Welcome to our June newsletter and, as the winter sets in and the end of the financial year approaches, it’s a good chance to spend some time tidying up and reviewing your finances.
Concerns that the Reserve Bank may lift interest rates this month, along with the drama over the US debt ceiling and the worry that the US Treasury may run out of cash, have affected local markets and the Australian dollar.
The dollar is at its lowest level in six months, at just under US65 cents, while the ASX200 ended the month nearly 3% down thanks also to weaker commodity prices. Energy and mining stocks led the falls. Brent Crude was down 7.5% for the month while iron ore prices hit a six-month low.
Inflation rose 6.8% in the 12 months to April, up from 6.3% in March and the number of housing approvals nosedived in April, down 8.1% after a 1.0% fall in March.
The rising prices have continued to dent consumer confidence. The ANZ-Roy Morgan Consumer Confidence survey has now spent 13 straight weeks at its lowest mark since the 1990-1991 recession. The survey reveals that only 7% of Australians expect good times ahead for the Australian economy in the next 12 months. With less money to go around, retail trade has plateaued over the past six months.
The latest unemployment figures show a slight increase to 3.7% in April and a slight decrease in the participation rate.
Setting yourself up for success in the new financial year
The start of a new financial year is the perfect time to get your financial affairs in order. Whether it’s tidying up your paperwork, assessing your portfolio or dealing with outstanding issues, there are plenty of practical actions you can take.
Here are some strategies for starting the new financial year on the right foot.
Tidy up your paperwork
Dealing with the paperwork is the task most of us love to hate. But taking a day to trawl through the ‘To Do’ pile and the growing mountain of filing could be a good investment in yourself. What’s more, you might identify some savings.
Set your budget
A lot can happen in a year, so it makes sense to review your budget to ensure it still works towards your goals in the new year. This will help you track your changing expenses and ensure you’re not overspending. And if you haven’t got a working budget, now’s a great time to start. There are plenty of budgeting apps and tools available online that can help you get started.
Assess your portfolio
Another important step to take as you start the new financial year is to assess your investment portfolio.
Some important questions include:
- Why did you start investing and have your circumstances changed? For example, you may have started investing to receive a better return than your term deposits but now that term deposits rates have increased and share markets are challenged, should you revisit that goal?
- What is the investment performance? Is it in line with your expectation and the benchmark?
- Should you consider diversifying into different asset classes?
- Is dividend reinvestment the best option for you or should you take the dividend income into cash?
- Is your risk appetite still the same, or should you be aggressive or more conservative?
Check your insurance
Now is a good time to examine your insurances closely and to consider whether they match your needs and risks. It is also a good reminder to take note of policy renewal dates so that you can shop around to make sure you get the best price.
Understand Federal Budget changes
Keeping up to date with the commentary about Federal Budget initiatives may be useful.
The measures aimed at easing the cost of living will provide a boost to some. They include energy bill relief for concession card holders and energy saving incentives. Meanwhile those with chronic health conditions will benefit from a number of changes announced in the budget.
The Budget also included support for families with cheaper childcare and a more flexible Paid Parental Leave scheme, and incentives for some types of new home building projects.
Review your superannuation
A review – at least annually – of your super account is vital to make sure that:
- Your investments and risk strategy are still right for you
- The fees are reasonable
- Any insurance policies held in your super account are appropriate
- Your employer contributions are being made
- Your death benefit nomination is relevant
- You don’t have multiple accounts incurring unnecessary fees
You might also consider a salary sacrifice strategy, where you ask your employer to make extra super contributions from your pre-tax salary. These additional contributions are taxed at 15 per cent within the super fund, plus an additional 15% if Division 293 tax applies to you (income over $250,000).
Meanwhile, it is not too late to top up your super balance for this financial year using either concessional contributions (from your pre-tax income) or non-concessional contributions (after-tax income). Don’t forget the caps on payments, which are $27,500 for concessional contributions and $110,000 for non-concessional.
It is a good idea to get some expert advice regarding your super contributions, we can assist with the best ways to manage your contributions.
So, set yourself up for a fresh start to the year with some simple strategies to help you achieve your financial goals.
Tax Alert June 2023
Budget incentives and crackdowns on unpaid tax debts and rental deductions
Although this year’s Federal Budget was short on big changes when it came to tax, there still have still been some important developments in this area. Here are some of the latest developments in the world of tax.
Small business tax incentives and write-offs
The budget ushered in some valuable new tax incentives for small businesses, including halving the increase in quarterly tax instalments from 12 per cent to 6 per cent for both GST and income tax during 2023-24.
The government also introduced a bonus 20 per cent deduction for businesses with turnovers under $50 million when they spend on energy saving upgrades. Up to $100,000 of total expenditure will be eligible, with the maximum bonus tax deduction being $20,000 per business.
Although smaller than the previous year, the instant asset write-off continues in 2023-24 with up to $20,000 available for immediate deduction on eligible assets.
The planned third tranche of personal income tax cuts due to start next financial year also remained in place, while >the low and middle income tax offset was not extended.
