Have you subscribed to the popularity of the podcast?

Have you subscribed to the popularity of the podcast?

Thanks to the internet we have so many options when it comes to the way we find information and how we choose to absorb it. The way we access content has also changed significantly over the past couple of decades.

Podcasts aren’t new, they predate the internet with the first known podcast, known as ‘audio blogging’, created back in the 1980s. This format allowed people to share their thoughts and opinions via an audible recording.

‘Podcast’ was coined by journalist Ben Hammersley in 2003 and exploded in 2005 when Apple™ added podcasting to iTunes and released a newer version of the iPod supporting audible content on-demand.i

Accessing content is easy

Podcasts are an easy and convenient way for us absorb information, especially when our lives and routines are busier than ever. Streaming is also easy - you can listen to them on different devices simply by downloading the app and episodes on your smartphone or via a web browser on your laptop, computer or tablet.

One of the most loved benefits, is that you can listen to a podcast virtually anywhere. If you are streaming a podcast on your smartphone you can listen to it on the go – whilst you’re exercising, cleaning the house, gardening, commuting to work, or driving in the car, and the good thing is, majority of the podcasts available you can download for free.

Some podcast creators will have advertising throughout their episodes which helps cover the cost of creating the podcast, allowing them to share their content for free rather than charging listeners to subscribe. Most popular podcasts release episodes weekly keeping their listeners engaged.

So many topics to choose from

With so many varied subjects and topics readily available, there is something for everyone - there are programs designed to improve your health and wellbeing, foster personal growth and professional development or you can simply download content specifically for entertainment purposes. For example, if you missed one of your favourite programs on a radio station, download it and listen on-demand, or rather than read a book you can download it and listen to an audible version.

Many businesses are also choosing podcasts as another way to communicate, educate and engage with their customers and clients. They can be short weekly episodes or longer and less frequent.

With the explosion in popularity, online communities have been formed for podcast creators and fans alike. This allows like-minded people to join a forum to discuss ways to create or improve their podcast or fans can chat to others about their favourite podcast.

Some of the most popular topics downloaded are - pop-culture, true crime, business and finance, comedy, health and wealth, news and sport, and technology-based podcasts – the choices are endless.

What are we listening to?

To give you an idea of what Australian’s are currently subscribing to, here are the most popular podcasts in the countryii:

West Cork – this non-fiction podcast focuses on the longest unresolved murder in Irish history.

Darling Shine – a weekly Q & A with Chloe Fisher & Ellidy Pullin for women about women.

Conversations (ABC) – with over 3000 episodes, this podcast covers topics from indigenous issues through to sporting triumphs.

Casefile – an award-winning true-crime podcast that investigates solved and unsolved cases globally.

Hamish & Andy – the comedic duo continues to make us laugh with their highly contagious podcast.

China – If You're Listening – this ABC podcast discusses the recent change in relationship between China and Australia and more.

She's on the Money – Victoria Devine hosts this highly relatable, easy to understand finance podcast for women.

Mamamia Out Loud – this covers a wide range of topics from beauty, pop culture through to parenting and the Kardashian’s.

Coronacast – stay up-to-date with the latest news and insights to help you live through the current pandemic.
As you can see, there is something for everyone!

Whether you’re a tradie, a retiree, small business owner, or a podcast lover in general there are podcasts out there that will motivate, educate, inspire, or simply entertain us all. Happy listening!

i https://brandastic.com/blog/why-are-podcasts-so-popular/

ii https://www.podcastinsights.com/top-australian-podcasts/

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.


Claiming small business CGT concessions: Mid 2021 update

Small Business CGT Concessions

Claiming small business CGT concessions: Mid 2021 update

The Government continues to tighten the eligibility rules for claiming tax concessions relating to small business capital gains tax (CGT) obligations. Of particular note are new rule changes impacting businesses letting out investment properties.

If you qualify, these concessions can have a big impact on how much of the profit from the sale of a business asset you get to keep, and how much goes to the tax man.

Ruling tightens eligibility

Selling an income-producing asset such as property, business equipment or shares at a profit, will create an assessable capital gain. This capital gain is then used to calculate your CGT obligation, which forms part of your annual income tax bill.

Business owners are permitted to use several tax concessions to reduce CGT, but the eligibility rules can be tricky to navigate.

A new tax determination (TD 2021/2) has further tightened them by clarifying that companies carrying on a business whose only activity is renting out an investment property are not eligible to claim the CGT concessions when the property is sold.

Small business and CGT

The four small business CGT concessions are in addition to the normal 50 per cent general discount on CGT when you have owned an asset for more than 12 months.

