Author: Glance Consultants

 

Are you thinking of investing in the Australian property market? If so, understanding key concepts such as negative and positive gearing can help you make wise decisions in relation to your property investment plans in the long run. So, let’s have a look at what these terms mean.

 

Understanding Negative Gearing

Gearing means borrowing to invest. In terms of negative gearing, the investor has to put some surplus cash into supporting the investment. That happens because your rental income from the investment property is less than the expenses of holding that property.  

These expenses normally include your loan repayments, which includes the interest expenses on that loan. It can also include other rental property costs such as agent fees, rates, insurance, maintenance costs etc.

If the property expenses which include interest costs and depreciation is greater than the rental income, your investment property is considered to be negatively geared. In short, a negatively geared property will require you to contribute additional funds from your back pocket each year.

 

Understanding Positive Gearing

Contrary to negative gearing, positive gearing adds to your annual income, which means the net return from your investment surpasses its expenses. Hence, you do not need to contribute additionally to holding costs or loan repayments.

 

Which Investment Option Should You Choose?

Focusing on your investment strategy is crucial. You might wonder why you would invest in a property that is negatively geared but choosing between negatively and positively geared investment properties solely depends on your long-term goals.

If you’re hoping to earn extra income from your investment property each year, then you may be best placed to look at positive gearing. Although finding a positively-geared property that still has good growth potential can be challenging.

On the other hand, negative gearing can help to minimise your taxable income and may have more growth potential long term. For this reason, negative gearing is traditionally favoured by individuals who don’t need extra annual income but would like to see the value of their investment property increase long-term.

 

What Should You Consider Next?

Before moving forward with any type of investment, it’s important to do your research. We recommend reviewing your financial capacity to ensure that you could service an investment property throughout changing market conditions.

It’s also worthwhile thinking about those unexpected costs relating to having an investment property, such as a sudden surge in Body Corporate contributions if you’re looking at an apartment or townhouse. Other costs like land taxes and landlord insurance cannot be passed onto tenants and need to be factored into your calculations. 

The good news is that we are able to support you throughout the process of securing an investment property. There are many pitfalls that can be avoided with proper advice.

Contact Glance Consultants today to get the right advice and help with your business on 03 98859793 or at enquiries@glanceconsultants.com.au

 

2022–23 Labor Federal Budget Highlights

The Federal Treasurer, Dr Jim Chalmers, handed down the Labor government’s first Federal Budget at 7:30 pm (AEDT) on 25 October 2022.

Despite an uncertain global economic environment, the Treasurer has lauded Australia’s low unemployment and strong export prices as reason for a 3.5% growth in the current financial year, slowing to 1.5% in 2023–24. The Budget projects a deficit of $36.9 billion, lower than the forecast earlier this year of $78 billion.

Described as a sensible Budget for the current conditions, it contains various cost of living relief measures including cheaper child care, expanding paid parental leave and encouraging downsizing to free up housing stock. Key tax measures are targeted at multinationals, particularly changes to the thin capitalisation rules, and changes to deduction rules for intangibles.

Importantly, no amendments have been proposed to the already legislated Stage-3 individual tax rate cuts. Additional funding for a range of tax administration and compliance programs have also been announced. Finally, the fate of a suite of announced but unenacted tax measures, including a few that have been around for at least 10 years, has been confirmed.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out below.

 

Businesses

• Electric vehicles under the luxury car tax threshold will be exempt from fringe benefits tax and import tariffs.

• A number of Victorian and ACT based business grants relating to the COVID-19 pandemic will be non-assessable non-exempt income for tax purposes.

• Grants will be provided to small and medium-sized businesses to fund energy efficient equipment upgrades.

• The tax treatment for off-market share buy-backs undertaken by listed public companies will be aligned with the treatment of on-market share buy-backs.

• The 2021–22 Budget measure to allow taxpayers to self-assess the effective life of intangible depreciating assets will not proceed.

• Heavy Vehicle Road User Charge rate increased from 26.4 to 27.2 cents per litre of diesel fuel, effective from 29 September 2022.

• Australia has signed a new tax treaty with Iceland.

• Additional tariffs on goods imported from Russia and Belarus have been extended by a further 12 months, to 24 October 2023.

• Ukraine goods are exempted from import duties for a period of 12 months from 4 July 2022.

• Technical amendments to the taxation of financial arrangements (TOFA) rules proposed in the 2021–22 Budget will be deferred.

• Amendments to simplify the taxation of financial arrangements (TOFA) rules proposed in the 2016–17 Budget will not proceed.

