The partners and team at Dominion Financial Group would like to thank you for your continued support during 2024.
Our office will close from 12pm Friday 20th December 2024 and re-open Monday 6th January 2025 at 9am.
We look forward to working with you again in 2025!
Best wishes,
Welcome to summer and, for many, an active season with last-minute tasks and celebrations with family and friends. We take this opportunity to wish you and your family a joy-filled and safe festive season!
While headline inflation eased to 2.8% in the September quarter, the Reserve Bank remains unmoved on interest rates. RBA Governor Michelle Bullock says the drop in the cost of living may be welcome relief for most of us, but the Board’s measure to watch is trimmed mean inflation and that’s still not “sustainably” in the desired target range of 2-3%. It’s not likely to get there until late in 2026, the RBA predicts.
The sharemarket reacted sharply to the Governor’s comments in the last days of a month that had seen several all-time highs. US President-elect Donald Trump’s promise for 25% tariffs on Canadian and Mexican goods also contributed to the billion dollar shares sell-off. Nonetheless, the S&P ASX200 finished November 3.4% higher.
The Australian dollar is also taking a beating from the possibility of both the US tariffs and the RBA’s rates forecast. It hit a seven-month low below 65 US cents near the end of the month.
And, in good news the ANZ-Roy Morgan Consumer Confidence Index, while down slightly has stayed above a mark of 85 points for the sixth week in a row for the first time in two years. Commonwealth Bank projections expect a boost in sales for small businesses thanks to the Black Friday and Cyber Monday sales and the coming festive period.
Australian share prices have seen record highs in 2024 after a sluggish couple of years.
The S&P ASX200 index added just under 7 per cent in the 10 months to October 31 closing at 8160.i It reached its previous all-time high of 8355 just two weeks before.
So, if you were invested in an index fund or a basket of shares mirroring the ASX200 for the entire period, it’s likely you would have added some value to your portfolio.
Over the course of the year, the index has ebbed and flowed, recording several all-time highs and some jarring notes in response to global events.
Geopolitical tensions have also played a part in market skittishness as the wars in the Middle East and Ukraine continue and economists argue about the future impact on Australia of a Trump presidency.
US share prices surged the day after Donald Trump’s election in what many saw as a positive reaction to the returning President’s policies. Since then, prices have declined in a not-unexpected correction. Various analysts are predicting future volatility as markets respond to the proposed policies including tariffs and mass deportations promised by the President-elect.
These ups and downs in prices can have investors scurrying to hit the ‘buy’ or ‘sell’ buttons. They may be desperate to save further losses when share prices are falling rapidly or wanting to cash in on a rising market. Meanwhile, those with lump sums to invest may delay, trying to pick the time when prices are lowest.
It’s a strategy – known as timing the market – that may work for some, particularly if you need access to your investment in the short term. But, for mid- to long-term investors, it’s generally accepted to be problematic.
To begin with, predicting the next market movement is extremely difficult – even for experienced investors – because of the endless factors that can influence the markets.
Reacting to major market movements by selling or keeping a lump sum in cash until ‘the time is right’ means you run the risk of missing the market’s best days and reducing your overall return.
Countless studies show that better long-term results are achieved by consistent investing over time.
In Australia, $10,000 invested in the ASX/S&P 200 during the 20 years to October 2024 would have increased to $60,777. ii But, if you had missed the 10 best days during that time, your total investment would be just $36,014.
One way of removing the emotion and guesswork is to consider investing at regular intervals over time, ignoring any market signals, in a strategy known as ‘dollar cost averaging’.
The strategy works best if you are investing over the medium to long term because it helps to smooth out the price peaks and troughs.
In fact, compulsory superannuation paid by employers is a form of dollar cost averaging. Smaller, regular amounts are invested automatically, regardless of market movements and, over time, the investment grows.
However, the jury is out on whether dollar cost averaging is a useful strategy when you have a lump sum in cash to invest.
Some advocates of dollar cost averaging argue that there’s a better return because you reduce the risk of making a large investment just before markets plunge.
Those opposed to the strategy for lump sum investing say that, with a lump sum sitting in a bank account as you chip away at regular stock purchases, there is a risk that you will miss the best of the market.
A 2023 study found that investing a lump sum in the markets at once over the long term delivers a better return than a dollar cost averaging strategy.iii
So, avoid the risks of timing the market and consider whether dollar cost averaging might be an appropriate strategy for you.
We’d be happy to discuss how best to ensure your regular investing strategy or investment of a lump sum, takes account of future market movements and volatility.
i Australia Stock Market Index | Trading Economics
ii Timing the market | Fidelity Australia
iii Lump-sum investing versus cost averaging: Which is better? | Vanguard
Fraudulent claims for GST refunds continue to be a major focus for the ATO, with several new pilot programs announced to help small businesses with GST reporting.
Here’s a roundup of the latest tax news.
Pay As You Go (PAYG) instalments – whether you pay quarterly or twice-yearly – has been increased to 6 per cent for 2024-2025 to reflect the latest GDP increase.
The change in the adjustment factor does not affect taxpayers who work out their own instalments or pay annually.
PAYG instalment amounts can be varied through the ATO’s Online services for business if you believe your current instalment amount will be more or less than your expected tax liability for the year.
The ATO will be running a number of pilot programs during 2025 that aim to improve the digital tax experience for small businesses.
The pilot programs will encourage more frequent payment and reporting by small businesses and try to reduce complexity by embedding the tax rules and logic into small business software.
The ATO also hopes to empower small businesses by providing more information to help them get their GST right from the start, providing them with more time to focus on their business, rather than their tax obligations.
