The effects of the Coronavirus

The effects of the Coronavirus

Since the outbreak of Coronavirus (COVID-19) on the 24th January 2020 there have been 4,027 deaths as of 10th March 2020 with 114,422 confirmed cases in 115 countries and territories. This has caused mixed results globally from a nationwide toilet paper shortage to extreme market volatility.

As the spread of the virus widens, we are seeing the effects globally, causing a lack of clarity and doubt for global investors. This is also impacting domestic businesses with supply deficiencies caused by China’s slowdown in production.  As the world’s manufacturing superpower accounting for 29% of production globally this was bound to have an impact.

We have seen the stock markets fall 14.98% year-to-date (at the market close on 9 March 2020) with GDP expected to slow by billions of dollars. This also encouraged the Reserve Bank of Australia (RBA) to announce its decision on the official cash rate for March slashing an already historically low interest rate by 25 basis points to 0.5%. AMP’s Capital chief economist Shane Oliver says, “Rate cuts won’t kill the virus or solve supply side constraints but they will help ease the pain for borrowers through this uncertain period and will help boost growth once the virus is under control.”

So, what should you do? Until more is known about the virus, we won’t fully understand the real economic and medical impacts of COVID-19 however we expect the volatility will continue. Please remember that our advice at times like these is to focus on the portfolio’s timeframe, generally years and decades, rather than weeks.

Should you have any concerns or questions you wish to discuss regarding COVID-19 and its impact on your finances please get in touch with your advisor on 02 9415 1511 or email reception@primeadvisory.com.au

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Health & Wealth

Health & Wealth

Talk about a vicious cycle. Money is one of the most significant causes of stress; unrelenting stress can lead to severe issues with our health, and severe health issues can affect our ability to do our jobs; resulting in even more financial struggles. The connection between health and wealth is why it is critical to develop and maintain lifelong plans to manage both.

Given my area of expertise, I will share some of my thoughts on what a long-term health plan should include at a minimum.

Exercise

Any physical activity is better than none. Research shows that exercise is one of the best short-term strategies for managing stress. It decreases our risk of developing heart disease and diabetes, thereby reducing the opportunity for stress to worsen these conditions. In general, exercise makes us feel good, improves our mood and increases our sense of self-efficacy and achievement. Some evidence even shows that exercise makes for a smaller stress response to some psychological stressors.

Getting active by walking at least 3-4 times per week will make a significant difference and help you manage your stress levels. Remember that exercise needs to occur regularly to give us the stress-relieving benefits, so put it in your schedule, and get moving. Don’t overdo it though and if you spent most of the past few years lounging on the couch with the TV remote close at hand, then see your doctor before you start pounding the pavements.

Sleep

Getting enough shut-eye is paramount to managing our stress levels and overall health and wellbeing. Although our brains are on average 3% of our body weight, they need 25% of our energy supplies! Research shows that deep sleep is essential for energy regeneration and if we don’t get enough deep sleep, we become more stressed. Research shows that 75% of insomnia is triggered by significant stress. Again, a vicious cycle: stress stops you sleeping, and no sleep makes you more stressed!

Cleaning up your sleep routine will have a significant impact on your stress levels general wellbeing. We need at least 8-9 hours of sleep a night, be device-free for at least 1-2 hours before we fall asleep, in a room dark enough that you cannot see your hand in front of your face and running a temperature of around 21 degrees Celcius.

Relaxation

Deliberately relaxing through meditation, breathing exercises, or mindfulness practices is important to switch off our sympathetic (fight or flight) nervous system and switch on our parasympathetic (rest and digest) nervous system. It also does wonders in reducing the amount of stress hormones that are circulating in our bodies.  The key is to do them regularly (15-30 min/day). There are so many apps available that can be used to help centre our breath and stay in the present.

Nutrition

Like cars, we cannot run on empty tanks or crappy fuel. Current nutritional guidelines call for eating a variety of vegetables and whole fruits; whole grains; low-fat dairy; a wide range of protein sources including lean meats, fish, eggs, legumes, and nuts; and healthy oils. By focusing on what we eat can make a massive difference to how our energy tanks are filled.

An 80:20 ratio of nutritionally valuable to nutritionally less valuable or junk food is a possible way to go. For those who feel they need to lose some extra kilos, try a 90:10 ratio during the week and 80:20 over the weekend. A word of advice if I may. Don’t be too strict when it comes to food, because we need to make it a way of life and our eating habits need to be sustainable.

When it comes to living a financially healthy life, recommendations are not quite as straight forward because it depends mostly on our individual circumstances. A long-term financial plan is, however, a must and I will leave this advice to our financial experts in next month’s newsletter.

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Support to get on track after the bushfires

Support to get on track after the bushfires

This 2019-2020 Australian bushfire season has seen over 18 million hectares burnt, destroying over 5,900 buildings including 2,800 homes. Lives and wildlife have been lost and the cost runs into the billions in lost revenue and clean-up costs.

