How to use salary sacrificing to cut tax and boost your super

How to use salary sacrificing to cut tax and boost your super

Salary sacrificing has become a popular technique for reducing personal tax and increasing superannuation. As we draw near to the start of a new financial year, it's a good time consider it.

Simply talking to your employer about setting up an arrangement to “sacrifice” some of your pre-tax salary could potentially lower your tax bill – and boost your retirement nest-egg.

Reducing your tax bill

A salary sacrifice arrangement simply involves coming to an agreement with your employer to pay for everyday items or services you would normally pay for out of your after-tax salary directly from your before-tax salary. This might include things like childcare, health insurance or super. The benefit is that this reduces the level of income the ATO uses to calculate your tax bill.

If you set up a salary sacrifice arrangement with your employer, it’s important to understand that while your taxable income is lower, the benefits are still listed on your annual payment summary. For some people, this reduces the tax offsets, child support payments or other government benefits they receive, limiting the value of salary sacrifice.

Salary sacrificing options

The items or services you can pay for using salary sacrifice depends on your employer.

Some employers let their employees salary sacrifice for expenses such as cars, health insurance, school fees and home phones. Others are not prepared to do this, as they may end up paying Fringe Benefits Tax (FBT) on the benefits you receive.

Employers are usually more willing to allow you to package FBT-exempt work-related items such as portable electronic devices, computer software, protective clothing or tools of trade, as these generally don't result in FBT bills.

Boost your super account

One of the most popular forms of salary sacrifice is redirecting some of your pre-tax salary into your super fund. Most companies are willing to provide this option as it not only helps you build retirement savings, but it can also earn them a tax deduction.

When you salary sacrifice into your super, your contributions are taxed at 15 per cent when your super fund receives the money. For most people this is a lower tax rate than if they received the money as normal income.

A further bonus with salary sacrificing into super is you only pay 15 per cent on any investment earnings you receive inside super, instead of your marginal tax rate for investments held outside super.

Find out what’s on offer

If you’re interested in a salary sacrifice arrangement, it’s a good idea to discuss the subject with your employer or HR team to find out the company’s policy.

It’s also a good idea to talk to us, as the value of these arrangements needs to be weighed up carefully against your reduced take-home pay and the potential loss of government benefits.

These arrangements should be put in writing before you earn the income you are sacrificing, so you need to talk to your employer prior to the start of the new financial year if your salary will change from 1 July.

Tips for employers

Allowing your employees to salary sacrifice can help them reduce their tax bill and it boosts engagement with your business. Another overlooked benefit is if your employee salary sacrifices into their super, you can claim a tax deduction for their contributions, as they are considered employer contributions.

To do this, you need to ensure you create an 'effective' salary sacrifice arrangement meeting the ATO’s guidelines. Otherwise the benefits your employee receives are considered part of their taxable income.

Effective arrangements require a clear agreement stating the terms and conditions and they must be documented in writing to avoid any uncertainty or future disputes.

Sacrifice arrangements can only apply to wage and salary payments for work yet to be performed, not past earnings. Salary and wages, leave entitlements, bonuses or commissions accrued prior to the arrangement cannot be used.

A simple way to avoid problems is to document your employees’ salary sacrifice arrangements before the start of a new financial year – or whenever there is a change to their salary – so it covers future earnings.

You need to keep detailed records of these arrangements for five years and list all sacrifice amounts on the employee’s annual payment summary.

If you would like help working out if a salary sacrifice arrangement makes sense for you, call our office 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.


Tax offset vs tax deduction: What are the differences?

Tax offset vs tax deduction: What are the differences?

This year’s Federal Budget was full of talk about one-off support for households in the form of tax offsets, but most people are a bit hazy on the difference between a tax offset and a tax deduction.

Both can help reduce the amount of tax you pay each year, but a tax offset generally results in a bigger dollar tax saving than a tax deduction of the same amount. The key difference is the point at which they are applied to your income when calculating the final amount of tax payable.

What is a tax deduction?

A tax deduction is one of the first things applied to your income when calculating your tax bill. It reduces your taxable income and hence the amount of tax you pay, potentially moving you into a lower tax bracket. Deductions are intended to ensure you only pay tax on income exceeding the costs associated with earning that income.

