Author: Adam_Admin

Salary Sacrificing for your Super

Posted on by Adam_Admin

One of the most effective ways to add to your super balance is through salary sacrifice. Salary sacrifice involves the employee agreeing to exchange a portion of their salary (before tax) for an increase in superannuation contribution by their employer.

Contributions made through salary sacrifice are classified as employer contributions, not employee contributions. These are taxed at a maximum of 15% (if you earn under $250,000 per year) which is lower than the marginal tax rate most employees are charged. The amount that you ‘sacrifice’ cannot be assessed for taxation purposes i.e. it is not subject to PAYG. Employees should ensure that their contributions per year are not above $25,000 as this is the cap on concessional contributions and if surpassed, will require additional tax to be paid.

Salary sacrifice is an effective way to minimise tax liability and increase super contributions if individuals are earning a greater amount than they require for annual expenses.

After beginning the salary sacrificing process, employees should keep a lookout for two important matters. First, the calculation of ordinary time earnings by your employer that super applies to, does not change. Second, the amount which is paid to your super through the salary sacrifice agreement does not contribute towards any super guarantee contributions that are required of your employer. Employees should verify that neither of these occur, and verify any confusion with their employer.

Salary sacrifice is a trade-off between income earned in the present, and contributions made for the future. Employees may experience difficulty in finding a balance which suits them or taking different aspects of their finances into consideration for the agreement with their employer. Asking for professional assistance to determine specifications for the agreement could help simplify this procedure.

Tips to upscale your business

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Set realistic and actionable goals

Businesses should set realistic and actionable small goals which they can work towards, rather broad goals which provide no direction. Setting broad and unrealistic goals is demotivating and makes any progress made seem insignificant. Every person in the business should be given a target to meet over a reasonable timeline which contributes towards achieving a larger goal.

Establishing standardised and automated processes

Small businesses can make the mistake of ‘doing things as they come’ but this means that as business grows, adjusting to high scale tasks is difficult. To avoid this, business should standardise all processes of work. Any individual placed into a role should be able to follow standardised procedure and yield a product which is of similar quality to the previous one. Investing money into automation tools is worthwhile for this procedure. This can include automating management of social media, email, and customer relationships. Both of these will contribute to creating structures which support growth.

Identify competitive strengths and weaknesses

Recognising the strengths and weaknesses of one’s business is essential. Strengths will allow businesses to hone in on unique qualities they possess which give them a competitive advantage. Weaknesses will reveal which areas require growth so that changes can be made before upscaling takes place.

Network

Businesses should continue to develop relationships with service providers, sales channel partners, suppliers and customers. Keeping an open mind about partnerships or potential collaborations could open up different avenues of business growth.

Building a social media strategy

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The right social media strategy can boost customer interaction and improve customer relationships. A social media strategy will help plan out the type of content that needs to be made, when it needs to be posted, and which platforms are best suitable for your business.

  1. What are your social media goals: What do you wish to achieve from your social media presence? Goals should be specific and measurable i.e. if your goal is to grow brand awareness, you can measure this by the amount of followers gained per week.
  2. Who is your target audience: Identify the age group that you are marketing your brand towards. This will be helpful to select the social media channel you focus on and you can create content which that group will interact with the most i.e. if your target audience is young adults, you might choose Instagram as your main channel, and create content that references different trends in social media.
  3. Which metric is most important to you: The number of likes for a post might not be relevant to your business, because this does not reflect the number of people who are utilising your business. Your metric might be the number of people that visit your website through social media, so you customise your social media promotions to show your website first.
  4. What is your social media timeline: Establishing a firm timeline for social media posts beforehand is extremely important. It allows you to create awareness and excitement about a new product or service before release. Ensure that your content is ready to go in advance so that you can stick to timelines.

All of these factors will determine your brand’s online presence, the visual content and how you interact with customers online. Make sure you think about these factors beforehand.

Which bad money habits could be getting in your way

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How you spend your money determines how well you can save you money. Spending more than you have or buying unnecessarily can severely impact how efficiently you can save. Sometimes you aren’t even aware of the small habits that are actually limiting your savings capabilities. Here are a few bad money habits that are getting in your way.

