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Retirement planning often seems like a distant concern until it’s suddenly upon us. The realisation that you might not have enough money or assets to maintain your lifestyle post-retirement can be alarming.
For some, a Self Managed Super Fund (SMSF) can be an effective solution to ensure financial security in retirement. Here’s how to determine if you’re ready to take on the responsibilities and benefits of an SMSF.
A Self Managed Super Fund operates similarly to other superannuation funds, with the primary difference being that the members are also the trustees. This means you have direct control over how your superannuation is invested, but also bear the responsibility of managing the fund in compliance with regulatory requirements. Each SMSF must be audited annually by an accredited auditor and adhere to Australian Taxation Office (ATO) rules.
1. You Want More Control Over Your Finances
The main appeal of an SMSF is the control it offers. If you value being directly involved in the investment decisions that affect your retirement savings, an SMSF might be the right choice. You can tailor your investment strategy to suit your preferences, whether it’s in property, shares, or other assets. This level of control allows you to potentially maximise your retirement income stream according to your specific goals.
2. Your Superannuation or Savings Can Handle the Fees
Managing an SMSF incurs costs, and it’s essential to ensure that your fund can handle these without depleting your savings. A general benchmark is having around $200,000 in superannuation to justify the costs of running an SMSF. While this might seem high, those with substantial professional or business experience may find they have accumulated sufficient funds. Ensuring that your savings are adequate to cover the fees is crucial for the sustainability of your SMSF.
3. You’re Prepared for the Administrative Work
With greater control comes greater responsibility. An SMSF requires diligent management to remain compliant with ATO regulations, including annual audits and detailed record-keeping. Partnering with a knowledgeable accounting firm is often necessary to navigate these administrative tasks effectively. Assess whether you have the time, resources, and willingness to manage these additional responsibilities. If not, professional support is essential to ensure your SMSF operates smoothly.
4. You’re Ready to Handle the Tax
Tax compliance is a significant aspect of managing an SMSF. To avoid the maximum tax rate of 15%, you need a solid understanding of tax laws and ATO regulations related to SMSFs (this is where the Attune team can help most). This includes making strategic decisions to minimise tax liabilities. Engaging Attune Advisory can provide the expertise needed to manage the tax aspects of your SMSF, ensuring that your fund remains tax-efficient and compliant.
5. You Have an Understanding of Investing
Successful SMSF management requires a good grasp of investment principles. While you can seek advice from financial experts, having a foundational understanding of how your investments work is beneficial. If you have previous investment experience, you’ll be better equipped to make informed decisions that enhance the performance of your SMSF. If investing is new to you, now is the time to start learning. Understanding your investments will help you maximise the returns on your superannuation.
Taking on an SMSF can be a rewarding way to secure your financial future, provided you’re prepared for the responsibilities it entails. Regular assessment of your readiness in terms of control, costs, administrative work, tax management, and investment knowledge is crucial.
At Attune Advisory, we specialise in guiding our clients through the complexities of SMSFs, offering the support and expertise needed to make informed decisions. Contact us today to learn more about how we can assist you in setting up and managing an SMSF, ensuring your retirement is as comfortable and secure as possible.
For more information and tailored, professional advice, call the team on 1300 866 113 or contact us via email to start the conversation.
The Australian Federal Budget announced on May 14, 2024, has changes that will impact various segments of society differently, but it certainly will impact each of us. We thought it worthwhile giving you a brief breakdown of some of the key winners and losers from the budget as we viewed it.
The below is designed to be a snapshot, so if you’re wondering how any of the below changes might impact you this coming tax year, reach out to the Attune team for a chat.
Low and Middle-Income Earners: The budget provides considerable relief to low and middle-income earners through Stage 3 tax cuts. These cuts reduce the tax rates for incomes up to $135,000, increasing take-home pay from July 2024.
Some changes to the previously proposed stage 3 tax cuts means that the outcome is a reduction in the 19 per cent tax rate to 16 per cent, a reduction in the 32.5 per cent tax rate to 30 per cent, and a raising of the threshold at which the 37 per cent tax rate applies.
Households: Significant measures have been introduced to ease the cost of living. Over 10 million households will benefit from a $300 rebate on electricity bills. Additionally, there's a freeze on Pharmaceutical Benefits Scheme (PBS) co-payments and increased support for renters, with the Commonwealth Rent Assistance maximum rates increasing by 10%.