For a small business, deductions ensure it doesn’t pay tax if its running costs exceed its revenue. Common deductions include operating expenses such as stationery, and capital expenses such as equipment.

There are also temporary deductions, such as the additional 20 per cent deduction for costs related to digital adoption (like portable payment services and cyber security) and employee training expenditure announced in the 2022 Federal Budget.

Employees can claim deductions in a similar way. Personal deductions include work-related expenses like the cost of a computer if you have a home office, or supplies purchased for classroom use by a teacher. Other deductions include the cost of managing your tax affairs, donations and income protection insurance.

Offsets are similar but different

Tax offsets on the other hand, are deducted at the end of the calculation process and directly reduce the tax you pay.

Offsets are used by the government to encourage specific outcomes, such as uptake of health insurance through the Private Health Offset, or adding money to your spouse’s super through a contribution offset. They are also used to provide tax relief or financial support to certain groups in the community.

Calculating tax using offsets and deductions

The easiest way to understand the difference between an offset and a deduction is to walk through an example.

In the table below, we have two taxpayers. One person has an income of $30,000 a year paying tax of 19c on every dollar above the tax-free threshold of $18,200. This results in tax of $2,242 before any deductions or offsets. The other earns $130,000 a year, paying the top marginal tax rate of 37c in every dollar above $120,000, resulting in tax of $33,167.

As you can see in the table below, the impact of a $1,000 tax deduction provides a bigger tax saving of $370 for the higher income earner, compared with $190 for the lower income earner.

However, not only does a $1,000 tax offset provide both taxpayers with a bigger tax saving of $1,000 each, but it’s worth relatively more to the lower income earner at 3.3 per cent of $30,000 compared with less than one per cent of $130,000.

Impact of a $1,000 tax deduction and tax offset on tax owed

How tax offsets affect the tax you pay

Unlike tax deductions, the ATO automatically applies most offsets to your tax payable when you lodge your tax return.

In general, tax offsets can reduce your tax payable to zero, but they can’t be used to generate a tax refund if you don’t pay tax. If your taxable income is $18,200 or less, an offset won’t reduce the tax you pay as your tax payable is already zero. If you have paid any tax on this amount, you receive the tax back as a refund, but no offset is applied.

Also, most tax offsets don’t reduce the Medicare Levy and Medicare Levy Surcharge (if any) you are required to pay.

The amount of tax offset you receive also depends on the particular offset and your taxable income. For example, with the Low and Middle Income Tax Offset (LMITO) for 2021-22, if your taxable income is $37,0000 or less, you will receive a $675 offset on your tax payable when you lodge your tax return. If your income is $48,001 to $90,000, however, the offset is worth $1,500.

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.


Succession Planning for Farmers

Succession Planning for Farmers

Succession planning can be difficult at the best of times without dealing with the added pressures farmers have recently faced with droughts, fires and floods.

And that’s why it is even more important to plan early and get it right when you are on the land. You are not just dealing with a business, but invariably also with a home.

Some 99 per cent of the 134,000 farms in Australia are family owned with the average age of farmers being 52.i It is believed that farmers are five times more likely than other Australians to be working beyond the age of 65. There are a variety of reasons for this, from a reluctance to relinquish control, to a lack of family willing to take over the reins and financial necessity.

Given the physicality of farming, it would seem to make a lot more sense to start thinking about succession planning well before that stage.

Often such planning is put into the too hard basket because there are so many variables to consider. But this will not solve the problem, so it’s better to get good advice and get it early.

Start talking

The first thing you need to do is open the doors of communication. Arrange a time to talk with your family to discuss:

  • Who wants to inherit and work on the farm and who wants to leave the property
  • Whether they agree each child should be treated equally or accept that the one inheriting the farm should receive preferential treatment
  • How everybody feels about splitting the property between siblings, or
  • The way forward if none of your children wants to stay on the land.

These are all considerations that need to be addressed and revisited over time to ensure they meet with everybody’s wishes.

If just one of the children wants to remain on the property, will they need to find the finance to pay out the other siblings? If so, then the next decision is how that finance will be found.

Perhaps the answer is to transfer the property before you die. If that is the case, then where will you live in retirement and what will be your source of income once you retire? Again, you need to examine the options. Perhaps you may receive an ongoing income from the property, or maybe find income from other investments. Importantly, you also need to revisit these options over time to ensure they still work for you.

