Footy is back for 2023!!

A reminder that the 2023 AFL season kicks off in 1 week on Thursday 16th March 2023 which means there is still time to join our footy tipping competition! Just choose one of the following options:

Option 1 – If you were part of the APM tipping competition last season, all you need to do is log back into your account using the same details as last year and your account will automatically be re-activated. You can login using the following link: https://www.footytips.com.au/home

Option 2 – If you were not part of the APM tipping competition last season but already have an account with footytips.com.au, then you will need to login to your account as normal (using the same details as last year), click on the ‘search comps’ button and search for ‘APM 2023’. Once you have located our competition (logo of a red football with APM printed on it) select that competition and click ‘join comp’. You can login using the following link: https://www.footytips.com.au/home

Option 3 – If you were not part of the APM tipping competition last season and do not already have an account with footytips.com.au, then you will be required to create an account using the following link: https://www.footytips.com.au/home You will need to select ‘join now’ and enter your details to create your account. Once your account has been created, click on the ‘search comps’ button and search for ‘APM 2023’. You should be able to locate our competition
(logo of a red football with APM printed on it) select that competition and click ‘join comp’.

If you run into any issues joining our competition, please email Andrew at our office on [email protected]

In an attempt to repair the Federal Budget and lower the overall national debt, the government is seeking to introduce changes to the way superannuation in accumulation phase is taxed over the threshold of $3 million.

Currently, earnings from super in the accumulation phase are taxed at a concessional rate of 15% regardless of the super account balance. It is now proposed that from the 2025–2026 income year, the concessional tax rate applied to future earnings for those with super account balances above $3 million will be 30%. This change would not apply retrospectively to earnings in previous years, and would not impose a limit on the size of super account balances in the accumulation phase.

This measure would affect an estimated 0.5% of people who have money in Australian super accounts, or around 80,000 individuals, so the government considers it a “modest” adjustment which is in line with its proposed objective of superannuation – to deliver income for a dignified retirement in an equitable and sustainable way.

To illustrate just how little the change would affect ordinary Australians: in the latest ATO taxation statistics (relating to the 2019–2020 income year), the average super account balance for Australian individuals is around $145,388, with a median balance of only $49,374. In addition, according to ASFA (Association of Superannuation Funds of Australia) estimates, for a comfortable retirement, a single homeowner individual aged 67 at retirement will need $65,445 per year. If that individual lives to the ripe old age of 100, their required balance would only equate to an amount of $1.5 million in super – well below the $3 million threshold proposed.

With younger Australians increasingly facing cost of living pressures, astronomical house prices, slow wages growth and uncertain international headwinds, most have no hope of contributing up to the maximum concessional cap every year and attaining a super balance even close to $3 million, short of winning the
lotto or receiving a lucky inheritance. This effect is amplified for women, who are usually more likely to take time away from work, or move to part-time opportunities, in order to raise children and take on caring responsibilities.

According to the latest Expenditure and Insights Statement released by the Treasury, government revenue foregone from super tax concessions amount to $50 billion per year, and the cost of these concessions is projected to exceed the cost of the Age Pension by 2050. With this single proposed change, the government estimates that around $2 billion in revenue will be generated in its first full year of implementation, which can be used to reduce government debt and ease spending pressures in health, aged care and the National Disability Insurance Scheme (NDIS). According to Treasurer Jim Chalmers, the government will seek to introduce enabling legislation to implement this change as soon as practicable. Consultation will still be undertaken with the super industry and other relevant stakeholders to settle the implementation of the measure.

If you think this may affect you or you have further queries, please contact our team.

From 1 January 2023, those 55 and over can make a ‘downsizer’ contribution to superannuation.

Downsizer contributions are an excellent way to get money into superannuation quickly. And now that the age limit has reduced to 55 from 60, more people have an opportunity to use this strategy if it suits their needs.

What’s a ‘downsizer’ contribution?

If you are aged 55 years or older, you can contribute $300,000 from the proceeds of the sale of your home to your superannuation fund.

Downsizer contributions are excluded from the existing age test, work test, and the transfer balance threshold (but are limited by your transfer balance cap).

For couples, both members of a couple can take advantage of the concession for the same home. That is, if you and your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).

Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Because a downsizer contribution can only be made once in a lifetime, it is important to ensure that this is the right option for you.

Let’s look at the eligibility criteria:

· You are 55 years or older (from 1 January 2023) at the time of making the contribution.

· The home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.

· The home is in Australia and is not a caravan, houseboat, or other mobile home.

· The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). Check with us if you are uncertain.

· You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the downsizer contribution.

· The downsizer contribution is made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.

· You have not previously made a downsizer contribution to super from the sale of another home or from the part sale of your home.

Do I have to buy another smaller home?

