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Director ID… last ditch awareness campaign!

What you need to know

With hundreds of thousands of directors yet to apply for their director identification number (director ID) ahead of the looming November deadline, a last-ditch public information campaign has been launched.

The Albanese Government has just launched a new awareness campaign to help company directors obtain their director ID as the 30 November deadline quickly approaches.

A director ID is a unique 15digit identifier that a company director will apply for once and keep forever. By allowing regulators to trace directors’ relationships with companies over time, director IDs will help prevent illegal activity and level the playing field for businesses.

Director IDs are administered by the Australian Business Registry Services (ABRS), which is managed by the ATO.

The new awareness campaign will feature both widespread communications and targeted outreach to ensure all directors are aware of their obligations.

Who needs a director ID?

You need a director ID if you are an eligible officer of:

  • a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act)
  • an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

An ‘eligible officer’ is a person who is appointed as:

  • a director
  • an alternate director who is acting in that capacity.

You need a director ID if you are a director of a:

  • company
  • Aboriginal and Torres Strait Islander corporation
  • corporate trustee, for example, of an SMSF
  • charity or not-for-profit organisation that is a company or Aboriginal and Torres Strait Islander corporation
  • registered Australian body, for example, an incorporated association that is registered with the Australian Securities and Investments Commission (ASIC) and trades outside the state or territory in which it is incorporated
  • foreign company registered with ASIC and carrying on a business in Australia (regardless of where you live).

Who doesn’t need a director ID?

A director ID is not required if you are a director of an incorporated association (with no ABRN) registered with the Australian Charities and Not-for-profits Commission (ACNC), a company secretary but not a director, acting as an external administrator of a company, or run your business as a sole trader or partnership.

It has been clarified by the ABRS that directors who resigned their directorship before 31 October 2021 are not required to obtain a director ID. Deceased directors, as they are unable to personally apply, are also exempt.

If you run a company that is a small business, corporate trustee of an SMSF, a not-for-profit or even a large sporting club, it’s quite likely that you’re a director, and you’ll need to apply for your director ID.

When?

All directors of companies registered with ASIC will need a director ID and must apply by the 30 November deadline. Directors of Aboriginal and Torres Strait Islander corporations may have additional time to apply.

The deadline depends on the date on which you first became a director. See the table on the following page which lays out these dates.

Not sure?

If you are still uncertain as to whether a director ID is required:

  • Search ABL Lookup using the ABN or business name. If ASIC Registration – ACN or ARBN or ARSN or ARFN is showing against their record, and they are a director, you need to apply for a director ID.
  • Search the online ASIC companies register for director details (providing the company is complying with its maintenance obligations).
  • Determine who the directors are for:
    • not-for-profit organisations that are not registered with ACNC and have an ARBN or ACN – check the online ASIC companies register for director details (providing the organisation is complying with its maintenance obligations)
    • charities that are registered with the ACNC and have an ARBN or ACN – search for a charity oline on the ACNC website
      After selecting your charity, navigate to the People tab. If the role listed their name is Director, they need to apply for a director ID.

Apply

The fastest way to apply for a director ID is online at Australian Business Registry Services (ABRS website – www.abrs.gov.au/directorID). To access the online application, use the myGovID app with at least a standard identity strength to log in to ABRS Online. You must apply personally; we cannot apply on your behalf; however we can advise you around eligibility, deadlines etc.

1. Corporations Act directors

Date you first become a director Date you must apply
On or before 31 October 2021 By 30 November 2022
Between 1 November 2021 and 4 April 2022 Within 28 days of appointment
From 5 April 2022 Before appointment

2. CATSI Act* directors

Date you first become a director Date you must apply
On or before 31 October 2021 By 30 November 2022
Between 1 November 2021 and 4 April 2022 Within 28 days of appointment
2022-11-01T10:53:08+10:00November 1st, 2022|
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Federal Budget 2022-23

The 2022-23 federal Budget was handed down on 25 October. The confirmation of lucrative income tax cuts, and the scrapping of a tax offset for low- and middle-income earners were the big-ticket items.