The community appears increasingly willing to report tax cheats. The ATO received more than 47,000 tip-offs during 2023-24, with around 90 per cent deemed suitable for further investigation.
Building and construction, cafes and restaurants, and hairdressing and beauty services topped the list of industries reported.
Common tip-offs include taxpayers not declaring income, demanding cash from customers, paying workers in cash to avoid paying tax and super, not reporting sales, and where someone’s lifestyle did not appear to match their income.
Hiring new employees to help out during the festive season brings with it the same tax and super obligations as for regular employees.
The ATO is reminding employers to ensure they withhold the right amount of tax from any payments made and also to pay all eligible employees’ super funds the correct amount of Super Guarantee to avoid paying the Super Guarantee Charge.
Employers without an approved exemption, deferral or concession must lodge the necessary information for new employees through the Single Touch Payroll system from their first payday.
Stamping out GST fraud continues to be a priority for the ATO, with a Victorian woman sentenced to four years imprisonment after claiming nearly $600,000 in GST refunds from 27 fraudulent business activity statements.
She is also being pursued for the amount she fraudulently obtained by submitting the multiple false claims for a fake cleaning business.
The case is part of the ongoing ATO-led Operation Protego, which was set up in response to numerous cases of attempted GST fraud. So far 104 people have been arrested and 59 convicted.
If you have a dispute with the ATO being heard by the Administrative Review Tribunal, you may be eligible for litigation funding to cover “reasonable” legal expenses.
To qualify, you must be a small business (sole trader, partnership, company or trust) operating a business for all or part of the relevant income year and have a turnover under $10 million.
Funding is available only if the matter does not involve a tax avoidance scheme, fraud or cash economy issues. You must not have a history of failing to lodge tax returns.
The ATO is reminding taxpayers holding an Australian Business Number (ABN) they need to regularly ensure their current contact details are correct so they don’t miss out on important help, information, or support like financial grants.
Check both your physical business address and postal address are listed on the Australian Business Register, together with your authorised contacts, contact details and business activities.
At this time of year, when giving is particularly on our minds, some might turn their attention to how best share their wealth or an unexpected windfall with their loved ones.
You might be thinking about handing over a lump sum to help them with a major purchase or business opportunity, or be keen to help reduce or extinguish their student loans. Alternatively, it might be about helping to solve a housing problem.
Whatever the reason there are some rules that it is worth being aware of to ensure both you and they are protected.
You can give anyone, family or not, a gift of cash for any amount and, as long as you don’t materially benefit from the gift or expect anything in return, no tax is paid on the amount by either you of the receiver.i
The same applies if you’re planning to pay out your child’s student loans.
However, be aware that if the beneficiary of your cash gift is receiving a government benefit, such as an unemployment benefit or a student allowance, there is a limit on the size of the gift they can receive without it affecting their payments.
They may receive up to $10,000 in one financial year or $30,000 over five financial years (which can not include more than $10,000 in one financial year).ii
Helping out with housing
Many parents also like to help their children get into the property market, where possible.
It’s been a difficult time for many in the past few years in dealing with the COVID-19 pandemic, the rising cost of living and interest rates, and a housing crisis.
A Productivity Commission report released this year found that while most people born between 1976 and 1982 earn more than their parents did at a similar age, income growth is slower for those after 1990.iii
With money tight and house prices climbing, three in five renters don’t believe they will ever own a home even though most (78 per cent) want to be homeowners, according data collected by the Australian Housing and Urban Research Institute (AHURI).iv
Just over half of those surveyed (52 per cent) were renting because they didn’t have enough for a home deposit and 42 per cent said they couldn’t afford to buy anything appropriate, the AHURI survey found.
So, in this climate, help from parents to buy a home isn’t just a nice-to-have it’s becoming a necessity for many.
Allowing your adult child, perhaps with a partner and family, to share the family home rent-free is common option, giving them the chance to save up for a deposit.
One Australian survey found that one-in-10 people had moved back in with their parents either to save money or because they could no longer afford to rent.v
If it gets too much living under the same roof, building a granny flat in your backyard may be an option. Of course there are council regulations to consider, permits to be obtained and the cost of building or buying a kit but on the upside, it may add value to your home.
Another way to help might be to become a guarantor on your child’s mortgage. This might be the best way into a mortgage for many but before you sign, think it through carefully, understand the loan contract and know the risks.vi
Don’t forget that, as guarantor, you’re responsible for the debt. You will have to step in and repay if the lender can’t afford to repay, and the loan will be listed as a default on your own credit report.
Any sign that you are being pressured to be a guarantor on a loan may be a sign of financial abuse. There are a number of avenues for advice and support if you’re concerned.
It’s vital that you obtain independent legal advice before signing any loan documents.
If you would like more information about how to provide meaningful financial support to your children, we’d be happy to help.
i Tax on gifts and inheritances | ATO Community
ii How much you can gift – Age Pension – Services Australia
iii Fairly equal? Economic mobility in Australia – Commission Research Paper – Productivity Commission
iv Rising proportion of ‘forever renters’ requires tax and policy re-think | AHURI
v Coming home: 662,000 Australian households reunite with adult children – finder.com.au
Self managed super funds (SMSFs) can offer their members many benefits, but one that’s often overlooked is their potential as a multigenerational wealth creation and transfer vehicle.
Family SMSFs are relatively rare. According to the most recent ATO statistics (2022-23), the majority of SMSFs (93.2 per cent) have only one or two members.i Just 6.6 per cent have three or four members and only 0.3 per cent have five or six members (the maximum allowed).