Generally, the concessions apply to any asset your business owns and eventually sells at a profit, provided your annual turnover is under $2 million.

The four small business CGT concessions are:

1. The 15-year exemption exempts the capital gain generated on a business asset you have owned for at least 15 years. The sale proceeds can then be contributed into your superannuation account (up to the relevant contributions limit). If you don’t qualify, you can still use the normal 50 per cent CGT general discount first, then use any of the remaining small business concessions for which you qualify.

2. The 50 per cent active asset reduction allows you to reduce any capital gain from the sale of an active business asset.

3. The retirement exemption applies if you sell an active business asset to retire, with a CGT exemption up to a lifetime limit of $500,000. If you are aged under 55, your profit must be paid into a complying superannuation fund. This exemption cannot be used for capital gains from passive investment assets.

4. The rollover concession can be used to defer your capital gain from the disposal of an active business asset to a later financial year. You must buy a replacement business asset or make a capital improvement to an existing asset to qualify.
If your business turnover is over $2 million but under $10 million, you may be able to use the small business restructure rollover concession. This permits the transfer of active assets – including CGT assets, trading stock and depreciating assets – from one business entity to another without incurring an income tax liability.

Qualifying for CGT concessions

You can apply for as many of the four special CGT concessions as you are entitled to. In some situations, this can reduce your capital gain to zero. Before applying, you need to meet the basic eligibility conditions for the CGT concessions.

Put simply, you must satisfy four basic conditions applying to all the concessions and then check if you meet the additional eligibility rules applying to each CGT concession.

The first condition requires you to be either a small business entity (SBE) with an aggregated turnover of less than $2 million; not carrying on a business but have a ‘passively-held asset’ used in the business as a connected entity; a partner in an SBE partnership; or satisfy the maximum net asset value ($6 million) test.

In addition, the business asset you are disposing of must satisfy the active asset test. If the asset is a share in a company or an interest in a trust, it must meet additional conditions.

The final step covers assets related to membership interests in a partnership. Each step must be considered in the set order before moving to the eligibility criteria for the individual concessions.

If you plan to take advantage of these concessions, ensure you check the qualifying requirements carefully – or speak to us – as the process is quite complex.

If you would like more information about the tax implications surrounding the disposal of your business assets, call us 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.


Using Family Trusts To Manage Wealth And Save Tax

Family Trusts - a practical investment vehicle

Using Family Trusts To Manage Wealth And Save Tax

Family trusts are a popular and effective investment structure to manage and protect your family’s fortune, but you don’t have to be worth a fortune to benefit from having one.

Despite their appeal, they are not for everyone. Indeed, it is suggested that if your assets are less than $300,000, and that is not counting your super, then it may well not be worth your while.

But for those with sufficient assets, a family trust can be an effective way to protect your family’s assets and limit your tax liability at the same time. So how do they work?

What is a family trust?

A family trust is a discretionary trust, where assets are placed in the care of a third party, the trustee, who manages it on behalf of the beneficiaries.

Discretionary trusts are so named because the distribution each year of the income and capital gains earned by the trust to the beneficiaries is at the total discretion of the trustee.

Beneficiaries are members of the trust and might include parents, children, other close relatives, and their spouses. A beneficiary may also be a company.

Key benefits

As mentioned, the key benefits of a family trust are asset protection and tax minimisation. A trust provides protection from creditors in bankruptcy, but the contents of a trust can be included as part of the matrimonial pool when it comes to divorce.

All income of the trust, including realised capital gains, must be distributed each year. It is then included in the beneficiary’s assessable income and taxed at their personal tax rate.

As a result, a trust can work particularly well from a tax viewpoint, if you are on a high marginal tax rate but your beneficiaries are on low marginal rates. If all individual beneficiaries are on a marginal tax rate greater than the company tax rate, then a family trust may include a corporate beneficiary to reduce tax.

More flexibility

Another advantage of a family trust is that it offers a flexible, tax effective structure to accumulate wealth for retirement alongside superannuation.

Their flexibility also makes them particularly attractive for small business owners who may run the business through a company structure but hold shares in that company in a family trust. The trust can then direct different types of income such as rental income from your business premises, franked dividends from company profits or capital gains to different individuals.

A family trust can also help with succession, allowing you to pass control of the family trust to the next generation by changing the trustee, without triggering a tax event.

There are some disadvantages too. There is the loss of ownership as the trust now owns the asset, not you. Also, if the trust suffers an investment loss, those losses cannot be distributed to offset your personal tax liability but must remain inside the trust. And there are costs involved in setting up and managing the trust.