That said, Labor’s first federal Budget in nine years was as noteworthy for the changes it didn’t make as for those that it did. Unmentioned were current outstanding issues impacting the taxation of trusts, the long-awaited simplification of 7A, the future of business depreciation after this financial year and more.

Business and Individual Taxation

Briefly the key taxation measures announced in the Budget are summarised as follows.

  • Digital currencies not a foreign currency – the Budget Papers confirm that the government is to introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency.
  • COVID grants treated as NANE – the Budget Papers contain a listing of further State and Territory COVID-19 grant programs eligible for nonassessable, non-exempt treatment.
  • LMITO axed – the government did not announce any extension of the low- and middle-income tax offset (LMITO) to the 2022-23 income year. The LMITO has now ceased and been fully replaced by the less lucrative and less available low income tax offset (LITO). The March 2022-23 Budget had increased the LMITO by $420 for the 2021-22 income year so that eligible individuals (with taxable incomes below $126,000) received a maximum LMITO up to $1,500 for 2021-22 (instead of the previous $1,080).
  • No action – the government did not make any announcements around outstanding issues such as the long-awaited changes to Division 7A, reform to section 100A, the extension of both Temporary Full Expensing and loss carry-back (both due to expire at the end of June 2023), and implementation of the Board of Taxation’s recommendations around changes to the individual tax residency rules.
  • Thin Cap – the current measures impose a restriction on the deductibility of foreign held debt under a balance sheet approach. The proposed Thin Cap measures will replace the safe harbour test with a new earnings-based test under which an entity’s debt-related deductions will be limited to 30% of profits (using earnings before interest, taxes, depreciation and amortization (EBITDA) as the measure of profit); allow deductions denied under the EBITDA test to be carried forward and claimed in a subsequent income year (up to 15 years) and replace the worldwide gearing test and allow an entity in a group to claim debt deductions up to the level of the worldwide group’s net interest expense as a share of earnings (which may exceed the 30% EBITDA ratio). These measures are proposed to commence on 1 July 2023.
  • Share buy-backs – the government intends to align the tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs. However, there is no detail in the Budget Papers nor in any associated media releases as to what precisely is intended.
  • Depreciation of intangible assets – the government will not proceed with the proposal to allow taxpayers to self-assess the effective life of intangible depreciating assets. This is the reversal of the previously announced option to self-assess effective life for certain intangible assets (eg intellectual property and in-house software). The effective lives of such assets will continue to be set by statute.
  • Individual tax rates – the government did not announce any personal tax rates changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated. From 1 July 2024, Stage 3 will see the abolition of the current 37% tax bracket, lowering the existing 32.5% bracket to 30%, and raising the threshold for the top tax bracket from $180,001 to $200,001.

    Consequently, the first $18,200 you earn will be tax-free (as it is currently), and every dollar you earn between that and $45,000 will be taxed at 19% (as it is currently).

    However, things then change from 1 July 2024 where every taxable dollar you earn from $45,001 to $200,000 will be taxed at 30%, and every dollar you earn above $200,000 will be taxed at 45%.

Tax Rate Thresholds in 2022-23
Nil Up to $18,200
19% $18,201-$45,000
32.5% $45,001-$120,000
37% $120,001-$180,000
45% $180,001 and over
Tax Rate New thresholds in 2024-25
Nil Up to $18,200
19% $18,201-$45,000
32.5% $45,001-$200,000
45% $200,001 and over

Superannuation and Retirement

CAPS AND LIMITS UNTOUCHED

In a pleasing development, the important superannuation caps and limits were undisturbed, providing all-important investor certainty moving forward. This means that:

