Month: December 2019

SMSF schemes for illegal access of super

Posted on by Adam_Admin

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.

Don’t delay new business ideas

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Many business owners have exciting ideas about where the future might take their company. These ideas may be concerning new products, internal improvements or new market segments.

It is, however, an unfortunate fact that the execution of these exciting plans often gets delayed. In the process, the growth of your firm is slowed.

One of the most common reasons that there is so often a delay in the execution of new ideas is limited time. Time is one of the most precious resources that a business owner has, and like all precious resources it is valuable because it is limited. If you have an idea that you think will make a significant improvement to your business, then you should make scheduled time in your week to work on it.

It is also advisable to discuss the idea with some of your staff members, and seek their advice on how you might be able to make your vision a reality.

Removal of the main residence exemption for non-residents

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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:

  • You, your spouse or your underaged child had a terminal medical condition.
  • Your spouse or underaged child died.
  • The CGT event involved the distribution of assets between you and your spouse because of divorce, separation or other maintenance agreements.

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

  • Sell a property bought after 9 May 2017 and do not experience a ‘life event’.
  • Sell property after six years of becoming a tax non-resident of Australia, regardless of a life event.

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.

Managing employees with personal crises

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Managing an employee who is going through a stressful period personally can be a big challenge for bosses. Handling these situations well as a manager often means you need to be compassionate and empathetic whilst also being professional and constructive.

Listen:
If an employee comes to you with a problem, it can be helpful if you listen to them without interrupting to assure them that you are aware of the situation so you can understand and act accordingly. This could prompt a productive discussion to consider work solutions that are appropriate for the employee and the business.

Keep it professional:
It is often useful to remember that you are still the employee’s manager and not their friend. If the line between manager and friend is blurred, it can make it difficult for you to take a stance and do what is best for the rest of the team and business down the line. If you become too entangled in the employee’s problem, it can make it harder for you to have a serious and upfront discussion about work, which could then damage productivity.

Offer appropriate assistance:
Make a judgement on what the employee needs depending on the situation and act accordingly. This could include reducing their workload, adjusting their work schedule or allowing them to take leave.

Don’t pry:
You often don’t know how much the employee is comfortable with sharing, so to avoid making things uncomfortable, make sure you don’t ask invasive questions. This will also prevent you from becoming too involved in the situation beyond the professional level.

Check in:
You can occasionally check in with your employee by sending a brief email or asking them in person. This doesn’t have to delve into the details of their personal troubles; you can ask questions like ‘do you feel you’re handling everything okay?’ or ‘have the solutions we talked about been helpful?’. This can help your employee feel supported and comfortable at work.

When is unpaid work legal?

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There are circumstances where unpaid work is okay, however, legal unpaid work situations are limited, and in most circumstances, workers should be paid. Employers who are not meeting the Fair Work Act guidelines can be penalised for breaking the law by paying workers’ compensation and fines up to $63,000 for corporations and $12,600 for individuals.

If no employment relationship exists between the worker and employer, then the worker does not legally have to be paid. An employment relationship can involve:

  • Intention to perform work for the employer under the arrangement.
  • Helping with the ordinary operation of the business.
  • Working for a long period of time.
  • An expectation of payment.
  • The employer receiving the main benefit of the arrangement.

Unpaid work is legal if the work is to provide someone with experience in that particular job/industry, to provide training and skills as part of formal programs (e.g. university placement), to test someone’s job skills, or if it is volunteer work for a non-for-profit organisation. These include:

Vocational placements:
A vocational placement is formal work experience that is part of an educational or training course. The aim of vocational placements is to give students important skills to help them transition smoothly into the workforce through industry experience. The placement must be approved through the legal authorisation of the institution delivering the course; programs offered at universities, TAFE and schools will meet this requirement. If the work meets the definition of vocational placement under the Fair Work Act, then the position can be lawfully unpaid.

Internships and work experience:
An internship or work experience arrangement is a type of on-the-job training, where someone works to gain experience in a particular occupation or industry. This type of work can be legally unpaid if it is a vocational placement, or if there is no employment relationship.

Trials and skill demonstrations:
This is when someone is asked to perform work or undertake a trial in order to be evaluated for a job position. This work trial is used to determine someone’s suitability for the job on offer. It can be unpaid if:

  • It is necessary to evaluate someone’s suitability for the job.
  • The trial is only for as long as necessary to demonstrate the skills required for the job.
  • The worker is supervised by the potential employer or other appropriate staff for the entire duration of the trial.

Volunteering:
Work is counted as volunteering when its main purpose is to benefit others, such as a church, sporting club, government school, charity or community organisation. A genuine volunteering arrangement occurs when:

  • The parties did not intend to create an employment relationship.
  • The volunteer is not obligated to attend the workplace or perform work.
  • The volunteer doesn’t expect to be paid for their work.

