Month: April 2021

Paying Off A Mortgage Debt Quicker

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Paying off the mortgage may sound like a dreary trudge to the end of a marathon’s finish line. However, there are options available for those who currently have a debt from a loan for their mortgage, and wish to reduce the time they spend paying it off. Here are a few simple ways to ensure that your mortgage debt decreases over less time.

Switching to fortnightly repayments from monthly could potentially increase the amount you are actually paying back on your mortgage. By paying half the monthly amount every two weeks, you’ll be making the equivalent of an extra month’s repayment each year (due to there being 26 fortnights in a year, as opposed to paying once a month over the year).

If the interest rate of your mortgage loan is too high, it may be worthwhile finding a lower interest rate in an alternative loan. Work out what features of the loan are ons that you would like to keep, and compare the interest rate on similar loans. If you can find a better rate elsewhere, you can ask your current lender to match it or offer you a cheaper alternative. Shop around to see what the best options for your particular loan may be. If you choose to switch your home loan to another lender, ensure that the benefits from that loan will outweigh the fees that you will have to pay to close your current loan and apply for another.

If you can afford to do so, making extra repayments on your mortgage can often cut your loan repayment time by years. If your mortgage is a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years will go towards paying off the interest from your loan. If you put in extra payments during that period of time, you could potentially reduce the amount of interest that you pay and shorten the loan’s lifespan overall. Simple ways to make these extra repayments could include putting your tax refund or bonus into your mortgage. These extra repayments could incur a fee though, so always check with your loan provider if that could be the case.

You can also choose to make higher repayments, as though you had a loan with a higher rate of interest. If you switch to a loan with a lower interest rate, you can continue to make those repayments at the same value of the higher interest rate repayments. This method again can decrease the overall time you will spend paying off a home loan.

An offset account is something that you can also consider creating to assist in paying off your mortgage debt. It is a savings or transaction account linked to your mortgage, where the balance of the offset account reduces the amount that you owe on your mortgage. It helps to pay off the mortgage faster and reduces the amount of interest that you will pay overall.

Most home loans are principal and interest loans, which means that any repayments reduce the principal (amount borrowed) and cover the interest for the period. An interest-only loan means that you will only be paying the interest on the amount that you have borrowed, over a set period of time. The principal does not reduce during the interest-only period, which means that the debt does not reduce and you will in fact end up paying more interest. Paying both the principal and the interest is a simple and the best way to get your mortgage paid off faster.

You can also speak with your accountant or your lender about other options for paying back mortgage debt a little quicker.

How Different Trust Types are Taxed

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A tried and true method of investment, trusts are generally and commonly known as being for the wealthier elements of society. A trust however is a highly versatile tool that individuals and businesses can use to align with and achieve their particular investment, financial or personal goals. They can also incur a number of taxable concessions, depending on the type of trust that has been established.

Trusts are a type of business structure that holds income, property or assets for the benefit of others (known as the beneficiaries of the trust). To establish a trust, a legal document called a trust deed is created to bestow upon the beneficiaries (be they a company, individual or a group) the power needed to deal with the trust’s contents.

In Australia, trusts are established as fiduciary relationships. This means that the two parties involved are bound legally and ethically to act in the best interests of the other, and particularly when acting on behalf of them. A trustee of a trust is responsible for managing the trust’s tax affairs, including registering the trust in the tax system, lodging trust tax returns, and paying some tax liabilities.

Some of the more common types of trust funds include unit trusts, managed investment trusts, family trusts, deceased estates, super funds, charitable trusts, family trusts, deceased estates, super funds, charitable trusts & special disability trusts.

Each type of trust has special tax rules mandated by the Australian Taxation Office.

Unit Trust

Unit trusts are used in many commercial arrangements, including managed investment schemes. Units can often be bought and sold in a way similar to shares in a company. Some unit trusts are taxed like companies and their unit holders like shareholders.