  • individuals will be permitted to contribute just as much to superannuation as currently under the concessional and non-concessional caps at $27,500 and $110,000 respectively (or up to $330,000 of non-concessional contributions over three years, subject to an individual’s total superannuation balance (TSB))
  • the TSB cap is unadjusted at $1.7 million and indexation continues. The retention of indexation means that the cap will very likely increase by $200,000 to $1.9 million from 1 July 2023. The TSB is relevant when working out eligibility for the following super-related measures:
    • • Carry-forward concessional contributions
    • • Non-concessional contributions cap and
    • the bring-forward of your non-concessional
    • contributions cap
    • • Work test exemption
    • • Government co-contribution
    • • Spouse tax offset
    • • Segregated asset method for calculating exempt current pension income.
  • frozen deeming rates will be retained starting at 0.25% until 30 June 2024. The deeming rules are used to work out the income for your financial assets including superannuation. The rules assume these assets earn a set rate of income, irrespective of what you really earn. On 1 July 2022, the deeming rates were frozen for a further two years for all people receiving Centrelink payments, including approximately 445,000 Age Pensioners. Therefore, even though interest rates have increased significantly in 2022 and may do so further, the current deeming rates are sheltered until at least the middle of 2024.

DOWNSIZER AGE REDUCTION

The government confirmed its election commitment that the minimum eligibility age for making superannuation downsizer contributions will be lowered to age 55 (down from age 60). Legislation in the form of the Treasury Laws Amendment (2022 Measures No.2) Bill 2022 is currently before Parliament to effect this change. When passed into law (a safe assumption given that this is a bipartisan measure) the reduced age limit will apply from the first day of the first quarter after the day the Bill receives Royal Assent (likely from 1 January 2023).

There is no maximum age limit to make a downsizer contribution.

This change will allow individuals aged 55 or over to make an additional non-concessional contribution of up to $300,000 from the proceeds of selling their main residence outside of the existing contribution caps. Either the individual or their spouse must have owned the home for ten years.

Downsizing will also be incentivised. Pensioners who downsize will have their sale proceeds exempt from the asset test extended from 12 to 24 months. Further, for income test purposes, only the lower deeming rate (currently 0.25%) will apply to these asset test exempt principal home sale proceeds for the 24-month period.

EXPANDED ACCESS TO THE COMMONWEALTH SENIORS HEALTH CARD

The government re-stated its commitment to increase the income threshold for Commonwealth Seniors Health Card eligibility from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.

OTHER ANNOUNCEMENTS

  • The SMSF audit cycle will not be expanded to three years. The annual audit requirement remains.
  • The relaxing of the SMSF residency rules, previously announced in the 2021-22 Budget to commence from 1 July 2022, will now start from the income year commencing on or after the date of assent of the enabling legislation (yet to be introduced). Therefore, SMSF trustees need to ensure that they satisfy the current residency requirements otherwise their fund may become non-complying with severe tax consequences to follow.

If you have any questions about how any of the above may impact you or your SMSF, please contact us.

2022-11-01T11:05:09+10:00November 1st, 2022|
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SMSF member obligations

A recent Administrative Appeals Tribunal decision reminds us all that SMSF trustees (members) can be disqualified where serious breaches, be they advertent or inadvertent, of the super rules are committed.

One of the ways the ATO deal with noncompliance is by disqualifying an individual as a trustee (or director of a corporate trustee) of a self-managed super fund (SMSF). This can occur if the trustee does not comply with super laws or if the ATO believe a trustee is not a “fit and proper person” to continue managing their SMSF. Between 1 April 2022 and 30 June 2022, the ATO disqualified 80 trustees, resulting in a total of 252 disqualified trustees during the 2021-2022 financial year.

Turning back to the Tribunal’s decision, in Goulopoulos and Commissioner of Taxation [2022] AATA 2540 (9 August 2022) two directors of a corporate trustee of an SMSF were disqualified following serious contraventions that had occurred on multiple occasions.

One of the many contraventions included the illegal early access of super where no condition of release had been met. A total of $878,365.86 was withdrawn from the fund for personal use, including the purchase of a new house and luxury car. A small amount was repaid to the fund, however any amount taken out was illegally accessed and in breach of the payment standards.

In addition to the illegal early access, the trustee’s actions also resulted in breaches of the borrowing provisions, the in-house asset provisions, acquisition of assets from a related party, and failure to lodge a return for a period of four years.

