A ‘set and forget’ attitude can no longer persist

A ‘set and forget’ attitude can no longer persist

Like mortgages, once upon a time life insurance policies and portfolios would incur little change year-on-year and, as a consequence, it was common to see the ‘set and forget’ practice of many clients and advisors.  This attitude was aided also by the fact that many Australian’s held a vast majority of their personal insurances within the superannuation environment which often meant they were out of sight and mind.

Over the past few years, however, we have seen increasing volatility and some significant premium increases most notably around income protection as well as Life & TPD cover within industry superfunds.  It was evident that insurers had concerns about keeping the income protection product profitable but we’re not sure anyone saw the enormity of losses that were about to ensue.

In the 12 months to March 2020, the industry as a whole reported an after-tax loss of $1.8bn dollars, an incredible transition from a $760m profit in previous 12 months.  Some of this was due to poor investment results in the Dec and Mar quarters due to COVID-19 but much of it was also due to income protection products which were contributing losses in excess of $100m per month.

This can be seen below in our governing body, APRA’s, recent quarterly statistics report to March 2020.

The reasons behind these results are varied but most notably they are due to;

  • Claims experience being far greater than ever anticipated driven largely by an increase in musculoskeletal and mental health claims
  • Extremely low returns on investment. Insurers place their deposits into bonds and other fixed interest products and with interest rates at globally low levels, they are simply not making the returns that were forecasted years before when policies were being priced
  • Regulatory change in the superannuation industry for those with inactive accounts or under the age of 25

It is the trend seen in the graphs above that is worrying however and the reason that APRA has now seen fit to step in to enforce product change with the first having been the abolishment of new ‘agreed value’ income protection policies from the 1st of April, 2020.  This is one of a number of changes that will be seen over the coming 12-18 months (and perhaps beyond) aimed at achieving APRA’s clear mandate for income protection products to become profitable in their own right and not subsidised by lump sum products.

Along with product amendments, the impact most keenly felt for our clients has been the significant premium increases that almost every insurer has already implemented and the likelihood is that more are to come.  Just this week, OnePath announced a 25% increase to IP (Income Protection) premiums for both stepped and level premiums and we’ve seen similar (and some even greater) increases from many other insurers over the past few months.

The importance of reviewing your portfolio

Once, this industry would see little change to policies year on year. This narrative certainly does not ring true for the next 36 months (at least) and our focus at MBS Insurance is strictly to deliver better outcomes and proactively manage our clients’ insurance needs and portfolios.

We have believed for the past few years that the economics of the industry were heading in this direction and whilst we did not necessarily expect the severity of these results, we have been proactively driving discounted product arrangements with our Insurer partners.  This is not only for new clients, but also existing policy holders.

While reduced premiums appear contrary to what the industry requires, we are in the fortunate position of having a scaled distribution business model, with a client base in a desirable demographic.  Moreover, the philosophy of treating Insurers like partners ensures our clients attain better outcomes and we will continue to proactively mitigate the impact of these changes on our clients via negotiated terms and client engagement, to ensure portfolios remain appropriate and necessary.

Whilst we have always sought to disrupt the ‘set and forget’ culture within our industry, this product change and premium volatility has meant that the engagement of our clients at review time has never been greater, which is pleasing.  However, I would implore anyone with personal insurances in place, whether through their superfund or in a retail policy, to ensure that your existing portfolio is reviewed to ensure it remains the most appropriate and competitive portfolio available.

A ‘set and forget’ attitude can no longer persist… Please get in touch 02 9415 1511 or email reception@primeadvisory.com.au.

Read More
Super guarantee amnesty ends on 7th September

Super guarantee amnesty ends on 7th September

Don’t wait until it is too late. This is the final call for all employers to apply for the super guarantee amnesty before tougher penalties apply. Note there are no extensions available.

As reported in March, the long-awaited superannuation guarantee amnesty bill passed both houses and received royal assent. This super guarantee amnesty provides for a one-off amnesty to encourage employers to self-correct historical super guarantee non-compliance dating from 1 July 1992 to 31 March 2018.

Note payment plans are available if you want to apply but don’t have the funds to pay right now. Additionally, any amnesty payments made before 7th September 2020 are tax-deductible.

If you need assistance, please get in touch with the team at PrimeAccounting on 02 9415 1511 or email reception@primeadvisory.com.au.

Read More
Do not be scammed

Do not be scammed

The Australian Government and Australian Tax Office are warning Australians to keep an eye out for fake/impersonation scams. Scammers want to get their hands on more than just your money. Your personal info is just as valuable.

You might be familiar with scams that ‘phish’ for personal and financial information – like your TFN, myGov details, address, or date of birth – by pretending to be government agencies. Criminals can use these details to drain your bank accounts, buy expensive goods and even scam your family and friends.