One danger of not having a succession plan and working well beyond your best years, is that you can run the farm into the ground and make it a far less attractive property to sell.

Structure your plans

There are so many questions to ask and what is right for one family, may not be right for another.

But once you determine how you want to move forward, you then need to examine the best structures to put in place to make the process as efficient as possible. Some of the key advice you may need is on tax, trusts and land ownership and the intersection of all three.

Tax is particularly important as you want to avoid or at least minimise capital gains tax (CGT).

If you are 55 years of age or more and retiring and have owned your property for at least 15 years, then you may qualify for the small business 15-year CGT exemption on your entire capital gains. Other concessions may apply if you don’t qualify the 15-year exemption.

For couples where the family farm is held in their own name, perhaps you might want to consider a joint tenancy agreement as it leads to automatic transfer of ownership if one dies.

Or you might consider putting the farm into a family trust or perhaps holding it as an asset in your self-managed super fund. There are so many what-ifs to consider when it comes to rural properties. If you want to discuss how to move forward on your estate and succession planning and what will work best for you, then give us a call.

i https://www2.deloitte.com/au/en/pages/consumer-business/articles/succession-family-farm.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.


How do you take the emotion out of financial decision making?

How do you take the emotion out of financial decision making?

In most walks of life our emotions wield considerable influence over the decisions we make. When it comes to financial decisions, they’re notorious for leading us to act irrationally and derailing our finances. So it’s important to understand how emotions tempt us to make poor financial decisions. Once you can recognise their pull, it becomes that much easier to act rationally. In turn you’ll end up making much better financial decisions.

So where do our feelings about our finances come from? We are the products of our upbringing, learning from and either emulating or rejecting our parents' attitudes to money - but we are also products of our environment. Money equates success in our society and your financial position strongly influences how people treat you, as well as how you perceive yourself, so it’s no wonder that financial matters tend to stir up strong emotions.

While we experience plenty of powerful positive emotions around money - think about how exuberant you feel when you receive an unexpected windfall or win a lucrative contract - it’s the negative emotions we feel about financial matters that really have the potential to impact our decision making.

Let’s look at the most prevalent and powerful feelings associated with money and how to ensure that they don’t adversely impact your financial position.

Fight the fear

One of the most common negative emotions around money is fear. While it’s prudent to be conscious of risk in your approach to financial matters, fear can take the form of avoidance and cause you to miss opportunities. The most successful businesspeople and investors know how to take calculated risks and as we know, risk and reward tend to go hand in hand. The key is to be mindful of your fears but not let them unduly influence your decision making.

The flip side of fear is hope and that’s a powerful motivator that can be channelled into building a successful business or saving for retirement.

Greed is not always good

Greed is another common emotion that can sabotage prudent financial planning. Greed fuels get-rich-quick thinking, making you vulnerable to those that exploit the unwary. Greed can also make it harder to maintain a disciplined, long-term investment plan and makes you prone to risk taking or knee-jerk reactions when the market is volatile.

Greed is not always bad either. It can drive you to chase ambitious goals, but the trick is in knowing when you’ve got enough or reached that goal. Greed makes us raise those goal posts. That’s where having defined plans and measurable benchmarks comes in.

Guilty as charged

Even more dangerous than fear and greed is guilt. While fear and greed are largely fuelled by external factors like the performance of the stock market or your SMSF or super fund, guilt is your internal conscience speaking to you and it can be insidious. People feel financial guilt about nearly everything. Spending too much... or too little, not earning enough or saving enough, or even having more than others - if it has a dollar value, we feel guilty about it. Feeling guilty can be a key factor holding you back from achieving (and enjoying!) business or personal success.

The best way to combat money guilt is to know your triggers, foster a good understanding of where you stand financially and ensure that your fiscal management reflects your values.

Overcoming envy

It’s hard not to compare your financial situation with others. There is an innate tendency to maintain a ‘keeping up with the Joneses’ kind of awareness of the holidays your friends are having or the cars they are buying.

In business you must keep a regular eye on your competitors. It can be disheartening to see that someone is doing much better than you. However, there is always going to be someone more successful. By all means aspire to more, but it’s important not to let envy drive your decisions.