An SMSF is sometimes established when two or more generations of a family share ownership or work in a family business. The fund can then form part of a personal and business succession plan, potentially making it easier to pass on ownership and management of assets to the next generation.
With more members, SMSFs also gain additional scale, allowing them to invest in larger assets (such as property). You can add business premises to the SMSF and lease it back without violating the related parties rule and 5 per cent limit on in-house assets.ii
Reduced tax and administration costs are also a benefit of multigenerational funds.
Running a family SMSF means the costs of establishing and administering the fund are spread across more members. This can be particularly helpful for adult children just beginning to save for their retirement.
In addition, more fund members means more people to share the administrative burdens of running an SMSF, which may be helpful as you get older.
A family SMSF does not need to be automatically wound up if you die or lose mental capacity and they can simplify the process of paying out a member death benefit as well as potentially allowing it to be paid tax-effectively. Note that death benefits paid to non‑tax dependent beneficiaries incur a tax rate of up to 30 per cent plus the Medicare levy.iii
More fund members also make setting up a limited recourse borrowing arrangement (LRBA) easier because their contributions reduce the fund’s risk of being unable to pay the borrowing costs. (An LRBA allows an SMSF to borrow money to buy assets)
Another advantage of an SMSF with up to six members may be when the fund begins making pension payments to older members.
If younger members are still making regular contributions, fund assets don’t need to be sold to make pension payments, which avoids the realisation of capital gains on assets.
Family SMSFs can also provide non-financial benefits, helping to transfer financial knowledge and expertise between the generations. And, while your children gain a solid financial education from participating in the running the SMSF, they can also provide valuable investment insights from a different perspective.
It is important to note that a multigenerational SMSF may not be right for everyone.
SMSFs of any size come with some risks and responsibilities. For example, if you lose money through theft or fraud, the government compensation that covers industry and retail super funds does not protect you. You are personally liable for the fund’s decisions, even if you act on advice from a professional, and your investments may not provide the returns you were hoping for.
Before you start adding your children and their spouses to your fund, it’s essential to spend time thinking about the challenges in running a family SMSF.
Fund members of different ages are at different stages in their retirement journey, with some accumulating savings and others drawing down.
This can make it tricky to administer and invest the fund’s assets in the best interests of all members.
For example, developing an asset allocation strategy catering to different life stages can be complex. Older members may prefer a strategy designed to deliver a consistent income stream, while younger members are usually more focused on capital growth.
Risk profiles are also likely to vary. Typically, younger fund members have a higher appetite for investment risk than members closer to retirement.
Family conflict can also be an issue when relationships are under pressure from divorce, blended families, and personality clashes.
The death of a parent can also create disputes over the distribution of fund assets or forced asset sales. Decisions about the payment of death benefits by the remaining trustees can derail carefully made estate plans and result in expensive legal battles.
Larger families with multiple adult children and partners may also find the six member limit an obstacle, forcing them to look at other options such as running a number of family SMSFs in parallel.
If you would look more information about establishing a family SMSF, call our office today.
10 questions to ask before setting up a family SMSF
i SMSF quarterly statistical report June 2024 | data.gov.au
ii Related parties and relatives | Australian Taxation Office
iii Paying superannuation death benefits | Australian Taxation Office
Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess when they’re grieving.
Your Will gives you a say in how you want your possessions and investments to be distributed. But, importantly, it should also include enduring powers of attorney and guardianship as well as an advance healthcare directive in case you are unable to handle your own affairs towards the end of your life.
At the heart of your estate planning is a valid and up-to-date Will that has been signed by two witnesses. Just one witness may mean your Will is invalid.
You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.
Keep in mind that an executor’s role can be a laborious one particularly if the Will is contested, so that might affect who you choose.
Around 50 per cent of Wills are now contested in Australia and some three-quarters of contested Wills result in a settlement.i
The role of the executor also includes locating the Will, organising the funeral, providing death notifications to relevant parties and applying for probate.
Writing a Will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid Will.ii
While that’s understandable – it’s very easy to put off thinking about your own demise, and some don’t believe they have enough assets to warrant writing a Will – not having one can very problematic.
If you don’t have a valid Will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.
The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.
Assuming there is a valid Will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.
Probate is a court order that confirms the Will is valid and that the executors mentioned in the Will have the right to administer the estate.
When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses then on death your share automatically transfers to your surviving spouse. It does not form part of the estate.
However, if the house is only in your name or owned as ‘tenants in common’, then probate will probably need to be granted. This is a process which generally takes about four weeks.
Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.
You will also definitely need probate if there is a refund on an accommodation bond from an aged care facility.
Another important consideration when dealing with your affairs is what will happen to your superannuation.
It is wise to complete a ‘binding death benefit nomination’ with your super fund to ensure the proceeds of your account, including any life insurance, are distributed to the beneficiaries you choose. You can nominate one or more dependants to receive your super funds or you could choose to pay the funds to your legal representative to be distributed according to your Will.
If a death benefit is paid to a dependant, it can be paid as either a lump sum or income stream. But if it’s paid to someone who is not a dependant, it must be paid as a lump sum.
If your spouse has predeceased you and you have adult children, they will pay up to 32 per cent on the taxable component of your super death benefit unless a ‘testamentary trust’ is established by the will, naming them as beneficiaries.
A testamentary trust is established by a Will and only begins after the person’s death. It’s a way of protecting investments, cash and other valuable assets for beneficiaries.
Bear in mind that beneficiaries of Wills have certain rights. These include the right to be informed of the Will when they are a beneficiary. They can also expect to hear about any potential delays.
