Posted in: Money
With so many charities competing for donations, it can pay to spend time researching to make sure your money is used for the cause you want to support. Just as important to making sure that the charity you donate to actually receives your donation. Here are some aspects to consider before you make a donation:
Choose a charity wisely
Regardless of what motivates you to support one charity over another, you should feel comfortable with your chosen charity’s activities and how it plans to use its donations. Donating directly to an overseas-based charity can be risky since it can be difficult verifying the information found on the charity’s websites or social media profiles.
How you will donate
There are a number of ways people can donate to charity. Some people feel comfortable making a regular set donation, whereas others prefer one-off donations. Individuals can also support a charity through automatic deductions from their salary. For example, if an employer has a workplace giving scheme, an employee’s donation can be deducted from their pay and sent directly to their preferred charity.
Those who opt to do this earn tax benefits at the time of donation and get a summary of payment at the end of the year. However, individuals should ensure that they can only participate in a workplace giving program if the charity has deductible gift recipient (DGR) status.
Another method of donating is to leave a bequest in your will. To do this, individuals need to contact the charity directly to discuss their plans.
Check if it is a legitimate charity
If the name of a charity seems unfamiliar, individuals should ask for more information about it, like where it is based, what its donations used for and if donations are tax deductible. Even if you have heard of the charity before, it can pay off to check that the person who contacted you is authorised to represent the charity.
Also, be wary of giving out your credit card details, as there are other ways of donating if it is a reputable charity contacting you.
Check if your donation is tax-deductible
A donation will only be tax deductible if it is donated to a charity that has been endorsed by the ATO as a deductible gift recipient (DGR) organisation.
Tax deductions are only given for donations that are $2 or more and claimed in the person’s tax return for the income year in which the donation was made.
Posted in: Business
Small businesses operating in an ever-changing environment increasingly need to ensure they get flexible working schemes right. Finding the right balance can be mutually beneficial for both your business and employees.
Business owners are responsible for effectively implementing and managing flexible working arrangements that ensure all employees are satisfied. Here are some things to consider when approaching flexible working schemes:
Flexible working arrangements not only make commercial sense but employers are legally obliged to consider the arrangement where an employee applies. Therefore, consideration needs to be given to all employee requests and when assessing applications you must make sure that they are not unfairly disadvantaged by their personal circumstances.
It is important to remain up-to-date with the latest legal documents, contracts and processes to ensure your business complies within its legal requirements.
Adopt a specific policy
Introducing a specific policy so decisions are clear and consistent for all employees is vital to the success of flexible working schemes. Inform employees of your expectations when commencing an arrangement, such as using an ‘out-of-office’ message when away, sharing employee work schedules and online calendars etc.
Reviewing flexible arrangements on a regular basis is a great opportunity to provide feedback to your employees and make any necessary changes. Conducting performance reviews for staff on flexible arrangements should be the same as for anyone else. Business owners may also want to consider gaining feedback from colleagues as these arrangements need to work for the whole team to succeed.
Posted in: Super
Insurance arrangements in super can create a few surprise outcomes for members who leave big superannuation funds to start their own self-managed super fund yet leave a portion in their old fund.
Members need to be wary of the traps that can cause a loss of cover. As insurance is a complex financial product; members need to understand the benefits, risks and the costs entailed when entering into insurance cover in large superannuation funds.
Even though it may seem advantageous to access low cost insurance with a large super fund there are some circumstances that may cease insurance cover including:
Most large super funds will require members maintain a minimum balance in their account to retain cover which can range from as low as $1,000 and up to $10,000.
Although most funds allow insurance cover to be kept providing premiums can be automatically deducted, some funds may cease cover once the account balance falls below the threshold and when no employer contributions have been made for six months.
Some superannuation funds that offer automatic income protection insurance will terminate a member’s insurance cover if employer contributions cease for six months. Other funds may cease income protection insurance cover after 13 months from the date of the last employer contribution regardless of the account balance.
If you change employers or no longer work in a particular industry you may risk losing your insurance cover. Funds may require that a particular employer makes contributions to the account to retain total and permanent disability (TPD) and income protection cover.
Members who cease to work in the public sector may risk losing their cover from the day they officially cease employment with the relevant public sector. These public sector funds generally do not accept further contributions or rollovers if the member is no longer working for the relevant public sector employer.
Some super funds may pay out insurance at the TPD level upon terminal illness, which reduces any remaining life cover paid on death. This may result in a deprivation of funds to account for medical or palliative care before death. This style of cover is in stark contrast to other funds that pay out 100 per cent of life cover upon terminal illness.
Posted in: Tax
The ATO has identified certain businesses it plans to target for potential tax audits. These businesses include the supermarket, bakery, computer system design and car retailing industries that often need more help to meet their tax and super obligations.
