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Updates to the unclaimed superannuation money protocol

The Superannuation (Unclaimed Money and Lost Members) Act 1999 (SUMLMA), more commonly known as the unclaimed superannuation money protocol, has been updated recently to provide a clearer structure going forward.

SUMLMA provides guidance on in relation to unclaimed money, lost member accounts, superannuation accounts of former temporary residents and their associated reporting and payment obligations. The update has now added content on inactive low balance accounts.

The act now clearly defines what is an inactive low-balance account, how statements and payments work, the registering of lost members and various rules for special cases.

It is important to note that the information in the protocol does not apply to super providers that are trustees of a state or territory public sector super scheme, in which:

The protocol provides administrative guidance only and should not be taken as a replacement for the law or technical reporting specifications.

Posted on 15 January '20, under super. No Comments.

The importance of keeping business records

Probably the most important reason behind sound record-keeping is that it allows you to learn and grow from your own business experiences. Keeping your records in check will help you understand the current situations of your business and also project future profit or losses. In addition, good record keeping will also show you where your business needs improvement or re-invention. Here a few records to keep that will prove invaluable in the future.

Financial Statements:
Keeping accurate and up to date financial statements will help you at a time of lending applications. These finances include income statements as well as balance sheets that show assets, liabilities and the equities of your business at a specific date.

Purchases and expenses:
The items you buy and sell to your customers and the costs of running your businesses. Supporting documents for both of these include invoices, email records, credit card slips, cancelled cheques, cash registrar tapes and account statements. These can help you to determine whether your business is improving, which items are selling, or what changes you may need need to make.

Assets:
The properties that you own and use in your business. These records verify information regarding your business assets, such as when and how you acquired these assets. They will also help you to determine the annual depreciation when you sell the assets. Examples of these records include the purchase or sales invoices and real estate closing statements.

Posted on 15 January '20, under business. No Comments.

What are franking credits?

Franking credits are a kind of tax credit that allows Australian companies to pass on the tax paid at a company level to shareholders. Franking credits can reduce the income tax paid on dividends or potentially be received as a tax refund.

Where a company distributes fully franked dividends (and those dividends are included in the taxable income of the taxpayer) the taxpayer can claim a credit against their taxable income for the tax that has already been paid by the company from which the dividend was paid.

Since the 2016-17 income year, the standard formula for calculating the maximum franking credits is:

Franking credit = (dividend amount / (1-company tax rate)) – dividend amount

Franking credits are paid to investors in a 0-30% tax bracket, proportionally to the investor’s tax rate. If an individual’s top tax rate is less than the company’s tax rate, the ATO will refund the difference. Therefore, an investor with a 0% tax rate will receive the full tax payment paid by the company to the ATO as a tax credit. Franking credit payouts decrease proportionally as an investor’s tax rate increases. Investors with a tax rate above 30% do not receive franking credits with dividends and may even have had to pay additional tax.

There can be eligibility requirements that must be met before franking credits can be paid, such as that you must hold the shares ‘at risk’ for at least 45 days to receive a total franking credits entitlement of $5,000 or more. There are also rules that can apply to buying, holding and selling shares with franking credits attached.

Posted on 15 January '20, under tax. No Comments.

Closing the office for the holidays

As the holiday season approaches, the workplace often gets more relaxed as things wrap up. However, closing the business for the holidays usually isn’t as simple as turning the lights off and heading home for a few weeks. There is often a lot of preparation and work that needs to be done before everyone leaves the office.

Notify staff:
Giving your staff at least two to four weeks notice of business closing dates will allow them to prepare for the shutdown and organise their workload appropriately. Having reminders through announcements, in-office calendars, emails or signs on notice boards will allow employees to ensure their work is done on time and organise personal events.

Notify other stakeholders:
Important stakeholders such as customers, suppliers or vendors should also be informed in advance of when the business is closed for the holidays to ensure that any services or needs are completed prior to shutdown. Customers can be notified through your business’s website, emails, signs around the business or letters and phone calls for close clients.

Update your security:
If your business has a security team or service, make sure that they are kept updated about your closing dates, as well as an emergency contact list with the owner and key employee details so they know who to contact in the event of a security issue, even when the business is closed. It is also a good idea to ensure that all cybersecurity software is up to date before you leave to prevent hackers and viruses from damaging your assets while you’re away.

Backup data:
Backing up your servers will reduce the risk of losing crucial business assets to hackers, viruses or software malfunction while you’re away. By making backups of your data through tools such as cloud storage or hard drives, you don’t have to worry about coming back to a corrupted system.

Change automated greetings:
If you have an automated answering service for business dealings, consider recording a message letting people know that your business has closed for the holidays. It is also a good idea to detail what dates you will return.

Turn off equipment:
Don’t forget to shut down any equipment that won’t be used throughout the holidays, such as lighting, copiers, computers and kitchen supplies. However, be aware of equipment that shouldn’t be turned off, such as fax machines, security systems, servers and backup systems, and refrigeration units.

Posted on 13 January '20, under business. No Comments.

SMSF schemes for illegal access of super

The ATO has issued a warning for Australians to be aware of scheme promoters that promise to allow you to withdraw your superannuation early, and illegally.

Individuals can legally withdraw super when they turn 65, even when they haven’t retired, are at their preservation age and retire, or under the transition to retirement rules while continuing to work. Super can only be accessed early under circumstances that mainly relate to specific medical conditions or severe financial hardship.

The ATO is taking action to shut down promoters who tell people they can gain access to their super before they are eligible to by setting up a self-managed super fund (SMSF), which is illegal. There has been a number of schemes that encourage individuals to channel money inappropriately and deliberately to avoid paying tax.