Setting up a trust

To set up a family trust you will need to consult a lawyer to create a trust deed. You will also need to do the following:

• Appoint a trustee and determine your beneficiaries

• Decide which assets to include in the trust (a wide range of assets including stocks, bonds, managed funds, cash, real estate, antiques and fine art can all be included)

• Apply for an ABN and a Tax file number (TFN) and open a bank account in the name of the trust.
It can cost some $2500 to set up the trust and there will be annual fees as you have to file with the Australian Tax Office each year. Stamp duty applies in both NSW and Victoria on establishment but not in other states.

What about testamentary trusts?

Another type of trust popular with families is a testamentary trust which is created within your Will and does not come into effect until your death. Similar to family trusts, they have the advantage in estate planning of providing tax and asset protection benefits for the future.

Family trusts are popular for good reason, but you need to make sure it is appropriate for your family’s circumstances. If you would like to know more, give us a call.

This advice may not be suitable to you because contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

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.


Making a gift of real estate to family members. Warning about tax implications.

What Do You Need to Know Before Gifting Real Estate?

Making a gift of real estate to family members. Warning about tax implications.

What Do You Need to Know Before Gifting Real Estate?

Are you considering gifting real estate property to a family member? Transferring a house or other property to family members can have various benefits, but there are some nasty pitfalls you’ll want to avoid.

Giving property to your heirs while you’re still alive may sidestep the probate process. Property transfer can also be part of an asset protection strategy.

But giving property to someone else can have financial and tax implications. Here’s what you need to know before transferring real estate ownership.

Can You Give Real Estate as a Gift?

Under Australian law, you can give real estate to a relative as an outright gift. When giving ownership to a third party, there is no exchange of money. The gifting process involves filing a Transfer of Land with your title office. Filing a gift deed may also be necessary.

In some cases, property gifting takes place as a sale. For instance, if you want to give a family member a house but need to cover costs, they can buy the property at a discounted price.

Who Should Be on Title for Property Gifted to Family Members?

When buying a property, you receive a Certificate of Title. This document outlines your rights and responsibilities as the property owner. When you sell or gift the property, the government will record the change on the property title. This official record contains all property details, including:

  • Ownership
  • Mortgages
  • Easements
  • Covenants
  • Caveats

After the property title transfer, your family member will be the owner of the property.

Is Gifted Real Estate Taxable?

Australia doesn’t have a federal gift tax for:

  • Cash gifts
  • Charitable gift donations
  • Immovable property

However, real estate may be a taxable gift. Depending on the type, location, and value of the property, the new owner may be liable to pay:

  • Stamp duty
  • Land tax
  • Absentee owner surcharge
  • Vacant residential tax

The new owner’s tax obligations depend on the relevant state’s tax laws.

What are the Tax Implications of Gifting Property?

Before you transfer ownership of a property, understanding the tax consequences is critical.

Capital Gains Tax

From a tax perspective, capital gains can impact your financial situation. You need to pay capital gains tax (CGT) as part of your income tax assessment when disposing of a property. In other words, the proceeds from the sale form part of your taxable income.
In a sale, the capital gain is the property’s purchase price minus the selling price. If the property is a gift, the capital gain is the property’s fair market value minus the purchasing price.
When gifting a house, the Australian Taxation Office (ATO) assesses the capital gains tax bill using the market value on the transfer day. A professional valuer can determine the property value using objective and verified data.
In some cases, property owners can avoid capital gains tax. You can eliminate or reduce CGT if you are transferring:

  • Your primary residence
  • Investment property
  • Small business premises
  • Property you purchased before September 20, 1985

A rental property can be your place of residence. Under the temporary absence rule, the property remains your place of residence if:

  • You didn’t vacate the house for longer than six years and
  • You lived in the house for at least twelve months before moving out

Stamp Duty

Australian states levy stamp duty on a transfer, even if the property is a gift. Contrary to popular belief, stamp duty is not a one-off payment. Under tax law, buyers need to pay stamp duty on all property deed transfers.
Stamp duty falls under state tax. For example, in New South Wales and Queensland, you can transfer an interest in property to your spouse without paying stamp duty. You also don’t need to pay duty if, after the transfer:

  • You and your spouse own the entire property as joint tenants
  • The property is your permanent place of residence

Before beginning the transfer process, it's best to seek financial advice to learn more about the laws in your state.

Other Considerations When Transferring Property to Someone Else

Pension Payments

The consequences of gifting a house may extend beyond taxes. Before transferring a property to a child, elderly parents need to consider the impact of the transfer on their pension payments.
Centrelink assesses the income from a transfer using the property’s value and not the actual selling price.
For example, suppose you give a house with a value of $250,000 to your children. Even if you sell the property for $100, Centrelink will assess the proceeds from the sale as $250,000. In this case, you may lose your pension payments.