Having been disqualified by the Commissioner, the taxpayers appealed to the Tribunal. In doing so, they relied on the fact that the ATO, for the most part, did not impose penalties for the contraventions, which they said indicated the contraventions were not serious. This was rejected out of hand by the Tribunal which found:

  • the taxpayers knew what they were doing was wrong
  • the contraventions were numerous and sustained
  • full responsibility was not taken by the taxpayers who blamed their accountant for planting the seed to make the withdrawals, and
  • some of the contraventions were of the most serious nature (member loans, unauthorised withdrawals and failing to lodge returns).

All these factors combined to provide the Commissioner with ample grounds for disqualification. Thus, the decision to do so was upheld by the Tribunal.

The Tribunal also accepted the Commissioner’s alternative submission that, in the circumstances, there should be disqualification on the basis that the “fit and proper person” test was not met.

Although this case is at the extreme end – involving a range of serious breaches of the SMSF rules – it does underscore the consequences that can flow from trustees breaching the rules, deliberately or accidentally.

If you have your own SMSF and are in any doubt around the rules that apply in relation to access to your funds, the borrowing provisions, the in-house asset provisions, the acquisition of assets from a related party or any other rules, seek expert advice before you act.

2022-10-05T14:58:14+10:00October 5th, 2022|
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Claiming business losses

You may be able to offset your business loss against other income (such as salary and wages) if you’re a sole trader or in a partnership.

Firstly, however, your loss must not be noncommercial. A non-commercial business loss is a loss you incur, either as a sole trader or in partnership, from a business activity that is not related to your primary source of income. This type of business activity could be a hobby or lifestyle benefit.

Even if it has business-like characteristics, if it is unlikely to ever make a profit and doesn’t have a significant commercial purpose or character, you can’t offset this non-commercial business loss against your other income. In this case, you can defer the loss until you make a profit from the business activity. This applies whether your business loss is from an Australian or a foreign source.

ATO Example

Bob is a sole trader who has a business operating machinery. His primary business income comes from helping others plough and prepare their land for growing crops.

Bob acquired a 5-acre block of land situated close to his residence with the intention that, in his spare time, he would upgrade the property from its present run-down condition and develop it into a small pumpkin farm to harvest and sell pumpkins.

The money he spent on developing the small pumpkin farm exceeded the income made from the pumpkins, as the pumpkins are not ready for sale yet. Bob has made a non-commercial loss but will need to work out if he can offset or defer the loss.

If your loss is indeed commercial, then that is just the first step to potentially claiming your losses.

Generally, the following tests must also be met (though they differ slightly for partnerships).

1. ASSESSABLE INCOME TEST

To pass the assessable income test, assessable income from your business activity during the financial year must be at least $20,000.

2. PROFITS TEST

Your business will pass the profits tests if it has made a tax profit in three out of the past five years (including the current year).

3. REAL PROPERTY TEST

You will pass the real property test if real property of at least $500,000 in value is used in your business activity on a continuing basis.

4. OTHER ASSETS TEST

You will pass the other assets test if the value of the “other assets” you use in your business on a continuing basis is at least $100,000. Only certain assets are included in this test and some are specifically excluded.

If you pass any of these tests, then generally you must also earn less than $250,000, otherwise your loss may be deferred until this test is met.

To sum up, if you’re an individual in business, as either a sole trader or in a partnership, and your business activity makes a loss, we can help you work out if you need to:

  • claim and offset the loss against your other income, such as salary and wages
  • defer the loss and claim it in a later year – if you do not pass the noncommercial loss rules above
2022-10-05T14:54:22+10:00October 5th, 2022|
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Optus data breach

Following a recent cyber-attack, Optus customers are advised they could be at risk of identity theft.

While Optus has not yet revealed how many of its 9.7million customers were impacted, they did confirm that the number was “significant”. Importantly, the breach has affected past Optus customers back to 2017, as well as current customers. Customers who have been affected will have already been contacted by Optus, or will be in the coming days.

Customer information that was accessed included:

  • Names
  • Dates of birth
  • Phone numbers
  • Email addresses
  • Street addresses
  • Drivers licence details
  • Passport numbers.