You are also entitled to contest or challenge the Will and to know if other parties have contested the Will.
If you want to have a final say in how your estate is dealt with, then give us a call.
David died in his early 60s. He left his estate to his wife Sally in accordance with his Will.
It seemed sensible at the time. But after a few years, Sally remarried. Unfortunately, the marriage did not last. When Sally died some 20 years later, her estate did not just go to her and David’s children but ended up being shared with her estranged second husband.
A testamentary trust, stipulating that the beneficiaries of both David’s and Sally’s estates were to be only blood relatives, may have solved this issue.
i Success rate of contesting a will | Will & Estate Lawyers
ii If you don’t, who will? 12 million Australians have no estate plans | Finder
Dear Clients,
With heavy hearts we announce the passing of Peter Ferguson. As some of you are aware Peter had been unwell for some time which led to his retirement in 2020.
We cannot overstate his importance to both Dominion in his role as a financial planner and the service he provided our good clients. Everyone who was lucky to have worked with and alongside Peter will miss him.
We are sending our love and condolences to his wife, Barbara, and his family. Please think of them during this difficult time.
At this stage funeral arrangements have not been finalized, should you wish to be notified please contact the office.
Welcome to Spring, a season that might be motivational for personal, business and financial renewal. We hope you enjoy the sunshine and warmer weather.
Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.
It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the dramas, the S&P/ASX 200 closed 1.28% higher for the month marking a gain of just over 10% for the 12 months to date.
A slight drop in inflation figures – down to 3.5% in July from 3.8% the previous month – had investors checking the Reserve Bank’s reaction but most economists agree there’s no chance of an interest rate cut this year. The RBA’s not forecasting inflation to get to its preferred levels until late 2026 or early 2027.
While the cost of living has dropped ever so slightly (and partly due to $300 federal government rebates on electricity bills), wages have risen. The Australian Bureau of Statistics reports that wages rose by 4.1% in the year to June. It means that wages are now keeping up with the cost of living.
The good news from the markets and inflation data contributed to a small upswing in consumer confidence although there’s still much ground to recover after the losses caused by Covid-19.
Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.
You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.i
An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.
Some considerations:
A transition to retirement (TTR) strategy allows access to some of your superannuation while still working, if you have reached age 60 (based on current rules).ii
Some considerations:
An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.
Some considerations:
An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.
Some considerations:
How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.
i Planning to retire | Australian Taxation Office (ato.gov.au)
ii Transition to retirement | Australian Taxation Office (ato.gov.au)
Employers need to check that payroll systems reflect recent legislative changes, and the ATO is highlighting deduction opportunities available to some small businesses. Here’s your roundup of the latest tax news.
The ATO is reminding employers to stay on top of legislative changes affecting payroll systems.
The Super Guarantee rate increased on 1 July 2024 to 11.5 per cent of ordinary times earnings, so all payments (starting with those for the July to September quarter) to super accounts for eligible workers must reflect the new rate.i
Individual income tax rate thresholds and tax tables changed also changed on 1 July 2024 so you may need to check calculations for your Pay As You Go Withholding obligations.
Many small business are eligible for a bonus 20 per cent tax deduction for new assets (or improvements to existing assets), that support more efficient energy usage.
The Small Business Energy Incentive applies to eligible assets first used or installed ready for use between 1 July 2023 and 30 June 2024.ii
Eligible expenditure for external training courses for employees incurred between 29 March 2022 and 30 June 2024 could also qualify for a 20 per cent bonus tax deduction from the Small Business Skills and Training Boost.iii
While a business can reduce capital gains made during a tax year by offsetting them with capital losses from the same or previous income years, not all capital losses are eligible.iv
Capital losses carried forward from previous years need to be used first, with losses from collectables (such as artwork and antiques) only permitted to be offset against capital gains from collectables.
Losses from personal use assets (such as boats or furniture), CGT exempt assets (such as cars and motorcycles), paying personal services income to yourself through an entity you set up, and leases producing income (such as commercial rental property), are ineligible as offsets.
Before claiming fuel tax credits in your next Business Activity Statement (BAS), check you are using the latest rates as they have changed twice in the new financial year.v
On 1 July 2024, the rate for heavy vehicles travelling on public roads changed due to an increase in the road user charge, with the rate altering again on 5 August 2024 due to a change in fuel excise indexation.
Different rates apply based on when you acquired fuel for your business’ use, so ensure you use the correct rate. If you are unsure, try the ATO’s online Fuel Tax Credit Calculator to work out the amount to report in your BAS.
Rental property investors without correct documentation to substantiate their expense deductions may find their claims declared invalid.vi
The ATO is warning investors they need all receipts, invoices and bank statements plus details of how deductions were calculated and apportioned for a valid claim.
While taxpayers registered for GST automatically receive a Business Activity Statement and are required to lodge and pay in full by the due date, businesses with nothing to report are still required to lodge.
If you have paused your business, you are required to lodge a ‘nil’ BAS by the due date either online or via the ATO’s automated phone service.vii
i How much super to pay | Australian Taxation Office (ato.gov.au)
ii Small business energy incentive | Australian Taxation Office (ato.gov.au)
iii Small business skills and training boost | Australian Taxation Office (ato.gov.au)
iv Pay less capital gains tax (CGT) | Australian Taxation Office (ato.gov.au)
v From 1 July 2024 to 30 June 2025 | Australian Taxation Office (ato.gov.au)
vii Cancelling your GST registration | Australian Taxation Office (ato.gov.au)
With the cost of doing business continuing to squeeze the bottom line, careful cash flow management has never been more important.
