COVID-19 + Accessing Your Super Early

As of 20 April 2020, people affected by the COVID-19 pandemic may be eligible to apply to access up to $10,000 of their super in FY 2019-20 and a further $10,000 in FY 2020-21.

ARE YOU ELIGIBLE?

You can apply to access your super if you meet one or more of the following requirements:

  • you are unemployed
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment [which includes the single and partnered payments], special benefit or farm household allowance
  • on or after 1 January 2020, either
    • you were made redundant
    • your working hours were reduced by 20 per cent or more
    • If you are a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more

If you meet these requirements and decide to withdraw super, you won’t pay tax on super you withdraw. It won’t affect Centrelink or Veterans’ Affairs payments.

HOW DO YOU WITHDRAW SOME OF YOUR SUPER?

You can register your interest today through myGov. Applications open 20 April 2020.

People who are eligible will be able to apply online [through myGov] to access up to $10,000 of their super between 20 April and 30 June 2020. Applications to access up to a further $10,000 will be open from 1 July until 24 September 2020.

ASSESS ALL OF YOUR OPTIONS FIRST

Before you withdraw super, it’s important to assess all of the options available to you. Access Government assistance and talk to your bank or lender about how they can help.

GOVERNMENT PAYMENTS

As part of the COVID-19 response, there are specific Government payments to help you:

  • Income support payments – crisis payments and a temporary fortnightly $550 coronavirus supplement
  • Household support payments – two automatic $750 Economic Support Payments
  • JobKeeper Payment – $1,500 a fortnight for 6 months may be available to employers to keep paying eligible employees whose hours have been reduced

CONTACT YOUR BANK

All banks and lenders have hardship teams ready to help customers in tough times.

You may be able change the terms of your loan, or temporarily pause or reduce your repayments for 6 months.

CHECK YOUR CURRENT SUPER BALANCE + CONSIDER THE IMPACTS ON YOUR INSURANCE

Your super balance as displayed through myGov may be as at 30 June 2019. Your super balance may have changed since then, so it’s a good idea to check your current balance by getting in contact with your super fund.

It’s also important to consider the impacts that withdrawing some of your super may have on your insurance. More than 70% of Australians that have life insurance hold it through super. If your super balance falls to zero or is too low, you may lose your life and income protection cover.

CONSIDER THE IMPACT ON YOUR RETIREMENT SAVINGS

At a time when you may be struggling to cover basic costs such as rent, groceries and utility bills, a payment of $10,000 or even $20,000 could be a very welcome injection of cash. However, it’s important to remember that withdrawing some of your super has the potential to make a significant difference to your level of income in retirement.

Your super is your retirement savings. Consider what impact withdrawing super today will have on your retirement by using the simple superannuation calculator available on the moneysmart.gov.au website to work out how much super you’ll have when you retire.

According to Ben Marshan, Head of Policy and Standards at the Financial Planning Association of Australia [FPA], “Conservatively, every $1,000 that you have in super at age 30 will be worth about $4,500 at age 60. If you take $1,000 out now, you have to put in $4,500 over the next 30 years to get back to the same position. Financially, for a lot of people that can be a massive struggle and they’ll never actually catch up.”

WE ARE HERE TO HELP

If you need assistance, our financial advisers at Canny Group are available to help you navigate these changes and discuss your current financial situation, superannuation and retirement savings in more detail.

 

Chris Graham – Client Services

Market Downturns + Your Retirement Savings

The Coronavirus [COVID-19] has had a significant impact on financial markets and global asset prices.  With wider economic and social disruption now evident and expected to continue in the short-term.  We understand that you may have concerns about the effects this pandemic and subsequent disruptions may have on your superannuation balance.  That’s why we’re going to talk about how to remain calm amid this crisis and avoid becoming an ‘April Fool’ when it comes to your retirement savings.

CONSIDERATIONS for investors?

It’s important to remember that superannuation is and always has been a long-term investment.  With that in mind, long-term performance is one of the key factors to consider during events like this.  While it’s confronting to see the global market experience a downturn of this scale, we remain confident this trend will reverse, as we have seen on previous occasions.

