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What is an annuity?

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An annuity provides guaranteed income for a number of years, or for the rest of your life. It is also known as a lifetime or fixed-term pension. 

You can buy an annuity from a super fund or life insurance company. You are able to choose whether you want the payments to last for a fixed number of years, your life expectancy, or the rest of your life. 

In order to buy an annuity through your super fund, you must be in the ‘preservation age’ which is between 55 and 60. Additionally. You are required to meet a condition of release e.g. permanently retiring. 

You are also able to buy an annuity in joint names using savings. Through this method, you can split income for tax purposes. If either you or your partner dies, then the survivor has ownership and access to the funds. On the other hand, buying an annuity using a super lump sum can only be in the name of the owner.  

When you buy the annuity, you decide the payment amount you will receive. This can increase each year by a fixed percentage or indexed with inflation. Further, you can also choose if you are paid monthly, quarterly, half-yearly or yearly. There are some conditions the ATO has about minimum annual payments if your annuity is bought with super money e.g. must pay a certain percentage of the balance based on your age. 

You decide what happens with your annuity if you pass away. You can either nominate a reversionary beneficiary or choose a guaranteed period option. A reversionary beneficiary will receive your income payments for the rest of their life, usually at a reduced level. The guaranteed period option will allow your beneficiary to receive their payments as a lump sum or an income stream. 

An annuity will impact your eligibility for the Age Pension as it is accounted for in the income and assets tests which are conducted. You should discuss exactly how the annuity will impact Age Pension entitlement with a Financial Information Service (FIS) officer. 

Claiming your tax deductions

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There are different types of deductions that individuals can claim to reduce their taxable income. 

Work-related expenses

In order to claim work-related tax deductions, the expenses must have to meet three criteria. Firstly, all the expenses have to be paid by the individual, without being reimbursed by the employer. Secondly, they must be directly related to earning your income. Finally, there must be a record of the expenses (i.e. a receipt). 

There are various different expenses that can fall under this category. 

  • Vehicle and travel expenses: Commuting between different locations but not usual travel between home and work
  • Clothing, laundry, and dry-cleaning expenses: Cost of work uniform which is distinct and unique (i.e. has a specific logo)
  • Self-education expenses: Any courses or study associated with employees current role, such as textbooks
  • Tools and other equipment: If you purchase tools or equipment, then a deduction for some or all the cost could be claimed

Investment expenses

The cost of earning interest, dividends, or other investment income can also be claimed. This can include:

  • Interest charged on money borrowed to invest
  • Investment property ex[enses
  • Investing magazines and subscriptions
  • The money you paid for investment advice

Home office expenses

A portion of the costs associated with installing your home office can be deducted. The process is now much easier due to COVID-19. It allows people to claim 80 cents per hour for all running expenses. Additionally, people living in the same house can claim this individually, there is no need for a dedicated office. 

Other deductions

There are also other deductions available. These include:

  • Union fees
  • The cost of managing your tax affairs
  • Income protection insurance (If not through super)
  • Personal super contributions
  • Gifts and donations to organisations that are endorsed by the ATO as deductible gift recipients

How innovation can help business

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Innovation doesn’t have to be a revolutionary and world-changing breakthrough. It can also be small changes you make to continually improve your business. Innovation can help in multiple aspects of business.

  • Improve sales and customer relationships: Putting the time and effort into improving your products and services is essential if you want to retain customers. Customers will recognise the changes you make and your commitment to doing the best you can for them. This will inevitably translate into improved sales.
  • Reduce waste and costs: Implementing changes which utilise new ways to eliminate waste and increase efficiency are extremely important. This will help you either increase your profits, or invest the money you save back into other necessary improvements for the business.
  • Improve employee performance: Creating a work environment that promotes innovation is more likely to keep employees stimulated and interested in their work. When employees are given the opportunity to suggest and implement changes, they are more likely to take pride in their work. This will also result in greater productivity.
  • Boost your market position: Innovation is also important in keeping up with changes in the market. Creating a company culture which is flexible and facilitates regular changes will mean that you can transform according to the needs of the market. This will differentiate you from competitors and boost your position in the industry.

