Posts Categorized: News
17 things you must have addressed – Part 2
Last month we began exploring the 17 things you must know the answer to. We now address the remaining 9 critical matters.
As we stated at the beginning of the last post, if you haven’t addressed the following points, then your estate planning is likely to lead to less than optimal outcomes, possible disputes and be more financially and emotionally costly to administer.
So have you understood and considered:-
9/. I understand that a Will dictates what happens to assets that are owned by an individual. I therefore understand that assets owned jointly as joint tenants, the owner of life insurance policies and my superannuation cannot be dealt with by my Will.
10/. I also understand that I control but do not own my trust(s). It will, subject to an 80 year perpetuity period, live beyond me. I cannot bequeath any asset owned by a trust through my Will; all I can bequeath is any unpaid loan account balance.
11/. I understand that any unequal unpaid trust distributions to family members will not be automatically addressed by my Will and I have made provisions regarding current and future imbalances.
12/. I understand that I can make one of three kinds of death benefit nominations in respect of my superannuation and that each nomination has its own advantages and disadvantages depending on one’s individual circumstances. I understand that there is no cookie cutter solution.
13/. I understand that if there is some dispute about my superannuation within my self managed super fund, then it cannot be referred to the Super Complaints Tribunal; it must go before the courts (in other words, put five or six numbers between the $ sign and decimal point). I also understand that there is a recent procession of landmark cases in this area.
14/. I understand that if not otherwise considered, a typical self managed super fund deed will give equal rights to each member – which means that two kids with balances of less than $100,000 each will have equal voting rights with my surviving spouse (even if their balance is over $2 million).
15/. I understand the prudential advantages of setting out my overall wishes in a deed of family agreement.
16/. I have made provisions for the disclosure of electronic passwords in the absence of which will make it difficult if not impossible for my executor/executrix to know of and transact on my assets.
17/. I understand that once I’m dead there is nothing I can do to ensure that my wishes are carried out. No one can ask me; they can only guess. This will waste both time and money. Worse still, they may act out of self interest.
Simply put, estate planning is the process of ensuring that the right assets get to the right people in the most efficient manner. It requires thought and consultation.
If you don’t have a Will, your circumstances have changed since your last Will was made, or you fear that your Will doesn’t address one or more of the above issues, then your best course of action is to attend our upcoming seminar in which the above and many other issues will be examined.
Since our first post, we have held one day on the office where clients were booked back to back with an estate planning lawyer. This was best for everyone as whilst it is CRITICAL that we attend the meeting, we only need to chair the first 5 to 10 minutes and attend the de-brief. Perhaps even some other questions need to be answered during the meeting. Whilst our involvement is critical, we do not need to sit through the whole meeting. It is dangerous for us not to be in the meeting. The risk of not having one’s accountant at (part of) an estate planning meeting is that the structure is all too often not understood and not conveyed to the lawyer. And having a Will that doesn’t account for trusts and super funds are as good as or worse than not having a Will.
So, does your will estate planning ensure the best outcomes?
At MRS, we will spend today planning for your success tomorrow.
Downsizing the family home
In our 2017 Federal Budget briefing party, we outlined the proposed downsizing the family home super concession. The proposal is designed to increase housing stock by encouraging retirees to move out of their family home earlier than they may otherwise do.
The intention is that from 1st July 2018, those aged over 65 can take up to $300,000 and contribute it into super (where the tax rate is lower than the first personal marginal tax rate). There is no maximum age limit and no work test need be satisfied. Any such contribution is non-concessional (meaning it is not a taxable contribution). It also doesn’t count against one’s non-concessional contribution limit.
Couples can both utilise this even where a property is only one person’s name. This means that a couple can contribute up to $600,000 between themselves.
However, it seems as though the Greens and Labour are against this initiative. We will keep you posted of whether this proposal is legislated and in what form with all of the conditions. We also remind you that the proposed start date is still seven months away.
At MRS, we will spend today planning for your success tomorrow.
A modern trap
Today’s modern electronic world makes it easier to keep and access records. But it also enables a modern trap. Without a paper trail one could have passed away yesterday and the evidence of one’s assets¸ liabilities and commitments would not be evident.
Possible ramifications include:-
- A surviving spouse not being able to access funds.
- A surviving spouse not being able pay bills.
- A single person’s commitments such as credit cards and loans not being met.
And all of this would add considerable stress at a time of grieving.
Some people assume as accountants, we know every asset that someone owns. The reality is that we are only aware of those assets that generate income that is taxable and are therefore reported in a Tax Return.