• The proposed measure from the 2018–19 Budget to impose a limit of $10,000 for cash payments will not proceed.

• Proposed changes in the 2016–17 Budget to amend the taxation of asset-backed financing arrangements will not proceed.

• The new tax and regulatory regime for limited partnership collective investment vehicles proposed in the 2016–17 Budget will not proceed.

• The Pacific Australia Labour Mobility (PALM) scheme will be expanded and enhanced.

 

Individuals

• The amount pensioners can earn in 2022–23 will increase by $4,000 before their pension is reduced, supporting pensioners who want to work or work more hours to do so without losing their pension.

• To incentivise pensioners to downsize their homes, the assets test exemption for principal home sale proceeds will be extended and the income test changed.

• The income threshold for the Commonwealth Seniors Health Card will be increased from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.

• The Paid Parental Leave Scheme will be amended so that either parent is able to claim the payment from 1 July 2023. The scheme will also be expanded by 2 additional weeks a year from 1 July 2024 until it reaches 26 weeks from 1 July 2026.

• The maximum Child Care Subsidy (CCS) rate and the CCS rate for all families earning less than $530,000 in household income will be increased.

• The current higher Child Care Subsidy (CCS) rates for families with multiple children aged 5 or under in child care will be maintained.

• Legislation will be introduced to clarify that digital currency (or crypto currencies) will not be treated as foreign currency for income tax purposes.

 

Superannuation

• Eligibility to make a downsizer contribution to superannuation will be expanded by reducing the minimum age from 60 to 55 years.

• The 2021–22 Budget measure that proposed relaxing residency requirements for SMSFs and small APRA-regulated funds (SAFs) from 1 July 2022, has been deferred.

• The 2018–19 Budget measure that proposed changing the annual audit requirement for certain self-managed superannuation funds (SMSFs) will not proceed.

• A requirement for retirement income product providers to report standardised metrics in product disclosure statements, originally announced in the 2018–19 Budget, will not proceed.

 

Multinationals

• Thin capitalisation rules for non-ADIs will be amended from 1 July 2023, with tests relating to ratios replaced by earnings-based tests.

• Significant global entities will be denied a tax deduction for payments to related parties in relation to intangibles held in low- or no-tax jurisdictions.

• Significant global entities and public companies will have additional reporting requirements for income years commencing from 1 July 2023.

• Proposed amendments to the debt/equity tax rules mentioned in the 2013–14 MYEFO will not proceed.

 

Tax administration

• Penalty unit increase to $275 from 1 January 2023.

• Personal Income Taxation Compliance Program extended a further 2 years to 30 June 2025

• Shadow economy compliance program extended to 30 June 2026.

• The ATO tax avoidance taskforce will receive additional funding and is being extended to 30 June 2026.

• Financial penalties for breaches of foreign investment compliance to double from 1 January 2023.

• Access to refunds of indirect tax, including GST, fuel and alcohol taxes, under the Indirect Tax Concession Scheme has been expanded to the diplomatic and consular representations of Bhutan.

• The proposed extension of reportable transactions relating to the sharing economy deferred by 12 months to 1 July 2024

 

Tax agents

• Funding to be given to the Tax Practitioners Board to increase compliance investigations.

• Additional funding will be provided to support the delivery of government priorities in the Treasury portfolio.

 

Not-for-profit

• Deductible gift recipients list to be updated.

• The 2021–22 MYEFO measure to establish a deductible gift recipient category for providers of pastoral care will not proceed.

 

Click to view our Federal Budget Update Glance Consultants 2022-23 October via PDF

 

 

 

If tax amendments that were introduced to Parliament recently are passed, the eligibility for the one-off bump to retirement savings will have widened. 

The new bill would allow individuals over the age of 55 to make downsizer super contributions provided they meet the eligibility criteria. It could apply as soon as October. 

A reduction has already recently taken place, bringing the age currently down to 60. Should this amendment be passed, it would have reduced the age by a decade in a matter of months. 

This will allow a one-off post-tax contribution of up to $300,000 after a main residence has been sold(subject to other requirements).

This will have the potential to free up suitable housing for growing Australian families, by encouraging empty nesters or older Australians to sell up and downsize to something more suitable.

There are other benefits as well. An additional ten years does give people more time to learn what suits them and what doesn’t. It also allows for more money to get into the system if you have reached your contribution cap and have maxed out on the total super balance. 

There are a couple of things to consider. In order to be eligible, the home being sold must have been owned for at least a decade, be at least partially exempt from CGT under the main residence exception and the super contribution needs to be deposited within 90 days post sale. 