Emotions aren’t intrinsically bad; it’s how we channel and manage them that either has a positive or negative affect on our finances. Developing an awareness of what emotions drive you and what holds you back will help you achieve your version of a prosperous and successful life.

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.


Thriving on social connection

Thriving on social connection

The phrase 'no man is an island' is from a poem written by John Donne and expresses the idea that humans need to be part of a community to thrive. That’s certainly true, by nature we are social creatures and connection is a core human need. So why do some many of us feel alone and what can we do to feel more connected?

The last few years have highlighted the importance of social connection on our mental health and physical well-being, as our movements were restricted to varying degrees. The need to connect socially is as basic as our need for food, water, and shelter, with studies showing that it reduces the incidence of heart disease and stroke.i

You’re not alone in feeling alone

While we all need social connection, so many of us are feeling that it’s lacking in our lives. Feeling isolated is pretty common and happens to us all at one time or another, although loneliness appears to be particularly prevalent at the moment. A 2018 survey revealed that one in four of us are lonely and this increased to around half of us during the pandemic.ii,iii

So, what measures can we take to feel more connected?

Think about what you need

Everyone has different social needs. If you’re used to spending a lot of time with colleagues, friends and loved ones, you might feel isolated or lonely with just a few interactions per week, while for someone who likes their own company that might be simply fine.

On that note, it’s important to be able to enjoy your own company and sometimes periods of being alone can provide inner peace and time for introspection, making those moments of connection all the more precious.

Your social needs also change over time and under different circumstances. A life change like becoming a parent or retiring from the workforce can prompt a shift in your need to connect with others.

Quality can be more important than quantity

It’s important to consider the significance of meaningful connections rather than just social interaction, for the sake of it. Often the intimacy of a deep and meaningful discussion with a close mate can be much more enjoyable than a dinner with people you barely know.

Foster good social skills

Social connection is a two-way street so there are things you can do to improve the quality of your social interactions. You can forge deeper connections by talking about things that matter to you and to the other person, developing good listening skills and demonstrating real interest in what they have to say.

Seek out new people and experiences

It can be hard to foster new social connections. One effective way is to join a group to be with people who have similar interests. This growing need has led to apps being built for this purpose, with one of the most popular being meetup.iv Meetup has groups for everything, whether you are interested in bike riding, cinema, salsa dancing or dining. If you can’t find a group that’s of interest you can always create your own.

When looking to meet new people, try to open yourself up to try new experiences. Not everything you try your hand at will open doors to friendship, but you can always learn from the experience and hopefully have some fun along the way.

Dust off old friendships

Friendships need nurturing and many of us have been guilty of neglecting old buddies – particularly of late. Have a think about the people in your life and the relationships that may have fallen by the wayside and reach out, even if it’s just to grab a coffee.

It can take a little time and effort, but it’s always possible to reach out and strengthen existing connections or forge new ones. The benefits of having those social connections in our lives are profound. Keep in mind that you’re not the only one out there in search of connection and your efforts are not just helping yourself but also benefitting those you are reaching out to.

i https://www.heartfoundation.org.au/media-releases/Loneliness-link-to-heart-disease-in-older-Australi

ii https://psychweek.org.au/wp/wp-content/uploads/2018/11/Psychology-Week-2018-Australian-Loneliness-Report.pdf

iii https://www.blackdoginstitute.org.au/news/what-is-loneliness-and-how-can-we-overcome-it-during-these-times/

iv https://www.meetup.com/en-AU/

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 The 2022-23 Federal Budget affects our tax bills

How The 2022-23 Federal Budget affects our tax bills

Tax offsets and temporary cuts were at the heart of this year’s Federal Budget as the government attempts to woo voters in the run-up to the election.

Treasurer Josh Frydenberg emphasised the crucial role of his tax measures in helping Australians cope with the growing cost of living pressures and in supporting the small businesses he calls the “engine room of our economy”.

According to the Treasurer, the measures in this year’s Budget represent the “next stage in leading Australia’s strong economy into the future”.

One-off tax offset and payments

A signature announcement in the Federal Budget was providing one-off cost of living tax offsets and payments to lower-income earners.