Not having a budget:

Spending a substantial amount of money each month on purchases and experiences adds up. Not preparing and sticking to a budget is a common mistake, as many people believe that a budget isn’t necessary for their lifestyle and income. Regardless of how much you earn, individuals need budgets to know where their money goes and what needs to be set aside to achieve their goals.

Eating Out:

Dining in restaurants or grabbing take away most nights in the week is a good way to deplete your finances. Save money by eating out one or two nights and cooking the rest of your meals in bulk at home. Preparation of food will help on those nights when you don’t want to cook and stops you from ordering food.

Impulse Buying:

Purchasing items without a second thought is an easy way to lose money. A good way to avoid this can be to ask yourself if you are buying something because you ‘want’ it, rather than if you ‘need’ it? Learn how to recognise when you do the action and force yourself to wait. You can then consider if you have the extra money to spend on that item, giving you time to properly think about your decision.

Credit Cards:

A credit card is an easy way to spend money you may not have. Living beyond your means is a fast way to fall into debt and is one of the worst things you can do for your finances. Remember, if you don’t pay the card in full each month, every dollar you put on a card will cost you many times more in interest charges. Avoid this problem by thinking of your credit card as an emergency-only option.

Income Tax cuts in Federal Budget Benefiting high-income earners

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In its efforts to boost the economy, the Federal Government is considering bringing the planned income tax cuts forward. The intention behind these cuts is to boost the economy by boosting consumption.

Initially, income tax cuts were to take place in three stages, the first of which has already been rolled out. The following stages aim to facilitate a reduction in tax for individuals earning from $90,000 to $200,000 over the next 4 years at the cost of billions of dollars to the Parliamentary Budget.

There has been criticism of the government’s suggestion that these stages be moved forward because they are unlikely to have the desired effect. Rather than boosting consumption, beneficiaries of this plan are likely to keep the additional money in the bank. This is because these plans are directed at high-income earners who will not need to spend the money on necessities, that low-income earners would.

Additionally, the uncertainty of the current climate which the government is relying on to justify this change may be the very reason that people save their money rather than spend it.

Critics of this change are suggesting that focus should be placed on ‘Social Spending’. An example of this could be an increase in pension – which pensioners are a lot more likely to reinvest into the economy.

Amnesty means that 24,000 businesses own up to underpaying Aussies superannuation

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An amnesty scheme which ended earlier this month has caused around 24,000 businesses to admit to underpayment of their worker’s super. A total of 588 million dollars will be distributed to almost 400,00 individuals.

The scheme, which covered payments from the introduction of super in 1992, gave employers the opportunity to come clean without any consequences as long as they paid the unpaid super as well as 10% interest for every year the money was overdue.

The ATO will be directing its attention at any businesses that did not admit fault and these businesses will face severe penalties.

Many individuals are looking to access their superannuation early in order to have support during these times. Although there is criticism of early access to super, this facility has been helpful to many families to keep afloat.

What business structure suits your business?

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An important decision to make before you start a business is what structure your business will run under. This will reflect into all facets of your business, so you should spend time understanding the implications of each structure.

Sole Proprietorship

  • You have complete control of your business.
  • Your business assets and liabilities are not separate from your personal assets and liabilities.
  • Personally liable for debts and obligations of the business
  • Low-cost structure

Partnership

  • Share control and management of business
  • Each partner pays tax on the share of net partnership income each receives
  • Minimal reporting requirements + Inexpensive to set up
  • Requires more documentation

Company

  • Separate legal entity from its owners – all profit, tax, and legal liability is directly to the corporation
  • Members not liable for company’s debt (only liable if you breach legal obligations)
  • Complex business structure + Extensive documentation and record-keeping
  • Wider access to capital

Trust

  • Expensive set-up and operation
  • Formal trust deed outlining operation required
  • Trustee responsible for yearly administrative tasks

Dealing with interview jitters

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An interview can be intimidating even if you are the perfect person for the job. Improving your performance during an interview can be a matter of learning to alleviate your anxiety.