The scheme can only be used once, however couples can double the $300,000 limit. 

If you would like to understand more about downsizer super payments to determine whether you are eligible, you are more than welcome to discuss your situation with us.

Such an amendment will change the dynamics of the scheme as participants will have their money locked away for 10 years.

So individuals need to consider their plans and decide whether they will need that money within that time frame; whether they act strategically and make a non-concessional contribution from excess sale proceeds and save this scheme for a later date. 

It really does depend on your personal situation and what is going to be the best financial outcome for you in the end. 

Contact our friendly team of trusted advisors on 03 98859793 or at enquiries@glanceconsultants.com.au to discuss your needs and our full service offering.

 

 

An election ago, the 2022-23 Budget proposed a 120% tax deduction for expenditure by small and medium businesses on technology, or skills and training for their staff. This proposal has now been adopted by the current Government and details released in a recent exposure draft by Treasury.

 

Timing

Two investment ‘boosts’ will be available to small and medium businesses with an aggregated annual turnover of less than $50 million:

• Skills & Training Boost
• Technology Investment Boost

The Skills and Training Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2024. The business, however, will not be able to start claiming the bonus deduction until the 2023 tax return. That is, for expenditure incurred between 29 March 2022 and 30 June 2022, the additional 20% ‘boost’ deduction will not be claimable until the 2022-23 tax return (assuming the announced start dates are maintained if and when the legislation passes Parliament).

The Technology Investment Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2023. As with the Skills and Training Boost, the additional 20% deduction for eligible expenditure incurred by 30 June 2022 will be claimed in the 2023 tax return.

The boost for eligible expenditure incurred on or after 1 July 2022 will be included in the income year in which the expenditure is incurred.

When it comes to expenditure on depreciating assets, the bonus deduction is equal to 20% of the cost of the asset that is used for a taxable purpose. This means that, regardless of the method of deduction that the entity takes (i.e., whether immediate or over time), the bonus deduction in respect of a depreciating asset is calculated based on the asset’s cost.

 

Technology Investment Boost

The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services.

The boost is capped at $100,000 per income year with a maximum deduction of $20,000.

To be eligible for the bonus deduction:

• The expenditure must be eligible for deduction (salary and wage costs are excluded for the purpose of these rules)
• The expenditure must have been incurred between 7.30pm (AEST), 29 March 2022 and 30 June 2023
• If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use by 30 June 2023.

To be eligible, the expenditure must be wholly or substantially for the entity’s digital operations or digitising its operations. For example:

• digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks;
• digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices; and
• e-commerce – supporting digitally ordered or platform enabled online transactions.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria. Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for an assessable income producing purpose.

The bonus deduction is not intended to cover general operating costs relating to employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells. The boost will not apply to:

• Assets that are sold while the boost is available
• Capital works costs (for example, improvements to a building used as business premises)
• Financing costs such as interest expenses
• Salary or wage costs
• Training or education costs
• Trading stock or the cost of trading stock

For example:

A Co Pty Ltd (A Co) is a small business entity. On 15 July 2022, A Co purchased multiple laptops to allow its employees to work from home. The total cost was $100,000 (GST-exclusive). The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use. As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense.

A Co can claim the full purchase price of the laptops ($100,000) as a deduction under temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return.

The $20,000 bonus deduction is not paid to the business in cash but is used to offset against A Co’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies.

 

Skills and Training Boost

The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees.

External training courses will need to be provided to employees in Australia or online, and delivered by training organisations registered in Australia.

To be eligible for the bonus deduction:

• The expenditure must be for training employees, either in-person in Australia, or online
• The expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope (if any) of the provider’s registration
• The registered training provider must not be the small business or an associate of the small business
• The expenditure must be deductible
• Enrolment for the training must be on or after 7.30pm, 29 March 2022.

The training must be necessarily incurred in carrying on a business for the purpose of gaining or producing income. That is, there needs to be a nexus between the training provided and how the business produces its income.

Only the amount charged by the training organisation is deductible. In some circumstances, this might include incidental costs such as manuals and books, but only if charged by the training organisation.

Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. The training boost is not available to:

• Sole traders, partners in a partnership, or independent contractors (who are not employees)
• Associates of the business such as a relative, spouse or partner of an entity or person, a trustee of a trust that benefits an entity or person and a company that is sufficiently influenced by an entity or person.