Penalties for involvement in illegal super schemes include fines up to $420,000 for individuals and up to $1.1 million for corporate trustees. An individual may also lose their right to be a trustee of their superannuation fund or, in some cases, jail time up to five years.

Fund trustees or members who have knowingly been involved in a scheme or been approached by anyone claiming that they can withdraw their super early should contact the ATO immediately to advise of the situation and avoid further penalties.

Posted on 13 January '20, under super. No Comments.

Can you change your business or company name?

Changing your business or company name can be an exciting leap. You can find yourself thinking about things like redesigned logos, rebranding and new customers, but before that, you have to think about the steps required to officially change your name.

You cannot request to change the name of your existing business once it has already been registered under the Australian Securities and Investments Commission (ASIC). If you decide you want to trade under a new name, then you must register a new business application through the Australian Government Business Registration Service. If you choose to register a new business, you can cancel the existing registration through ASIC, however, the fees for a cancelled name will not be refunded.

If you’ve realised that a legitimate mistake has been made in your existing business name, then you can request for a correction to be made if there is a typographical error, the name of a place is incorrect, or the date of birth is incorrect. To support your correction request, you must provide evidence of the error, for example, a driver’s license or passport. You can request a correction through your ASIC Connect account.

If you have a company, which is a separate legal entity registered with ASIC, then you are able to change the name of your registered company without applying for a new company for a fee of $408. The new name you choose in this case is still subject to be rejected if it does not meet the following criteria:

Posted on 9 January '20, under business. No Comments.

Tax implications of buying a holiday home

Buying a holiday house can seem appealing, whether it’s to rent out for income, for your own holidays or both. However, it is important to be aware of the different tax implications for how you choose to use your holiday house.

If you own a holiday house and do not rent it out, you cannot claim any expenses relating to the property. If you decide to sell the property, you will need to calculate your capital gain or loss. Even though you don’t need to include anything in your tax return while you own the property, it is still important to keep all records to determine the capital gains tax implications for when you sell it.

If you own a holiday house and rent it out to others, you have to include the income you receive from rent as part of your income in your tax return. Deductions can be claimed on expenses incurred for the purpose of producing rental income, such as cleaning, advertising costs, pest control, insurance, maintenance and repairs. The cost of repairs and renovations cannot be claimed immediately, but are deductible over a number of years.

You are only able to claim deductions for the periods the property is rented out or genuinely available for rent. A holiday house may not be considered genuinely available when:

If a holiday house is shared between two owners, then the deductions need to be split accordingly. For example, if the house is owned 50-50, then the owners can claim equal shares of the expenses. If one partner owns 20% of the property, they can only claim 20% of the expenses.

Posted on 9 January '20, under tax. No Comments.

Removal of the main residence exemption for non-residents

The government has changed capital gains tax (CGT) rules for foreign residents under the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, which was granted assent on 12 December 2019.

The law change no longer allows foreign residents to claim the CGT main residence exemption, which will impact people who are overseas or will be going overseas and want to sell residential property in Australia while they are a tax non-resident of Australia. However, this may not apply if you were a foreign resident for tax purposes for a period of six years or less during a CGT event occurrence on your Australian residential property, and a ‘life event’ occurred, including if:

Individuals who will be impacted by the changes are non-tax residents who:

If you were not an Australian resident for tax purposes while living in your property, then it is unlikely that you will meet the requirements for the CGT main residence exemption.

Posted on 9 January '20, under tax. No Comments.

Do you have insurance with your super?

Most super funds offer insurance as part of their super plan. It is important to be aware of what types of insurance you are covered by through your super fund to help you determine if you need extra cover outside your super and if you have adequate support in the event that you cannot work. There are three types of insurance that can be available through super funds:

Life insurance (also known as death cover):
This is the most common of all personal super insurances, and is part of the benefits your beneficiaries will receive when you die. Life insurance is typically applied to your super account by default. It is not compulsory with your super, however, if you have a self-managed super fund (SMSF), then you are required to consider insurance as part of your investment strategy.

Total and permanent disability (TPD) cover:
This insurance pays a lump sum if you become permanently disabled and are unable to work again, protecting you against the risk that your retirement income is cut unexpectedly short. TPD cover is often automatically joined with life insurance as a default cover.

Income protection (IP) cover:
This pays you an income stream for a period of time that you are not able to work due to temporary disability or illness. It is only available as a default cover in about one-third of super funds. It may be particularly useful if you are self-employed or have debts.

From 1 April 2020, you will not be given insurance through your super fund if you are a new member under the age of 25 unless you specifically request insurance and they accept, or if you work in a dangerous job.

You can check what insurance you have with your super fund on your annual super statement, your online super account or by contacting them. Through these you can see the type and amount of cover you have, and how much you are paying for it.

Posted on 9 January '20, under super. No Comments.

What you need to know about BFAs

A Binding Financial Agreement (BFA) is the Australian equivalent of a prenup. It is used to agree in advance on how a couple’s property and other assets would be distributed should their marriage or de facto relationship break down. The Agreement can cover financial settlement, spousal maintenance and any other incidental issues.

BFA’s can be entered into at any stage of a relationship, i.e. before, during or after a marriage or de facto relationship. Couples may consider entering into a BFA if one party has more property, assets or is expected to receive an inheritance at a later stage.

Some benefits of entering a Binding Financial Agreement include:

Properly drafted and executed BFA’s are particularly beneficial for those who want to establish a level of reassurance that there would be a harmonious division of property and assets in the circumstance of separation or divorce without the need for stressful court action. A BFA can also make both parties feel secure knowing that any property or assets accumulated before their relationship or marriage is safe.

Posted on 11 December '19, under money. No Comments.

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