What would happen if….?

What would happen if….?

Life does not always go to plan. While we logically know that, most of us don’t plan for the worst – it’s all a bit morbid and time consuming. However, as the late, great John F Kennedy said, “The time to repair the roof is when the sun in shining”. It might be uncomfortable to think about it, but it’s important to plan for the unexpected and sometime unpleasant aspects of life.

The downside of not planning, should you not be in a position to make decisions about your assets or business is the potential for these hard-earned assets to be squandered.

When people haven’t made firm binding arrangements for their estate, it’s often squandered through family fall-outs, and money handed to the Government that could have been distributed in accord with your wishes.

If you are a business owner, then the stakes are even higher.

As a population, planning is more important than ever right now because:

  • The ageing demographic – 1 in 7 of us are now aged 65 and over (3.8 million)
  • The baby boomer generation represent only 25% of the population but hold 55% of the wealth
  • We are entering a period of intergenerational wealth transfer from the baby boomer generation
  • Over the last 25 years there has been an explosion of wealth in Australia

Making plans for your Estate

Estate planning is simply identifying your assets and liabilities and what you want to happen to those assets if something happens to you. As part of that, you need to look at the issues that might arise and how best to manage them. All of this is then reviewed for tax outcomes and the legal requirements to provide the best care and protection for your beneficiaries.

If you are a business owner, there are also another set of issues to consider to ensure that the business can continue if you are not able to continue in your current role. Or, your beneficiaries can take their share of the value accumulated in the business. This planning will protect your beneficiaries, the business, and your business partners.

Estate planning does not have to be hard work, but it does have to be planned.

It’s also important to understand that actual wealth or the size of your estate is not the sole reason for estate planning. Estate planning is important for:

  • The care and maintenance of minor children.
  • Managing the respective rights and expectations of beneficiaries, particularly with blended families.
  • Avoiding disputes between family members.
  • Relationships outside of the immediate family.
  • Managing liabilities of the estate.
  • Assets which may not be capable of immediate realisation or where value will be diluted by realisation.
  • The transfer of assets through generations.

Estate planning seeks to not only distribute the assets of your estate but do so in a way that protects the estate, addresses issues within the estate, and fulfils your wishes.

What the stats say about our health and longevity

While 4 in 5 of us rate our health as ‘very good’, 50% of Australians have a chronic condition that is likely to cause their death, 63% of adults are overweight or obese, and around 45% of us will experience a mental illness in our lifetime.

Leading causes of death differ by age:

  • 1–44 years: suicide, land transport accidents
  • 45–74 years: coronary heart disease, lung cancer
  • 75 years and over: coronary heart disease, dementia and Alzheimer disease

It’s estimated that 138,300 people were diagnosed with cancer and 48,600 died from it in 2018.

Proportion of adults who are overweight or obese

Australia enjoys one of the highest life expectancies of any country in the world at 82.5 years (in 2015) and is ranked fifth among 35 OECD countries. Japan has the highest life expectancy at 83.9 years.

Men aged 65 in 2014–2016 could expect to live another 19.6 years (an expected age at death of 84.6 years) and the life expectancy of women aged 65 in 2014–2016 was 22.3 years (an expected age at death of 87.3 years).

We’re also working longer – 13% of Australians aged 65 and over participate in the workforce (17% for men and 10 for women). This is compared to 2006 when the workforce participation rate was 8%.

Our experienced advisors at PrimeAdvisory can help you structure and plan for your financial future, including any unexpected life events.  Take our free 5 minute financial health check to understand your current financial position or Contact us to arrange an initial consultation.

 

 

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What Women Need To Consider When It Comes To Super

What Women Need To Consider When It Comes To Super

Today we celebrate International Women’s Day and with this year’s campaign theme #BalanceforBetter – better the balance, better the world; what a great time to start working on maximising your super.

Whilst we are working towards correcting the balance between the genders, unfortunately, on average, women have much lower super balances.

Three key reasons why;

  • On average women earn less than men.
  • Women are more likely than men to take a career break to raise their children.
  • Some women choose to return to work on a part-time basis until their children are older.

All this results in lower contributions and will have a greater impact on their super balance.

What can you do to maximise your super?

There are several steps you can take to start planning.

1. Get Super Smart

Understand where all your super is, how much super you have, what investments you are in, what fees you are paying and what insurances you have through your super fund and if they are adequate.

2. Look at growing your contributions

You can ask your employer to pay part of your pre-tax salary into super, this can be a very tax effective way of growing your super. You can also make further contributions out of your own pocket – also known as after-tax super contributions.

3. Spouse Contribution

Your partner may be able to assist you in boosting your super balance by either spouse contributions or contribution splitting.

4. Get help from a professional

Financial planning can be complex and overwhelming at times. At PrimeAdvisory we will work with you to give a better understanding of your options and get you on track to maximize your super balance for retirement.

A super story:

“PrimeAdvisory were really good at helping me get organised. I had 6 super funds, which were all over the place. They helped me get it sorted out so our net asset position was understood. It helped me know my total asset position and how much wealth we had. At 53, it was important to see a pathway to retirement, how we will fund it and maintain our lifestyle. Having an independent source to facilitate a discussion around finances with my husband also helped bring out the differences between our ambitions and what we want to do in retirement, lifestyle-wise. Working with Guy helps us have those conversations.”Carolyn, 54, Financial Services Executive

To start a conversation about getting on track and planning for retirement contact us today on (02) 9415 1511.