 

For example:

Cockablue Pets Pty Ltd is a small business entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 (GST exclusive) for the employee to undertake external training in veterinary nursing. The training is delivered by a registered training provider, whose scope of registration includes veterinary nursing.

The bonus deduction is calculated as 20% of 100% of the amount of expenditure that can be deducted under another provision of the taxation law. In this case, the full $3,500 is deductible under section 8-1 of the ITAA 1997 as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700.

In this example, the bonus deduction available is $700. That does not mean the business receives $700 back from the ATO in cash, it means that the business is able to reduce its taxable income by $700. If the company has a positive amount of taxable income for the year and is subject to a 25% tax rate, then the net impact is a reduction in the company’s tax liability of $175. This also means that the company will generate fewer franking credits, which could mean more top-up tax needs to be paid when the company pays out its profits as dividends to the shareholders.

Any queries or need help with your business? Contact our friendly team of trusted advisors at Glance Consultants on 03 98859793 or at enquiries@glanceconsultants.com.au

 

There has been a new Bill proposed in Parliament – one made in a bid to incentivise electric car purchases by removing fringe benefits tax (FBT).

This proposed FBT exemption will reduce costs for a few thousand owners each year. The first year cost is around $20 million, reaching $90 million by 2025/2026. 

The removal of FBT from electric, plug-in hybrid and hydrogen cars that are supplied by employers to staff, if the vehicle price is below the luxury car tax threshold (which is $84,916 for the financial year 2022-2023), would benefit business financially.

It could save an employer $9,000 for an EV costing $50,000, or $4,700 where the arrangement includes salary sacrificing.

If enacted, the Bill will apply to all eligible vehicles first held and used on or after 1 July 2022. 

There is confidence that this move will lower the barrier to the uptake of EVs in Australia. It will encourage more affordable vehicles into the market, which is a welcome relief in the face of the rising cost of fuel. 

There are some implications of this proposed Bill that have been observed.

For example, gifting an EV to an employee will not allow for FBT exemptions as technically this would make it a ‘property benefit’ and not a ‘car benefit’.

Some concern has been expressed regarding reportable fringe benefit amounts (RFBAs) and how providing use of an eligible EV will still be included in determining this amount. 

However, this should not be too much of a deterrent for those willing to benefit from the proposed scheme, as the approach does seem equitable when considering RFBAs are used to determine various other entitlements. 

There is also the issue of the lack of supply, which is a critical factor that is stagnating the uptake in Australia. This contributes to inflated prices and although we may eventually reach a second-hand market, data is thin on the resale value of EVs.

The threshold which is just shy of $85,000 does encompass several brands available in the Australian market today, however does not accommodate the cost of additional features and modifications that some businesses may wish to purchase. 

If you like to understand the benefits of this proposed measure to you and your business, the team at Glance Consultants are happy to assist. Call us now on 03 98859793 or email us at enquiries@glanceconsultants.com.au

 

 

The tax consequences of land subdivision

It’s quite common for individuals to subdivide land they own, and then sell off one of the blocks. Depending on the circumstances, this can have capital gains tax (CGT) and GST implications.

Capital gains tax

If you subdivide a block of land, each resulting block is registered with a separate title. For capital gains tax (CGT) purposes, the original land parcel is divided into two or more separate assets.

The profit from selling subdivided land may be a capital gain or ordinary income, depending on the circumstances.

If you subdivide a block of land and sell the new block, any profit is generally treated as a capital gain subject to CGT.

However, any profit you make is treated as ordinary income (not a capital gain) if both of the following apply:

• your intention or purpose in subdividing was to make a profit
• the profit was made in the course of carrying on a business, a business operation or commercial transaction.

This is true even if you aren’t in business (for example, if it’s a one-off transaction by an individual).

Where the amount is treated as ordinary income, CGT concessions (such as the 50% discount) are not available.

If you sell any land separately from your home, it is invariably subject to CGT.

Only land sold with the home that is your main residence can receive the main residence exemption. Land is adjacent to your home if it is close to, near, adjoining or neighbouring it.

Goods and services tax

You may have GST obligations and entitlements if you sell with the intention of making a profit:

• in the course of carrying on a business, or
• as a business or commercial transaction.

If you’re unsure whether your subdivision falls into the above categories, consult with us.

Even with a one-off transaction, you may still be required to register for GST because your transaction may have the characteristics of a business deal/enterprise. Whether an enterprise is being carried on (and therefore whether you need to register for and charge GST) will depend on a range of factors.