Not only is the ATO paying extra attention to timely payment of tax debts, but once the new payday super rules commence, many small businesses will no longer have access to one of their traditional sources of emergency funding.i
The government recognises how important cash flow is in small businesses and allocated an additional $23.3 million in the May 2024 Federal Budget to boost the adoption of eInvoicing. This electronic system is designed to help improve cash flow and productivity in smaller operations.
If you don’t have clear insights into your cash flow position and are not careful in managing income and expenses, it’s much harder to pay your bills and meet your tax, super and employer obligations.ii
A cash flow projection or budget helps to ensure there is enough cash available to meet upcoming expenditure. You will be able to understand your likely cash position at any time, identify fluctuations that could lead to potential cash shortages and plan for tax payments and major expenses.
The three main things to consider when creating a cash flow budget are timing, fixed and variable costs, and your income.
While cash flow projection tools can be off-the-shelf digital products or simple templates, we can also work with you to use the ATO’s Cash Flow Coaching Kit to improve management of this critical area.iii
When you have completed a cash flow projection and understand your position, it is time to work on ways to improve it.
One of the most important ways to improve cash flow is to ensure your invoices are paid as quickly as possible. Make sure invoices are sent out as soon as you can and, if possible, ask for immediate payment.
Consider shortening your payment terms, particularly if they are currently longer than 30 days. Some businesses offer an early payment discount or charge interest on overdue accounts to help speed up payments.iv
Setting clear payment guidelines for your customers is also valuable and think about taking action with customers who regularly fail to pay on time.
Check suppliers’ payment terms to make sure you are not paying earlier than required (unless there is a discount on offer!).
Using a business credit card with an interest-free payment period can be an easy way to smooth your cash flow.
Separating your personal and business expenses makes tracking your business cash flow and expenses easier and reduces the time required for reconciliations.
If you sell or supply products, carry out regular reviews of your inventory to ensure you are only holding the stock needed and are not tying up valuable cash flow and possibly increasing storage and insurance costs.
An inventory management system can be helpful to automate ordering and reduce lags between placing and receiving orders, and to identify unwanted or outdated stock.
Also review your pricing and margins to see if it is possible to raise prices without losing business.
Keeping a close eye on regular expenses and one-off spending helps to keep outgoings to a minimum.
Look for opportunities to save money by streamlining operations and reducing operating costs by cutting energy expenses and reviewing existing service contracts including phone and insurance.
Negotiating better prices with suppliers and more tightly targeting marketing expenditure can also boost your cash flow.
If your business includes expensive assets like vehicles and equipment, ensure they are working hard for you.
Consider leasing or hiring assets to reduce upfront costs, sell assets you no longer need, and review any asset financing to make sure that it is competitive.
While these general tips may help improve your cash flow position, don’t forget we can provide advice tailored to the specific needs of your business. So, call us today if you would like our help.
i Payday superannuation | Australian Taxation Office (ato.gov.au)
ii Manage your business cash flow | Australian Taxation Office (ato.gov.au)
iii Cash Flow Coaching Kit | Australian Taxation Office (ato.gov.au)
The new financial year brings a host of changes to taxes that affect all 13.6 million taxpayers.i
The biggest and most high-profile change is the cuts to tax rates from 1 July, which will deliver a benefit to every taxpayer, according to the Federal Government.ii
With the changes and extra income on the table it could be useful to review your current tax, super and investment strategies.
This will ensure you maximise the benefits from the tax cuts and make informed decisions when it comes to areas such as debt repayment, salary packaging and super contributions.
The new rates for each income tax bracket see the current 19 per cent tax rate reduce to 16 per cent, while the 32.5 per cent rate drops to 30 per cent. The income threshold at which the existing 37 per cent tax applies increases from the current $120,000 to $135,000.iii
In addition, the income threshold at which the 45 per cent tax rate applies increases from $180,000 to $190,000.
The government says the new rates provide taxpayers with greater protection against bracket creep (particularly low- to middle-income taxpayers) and result in lower average tax rates for all taxpayers.iv
With additional disposable income now available, the start of the financial year is a good time, depending on your individual circumstances, to consider contributing more to your super account or paying down non-deductible debt such as your mortgage.
If you have a salary packaging arrangement currently in place, it’s worth noting the reduction in the lowest tax rate from 19 per cent to 16 per cent may affect the value of these types of strategies for some taxpayers.
For example, someone packaging $15,000 of debt repayments in 2023-24 saved around $5,000 with the 37 per cent tax rate, but under the new, lower 2024-25 tax rate of 30 per cent, this tax saving is significantly reduced.
Some taxpayers will also see changes due to the May 2024 Federal Budget increase to the low-income threshold for the Medicare Levy.
The lift in the existing income thresholds is designed to ensure low-income taxpayers continue to be exempt from the Medicare Levy or pay a reduced levy rate.
For the 2024-25 year, the income threshold exempts people earning $26,000 or less from paying the Medicare levy. After that, the levy increases gradually, with the full 2 per cent levy paid by anyone earning more than $32,500.v
Employers will also feel the impact of the new income tax rates and need to ensure they are withholding the right amount of pay as you go (PAYG) withholding tax from each employee’s pay, starting from 1 July 2024.
Employers should check their payroll software is using the correct, new withholding rates. An easy way to do this is to use the ATO’s online Tax Withheld Calculator.
Unincorporated businesses (such as sole traders) also benefit from the tax cuts as income received is taxed under the new, reduced individual income tax rates and thresholds.
