Month: April 2022

The Benefits & The Downsides Of SMSF Set UP

Posted on by Adam_Admin

One of the benefits of establishing or opting for an SMSF is due to the control they are given over where the money is invested. While this sounds enticing, the downside is that they involve a lot more time and effort as all investment is managed by the members/trustees. They are also often the targets of fraud and scams.

Firstly, SMSFs require a lot of ongoing investment of time:

  • Aside from the initial set-up, members need to continually research potential investments.
  • It is important to create and follow an investment strategy that will help manage the SMSF – but this will need to be updated regularly depending on the performance of the SMSF.
  • The accounting, record keeping and arranging of audits throughout the year and every year also need to be conducted up to par.
  • Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs. This adds up to more than 100 hours per year and demonstrates that compared to other superannuation methods, is a lot more time occupying.

Secondly, there are set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor. These costs are difficult to avoid if you want the best out of your SMSF. A statistical review has shown that on average, the operating cost of an SMSF is $6,152. This data is inclusive of deductible and non-deductible expenses such as auditor fees, management and administration expenses etc., but not inclusive of costs such as investment and insurance expenses.

Thirdly, investing in an SMSF requires financial and legal knowledge and skill. Trustees should understand the investment market so that they can build and manage a diversified portfolio.

Further, when creating an investment strategy, it is important to assess the risk and plan ahead for retirement, which can be difficult if one is not equipped with the necessary knowledge. In terms of legal knowledge, complying with tax, super and other relevant regulations requires a basic level of understanding at the very least.

Finally, insurance for fund members also needs to be organised which can be difficult without additional knowledge.

Although SMSFs have the advantage of autonomy when it comes to investing, this comes at a price. Members/trustees need to invest time and money into managing the fund and on top of this, are required to have some financial and legal knowledge to successfully manage the fund.

SMSF Fraud Alert

The ATO is also warning of an increase in Self Managed Super Fund identity fraud and scams targeting the retirement savings of individuals. This is something to be aware of if looking to start an SMSF and maintain it.

These fraudulent perpetrators use stolen identity information or may harvest information from individuals by cold calling the victim and presenting themselves as superannuation experts.

They typically offer superannuation comparisons and/or high-return investment options through the establishment of a fraudulent SMSF. Remain vigilant, and remember that if you are dealing with an advisor for the benefit of your SMSF, you should check to see if the advisor is listed on ASIC’s Professional registers or Moneysmart’s list of unlicensed companies you should not deal with. 

Car Parking Benefit Readdresses FBT Definition, Employers To Benefit

Posted on by Adam_Admin

It’s getting closer to the time that FBT returns need to be lodged, so it’s important to understand that there may be a change to the FBT liability of your business when it comes to one employee benefit.

Car parking as an FBT benefit is provided on a particular day when, between 7.00am and 7.00pm:

  • a car is parked at a work car park for the minimum parking period;
  • an employee uses the car in connection with travel between their place of residence and primary place of employment at least once on that day;
  • the work car park is located at or in the vicinity of the primary place of employment, on that day;
  • a commercial parking station is located within a one-kilometre radius of the work car park used by the employee;
  • the lowest representative fee charged by any commercial parking station for all-day parking within a one-kilometre radius of the work car park exceeds the car parking threshold;
  • the parking is provided to the employee in respect of their employment, and
  • the parking is not excluded by the regulations.

However, a car parking benefit provided in respect of an employee is exempt where:

  • the car is not parked at a commercial parking station;
  • the employer is not a public company or a subsidiary of a public company;
  • the employer is not a government body; and
  • for the income year ending before the start of the FBT year, the employer’s assessable income is less than $10 million or alternatively, it is a ‘small business entity’ (SBE)

Redefining a ‘commercial parking station’ to revisit a prior concept associated with the application of fringe benefits tax may make the perks of coming into the office a little more appealing to employees.

FBT applies to parking provided by employers to their employees where there is alternative parking available commercially available.

Prior to the recent ruling, there was a previous understanding that car parks that effectively charge penalty rates for all-day parking (to encourage shorter stays) would not represent genuine alternative parking arrangements for commuters, and should not trigger FBT liabilities as a result. However, the recent ruling has overturned this, which means that any alternative paid parking would trigger the liability.

This ruling came into effect on 1 April 2022.

This recent ruling on how car parking is treated as an FBT liability should assist in reducing the potential FBT burden on some employers (which should assist them in turn in incentivising employees back into the workplace with benefits).

Other FBT benefits that employers may be able to claim back on in their FBT return could include COVID-19 related benefits (such as office equipment, technology, etc), company cars, meals, entertainment, living away from home allowances, and more. As a result of the impact

If you need assistance with preparing your FBT return for lodgement, consult with a professional as soon as possible so that we can assist you with preparing your return.

