Agreed value income protection to be a thing of the past…

Agreed value income protection to be a thing of the past…

Are you currently or moving towards self-employment? Do you receive a base salary but have fluctuating income with bonuses and commission? – this is a MUST read.

Recently, APRA has imposed sustainability measures on the life insurance industry with a particular focus on the income protection product due to significant industry wide losses over recent years. As of April 1, 2020, new ‘agreed value’ income protection policies will no longer be available in the market. This has significant ramifications for those who are self-employed or who are likely to become self-employed in the future, as well as those who have significant bonus portions to their income.  Given its pertinence for many in our client base, we wanted to reach out to you to ensure that, at the very least, you understand these implications and ensure that any existing policies are reviewed or that you look to implement cover that will protect you in the long term.

What is the difference between agreed and indemnity? 
To give you some context, there are 2 types of income protection policies – ‘agreed value’ and indemnity – and there is one fundamental difference.

Agreed value contracts are offered by insurers having seen a client’s recent history of earnings at the time of application and they ‘agree’ that they will offer a certain sum insured based on those earnings.  In practice this means that in almost every instance, whatever the client earns in the future is irrelevant as the insurance policy will pay out whatever sum is in place at the time of a claim regardless of their earnings at that time.

An indemnity contract on the other hand does not require financials upfront but whenever a client goes to claim on that policy, they need to produce evidence of their recent earnings to justify the level of cover they have in place and are indeed paying for.

Indemnity contracts may be perfectly reasonable for PAYG employees with steady (and generally increasing) incomes but self-employed clients with potentially fluctuant incomes from year to year typically want the certainty that what they’re paying for is going to be received at claim time when and if they need it.  They do not want to be exposed to the scenario where they have a period (before claiming) where they’re working a little less, have taken some time off or have just had a leaner period of earnings and for that to form the basis for an insurers payout figure.  Moreover, many of our clients have ‘level premium’ policies in place for sustainable premiums and long term savings and the certainty of an agreed value contract over that time is extremely comforting.

What now?
For the reasons cited above, we believe that it’s important that you are made aware of this imminent development and have a chance to make any necessary changes to existing cover or implement new cover if nothing is in place.  Also, be aware that any ‘agreed value’ policies in place before April 1 of this year will remain in place and can be amended in any way moving forward. If would like your cover reviewed, please give us a call 9415 1511 to have one of our insurance experts give you a complimentary review, or email us.

Read More
Spousal contributions – a win-win.

Spousal contributions – a win-win.

When raising a family or reaching retirement, either you or your spouse may likely choose to take time off or cut down on work. But, you may be able to help your partner by contributing to their super whilst being eligible for a tax offset!

When raising a family or reaching retirement it is likely that either you or your spouse may choose to take time off or cut down on work. This however means that their super can fall behind.

The good news is if you’d like to help your partner by contributing to their super, not only will you help grow your combined retirement funds, you may be eligible for a tax offset! Are you eligible?

The spousal contributions tax offset eligibility criteria;

  • You must be married or in a de facto relationship (including same sex partnerships).
  • You must both be Australian residents.
  • You must make a contribution using after-tax dollars, which you haven’t claimed as a tax deduction to your spouse’s super.
  • The receiving spouse has to be under 65 years of age, or if they’re between 65 and 69 they must meet work test requirements, meaning they were gainfully employed during the financial year for at least 40 hours over a period of 30 consecutive days.
  • The receiving spouse’s income must be $37,000 or less for you to qualify for the full tax offset and less than $40,000 for you to receive a partial tax offset.

What does that mean for me?

  • Claim an 18% tax offset on up to $3,000 through your tax return ($540 tax offset).

Please note the spouse contribution cannot be claimed if;

  • The spouse has exceeded their non-concessional contribution cap of ($100,000 per annum).
  • Or, if your spouse is under age 65 and have not exceeded the contribution cap under the bring-forward rule, which would allow a maximum non-concessional contribution up to $300,000.

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.

Read More
Changes your business need to know.

Changes your business need to know.

With the world operating at such a fast pace, laws and legislation are trying to keep up, and so do you and your business.

With the world operating at such a fast pace, laws and legislations are trying to keep up and the ATO is no different, with the introduction of many new features and improved functions being made to their online systems for reporting purposes. This is what you need to know to make sure you are ahead and planned for these changes.

  1. AUSkey to be made redundant

From 1 April 2020, the AUSkey system will be replaced as the reporting tool between businesses and the ATO. This new online services system will be through the use of myGovID and Relationship Authorisation Manager (RAM) instead.

Susan Franks, senior tax advocate at Chartered Accountants Australia and New Zealand (CA ANZ), says,  “the ATO says this new process will be a more secure, streamlined and flexible way to report information to the ATO.”

  1. E-Invoicing

With more than 1.2 billion invoices exchanged in Australia annually, and Australian small businesses collectively owed $26 billion in unpaid invoices at any given time, the ATO believes e-invoicing could be the answer.

The ATO believes with increased efficiency in invoicing, the economy would save an estimated $28 billion over ten years. This year the federal government will begin its e-invoicing framework, committing to pay electronically supplied invoices from small business suppliers within five days, to the value of $1 million, or interest will be applied.

But how does it work? E-invoicing us an automated process to submit and process an invoice in a digital format. E-invoices are received into the business’s financial systems, minimising the risk of fake or compromised invoices due to a direct exchange of invoices between a supplier and a buyer’s computer systems.