Managed Investment Trusts

Managed investment trusts are a type of managed investment scheme, which had a new tax system come into effect in 2016. The new tax system was designed to reduce complexity and increase certainty for MITs and their investors.


Family Trusts

Trusts that are qualified as family trust for the purposes of the trust loss provisions may benefit from concessional tax treatment. However, family trust distribution tax (FTDT) will apply to distributions made from these trusts if the trustee confers a present entitlement or distributes income or capital, makes concessional loans or otherwise provides or allows the use of income or capital of the trust for less than its market value to a person or entity that is outside of the trust’s family group. FDTD is payable by the trustee of the family trust at the highest marginal rate plus the Medicare levy. Beneficiaries that receive distributions on which FTDT was paid receive the distribution as non-assessable non-exempt income (against which they can’t deduct expenses).

Deceased Estates

A deceased estate is technically not a trust while it is being administered, but is treated as a trust for tax purposes, with the executor or administrator of the estate taken to be the trustee

Super Funds

Self-managed super funds, in essence, are trusts, with trustees and beneficiaries (members) of the funds. However, these super funds are taxed differently from other types of trusts.

The income of an SMSF is generally taxed at a concessional rate of 15%, but the fund needs to be a complying fund that follows the laws and rules for SMSFs to be entitled to that rate. If they are a non-complying SMSF, they could be taxed at 47% instead. The certain assessable contributions that can comprise an SMSF fund include:

  • Employer contributions
  • Personal contributions that a member has notified as being intended to be claimed as a tax deduction
  • Generally, any contribution made by anybody other than the member, with limited exceptions such as spouse contributions and government co-contribution.

Charitable Trusts

Some types of charitable funds must be established as trusts in order to qualify for charity tax concessions.

Special Disability Trusts

Immediate family members and carers can set up a special disability trust to provide for the future care and accommodation needs of a person with a severe disability. The trustee is taxed at individual marginal rates.

For more information about trusts and taxable concessions, speak with us.

Corporate Social Responsibility, and Your Business’s Social-Cause Branding

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When branding your business, it’s important to consider all aspects of marketing. Businesses should utilise their marketing and branding strategies effectively to promote not only their business but also the values that the business holds true to.

In a socially conscious world, consumers are moving towards businesses whose business values align with their own moral, social, and environmental values. Effective marketing and branding strategies are often used by businesses to promote their image, boost their reputation, convey a specific message to their customers or impart their values.

Social branding is no different to most marketing campaigns – it simply conveys the business’ commitment to social and environmental responsibility, and creates visibility and transparency around how they are doing so. Social-cause branding as it is also known is furthered by the concept of Corporate Social Responsibility.

Corporate Social Responsibility is a concept that began to emerge over the past decade, where a company, business, or organisation markets with or alongside morally or socially just causes to promote their support and remain relevant in a constantly changing world.

Incorporating Corporate social responsibility into a business does not have to start at a global or macro level. Businesses can address their social, ethical, and environmental responsibility by beginning with their local community or smaller causes. This can be a more effective strategy for smaller businesses.

Social branding driven by corporate responsibility can be engaged by businesses for strategic or ethical purposes. It can aid in adding to a business’s profitability and relatability to its shareholders, as well as promote positive and negative outcomes of their endeavours from this engagement. It also addresses the loyalty of a customer base, as shared business values and personal values for a customer may result in a more stable consumer base beyond what was initially forecast. If your business is not seen as socially or ethically conscious, it can attract negative feedback and impact your business reputation.

Some notable examples of the ways in which corporate social responsibility is expressed by businesses include fair trade coffee beans, Pride Month branding of products, recycling resources to repurpose for other goods (e.g. recycled paper cups).

Here are a few tips on how to adjust your marketing strategy to reflect your business’ diverse social branding, and show your consumers that you are in alignment with their values:

If you are a local business, showing support to identified causes that are relevant to your community can kindle a sense of belonging and solidarity towards the community.