Paid Parental Leave Scheme Update For Federal Budget Announcements

Posted on by Adam_Admin

If you have employees who are expecting to expand on their family (whether they are adopting or looking to become pregnant), the Federal Budget 2022-23 announced a change to paid parental leave that could impact you and your employees.

Single parents and fathers are now eligible for longer paid parental leave after the government proposed an ‘enhanced’ 20-week scheme from announcements made during the Federal Budget 2022.

Under existing arrangements, up to 18 weeks of paid parental leave can be taken by whoever is designated a baby’s primary carer – usually the mother – at the minimum wage, while a secondary carer is eligible to take two weeks. If the secondary carer does not use the two weeks, it is lost.

As a result of the recent announcements made in the Federal Budget 2022-23, the secondary carer’s leave will be merged with the 18 weeks of Paid Parental Leave to increase the government-funded scheme to 20 weeks of leave.

Single parents will see two additional weeks of paid parental leave added to what they normally would be entitled to, whereas two-parent households will be able to split the Paid Parental Leave as they would like. However, this leave must be taken within two years of the child’s birth or adoption.

The ‘use it or lose it’ incentive will not be implemented into the new scheme, but an emphasis may still be placed on the primary caregiver to take the bulk of the leave.

The enhanced scheme will also broaden the eligibility for paid parental leave to include a household income threshold of $350,000 per year.

This fully flexible leave aims to help working parents make caring decisions that suit their specific circumstances and encourage fathers to take up parental leave.

Presently, women who earn up to $151,350 can access paid leave, but women earning more than the threshold are not entitled to this scheme, even if their partner has lesser or no income.

The rate of paid parental leave has not increased either – it is simply that eligible parents will be able to access more of it. This may be a disincentive however to the higher income earner, as taking the paid time off may be less than what they would otherwise earn working.

Notably, though, the proposed scheme still does not include superannuation payments in parental paid leave. Paying super on paid parental leave would allow parents to continue building their retirement savings while taking time out of the paid workforce to care for children.

If all goes to plan, these changes to the paid parental leave scheme will take place no later than 1 March 2023.

Paid parental leave is a topic that can be tricky for employers. Having a discussion with a professional can be a way to alleviate concerns about what your employees are entitled to or the risks of failing to match standard employee obligations around the matter.

Superannuation Changes To Affect Pensioners (And What You May Still Need To Take Into Account From Last Year’s Budget)

Posted on by Adam_Admin

The Federal Budget was released last Tuesday, announcing key changes to taxation and business. For superannuation, the minimum pension drawdown amount was in the spotlight.

The reduction in the minimum pension drawdown amount for superannuation pension recipients has been extended for another year by the Federal Government, as announced in the Budget for 2022-23.

The minimum pension amount will be only 50% of the general amount (the balance from which the pension is drawn). For example, a 65-year old would usually need to draw down 5% of their opening balance as a pension payment throughout the year.

For the 2022-23 financial year, the minimum amount will be reduced 50% (dropping this to 2.5%). This measure is set to cost the Federal Government around $19.2 million dollars for the 2022-23 years, but you need to be alert and conscientious about it.

Why Is That?

Whilst it is a great outcome to keep as much of your money in your super as is possible (if it’s not required for you to live on), you do need to be conscious that at some point, the remaining balance will be passed onto the next generation, potentially as a part of their inheritance.

When this money does change hands and is given to the next generation if the superannuation balance includes a taxable component, then your children may be subject to as much as 17% tax on the capital value of that balance.

Different tax treatments can apply depending on whether your super is being paid as a lump sum, income stream or mixture of both, and if your beneficiary or beneficiaries are classified as ‘tax dependants’.

A tax dependant includes:

  • a current spouse, including defactos
  • any children of the deceased who are under the age of 18
  • any other financial dependents.

If your beneficiaries were not financially dependent of you, such as a spouse or child under 18 years of age, then they will have to pay tax on the inheritance that you have left for them in your superannuation fund.

However, if you take that money out of your super and it passes to your children as a part of your estate instead, there will be no death duties payable (in this instance, ‘death duties’ refers to inheritance tax that may be payable, which has not been an issue since 1981).

The primary reason for the reduction in the minimum pension payment amount is to protect pensioners from having to sell their assets during a volatile period. However, this is a double-edged sword that needs to be carefully considered and weighed against your circumstances.

You May Need To Start A Discussion 

Superannuation can be a tricky area to navigate, especially when you’re trying to do it by yourself.

If you’re approaching retirement, you may have questions about how to prepare for your pension years. These may include

  1. General retirement adequacy – how much money you’ll actually need to retire on
  2. How to manage your finances in retirement
  3. Old age issues that could crop up
  4. Using your home to fund retirement and insurance (and embracing the grey nomad lifestyle)
  5. Recent changes to superannuation measures, including the extended timeframe of the minimum pension drawdown,

Consulting with a professional is the best way to ensure that your pension is currently operating at its most effective level, and they can assist you with understanding what you may need to do to get your affairs in preparation for the future.