Posts Categorized: News
She may not be right mate & death benefit nominations
She’ll be right mate. Australians have a great outlook on life don’t they? Sometimes though this casual nature can come at great cost. Like with not ensuring their estate and in particular their super gets into the right hands.
Upon death, super can be paid to anyone who is a dependent. Close family members can receive it tax free. All of this is critical in ensuing that the pool of your life’s hard work and sacrifices gets into the right hands and does so in the most effective manner.
Super is today most people’s biggest or second biggest asset. The way of ensuring it gets into the right hands is to make a death benefit nomination. There are various forms of nominations – the right one for you depends on your circumstances and what you wish to have happen. This is all critically important where large sums are involved, particularly in respect of a self managed super fund as control may fall to just one side of the family.
If you would like to know more, then attend the upcoming Maggs Reid Group seminar on death benefits. This free seminar will also explain what is good and bad and the opportunities from the 2016 Federal Budget. We will also be exploring some great business tools and solutions to small and medium sized business owners alike.
At MRS, we will spend today planning for your success tomorrow.
Great by Choice
Many of you will know of or have read Jim Collins famous book Good to Great. Over the weekend I finished another one of his books called Great by Choice.
Great by Choice is a fascinating examination on the role of luck and preparation in the success of a business. It is a highly readable book full of real life examples as well as some most interesting analogies such as Scott and Amundsen’s respective efforts to reach the South Pole.
Collins and his co-author Hanson studies lead to some interesting discoveries including that the best leaders were not greater risk takers, were not more visionary and were not more creative than their competitors. They were however more disciplined, understood their industry better and as the authors described, more paranoid. Consequently, bad luck did not derail them and they were better place to take advantage of good luck and opportunities when they presented themselves.
Although it is a book written with American businesses as case studies, it is highly relevant to anyone in business anywhere.
And like any great business book, don’t try reading it before you go to bed – you won’t be able to sleep as your mind will be racing too fast.
Our new reception features this and many other famous business books which you are welcome to borrow.
At MRS, we will spend today planning for your success tomorrow.
Good news in the Budget
Amongst all the politic game playing and doom and gloom reporting, there were actually some good news in the Budget.
Whilst the Company Tax rate cut took all the headlines, more medium sized businesses will now be able to avail themselves of the tax concessions previously restricted to small businesses.
What accountants call Division 7A (which is incomprehensible to the typical business owner) will be reviewed. Division 7A requires repayments of loans made by companies to shareholders and their associates (which includes trusts) and which can require significant tax to be paid. Whilst the statements were brief and vague, it is clear they are going to reduce the compliance burden and related costs.
The further restrictions to super certainly took front stage. However, there were some very valuable announcements that many will be able to benefit from as well as some just plain common sense changes.
If you would like an informed analysis of how you may benefit from the Budget, please e-mail Alex and ask for a copy of our briefing paper.
At MRS, we will spend today planning for your success tomorrow.
The Budget
The following public domain You Tube clip from BT Financial Group is a great summary of The Budget as it affects most people.
It is an interesting one with some bad news, a few sweeteners but also some changes that will benefit many
There are however a range of other tax changes which we will address in upcoming blogs that will benefit businesses and individuals alike.
Super work test
If you watched the analysts on TV after the budget or read the press thereafter, you would understandably think that there was only bad news in the 2016 Federal Budget. Not so. One welcome announcement will be that the super work test is to be removed as form July 2017.
So from July 2017, anyone aged between 65 and 75 will automatically be able to make a contribution into super. Currently, those aged between 65 and 75 can only make a contribution into super after they have satisfied a work test of having worked 40 hours in a 30 day period.
This will be a very welcome change for those wishing to still make deductible (concessional) contributions to reduce their tax. It is also a way for those who fail the life time non-concessional cap of being able to get money into super.
Keep an eye out for future blogs on other ways you might benefit from the 2016 Federal Budget.
At MRS, we will spend today planning for your success tomorrow.
Changes to Victorian Payroll Tax
The 2016 state government budget was handed down during the week. The most significant announcement was the changes to Victorian Payroll Tax.
Unfortunately, the change is not as attractive as one might believe.
The Payroll Tax threshold (currently of $550,000) will increase by $25,000 each year for the next four years starting from 1st July 2016.
Whilst it is better than nothing:-
- The increase in the threshold is only between 4 to 5%.
- Victoria still has one of the lowest thresholds and remains well below the national average of $1,050,000 – although it should also be said that we have the second lowest payroll tax rate.
- This rolling reduction in the payroll tax threshold provides immaterial relief to medium to larger size businesses.
- Employers with payroll in excess of $3 million would benefit more from a 0.5% decrease in the Payroll Tax rate.
Personally I find a Payroll Tax system archaic and counter-productive in the global economy that we now find ourselves. We are a country of high wages and make ourselves less competitive with such a tax. One of the trade offs in John Hewson’s ill-fated 1993 GST model was the removal of Payroll Tax systems in each state (just as John Howard did in 2000 with other state taxes such as the Financial Institutions Duty). It amazes me that no one has had the common sense to revisit this common sense initiative.