Home Loans

If the property you transfer has a mortgage over it, your relative has to take over the loan. Before commencing with the transfer, the lending institution holding the mortgage needs to approve the new owner.

Costs

In addition to taxes, various fees may apply to a property transfer. You may need to pay for an independent valuation that you will need when filing your taxes. You will also likely need to pay a solicitor to:

  • Provide you with legal advice
  • Draw up the necessary agreements and transfer documents
  • Transfer property titles

Before gifting a house to a relative, consider any additional costs carefully. You also need to ensure that the new owner can afford costs, such as the stamp duty.

Contact the Estate Planning Experts in Australia!

At House of Wealth Property Tax Experts, we can assist you in all matters relating to real estate taxes. We can provide you with professional advice and structure your taxable estate to lower your tax burden.
Are you planning on giving real estate to a relative as a gift? You may be eligible for an income tax deduction or federal estate tax exemption. Using our tax planning service, you can rest assured that you are not paying a cent in unnecessary tax.
Our other services include portfolio management, real estate tax accounting, and Centrelink advice. If you are looking to give real estate to a relative, contact us today to schedule a free consultation.

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.


Lease vs buy business assets in Australia. Which is best?

Lease vs buy business assets in Australia. Which is best?

If you're a business owner, you may be thinking about acquiring new equipment as conditions continue to improve in Australia. There are two main options for doing this: lease or buy. When weighing up which is best for you, you have a few factors to consider, including the need for future flexibility, your risk tolerance and the type of industry that you work in.

The question is, which way will provide your company with more value? In some cases, leasing may make more sense but in other scenarios purchasing may be a better option. Let's take a look at some of these different points so you can decide which route is best for you!

Whether it’s a new delivery van or a high-end digital printer, problem free equipment and tools are essential to keep your business running smoothly.

In the May 2021 Federal Budget, the government announced full write-off of eligible business assets will be available for another year, so the opportunity to tool up is even more attractive.

Issues to consider

Unfortunately, deciding the best way to acquire business assets is not always straightforward as you weigh up whether to buy outright or lease.

With leasing, you are able to use the plant or equipment under the terms of a contract and return it when your lease expires. Whereas buying means you purchase and own the equipment outright. If you have insufficient cash to buy an asset, you can also finance your purchase and repay the lender over time.

For both buying and leasing it’s not just the immediate costs and tax benefits you should bear in mind. You need to calculate the total costs, including ongoing maintenance, usage conditions, termination fees and equipment return.

You also need to review whether your business’s cash flow is steady and reliable, and allows you to commit to regular lease payments, or is subject to seasonal fluctuations.

Impact on your tax bill

A key factor to consider when it comes to the lease or buy decision is tax, as there can be valuable tax benefits if you buy an asset outright.

At the moment, the government’s COVID-19 temporary full expensing provisions provide a significant tax incentive to buy new equipment. These instant write-off incentives allow you to claim the cost of your asset against your business’s tax bill in the year of purchase.

For many eligible businesses, these tax incentives could tip the scales towards buying rather than leasing between now and 30 June 2023.

GST and leasing

The rules around claiming GST credits also favour purchasing.

When you lease equipment for your business it’s similar to renting, so you can only claim GST credits for your lease payments, not the total cost of the asset. For example, if you purchase equipment valued at $66,000 (including GST) you can claim back $6,000 in GST credits in your next BAS, but only a couple of hundred dollars for each monthly lease payment.

If you purchase a vehicle for business purposes valued at over the annual car limit ($60,733 in 2021-22), the maximum amount of GST credit you can claim is one-eleventh of the limit ($5,521 in 2021-22). If you pay luxury car tax on a vehicle you purchase for your business, you are unable to claim GST on the tax paid.

Leasing is still attractive

Although buying can be sensible for some businesses, if you have insufficient cash to cover the cost of new equipment leasing still offers benefits, especially while interest rates are low.

Leasing also allows you to keep working capital within the business and available for other uses. For example, if you want to acquire an asset worth $120,000 and finance it at 4 per cent interest, your business retains the $120,000 on its balance sheet and still has access to it if required.

What’s more, you may be able to invest the $120,000 and achieve a return higher than 4 per cent.

In addition, leasing is often more appropriate for assets that rapidly become obsolete and need regular updating, such as IT equipment.

Leasing new equipment can also make it easier to match regular monthly loan repayments to your business cash flow, rather than having to make a large one-off outlay for the asset.