If several of these factors are present it may be an indication that an enterprise is being carried on (as distinct from the land being sold as is):

• there is a change of purpose for which the land is
  held
• additional land is acquired to be added to the original
  parcel of land
• the parcel of land is brought into account as a business asset
• there is a coherent plan for the subdivision of the land
• there is a business organisation – for example a manager, office and letterhead
• borrowed funds financed the acquisition or subdivision
• interest on money borrowed to defray subdivisional costs was claimed as a business expense
• there is a level of development of the land beyond that necessary to secure council approval for the subdivision and
• buildings have been erected on the land.

 

Once registered for GST, you will:

• need to include GST in the price of goods you sell, including land that you’ve subdivided
• be able to claim credits for the GST included in the price of most of your business purchases (subject to the normal GST rules)
• report these transactions by completing an activity statement.

If you are considering subdividing and selling, or even just selling vacant land, we can advise you of both the CGT and GST consequences.

If you sell any land separately from your home, it is invariably subject to CGT.

 

Hiring employees

With unemployment at historic lows, workers are in demand and are also switching jobs at record rates. There are a range of issues employers should be aware of when hiring.

KNOW THE LAW

Before hiring a new employee, make sure you know your rights and responsibilities. The minimum terms and conditions of employment come from an award, registered agreement and contract of employment, and also the National Employment Standards (NES). An employment contract or registered agreement can’t provide for less than what is in the NES.

To find the right award, and if an enterprise agreement applies, visit the Fair Work Commission website.

GETTING PAY RIGHT

To work out the right pay when hiring a new employee, you need to decide on the person’s employment status – whether they will be a full-time, part-time or casual employee. Visit the Fair Work website or ask us for guidance.

On the Fair Work website, you can also locate the minimum pay rates, penalties and allowances that apply using their Pay and Conditions Tool.

EMPLOYMENT CONTRACTS

It’s important that your employment contracts protect your business and your staff. To help you get things right, use the business.gov.au – Employment Contract Tool to create an employment contract that’s tailored to your business needs and complies with workplace laws.

To use this tool, your employee must be full-time, part-time or casual, covered by an award, paid an hourly or weekly wage. The Employment Contract Tool isn’t for every worker. It can’t be used for, employees who’ll be paid a salary, apprentices and trainees, seasonal workers, independent contractors, or employees covered by registered agreements.

INDUCTION

Take the time to go through an induction with your new starter. Use this time to communicate your expectations and give them an opportunity to ask questions. It also helps employees feel informed, welcomed and prepared to do their job.

PRODUCTIVE WORKPLACES

During the first few weeks of employment, employers and employees should organise a time to set goals and expectations. You can use this opportunity to outline training needs and create a plan together to ensure these needs are met.

COMMUNICATION

Communication is an essential part of a good working relationship. Set up regular meetings to provide performance feedback and discuss any issues or concerns early, before they become workplace problems.

HIRING AN APPRENTICE OR TRAINEE

If you’re hiring an apprentice, use Fair Work’s Guide to taking on an apprentice to help you understand your obligations. You can also find more information on Fair Work’s Apprentices and trainees page.

These are just some of the issues to consider when hiring a new worker. If you have any questions around taxation, payroll, or whether the worker is a contractor or an employee, please contact us for assistance.

 

Super funds post lowest returns since GFC

Superannuation funds have recorded their worst performance since the global financial crisis, with the median balanced superannuation fund ending the 2021/22 financial year down 3.3% due to global market instability. This result is the third lowest return since the introduction of superannuation guarantee in 1992. So, what are your options if your superannuation balance has suffered a decline?

Sit tight and have faith

Although easier said, it is important not to panic about negative returns. Superannuation is a long- term investment, so if you are not approaching or in retirement, keep in mind that all market movements in the short-term can bounce back. Losses in superannuation are not crystalised until your superannuation is withdrawn or switched to another investment option. This means your superannuation balance will recover over the long-term if you sit tight and ride the market volatility wave.

Change superannuation funds

If you have a MySuper fund that is underperforming, you can use the ATO’s YourSuper comparison tool to help you compare different MySuper products and choose a superannuation fund that meets your needs. To recap, a MySuper fund is a low-cost superannuation product and is usually the default account for people who don’t choose their own superannuation fund when they start a new job.

The YourSuper comparison tool can be accessed by logging in to ATO online services through myGov, then clicking on the Super drop-down menu and select Information, then select YourSuper comparison.

There are other non-government superannuation comparison websites that can be used which provide some information for free, but some offer more information for a fee.