From 1 July 2022, taxpayers will receive a one-off $420 cost of living offset. The offset will take effect when they submit their tax returns at the end of the 2021-22 financial year.

In addition, the Budget included a one-off income tax-exempt payment of $250 to help eligible pensioners, welfare recipients and concession card holders with their cost of living pressures. They will automatically receive the payment in April 2022.

A key tax omission in this year’s Budget was another extension to the existing Low and Middle Income Tax Offset (LMITO), which means eligible taxpayers will no longer receive the offset (currently worth up to $1,080) beyond the current financial year.

Cut to fuel excise

Another major measure in the Budget was a temporary halving of the current excise rates for petrol, diesel and other fuel and petroleum-based products for six months until 28 September 2022.

This temporary cut in petrol and diesel rates (from 44.2 cents to 22.1 cents) per litre is designed to reduce cost of living pressures for households and small businesses.

According to the Treasurer, households will be around $300 better off over the 6 month period. Businesses will receive fuel tax credits where fuel is used in light vehicles travelling off public roads and by heavy vehicles or plant and machinery. Light vehicles operating on public roads are ineligible for FTCs, but will benefit from cheaper bowser prices.

Small business support

The Budget also included a reduction in the GDP uplift rate to be used for 2022-23, which will provide $1.85 billion in cash flow support for small business.

Both the offsetting of losses against previously taxed profits and the instant write-off of assets for businesses with a turnover of less than $5 billion were extended again until 30 June 2023.

Businesses with annual turnover of less than $50 million will also gain access to a new bonus 20 per cent tax deduction for the costs (up to $100,000) of expenses and depreciating assets relating to improvement of the organisation’s uptake of digital technologies. These technologies include such things as cloud computing, cyber security enhancements and portable payment devices.

Training and apprenticeship subsidies

A new Skills and Training Boost will provide small businesses with an annual turnover of less than $50 million with access to a bonus 20 per cent tax deduction for the cost of external training courses delivered to their employees. The deduction will apply to training expenditure from Budget night until 30 June 2024.

Employers will also be able to access wage subsidies if they take on apprentices in occupations listed on the Australian Apprenticeship Priority List. For an apprentice earning $34,000 a year, an employer will be eligible to receive up to $8,750 in wage subsidies over two years.

The Budget also provided $5.6 million over four years in funding for a new dedicated small business unit in the Fair Work Commission and $2.1 million for Financial Counselling Australia’s Small Business Debt Helpline.

COVID-19 tests tax deductible

To clarify concerns expressed by taxpayers, the Budget included a provision to make the cost of taking a COVID-19 test to attend a place of work tax deductible for individuals from 1 July 2021. The government also announced that Fringe Benefits Tax (FBT) will not be incurred by businesses where they provide COVID-19 tests to their employees for this purpose.

If you would like to discuss any measures in the Federal Budget, please don’t hesitate to give us a call.

Information in this article has been sourced from the Budget Speech 2022-23 and Federal Budget support documents.

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.


Common and costly scams to know about in 2022

Common and costly scams you should know about in 2022

There is a saying ‘a fool and his money are often parted’ but with scammers becoming ever more devious and sophisticated in their methods, it pays for everyone to be aware of the latest tricks being employed. We take a look at some of the most common and costly scamming practices in 2022, and what you can do to steer clear of them.

According to Australian Competition and Consumer Commission (ACCC) data, last year was the worst year on record for the amount lost to scammers, with a record $323 million lost during 2021. This represents a concerning increase of 84% on the previous year.i

And with Australians spending more time online than ever before, predictably the area of most growth is cybercrime.

Incidences increasing

Cybercrime increased over 13% during the 2020-21 financial year, with data revealing one attack occurs every 8 minutes. ii

Police records indicate that as the number of house break-ins and burglaries decreased through COVID, the amount of digital scams increased as criminal activity found an alternative outlet and moved online.iii Scammers also exploited the pandemic environment by targeting an increasing reliance on online activity and digital information and services.

Most common scams

Phishing, where scammers try to get you to reveal information that enables them to access your money (or in some cases steal your identity), is one of the most common scams. Last year Scamwatch, a website run by the Australian Competition and Consumer Commission (ACCC), received more than 44,000 reports of phishing, costing Australians $1.6 million.iv While some phishing scams are obvious, like free give-aways, you can also be directed to sites that masquerade as financial providers or government departments and they can look pretty official.