Super changes for employers
Another significant tax change announced in the budget will affect employers. From 1 July 2026 employers will be required to pay their Super Guarantee (SG) obligations at the same time they pay employee salary and wages.
The ATO has received additional resources to help it detect unpaid super payments earlier.
Employers also need to remember the SG amount for employee super rises to 11 per cent from 1 July 2023.
Tax debt warnings sent out
The ATO is continuing to write to directors of companies with tax debts warning if the company hasn’t paid the amount owing or contacted it to make other arrangements, a director penalty notice(DPN) may be issued.
DPNs are issued to current directors and anyone who was a director at the time the company failed to pay. They make directors personally liable for failure to meet pay-as-you-go withholding (PAYGW), GST and Super Guarantee Charge obligations.
Directors receiving these letters need to arrange payment of the overdue amount or enter into a payment plan.
Data-matching adds investment properties
Residential investment property loans (RIPL) are the latest target of the ATO’s increasingly wide-ranging data-matching program.
Data will be obtained from financial institutions including all the major banks, regional banks and building societies.
The information is being collected following the ATO’s identification of a tax gap of $1 billion for individuals in the 2020-21 financial year due to incorrect reporting of rental property expenses.
Self-education expenses under spotlight
The ATO is currently developinga new draft taxation ruling covering the deductibility of self-education expenses incurred by an employee or an individual carrying on a business.
The draft ruling will reflect the current rules in this area following repeal of several sections of the Income Tax Assessment Act and some new legal decisions. The new ruling is expected to be completed in late June.
Taxpayers claiming self-education expenses recently had the existing requirement to exclude the first $250 of deductions removed.
GST fraud enforcement continues
Search warrants were executed in three states against individuals suspected of promoting the fraud. This follows previous compliance action against more than 53,000 people, with two individuals sentenced to jail time for their GST fraud activities.
Cyber safety checklist released
The ATO is again emphasising the importance of business cyber safety by releasing a new checklist for small businesses.
The tips include simple ideas for keeping business and client data safe from cybercriminals, such as turning on automatic updates and using multi-factor authentication when possible.
Resources for training staff on preventing, recognising, and reporting cyber incidents are available from the government’s Australian Cyber Security Centre.
The importance of getting enough ZZZZ’s
Who says we can’t achieve more if we sleep less? Science, that’s who!
To be fair, there are many successful people who credit their success to managing or indeed thriving, on a few hours’ sleep so they can get more done. Martha Stewart, the American media personality, sleeps around four hours a night, stating: “Sleep is not the most important thing.” While Thomas Edison, the inventor of the electric light, kept the lights on – rejecting the idea of sleeping at night for napping for 15 minutes every four hours.
The science of sleep
The idea that successful people don’t sleep is an odd one, when you consider the science.
Scientists have long theorised about why we need to sleep. The most respected theories see sleep consisting of restorative processes that occur when normal brain function is partially suspended, and brain activity suggests information is being “replayed” during certain stages of sleep to consolidate memory.
A good night’s sleep
Given that sleep is as critical to our survival as food and oxygen – how much sleep is enough?
While there may be some individuals who function ok on just a few hours’ sleep, it’s thought that most adults need between 6- and 9-hour’s sleep for optimal health and wellbeing. On average, we manage less than six.i
It looks like those successful people who “humble boast” about how little sleep they get, might be in fact jeopardising their success by missing the benefits of a good night’s sleep.ii
The impact of sleep deprivation
Sleep deprivation has a powerful impact on your thought processes so it’s quite ironic that there are those who credit their success in part to sleeping less than the recommended amount.
Sleep duration and quality impacts more than just the obvious things like your mood and clarity of thought. Inadequate sleep can compromise decision-making processes, impact creative thought and the retention of information.
Sleep is also critically important to our physical wellbeing. Sleep deficiency is linked to many chronic health problems, including heart disease, kidney disease, high blood pressure, diabetes, stroke, and obesity.
How do I get a better night sleep?
If you are one of those ‘too busy to sleep’ people, it might be time to prioritise restful sleep. And if you are tossing and turning at night there is a lot you can do to get a better night’s sleep.
To sleep well, the most important thing you can do is set the scene to easily drift off to sleep and then stay asleep. That means making sure your sleeping environment is comfortable, quiet, and dark. Exposure to light, particularly light from screens like your phone or computer at night-time can mess up the body’s production of a hormone called melatonin that helps us to fall asleep, and sleeping in a room that is not very dark is not conducive to quality sleep – so close those blinds and turn off those devices.
Setting yourself up for a good night sleep can also involve a combination of deep breathing, relaxation, and creative visualisation techniques. This infamous sleep ‘hack’ is used by the US military to help soldiers in the field get to sleep involving these practices is considered amazingly effective, if practiced regularly.iii
Going to bed at the same time every night can also help establish good sleep habits and not eating too late at night, and avoiding stimulants like alcohol and caffeine late in the day will also improve your sleep quality.
Getting a good night’s sleep is one way to help you on your path to success. By making some easy tweaks to your routine you’ll be sleeping like a baby and feeling more alert and productive as a result. Goodnight and sleep well!i https://pilot.com.au/co-pilot/6-hours-sleep