Making your decision

Whichever way you are leaning – buy or lease – it’s important to review your business cash flow, your future growth plans and the current business and economic outlook.

Your personal approach to your business is also a factor to consider. Some owners prefer the certainty of ownership and not having to worry about a lot of fixed costs. For others, it’s more important to have access to the latest equipment and to focus on rapidly expanding their operation.

If you would like to discuss whether buying or leasing would be best for your business in the current economic environment, call us 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.


What's up with inflation?

What's up with inflation?

Fears of a resurgence in inflation has been the big topic of conversation among bond and sharemarket commentators lately, which may come as a surprise to many given that our rate of inflation is just 1.1 per cent. Yet despite market rumblings, the Reserve Bank of Australia (RBA) appears quite comfortable about the outlook.

Inflation is a symptom of rising consumer prices, measured in Australia by the Consumer Price Index (CPI). The RBA has an inflation target of 2-3 per cent a year, which it regards as a level to achieve its goals of price stability, full employment and prosperity for Australia.

Currently the RBA expects inflation to be 1.5 per cent this year in Australia, rising to 2 per cent by mid-2023.i Until the inflation rate returns to the 2-3 per cent mark, the RBA has said it will not lift the cash rate.

US inflation rising

The situation is a little different overseas where inflation has spiked higher. For instance, US inflation shot up to an annual rate of 5 per cent in May, the fastest pace since 2008, up from 4.2 per cent in April.ii As experienced investors would be aware, markets hate surprises. So with inflation rising faster than anticipated, share and bond markets are on edge.

But just like the RBA, the Federal Reserve views this spike as temporary, pointing to it being a natural reaction after the fall in prices last year during the worst days of the COVID crisis. In addition, companies underestimated demand for their goods during the pandemic and as a result there are now bottlenecks in supply that are putting upward pressure on prices.

The central banks believe that once economies get over the kickstart from all the government stimulation, inflation will fall back into line. After all, most world economies went backwards last year, so any growth should be viewed as a good thing and more than likely a temporary event.

But markets are not convinced.

Inflation and wages

Market pundits argue that if businesses must pay more for materials and running costs such as electricity then these increases will most likely be passed on to the consumer.

That’s all very well if your wages also rise, but if your income remains static then your standard of living will go backwards as you will have to spend more money to buy the same goods.

This then becomes a vicious circle. If the cost of living rises, then you will seek higher wages; this will the put further pressure on the costs for businesses. They will then have to increase their prices further to cover the higher wages bill. Some companies may react by reducing staff levels which will lead to higher unemployment.

Impact on investment

Inflation can also have a negative impact on investors because it reduces their real rate of return. That is, the gross return on an investment minus the rate of inflation.

Rising prices and interest rates also impact company profits. With companies facing higher costs, the outlook for corporate earnings growth comes under pressure.

But not all stocks are affected the same. Companies that produce food and other essentials are not as sensitive to inflation because we all need to eat. Mining companies also benefit from rising prices for the commodities they produce. Whereas high growth stocks like technology companies traditionally suffer from rising interest rates.

Markets current fear is that central banks will tighten monetary policy faster than expected. Interest rates will rise, money will tighten, and this will fuel higher inflation.

Bond market fallout

Expectations of higher inflation has already seen the bond market react, with the 10-year bond yield in both Australia and the US on the rise since October last year.

If yields rise, then the value of bonds actually fall. This is particularly concerning for fixed income investors. Not only are you faced with the prospect of capital losses because the price of your existing bond holdings generally falls when rates rise, but the purchasing power of your income will also be reduced as inflation takes its toll. Investments in inflation-linked bonds should fare better in an inflationary environment.

Inflation is part of the economic cycle. Keeping it under control is the key to a well-run economy and that is where central banks play their role.

Call us if you would like to discuss how an uptick in inflation may be impacting your overall investment strategy.

i https://www.rba.gov.au/media-releases/2021/mr-21-09.html

ii https://tradingeconomics.com/united-states/inflation-cpi

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.


15 minutes a day to achieve financial success through better habits

15 minutes a day to achieve financial success through better habits

If you're looking to grow your wealth and build financial security for your retirement, don't try to rely on willpower. Instead work on establishing better habits. In just 15 minutes a day, you can take the first steps towards greater wealth and improved living standards.

The new financial year offers an opportunity for taking an ‘out with the old, in the new’ approach, making a fresh start in relation to your financial affairs, it’s also a good opportunity to re-examine other aspects of your life.