  • Creating and finding partnerships with similarly like-minded businesses that share your corporate social goals can shine more light on the social and moral values your business takes pride in.
  • Marketing the successes of your business in achieving corporate social responsibility is a good way to ensure that your targets are being met and that your consumers are seeing the results.
  • By committing to a social or environmental cause, and using it to promote awareness, your appeal should increase to consumers who value that aspect or cause highly.

By increasing the visibility of your business’s corporate social responsibility, you are more likely to engage with consumers beyond your initial target. Consider what best suits your business’ products when it comes to championing a cause to support. Your messaging is impacted by how your product is seen and conveyed and choosing an improper way to relate to a cause will minimise the effect it could otherwise have had.

Corporate social responsibility could be as simple as being against domestic violence and supporting local charities, using your position as a corporate body to promote this message in your sponsoring of, for example, sports teams, or donating to worthy causes to gain recognition of the good deed.

As a business, consider your marketing strategy and whether or not you should address causes in your branding. Can you use it effectively? And if so, how? Discuss with your marketing manager or team whether or not this could be a viable plan for your business potential to be maximised.

Superannuation Funds For Children – Why It’s A Good Idea?

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It’s likely that you’re already aware that people can put money into their super up until they reach 67 years, and probably already do so yourself. But did you know that you can put money into your children’s superannuation for them, if they are under 18 years old?

One of the advantages of doing this early on is that that money will accrue until your child reaches their preservation age, which will help them with their retirement. Additionally, the compound interest that superannuation funds with as little as $5,000  for example, accumulating at 7% per annum until the child reaches their preservation age could increase exponentially.

Compound interest on these superannuation funds could assist them year after year with increased gains and profit.

With that previous example of a child’s superannuation fund of $5,000, if that amount of money accrued interest at the 7% per annum interest rate over 55 years, the result could be that that amount in the super fund may total over $200,000.

This idea is not always suited for everyone. The funds to start the super account need to be readily available, and for many people that might not be an option. If the money is available through other investment opportunities (i.e. a grandparent wishing to leave their grandchildren money), this could be a means through which that money is tucked away, ready for their superannuation

If you’re looking for a way for your children or grandchildren to be looked after when you are not around, investing in superannuation is a smart way to look towards the future.

Seek further information and advice from your accountant about what we can do for you to get this started.

How Does A No Interest Loan Work?

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Sometimes there are a few unexpected expenses that can impact on our financial situations, and make things just a little more difficult to deal with. The refrigerator breaking down the same week that the car registration is due could be too much of a financial burden for many individuals. With many credit-providing schemes and dubious loans advertised to the public, there is a simpler way to solve your financial issue if you are applicable.

The No Interest Loan Scheme is provided by the Australian government for individuals and families to have access to safe, affordable credit.

No interest loans are designed to assist people in getting back on a more stable footing financially, allowing them to borrow up to $1,500 to pay for essentials. The term for this loan is between 12 and 18 months, with no credit checks, interest, fees or charges. Repayments for no interest loans are affordable as you are only paying for what is borrowed.

To receive a no interest loan, you must:

  • Have a Health Care Card, a Pensioner Concession Card or an income less than $45,000
  • Have lived at your current address for more than 3 months
  • Show that you can repay the loan.

There are only a couple of steps that need to be completed to apply for a no interest loan under the scheme. A meeting must be arranged with a NILS provider through a telephone or website enquiry, in which you will be interviewed and helped through the application process. Then they will assess your eligibility and present you with an outcome. Loan assessments generally take between 45 and 90 minute, with the loans being approved within 2 days. If all paperwork is provided on the day, it can sometimes be same-day approval.

No interest loans can only be used for essentials. These can include:

  • Household items, like a fridge, washing machine, computer or furniture
  • Educational materials e.g. tablet or textbooks
  • Some medical and dental services
  • Car repairs and tyres

What Is A Retirement Planning Scheme?

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With a significant number of Australians approaching retirement and looking at the best ways to maximise their retirement assets and income from their super for it, retirement planning makes sense.