Although the ATO reports e-invoicing will not be compulsory for all businesses, it is definitely suggested with cost savings on invoicing processing up to 70% as well as increased cash-flow.

  1. Single Touch Payroll (STP)

The introduction of STP has been met with some resistance in it’s transparency and guarantee provided that employers are meeting their payroll obligations. However, as the transition to the digital reporting platform is being made penalties will soon start to apply for those who have not adopted the STP in their business.

Small businesses (less than 20 employees) were granted a three-month extension to 30 September 2019 to make the transition, and penalties will be waived until 30 June 2020. However, for larger employers (more than 20 employees), penalties already apply from the beginning of FY 2019-20.

To avoid penalties and make sure you are compliant with all the latest changes please get in touch with your Prime Accountant today, 9415 1511 or email reception@primeadvisory.com.au.

Read More
Driving into a new stage of life.

Driving into a new stage of life.

For those who haven’t been to our office and seen the wall, each month we will be introducing you to our latest inductees. This month we present husband and wife team Peter and Jacki who have recently achieved their 20-year long dream.

This month we induct two very hardworking clients to the ‘OnTrack for Life Wall,’ husband and wife duo Peter and Jacki. They first became clients of PrimeAdvisory (utilising both the Accounting and Wealth divisions) over ten years ago on the recommendation from a friend. In moving back to Australia after over 25 years as ex-patriots Peter and Jacki were after someone to correctly structure and manage their finances.

When starting as clients of PrimeAdvisory, Peter was working offshore as a power station engineer advancing through many roles in his career. Jacki played a very influential part in the assistance of many charities, namely the AUS NZ Women’s Association and the community centre for ex-pats in Jakarta.

Since then, they have achieved several goals in their time working with Financial Advisors Ben Norval and Guy Wall, a major focus has been maximising their superannuation which is often missed by being offshore.  Also, a 20-year long dream for Jacki was to buy a Jaguar. In being ex-pats for over 30 years, both Peter and Jacki have required drivers, after being requested not to drive and have not had a car of their own. Their dream was always to purchase and drive nice cars upon their repatriation to Australia. Peter was also able to treat himself to a more beautiful car than he expected he could achieve financially in his latest purchase of an Aston Martin.

Attributed to much hard work and sacrifice, both Peter and Jacki now define success as being comfortable and established to afford luxuries without worrying and being able to assist their family. They have been able to look after their parents and financially assisted their eight nephews and nieces, some already securing property.

Peter and Jacki are very humble and gentle people who have contributed a lot to society, and we are honoured to induct them into the ‘OnTrack for Life Wall’ this month.

If this story inspired you or you have one similar you would like to share, please get in touch on 02 9415 1511 or email reception@primeadvisory.com.au.

Read More
Merry Christmas from the ATO, with love Mum & Dad

Merry Christmas from the ATO, with love Mum & Dad

How you can easily help your offspring add an extra $500 to their super account from the government. Learn more about the superannuation government co-contribution. 

What is the co-contribution?

Are you or a loved one earning less than $53,564 in the 2019/20 financial year? Pending below eligibility criteria you could boost you/ your offspring’s retirement savings by up to $500 (You’re boosting by $1,500 (Add $1,000 + $500 from the Govt). The contribution is paid at the rate of 50 cents for every eligible dollar to a maximum of $500 as per the below indicative table.

Superannuation Co-contribution Payable
Total Income Personal Contribution
$1,000 $800 $500 $200
Potential Government Contribution
$38,564 or less $500 $400 $250 $100
$39,564 $467 $400 $250 $100
$44,564 $300 $300 $250 $100
$48,564 $167 $167 $167 $100
$51,564 $67 $67 $67 $67
$53,564 $0 $0 $0 $0

So, what’s the eligibility?

If you meet the following criteria you may be eligible for the superannuation co-contribution this financial year!

  • You make personal contributions (after-tax) to a complying superannuation fund
  • Your total income* is less than $53,564 (less than $38,564 to receive the maximum)
  • At least 10% of your total income is from eligible employment, carrying on a business, or a combination of the two
  • You do not hold an eligible temporary resident visa during the financial year
  • You lodge a tax return for the financial year
  • You do not exceed the non-concessional contribution cap for the financial year
  • You are under age 71 at the end of the financial year

And, how much co-contribution is payable? 

If your total income is less than $38,564 the Government may contribute 50 cents for every $1 you contribute, up to a maximum of $500.

FOR EXAMPLE: John & Jane have a 19-year-old son Harrison who works part-time whilst studying and earns around $20,000 per year. John and Jane could give Harrison $1,000 to add to his super fund, and the government will top this up with an additional $500.

I’m eligible, now what do I need to do?

Make your personal contribution, the tax office will do the rest. Assuming you lodge your tax return on time the co-contribution should arrive within several months after that. Further, you will receive a letter from the tax office to confirm the amount of the contribution and to which fund.

Did you enjoy reading this article and want more of this? Ensure you are signed up to our newsletter or contact PrimeAdvisory for more on 02 9415 1511 or email reception@primeadvisory.com.au.

 

* Total income is your assessable income plus reportable fringe benefits plus reportable employer superannuation contributions (essentially salary sacrificed contributions in excess of the superannuation guarantee). 

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.

 

Read More

SIGN UP

For our free e-newsletter

TAKE A HEALTH CHECK

For our free e-newsletter

Personal