Seeking advice from a financial adviser will often be your best option as your entire circumstances will be taken into account to ensure the comparison information relates to your specific situation.

Start an SMSF

A further option may be to take charge of your own superannuation by setting up a self-managed superannuation fund (SMSF).

There are a number of benefits of having an SMSF, for example, as trustee you can choose how to invest and manage your superannuation savings. Having greater investment control and flexibility can allow you to have a more hands-on approach to acquiring and selling your investments, which means you can respond quickly by adjusting your investment portfolio as market conditions change. But for all the benefits that come along with SMSFs, you must consider the risks (and the work that may be involved) as there are strict laws and regulations that govern SMSFs.

Seek advice

A financial advisor can help review your superannuation to ensure that you are on the right track to meeting your retirement income goals. Contact us today if you are uncertain about your options and would like further information.

 

eInvoicing: Save time and money

The ATO is anticipating a significant upward spike in the number of businesses using eInvoicing over the coming 12 months. Already, more than 18,000 businesses are using eInvoicing to make their transactions faster, simpler and more secure.

eInvoicing is the new, standardised way to send and receive electronic invoices directly in software, via a secure network.

With eInvoicing, suppliers no longer need to print, post or email paper-based or PDF invoices and buyers won’t need to manually enter or scan invoices into their software.

ATO Deputy Commissioner Will Day says:

The pressures of running a business can often leave businesses with little time to focus on anything else. eInvoicing offers a streamlined way of managing invoices, allowing more time to focus on what is important to the business.

Once connected with eInvoicing, businesses can immediately transact with everyone on the same network, meaning you can be paid faster, and ultimately improve your cashflow.

With eInvoicing, you no longer need to manually enter or scan the invoices you receive, because that information is received directly through your accounting software, ready to be checked and paid.

Mr. Day said eInvoicing also reduces the risk of fake or compromised invoices and email billing scams.

With eInvoicing, the invoice is delivered directly into the customer’s software via a secure network, so there’s less risk of lost or fraudulent invoices being paid.

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said he enthusiastically encouraged small businesses to adopt eInvoicing.

It is a great way to enable faster payment, it cuts the administrative burden and is more secure than posted or emailed invoices, so it reduces the chance of invoice fraud or scams.

About 1.2 billion invoices are exchanged in Australia every year but many are sent to the wrong person or with incorrect information. It costs around $30 to process a paper invoice while an e-invoice costs less than $10.

Aside from cost savings, there are also fewer errors. An eInvoice is accurate and complete. eInvoicing uses standardised data that is validated before the eInvoice is sent through the network to your software.

With eInvoicing you don’t need to:

• re-type or scan invoices
• make corrections
• chase missing information

 

This new system is also reliable and secure in that:

• eInvoices are exchanged securely through the Peppol network by approved access points, using the buyer’s and supplier’s ABNs.
• The risks of fake or compromised invoices, email scams and ransomware attacks are lower compared with posted or emailed invoices.
• There is no risk of lost invoices.
• You keep control of invoice processing.
• This includes verifying and approving invoices. eInvoices can only be viewed by the supplier, buyer and digital software provider, where needed.
• eInvoices do not go through the ATO and they cannot view them.

Businesses can get started with eInvoicing by registering in their software or talking to us. To find out if your software is eInvoicing enabled, we can check with your software provider.

 

Estate Planning Explained

Estate Planning means different things to different people. Ultimately, it is about ensuring that you have the right mechanisms in place to ensure that in the event of your death, your assets pass in the manner you intend.

Broadly speaking, there are four key steps in the estate planning process:

Firstly, identify which assets are to be dealt with as part of your estate plan? This can be more extensive than you think and could involve:

• Savings accounts
• Shares
• Businesses
• Properties
• Vehicles
• Collectibles
• Items with sentimental value
• Superannuation savings.

Next, who owns those assets? Assets can be owned individually, jointly, within superannuation, or by a related entity such as a company or trust.

Third, how do you want those assets distributed on your death? This a question only you can answer: who should get what and when?

Finally, how do you bring about this outcome? An estate plan brings together the answers to the above questions. It will usually include Wills and Powers of Attorney but in many cases will also involve succession planning strategies to deal with related entities and superannuation balances. Additionally, steps may also be necessary to provide for children and blended families.

Another key step is choosing your Executor. This is the person who will carry out your final wishes after you die. An Executor should be someone you trust who has some financial knowledge as they will be responsible for paying off debts and managing your Estate according to the terms set out in your Will. An Executor can be a family member, close friend, a lawyer, Public Trustee or other corporate provider.