This is a particularly good idea if the New Year’s resolutions you made in January have fallen by the wayside over the past few months. If that’s the case, you’re certainly not alone. In fact research by the Journal of Clinical Psychology reported that around 54% of people who resolved to change their ways, failed to make the transformation last beyond six months.i

Imagine if you could change your habits, so you did not have to rely on willpower alone ever again?

Willpower is not enough

We all tend to think that willpower is the key to achieving success, that sheer determination will get us to our goals. Certainly the will to succeed is a critical component, but research has shown us that people who score high on self-control are successful, not because of their superior willpower, but because they have better systems in place for forming new habits to meet their goals.ii

Start small

So how do you get started? Why not start with an incredibly small habit and build from there. Set your timer to 15 minutes and spend the time on a task you have been putting off. Why just 15 minutes? It’s too small a goal to fail at. It may take a few days to complete the task but you will get there eventually and have the satisfaction of ticking off that annoying task that’s been on your ‘do list’ for ages.

Do it... again and again and again

New habits take time to form. The most common timeframe is 21 days to make a new habit, and the key to forming a habit is repeating the action, over and over again until it becomes increasingly effortless. To that end, it’s important to allocate the necessary time to support your new habit.

Another good tip to help you commit to the new habit is to “anchor” the habit to your existing routine in some way. Make those sales calls, or do some other task that takes a bit of effort, straight after your morning coffee every day and you won’t be tempted to put it on the back burner.

Aim for incremental improvement

While it is certainly important to ‘dream big’, it is equally important to have a series of milestones in place when it comes to those lofty goals.

If you are aiming for a certain figure in terms of your businesses revenue, make sure to have some incremental steps in place in the form of monthly sales targets and a solid sales and marketing plan to help you get there.

Put some processes in place

It’s helpful to think about implementing processes to support the habits and behaviours you want to put into place. These processes can provide a solid foundation, enabling you to progress towards your end goal.

If you are wanting to change your saving and spending behaviour to work towards a longer term retirement savings goal, you may wish to consider setting up a salary sacrificing arrangement, in order to build your nest egg while you go about your day-to-day.

Breaking bad habits

It’s not just establishing good habits that you need to focus on, we often have a few bad habits preventing us from reaching our end goal. The key to breaking bad habits is replacing them with good ones.

If you are prone to procrastination and it’s interfering with your productivity, get into the habit of scheduling time for those things you tend to put off and setting alarms or prompts to give you that extra push you need to get you started.

Speaking of pushes, here is your prompt to have a think right now about what you need to put into place to foster good habits and set yourself up for success this financial year.

i https://pubmed.ncbi.nlm.nih.gov/11920693/

ii https://behavioralscientist.org/good-habits-bad-habits-a-conversation-with-wendy-wood/

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.


Going for gold to achieve your goals

Going for gold to achieve your goals

The Olympic Games always provides a platform to marvel at what humans are capable of, as the athletes competing strive to be the fastest, the strongest or just the best, to win gold. While this year may be a little different, the Games still give us the opportunity to be inspired by the remarkable performances of the athletes as they compete.

The passion and discipline in perfecting their craft has propelled these athletes to elite level, so it’s not surprising that many have also found success outside the sporting arena by transferring this focus to new endeavours.

So how can we apply the same determination and focus to achieving success in our everyday lives?

Set clear, realistic goals

SMART (Specific, Measurable, Attainable, Relevant and Time-Bound) goals are commonly used by athletes to get closer to their medal dreams.i By following this structure, your goals will become clearer and will more likely lead you to where you want to go. No athlete has reached gold by loftily thinking they ‘might train today’! They have a well-planned schedule and overall plan to develop their skills and abilities to elite level. You can do so in other facets of your life as well through goal setting – and then following through.

Build a great team to support your efforts

While we are focused on the athlete, there is an entire team of people behind their success. Usually from a young age, their parents ferried them around, coaches imparted their wisdom and fellow athletes helped improve their skills through competition. Then there are the trainers, physios, dietitians and life coaches who make up a champion’s team.

While you may not need to assemble an entourage, building a strong network can support your endeavours, keep you accountable and provide ongoing motivation. Perhaps this is an advisor or mentor, a business coach, a career specialist, or perhaps even a savvy friend or family member. Get them on board by sharing your vision and outlining how they can help.

Play to your strengths

While there are some athletes who have won Olympic medals in different sports, the majority specialise in one area.ii By playing to your strengths, you can dedicate your time and energy to a set goal, honing your skills and building on an already strong foundation without overextending yourself.