Unfortunately, there are those who want to target people approaching and planning for their retirement with schemes designed to ‘help’ retirees and prospective retirees avoid paying tax by channelling their income through a self-managed super fund.

Retirement planning schemes are designed to help people avoid paying tax on the income earned through their assets (often in an illegal manner). Those schemes may seem like a simple get-rich-quick solution in maximising assets and income for retirement but can put people’s entire retirement savings at risk.

Anyone can fall prey to a retirement planning scheme. Anyone who is looking to put significant amounts of money into superannuation can be at risk of being ensnared, particularly those who are over 50, and who are:

  • SMSF trustees
  • Self-funded retirees
  • Small business owners
  • Professional service providers
  • Individuals who are involved in property investment

Checking for standard features of retirement planning schemes can be an excellent way to avoid becoming tangled in one. Retirement planning schemes usually:

  • Are artificially contrived and complex, with SMSF members often targeted and encouraged to use their SMSF as part of the scheme
  • Involve a lot of paper shuffling
  • Are designed to leave the taxpayer with a minimal or zero tax, or even a tax refund
  • Aim to give a present-day tax benefit by adopting the arrangement
  • Sound too good to be true – in most cases, they are.

Currently, there are a number of schemes targeted towards those individuals who currently have an SMSF, as they have a high level of control and autonomy in the way that their retirement savings are invested (subject to applicable tax and super laws).

Some examples of retirement planning schemes include:

  • Some arrangements involving SMSFs and related-party property development ventures.
  • Refund of excess non-concessional contributions to reduce taxable components
  • Granting legal life interest over a commercial property to SMSFs
  • Dividend stripping
  • Non-arm’s length limited recourse borrowing arrangements
  • Personal services income
  • Liquidating an SMSF

To avoid becoming a part of a retirement planning scheme, seek professional advice on super or SMSFs from an accountant.

Employing A Talent Acquisition Strategy For Your Business’s Employment Needs

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It’s a daunting task, seeking someone who can fill a specific position that your business needs filled. It’s important that irrespective of how the economy is performing, the state of the workforce and what your business currently consists of, the employees that you hire are the best and most-talented people that you can get.

Though often we think of recruitment as a valid strategy of employment, it often seeks to fill gaps or vacancies that might be caused by staff turnover or insufficiency. This is still a valid strategy for businesses that need immediate solutions to staff/skill shortages.

However, hiring for your business shouldn’t just be about filling an immediate need – it’s about ensuring that your business attracts and retains talented employees for the long-term, to help your business grow to its full potential. A talent acquisition strategy should be put in place by your business to assist in addressing this issue.

Essentially, a talent acquisition strategy should be tailored to reflect and suit your business goals over the course of the next five years. It’s important to consider how the business is going to expand in the future, and what employees you need to join you in journeying towards that goal. Investing in the right talent now will pay off dividends for your business in the long term.

It’s all well and good to know what you need for your business in terms of talent – but how do you convince them to join you? Just as marketing campaigns are important for selling whatever your business produces, it’s important to consider how to market your business towards the talent you want to acquire.

There are plenty of ways to use data to strengthen your strategy, such as figuring out where your current top talent came from and using that information to focus your talent acquisition efforts on certain academic programs or professional networking sites. Data can also be used to refine job descriptions, career pages, emails and more, as it can eliminate in the application process any questions or phrasing that could be deterring qualified candidates.

Identifying where to find the majority of your top talent is an important step in the process of acquiring talent. It’s also important to ensure that you are utilising and expanding on our sourcing strategies when trying to find better talent.

Sometimes to recruit a skillset, you have to be a little adventurous in where to reach out to. Diversify your talent searching approach by looking outside of the usual LinkedIn profiles, and seeking out talent at specialised job boards, academic programs or networking events.

Above all, ensuring that your business has a reputation that draws potential talent is critical to engaging with those you want to acquire. Promoting aspects of your business that could draw in potential talent through multiple channels could be what convinces them to sign up with your business. Drawing attention to perks, the company culture and other work-life balance benefits or growth opportunities could be a way to highlight what sets you apart from the rest.