Here are a few questions to help you decide whether you might have some gaps that need filling in your estate planning:

• Do you have a Will?
• If you do, when was it last updated?
• Could you (or your spouse) locate your Will if you had to?
• Do you have a Power of Attorney in place in case you were unable to make your own decisions?
• If you and your spouse leave everything to one another in your Wills, have you considered what would happen in the event of your simultaneous death?
• Do you realise that superannuation and family trusts don’t form part of your Estate and thus other strategies (besides a Will) are needed to properly deal with these?
• Do you know that special, tax-effective structures known as Testamentary Trusts can be used to pass wealth securely to family members, but they are most effective when documented in your Will?
• Have you properly considered who should be the Executor of your Will (sometimes the people closest to you, such as a spouse, may be in no fit state to play the role)?

Once in place, any good Estate plan should be reviewed and updated regularly. Major life events like marriages, divorces or deaths are a good opportunity to go back through your Estate plan and make sure the right people will be protected when you die.

Through a deep understanding of the personal and business structures of our clients, we are well positioned to help in the estate planning process, bringing about tax-effective outcomes tailored to the specific requirements at hand. Contact us for further information.

Insurance: Inside or outside super?

Most people insure their personal assets, such as their house, contents and car, but when it comes to personal insurance, many overlook the importance of protecting their wealth because personal insurance is often seen as unnecessary, a luxury and an additional cost to pay for.

Unfortunately, we don’t know what’s around the corner but having the right level of protection in place will assist you and your family through sickness and injury and protect you and your family’s lifestyle when times get tough.

Depending on your needs, insurance can be structured either inside or outside superannuation, with most superannuation funds offering insurance for their members.

Superannuation funds generally offer three types of life insurance for their members, including life insurance, total and permanent disablement (TPD) insurance and income protection insurance. This article briefly summarises these insurances and covers some common benefits and considerations when owning insurance in superannuation.

LIFE INSURANCE

Life insurance, also known as death cover, is a lump sum amount paid to your beneficiaries on top of the balance that’s already in your superannuation account if you pass away. It may also be paid if you have a terminal illness.

TPD INSURANCE

Total and permanent disablement (or TPD) cover pays you a benefit if you become seriously disabled or are too sick to ever work again.

In addition to meeting the insurance policy definition of incapacity, you must also meet the permanent incapacity condition of release definition under superannuation law before the trustee can pay the TPD benefit to you.

Superannuation law defines permanent incapacity to mean:

“ill health (whether physical or mental), where the trustee is reasonably satisfied that the member is unlikely, because of the ill heath, to engage in gainful employment for which the member is reasonably qualified by education, training or experience”.

To be ‘reasonably satisfied’, a superannuation fund trustee will usually request medical evidence in the form of two doctors’ certificates to that effect. This is to also satisfy the requirement for the payment of a disability superannuation benefit.

It is also worth noting that the superannuation law definition of permanent incapacity is generally referred to as an ‘any occupation’ definition of permanent incapacity because it relates to gainful employment ‘for which the member is reasonably qualified by education, training or experience’.

INCOME PROTECTION

Income protection (also called salary continuance insurance) helps replace your income if you can’t work due to a temporary disability or illness. If your claim is approved, your superannuation fund will pay you a regular income as a percentage of your salary for a specified period of time (ie, the benefit period could be for 2 years, 5 years or up to a certain age, such as age 65).

WHAT ABOUT TRAUMA COVER?

Trauma cover (also known as critical illness cover) pays you a lump sum amount if you are diagnosed with a critical illness or injury as specified in the policy, such as cancer, stroke, coronary bypass or heart attack. However due to changes in the law that came into effect on 1 July 2014, it is no longer possible to take out trauma insurance through your superannuation fund.

FACTORS TO CONSIDER

The key benefits of insurance inside superannuation include:

• Premiums can be funded from your existing superannuation account balance, which can assist in managing your cashflow and affordability of premiums
• You may benefit from income tax savings if you claim a tax deduction for personal contributions or if you contribute via a salary sacrifice arrangement using pre-tax salary which may provide cost savings on premiums
• Insurance in employer superannuation plans may be cheaper than insurance outside superannuation as superannuation funds purchase insurance policies in bulk
• After joining your employer’s default superannuation plan, you may be able to obtain automatic acceptance up to a set level of cover with no medicals required.