However, payment details and account passwords reportedly have not been compromised and Optus’s phone services remain safe to operate. Thus, customer financial details were not directly compromised.

Of concern (not just for Optus customers but for any person whose above information has fallen into the wrong hands) is that the above details are easily enough to compromise a person’s identity, warns the Office of the Australian Information Commissioner:

Your identity can be stolen if a thief accesses your personal information, including from any document that contains information about you, the OAIC website says. Even if a thief only accesses a small amount of your personal information, they may be able to steal your identity if they can find out more about you from public sources. This includes social media accounts which may include your date of birth, photos and information about your family.

Identity fraud can result in someone using another individual’s identity to open a bank account, get a credit card, apply for a passport or conduct illegal activity.

The government’s Scamwatch website advises the following steps to protect your personal information:

  • Secure your devices and monitor for unusual activity
  • Change your online account passwords and enable multi factor authentication for banking
  • Check your accounts for unusual activity such as items you haven’t purchased
  • Place limits on your accounts or ask your bank how you can secure your money
  • If you suspect fraud you can request a ban on your credit report.

Moving forward, also be vigilant regarding future contact. Scammers may use your personal information they have obtained to contact you by phone, text or email. Never click on links or provide personal or financial information to someone who contacts you out of the blue.

If you are concerned that your identity has been compromised or you have been a victim of a scam, contact your bank immediately and call IDCARE on 1800 595 160. IDCARE is Australia’s national identity and cyber support service, to get expert advice from a specialist identity and cyber security service. You can also report scams to Scamwatch www. scamwatch.gov.au and check cyber.gov.au for information about cyber security.

Optus customers can also contact Optus directly via the My Optus app or call 133 937. Businesses can ring 133 343.

2022-10-05T14:51:37+10:00October 5th, 2022|
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Bridging the super gender gap

Fresh statistics released by the ATO reveal that the superannuation gender cap is very real.

While the average super balance for a man is $161,834, for a woman it’s $129,506 – a massive 25% difference. This gender gap begins in peoples’ twenties, mostly caused by wage differences and time off for children, and by their early thirties it is already 20%. A man aged 30-to-34 has an average super balance of $48,603 and a woman $40,479, the ATO data shows. The compounding impact of this difference alone over time is significant.

There are at least three key strategies that can be implemented to help close this gap. Reach out to us if you have any questions around the following concessions:

1. CATCH-UP CONTRIBUTIONS

If you make or receive concessional contributions (CCs) of less than the annual concessional contributions cap of $27,500 (for the 2022/23 financial year), you may be able to accrue these unused amounts and carry them forward for use in subsequent financial years. This is known as catch-up concessional contributions.

Catch-up concessional contributions can accrue from 2018/19. Unused cap amounts can be carried forward for up to five years before they expire. To be eligible to make catch-up CCs, your total super balance must be below $500,000 at the prior 30 June.

The ATO will determine your total super balance based on information it receives from your super funds. You can find out your balance by logging into your myGov account www.my.gov.au

2. SPOUSE CONTRIBUTIONS

If you have a spouse, they can help top up your superannuation by making a contribution to your fund (spouse contribution).

In terms of the amount of the contribution, you cannot contribute more than your partner’s non-concessional contributions cap, which is $110,000 per year.

However, if your partner is under 75 and eligible, they (or you) may be able to make up to three years of non-concessional contributions in a single income year, under the bring-forward rules, which would allow a maximum contribution of up to $330,000 (but no more for the following two years). However, non-concessional contributions can’t be made once your spouse’s super balance reaches $1.7 million or above as at 30 June of the previous financial year.

By making a spouse contribution, the contributing spouse may also be eligible for a tax offset if the receiving spouse has an income of less than $40,000.

3. SUPER SPLITTING

Another way to increase your partner’s super is by splitting up to 85% of your concessional super contributions with them, which you either made or received in the previous financial year. Concessional super contributions can include employer and or salary-sacrifice contributions, as well as voluntary contributions you may have claimed a tax deduction for.