The trick to not be taken in, is to be very wary of clicking on a pop up or unknown site and do an independent google search or verify the site is secure. Before submitting any information, make sure the site’s URL begins with “https” and there should be a closed lock icon near the address bar. It’s also a good idea to keep your browser and antivirus software up to date.

Scams that cost us the most

Investment scams are becoming ever more sophisticated and the amounts associated with these scams are significant. Investment scams accounted for $177 million in 2021.v

In one of the most disturbing trends of the year, the Australian Securities and Investment Commission (ASIC) said some investment scammers were presenting impressive credentials, including their funds ‘association’ with highly regarded domestic and international financial services institutions.

Those doing their diligence on the funds were met with professional-looking prospectuses offering very high returns and claiming investor funds would be invested in triple A rated or government bonds, offering protection under the government’s financial claims scheme. Scammers even cleverly honed in on those most likely to be tempted by these investment products by gathering the personal and contact details potential ‘investors’ entered into fake investment comparison websites.

While the rise in, and increasingly compelling nature of investment scams is certainly of concern, we are here to help if you have any opportunities you’d like to explore that need thorough investigation.

Staying scam-proof

    • Be alert, not alarmed – always consider the fact that the ‘opportunity’ you are being presented with or the fine or fee you are being asked to pay may be a scam. Don’t be swayed by the fact that it looks like it is coming from a well-known company or source.
    • Keep your personal details and passwords secure. Be careful how much information you share on social media and be wary of providing personal information.
    • Beware of unusual payment requests. Scammers will often ask for unusual methods of payment which are untraceable like iTunes cards, store gift card or debit cards, or even cryptocurrency like Bitcoin

.

The best way to avoid scams, is to be aware of the tactics being employed and maintain a sceptical frame of mind. If something seems too good to be true, or if your alarm bells are ringing take your time and do your due diligence before taking any action.

i, v https://www.savings.com.au/news/scamwatch-2021

ii https://www.cyber.gov.au/acsc/view-all-content/reports-and-statistics/acsc-annual-cyber-threat-report-2020-21

iii https://www.abc.net.au/news/2021-09-22/financial-crimes-increasing-as-burglars-switch-to-fraud/100473828
iv https://www.scamwatch.gov.au/get-help/protect-yourself-from-scams

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.


Sharing superannuation: a win-win for couples

Sharing superannuation: a win-win for couples

Australia’s superannuation system is based on individual accounts, with men and women treated equally. But that’s where equality ends. It’s a simple fact that women generally retire with much less super than men. We take a look at how this imbalance can be rectified, by sharing your super.

The latest figures show women aged 60-64 have an average super balance of $289,179, almost 25 per cent less than men the same age (average balance $359,870).i

The reasons for this are well-known. Women earn less than men on average and are more likely to take time out of the workforce to raise children or care for sick or elderly family members. When they return to the workforce, it’s often part-time at least until the children are older.

So, it makes sense for couples to join forces to bridge the super gap as they build their retirement savings. Fortunately, Australia’s super system provides incentives to do just that, including tax and estate planning benefits.

Restoring the balance

There are several ways you can top up your partner’s super account to build a bigger retirement nest egg you can share and enjoy together. Where superannuation law is concerned, partner or spouse includes de facto and same sex couples.

One of the simplest ways to spread the super love is to make a non-concessional (after tax) contribution into your partner’s super account. Other strategies include contribution splitting and a recontribution strategy.

Spouse contribution

If your partner earns less than $40,000 you may be able contribute up to $3,000 directly into their super each year and potentially receive a tax offset of up to $540.

The receiving partner must be under age 75, have a total super balance of less than $1.7 million on June 30 in the year before the contribution was made, and not have exceeded their annual non-concessional contributions cap of $110,000.

Also be aware that you can’t receive a tax offset for super contributions you make into your own super account and then split with your spouse.ii

Contributions splitting

This allows one member of a couple to transfer up to 85 per cent of their concessional (before tax) super contributions into their partner’s account.

Any contributions you split with your partner will still count towards your annual concessional contributions cap of $27,500. However, in some years you may be able to contribute more if your super balance is less than $500,000 and you have unused contributions caps from previous years under the ‘carry-forward’ rule.

