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May 2016

 Office News
 Financial Planning - Budget 2016
 Financial Planning - Insurance
 Business and Tax
 Lending
 Pursuit Super



Office News

 

Team Update

This month, we welcome Edward Watt to the Business & Tax Team.  Ed has been working as a business services accountant since 2013 at firms in Melbourne's Bayside region and Inner South Eastern Suburbs.  He has experience working with high net worth individuals and small to medium sized businesses in several industries such as manufacturing, investment and retail.  Ed is also a Xero Certified Adviser.

Ed will be replacing Steve Austen who moves on to take a position in a Management Accounting role with Saferoads.  Steve has been with our business for over 2 and half years and we wish him well in the role change.

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Financial Planning– Budget 2016

As most people will be aware Treasurer Scott Morrison handed down his first Federal Budget - the Coalition Government's third, in early May.

The winners appeared to be low and middle income earners, unemployed youth and small business, and there are significant changes to superannuation.

Below is a brief summary of main points from the Budget. Should you have any questions or are concerned about how the proposed changes may impact upon you please call your adviser.

Important to Note: These changes are proposals only and may or may not be made law.

Summary

  • A lifetime cap on non-concessional (after-tax) superannuation contributions of $500,000 will apply from 7.30pm on 3 May 2016.
  • The income tax threshold at which the 37% tax applies will increase to $87,000 pa on 1 July 2016, from the current $80,000 pa.

The tax rate that applies to small business companies will reduce to 27.5% for businesses with a turnover up to $10 million in 2016/17. Further tax concessions will apply in future financial years.

A range of superannuation measures will also apply from 1 July 2017.

  • The annual cap on concessional (pre-tax) super contributions will reduce to $25,000, regardless of age.
  • Concessional super contributions may exceed the annual cap if certain conditions are met.
  • Those aged between 65 and 74 will be able to make super contributions regardless of whether they work or not.
  • Tax deductions will be able to be claimed for personal contributions regardless of employment status.
  • A lifetime limit of $1.6m will be placed on the amount of superannuation that can be transferred to start pensions.

Earnings on investments held in 'transition to retirement' pensions will be taxed at 15% (currently 0%).

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Financial Planning– Insurance

A recent newspaper article reinforced my belief that Trauma / Critical insurance cover is by far the least common type of Personal Insurance cover taken out by individuals and those with families. Yet arguably, it is the one type of insurance that we will most likely claim against.

The article stated  that Research shows Cancer patients are experiencing significant out-of-pocket costs for their treatment at the same time as losing income at work. 

Unfortunately, it also alluded to the fact that experts say people mistakenly believe our free public health system means people are protected when they get sick. 

A recent  study of nearly 270 cancer patients receiving treatment in NSW and Victorian hospitals found the majority were facing significant financial stress - whether they were on a high or low income before their diagnosis.

One in three said the cost of their medications was placing a significant financial burden on them, while about two thirds were either working less, or earning less, according to research presented at a Clinical Oncology Society of Australia conference.

For those who had lost money, on average their incomes had halved.

Few people realise that out-of-pocket costs came from things like co-payments or medications that had not been publicly subsidised yet. 

As Financial Advisers our role is not only to assist clients with investing money, making money and saving money, it's also to ensure that their assets and lifestyles are protected in the event of something awful happening.

That is why I am so passionate about getting the message out there about Trauma insurance. It is my belief that everyone should at least be made aware of it and at least consider it. 

Put simply it provides a lump sum benefit in the event of being diagnosed with not only Cancer but a number of other conditions including heart attack stroke and as highlighted by an article written by a client in our last newsletter, MND.

A lot of people say "I don't need this type of insurance". The fact is that many people do but believe that nothing bad will ever happen to them. 

The other common comment is "we can't afford it". Although unfortunately for some this may be true, for most it's the unwillingness to prioritise the cost over other things. 