To be eligible for contributions splitting, your partner must be under their preservation age, or between their preservation age and 65 (and not retired).

In terms of limits on the contribution, amounts you split from your super into your partner’s super will count toward your concessional contributions cap, which is $27,500 per year.

Unused cap amounts accrued since 1 July 2018 can also be contributed, contingent on eligibility.

2022-10-05T14:47:34+10:00October 5th, 2022|
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Director identification numbers… time is running out

All existing directors of a company, registered Australian body, registered foreign company, or a director of corporate trustees of an SMSF are required to apply for a director identification number (director ID) by 30 November 2022…so act now!

If you are a director of an Aboriginal or Torres Strait Islander corporation (CATSI), you have an additional 12 months to apply to 30 November 2023.

To be clear, if you are currently a director, or plan to become one in the next 12 months, you’ll need a director ID.

Directors must apply for their director ID personally – we as your tax agent cannot apply on your behalf but we can help you understand the new requirement, if you need to apply, and by when. Beat the rush and get your director ID online today.

A director ID is a unique 15-digit identifier that all directors or people intending to become directors must apply for. It’s free to apply and you only need to apply once – you keep your director ID forever. A director must apply for their own director ID and verify their identity using their personal records.

The fastest way to apply for a director ID is online at Australian Business Registry Services (ABRS website – www.abrs.gov.au/directorID).

To access the online application, use the myGovID app with at least a standard identity strength to log in to ABRS Online.

Before you start your online application, make sure you have your personal identity documents at hand. Most applicants use the following documents:

  • bank account details (where your tax refunds or payments are made and received)
  • an ATO notice of assessment.

In addition, you can also use:

  • APRA fund account details (SMSF details are not accepted)
  • a dividend statement
  • a Centrelink payment summary
  • a PAYG payment summary (this is different to your income statement or your PAYG instalment activity statement).

When you receive your director ID, you must pass it on to the record-holder in your company or Aboriginal and Torres Strait Islander corporation. This might be your company secretary, another director, a contact person or an authorised agent of the company.

There is no requirement to provide your director ID to the Australian Securities and Investments Commission (ASIC) unless they request you to do so.

The government estimates that more than 500,000 directors are yet to apply with only a month before the deadline.

If you require further information around this new measure, please don’t hesitate to reach out to us.

2022-10-05T15:05:20+10:00October 5th, 2022|
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Insurance: Inside or outside super?

Most people insure their personal assets, such as their house, contents and car, but when it comes to personal insurance, many overlook the importance of protecting their wealth because personal insurance is often seen as unnecessary, a luxury and an additional cost to pay for.

Unfortunately, we don’t know what’s around the corner but having the right level of protection in place will assist you and your family through sickness and injury and protect you and your family’s lifestyle when times get tough.

Depending on your needs, insurance can be structured either inside or outside superannuation, with most superannuation funds offering insurance for their members.

Superannuation funds generally offer three types of life insurance for their members, including life insurance, total and permanent disablement (TPD) insurance and income protection insurance. This article briefly summarises these insurances and covers some common benefits and considerations when owning insurance in superannuation.

LIFE INSURANCE

Life insurance, also known as death cover, is a lump sum amount paid to your beneficiaries on top of the balance that’s already in your superannuation account if you pass away. It may also be paid if you have a terminal illness.

TPD INSURANCE

Total and permanent disablement (or TPD) cover pays you a benefit if you become seriously disabled or are too sick to ever work again.

In addition to meeting the insurance policy definition of incapacity, you must also meet the permanent incapacity condition of release definition under superannuation law before the trustee can pay the TPD benefit to you.

Superannuation law defines permanent incapacity to mean:

“ill health (whether physical or mental), where the trustee is reasonably satisfied that the member is unlikely, because of the ill heath, to engage in gainful employment for which the member is reasonably qualified by education, training or experience”.

To be ‘reasonably satisfied’, a superannuation fund trustee will usually request medical evidence in the form of two doctors’ certificates to that effect. This is to also satisfy the requirement for the payment of a disability superannuation benefit.