So what do you do? Make sure someone else knows or is left with instructions as to assets and passwords. How you effect this depends on the complexity of your affairs, your family structure, existing security arrangements and who you trust most.
You could also consider keeping such notes with your will. You might also consider using a master password protection program (which we will cover in a future post).
At MRS, we will spend today planning for your success tomorrow.
Estate planning lessons
Last Wednesday, we ran a seminar which explored estate planning, at home aged care solutions, ways to deal with family members suffering from dementia and the various types super death benefit nominations. We had an almost full house despite the stormy weather and despite the fact that we last ran an estate planning seminar just two years ago. We are so pleased that so many saw the wisdom to learn, and for some, re-visit key estate planning lessons.
Simply put, estate planning is the process of ensuring that the right assets get to the right people in the most efficient manner.
This process requires the consideration of both state and federal laws (such as Capital Gains Tax).
The process also considers that the following assets which must be addressed separately as they do not come into an estate and therefore cannot be dealt with by a will:-
- Jointly owned assets.
- Assets held within a discretionary trust.
- Superannuation (unless addressed via a death benefit nomination).
- The beneficial owner of a life insurance policy.
Although a will is usually the main estate planning tool, it is just one of many estate planning tools.
Sadly, less than half of the population have a will; these people are said to die intestate. I say sad as intestate provisions, even with upcoming changes to the way default provisions will distributes assets, rarely deliver anything close to an optimum outcome.
It is my personal belief that one has a moral obligation to ensure one has an effective will as:-
- Those left behind at a time of grieving prefer to have a set of instructions to follow. They also prefer not to second guess what you would have preferred.
- It prevents disputes. I know of cases where improper estate planning has ended in court costs of over $300,000. One should also read this as years of delay and family members that no longer speak to each other.
- It ensures family complexities are best handled such as second marriages, kids getting divorced or having addictions such as drugs, spending or gambling as well as protecting inheritances being claimed by business creditors.
- It greatly diminishes the likelihood that someone will be able to contest an estate.
Estate planning is your opportunity to ensure your life’s work, sacrifice and your intended legacy is carried out. The more complicated your structure, the more professional assistance you will require from lawyers, accountants and financial planners. It may cost money to properly implement but it can save a great deal more in the long run. And it is the right thing to do.
At MRS, we will spend today planning for your success tomorrow.
$20,000 asset write-off
The $20,000 asset write-off is due to end on 30th June 2018. Thereafter, small businesses will return to the old system of only being able to write-off the cost of an asset costing less than $1,000.
June will soon be here so best to start planning as to what you need to buy. Best also to keep out an eye for any specials in the meantime.
And don’t leave it too late. There will no doubt be a rush in June and perhaps there might some inflated prices for some assets as there was in 2009 with the 50% investment allowance. There are also other traps to be aware of.
Won’t to know more? Then go to our previous blogs at:-
http://www.mrsaccountants.com.au/20000-asset-write-off/
and
http://www.mrsaccountants.com.au/20000-asset-write-off-part-2/
We will also be happy to answer any questions you may have. Call us on 9899-7511.
At MRS, we will spend today planning for your success tomorrow.
17 things you must have addressed
So what are the 17 things you must have addressed?
As Benjamin Franklin once rightly noted, the only things certain in life are death and taxes. We most certainly help all of your client with the second matter. We also do our best to guide clients to undertake proper estate planning as it is something that will eventually affect everyone..
Simply put, estate planning is the process of ensuring that the right assets get to the right people in the most efficient manner. It requires thought and consultation.
So, will your estate planning ensure the best outcomes?
If you haven’t addressed the following points, then your estate planning is likely to lead to less than optimal outcomes, possible disputes and be more financially and emotionally costly to administer.
So have you understood and considered:-
- My Will still reflects my wishes and considers my current assets, extended family and any entities that I have established or control.
- I have taken steps to prevent inheritances falling into other people’s hands due to divorce, bankruptcy, drug and gambling debts.
- Everyone knows where my Will is.
- There is proof that my last Will was written at a time when I had the mental capacity to make such decisions.
- I have clearly set out which personal items and family heirlooms are to be left to whom.
- Dying intestate (without a Will) really does matter as it rarely provides an optimal outcome.
- I still wish that my named executor/executrix is to administer my estate. Are they still alive? Are they capable of administering the complexities of my estate? Are they still living in my home town? Do they know they are the named executor/executrix? What if they reject the appointment?
- I understood and have considered all Capital Gains Tax implications including utilising existing capital losses which may otherwise be lost.
- I understand that a Will dictates what happens to assets that are owned by an individual. I therefore understand that assets owned jointly as joint tenants, the owner of life insurance policies and my superannuation cannot be dealt with by my Will.