There’s no doubt this Coronavirus pandemic is a serious event.  However, as a result of this, we’re likely to see global fiscal stimulus, low valuations on equities and low interest rates for a long time.  Another thing to bear in mind is that the world economy has experienced and overcome many challenging events over the last 100 years, including World War I and World War II, the Spanish flu, the Great Depression and more recently the 2008 Global Financial Crisis [GFC].  The below graph demonstrates how shares climb a “wall of worry” over many years with numerous events pulling them down periodically.  As we can see, the long-term trend of shares is ultimately upward while providing greater returns than other more stable assets.  The takeaway message from this is that periods of volatility are the price we pay for higher longer-term returns from the share market.

Australian Shares "Wall of Worry" - Source ASX, AMP Capital
Australian Shares “Wall of Worry” – Source ASX, AMP Capital

WHAT CAN I DO… to protect my superannuation?

We mention the above because as we experienced during the 2008 Global Financial Crisis [GFC], many investors are now electing to switch their superannuation investments to cash or very defensive options in search of lower volatility and greater stability.  Unfortunately, it’s near impossible to predict when market confidence will return and recover.  As a result, efforts to mitigate risk by attempting to time market movements simply lock-in, and in many cases, magnify losses.  For example, the share market fell some 40% in 2008-9, but recovered near all of the fall in the following 12 months, and subsequently went on to exceed the pre-GFC levels.

The Coronavirus pandemic has escalated rapidly during the early months of 2020, resulting in the fastest share market drop of this magnitude in history.  It has left us all questioning how long this will last and when global markets will rebound and return to pre-COVID-19 levels.  The sharp market falls and headlines blaring that billions of dollars have been wiped off the share market are stressful for all of us.  It’s only natural to want to take action and do something about it to protect your retirement savings.  However, if history is any indication, those who are unlikely to draw on their superannuation in the short-term are often best to take no action.  We know it may seem counter-intuitive, but panicking and switching your superannuation investments to cash or very defensive options in the midst of a market downturn can lock-in losses and significantly impact your retirement savings in the long-run.

In times like this, it’s often best to turn down the noise.  We have always recovered, and we’re confident that we will come through this crisis as we have in previous times.  With this in mind, we encourage you to consider your immediate and long-term requirements.  As always, you should also continually consider your own objectives, financial situations and needs which are not addressed in this general article.  If you have any concerns or queries, please don’t hesitate to contact us and we will discuss your personal circumstances in more detail.

Stay healthy + safe!

 

Chris Graham – Client Services

COVID-19 // Economic Stimulus + Survival Guide

The Federal Government and State Government have together announced multiple stimulus packages to help support everyone affected by Covid-19 [Corona Virus].  With that in mind, we want to try to provide you with a brief and up-to-date rundown of the benefits for individuals and Small to Medium Sized Businesses [SME’s].  Please note that this is not exhaustive, and we have provided links to original Government releases, so you can double check all information and keep abreast of developments.

April 2020

April Announcements
If you are an EMPLOYER – click here.  

Also important for employers to register with the ATO here AND here.  If you are an employer and have a State Revenue Office payroll tax registration click here.

If you are an EMPLOYEE – click here

If you are a SOLE TRADER – click here.  

Also important to for sole traders to register with the ATO here AND here.

If you need information on ACCESS TO CREDIT for small business – click here

If you employ APPRENTICES – click here

If your income falls BENEATH $1,075 p/fortnight you may be entitled to the Coronavirus Supplement – click here

If you are a VICTORIAN small business with a turnover of +$75,000 – click here

If you are a TENANT – click here

 

March 2020

March Announcements
Small – Medium Businesses – https://treasury.gov.au/coronavirus/businesses

