Retirement on your mind?

Retirement on your mind?

As you saw in our previous month’s client video with Steve Fairall, he’s been retired for 2 years and it looks pretty good! Steve says, “there was a stage when we had 4 young kids, we wanted to provide them with a good life in Sydney, help them grow and get well educated whilst also setting ourselves up for the future.”

But there’s a lot of work and strategy that goes into a financially effective retirement.

Let me explain,

As you would know if you meet certain requirements you can add up to $25,000 per year into your superannuation fund as a concessional contribution and up to $100,000 can be added as a non-concessional contribution each year. 1

During the accumulation phase of your superannuation, contributing to your fund can ensure that you will have ample funds held tax effectively during your pension phase. Most people think after you are 65 years old and no longer working that you are unable to make voluntary contributions. However, this is where the strategy comes into play.

It is called the “downsizer contribution”, put simply if you are aged 65 or older and you have owned your principal place of residence for at least 10 years you may be eligible. This means you can make a tax-free contribution into your super of $300,000 and as a couple you can contribute $600,000 irrespective of having a total superannuation balance in excess $1.6 million.

Prime Wealth’s Senior Advisor Angus Rodgers says, “Where it applies, this is an awesome strategy to ensure retirement funds are maximised and invested tax-effectively.”

Still confused or want to know more about this strategy, the tax and social security implications talk to our advisors today on (02) 9415 1511 or email us.

1 This contribution will be considered at 30 June of the financial year in which the contribution is made, when the total superannuation balance is recalculated.

This strategy is not for everyone and has been provided as general information only and prepared without taking into account your financial position, objectives, and needs. You should consider its appropriateness and seek financial advice before making any financial decisions.

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How the ‘gig economy’ has changed work and the economy.

How the ‘gig economy’ has changed work and the economy.

Firstly, you’re probably wondering what this whole “gig economy” means.  It’s actually a buzz phrase, first coined at the height of the financial crisis when a number of workers started ‘gigging’ and working many casual jobs to stay afloat financially. Today, it is more recognised with people freelancing who are seeking more flexible and diversified work and working hours especially within the rapidly growing digital platforms.   These platforms allow freelancers to directly connect with potential employers to find employment.  Hence the term ‘gig workers”.  Great examples of these digital platforms are companies such as Uber, Airtasker and Deliveroo who are changing  traditional markets.

With this growing trend legislation also needs to be updated to reflect these abovementioned changes and it has, but it has been slow. Internationally, we have seen disagreement over gig workers classifications as either ‘employees’ or ‘independent contractors’. The most recent ruling by Australia’s Fair Work Ombudsman in June 2019 found Uber drivers to be independent contractors because there is not “an obligation for an employee to perform work when it is demanded by the employer”, as reported by Stuart Ridley.

A survey commissioned by the Victorian government published in June 2019, found 7.1% of Australians reportedly used a digital platform such as Airtasker (34.8%), Uber (22.7%), Freelancer (11.8%), Uber Eats (10.8%), Deliveroo (8.2%) for work. This report further found 64.8% of gig economy workers to access work via one platform opposed to 35.2% who accessed work through more than one platform and 11.4% who are registered on four or more platforms.

This however has forced changed to be made in the definition of work reviewing the definition of ‘casual’ work to ensure legislation applies to capture gig workers under workplace health and safety, improve superannuation rights and ensure protection under Australia’s industrial relations system. Simona Scattagalia Cartago says, “Getting a real measure of this global phenomenon is not easy, especially when some may underestimate its true size by considering only gig work as a primary source of income. In the US, more than 35% of the workforce seems to be participating in the gig economy, and that number is expected to jump to 43% by 2020.”

This however is also causing issues regarding superannuation. The Association of Superannuation Funds of Australia (ASFA) noted almost a quarter of self-employed people to have no super and less likely to meet the $450 per month earning threshold with any one employer as recorded in February 2018. It has been suggested a new ‘dependant contractor’ category to be made, ditching the earning threshold.

Further taxation issues have arisen from this new gig economy with the Australian Tax Office (ATO) updating guidelines for people earning income via digital platforms to also include ride sharing, short-term property or room rentals or skills on demand, as changed in June 2019. The ATO warn they will be matching data earnings from such above-mentioned platforms.

If you want to know more about how to navigate through these gig economy changes, please get in touch with the team via email or phone us 02 9415 1511. Speak soon!

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Don’t let your Christmas generosity cause unwanted tax for your business

Don’t let your Christmas generosity cause unwanted tax for your business

When celebrating Christmas with your staff in the form of Christmas parties or gifts, be sure to keep accurate record as certain scenarios may attract Fringe Benefit Tax (FBT). Since 1986, the FBT system has existed in order to tax on things on the fringe, as the name suggests or outside of your salary package.

There is no separate FBT for the Festive Season however you may encounter several different circumstances when providing these events to your staff. This could also include fringe benefits provided by you to past and future employees and their associates (spouses and children), an associate or those under an arrangement with a third part to any current employees.