The Sharing Economy And Your Tax Return – How You Could Be Affected

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In Australia any income earned by a job may be considered to be taxable income. Those who receive their income via the sharing economy are no exception to the rule. In fact, there can be further complications that result from incorrect understandings of how the income tax and goods & services tax  may apply to those individuals.

The sharing economy is a socio-economic system built around sharing resources, often through a digital platform like a website or an app that others can purchase the right to use for a fee.

Popular sharing economy services and activities that could be subject to income tax include

  • Being a Driver for popular ride-sharing/ride-sourcing services and obtaining fares for those services
  • Renting out a room, whole house or a unit on a short term basis
  • Sharing assets (such as cars, parking spaces, storage space or personal belongings) through platforms such as Camplify, Car Next Door, Spacer, Toolmates or Quipmo.
  • Creative or professional services provided by individuals through online platforms to fill a need of others (also known as the gig economy)

Here are some of the things you need to bear in mind about the income and goods & services tax for these popular sharing economy services.

Ride-Sourcing/Ride-Sharing

If you’ve ever caught an Uber or gotten a Lyft, you’ve been on the passenger side of ride-sourcing. The income received from ride-sourcing is subject to goods and services tax (GST) and income tax is applied to it. All drivers on ride-sourcing platforms in Australia must have an Australian business number and be registered for GST.

GST requires:

  • An ABN
  • GST to be registered from the day that you start, regardless of how much you earn.
  • GST to be paid on the full fare.
  • Business activity statements (BAS) to be lodged monthly or quarterly.
  • To know how to issue a tax invoice (any fares over 82.50 must be provided one if asked).

Income tax needs to:

  • Include the income you earn in your income tax return
  • Only claim deductions related to transporting passengers for a fare, including apportioning expenses limited to the time you are providing a ride-sourcing service
  • Keep records of all your expenses and income.

Renting out all or part of your home

Renting out all or part of your residential house or unit through a digital platform can be an easy way to supplement your income, especially if you aren’t using the property at that particular time. If you do this, you:

  • Need to keep records of all income earned and declare it in your income tax return
  • Need to keep records of expenses you can claim as deductions
  • Do not need to pay GST on amounts of residential rent you earn.

Sharing Assets (Excluding Accommodation)

Assets that can be shared through a platform can include personal assets (e.g. bikes, caravans), storage or business spaces (e.g car parking spaces) or personal belongings like tools, equipment and clothes.

When renting out or hiring these (share) assets that you own or lease through a digital platform, you:

  • Need to declare all income you receive in your income tax return
  • Are entitled to claim certain expenses as income tax deductions
  • Need to keep records of the income you earn and of the expenses you can claim as deductions

Providing Services

Providing time, labour or skills (services) through a digital platform for a fee requires you to report income in your tax return. Deductions for expenses directly related to earning this income can be claimed, and records need to be kept to support these claims.

The following services that can be provided are considered to incur assessable income that needs to be reported in your tax return:

  • Delivering goods
  • Performing tasks and activities
  • Providing professional services

If the thought of trying to navigate your way through your tax return is a little daunting, consider speaking to us for assistance.

Outsourcing Models – How To Know What’s Right For You

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When a business cannot deal with the workload in house, a candidate or party outside of the business is often hired to assist in performing those services. This is called outsourcing, and it’s a practice that companies sometimes use to cut costs – especially if it’s easier to do this than to train up another employee.

The best model of outsourcing is one that meets the needs of the business. Clearly identifying those needs is a strategic step to take to ensure that the model chosen is the right one. There are four types of models when it comes to outsourcing.

Freelance

The freelance model of outsourcing assigns work to a freelance worker, which can be long-term, short-term, part-time or full-time. Jobs can be posted to freelance sites, freelancers can bid on them and you can select who you would like to work with. This model is a quick and easy way to get one-off projects completed that require special skills or obtain a little extra help during the busy season.