A much-loved story in Olympic history that illustrates playing to strengths is that of Australian speed skater Steven Bradbury. Realising he was not the fastest skater in the group, Steven’s tactic was to stay back of the pack to avoid a collision, which had happened in an earlier race trial. His smarts (and good luck!) paid off when the faster skaters collided, leaving Steven to cross the finish line and win gold.iii

Project confidence

“I am the greatest; I said that even before I knew I was,” boxer Muhammad Ali famously stated. While we don’t all have Ali-levels of confidence, we can take a note from his book in projecting an air of confidence.

This may require a bit of a ‘fake it ‘til you make it’ approach, but it won’t be long until this transforms into actual self-belief. Studies have found that adjustments we make to our bodies, such as standing up straight and smiling, can result in improved mood.iv

Embrace failure

No-one likes failing, especially those of us who are competitive. Yet athletes learn from failure, using it to improve and craft their skills, inching towards success.

Failure also builds resilience, by dusting yourself off and not giving up, you develop the tenacity to keep going when times are tough. Use failure as a learning experience that helps you grow, develop and take steps towards your ultimate goal.

As we watch the world’s best athletes perform in Tokyo, be inspired to dream big and set your own goals, making sure you then follow through to achieve your very own version of success.

i https://www.forbes.com/sites/davidcarlin/2020/01/10/why-olympic-athletes-are-smarter-than-you/?sh=77bd0d667384

ii https://en.wikipedia.org/wiki/List_of_athletes_with_Olympic_medals_in_different_sports

iii https://www.youtube.com/watch?v=fAADWfJO2qM

iv https://psychcentral.com/blog/fake-it-till-you-make-it-5-cheats-from-neuroscience#1

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.


Important new superannuation rules from July 1st 2021: What you need to know

Important new superannuation rules from July 1st 2021

As the new financial year gets underway, there are some big changes to superannuation that could add up to a welcome lift in your retirement savings. Here's what you need to know.

Some, like the rise in the Superannuation Guarantee (SG), will happen automatically so you won’t need to lift a finger. Others, like higher contribution caps, may require some planning to get the full benefit.

Here’s a summary of the changes starting from 1 July 2021.

Increase in the Super Guarantee

If you are an employee, the amount your employer contributes to your super fund has just increased to 10 per cent of your pre-tax ordinary time earnings, up from 9.5 per cent. For higher income earners, employers are not required to pay the SG on amounts you earn above $58,920 per quarter (up from $57,090 in 2020-21).

Say you earn $100,000 a year before tax. In the 2021-22 financial year your employer is required to contribute $10,000 into your super account, up from $9,500 last financial year. For younger members especially, that could add up to a substantial increase in your retirement savings once time and compound earnings weave their magic.

The SG rate is scheduled to rise again to 10.5 per cent on 1 July 2022 and gradually increase until it reaches 12% on 1 July 2025.

Higher contributions caps

The annual limits on the amount you can contribute to super have also been lifted, for the first time in four years.

The concessional (before tax) contributions cap has increased from $25,000 a year to $27,500. These contributions include SG payments from your employer as well as any salary sacrifice arrangements you have in place and personal contributions you claim a tax deduction for.

At the same time, the cap on non-concessional (after tax) contributions has gone up from $100,000 to $110,000. This means the amount you can contribute under a bring-forward arrangement has also increased, provided you are eligible.

Under the bring-forward rule, you can put up to three years’ non-concessional contributions into your super in a single financial year. So this year, if eligible, you could potentially contribute up to $330,000 this way (3 x $110,000), up from $300,000 previously. This is a useful strategy if you receive a windfall and want to use some of it to boost your retirement savings.

More generous Total Super Balance and Transfer Balance Cap

Super remains the most tax-efficient savings vehicle in the land, but there are limits to how much you can squirrel away in super for your retirement. These limits, however, have just become a little more generous.

The Total Super Balance (TSB) threshold which determines whether you can make non-concessional (after-tax) contributions in a financial year is assessed at 30 June of the previous financial year. The TSB at which no non-concessional contributions can be made this financial year will increase to $1.7 million from $1.6 million.

Just to confuse matters, the same limit applies to the amount you can transfer from your accumulation account into a retirement phase super pension. This is known as the Transfer Balance Cap (TBC), and it has also just increased to $1.7 million from $1.6 million.

If you retired and started a super pension before July 1 this year, your TBC may be less than $1.7 million and you may not be able to take full advantage of the increased TBC. The rules are complex, so get in touch if you would like to discuss your situation.

Reduction in minimum pension drawdowns extended

In response to record low interest rates and volatile investment markets, the government has extended the temporary 50 per cent reduction in minimum pension drawdowns until 30 June 2022.