If your partner is younger than you, splitting your contributions with them may help you qualify for a higher Age Pension. This is because their super won’t be assessed for social security purposes if they haven’t reached Age Pension age, currently 66 and six months.iii

Recontribution strategy

Another handy way to equalise super for older couples is for the partner with the higher balance to withdraw funds from their super and re-contribute it to their partner’s super account.

This strategy is generally used for couples who are both over age 60. That’s because you can only withdraw super once you reach your preservation age (currently age 57) or meet another condition of release such as turning 60 and retiring.

Any super transferred this way will count towards the receiving partner’s annual non-concessional contributions cap of $110,000. If they are under 67, they may be able to receive up to $330,000 using the ‘bring-forward’ rule.

As well as boosting your partner’s super, a re-contribution strategy can potentially reduce the tax on death benefits paid to non-dependents when they die. And if they are younger than you, it may also help you qualify for a higher Age Pension. These are complex arrangements so please get in touch before you act.

A joint effort

Sharing super can also help wealthier couples increase the amount they have in the tax-free retirement phase of super.

That’s because there’s a $1.7 million cap on how much an individual can transfer from accumulation phase into a tax-free super pension account. Any excess must be left in an accumulation account or removed from super, where it will be taxed. But here’s the good news – couples can potentially transfer up to $3.4 million into retirement phase, or $1.7 million each.iv

By working as a team and closing the super gap, couples can potentially enjoy a better standard of living in retirement. If you would like to check your eligibility or find out which strategies may suit your personal circumstance, get in touch.

i https://www.superannuation.asn.au/ArticleDocuments/402/2202_Super_stats.pdf.aspx?Embed=Y

ii https://www.ato.gov.au/individuals/income-and-deductions/offsets-and-rebates/super-related-tax-offsets/#Taxoffsetforsupercontributionsonbehalfof

iii https://www.ato.gov.au/Forms/Contributions-splitting/

iv https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/transfer-balance-cap/

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 protect your business from ID thieves

How to protect your business from ID thieves

A surge in ID theft over the past 12 months has meant a significant escalation in cybersecurity threats to small businesses in Australia. We take a closer look at this trend and the countermeasures business owners now need to take.

The Australian Competition and Consumer Commission’s (ACCC’s) Scamwatch recently reported that ID theft in Australia increased 234 per cent in 2021.

The scale of the problem is worrying, with a recent survey by the Australian Institute of Criminology finding 19 per cent of respondents had experienced misuse of their personal information.

What identity criminals want

The explosion in ID crime is not just a problem for individuals, it’s a growing headache for businesses. This is due to the increasing amount of personal information they now hold, about their employees, clients and customers.

The ATO has been reminding small businessowners that ID documents are like gold to tax scammers, who can use information such as a driver’s licence, passport and tax file number to steal tax refunds and super.

Cybercriminals can also commit fraud in your name, take over your business and submit amendments to your Business Activity Statements. This makes it vital to protect key information ID thieves target, such as employees’ personal information, business records containing personal information, BAS documents and myGovIDs.

Check your physical records are protected

Worrying about the physical security of your information may seem old-fashioned, but ensuring your business premises and systems are protected is vital.

ID criminals can obtain invaluable business and client details simply by breaking into your premises and photographing business records or employee details.

To combat this, fit physical barriers such as window and door locks, file copies of documents and ID information in lockable storage units, and ensure you install an appropriate alarm system to protect against intruders.

Securing your business online

Strong online security practices are also essential to protect information about your business, employees and clients from ID thieves.

If you hold financial records, confirm the identity of anyone requesting changes to their information and fully verify new payment details. Ensure your employees are trained to identify suspicious requests for personal information, or emails that may link to fake websites built to capture passwords.

It’s also important to secure your email account through multi-factor authentication or a strong, unique passphrase.

Good online security also means changing all the passwords used in the business on a regular basis and ensuring they are not easy for potential thieves to guess. Updated security and anti-virus software needs to be installed on all devices used by the business and by any employees working from home.

When sourcing business software and support (such as payroll services), ask vendors about their system security, including where the data will be stored and their security certification and support services for data breaches.