The name ‘downsizer’ is a bit of a misnomer. To access this measure you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home – you could buy a larger and more expensive one.

I got a text the other day “Hi Mum, I have broken my phone and I am using this number.” The “Hi Mum” scam has exploded with more than 1,150 Australians falling victim to the ploy in the first seven months of 2022, with total reported losses of $2.6 million. Once the scammer establishes contact, they start requesting money for an urgent bill or a replacement phone etc. For those with children or dependant family members, it is not that hard to believe. According to the Australian Consumer and Competition Commission (ACCC), two-thirds of family impersonation scams were reported by women over 55 years of age.

Another common scam is the lost or unable to deliver package texts and voicemail. With Christmas just around the corner, we can expect to see another escalation of this scam where tracking links purportedly from Australia Post, Toll, or Amazon etc., are used to instal malware. Once accessed, the malware will access your contacts and spread the malware and potentially access your personal information and bank details.

In July, the Australian Taxation Office (ATO) reported a new wave of ‘Tax refund SMSF scams’. The texts purported to be from the ATO stating that the individual had a tax refund and to click on the link and complete the form. Another scam purporting to be from the ATO advised that the recipient was suspected of being involved in cryptocurrency tax evasion and requested that they connect their wallet. At which point the wallet was accessed and any assets stolen.

The ACCC’s Targeting Scams report states that in 2021, nearly $1.8bn in losses were reported but the real figure is likely to be well over $2bn.

The largest combined losses in 2021 were:

· $701 million lost to investment scams with 2021 figures significantly increased by cryptocurrency scams – more scammers are seeking payment with cryptocurrency and losses to this payment method increased 216% to $84 million.

· $227 million lost to payment redirection scams.

· $142 million lost to romance scams.

Protecting yourself from scams

· Help educate older relatives. The over 55s are the most likely to fall victim to a scam.

· Always use the primary website or app of your suppliers not a link from a text or email.

· Don’t click on links from emails or text messages unless you are (absolutely) certain of the source. For email, if the sending email domain is not clear or hidden, hover over the name of the sending account to check if the email is from the company domain.

· For Government services, use your MyGov account. Any messages to you from the ATO or other Government services need will be published to your MyGov account. Never click on links purporting to be from a bank, ATO or Government department.

Protecting your business from scams

Payment redirection scams, where the email of the business is compromised, caused the highest reported level of loss for business in 2021 at a combined $227 million.

Payment redirection scams involve scammers impersonating a business or its employees via email and requesting an upcoming payment be redirected to a fraudulent account. In some cases, scammers hack into a legitimate email account and pose as the business, intercepting legitimate invoices and amending the bank details before releasing emails to the unsuspecting business. Other times, scammers impersonate people using a registered email address that is very similar to one from a legitimate business.

· Educate your team about threats and what to look out for, the importance of passwords and password security, and how to manage customer information. Phishing attacks, if successful, provide direct access into your systems.

· Ensure staff only have access to the business systems and information they need. Assess what is required and close out access to anything not required. Also assess how customer personal information is accessed and communicated. Personal information should not be emailed. Email is not secure and it is too easy for staff to inadvertently send data to the wrong person.

· No shared login details or passwords.

· Complete a risk assessment of your systems and add cybersecurity to your risk management framework.

· Develop and implement cyber security policies and protocols. Have policies and procedures in place for who is responsible for cybersecurity, the expectations of staff, and what to do in the event of a breach. Your policies should prevent shadow IT systems, where employees download unauthorised software.

· Understand your organisation’s legal obligations. For example, beyond the Privacy Act some businesses considered critical infrastructure such as some freight and food supply operations are subject to the Security of Critical Infrastructure Act 2018. This might involve small businesses in the supply chain.

· Use multifactor authentication on your systems and third-party systems.

· Update software and devices regularly for patches

· Back-up data and have backup protocols in place. If hackers use ransomware to lock your systems, you can revert to your backup.

· If customer data is being shared with related or third parties domiciled overseas, ensure your customer is aware of where their data is domiciled and your business has taken all reasonable steps to enforce the Australian Privacy Principles. Your business is responsible for how the overseas recipient utilises your customer’s data.

· Only collect the customer data you need to provide the goods and services you offer.

· Ensure protocols are in place for accounts payable.

· Don’t forget the hardware – laptops, computers, phones.

Child Care Subsidy increase

From 2022-23

As previously announced, the maximum Child Care Subsidy (CCS) rate will increase from 85% to 90% for families earning less than $80,000. Subsidy rates will then taper down one percentage point for each additional $5,000 in income until it reaches zero per cent for families earning $530,000.

The current higher CCS rates for families with multiple children aged 5 or under in child care will be maintained, with higher CCS rates to cease 26 weeks after the older child’s last session of care, or when the child turns 6 years old.