So want to know what the other 8 matters are? You can check back for Part 2 to this blog topic or attend our upcoming seminar.
At MRS, we will spend today planning for your success tomorrow.
18 Minutes – Get The Right Things Done
Over the weekend, I read Peter Bregman’s 18 Minutes (Find Your Focus, Master Distraction, Get The Right Things Done). Bregman recommends that you should ask yourself three questions at the end of each day.
So what are those three questions:-
- How did the day go?
- What did I learn today?
- Whom did I interact with?
Bregman explore these three questions in a chapter titled It’s Amazing What you Find When You Look. He suggests that at the end of the working day, take five minutes to review what went well and what didn’t, check what happened after reviewing your calendar and ensure tomorrow is more productive.
So what else does one need to do in the other 13 minutes? I will leave you to read the book; I highly recommend it to you.
At MRS, we will spend today planning for your success tomorrow.
How do you claim your mobile and internet costs?
So how do you claim your mobile and internet costs? You have to be careful as the ATO is quite strict. In fact they are even more onerous than for car claims.
Any expenditure is deductible:-
- To the extent that it relates to earning income, and
- Can be proved (or in ATO language, can be substantiated).
So how do you substantiate mobile and internet deductions?
- There is a safe harbour method for phone claims. Under this method, you can make an estimate if your phone claim is less than $50 and is based off rates of 25c for calls from landlines, 75c from mobiles and 10c for texts.
- Where phone and internet usage is itemised on a bill, then you can claim a % based off a 4 week analysis of your bills. Identifying work calls is easy. What isn’t so easy is analysing the data downloaded as a percentage of total downloads.
- Where usage is not identified on a bill(s), you need to keep a register for 4 weeks.
One could argue that this too onerous as one can keep a log book for a car in one year and use it for as many as the next four years – provided there has been no major change in the pattern of ravel such as change of job and house. But we don’t write the rules – it is our duty to explain them to you so that you can legally claim everything you are entitled to.
So what if you have a bundled plan? The ATO requires apportionment determined by:-
- A supplier’s breakdown,
- Based on the relative cost if they were purchased separately, or
- A breakdown based off a comparable supplier.
In addition to keeping bills and diary records, it is also advisable to keep any acknowledgment from your employer. As a side issue, the ATO has taken the approach with travel claims to contact a taxpayer’s employer directly asking them whether there was a legitimate and deductible approved trip.
It doesn’t matter how genuine your claim may be, if you can’t substantiate it, the ATO will deny the claim (and possibly charge both interest and penalties).
Please e-mail accountants@mrsaccountants.com.au if you need a diary record register and declaration to evidence your phone and internet claims.
At MRS, we will spend today planning for your success tomorrow.
SG super
Friday 27th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 2017 quarter.
SG super is payable on all forms of remuneration including:-
- Commissions.
- Bonuses (but see below).
- Directors’ fees and all other forms of remuneration to directors.
- Allowances (except where fully expended).
- Contractors paid mainly for their labour.
But excluding the following remuneration:-
- Overtime.
- Reimbursements.
- Unused annual leave on termination.
- Remuneration of less than $450 in a month.
- Bonuses that are only in respect of overtime.
- Bonuses that are ex-gratia but have nothing to do with hours worked (harder to satisfy than what you might think).
- In respect of employees younger than 18.
- Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies).
- On quarterly remuneration greater than $51,620.
- Non-residents performing work for an Australian business outside Australia.
SGC super should never be paid late as late payments attract substantial interest and penalties. Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.
The SGC rate remains at 9.50%.
Please ensure that you make your payment with sufficient time through your Super Stream gateway. A SG commitment is only satisfied when the money is received by the fund; not when paid to the gateway. Whilst some gateways pay into the respective super funds the next working days (such as the ATO’s free gateway), other gateways take up to 5 working days.
We welcome any question you might have.
At MRS, we will spend today planning for your success tomorrow.
Stay Smart Online Week
Last week, the Australian government, together with some 1,400 partners, ran Stay Smart Online week. The initiative aims at encouraging and educating both individuals and businesses to adopt safe online practices.
You find it at https://www.staysmartonline.gov.au/get-involved/stay-smart-online-week.
This page will take you to guidebooks on:-
- How to protect yourself in 8 steps.
- How to protect your business in 5 minutes.
There are a number of other guides and tools including helping the elderly and keeping kids safe.
With cyber crime on the rise, and in particular email scams and ransomware, we encourage you read through the web site. Prevention is better than cure!
At MRS, we will spend today planning for your success tomorrow.