Implications for taxpaying body

If you are not a tax-exempt organisation and do not use the 50-50 split method for meal entertainment, the following scenarios may help you determine whether there are FBT implications arising from a Christmas party;

Implications for tax-exempt body

If you are a tax-exempted organisation the following situations may be relevant in determining the possible FBT implications arising from a Christmas party.

Understanding the Fringe Benefits Tax implications can be confusing and for a merrier Christmas your awareness of FBT and having accurate record keeping is important. Before planning your Christmas party, staff and client gifts please call us for advice.

If you any questions and what to know more please get in touch 02 9515 1511 or email us reception@primeadvisory.com.au.

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The real cost of late payments

The real cost of late payments

People power businesses, and when people are paid on time not only do you keep your employees stress lessened and enjoyment heightened but you also build a more productive workforce.

A recent survey performed by Xero found 43 percent of workers to be experiencing payday problems in Australia, rising to 49 per cent for those employed by small business.

This effected employees in varied ways with 68 per cent reporting feeling stressed and 45 per cent had missed payments such as mortgage repayments. These pay day problems come at a big cost with 43 per cent of employees feeling less engaged and productive at work and over a third (34 percent) of employees considering leaving their job as a result.

From all surveyed in the study the most common payment errors experienced by employees were incorrect salary payments (24 percent), followed by late salary payments (22 percent), underpayment of salary (22 percent) and overpayment of salary (10 percent).

As a small to medium business owner, sometimes you must do it all, but finances may not be your strong suit. It’s no surprise that 73 percent of business owners feel much more optimistic about their business when they have positive cash flow.

This further goes to impact the personal wellbeing of business owners with more than 40 percent of owners claiming late payments to affect their mental health, 43 percent of owners losing sleep over their businesses cash flow, and 37% of entrepreneurs have considered giving up because of cash flow issues.

This sounding all too familiar? Don’t struggle in silence, that’s what we are here for. Please give us a call, 02 9415 1511 or contact us and we can get you on track.

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Self Correct Your Super Or Suffer….

Self Correct Your Super Or Suffer….

Find out what the Super Guarantee Amnesty means for you.

After the original amnesty failed to pass parliament in May 2018 the government have reintroduced legislation to establish a one-off amnesty for historical underpayments of the superannuation guarantee.

If enacted this will apply from the date of the original amnesty announcement, 24 May 2018 until 6 months after the legislation has passed. This will give employers time to disclose of these super guarantees to the commissioner of taxation including historical underpaid or unpaid for any period to the March 2018 quarter.

To qualify for the amnesty, employers must voluntarily make this disclosure and either pay the full amount owing or arrange a payment plan in which all payments are met otherwise the amnesty will no longer apply.

The ATO continue its compliance activities during the amnesty period and if they make the discovery first, full penalties will apply. The amnesty will also not apply to amounts already identified as owing in which the employer is subject to an ATO audit.

What employers pay for failing to meet SG obligations

No AmnestyAmnesty
SGC comprised of:SGC Comprised of:
- The outstanding SG entitlements (this component might be higher than what it would have been had the entitlements been paid on time)- The outstanding SG enititlements
- Interest of 10% per annum- Interest of 10% per annum
- An administration fee of $20 for each employee with a shortfall per quarter- No administration fees
Penalties of up to 200% of the amount of the underlying SG charge (minimum 100% for quarters covered by the amnesty)No penalties
A general interest charge of the SBC or penalties are not paid by the due dateA general interest charge
SGC amount is not deductible - even if you pay the outstanding amountA general interest charge

So, what do employers need to pay under the amnesty?

Under normal circumstances employers pay the super guarantee charge and lodge a superannuation guarantee statement. However, under the quarterly superannuation guarantee, the interest is calculated on an employer’s quarterly shortfall amount from the first day of the relevant quarter to the date when the super guarantee charge would be. If the superannuation guarantee is paid late, special provisions exist within the legislation to automatically protect employees from inadvertently breaching concessional contribution cap limits if the unpaid superannuation guarantee is paid to the Commissioner and then transferred to the employee’s superannuation fund. In the case an employer makes the payment directly into the employee’s fund, the individual would need to apply to the Commissioner requesting the exercise of discretion to either disregard the concessional contributions or allocate them to another financial year.

But what happens if you don’t take advantage of this amnesty?

If you are found to have underpaid employee’s superannuation guarantee penalties up to 200% apply. With the amnesty-imposed legislation however calls for tougher penalties on employers that do not voluntarily correct underpaid or unpaid. The Commissioner therefore loses the power for leniency even in cases where an employer has made a genuine mistake.

So what does that mean for you?

Regardless of if you do not believe that your business has an Super Guarantee underpayment issue, it is worth undertaking a payroll audit to ensure that your payroll calculations are correct, and employees are being paid at a rate that is consistent with their entitlements under workplace laws and awards.

With the introduction of single touch payroll there is going to be a lot more transparency on super and non-compliance with the ATO now able to capture more recent non-payments.

If  you need a super health check get in touch with our accounting team to see how we can help you avoid these penalties and stay on track , you can call us direct on 02 9415 1511 or contact us.

 

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