Scamwatch reports over $1.26 million lost and more than 7100 reports made as in June however in reality the losses are likely to be far greater. Reported scams increased during tax time with text messages claiming to be from myGov or from agencies claiming to help victims gain early access to their superannuation.

“Scammers are increasingly taking advantage of the financial difficulties and uncertainty generated from the COVID-19 pandemic to trick unsuspecting Australians,” ACCC Deputy Chair Delia Rickard said.

From 1 January-5 July 2020 Scamwatch has received:

  • 67 reports of scams involving impersonation of the Department of Health, or state Department of Health and Human Services, with losses over $8700
  • 443 reports of scams involving Australian Federal Police impersonations with losses over $176,000
  • 1,070 reports of scams involving Services Australia impersonations with losses over $94,000
  • 1,638 reports of scams involving myGov impersonations with losses over $105,000
  • 2,016 reports of scams involving Department of Home Affairs impersonations with losses over $99,000
  • 2,389 reports of scams involving ATO impersonations with losses over $905,000.

 

If you have been scammed and needed to change any of your contact information, please get in touch with our office.

Read More
Help for business

Help for business

The Government has announced further changes to the JobKeeper scheme. The good news is that employees that missed out on JobKeeper because they were not employed on 1 March 2020 might now be eligible. The proposed changes would enable employees employed on 1 July 2020 to receive JobKeeper payments from 3 August if they meet the other eligibility criteria. If you have employees impacted by this change, you will still need to work through the eligibility requirements including providing JobKeeper Payment Employee Nomination, but just remember that these changes are not yet law.

JobKeeper will also be extended beyond 27 September 2020. To receive JobKeeper from 28 September 2020, employers will need to reassess their eligibility with reference to actual GST turnover for the September 2020 quarter (for JobKeeper payments between 28 September to 3 January 2021), and again for the December 2020 quarter (for payments between 4 January 2021 to 28 March 2021).

Most businesses will generally use their Business Activity Statement (BAS) reporting to assess eligibility. However, as the BAS is generally not due until the month after the end of the quarter, eligibility for JobKeeper will need to be assessed in advance of the BAS reporting deadlines to meet the wage condition for eligible employees.

However, the ATO will have discretion to extend the time an entity has to pay employees in order to meet the wage condition.

From 28 September 2020 the payment rates for JobKeeper will reduce and split into a higher and lower rate. Whether an eligible employee can access the higher or lower rate will depend on the number of hours they worked during a 4-week test period. The higher rate will apply to employees who worked at least 20 hours a week on average in the four weeks of pay periods prior to either 1 March 2020 or 1 July 2020. Between 28 September 2020 and 3 January 2021, the higher rate is $1,200 per fortnight, and $750 for the lower rate. Between 4 January and 28 March 2021, the higher rate is $1,000 per fortnight and $650 for the lower rate.

JobKeeper payment rate 30 Mar to 27 Sept 2020 28 Sept to 3 Jan 2021 4 Jan 2021 to 28 Mar 2021
< 20 hours $1,500 $750 $650
> 20 hours $1,500 $1,200 $1,000

Cashflow boost payments

If your business received the first cashflow boost tranche, you will receive a further cashflow boost for the June to September quarters of the same amount. If you report quarterly, the cashflow boost will be paid in two equal payments for June and September. If you report monthly, the cashflow boost is provided in four equal payments.

The cashflow boost is applied to reduce any liabilities in the same reporting period with any excess amount being paid as a cash refund from the ATO.

Support for business employing apprentices and trainees

JobTrainer provides a 50% reimbursement to eligible employers for the cost of apprentice or trainee wages up to $7,000 per quarter. Originally only for small businesses employing less than 20 employees, the subsidy recently expanded to include businesses with under 200 employees.

For small businesses (under 20 employees), the apprentice had to be employed on 1 March 2020 or on 1 July 2020 for claims after this date (claims are open now). For medium sized businesses (under 200 employees), the apprentice had to be employed on 1 July 2020 (claims open 1 October 2020). To access the subsidy, you will need to provide evidence of wages paid to the apprentice.

The subsidy is also accessible to larger employers employing apprentices let go by a small/medium business where that apprentice was eligible for the wage subsidy.

The subsidy is scheduled to end on 31 March 2021.

State & territory based support

In addition to general waivers, reductions or rebates on some Government licensing and fees, each State and Territory has some form of support accessible to certain businesses impacted by COVID-19.

Australian Capital Territory

Support Description Closes
Rate deferrals Rate deferrals for commercial property owners affected by COVID-19. 1 April 2021
Payroll tax deferral All ACT businesses with Australia-wide wages of up to $10 million can apply to defer their 2020-21 payroll tax, until 1 July 2022.

New South Wales

Support Description Closes
Payroll tax deferral Option of deferring 2019-20 payroll tax to October 2020. Instalment plans can be entered into after October 2020.

Payroll tax threshold has increased to $1m for 2020-21.