In addition, from 2022-23, a base entitlement to 36 hours per fortnight of subsidised early childhood education and care will be implemented for families with First Nations children, regardless of activity hours or income level.

The CCS increase also comes with a renewed focus on industry compliance requiring large providers to publicly report CCS related revenue and profits. In addition, the way the Child Care Subsidy is managed will change, requiring the electronic payment of early childhood education and care gap fees to weed out fraudulent claims for care not received.

Paid parental leave reforms

From 1 July 2023
1 July 2024

As previously announced, from 1 July 2023 the Government will introduce reforms to make the Paid Parental Leave Scheme flexible for families so that either parent is able to claim the payment and both birth parents and non-birth parents are allowed to receive the payment if they meet the eligibility criteria. Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time.

Eligibility will also be expanded with the introduction of a $350,000 family income test, which families can be assessed under if they do not meet the individual income test.

From 1 July 2024, the Government will begin expanding the scheme from the current 18 weeks by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.

Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally. Sole parents will be able to access the full 26 weeks.

Encouraging pensioners back into the workforce

From 2022-23

Age and veterans pensioners will be able to work and earn more before their pension is reduced. The Government is providing a one-off $4,000 credit to their Work Bonus income bank.

The temporary income bank top-up will increase the amount pensioners can earn in 2022–23 from $7,800 to $11,800, before their pension is reduced, supporting pensioners who want to work or work more hours to do so without losing their pension.

The Work Bonus increases the amount an eligible pensioner can earn from work before it affects their pension rate. Under the current rules, the first $300 of fortnightly income from work is not assessed and is not counted under the pension income test. The Work Bonus operates in addition to the pension income test free area.

When the work bonus is not used in a fortnight it accumulates in an income bank where the standard maximum is $7,800. This allows pensioners who work on an ad hoc basis to not be disadvantaged compared to those with regular fortnightly income.

Aged care reform

As previously announced, $2.5bn will be provided over 4 years to improve the quality of aged care in residential aged care facilities by requiring all facilities to have a registered nurse onsite 24 hours per day, 7 days a week from 1 July 2023 and increasing care minutes to 215 minutes per resident per day from 1 October 2024.

The reforms also enable the Government to cap charges that approved providers of home care (home care providers) may charge care recipients and removes the ability of home care providers to charge exit amounts.

Additional funding for floods and natural disasters

An additional $51.5m has been provided to support communities impacted by natural disasters through the Australian Government Disaster Recovery Payments (AGDRP), Disaster Recovery Allowance (DRA) and other payments made under the Disaster Recovery Funding Arrangements.

Lifting the income limit on Seniors Health Card

As previously announced, the income test limits will be increased for access to the Commonwealth Seniors Health Card (CSHC). The CSHC provides subsidised pharmaceuticals and other medical benefits for self-funded retirees that have reached aged pension age.

The income test captures adjusted taxable income plus deeming on account-based pensions unless grandfathered under the pre-1 July 2015 rules. The CSHC is not asset tested.

Current ($ per annum) New ($ per annum)

Single $61,284 $90,000

Couples combined $98,054 $144,000

Legislation enabling the increase is before Parliament.

The Government will also freeze social security deeming rates at their current levels for a further two years until 30 June 2024.

Income support asset test extended on proceeds of sale of main residence

As previously announced, the Government is:

· Extending the assets test exemption for principal home sale proceeds from 12 months to 24 months for
income support recipients, and

· Changing the income test, to apply only the lower deeming rate (0.25%) to principal home sale proceeds
when calculating deemed income for 24 months after the sale of the principal home.

The exemptions apply until the income support recipient acquires another main residence or the 24-month period expires. The Bill enabling the extension is currently before Parliament.

Total and permanent incapacity payments to veterans

From 2022-23

The Special Rate of Disability Compensation Payment, Temporary Special Rate Payment, and the Special Rate Disability Pension for veterans will increase by $1,000 per year.

Community batteries for household solar

From 2022-23

The Government will provide $224.3m over 4 years from 2022-23 to deploy 400 community batteries across Australia.

A related solar initiative will see an additional $102m committed to establish a Community Solar Banks program for the deployment of community-scale solar and clean energy technologies. This initiative is aimed at regional communities, social housing, apartments, rental accommodation, and households that are traditionally unable to access rooftop solar.

Clients with self managed superannuation funds (SMSF) often ask what assets the SMSF can acquire.

‘Why’?

The golden rule for acquiring assets inside your SMSF is why? To be compliant, your fund must be maintained for the sole purpose of providing retirement benefits to members, or to their dependants if a member dies before retirement. The sole purpose test (section 62 of the Superannuation Industry (Supervision) Act 1993), is your starting point. If the collectible you are looking to acquire does not fulfil this purpose, then you have an immediate problem.