On the other hand, potential downsides of insurance inside superannuation include:

• The amount of cover you can get inside superannuation is often lower than the cover you can get outside superannuation. Further, default insurance through superannuation isn’t specific to your circumstances and some eligibility requirements may apply. To avoid this risk, you can purchase a retail insurance policy through superannuation (or personally outside of superannuation). While retail cover requires a more detailed application process, underwriting your personal history and generally higher premiums than default group cover, retail cover can provide you with better quality cover and greater confidence that a payment is likely to be made at claim time
• Premiums can erode your retirement savings if you do not make extra contributions to negate the premium cost
• Contributions made to fund premiums count towards the contribution caps
• If you consolidate your superannuation accounts, you may lose any cover you have with the superannuation fund you close. Thus, you should always check that the new superannuation fund you’re choosing can cover you for equivalent (or more) insurance cover
• Unless you actively opt-in to maintain your insurance, your cover may be cancelled if your superannuation fund becomes inactive for 16 months or more, the fund balance falls below $6,000 or you are under age 25.

THE LAST WORD …

Wealth protection is considered to be the foundation of all good wealth creation plans, because without it, even the best laid wealth creation plans can go awry. Insurance is all about having peace of mind, so plan for tomorrow by obtaining advice on whether you need insurance cover and if so, the types of personal insurances you may need and how to best structure the cover.

 

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Although cryptocurrencies are now the second most popular investment, too many holders are completely unaware of the dangers they may be putting themselves in.

A recent survey found that a quarter of investors had crypto in their portfolio yet only a fifth believed such an investment was ‘risky’.

There has been a growth in retail investing since the pandemic, which has driven a change in investment patterns and fuelled changes to the mix of product types being traded.

The prevalence of social media and other digital channels to spread information and to add diversity to trading platforms has also had an impact on the way that investors behave. 

44% of retail investors said that they held cryptocurrency. This makes it second only to Australian shares, where 73% of those surveyed said they held these. 

Interestingly, a quarter of those who hold crypto say that this is their only investment.

At Glance Consultants, we keep up to date with current cryptocurrency news and regulatory changes and are keenly aware of the risks, and potential gains, involved with cryptocurrency investments. 

We are able to advise our clients who have invested in cryptocurrency what their tax obligations are and to work out a plan with them to ensure that they are making the most sound investment decisions from a tax perspective.

There is currently limited protection for crypto-assets even as they have become a widely mainstream investment source and receive copious amounts of media advertising and attention. 

Over half of surveyed investors who own cryptocurrency shares are sitting in the 18-34 age bracket. Four out of ten investors were heavily reliant on influencers to gain relevant information about their cryptocurrency investments.

Much more clarity is required around cryptocurrency regulations, including adequate and reliable information regarding the risk factor of these potentially lucrative investments. 

If you’d like to learn more about cryptocurrency and its tax and accounting implications please contact our team at Glance Consultants on 03 98859793 or at enquiries@glanceconsultants.com.au 

Between rising inflation and supply chain issues, the final straw for SMEs is the difficulty in finding skilled staff to fill roles.

Insolvency Australia recently said that one of the driving factors behind businesses nationwide being forced into insolvency is the inability to find workers. 

The tourism, hospitality and construction sectors were particularly vulnerable but with unemployment at a record low 3.5%, this issue is felt across multiple industries.

Although the hospitality industry is clearly struggling to find staff and labour shortages are forcing doors to close, the supply of parts and services are causing problems for many other businesses. 

Whether it be a delay in postal or freight services due to reduced staffing numbers or a delay in stock coming in to suppliers, there is a flow on effect that is felt across all the sectors and is having a detrimental impact on the performance of a business.

Recently, reports of the financial sector struggling to keep up with customer demand due to staff shortages has had an impact on customer satisfaction. Even the timeframe for opening a bank account in some major banks has ballooned to up to two weeks.

Glance Consultants are seeking ways to support their clients to find solutions to best meet their ever-changing needs. Tightening cash flows, squeezed margins and skill shortages are just some of the crises that businesses are facing. Contact our office on 03 98859793 or at enquiries@glanceconsultants.com.au at for help with your business. 

By speaking to an experienced advisor, you can bounce ideas off professionals who are equipped with the skills to provide sound advice.

We are aware of the domino effect that can occur when staff shortages can cause a loss in customer service which in turn has an effect on the bottom line.

As the government makes moves to ease these skills shortages by adopting visa rule changes, there is a time lag between application to acceptance to hiring that may be too late for some businesses. 

The pandemic created border closures that prompted the exodus of many foreign workers who are yet to return, leaving a gaping void in our workforce that needs to be filled, and quickly.