Small business recovery grant Grants of between $500 and $3,000 to help small business reopen safely. 16 Aug. 2020
Export assistance grants Up to $10,000 for up to 1,000 eligible small or medium NSW export businesses that have experienced disruptions to freight channels or reductions in orders. Opening soon.

Northern Territory

Support Description Closes
Business hardship package A package of concessions including payroll tax waiver or deferral, council rates, utilities and rate concessions. 30 Sept. 2020

Queensland

Support Description Closes
Adaption grant Funding of up to $10,000 for regional micro and small businesses to adapt and sustain operations. When allocation exhausted
Payroll tax relief Payroll tax deferrals for the 2020 calendar year. 31 Dec. 2020

South Australia

Support Description Closes
Support when employing apprentices A range of grants and support when you hire an apprentice – up to $5,000 for hiring an apprentice, $1,500 on equipment reimbursement, and up to $5,200 off the Group Training Organisation charge out rate. Generally 31 Aug. 2020

Tasmania

Support Description Closes
Small business sustainability Grants of up to $5,000 for businesses with fewer than 20 employees to reopen and rebuild. 24 Aug. 2020

Victoria

Support Description Closes
Business Support Fund One-off grant of $10,000 for employers in metropolitan Melbourne and Mitchell Shire and $5,000 in regional local government areas. 14 Sept. 2020
Regional Tourism Accommodation Support Up to $225 per night up to a maximum of $1,125 per bookable accommodation for cancelled bookings during stage 3 restrictions. 19 Aug. 2020
CBD Business Support Fund $20m fund for CBD businesses. No details available as yet but register your interest.
Night-time economy support $30m fund for hospitality businesses. No details available as yet but register your interest.
Payroll tax deferrals Businesses with payrolls up to $10 million can defer their liabilities for the first half of the 2020-21 financial year.
Payroll tax refunds Eligible businesses can claim an emergency tax relief refund of payroll tax already paid in the 2019-20 financial year.

Western Australia

Support Description Closes
International competitiveness co-investment Matched funding of between $50,000 and $100,000 for existing exporters (under 200 employees) of food, beverages and services into Asia. 12 Aug. 2020
Payroll tax relief The tax-free threshold increased to $1m on 1 July 2020.

Automatic grants of $17,500 are being paid to employers with annual Australian taxable wages of more than $1m and up to $4m in 2018-19.

Support when employing apprentices A one-off payment of $6,000 for an apprentice and $3,000 for a trainee employed from 1 July 2020. 30 June 2021
Incentive to employee apprentices Incentive of up to $8,500 for employing an apprentice or trainee from 1 July 2019.
Local Capability Fund Fund to increase capability of SMEs for planning, improvements to internal infrastructure, plant and equipment and training. Current rounds include cost recovery for: PPE manufacturing (up to $500k) and feasibility (up to $20k), and general recovery and growth (up to $100k) for supply to certain industries. 30 June 2021

 

For further support please get in touch 02 9415 1511 or email reception@primeadvisory.com.au.

Read More
NSW Government New $3k Grants for Small Businesses.

NSW Government New $3k Grants for Small Businesses.

From 1 July, the NSW Government will give further support to small businesses of between $500 and $3,000 to assist in safely reopening or upscaling their operations. These costs must be incurred from 1 July 2020. They can include business advice & continuity planning, cleaning products & additional cleaning services, fit-out changes, staff training & counseling, marketing, communications, and advertising.

This new grant comes as the NSW state government’s previous $10,000 grant comes to a halt at the end of the 2020 financial year. The first grant was taken up by 49,000 businesses totalling $490 million of support given by the NSW state government. This comes from a $750 million funding pool, in which the new grant will be funded.

Note if you have claimed the first $10,000 support grant previously you may also be eligible for this $3,000 recovery grant. To be eligible your business or not-for-profit will need to;

  • Have an Australian Business Number (ABN) as at 1 March 2020 registered in NSW
  • Have total Australian wages below the NSW Government 2019-20 payroll tax threshold of $900,000 as at 1 March 2020
  • Have fewer than 20 full-time equivalent (FTE) staff (including non-employing businesses) as at 1 March 2020
  • Have an annual turnover of more than $75,000 as at 1 March 2020
  • Have experienced a decline in turnover of at least 30% from March to July 2020 compared to the equivalent period (of at least 2 weeks) in 2019
  • Are in a highly impacted industry as at 1 March 2020
  • Have costs from 1 July 2020 associated with safely reopening or scaling up their business and can support these costs by providing invoices if required

If you are eligible, please apply online here.

Please note that the grant closes on 16 August, so if you need assistance in understanding if you are eligible for this NSW small business recovery grant, please contact us on 02 9415 1511 or email us.

Read More

SIGN UP

For our free e-newsletter

TAKE A HEALTH CHECK

For our free e-newsletter

Personal