Healthcare: The budget allocates $5.7 billion to strengthen Medicare, including higher bulk billing incentives and funding for new Medicare Urgent Care Clinics. This will particularly benefit pensioners, children under 16, and concession card holders.
Students and Recent Graduates: The government will cut $3 billion in student debt, impacting over three million Australians. The annual indexation of HECS-HELP debts will now be limited to the lower of the Consumer Price Index (CPI) or Wage Price Index (WPI), easing financial pressure on graduates.
Veterans: Veterans will see improved support with $64.1 million to address the backlog of claims and $250 million to upgrade veteran services' IT systems. An additional $4.8 billion is allocated for future compensation and support payments.
Small Businesses: Small businesses will benefit from a $290 million support package, including an instant asset write-off of $20,000 for eligible assets, helping to boost cash flow and investment in new equipment.
Environmental Initiatives: Tradies specialising in eco-friendly upgrades will see increased demand, thanks to the $1.3 billion Household Energy Upgrades Fund. This initiative offers low-interest loans for households to install energy-efficient measures like solar panels and double-glazed windows.
High-Income Earners: The budget does not favour high-income earners as much as first suggested in the Stage 3 tax-cuts announced earlier this year, but there are other areas high-income earners will be impacted. Those with superannuation balances over $3 million will lose the ability to make concessional contributions at a reduced tax rate. This move aims to ensure that tax benefits are more evenly distributed.
Vapers and Smokers: Smokers face a 5% annual increase in tobacco taxes over the next three years. Recreational vaping is also being heavily regulated, with new national campaigns highlighting the dangers of smoking and vaping.
Alcohol Consumers: Drinkers will see higher prices for alcohol due to increased taxes on beer and spirits, impacting those who frequently purchase these products.
To conclude, the 2024 Federal Budget is a bit of a mixed bag, offering significant support to lower and middle-income Australians, students, small businesses, and those in need of healthcare improvements, while imposing more stringent measures on higher-income earners, smokers, and alcohol consumers.
If you’d like to discuss how any of the above changes will impact you this year, reach out to the Attune team on 1300 866 113 or contact us via email.
With the flurry of public holidays we see in the first few months of the year here in Australia, we thought it would be of interest to delve more closely into the cost of public holidays from multiple perspectives.
It’s important to note here: we’re certainly not arguing against public holidays – especially when they give us a chance to pause and reflect on important times or people in our collective history, but, while they’re a welcome break for many, they come with financial implications that impact stakeholders in different ways.
From the viewpoint of business owners managing operational costs to employees benefiting from penalty rates, and even the broader impact on the Australian economy, the cost of public holidays is a multifaceted issue we think is worth exploring.
For business owners, public holidays can present a double-edged sword. While they provide an opportunity for employees to rest and recharge, they also come with increased operational costs. Businesses that remain open on public holidays often have to pay penalty rates to employees who work during these times, which can significantly inflate wage expenses.
Moreover, for industries like retail and hospitality, where public holidays often coincide with increased consumer spending, the pressure to remain open and capitalise on potential sales can be intense. However, staying open means incurring additional expenses such as overtime pay, increased staffing levels, and higher utility costs.
To be clear, all hours worked on a public holiday are typically “double time and a half” which is calculated at 250% of the normal hourly wage. For salaried staff, employees would generally be offered time in lieu for time worked on a public holiday which may have knock-on effects for future productivity.
As you can tell from a financial standpoint, the cost of public holidays can eat into profit margins, particularly for small businesses operating on tight budgets. Balancing the need to provide employees with fair compensation for working on public holidays while ensuring the business remains financially viable can be a challenging task.
On the flip side, public holidays offer employees the opportunity to earn extra income through penalty rates. For many workers, especially those in industries like hospitality and retail, penalty rates can significantly boost their earnings, making working on public holidays a lucrative option.
From a tax perspective, it's essential for employees to understand the treatment of penalty rates. In Australia, penalty rates are considered part of an employee's ordinary income and are subject to the same tax rates. However, depending on the individual's total income and tax bracket, penalty rates may push them into a higher tax bracket, resulting in a higher tax liability.