Customer retention strategies

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Retaining customers is just as important as acquiring new ones, if not more important. This is because unless customers had a negative experience with your company, they will use your services or buy your products again. 

Here are some strategies you can use to retain your customers:

  • Observing customer behaviours: Analysing customer behaviour patterns will help predict customer needs and create services or products that respond to those needs. This could involve having a sale during periods when your customers show a tendency to engage with your company. 
  • Targeted approach to customers: Collecting data can also help you personalise your approach to individual customers. For example, a certain demographic of customers may value free delivery, while others prefer discounted products. Ensure that you are making the best of the data you collect.
  • Create VIP programs: Rewarding customers that regularly buy from or use your services is important in making them feel valued. Create a VIP program that gives regular customers incentives and benefits so that they are encouraged to continue coming back.
  • Individualised communications: Interactions that are personalised have been found to be effective. This can start with something as basic as sending email campaigns that have the customers’ names. 

Breach of employment contracts

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Employment contracts contain terms and conditions which both the employee and employer agree upon. Ideally, this contract should be written rather than confirmed verbally to avoid miscommunications or misunderstandings. Contracts may also contain implied terms i.e. not misusing confidential information. 

Employment contracts are also governed by legislation that provides further information about the minimum terms required, remedies that can be utilised, and basic regulatory frameworks. The industry you are in may also have additional industry-specific requirements that are legally reinforced. 

Breach of employment occurs when employers or employees fail to comply with the terms of the contract. The innocent party may be entitled to sue for the damages that have occurred as a result of the breach – so that they can be restored. A substantial breach may also allow an immediate termination of the contract and additionally allow individuals to sue for any loss incurred. 

In the case that an employer or employee has breached a contract, it may be easier to navigate the difficult processes that need to be completed with the help of a legal advisor. This is because a breach of contract can be fairly nuanced and information provided on websites may not be sufficient enough to lead the process without help from a legal professional. 

The government may be able to provide free or concessional legal advice which should be utilised as legal proceedings can often be costly. 

 

Super scams: What to look out for

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The market for super funds is extremely competitive. Scammers take advantage of this by promising unrealistic benefits to acquire personal or account details. They are able to use this information to steal your identity or transfer your super to an account they can access. 

Scammers can approach you in various ways. You could receive a phone call, email, or be contacted online. 

This is what you should be wary of: 

  • Advertisements promoting early access to super
  • Offers to ‘take control’ of your super
  • Offers to invest your super in property
  • Offers quick and easy ways to access or ‘unlock’ super

The best way to spot a scam is to know what the rules about your super fund are. Knowing when you can legally access your super will protect you from false promises. Additionally, the ASIC website lets you check if someone is licensed, if they are not licensed, more likely than not, they should not be trusted. 

If you believe that you’re being targeted by a scam, then rather than simply ignoring approaches and not engaging, you should report the scam. You can do this by calling the ATO or completing the online complaint form on the ASIC website. 

How are investments taxed?

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Investment income needs to be included when conducting tax returns. This includes any income acquired through interest, dividends, rent, managed funds distributions, and capital gains. The income yielded from investments is taxed at a marginal tax rate. 

Individuals are able to claim deductions for the cost of buying, managing, and selling an investment. However, the Australian Tax Office (ATO) provides rules about what an or cannot be claimed as a tax deduction. 

The MoneySmart website has a simple and easy-to-use tax calculator that may give an indication as to what the annual tax will be. However, it is recommended that if an individual has a diverse portfolio that yields income from multiple sources, then should consult an accountant or advisor that can lead them through the process as it can become quite complex. 

In order to minimise taxation on investment income, individuals should consider tax-effective investments that provide concessional taxation. These include superannuation and insurance bonds. 