  1. Businesses with turnover of less than $50M who employ workers will be eligible for the “Boosting Cash Flow for Employers Package”.  All employers will receive a minimum payment of $10,000 [increased from the initial $2,000 announced in mid-March] and the maximum is calculated as 100% of the PAYG withholding withheld from employee wages up to a maximum of $50,000.  The amount is calculated on PAYG withheld between January and June 2020 and calculation varies depending on how often you lodge your activity statements.
  2. An additional payment is being introduced from the July – October 2020 period.  This amount will be exactly the same as the original amount received by the business.  This effectively doubles the amount received to a minimum of $20,000 and a maximum of $100,000 https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf.
  3. The Victorian Government has announced that SME’s with a yearly payroll of less than $3M, will be provided with 12 months Payroll Tax relief.  Businesses that currently pay payroll tax [ie. business with payroll, including superannuation, of greater than $54,166 per month] will receive a refund to their bank account of any payroll tax paid for the period 1 July 2019 to 29 February 2020.  In addition, there will be no further payroll tax payable up to 30 June 2020.  The Victorian Government advises that refunds will be accessed by 27 March 2020 https://www.premier.vic.gov.au/economic-survival-package-to-support-businesses-and-jobs/.
  4. There are also measures to temporarily assist businesses in financial distress, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf.
  5. Instant asset write-off is increased from $30,000 to $150,000 for those of you who are not concerned about cash-flow and view this as a good time to invest in assets for your business, https://treasury.gov.au/sites/default/files/2020-03/Fact_Sheet-Delivering_support_for_business_investment.pdf.  There are also measures around depreciating fixed assets faster, https://treasury.gov.au/sites/default/files/2020-03/Fact_Sheet-Delivering_support_for_business_investment.pdf.
  6. Wage subsidies are available for up to 50% of an apprentice or trainee’s wage for the nine months from 1 January to 30 September 2020.  Employers will be reimbursed to a maximum of $7,000 per quarter per apprentice/trainee, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf.

March Announcements
Support for Cash Flow Needs for Small – Medium Businesses – https://treasury.gov.au/coronavirus/business-investment

  1. The Federal Government will provide a guarantee of up to 50% of loans made to SME’s https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Supporting_the_flow_of_credit_1.pdf.
  2. Lenders will be provided with a temporary exemption from the responsible lending obligations to provide loans to existing small business clients to enable faster approval and provision of loans to SME’s, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Supporting_the_flow_of_credit_1.pdf.

March Announcements
Individuals + Households – https://treasury.gov.au/coronavirus/households

  1. Income support payments and coronavirus supplements to existing and new recipients of some Centrelink payments, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Income_Support_for_Individuals.pdf.  There will also be streamlined application for Centrelink benefits and reduced waiting times for payments.
  2. Two separate payments to recipients of social security, veteran and other support payments from Centrelink.  These are due to be paid as $750 on 31 March 2020 and $750 on 13 July 2020, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Payments_to_support_households.pdf.
  3. Temporary early release of superannuation amounts up to $10,000 for the financial year 2019-20 and again for the financial year 2020-21.  There will be no tax payable on the amounts withdrawn and they will also not effect Centrelink or Veterans’ Affairs payments, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Early_Access_to_Super_1.pdf.
  4. Temporary reduction in superannuation minimum drawdown amounts for those receiving a pension from their super fund, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_support_for_retirees_to_manage_market_volatility.pdf.
  5. Reduced Centrelink deeming rates to support retirees, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_support_for_retirees_to_manage_market_volatility.pdf.

Super Women

RETIREMENT!  The very thought of it appeals to many hardworking persons.  They think about a time for doing the things that bring them pleasure, recreation and fun.  Sadly, many, in particularly women, will not have sufficient superannuation savings to fund the lifestyle they are hoping for in retirement.

On average, women retire with 39% less super than men and surprisingly an estimated 40% of older single retired women live in poverty in retirement.  This group of single retired women are the fastest growing cohort of homeless people in Australia.  What are the reasons for this?  Australia’s gender pay gap is currently 13.9% so on average, women earn less than men and since compulsory employer super is based on wages, women will have less in super in retirement.  Women are also more likely to take time off work for maternity leave and to care for their families.  As a result, a lower superannuation balance may mean a reliance on receiving a government pension.  For some, this may limit their independence and affect their quality of life.