From 1 July 2024, the Super Guarantee (SG) that employers are required to pay into their employees’ personal super accounts increased from 11 per cent to 11.5 per cent of ordinary times earnings. The SG will rise again on 1 July 2025 to reach its final level of 12 per cent.
The quarterly maximum super contributions base (MSCB) also rose to $65,070 (up from $62,270) from 1 July. Employers are not required to provide SG contributions for any salary amount paid to an employee above the quarterly MSCB limit.
From 1 July, there were increases in the annual caps governing the amount of contributions you can make into your super account before additional tax becomes payable on the contribution amount.
The concessional (before-tax) contributions cap increased to $30,000 (up from $27,500 in 2023-24), while the annual non-concessional (after-tax) contributions cap rose to $120,000 (up from $110,000 in 2023-24).viii
The increase in the non-concessional contributions cap means the limit for bring forward contributions now sits at $360,000 over three years (up from $330,000 over three years in 2023-24). The cap on your total super balance remains at $1.9 million, as does the general transfer balance cap.
For 2024-25, the CGT cap amount (or lifetime limit) for eligible business owners wanting to make tax advantaged contributions into their super account is $1,780,000 (up from $1,705,000 in 2023-24).ix
If you need help navigating the updated tax and super rules in place for the new financial year, call our office today.
Income tax rates for Australian tax residents
| Taxable income range ($) 1 July 2020 – 30 June 2024 | Marginal tax rate (%) | Taxable income ($) From 1 July 2024 | Marginal tax rate (%) | Tax payable |
| 0 – 18,200 | Tax free | 0 – 18,200 | Tax free | Nil |
| 18,201 – 45,000 | 19 | 18,201 – 45,000 | 16 | 16c for each $1 over $18,200 |
| 45,001 – 120,000 | 32.5 | 45,001 – 135,000 | 30 | $4,288 + 30c for each $1 over $45,000 |
| 120,001 – 180,000 | 37 | 135,001 – 190,000 | 37 | $31,288 + 37c for each $1 over $135,000 |
| Above 180,000 | 45 | Above 190,000 | 45 | $51,638 + 45c for each $1 over $190,000 |
These rates do not include the Medicare Levy, which remains at 2%
i, ii, iv https://budget.gov.au/content/01-col-pressures.htm
iii https://taxcuts.gov.au/
v https://www.abc.net.au/news/2024-01-25/low-income-earners-extra-tax-relief/103387054
vi https://taxcuts.gov.au/dist/media/resources/Tax_Cuts_Factsheet_April_2024.pdf
vii https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/super-guarantee
viii https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/concessional-contributions-cap
ix https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/contributions-caps
Treasurer Jim Chalmers has high hopes that his 2024 Federal Budget will rein in inflation earlier than expected, ease cost-of-living pressures and build a stronger economy in the future.
It’s a Budget for the here and now, he says, but also for the decades to come.
More than $8.4 billion has been allocated to quick-fix cost-of-living adjustments along with the previously announced Stage 3 tax cuts and the waiving of $3 billion in student debt.
With a federal election due next year, the Federal Government has announced spending of almost $83 billion on housing, infrastructure, health and a Future Made in Australia project to build a more resilient economy for the future.
While Treasury is forecasting a $9.3 billion surplus for 2023-24 after the previous year’s $22.1 billion surplus, the books will look considerably different the following year with a $28.3 billion forecast deficit expected.
That’s against a backdrop of an uncertain global economic outlook with wars in the Middle East and Ukraine as well as slowing growth in China and elsewhere.
“Most advanced economies recorded subdued outcomes during 2023, with around a third of OECD nations recording a technical recession,” notes Treasury in the Budget papers.
“Global inflation has moderated but remains too high, and there are risks it will persist. Tackling inflation remains the primary focus but, as inflationary pressures abate and labour markets soften, the global policy focus will increasingly shift to managing risks to growth.”
There are some bright spots for Australia though.
Treasury is forecasting inflation could return to the target rate of between 2 and 3 per cent earlier, perhaps by the end of the year, the Treasurer says.
Jobs growth is stronger here than in any major advanced economy and real wages are growing again for the first time in almost three years.
This year’s Budget aims to help out those struggling to pay the bills with a range of tax cuts and subsidies.
Every taxpayer will pay less tax as part of the Stage 3 tax cuts announced earlier this year. The average tax cut is $36 a week or an annual $1,888.
More than 10 million households will receive a total rebate of $300 on their electricity bills and eligible businesses will receive $325.
The government says its Energy Bill Relief Plan has kept electricity price increases to two per cent through the year to the March quarter this year. Without it, prices would have increased by 14.9 per cent.
While it won’t provide immediate relief, the government has grocery prices in its sights. It’s taking steps to make a Food and Grocery Code mandatory with penalties up to 10 per cent of turnover for major breaches. It also directed the Australian Competition and Consumer Commission to investigate pricing and competition in the supermarket sector.
Commonwealth Rent Assistance has been increased by a further 10 per cent, there is a $138 million boost to emergency relief funding and financial support services, and the freeze on the deeming rate for income support recipients has been extended. The deeming rates are used by Centrelink to predict earnings from super and investments over the 12 months ahead. The lower deeming rate will remain at 0.25 per cent and the upper rate will remain at 2.25 per cent until 30 June 2025.
Anyone with a student debt will welcome a change to the indexation rate for the Higher Education Loan Program (HELP). The government says it will cut $3 billion in student debt for more than three million Australians.
Medicines can be a big cost for many people and a new $3 billion agreement with community pharmacies is expected to help. The government is expecting the deal to deliver cheaper medicines and better patient health.