Retirees with certain super pensions and annuities are required to withdraw a minimum percentage of their account balance each year. Due to the impact of the pandemic on retiree finances, the minimum withdrawal amounts were also halved for the 2019-20 and 2020-21 financial years.

Time to prepare

There’s a lot for super fund members to digest. SMSF trustees in particular will need to ensure they document changes that affect any of the members in their fund. But these latest changes also present retirement planning opportunities.

Whatever your situation, if you would like to discuss how to make the most of the new rules, please get in touch.

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.


Women and Younger Australians Now Leading the Way With SMSFs

Women and Younger Australians Now Leading the Way With SMSFs

Self-managed super funds (SMSFs) have emerged from a difficult year stronger than ever. Not only have balances been repaired after the initial market shock in the early days of COVID-19, but more young people and women are taking control of their retirement savings. We take a look at what's attracting them.

At the end of March there were 597,396 SMSFs with 1,120,936 members, according to the ATOs latest SMSF Statistical Report for March 2021.

Numbers have been increasing steadily this financial year after a short decline in the June quarter last year. In the nine months to March this year, there were an additional 16,817 SMSFs in operation with 32,054 new members. And they are not necessarily who you might expect.

The changing face of SMSFs

It’s often assumed that SMSFs are for older, wealthy retirees, mostly men, who enjoy tinkering with their investments. While that may have been true once, times are changing.

The ATO report shows Australians under age 45 now make up around 47 per cent of all new SMSF trustees. The largest group by age to set up a fund in the March quarter was the 35-44 age bracket, accounting for 34 per cent of new funds. Coming a distant second, the 45-49 age group established 18 per cent of funds.

What’s more, women are diving in at an earlier age than men. While men still account for more SMSF establishments overall than women, at 56 per cent and 44 per cent respectively in the March quarter, 65 per cent of women were under 50 when they set up their fund compared with 62 per cent of men.

So what’s attracting younger people to SMSFs?

The advantages of starting early

The sooner you take control of your super, the better your retirement outcome is likely to be. SMSFs not only give you more control over your investments, but they also provide more flexibility to:

• Invest in assets such as real property and collectibles which you can’t access in other types of super funds,

• Manage your tax to suit your personal circumstances, and

• Develop an estate plan to ensure the best tax outcomes for your beneficiaries.
That said, it’s generally agreed that an SMSF becomes more cost effective than other types of funds once you have accumulated $200,000 or more in super. That means someone on a higher-than-average salary with Super Guarantee (SG) payments from their employer of $10,000 to $15,000 a year will likely be in their late 30s before an SMSF becomes cost effective.

This was backed up by the ATO report which revealed the taxable income range with the highest number of new SMSFs was the $100,000 to $150,000 bracket. This group accounted for 19 per cent of new funds, followed by the $80,000 to $100,000 bracket which accounted for 14 per cent.

Those who have the means may be able to build up their balance sooner via salary sacrifice or personal super contributions.

Shares and property bounce back

The rise in total funds and members was also reflected in a jump in total SMSF assets to $787.1 billion in the March quarter, up more than 13 per cent over the year.

For those curious about where other SMSF trustees are investing, the top asset types are listed shares (26 per cent of total assets worth $207.4 billion) and cash and term deposits (19 per cent or $149.4 billion). Shares have bounced back strongly since March last year, mostly at the expense of cash and term deposits, as SMSFs reinvest some of their cash holdings.

The booming property market was also reflected in the biggest increase in limited recourse borrowing arrangements (LRBAs) since 2019. LRBAs, popular with SMSF residential property investors, increased by $3.5 billion over the March quarter alone to $59.4 billion, or 7.5 per cent of total SMSF assets.

Happy SMSF customers

There’s nothing like booming markets to put a smile on investors’ faces, but a recent survey shows SMSF trustees are happier than most.

Roy Morgan’s April Superannuation Satisfaction Report showed overall super fund satisfaction increased by 7 percentage points to almost 72 per cent over the year. But SMSFs had the highest customer satisfaction at 81 per cent.i

Clearly, SMSFs are providing real value for more Australians at an increasingly earlier age. But getting expert advice is crucial, especially in the early stages, to ensure your fund is set up correctly to provide the outcomes you want.

If you would like to discuss your current SMSF strategy or whether an SMSF is appropriate for you, give us a call.

All statistics taken from the ATO SMSF Statistical Report for March 2021, https://data.gov.au/data/dataset/self-managed-superannuation-funds/resource/c2d3808d-fc2c-41bd-8122-b8e83fe22188

i http://www.roymorgan.com/findings/8703-superannuation-satisfaction-april-2021-202105250447

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.