In response to this, the ATO has begun an education campaign for business owners in these industries to assist them better understand their responsibilities such as superannuation, pay as you go (PAYG) withholding and FBT.
From July 2016, the ATO will be undertaking audits of employers who continually fail to meet their obligations, particularly those who do not correctly meet their superannuation obligations.
The tax office will be examining:
– how much employers are required to pay
– if employers are meeting their quarterly deadlines
– if employers pay super for contractors
– if employers are keeping accurate records
– if employers pass on an employee’s TFN to their super fund within 14 days of receiving it
Posted in: Tax
The ATO has issued a statement expressing its concern over recent misrepresentations of transition to retirement income streams (TRIS) and how they are meant to operate.
In its statement, the ATO said that under special circumstances a member can select under regulation 995-1.03 of the Income Tax Assessment Regulations (ITAR) 1997 to treat a TRIS payment as a super lump sum and access the low rate cap.
Members who choose to make this election for income tax purposes must recognise that the nature of the payment from the SMSF does not change for the purposes of the super regulatory law.
The tax office has warned that the complexity surrounding these transactions give rise to a number of issues that trustees need to consider to ensure their SMSF’s compliance with superannuation regulatory and income tax laws.
In particular, the ATO reminds trustees that:
it is the nature of a TRIS payment for superannuation regulatory law purposes that is relevant to a trustee’s compliance with the 10 per cent TRIS payment annual limit
if the TRIS payment is not a lump sum for super regulatory law purposes, it cannot be paid by an in-specie asset transfer
electing for a TRIS payment to be treated as a super lump sum for income tax purposes may affect the amount of the SMSF’s exempt current pension income for an income year and whether particular fund assets are segregated current pension assets
electing for a TRIS payment to be treated as a superannuation lump sum for income tax purposes will affect which super-related tax offset/s may apply to the payment
Posted in: Business
Businesses that choose only to hire experienced staff are missing out on the energy, drive and creativity of youth. Many employers are reluctant to hire young people because they doubt their readiness to work, abilities and skill level.
However, business owners need to realise that younger people do have plenty to offer, and in the right environment, will thrive. For example:
Many young people came into the job market during or after the last recession, which has had a continuing impact on the job prospects of young Australians. Young people want to work and they want to prove themselves.
While this isn’t to say that older people don’t understand the latest digital technology, for younger generations, digital has always been the norm.
Since youth is a time of change and flexibility, young people are flexible and willing to learn new skills. They are also usually eager to work in new areas or locations.
Younger people can use social media platforms like Facebook, Twitter, WhatsApp, SnapChat, Instagram to reach customers, prospects and future business partners.
Younger workers have the time, energy and interest to keep up to date with the latest products and services. They can help a business adapt quickly to these trends and act as focus groups for targeted marketing campaigns.
Posted in: Super
Most self-managed super fund trustees don’t give much thought as to how much professional indemnity (PI) insurance their advisor has.
But since PI insurance is the only course of action to recover lost funds for trustees who become victims of fraud or negligence, it is an essential prerequisite trustees should be aware of.
PI insurance is insurance that provides financial compensation to trustees in the event that the advice they have been given proves to be negligent.
Unfortunately, there are many cases of negligent advice. Negligence becomes a factor when an adviser alludes to a particular idea or strategy they don’t understand or know to be deceitful (or even fraudulent) and encourages a trustee to think about it in a positive way.
SMSFs are all about individuals taking responsibility for their super, which includes being aware of circumstances where things can go wrong. Therefore, one of the essential prerequisites for anyone engaging an SMSF adviser is to be aware of the professional indemnity insurance they have. That involves directly asking them how much insurance cover they have and whether or how it covers the services they offer.
The advisor should provide this is information in writing as it may need to be referred to in case there is cause to make a claim against it.
Competent SMSF advisers will have read a trustee’s fund trust deed and not give advice that is contrary to what it states, as doing the latter can be regarded as negligent.
Anyone who is competent enough to provide specialist SMSF advice has professional indemnity insurance, including accountants, financial advisers, auditors, SMSF administrators and tax agents.
Questions to ask about PI cover is whether it captures all the advice about services that are provided e.g. strategic advice about super pensions such as transition to retirement pensions.
Knowing what services are not covered under PI insurance and why this is so is also just as important. An entitlement a fund could win when successfully challenging an adviser under a PI insurance claim is restoring the fund to what it was before the advice was given.
Posted in: Business
Categorising the problems and growth patterns of small businesses in a systematic way can increase owners’ understanding of the nature, characteristics and challenges of business.
While small businesses vary widely in size and capacity for growth, they do experience common problems that arise at similar stages in their development.
For owners and managers of small businesses, an understanding of these common problems can aid in assessing current challenges and help anticipate the key requirements at various points.
Stage 1: Existence
At this stage, the main challenges of the business are obtaining customers and delivering their product or service. The owner usually does everything and directly supervises everyone. Systems and formal planning are minimal to nonexistent and the overall strategy is simply to remain alive.