It is also worth noting that the superannuation law definition of permanent incapacity is generally referred to as an ‘any occupation’ definition of permanent incapacity because it relates to gainful employment ‘for which the member is reasonably qualified by education, training or experience’.

INCOME PROTECTION

Income protection (also called salary continuance insurance) helps replace your income if you can’t work due to a temporary disability or illness. If your claim is approved, your superannuation fund will pay you a regular income as a percentage of your salary for a specified period of time (ie, the benefit period could be for 2 years, 5 years or up to a certain age, such as age 65).

WHAT ABOUT TRAUMA COVER?

Trauma cover (also known as critical illness cover) pays you a lump sum amount if you are diagnosed with a critical illness or injury as specified in the policy, such as cancer, stroke, coronary bypass or heart attack.

However due to changes in the law that came into effect on 1 July 2014, it is no longer possible to take out trauma insurance through your superannuation fund.

FACTORS TO CONSIDER

The key benefits of insurance inside superannuation include:

  • Premiums can be funded from your existing superannuation account balance, which can assist in managing your cashflow and affordability of premiums
  • You may benefit from income tax savings if you claim a tax deduction for personal contributions or if you contribute via a salary sacrifice arrangement using pre-tax salary which may provide cost savings on premiums
  • Insurance in employer superannuation plans may be cheaper than insurance outside superannuation as superannuation funds purchase insurance policies in bulk
  • After joining your employer’s default superannuation plan, you may be able to obtain automatic acceptance up to a set level of cover with no medicals required.

On the other hand, potential downsides of insurance inside superannuation include:

  • The amount of cover you can get inside superannuation is often lower than the cover you can get outside superannuation. Further, default insurance through superannuation isn’t specific to your circumstances and some eligibility requirements may apply. To avoid this risk, you can purchase a retail insurance policy through superannuation (or personally outside of superannuation). While retail cover requires a more detailed application process, underwriting your personal history and generally higher premiums than default group cover, retail cover can provide you with better quality cover and greater confidence that a payment is likely to be made at claim time
  • Premiums can erode your retirement savings if you do not make extra contributions to negate the premium cost
  • Contributions made to fund premiums count towards the contribution caps
  • If you consolidate your superannuation accounts, you may lose any cover you have with the superannuation fund you close. Thus, you should always check that the new superannuation fund you’re choosing can cover you for equivalent (or more) insurance cover
  • Unless you actively opt-in to maintain your insurance, your cover may be cancelled if your superannuation fund becomes inactive for 16 months or more, the fund balance falls below $6,000 or you are under age 25

THE LAST WORD…

Wealth protection is considered to be the foundation of all good wealth creation plans, because without it, even the best laid wealth creation plans can go awry. Insurance is all about having peace of mind, so plan for tomorrow by obtaining advice on whether you need insurance cover and if so, the types of personal insurances you may need and how to best structure the cover.

2022-09-07T17:55:41+10:00September 7th, 2022|
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Estate Planning Explained

Estate Planning means different things to different people. Ultimately, it is about ensuring that you have the right mechanisms in place to ensure that in the event of your death, your assets pass in the manner you intend.

Broadly speaking, there are four key steps in the estate planning process:

Firstly, identify which assets are to be dealt with as part of your estate plan? This can be more extensive than you think and could involve:

  • Savings accounts
  • Shares
  • Businesses
  • Properties
  • Vehicles
  • Collectibles
  • Items with sentimental value
  • Superannuation savings.

Next, who owns those assets? Assets can be owned individually, jointly, within superannuation, or by a related entity such as a company or trust.

Third, how do you want those assets distributed on your death? This a question only you can answer: who should get what and when?

Finally, how do you bring about this outcome? An estate plan brings together the answers to the above questions. It will usually include Wills and Powers of Attorney but in many cases will also involve succession planning strategies to deal with related entities and superannuation balances. Additionally, steps may also be necessary to provide for children and blended families.