Let’s assume you are looking to acquire vintage cars. The question to ask is, is the acquisition a viable investment or simply a desire of the members to own vintage cars. Does the investment ‘stack up’ relative to other forms of investment to build/protect the retirement savings of members?

The sole purpose test extends to how the collectible is managed once acquired. Given the asset is for the sole purpose of the member’s retirement benefits, the members (or their associates) cannot use or enjoy the asset in any way. This means:

Storage of the collectible cannot be at the trustee’s residence or displayed at their office. The ATO says, “You can store (but not display) collectables and personal use assets in premises owned by a related party provided it is not their private residence. They can’t be displayed because this means they are being used by the related party. For example, if your SMSF invests in artwork it can’t be hung in the business premises of a related party where it is visible to clients and employees.”

Leasing or use of the collectible can only be undertaken with an unrelated party.

The collectible must have its own insurance policy owned by the SMSF (multiple items can be listed on the same policy i.e., wines of different brands). The insurance policy must be in place within 7 days of acquisition.

Like all other assets, if a collectible is sold to a related party, then it must be sold at market value. Collectibles also require a qualified independent valuation if sold to a related party.

This means you cannot stay in a holiday home owned by your SMSF, you cannot drive a vehicle owned by the SMSF, and you cannot enjoy artwork held by the SMSF. And, those bottles of Penfolds Grange owned by the SMSF that broke (wink, wink) are likely to trigger an audit as they should have been properly stored in a way that prevents breakage.

Your investment strategy

An SMSF investment strategy should articulate the plan trustees have for a fund and the investments they choose to hold. It should drill down into the reasons why certain assets will be acquired (or sold) and how these choices align to the retirement goals of the members. If your SMSF is considering purchasing collectibles, it is essential that your investment strategy is aligned to these types of investments and articulates why the asset fits within the strategy. This is particularly important if the collectible/s will dominate the types of assets held by the fund, its liquidity, and diversity.

A common question is, can my SMSF purchase, let’s say artwork, from a member or a related party of the fund? The answer is no. SMSFs are not allowed to purchase assets, other than listed shares and business real property, from related parties. But, the SMSF could transfer the artwork to a member as an in-specie lump sum payment if the member meets a condition of release, or sell the asset to the member but only if the transaction is at arms length, and an independent valuation confirms the market value of the asset.

The RBA lifted the cash rate to 1.85% in early August 2022. The increase comes a few weeks after Reserve Bank Governor Philip Lowe told the Australian Strategic Business Forum that “…we’re going through a process now of steadily increasing interest rates, and there’s more of that to come. We’ve got to move away from these very low levels of interest rates we had during the emergency.” He went on to say that we should expect interest rates of 2.5% – how quickly we get there really depends on inflation.
The RBA Governor has come under increasing pressure over comments made in October 2021 suggesting that interest rates would not rise until 2024. At the time however, Australia was coming out of the Delta outbreak, wage and pricing pressure was subdued, and inflation was low. That all changed and changed dramatically. Inflation is now forecast to reach 7.75% over 2022 before trending down. We’re not expected to reach the RBA’s target inflation rate range of 2% to 3% until the 2023-24 financial year.

In the UK, the situation is worse with the Bank of England predicting that inflation will reach around 13% over the next few months. The UK has been heavily impacted by the war in Ukraine with the price of gas doubling, compounding pressure from post pandemic supply chain issues and price increases.

With interest rates rising, what can we expect? Deputy RBA Governor Michele Bullock recently said that Australia’s household credit-to-income ratio is a relatively high 150%, increasing in an environment that enabled households to service higher levels of debt. But it is not all doom and gloom. “Strong growth in housing prices over 2021 and early 2022 has boosted asset values for many homeowners, with housing assets now comprising around half of household assets,” she said. The recent downturn in house prices has only marginally eroded the large increases over recent years. Plus, households have saved around $260m since the pandemic creating a buffer for rising interest rates. This however, is a macro view of the economy at large and individual households and businesses will face different pressures depending on their individual circumstances.

For businesses, the rate increase has a twofold effect. It is not just the rate rise and the higher cost of funds in their borrowings. That by itself is significant but at this stage, if anything, it is the lesser issue. The more significant impact comes from negative consumer sentiment and the flow through effect on sales and cash flow.

· In general, your debts should not exceed around 35-40% of your assets. There will be some exceptions to this with new business start-ups and first home buyers.

· Review the cost of cash in your business, reviewing rates, and the configuration and mix of loans to ensure you are not paying more than you need to.

· If possible, avoid having private debt as well as business and investment debts. You can’t get tax relief on your private debt.

· Keep an eye on debtors and don’t become your customer’s bank.