With approximately 3.5 million businesses, individuals, and self-managed superfunds in the bushfire affected areas, the ATO have granted the following special concessions and relief to the affected postcodes;

  • An automatic extension until 28 May 2020 to lodge and pay activity statements, income tax, SMSF and FBT lodgements. The deferral does not apply to: Superannuation guarantee payments or lodgements, Large PAYG withholders (although they will be assessed on a case by case basis if they apply for relief from the ATO)
  • Fast tracking of refunds due
  • Income tax instalments able to be varied to nil without penalty
  • Tax debt recovery on hold until 28 May 2020.
    • Impacted taxpayers need to apply for special consideration. The ATO has stated they will, “consider releasing individuals and businesses from income tax and fringe benefits tax debts if they are experiencing serious hardship.”
    • Interest and penalties accrued by taxpayers in affected areas since the bushfires commenced will be remitted

Support for individuals and families is also provided through the disaster recovery payments, (a tax exempt Federal Government payment), available for those who are seriously injured, have lost an immediate family member or have lost or had significant damage to their home or major assets. Relief includes;

  • $1,000 for each eligible adult, and
  • $400 for each dependent child under the age of 16.
  • An additional $400 to help with education expenses for eligible children. These payments are automatic if you are the primary carer of a child affected by the bushfires after 30 June 2019.

Businesses are also eligible for support if they have suffered direct or indirect economic losses and may be eligible to access;

  • Recovery grants of up to $50,000 (tax free)
  • Concessional loans of up to $500,000 for eligible small businesses (including farmers, fishers and foresters) and non-profit organisations who have suffered significant asset loss or significant loss to revenue. The loan would be for up to 10 years and used for the purposes of restoring or replacing damaged assets and for working capital.
  • A range of State Government grants are also available.

The brave volunteer firefighters in NSW and QLD will also be eligible for payments of up to $300 per day, with a cap of $6,000. The payments will not be means tested and are tax-free, NSW and QLD.

If you have been affected by the fires this bushfire season and would like assistance in claiming and understanding your eligibility, please get in touch with the team today on 9415 1511 or email reception@primeadvisory.com.au.

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‘Lifestyle assets’ – the next ATO target

‘Lifestyle assets’ – the next ATO target

As the ATO cracks down on taxpayers with their recent data matching program rollout,  this will now allow the matching of “lifestyle assets” such as yachts, fine arts and thoroughbred horses by requesting insurance policy information from 30 insurers which will assist to automate compliance activity.  The existence of an insurance policy could alert the ATO of the taxpayer’s wealth and identify where the taxpayer has non disclosure their all their assets.   

The ATO expect 350,000 taxpayers to be impacted by this review as they reveal undisclosed or unreported income from the 2015-16 financial year to today. Deputy Commissioner Deborah Jenkins says, “If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a three million dollar yacht then this is likely to raise some red flags,” Deputy Commissioner Deborah Jenkins said. 

The ATO is looking for: 

  • under-reporting of income and mismatches between lifestyle assets and reported income,  
  • the purchase of assets in a company name but where those assets are used for private purposes (incorrect claims or non-reporting of GST credits, FBT, Division 7A, capital gains tax), and
  • lifestyle assets purchased by self-managed superannuation funds that might breach the sole purpose test. 

Unsure what that may mean for you and need some advice? Get in touch today 02 9415 1511 or email reception@primeadvisory.com.au. 

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Changes to capital gains tax forcing expats and foreigners to consider listing their homes.

Changes to capital gains tax forcing expats and foreigners to consider listing their homes.

Are you an expat, foreigner or know someone who is? Share this article before it’s too late.

In late 2019, legislative changes were made that will exclude tax non-residents from accessing the capital gains tax (“CGT”) main residence exemption, directly impacting foreigners and expats who may be considering selling their family home / main residence in Australia.

Key takeaways:

  • If you are a tax non-resident of Australia, you are now excluded from accessing the CGT main residence exemption.
  • Limited exemptions will continue to apply for non-residents if certain ‘life events’ occur.
  • If you don’t satisfy the conditions for a ‘life event’, your Australian property sale will be taxed on the full value of the capital gain (utilising the original acquisition price for all post 1985 properties).
  • A limited transitional window applies for properties sold prior to 30 June 2020.

Transitional rules expiring on 30 June 2020

Transitional rules are now in place until 30 June 2020 which will allow non-residents to sell their family home in Australia and still access the main residence exemption.  However, the property must have been acquired before 9 May 2017 and contracts for the property’s sale must be exchanged no later than 30 June 2020.  Therefore, this only provides non-residents with a very limited period of time in which to find an agent, market and then sell their property by 30 June 2020.

‘Life events’

If you would have been able to access the main residence exemption under the prior rules, and have been a non-resident for six years or less, then there is a limited exclusion to the new rules where certain ‘life events’ occur including:

  • Your death or the death of your spouse or child (under 18 years);
  • Terminal illness of you, your spouse or your child; and / or
  • Marriage breakdown and divorce.

Under these limited circumstances, non-residents can continue to access the main residence exemption.  For example, if you or your spouse dies while living overseas and it has been six years or less since you became a non-resident, the property can continue to be treated as your main residence upon its sale.

However, if you have been a non-resident for greater than six years, you will not be entitled to the main resident exemption upon the property’s sale, irrespective of whether a ‘life event’ has occurred.

If you need advice on how to best maintain your financial position with these changes please call the team 02 9415 1511 or email reception@primeadvisory.com.au, we are here to help!

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