For some reason we don't bat an eyelid when it comes to insuring our homes, our cars and our other prized possessions yet when it comes to our most important asset and by far the most valuable, we believe we're invincible. 

Please, do yourself a favour. Call our office and get a quote, it may just be the most important phone call you ever make .

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Business & Tax

Five steps to faster payment

Cashflow is king for small business. You feel it when payments are late. Yet up to 40 percent of invoices are overdue by a month or more.

Here are five things you can do to help get faster payment.

1. Review and adjust your payment terms and pricing

As a business owner, you might have set your payment terms based on what others do in your industry. Often these payment terms are based on tradition – invoice at the end of the month and allow 30 days to pay. But you can tweak this to get faster payment. Things to consider are:

How long do you give customers to pay you? Could you shorten that period?

How long do your customers actually take to pay you?

Could you offer an early payment discount?

For consistently late payers, you could change their payment terms. For example 50 percent deposit, cash on delivery, or late payment penalties.

It's also a good idea to check your pricing – things might have moved on since you last reviewed what you charge. Have your supplier costs such as goods, services or distribution increased? Is your profit where you expect it to be?

If you're putting off reviewing your payments and pricing, this might be a task to give to an expert advisor. It's vital that someone does it – even if that someone isn't you.

2. Get insight and data about who you're doing business with

3. Get expert assistance

4. Make your money work for you

5. Give your customers more ways to pay

Faster payment is a realistic expectation.

Giving customers a month to pay bills made sense when everything was done by cheque. But digital transactions have been around for years now. Make sure your business takes advantage of all those tools to get faster payment.

For more information on points 2 to 5 listed above or further advice on improving your customer's payments and cashflow, please give us a call on 03 5623 3778.

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Lending

What to consider when buying a second property

Buying your own home remains the great Australian dream – and purchasing a second property may help you take your wealth further. Whether you're building your property investment portfolio, buying a holiday house or supporting a family member, there are plenty of things to think about before you take that next step.

Consider your cashflow

Property tends to be a long-term investment, so do your sums to make sure you can afford the ongoing repayments on two mortgages. Also think about any major life changes on the horizon. For example, you may be planning to expand your family, or you might need to support a parent in the coming years.

Get to know the market and location

Research what's happening in the current market and whether it's the right time for you to buy. Get to know the area you're considering by speaking to local residents and real estate agents. It's also wise to look into the short and long-term planning for the area. For example, nearby construction may affect your ability to find a tenant.

Investigate before you invest

If you're buying a property as an investment, carefully consider its location. Buying in a high demand area is likely to see you enjoy a constant flow of income from the rent.

You'll need to provide your lender with a rental estimate letter, which you can get from the agent managing the property. Keep in mind that generally lenders only take 50–80% of the rental income into account when calculating whether you can afford the loan.

Choose the right mortgage

The amount you can borrow and the type of loan you choose will depend on various factors, including the equity in your current home, your income and expenses, and your property valuation. It helps to get quality advice on the right mortgage for you, along with other considerations such as negative gearing, and how to structure your loan to maximise tax effectiveness.

Whatever your reason for considering a second property, being well-informed will ensure a smoother purchasing process and a financially secure future.

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Pursuit Super

The ATO has released its latest statistics on the SMSF sector with the publication of the annual Statistical Overview 2013-14 and the September 2015 edition of the quarterly SMSF Statistical Report.

Some highlights from the report include:

  • SMSFs account for 99.5 per cent of all superannuation funds and 29 per cent of the $2 trillion in total superannuation assets in Australia. 
  • Between the years ended 30 June 2011 and 30 June 2015, the number of SMSFs grew from 440,000 to 557,000, or average of 36,000 new funds added each year.
  • Of SMSFs established in the last 10 years to 2014, 90% are still in existence.
  • Estimated return on assets was 9.8% for 2013-14, the 5th consecutive year of positive returns for SMSFs.
  • Top 5 assets make up 84% of all SMSF assets, 32% in equity and 27% in cash and term deposit.

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