Another key step is choosing your Executor. This is the person who will carry out your final wishes after you die. An Executor should be someone you trust who has some financial knowledge as they will be responsible for paying off debts and managing your Estate according to the terms set out in your Will. An Executor can be a family member, close friend, a lawyer, Public Trustee or other corporate provider.

Here are a few questions to help you decide whether you might have some gaps that need filling in your estate planning:

  • Do you have a Will?
  • If you do, when was it last updated?
  • Could you (or your spouse) locate your Will if you had to?
  • Do you have a Power of Attorney in place in case you were unable to make your own decisions?
  • If you and your spouse leave everything to one another in your Wills, have you considered what would happen in the event of your simultaneous death?
  • Do you realise that superannuation and family trusts don’t form part of your Estate and thus other strategies (besides a Will) are needed to properly deal with these?
  • Do you know that special, tax effective structures known as Testamentary Trusts can be used to pass wealth securely to family members, but they are most effective when documented in your Will?
  • Have you properly considered who should be the Executor of your Will (sometimes the people closest to you, such as a spouse, may be in no fit state to play the role)?

Once in place, any good Estate plan should be reviewed and updated regularly. Major life events like marriages, divorces or deaths are a good opportunity to go back through your Estate plan and make sure the right people will be protected when you die.

Through a deep understanding of the personal and business structures of our clients, we are well positioned to help in the estate planning process, bringing about tax-effective outcomes tailored to the specific requirements at hand. Contact us for further information.

2022-09-07T17:47:39+10:00September 7th, 2022|
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eInvoicing: Save time and money

The ATO is anticipating a significant upward spike in the number of businesses using eInvoicing over the coming 12 months. Already, more than 18,000 businesses are using eInvoicing to make their transactions faster, simpler and more secure.

eInvoicing is the new, standardised way to send and receive electronic invoices directly in software, via a secure network. With eInvoicing, suppliers no longer need to print, post or email paper-based or PDF invoices and buyers won’t need to manually enter or scan invoices into their software.

ATO Deputy Commissioner Will Day says:

The pressures of running a business can often leave businesses with little time to focus on anything else. eInvoicing offers a streamlined way of managing invoices, allowing more time to focus on what is important to the business.

Once connected with eInvoicing, businesses can immediately transact with everyone on the same network, meaning you can be paid faster, and ultimately improve your cashflow.

With eInvoicing, you no longer need to manually enter or scan the invoices you receive, because that information is received directly through your accounting software, ready to be checked and paid.

Mr. Day said eInvoicing also reduces the risk of fake or compromised invoices and email billing scams.

With eInvoicing, the invoice is delivered directly into the customer’s software via a secure network, so there’s less risk of lost or fraudulent invoices being paid.

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said he enthusiastically encouraged small businesses to adopt eInvoicing.

It is a great way to enable faster payment, it cuts the administrative burden and is more secure than posted or emailed invoices, so it reduces the chance of invoice fraud or scams.

About 1.2 billion invoices are exchanged in Australia every year but many are sent to the wrong person or with incorrect information. It costs around $30 to process a paper invoice while an e-invoice costs less than $10.

Aside from cost savings, there are also fewer errors. An eInvoice is accurate and complete. eInvoicing uses standardised data that is validated before the eInvoice is sent through the network to your software.

With eInvoicing you don’t need to:

  • re-type or scan invoices
  • make corrections
  • chase missing information.

This new system is also reliable and secure in that:

  • eInvoices are exchanged securely through the Peppol network by approved access points, using the buyer’s and supplier’s ABNs.
  • The risks of fake or compromised invoices, email scams and ransomware attacks are lower compared with posted or emailed invoices.
  • There is no risk of lost invoices.
  • You keep control of invoice processing. This includes verifying and approving invoices. eInvoices can only be viewed by the supplier, buyer and digital software provider, where needed.
  • eInvoices do not go through the ATO and they cannot view them.

Businesses can get started with eInvoicing by registering in their software or talking to us. To find out if your software is eInvoicing enabled, we can check with your software provider

2022-09-07T17:45:04+10:00September 7th, 2022|
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