as they choose, but any outstanding amount is charged as a DAP.

The RAD is fully refundable to the estate, unless it is used to pay any of the aged care costs such as the DAP.

Daily fees

As well as an accommodation cost there are daily resident fees that cover living and care costs. There is a basic daily fee which everyone pays and is set at 85 per cent of the basic single Age Pension. The current rate is $52.71 a day and covers the essentials such as food, laundry, utilities and basic care.

Then there is a means tested care fee which is determined by Services Australia or Veteran’s Affairs. This figure can range from $0 to about $256 a day depending on a person’s income and assets. The figure has an indexed annual and a lifetime cap – currently set at $28,339 a year or $68,013 over a lifetime.

Some facilities offer extra services, where a compulsory extra services fee is paid. It has nothing to do with care but may include extras like special outings, a choice of meals, wine with meals and daily newspaper delivery. It can range from $20-$100 a day.

A means assessment determines if you need to pay the means-tested care fee and if the government will contribute to your accommodation costs. Everyone who moves into an aged care home is quoted a room price before moving in. The means assessment then determines if you will have to pay the agreed room price, or RAD, or contribute towards it.

How means testing works

A means-tested amount above a certain threshold is used to determine whether you pay the quoted RAD and how much the government will contribute towards the means-tested care fee.

A person on the full Age Pension and with property and assets below about $37,155 would have all their costs met by the government, except the $52.71 a day basic daily fee.

A person on the full Age Pension with a home and a protected person, such as their spouse, living in it and assets between $37,155 and $173,075 may be asked to contribute towards their accommodation and care.

To be classified a low means resident there would be assessable assets below $173,075.20 (indexed). It is also subject to an income test.

A low means resident may pay a Daily Accommodation Contribution (DAC) instead of a DAP which can then be converted to a Refundable Accommodation Contribution (RAC). They may also pay a small means-tested care fee.

Payment strategies

The fees you may pay for residential care and how you pay them requires careful consideration. For example, selling assets such as the former home to pay for your residential care can affect your aged care fees and Age Pension entitlements.

If you would like to discuss aged care payment options and how to ensure you find the right residential care at a cost you or your loved one can afford, give us a call.

i All costs quoted in this article are available on https://www.myagedcare.gov.au/aged-care-home-costs-and-fees

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Tax Alert September 2021

Tax Alert September 2021

Although smaller businesses are now enjoying a lower corporate tax rate, their quarterly super bills have gone up, following the latest indexed rise in the Super Guarantee rate.

Here’s a roundup of some of the other key developments when it comes to the world of tax.

SME tax rate drops

With business conditions remaining tough, small and medium companies will welcome the lower corporate tax rate applying from 1 July 2021. Businesses with a turnover under $50 million are now only up for tax of 25 per cent.

This reduction was part of legislation passed back in 2018 to gradually reduce the corporate tax rate from 27.5 per cent to 25 per cent.

More small companies are eligible for this lower rate as the turnover threshold to access a range of tax concessions has been lifted from $10 million to $50 million.

Reminder on SG increase

If you are an employer, don’t forget the Superannuation Guarantee (SG) rate increased by 0.5 per cent on 1 July 2021, making the annual rate 10 per cent.

When paying SG contributions for the July to September quarter for your employees, check your calculations are based on the new, higher rate to ensure you don’t run into problems with the ATO.

The higher SG rate may also increase your Workcover premiums and payroll tax liability.

Tax status of COVID-19 grants

If your business is taking advantage of the financial support provided by state and territory governments during pandemic lockdowns, it’s essential to check the strict tax rules covering these grants.

Most of these financial supports have been given a concessional tax status and are classed as non-assessable non-exempt (NANE) income, but only grants paid in the 2020-21 and 2021-22 financial years currently qualify.

For the grant to qualify for NANE income tax status, your business’s aggregated turnover for the current year must be under $50 million. You are also required to be carrying on a business in the current financial year and the grant program must be declared an eligible grant through a legislative instrument.

Continuation of full expensing and loss carry-back

In more good news, eligible business taxpayers who took advantage of the government’s full expensing and loss carry-back measures in the past financial year will be able to use them again this financial year.

The temporary full expensing regime was introduced to help businesses with an aggregate annual turnover of under $5 billion to cope with the financial challenges of the pandemic. Eligible businesses can deduct the full cost of any eligible depreciable assets purchased after 6 October 2020.