There will be a one-year freeze on the maximum patient co-payment and a five-year freeze for pensioners and other concession cardholders. This change means that no pensioner or concession card holder will pay more than $7.70 (plus any applicable manufacturer premiums) for up to five years.
Almost half of Australians live with a chronic health condition and the Budget provides more than $141 million for research and services for conditions including bowel and skin cancer, diabetes and dementia.
The government is also providing an extra $411 million to the Medical Research Fund to continue research for low-survival cancers.
And, in a strengthened mental health package, the government has committed more than $888 million over eight years to improve access to services and support.
Providing further support for the recommendations of the Royal Commission into Aged Care Quality and Safety, the Budget allocates $2.2 million to develop a new Aged Care Act. The Act is expected to establish a new Support at Home program and improve the standard of in-home aged care.
An extra 24,100 Home Care Packages will also be made available to reduce waiting times and wait times for the My Aged Care Contact Centre will be reduced.
Meanwhile, the government has allocated funding to beef up the regulatory capabilities of the Aged Care Quality and Safety Commission.
To support fair wages for care workers, the government has committed to fund a further increase in the award wage for direct and indirect aged care workers. The government is also providing $87.2 million for initiatives to attract nurses and other workers into aged care.
With housing affordability affecting millions of Australians, the government has allocated $6.2 billion in the Budget on a range of initiatives.
There’s a further $1 billion for states and territories to deliver new housing, more student accommodation, an increase in funds for homelessness services and more concessional loans for community housing providers.
The Build to Rent market will receive a boost with a plan to allow foreign investors to purchase developments with a lower foreign investment fee.
The government is also supporting 20,000 new fee-free TAFE places for courses in the construction sector.
The government aims to stimulate the economies of the states and territories with funding for a number of major infrastructure projects.
There’s $21.6 billion for Queensland over 10 years for projects including the Sunshine Coast rail line and Bruce Highway works; $20.8 billion over 10 years for NSW for various road upgrades; $19.2 million in Victoria for the North East Link and other projects.
Aiming to shore up Australia’s economic fortunes, the government has created a comprehensive package of projects to lift our manufacturing industry and position us to take advantage of net zero.
The Treasurer says the world’s commitment to net zero by 2050 will demand “the biggest transformation in the global economy since the industrial revolution”.
He believes Australia’s energy, resources, regions, researchers and workers can all play a part in creating a “renewable energy superpower”.
To that end, the Budget includes $13.7 billion in production tax incentives for green hydrogen and processed critical minerals, $1.7 billion to develop new industries using green metals and low carbon fuels and $566 million to map the geological potential of the entire country to get a better picture of our critical minerals and groundwater.
There will be major work on attracting new investment by reforming investment settings and regulatory processes.
The government says it will make it simpler to invest in Australia to entice more capital both from overseas and at home. It will work with business, governments, unions, communities and other experts during 2024 to come up with the best approach.
With escalating rates of family violence and an alarming increase in the incidence of violence against women, the Budget includes funding to support a range of programs.
More than $925 million will be spent over five years to provide support for victim survivors leaving a violent intimate partner relationship and a program to strengthen accountability for systemic gender-based violence in higher education.
The government will invest more than $56 million over four years to improve access to sexual and reproductive healthcare for women including training GPs to provide better menopause care.
A newly released national gender equality strategy will drive government action on women’s safety, sharing, economic equality, health, leadership and representation.
In a move to take the pressure off parents, superannuation will be paid on government funded Paid Parental Leave (PPL) for parents of babies born or adopted on or after 1 July 2025.
The stimulus provided by this Budget will bring some relief in the short term, but our economy will be relying on the big ideas, such as the Future Made in Australia project, to provide the resilience we need in an uncertain global economy.
Treasury is forecasting slow global growth and only 1.75 per cent growth in Australia this financial year and 2 per cent next year along with a significant deficit.
But the Treasurer is confident he has delivered “an inflation-fighting and future-making Budget” with “responsible relief that eases pressure on people and directly reduces inflation”.
It’s one that will “forge a new economy and a new generation of prosperity”, he says.
If you have any questions about the Budget measures announced, please don’t hesitate to contact us.
Information in this article has been sourced from the Budget Speech 2024-25 and Federal Budget Support documents.
It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.
As the end of financial year gets closer, some investors are thinking about the most effective ways to boost their super balance, particularly with an increase in the caps on contributions from 1 July.
The concessional contributions cap, which is the maximum in before-tax contributions you can add to your super each year without paying extra tax, is increasing to $30,000 from $27,500 in the new financial year.i
The cap increases in line with average weekly ordinary earnings (AWOTE).
It’s a good idea to keep track of your concessional contributions – which include any compulsory contributions made by your employer as well as salary sacrifice contributions – so that you don’t unintentionally exceed the cap. It is particularly important for those with more than one job or super fund because all of the contributions are added together and must not exceed the cap.
You can check your current balance at ATO online services. Log into your myGov account and link to the ATO to see all your details.
It is also useful to be aware of payment and reporting timelines. For example, your employer can make super guarantee contributions up until 28 July for the final quarter of the financial year and salary sacrifice contributions up until 30 June.
Any amounts showing on the ATO website for your account are based on when your fund reports to the ATO.
If you haven’t made extra contributions in past years, you may have unused concessional cap amounts.
These can be carried forward, allowing you to contribute more as long as your super balance is less than $500,000 at 30 June of the previous financial year.
You can carry forward up to five years of concessional contributions cap amounts.