Alan Lakein, a well-known author on personal time management said, “Planning is bringing the future into the present, so you can do something about it now.”

What little steps can you take now to prepare for the kind of retirement you want?

  1. CONSOLIDATION… Do you have multiple super funds?  If so, consolidating your super will likely reduce the management fees you are paying to different funds.
  2. INVESTMENT CHOICE IN SUPER… Most super funds allow you to choose from a range of investment options and asset classes.  These may include, growth, balanced, conservative and cash.  Do you know what investment options are available to you and have you reviewed how your super is invested?  Your investment choice will affect the earnings in your super and ultimately will impact the balance you have in super in retirement.
  3. INSURANCE IN SUPER… Most super funds offer life, total permanent and disability and income protection insurance for their members.  Premiums are deducted from your super to pay for your insurance cover.  Have you reviewed your level of insurance cover?  Do you know if you are over or under insured?  Do you know how much you are paying in insurance premiums for your cover?
  4. CONTRIBUTIONS… You can boost your super and get the power of compounding to work for you by making additional contributions.  If you make personal [after tax] contributions, you may be eligible for the super co-contribution and the low-income super tax offset of up to $500 each.  You can also salary sacrifice part of your salary and have it paid to your super fund.  By salary sacrificing to super, you may be able to reduce your tax because you are only paying 15% tax on your contributions you make rather than your marginal tax rate.  Salary sacrifice to super is considered employer contributions so its important to ensure that you don’t exceed the annual contribution cap of $25,000 for concessional contributions.  From 1 July 2019, if your super balance is less than $500,000 and your employer contributions have not exceeded $25,000 for the year, you are able to carry forward the unused part of the contribution cap for up to 5 years.  This may be a valuable opportunity for those who suddenly have a lump sum assessable income resulting from a disposal of a property.

If you would like to know more or come in for a free 30 minute appointment to speak to one of our team on how you can make the most of your superannuation, get in touch here!

 

Helen Yau – Manager + Financial Planner

CA, BCom, Dip Fp, SSA

Superannuation Nominations – Make It Legit!

Don’t be trapped by the pitfalls of superannuation nominations – make it legit!

Have your circumstances changed recently?  Have you married, separated, divorced, had kids, or are your kids now over 18 years old?  It may be time to consider and/or review your superannuation nomination.

A superannuation nomination is a notice to your superfund trustee outlining who you want to receive your superannuation benefits after your death.  However, your superfund trustee is only bound by a nomination that is valid [in accordance with superannuation laws].

Many superannuation funds will not guide you through what constitutes a valid superannuation nomination, which makes it all the more difficult.

So, what constitutes a valid superannuation nomination? Your superfund trustee will look at the following hierarchy of people when considering how to distribute your super:

  1. Your spouse or ex-spouse;
  2. Your children [or other financial dependents]; and
  3. Your Estate.

Let’s break these categories down a bit further…

1. YOUR SPOUSE OR EX-SPOUSE

It may seem common sense that a superfund trustee would pay your super benefits to your partner automatically.  And this is true, particularly if you have made a nomination directing the payment to your spouse.  However, if, since making the nomination, you have separated or divorced from your spouse, the nomination is not revoked and, in fact, remains valid. Thus, your benefits may be paid to an ex!

2. YOUR CHILDREN

The intention of superannuation is to fund the retirement of you and your dependents.  Accordingly, a spouse and children who are considered to be financially dependent upon you will receive the most beneficial treatment under superannuation law.  Your children who are under 25 or have a disability will be considered dependents.