Similarly, eligible companies will also be able to carry-back tax losses from the current income year (2021-22) to offset previously taxed profits going as far back as 2018-19 when they lodge their business tax return.

FBT exemption for retraining and reskilling

The ATO is reminding employers that if they provide training or education to employees who are made redundant, or soon to be redundant, the cost is exempt from fringe benefits tax (FBT).

Eligible employers using the exemption are not required to include the retraining in their FBT returns, or in the reportable fringe benefits listed in the employee’s Single Touch Payroll reporting or payment summary.

You are, however, required to keep a detailed record of all the training and education provided if you intend claiming this exemption.

Changes to SuperStream

And finally, a reminder that from 1 October 2021, self-managed super funds (SMSFs) will only be able to roll member benefits into and out of their fund using SuperStream. Some electronic release authorities will also need to be processed using SuperStream.

SMSF trustees need to ensure their fund will be ready to meet the new requirements by checking the details recorded with the ATO are up-to-date for both the fund and its members.

Trustees should also check they have provided the ATO with details of the fund’s ABN and unique bank account for super payments.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Future proofing your career with professional development

Future proofing your career with professional development

“The only thing that is constant is change” – so said the ancient Greek philosopher Heraclitus and it continues to ring true today.

Industries are changing, continuing to evolve in response to challenges (such as the COVID-19 pandemic), technological disruptors and customer expectations. As a result, there is a greater need for the workforce to continue to adapt and develop. We need to be agile to stay on top of these changes, continue developing and learning, which will work towards future proofing our careers.

While some industries have formal professional development programs, there are many ways to foster your own development for those who don’t have formal pathways. Here is how you can take the lead to future proof your career.

Enrol in a course

Some workplaces offer both in-person and online courses, for example LinkedIn Learning, so take advantage of what’s on offer. You can also seek out professional courses relevant to your industry to upskill, keeping you abreast of the changing environment – not to mention that further education is a great additional to your CV as it showcases your engagement within the industry and your proactive approach to your career.

Attend webinars or seminars

While COVID restrictions have halted many in-person seminars, there are plenty of online webinars you can attend, some which are specifically on the topic of future proofing your career. While there are a number of free webinars you can attend, others may be offered by organisations to their members. Paid membership to these organisations be they industry groups, or groups centred around a common goal, can be a worthwhile investment assisting with not only educational sessions but networking opportunities.

Not only are webinars accessible from your office or living room, they tend to be more budget-friendly than seminars. However, seminars offer face-to-face learning and networking opportunities, so they are great to utilise where possible.

Pick up a book or listen to podcasts

It doesn’t get easier than picking up a book to arm yourself with new knowledge. There is a wealth of information out there, some which will be general advice discussing trends and management styles, others that will be tailored to your industry.

If you don’t have much time to read, opt for an audio book to listen to in the car or during exercise. Podcasts are also excellent ways of getting helpful information in a format that is convenient and can be tapped in and out of. As they are regularly created, you’re likely to get more up-to-date information this way.

Enlist the help of a mentor

It’s clear that a mentor can help you stay on top of your industry or explore new opportunities by providing support and guidance. A 2019 survey showed that while 76% of people thought mentors are important, only 37% actually have one.i

The study also found that 61% of mentor-mentee relationships developed naturally, with 25% happening after someone offered to mentor, and 14% when someone asked for a mentor. This means that there’s likely to already be someone in your life who could be your mentor. Think about who is dynamic in facing industry changes and don’t be shy to ask if they’re open to mentoring you.

Join peer groups

An extension of having a mentor, peer groups provide you with the support of others who are also dedicated to professional and personal growth. If you are someone who thrives on peer support, it will be invaluable to be part of a group of people rather than going it alone.

You can give each other feedback, check in on each other’s goals and share helpful experiences and resources such as great books or webinars. This is also a fantastic way to make real-life connections – you might even meet someone who helps you land a new job or open doors to a new industry. Online tools such as Meetup can help you find a group near you and keep an eye on industry meetups as well.

Life is full of change, but rather than feeling overwhelmed, embrace it. By furthering your education, you’ll future proof your career and feel more empowered tackling the changes you face.

i https://online.olivet.edu/research-statistics-on-professional-mentors

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.