Preparing for your interview can be extremely helpful.

  • Read about the company and what they do
  • Prepare your responses to common interview questions (strengths, weaknesses, plans for the future, etc.)
  • Remind yourself of the achievements that make you worthy of the job

Change your mind-set about the interview

  • Remember that the interview is the best time to understand whether the company culture aligns with your values
  • Think about it as an opportunity to learn more about the organisation, and not just an opportunity for them to interview you

Small details

  • Get a good night’s sleep
  • Avoid caffeine
  • Set aside the clothes you’ll be wearing (Dress for success!)
  • Plan to get to the interview 15 minutes ahead of time

During the interview

  • Focus on your breathing to calm yourself
  • If you need, ask for a second to gather yourself
  • Take water with you and take small sips between questions

Businesses should consider adopting flexible workplace arrangements

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Businesses working from home due to social distancing restrictions can take the opportunity to learn from the experience and consider new work structures coming out of COVID-19. This could mean increased flexibility for employees when it comes to working remotely and adaptable hours. Here’s why flexible work arrangements with your employees may be beneficial for your business in the long term.

Increased productivity

Flexible work arrangements can increase the productivity of employees by allowing them to work when they feel most motivated. Some people may naturally be more productive at night time and do their work then, which would not be possible with regular office hour restrictions. Remote work also saves time on excessive staff chatter and workplace distractions, such as ringing telephones and colleague drop-ins. Offering flexible work arrangements can show your employees that their lives are valued, which can lead to higher levels of performance and hard work to justify the flexible arrangements.

Reduced expenses

When employees are working from home more frequently, it means that your office doesn’t have to sustain as many people and you can reduce rent and utility expenses. This doesn’t mean that your employees have to pay too much more; the ATO has introduced an easier way of deducting work from home costs during the COVID-19 period called the ‘shortcut method.’ This allows employees to deduct 80c per hour they work from home to compensate for running expenses.

Attract talent

Businesses that exclusively depend on employees being physically present may be missing out on ideal workers who live too far or require more flexible arrangements. Modern job seekers are often on the lookout for positions that offer greater flexibility, rather than the regular 9 to 5 in the office. Highlighting workplace flexibility in your job advertisements can attract more prospective talent as physical barriers are eliminated.

Improved wellbeing

Remote work can improve the overall physical and mental wellbeing of your employees. One perk is that they may be able to be better rested and eat a proper breakfast in replacement of the morning commute. Work flexibility will also enable them to work around family commitments, which can boost their quality of life and happiness. This can raise morale and improve their quality of work by reducing the risks of fatigue and burnout.

Employee retention

Workplaces that allow employees to maintain a healthy work-life balance are more likely to retain their employees for long terms. This can benefit businesses by reducing the frequency of hiring and training periods, which can save a lot of money and productivity while continuing to grow corporate knowledge in existing employees.

Getting on top of your SMSF during divorce

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Running an SMSF under regular circumstances comes with enough compliance obligations as it is. Adding divorce or separation into the equation can raise even more legal and tax issues that need to be addressed.

The breakdown of your relationship does not absolve you from your responsibilities as an SMSF trustee; you are still expected to continue acting in accordance with super laws and in the interests of all members. As a trustee, you must:

  • Include another trustee in the decision-making process, and
  • Acknowledge requests to redeem assets and rollover benefits to another super fund.

When it comes to dividing SMSF assets, separating couples can transfer assets, such as property, from one SMSF fund into another. During this process it is important to consider:

  • How they will decide to split their superannuation fund. They can choose to enter into a formal written agreement, seek consent orders, or if the separating couple cannot reach an agreement, they can seek a court order.
  • Whether they have the necessary documentation readily available, as it is essential in the event of an ATO audit. Due to there being beneficial tax consequences in splitting a superannuation fund, it is essential that the documentation, such as the notice for splitting the super, shows a genuine separation.
  • Where the new fund is to be a single member fund, it is advisable to incorporate a special purpose company to be the trustee. This avoids having a second person as a trustee.