You must be careful with nominations to children as there can be pitfalls, including:

  1. You cannot nominate nieces or nephews [invalid];
  2. If the children are under 25 and you have a spouse or an ex-spouse who is alive, that person will be considered the guardians and your super will be paid to them [to hold upon trust for your children until they attain the age of 18];
  3. Children who are over 25 are determined as not being financially dependent upon you, and if the super benefit is paid to them then they will be heavily taxed upon receiving the death benefit.
  4. The taxation consequences can be different for children depending on their ages at the time of your death, which will create an uneven division in real [net] terms;
  5. As long as your children are over the age of 18 years, the superannuation fund will pay an entitlement directly to nominated children, meaning you cannot protect that benefit for your children until they attain an older age.

If you intend for your super benefits to benefit your children, and any of the above issues are in concern in your current circumstances, one solution may be to nominate your Estate as the beneficiary [provided you have an up-to-date Will].  Your Will then controls the distribution of the super death benefits to your chosen beneficiaries and much can be done to reduce or avoid the tax consequences described above!

3. YOUR ESTATE

As mentioned, nominating your Estate is a great way to cover most pitfalls of superfund nominations.  Tax can be avoided or reduced where you have children under and over the age of 25, you can implement asset protection strategies for your personal and superannuation assets for your children, and you can distribute your super death benefits to third parties [who aren’t your spouse or child] through your Will.

The potential consequences of this option are that this can create a further delay between your date of death and the distribution of the superannuation death benefits, and it also has the effect of increasing the value of your estate.  If your Will is challenged after your passing, the superannuation benefits will form part of the asset pool which can be claimed against.  Some food for thought regarding the significant asset that is your superannuation.

So, maybe it’s time to review your superannuation nomination – and for the greatest benefit, we suggest reviewing it concurrently with your Will and Powers of Attorney.

Contact our Legal Team for an appointment to review your Estate Planning to find out how we can help.

 

Katherine Taylor – Solicitor

BCriminology [History], LLB

Financial Savvy

Mark it in your diaries ladies.. FRIDAY 31ST MAY + FRIDAY 21ST JUNE!

We are hosting a FREE seminar for women who would like some education on their finances + most importantly their financial security!

Our in-house Financial Planner, Samantha Butcher will be covering topics such as:

  • Women’s Money Challenges
  • Life Events + Women
  • Women’s Money Goals
  • The Need for Insurance
  • Tax Effective Ways to Contribute to Superannuation
  • Superannuation Beneficiaries
  • Superannuation Investment Options
  • Budgeting/Credit Card Debts
  • Wills + Powers of Attorney

Refreshments included + all children welcome!

LIMITED TICKETS VIA EVENTBRITE: https://www.eventbrite.com.au/e/financial-savvy-tickets-62243498981

Superannuation – Is It Still Worthwhile?

The constant changes to superannuation can be frustrating to many as they find it difficult to maintain their confidence in the superannuation industry.  Many have chosen to put the bare minimum into superannuation with their preference to build for their nest egg outside superannuation where they have full control and access without impact from the changes to superannuation.  However, is superannuation still a worthwhile consideration?

Currently, compared to other tax structures available, such as companies, trusts and partnerships, and personal tax, superannuation is still one the best tax structures available for many and should not be discounted.  All income in superannuation is taxed at a fixed rate of 15% and capital gains can be taxed as low as 10%.  If you commence receiving a pension for superannuation then all the income and capitals gains will be taxed at 0% up to the $1.6 million cap.

So are you taking full advantage of the changes to superannuation available to you?  Due to the many changes, it can be easy to overlook what you may be eligible for and what may impact you. Below are some things that may be relevant to you:

  • Tax Deduction for personal contributions – You may claim a tax deduction for personal contributions up to the concessional contributions cap of $25,000. Note, if you aged between 65-75 years you will need to meet a work test in order to claim a tax deduction.
  • Super Co-contribution – you may be eligible for a co-contribution of $500 if your total income is less than $37,697 and you make personal contribution of $1000 to your super. If your income exceeds $37,697 but is below $52,697, you will receive a reduced co-contribution.
  • Low Income Superannuation Tax Offset – a tax offset up a maximum of $500 is available to individuals with an adjusted taxable income of $37,000 or less. As long as your fund has received and reported a concessional contribution and you have lodged your tax return, the ATO will pay this directly to your superannuation account.
  • Low Income Spouse Tax Offset – a tax offset up to a maximum of $540 is available to individuals who make personal contributions to super on behalf of their spouse and their spouse’s income (including fringe benefits and reportable employer super contributions) is $37,000 or less. Where the spouse’s income is $40,000 or less but exceeds $37,000, a reduced tax offset is available.
  • Downsizer contributions – if you are aged 65 years or over and have sold your personal home, you may be eligible to make a downsizer contribution to your superannuation of up to $300,000 from the proceeds of selling your home.
  • Rolling 5 year concessional contributions – If you have a super balance of less than $500,000, you can make additional catch-up concessional contributions if you have not reached your concessional contributions cap in previous years. This applies from 1 July 2018.
  • Division 293 tax – high income earners pay an additional tax if their income exceeds $250,000. Income for the purposes of Division 293 tax includes taxable income, reportable fringe benefits, net financial investment/rental property loss, net amount of which family trust distribution tax has been paid, super lump taxed elements with zero tax rate.

If you have the long term goal to build for wealth and your retirement, superannuation should be considered as part of your financial plan.

If you would like further information on how to do this or would like to discuss a self-managed superannuation fund, please contact our team.

 

Helen Yau – Accountant Manager & Financial Planner

CA, BComm, Dip FP, SSA

Superannuation Beneficiaries and their importance

Not a lot of people are aware that superannuation is a non-estate asset. This means that it will not automatically be dealt with, through your Will if you were to pass away. It could be your wish that your partner receives your superannuation, and you could state in your Will that that is what you want to happen, but without a valid beneficiary nomination on your superannuation fund, the Trustee of the fund may grant your money elsewhere.

There are several varieties of nomination, including non-binding, binding, and non-lapsing binding beneficiary.

Nomination of Beneficiary

A ‘Nomination of Beneficiary’ is a direction that a member provides to the Trustee of the super fund in relation to distribution of his or her funds on death. It can be done by a simple one page document setting out the member’s preference and appropriately signed and witnessed.

A member can choose to make:

A Binding Nomination

  • The Trustees MUST pay the death benefit as nominated.

A Non-binding Nomination

  • The Trustees have the discretion to follow the stated wishes of the member or direct the entitlements to another person (or persons) or pay the entitlement directly to the Estate.

No Nomination

  • If you do not make any nomination, you are not breaking any Laws. The surviving Trustees simply have full discretion to distribute the funds to the Estate or any Dependent that they chose.

As important as it is to ensure that you have nomination made, it is important to make sure that it is a valid nomination.

 

Who can I nominate?

There are restrictions on who you can nominate under the Superannuation Industry Supervision Act (SIS). Valid nominations can be made to:

  1. The Legal Personal Representative in which case the benefit is paid to the Estate; or
  2. A dependant which is defined as follows:
  • Spouse (current or de facto or former spouse and can include same-sex and living with a person in a genuine domestic basis in a relationship as a couple);
  • A child of the member (including adopted, stepchild, ex-nuptial, child of your spouse);
  • Any other person with whom the member has an interdependency relationship, which covers persons where there is a close personal relationship and one or more provides the other with financial support, domestic support and personal care. We recommend seeking advice if you have circumstances that you think may qualify.

Common mistakes that we see are Nominations being made to parents, brothers or sisters or other relatives, but there is no interdependent relationship so the Nomination is invalid. A Nomination can have “if, then” clauses to allow you to nominate persons should certain beneficiaries have already passed away – such as “100% distribution to my spouse. If I survive my spouse, or if I divorce from current spouse, then distribute to my children on equal proportionate basis”.

So please ensure that you review your beneficiaries and ensure that they are the right type for your situation, and valid. If you would like to update your superannuation beneficiaries or have a chat to one of our financial advisors, we are always here to help. Please get in touch with our team.

 

Steve Reynolds – Certified Financial Planner

BComm, Dip.FS(FP)