Stage 2: Survival
Reaching this stage means the business is a workable business entity. It has attracted enough customers and satisfied them sufficiently with products or services to keep them. The key problem has shifted from mere existence to the relationship between revenues and expenses. Systems development is minimal and the major goal is still survival.
Stage 3: Success
At this stage, owners usually face the decision on whether to exploit the company’s success and expand or remain the same and keep the company stable and profitable. A key issue to arise is whether to use the company as a platform for growth or as a means of support for the owners.
Stage 4: Take off
In this stage the key problems are how to grow rapidly and how to finance that growth. In regards to cash flow, owners must determine whether there will be enough to satisfy the great demands growth brings. This is a pivotal period in a business’s life. If the owner rises to the challenges of a growing company, both financially and managerially, it can become a big business. If not, it can usually be sold at a profit provided the owner recognises their limitations. Often those who reach Stage 3 are are unsuccessful in Stage 4 because they either try to grow too fast and run out of cash or are unable to delegate effectively enough to make the business work.
Stage 5: Resource maturity
The greatest concerns of a business entering this stage are controlling financial gains brought on by rapid growth and retaining the advantages of small size. Businesses who reach this stage have the resources to engage in detailed operational and strategic planning. The business’s systems are extensive and well developed. The company has the advantages of size and financial resources, and if it can preserve its entrepreneurial spirit, will be a formidable force in its market.
Posted in: Super
The prospect of putting less into superannuation has prompted many Australians to start looking for other ways to boost their retirement savings.
Jumping on the offensive by seeking out other tax-effective ways to increase retirement savings isn’t always easy, with complications such as fees, administration and confusing terminology attached to saving outside of super
Nonetheless, there are existing strategies that may experience a resurgence if contribution caps are reduced. Below are three options for savers looking to alternative measures to protect their wealth:
For those in the top tax bracket, insurance bonds (also known as investment bonds) can be used as a wealth-building strategy. They are a type of a life insurance policy with the features of a managed fund sold through life insurance companies and building societies.
All earnings within the structure attract the corporate tax rate of 30 per cent. After ten years no further tax is payable.
Investors can top of up the amount in the fund as long as their subsequent investment does not exceed 125 per cent of the initial investment. Doing so triggers the 125 per cent rule which sets back the 10-year benefit to year one for the newly invested amount.
For those who have at least 20 years or more until retirement and can afford to take on a more aggressive strategy, instalment warrants may be a viable alternative to salary sacrificing. Instalment warrants are similar to a lay-by on an asset like shares i.e. similar to putting down a deposit or a part-payment and repaying the remaining amount on the listed asset in instalments over time.
A key selling point of an instalment warrant is that the taxpayer receives all the benefits of owning shares, such as dividends and franking credits. The interest component of the loan and the borrowing fee can also be offset against tax.
However, since instalment warrants can be a relatively aggressive strategy, they may be better suited to those who have a longer investment horizon so they can ride out the volatility.
When used correctly, family trusts can be an effective way to add to super. They allow higher-earning family members to distribute income to lower-earning family members to even out the tax burden among the family and protect assets for future and current generations.
Family trusts are accessible before retirement and can safeguard assets for nominated people and purposes, which can help prevent the assets falling into the wrong hands in the case of death or divorce.
However, with annual running costs of around $2000 and set-up costs of about $2000, family trusts are only appropriate for those who can build up $200,000 or more within five years.
Posted in: Tax
The ATO has begun working with insurance companies to assess artworks and collectibles owned by taxpayers and identify the owners of these kinds of assets.
There have been many instances where the tax office has identified ‘lifestyle assets’ that were not being properly accounted for. Since some assets may be subject to capital gains tax (CGT) on disposal, it is fundamental taxpayers are aware of properly accounting for their assets to avoid being hit with a CGT bill.
The ATO has advised taxpayers to be aware that:
– items purchased for more than $500 on or after September 20, 1985 are subject to CGT, even if they are kept for the personal use or enjoyment
– special CGT rules apply to items that form part of a deceased estate
– the date of an asset’s purchase or auction needs to be accounted for; not the asset’s settlement date
With changes looming for Australia’s SMSF landscape, it is of particular importance taxpayers understand how to account for any assets or collectibles their SMSF holds. The way collectible investment assets are dealt with when owned by an SMSF will be required to adhere to a new set of rules.
From July 1, 2016, the rules regarding any collectible and/or artwork owned by an SMSF include:
the collectibles cannot be stored at an SMSF trustee’s residence
an SMSF trustee or a related party is not permitted to lease or use any of the collectibles
the collectible must be insured by its own separate policy
the storage decisions by the trustees must be documented and minuted
if the collectible is to be sold to an SMSF trustee or related party, then a valuation by a qualified independent valuer may be required to determine the market value