PAYG instalments for business and investment income

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Pay as you go (PAYG) instalments are payments you can make throughout the year to avoid accumulating a large tax bill to pay at the end of the year. Making these payments is a great way to budget for income tax and keep a healthy cash flow. 

To qualify for PAYG instalments, you must earn over a threshold amount from your business or investment income (also known as instalment income).

The amount that you pay in PAYG instalments throughout the year will be offset against any owed tax for the entire year. But it is important to lodge your activity statements and pay all PAYG instalments before lodgment of tax returns if you want these to be included in your tax assessment. 

There are two options for calculating and paying PAYG instalments:

  • Instalment Amount: Simplest option which involves paying instalment amounts the ATO calculates based on relevant information. 
  • Instalment Rate: You calculate the instalment amount using instalment rate provided by the ATO and your instalment income. Therefore, dependent on income as you earn it and not predetermined. 

How to get the most out of your bank account

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Banking is often more complicated than you expect it to be with different types of accounts, fees and fine print to take into consideration. You are able to get more out of your bank account if you pay closer attention to certain details. 

Re-evaluate your bank

Due to the competitive market space, new offers that might be much better suited to your needs than the 10-year-old bank account you are using may be available. Keep a lookout for these offers so that your bank account is helping you put more money into your pocket. 

You should also consider changing accounts if your bank is asking you to pay high fees or requires a high minimum balance. You may find that other banks are offering better options or attempt to renegotiate terms of your account with your current bank.

Don’t assume your bank is giving you the best rate

Your bank may not be giving you competitive rates and assuming that they will do right by you lets them get away with this. Make sure that you keep up to date with different types of rates and what they should be. Discuss these with your bank and how they might be able to give you more competitive rates to the ones you are currently receiving. 

Plan interactions with your bank strategically

Other than when it’s regarding an urgent matter, plan interactions with your bank ahead of time. For example, if you need to visit the bank about your mortgage, aim to have a mortgage specialist with you, this will ensure that you get the best out of your visit. 

You may be able to resolve your request by calling the bank. In this case, aim to call in off-peak hours to reduce waiting time. Before you call, make sure you’ve checked whether the bank has provided an online method to complete the process. 

Don’t forget cards and bank accounts you don’t use

Carrying a spare credit or debit card is okay as long as you aren’t being charged annual fees on it. If you find that you rarely use the card but it has a high annual fee, it might not be worth continuing to pay for it. 

The same applies to bank accounts that you may not be using or using rarely. Banks may charge a dormant account fee if there is no activity in the account over a period of time (check details that apply to your bank). However, using your bank account every few months should be enough to prevent dormant account fees from being charged. 

Running a successful email marketing campaign

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Email campaigns are important because research shows a large percentage of both adults and teenagers regularly use email. Running a successful email campaign can significantly contribute to customer interactions and generate sales in the long term. 

How to run a successful campaign?

  • Know your goals: Email campaigns can serve various purposes including nurturing existing customers or welcoming new ones. The email itself should have content that is relevant to the purpose it is serving and encourages the recipient to take the intended actions. 
  • Build a targeted email list: Your email list should contain customers who are interested in your products. A simple way to do this is to ask visiting customers, both online and in person, if they would like to receive emails about new products and sales. 
  • Understand the types of emails: Promotional, relational and transactional emails each play a different role. Knowing what the purpose of these emails is will help build the email campaign to serve that purpose. 
  • Know your audience: Use your data to understand who your customers are and what they are likely to be interested in. This will help curate email campaigns that will engage the customer. 
  • Create engaging emails: The campaigns should be structured and designed in a way that they keep the customer connected. For example, if the campaign is promotional, the header should be eye-catching, followed by some of the best products, and finally, directed to the website where they can find other products in the promotion. 
  • Plan emails and follow-ups: The content, purpose and goal of your email will determine the frequency of that campaign and whether follow-ups are required. Often, this requires finding a balance between reminding the customer of promotions or actions they need to complete, and not overwhelming them with emails.