Additionally, for employees with families, public holidays can pose logistical challenges, particularly if they have to arrange childcare or take time off to care for children who are out of school. While some employers may offer flexibility or additional leave entitlements to accommodate these situations, for others, taking time off on public holidays may come at the expense of annual leave or unpaid leave.
Beyond the microeconomic impact on individual businesses and employees, the cost of public holidays also has broader implications for the Australian economy. While public holidays stimulate consumer spending in certain sectors, they can also disrupt productivity and economic activity in others.
Industries that rely on continuous operations, such as manufacturing and healthcare, may experience disruptions and increased costs associated with maintaining essential services during public holidays. Moreover, the cumulative effect of multiple public holidays throughout the year can lead to a loss of productivity and output for the economy as a whole. This can be especially true for businesses ‘running a tight ship’ when there are multiple public holidays that fall within a single trading quarter or even month.
If you’re a business owner or employee finding challenges with your public holiday operations or working hours, we get it. Although for the most part they’re an important part of the Australian identity, they can create difficult situations. So, of you’d like to discuss your strategy for approaching public holidays and ensure you’re making the most of what they can offer, get in touch with the Attune team today.
Call us on 1300 866 113 or send us an email to start the conversation. One piece of tailored advice could change your outcome for the better.
Are you maximising your superannuation contributions? With the advent of the unused concessional contributions cap carry forward measure, Australians now possess a golden opportunity to fortify their retirement nest eggs.
So without further ado, let’s dive into to what it all means for you…
The concessional contributions cap signifies the maximum before-tax contributions allowable to your super each year without attracting additional taxes. As of 1 July 2021, this cap sits at $27,500, a step up from the previous financial years' $25,000. This figure escalates in alignment with the Average Weekly Ordinary Time Earnings (AWOTE), and is current for the 2022-23 tax year.
From 1 July 2018, a significant shift was initiated to address the quandaries faced by individuals with fluctuating incomes and to maximise the utility of unused caps for those with lower super balances. This alteration permits individuals with a Total Superannuation Balance (TSB) below $500,000 as of 30th June of the preceding financial year to carry forward any untapped concessional contributions cap from previous years.
Meeting the eligibility criteria empowers you to transport unused concessional cap amounts from up to five preceding financial years, commencing from 2018–19. These surplus amounts can be deployed to augment your contribution caps in forthcoming years, offering a valuable avenue to grow your retirement savings.
Unused cap amounts are automatically deployed upon surpassing the cap in any given year. Nonetheless, it's imperative to bear in mind that these residual cap amounts expire after five years. For instance, any surplus cap amount from 2018–19 would lapse by the conclusion of 2023–24.
Consider James, who has been falling short of his concessional contributions cap over several years, resulting in accrued untapped caps. In the fiscal year 2021-22, James finds himself in a position to make additional contributions. Here's how it unfolds for him:
• In 2020–21, James's TSB surpassed $500,000, rendering him unable to carry forward untapped cap amounts.
• However, in 2021–22, James's TSB dipped below $500,000, rendering him eligible to leverage the untapped cap amounts from preceding years.
By harnessing the carry forward measure, James can inject up to $94,500 into his super in the fiscal year 2021–22, substantially maximising his super contributions and fortifying his retirement.
While capitalising on the benefits of the unused concessional cap carry forward measure is undeniably advantageous, it's imperative to proceed with caution to sidestep potential pitfalls, particularly concerning any excess contributions.
Should you exceed your concessional contributions cap, the excess concessional contributions (ECC) become part of your assessable income. These excess contributions are then subject to taxation at your marginal tax rate, albeit with a 15% tax offset to account for the contributions tax already paid by your super fund. The implications of surpassing your cap extend beyond mere taxation and could impact your PAYG instalments, Medicare levy, Centrelink benefits, and child support obligations.
As we approach a real tax-milestone, we’re dedicated to equipping you with the knowledge and guidance needed to optimise your super contributions. Our approach is always about you, not only helping you maximise your tax position, but also assisting with navigating potential risks with absolute accuracy.
If you're keen on leveraging the unused concessional cap carry forward measure to secure your financial future, or, are looking for strategic advice on how to grow your superannuation for best results and ensure your compliance, reach out to the Attune team today.
You can call us anytime on 1300 866 113 or send us an email to start the conversation – let's collaborate to safeguard your retirement aspirations.