If you’re worried about going over the cap, you may wish to stop any further voluntary contributions based on an assessment of the extra tax you will pay.
For those with two or more employers, you may opt out of receiving the super guarantee from one of the employers.
Meanwhile, if special circumstances have caused you to exceed your cap, it’s possible to apply to the ATO for some or all of the contributions to be disregarded or allocated to the next financial year.
But, if all else fails and you have exceeded the cap, the excess contributions will be included in your assessable income and taxed at your marginal rate less a 15 per cent tax offset. The good news is that you can withdraw up to 85 per cent of the excess contributions from your super fund to pay your tax bill. Any excess contributions left in the fund will be counted towards your non-concessional contributions cap.
The non-concessional contributions cap is the maximum of after-tax contributions you can make to your super each year without paying extra tax.ii
The non-concessional cap is exactly four times the amount of the concessional cap so it increases from $110,000 to $120,000.
If you exceed the cap, you may be eligible to use the ‘bring forward rule’, which allows you to use caps from future years and possibly avoid paying extra tax. It means you can make contributions of up to two or three times the annual cap amount in the first year of the bring forward period. iii
If your total super balance is equal to or more than the general transfer balance cap ($1.9 million from 2023–24 and 2024-25) at the end of the previous financial year, your non-concessional contributions cap is zero for the current financial year.
We’d be happy to help with advice about how the changes in contribution caps might affect you and whether you are eligible for the bring forward rule.
| Bring-forward cap first year (applying to 2023–24 and later years) | ||
| Total super balance on 30 June of previous year | Non-concessional contributions cap for the first year | Bring-forward period |
| Less than $1.68 million | $330,000 | 3 years |
| $1.68 million to less than $1.79 million | $220,000 | 2 years |
| $1.79 million to less than $1.9 million | $110,000 | No bring-forward period, general non-concessional contributions cap applies |
| $1.9 million or more | nil | Not applicable |
i, ii Understanding concessional and non-concessional contributions | Australian Taxation Office (ato.gov.au)
iii Non-concessional contributions cap | Australian Taxation Office (ato.gov.au)
Investing successfully and improving your investment portfolio can be as much about minimising mistakes as trying to pick the ‘next big thing’. It’s all about taking a calm and considered approach and not blindly following trends or hot tips.
Let’s delve into some of the most prevalent investment mistakes and look at the principles that underpin a robust and successful portfolio.
Every so often there are industries or shares that are all over the media and you may begin to worry that you are missing out on something. For example, there was the ‘dot com’ bubble in the early 2000s, the social media hyped ‘AMC’ shares in 2020 or the lithium shares in 2022. Jumping on every trend is like trying to catch a wave; you might ride it for a bit, but you’re bound to wipe out sooner or later. That’s because the hot tips and ‘buy now’ rumours often don’t pass the fundamentals of investing test.
The key is to keep a cool head and remember that the real winners are often the ones playing the long game.
What would you like your investment portfolio to achieve? Understanding your motivations and goals will help you to choose investments that work best for you.
If you want to build wealth for a comfortable retirement, say 20 to 30 years down the track, you can afford to invest in riskier investments to play the long-term game. If you have already retired and plan to rely on income from your portfolio, then your focus will be on investments that provide consistent dividends and less on capital growth.
Timing the market involves buying and selling shares based on expected price movements but at best, you can only ever make an educated guess and then get lucky. At worst, you will fail.
As the world-renowned investor Peter Lynch wrote in his book Learn to Earn: “Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves”.i
This is one of the classic concepts of investing and something that you have probably heard many times. But it’s worth repeating because, unless you are regularly reviewing your portfolio, you may be breaking the rule.
Diversifying your portfolio allows you to spread the risk when one particular share or market is performing badly.
Diversification can include different countries (such as adding international shares to your portfolio), other financial instruments (bonds, currency, real estate investment trusts, exchange traded funds), and industry sectors (ensuring a spread across various sectors such as healthcare, retail, energy, information technology).
While diversification is key, how do you achieve it? The answer is by setting an asset allocation plan in place.
How much exposure do you want to diversify into defensive and growth assets? Within them, how much should be invested in the underlying asset classes such as domestic shares, international shares, property, cash, fixed interest and alternatives.
Then review your asset allocation from time to time to rebalance any over or under exposure that may occur due to market movements.
The financial markets are volatile and that often leads investors to make decisions that in hindsight seem irrational. During the COVID-19 pandemic, on 23 March 2020 the ASX 200 was 35 per cent below its 20 February 2020 peak.ii By May 2021, the ASX 200 crossed the 20 February 2020 peak. Many investors may have made an emotional decision to sell out during the falling market in March 2020 but then would have missed the some of the uplift in the following months in.
Some of the other common investment mistakes include reacting to the noise in media, trading too much, over-diversification, not reviewing your portfolio regularly to ensure it still aligns with your goals, not doing enough quality research and not working with a professional.
Seeking out quality and trustworthy financial advice can help to minimise investment mistakes. Give us a call if you would like to discuss options for growing your portfolio.
Behavioural finance is the study of how psychological influences can affect investing and markets. This chart shows how emotions affect an investor’s behaviour at different points in the market.
Source: Russell Investments – Cycle of Investor Emotions | Russell Investments
Having a financial adviser coach you through this wave of emotions can be a way to limit making irrational decisions.
i From the Archives: Fear of Crashing, Peter Lynch – From the Archives: Fear of Crashing – Worth
ii Australian Securities Markets through the COVID-19 Pandemic – Australian Securities Markets through the COVID-19 Pandemic | Bulletin – March 2022 | RBA