Closing the office for the holidays

Posted on by Adam_Admin

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.

Tax on gifts and donations

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Individuals can claim tax deductions when giving gifts or donations to organisations that have the status of deductible gift recipients (DGR).

To be eligible to claim a tax deduction for a gift, the ATO stipulates that it must meet the following four conditions:

  • The gift must “truly be a gift”; that is, a voluntary transfer of money or property where the giver receives no material benefit or advantage.
  • The gift must be made to a deductible gift recipient (DGR).
  • The gift must be money or property, this can include financial assets such as shares.
  • The gift must comply with any relevant conditions. For some DGRs, the income tax law adds extra conditions affecting the types of deductible gifts they can receive.

What you can claim:
The amount an individual can claim for a gift or donation depends on the type of gift given. For gifts of money, individuals can claim the total amount of the gift, as long as it is $2 or more. Different rules exist for gifts of property, and the amount of the tax deduction depends on the value and type of property. There are special circumstances where donations to Heritage and Cultural programs can also be deductible and are based on the value of the donation.

Tax deductions for the majority of gifts can be claimed in the tax return for the income year when the gift is made. However, individuals can also spread the tax deduction over five income years under certain circumstances.

What you can’t claim:
Individuals cannot claim a tax deduction for gifts or donation items that provide some personal benefit, such as:

  • Raffle tickets.
  • Membership fees.
  • The cost of attending fundraising dinners, even if the cost exceeds the value of the dinner. You may be eligible to claim a deduction as a contribution if the cost of the event was more than the minor benefit supplied as part of the event.
  • Payments to school building funds.
  • Payments where there is an understanding with the giver and recipient that the payments will be used to provide a substantial benefit for the giver.

Proposed measures to increase retirement savings

Posted on by Adam_Admin

Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they meet the ‘work test.’ This means they must report themselves to be working a minimum of 40 hours over a 30 day period within the financial year to qualify.

The government has proposed that from 1 July 2020, individuals aged 65 and 66 will be able to make voluntary concessional and non-concessional superannuation contributions without meeting the work test. This approach will enable participants nearing retirement to increase their superannuation savings regardless of their working arrangements.

As well as this, the government also proposes to increase the age limit for receiving spouse contributions from 70 to 74, to be implemented on 1 July 2020. Currently, people aged 70 and over cannot receive any contributions made by another person on their behalf, and the change will give older Australians greater flexibility to save for their retirement.

Doing market research for your business

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Market research is key to developing relevant and effective business strategies as it helps you understand your industry, customers, competitors and market trends. Undertaking both primary and secondary market research can allow you to boost your business’ success if you utilise the information to improve your product/service and marketing strategies.

There are a variety of sources you can use to begin your research. To research areas such as your customers, competitors, industry and location, you can conduct primary research through things like:

  • Surveys (postal, online or face-to-face).
  • Focus groups.
  • Customer feedback.
  • Interviews (face-to-face, written or online).
  • Product testing with potential consumers.
  • Observation.

Meanwhile, useful secondary research can be conducted through:

  • Census data.
  • News reports.
  • Academic journals and research.
  • Legal documents.
  • Australian Bureau of Statistics.
  • Social media and websites.
  • Industry and trade publications.

Before conducting an extensive examination, it is important to prepare and plan how you will undertake the research. It is useful to define your objectives prior to starting research to help you successfully gather the data you need. As well as this, identify the best research methods for your goals and whether you will conduct the research yourself or if you will want to use a professional company. It is also important to consider the time frame and appropriate budget for your research.

When conducting research questions and strategies, make sure that you are open-minded and don’t let your preconceived opinions or preferences affect your tactics. Having a predicted outcome in mind whilst gathering information can often affect the results to match your opinions which can be misleading. To avoid this, prepare for unexpected results and create all-rounded questions and gather data from a range of sources.

What you need to know about BFAs

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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:

  • Establishing a level of reassurance if one or both partners has been through a separation or divorce before.
  • Protecting some or all of the assets from each party.
  • Being able to specify the ground rules when it comes to how the couple will acquire property, who will pay the bills, and where weekly wages or income will be saved.
  • Preserve family or other businesses for future generations.

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.

Couples should also be aware, however, that there can be some risks and downsides to entering a BFA. They include:

  • Legal fees for drafting the agreement.
  • Content of the agreement may be complicated.
  • Use of the agreement could be unfair to one half of the couple.

Couples also need to ensure that the BFA is in fact binding. Both parties must sign the BFA and receive independent legal and financial advice before doing so. It is also worthwhile to evaluate the potential effects of the BFA on the relationship, especially if it is considered unfair to one half of the couple.