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Warning on ATO and Medicare scams

Warning on ATO and Medicare scams

Recently we’ve been contacted by a number of clients who have received suspicious calls and messages from people claiming to be from the Australian Taxation Office (ATO) and Medicare.  It’s important that you are aware of some recent scams.

Tax scams

The Australian Taxation Office (ATO) has warned about the emergence of a scam where “…scammers are using an ATO number to send fraudulent SMS messages to taxpayers asking them to click on a link and hand over their personal details in order to obtain a refund.”

The refund scam follows a more sinister four phase scam stating there is a warrant out for your arrest for unpaid taxes in prior years. The scam starts with a text message purportedly from the Australian Federal Police (AFP). Within minutes, your mobile rings and the caller identifies themselves as being from the AFP and working with the ATO. They then ask for your accountant’s details. You then receive a call purportedly from your ‘accounting firm’ asking you to verify the AFP/ATO claims. Finally, you are provided with a way, if you act quickly, to make the AFP go away by paying a fee before your ‘imminent arrest’.

The ATO states that it will not:

  • Send you an email or SMS asking you to click on a link to provide login, personal or financial information, or to download a file or open an attachment.
  • Use aggressive or rude behaviour, or threaten you with arrest, jail or deportation.
  • Request payment of a debt via iTunes or Google Play cards, pre-paid Visa cards, cryptocurrency or direct credit to a personal bank account, or
  • Request a fee in order to release a refund owed to you.

Medicare Scam

A new phishing scam sent text messages purportedly from Medicare advising the recipient that they are owed a $200 rebate from Medicare. Once the person clicks on the reclaim link, they are asked to provide their personal details including bank account details for the ‘rebate.’

If you are uncertain about any suspicious messages please contact the registered office of the “sender” or alternatively speak with your accountant or advisor.

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Tax on overseas income – It could be higher than you think..

Tax on overseas income – It could be higher than you think..

 

Do you earn income overseas? A recent case highlights why you might pay more tax than you thought on foreign income.

If you are an Australian resident and earn income from overseas, such as income from investments, sale of assets such as property, distributions from foreign trusts, etc., you will generally need to declare that income in your Australian tax return. If you have paid tax in a foreign country on that income, you might be able to claim a foreign tax offset to reduce your Australian tax liability.

Sounds simple enough but a recent case highlights where problems can occur and you might end up paying a lot more tax than you thought.

The taxpayer in this case was a resident of Australia but was taxed in the US on gains they made on interests in US real estate. Most of the gains they made were taxed at a concessional rate of 15% (rather than the normal rate of 35%) because the interests had been held for more than one year. Some of the gains were ultimately taxed at 35% in the US.

The capital gains were also taxed in Australia and qualified for the general CGT discount of 50%.

As the taxpayer was a resident of Australia and had paid tax on the US gains, the taxpayer claimed a foreign income tax offset for all of the US tax they paid. However, the ATO amended the tax assessment and only allowed a tax offset for slightly less than 50% of the tax they paid in the US.

The problem for the taxpayer was that while the US and Australia both have tax concessions for longer term capital gains, they operate quite differently. The US applies a lower rate to the whole gain while Australia applies a normal tax rate to half of the gain. Unfortunately for the taxpayer, the Federal Court held that the Commissioner’s approach was correct. If foreign tax has been paid on an amount that is not included in your assessable income then you cannot claim a foreign tax offset on it. In this case, the portion of the capital gain that was exempt from Australian tax because of the CGT discount, was not included in assessable income.

It is not uncommon for people who have made capital gains on foreign assets to assume that they get all of the tax back that they paid overseas. Unfortunately, that’s not necessarily the case and often only a partial credit is available, if at all.

Contact PrimeAdvisory for professional advice on transactions overseas that may affect your taxable income.

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Good News For Small Business With Instant Asset Write-Off Set To Be Extended

Good News For Small Business With Instant Asset Write-Off Set To Be Extended

On 30 January 2019, the Prime Minister, Scott Morrison delivered some good news for business owners, announcing that the instant asset write-off scheme is expected to be extended through to 30 June 2020 and the current threshold of $20,000 increased to $25,000.    The government will be seeking to legislate this change when Parliament resumes on 12 February.

What is the Instant Asset Write-Off Scheme?

Initially, the Instant Asset Write-Off allowed for businesses with an annual turnover of less than $10 million to write-off business assets worth up to or less than $20,000, bought and used or installed ready for use.  This applied irrespective of whether the asset was purchased new or second-hand. This would then allow for business owners to claim a deduction for that asset in the same financial income year as the asset was purchased.

What does The Extension Mean?

In the words of “Sco-Mo” himself, it means that “Businesses can go out and invest today, whether it’s a vehicle, a piece of plant or equipment, all of it up to $25,000 and immediately write-down the asset”.

We look forward to providing an update following formal parliamentary approval.

In the meantime, for help with planning your tax effectively and taking advantage of all available business tax benefits contact us.

 

 

 

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