Pros: Cost-effective, quick and the skills needed for the job can be sourced

Cons: Overselling skills, difficult to brief, and jobs can be further outsourced by freelancers.

Project-Style Work

This model focuses on project-based work and involves outsourcing entire projects to a specialised outsourcing centre. Essentially all you have to do is provide the centre with the project requirements, and they will carry out the development work, project management and quality control through to the project’s completion.

Pros: Less work to be done by you, cost-effective in money and time, new staff aren’t needed and there is a fixed cost for the project.

Cons: May lack local knowledge if located overseas, time zone and language barriers can be difficult to overcome

Business Process Outsourcing

With the business process outsourcing model, a service provider sets up and operates an offshore office for you that they hand over when it is ready. Essentially, it’s contracting a business or organisation that hires another company to perform a process task required by the hirer for the business’ operational success. The provider has the facilities, setup, office environment and management required for global team members to work.

Pros: offers improved productivity, increased capacity, no need to worry about other sectors, inexpensive and an easy way to grow your team.

Cons: Large-scale BPOs can be more expensive to run and can be difficult to communicate needs and wants if the BPO doesn’t understand your industry or business.

Build-Operate-Transfer Model

This model is the model you want to employ if you’d like to build a separate office outside of your home country with more than 25 staff. To begin with, and much like a BPO, a provider ensures that there is a workspace and office equipment, and hires the employees. Rather than have the provider run the business for you, they then transfer the operation back to you.

Pros: Create work culture and environment among global team members, costs are less expensive than a BPO if there are more than 15 employees.

Cons: Can be expensive to set up, operating under foreign work ethics and work cultures can impact team management and requires time and effort to invest in the business in person.

Always consider what is best suited for your business, and confer with professional advisors before implementing a strategy regarding outsourcing

Super Co-Contributions Boost On Behalf of A Spouse

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Marriage and de facto relationships come with a number of perks – but did you know that if your partner earns less than you or is not currently working, you could contribute to their super fund savings?

Many households in Australia, either as a result of unemployment, maternity/paternity leave or by choice, have single-income households. As a result, the retirement savings held in super for one member of these households may not be increasing as exponentially fast as the working member. The good news is that when in a relationship, a spouse can boost their non-working partner’s super fund with their own contributions.

The best part? It could be a tax write-off for the working spouse.

Under Australian superannuation law, a spouse can be a legally married partner with whom you live or your de facto partner. That gives additional benefits to those in de facto relationships, who can choose (if one member of the relationship isn’t working or earns less) to boost their partner’s super fund. A spouse must also be younger than their preservation age or between 65 and their preservation age and not retired.

There are two ways that someone can help their partner’s superannuation grow:

  • Making a Spouse Contribution to their super account
  • Arranging for Contribution Splitting (also known as Super Splitting)

Spouse superannuation contributions can now be made for spouses earning up to $40, 000 per year. If a spouse earns less than $37, 000, the maximum tax offset of $540 can be claimed when contributing a minimum of $3, 000 to their super. Anything contributed that is more than $3, 000 will not receive the spouse contribution tax offset.

This tax offset cannot be claimed if:

  • A spouse has exceeded their non-concessional contributions cap for the financial year.
  • Their super balance is $1.6 million (for 2020/21) or more on 30 June of the previous financial year in which the contribution was made.

Another way to inject funds into your spouse’s super is to choose to have some of your own super contributions put into their super account. This is fine as long as they have not reached their preservation age yet, or are between their preservation age and 65 years and not retired.

Super contributions can only be split in the financial year immediately after the year in which the contributions were made or in the same financial year as the contributions were made only if your entire benefit is being withdrawn before the end of that financial year as a rollover, transfer, lump sum or benefit.

There are two types of contributions that can be split:

  • Employer contributions – the most common form of super contributions to split
  • After-tax contributions – money that you voluntarily deposit into your super after tax.

Always discuss starting spousal co-contributions to super with your accountant or financial advisor for help and guidance prior to starting this process.