Reporting cybercrime to the ATO

While your business’s reputation can take a real battering if you don’t have adequate protections for both your own and your clients’ ID information, there are also regulatory requirements when it comes to data breaches.

Businesses have an obligation to report all tax-related security issues to the ATO.

To help you manage your obligations to protect identity information, the ATO has an online security self-assessment questionnaire small businesses can use to check their performance in this area. This can help you identify which online security measures you are getting right as well as potential areas for improvement.

Businesses also have data breach reporting obligations under the Privacy Act. The Office of the Australian Information Commissioner has helpful tips on how to create a solid data breach response plan.

Protect your myGov ID

The government’s push for more online transactions means more and more personal and business information needs to be protected. If you or a key employee accesses the government’s online services on behalf of your business, you will need a myGovID.

This new digital identity key uses encryption technology to protect your identity when interacting with government agencies online. To strengthen protection of your identity and business information online, you can now set up face verification on myGovID.

If you are aware or suspect your myGovID has been inappropriately accessed, you need to report it immediately.

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.


Embracing the power of automation

Embracing the power of automation

Life seems to be getting busier year after year, especially in the workplace. Just as well there are measures we can take to increase productivity and create efficiencies within not only our workplace, but our personal life as well.

Automation within organisations is a common occurrence these days due to the importance placed on streamlining processes and increasing productivity. And with technology changing at such a rapid rate, it’s empowering businesses to implement changes along the way.

While most jobs can benefit from a degree of automation, ‘automation’ doesn’t need to be and shouldn’t be a scary word. When used effectively in the workplace and your day-to-day life, it can free up time for the critical tasks, allowing you to do what you do best; foster creativity, think strategically and build relationships.

Advantages and challenges to be aware of

We all have those tasks that bog us down, they are often repetitive and prevent us from undertaking the more important aspects of our roles. Automating these mundane tasks can provide many advantages including;

  • Reducing busy work, freeing up resources to focus efforts on more important tasks that require critical thinking.
  • Increasing knowledge sharing within and between teams, with improved reporting and processes.
  • Minimising duplication of data and the possibility of data entry errors.

Introducing change comes with its own set of challenges, even if automating processes leads to improved satisfaction and productivity. Some key considerations when implementing new technology and automation include;

  • The initial costs of new products or services, team training and the time for the team to take up the new process.
  • Data security issues with the increased reliance on technology.
  • Being mindful not to introduce unnecessary complexity. Automation for the sake of automation will not always create efficiencies.
  • Developing indicators to measure the success of the new process.

Where can you start making changes today

Automation should ultimately make your working environment simpler and it’s one of the best tools we have at our disposal for efficiency. A few areas where you can begin making changes include;

  • Sales and client onboarding: Client relationships are built over time, and often require a personalised touch. However, there are simple ways to reduce the administration of finding, converting and onboarding new clients. This may include an integration between your emails and CRM for better client profiles, appointment setting tools and a sales workflow with automated emails to prospects to maintain regular touch points.
  • Data entry across various areas of the business: No one likes to get bogged down entering, or worse re-entering data. Investigate integrations between your accounting software and CRM (and any other platforms) so data only needs to be entered once. This will both reduce time and the possibility for errors.
  • Invoicing and accounts: Online accounting software enables businesses to manage accounts and payroll effectivity - but are you making the most of the tools available to you? Do team members enter timesheets directly into the accounting software, eliminating data entry? Also consider issuing repeat invoices and invoice reminders to assist with prompt payment.
  • Marketing: There has been an explosion of tools to assist you in effectively marketing your business. Consider scheduling your social media with a free scheduling tool. Share content across the business to maximise your efforts. Collect and store new leads in your CRM or email platform so you can market to them in future.

Get on board with change

There are many reasons why automating processes within an organisation is beneficial for productivity, but it can also have a positive effect on team morale and job satisfaction. By removing manual tasks and replacing them with an automated process, you could reduce stress levels and potentially have a beneficial impact on absenteeism within the workplace.

One key thing to remember is now that flexible working is a high priority for most people, whatever strategies you implement, they must have the ability to be accessed remotely.

By incrementally introducing a few new strategies across various areas of the business or your role, you’ll start reaping the rewards sooner than you think.

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.