At MRS, we will spend today planning for your success tomorrow.
Capital gains tax and the family home
Capital gains tax and the family home – it was one of the few tax free options left. It is also the most common large concession.
Sounds simple doesn’t it, but in Part 1 we will explore some useful tips and traps:-
- One’s own home is exempt from capital gains tax provided is not used for income producing activities – such as running a business. If say 29% of the family home is used to run a business, then the exemption will not be available on 29% of the property for the proportional time it was used to run the business.
- A property will always be exempt if it was acquired before the introduction of capital gains tax in September 1985. Beware though if you have inherited a half interest since then from a deceased spouse. You may still be in the same home, but the inherited share is a post capital gains tax acquisition (and will be taxable if used for income producing activities).
- So if you are looking to buy another home, you may wish to keep the old one – as any further capital gain will remain tax free.
- One can only have one principle residence at one time.
- However, if spouses both own a property that could be treated as a principal residence, then they can elect to choose one property or apportion the exemption between the two properties.
- The capital gains tax exemption is available to individuals, the trustee of a disability trust and the beneficiary of a trust who is absolutely entitled to the residence.
This is not an exhaustive list; just simply some of the more useful tips and traps. If you would like to know more, please make contact us to discuss further.
Keep an eye out for part 2.
At MRS, we will spend today planning for your success tomorrow.
Issues with a myGov account
Whilst it has many useful features and benefits, there are issues with a myGov account which you need to mindful of.
A myGov account enables:-
- You to access a range of government services using a single username and password.
- A single inwards message box for all government departments including Centrelink and the ATO.
- A gateway to update you details.
But whilst this all sounds modern and efficient, there have been teething problems such as someone else logging in on the same device would see the previous users details; thankfully that cookie based problem has been fixed.
The biggest problem that does remain though is that if you open a myGov account, all future correspondence will sent directly to you. We will not receive it. This problem is compounded if you don’t check your in box regularly.
The professional accounting bodies have been screaming for this ridiculous situation to be rectified. For reasons that are clear to no-one, the ATO have not seen it fit to rectify this.
We have though been able to find a work around in that you can unlink the ATO from your in box. To avoid any adverse outcome, like not paying a tax payment, we strongly recommend that you do so and do so at your earliest possible opportunity.
At MRS, we will spend today planning for your success tomorrow.
Kid’s bank accounts & Tax File Numbers
A child under 16 need not have a Tax File Number provided they quote their date of birth where the interest is under $420. The threshold for a child older than 16 is only $120. A child is treated as being 16 until the end of the year in which they turn 16.
The unfortunate reality though is that banks often record the parents’ Tax File Number which can result in ATO data matching audit issues. This is just one of an ever increasing number of reasons as to why a child should apply for a Tax File Number.
A common question is what is interest income of a child? Interest from pocket money and Christmas and birthday presents is their interest. Interest from what is basically the parent’s money is not. There are many shades of grey, so perhaps this is best explained by the following example from the ATO:-
Wayne opens an account for his son by depositing $5,000. Wayne is signatory to the account because Jack is two years old. Wayne makes regular deposits and withdrawals to pay Jack’s pre-school expenses. Interest earned from that account is considered to be Wayne’s.
At MRS, we will spend today planning for your success tomorrow.
3 questions to address increasing profitability
Three questions that address increasing profitability which are often ignored are:-
- What makes your business succeed?
- What are the key metrics (KPI’s) that reveal how well your business is performing?
- Are those metrics part of your regular reporting process?
The reality is that these key numbers aren’t produced by the typical accounting system. Your accounting system tells you what happened in your business in terms of things such as profit and money in the bank.
An accounting system won’t tell you how you got there – just what the results are. An accounting system also won’t report on what would be the result of making changes to your business’ key drivers. You need to augment your reporting function to report on these critical numbers.
We had an interesting case during the week. We have a client who runs a consulting business. As such, there aren’t many moving parts to it. There is no stock and there aren’t any creditors. There also aren’t any employees other than himself; but that will change shortly. In this case, the key metrics are all in respect of customers – retention of existing customers, conversion rate of good (not any) prospects and increasing average transaction value. Measuring and following these metrics will involve many activities including such as:-
- Setting up a process of checking in with existing customers to see if they require repeat or new services.
- Asking for testimonials from existing customers.
- Asking for referrals from existing customers.
- Targeting new customers of the type they want to deal with.
- Being aware of any opportunity to sell a complimentary or even new service.
- Focused marketing activities concentrating on key offerings the business wishes to sell more of.
Our advanced modelling software has revealed that minimal change to these drivers will more than double the profit. As the change required to the key drivers are so small the outcome of increased profitability is highly achievable.
And rather than working hard on everything as most business owners do, he will be working hard on the matters that matter most in his business. I will let you know what ensues.
At MRS, we will spend today planning for your success tomorrow.