Newsletter - Christmas/End of Year Edition

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Cents & Sensibility | Tax News | Views | Clues 

 

23 December

Super in your 40s. It’s time to get focused. (By Ali Roshan)

 

As more Australians now work longer, there is a greater opportunity to boost super. However, we are also living to older ages, so the superannuation balance needs to last longer too.

 

Typically, the forties are a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget and retirement seems a long way off.

 

As you pass the halfway mark of working life, it’s time to give retirement planning a bit more attention. Small changes in your forties can translate to significant benefits in retirement.

 

For example, a 45-year-old today will reach ‘retirement age’ in 22 years. Taking inflation into account a couple will, by then, need around $120,385 per year if they want to enjoy a ‘comfortable’ retirement. Looking at this example, with only two short decades until retirement age, what could a 45yr consider to ensure they have sufficient funds in retirement?

 

At this age, a popular strategy for boosting retirement savings is ‘salary sacrifice’ in which you take a cut in take-home pay in exchange for personal tax concessions and additional pre-tax contributions to super. If you are self-employed, you can increase your tax-deductible contributions (within the concessional limit) to gain the same benefit.

 

Salary sacrificing provides a double benefit. Not only are you adding more money to your retirement balance, these contributions and their earnings are taxed at up to 15% within superannuation. If you earn between $120,001 and $180,000 per year that money would otherwise be taxed at 39% including Medicare Levy. Sacrifice $1,000 per month over the course of a year and you’ll be $2,880 better off just from the tax benefits alone.

 

It’s important to remember that if combined salary sacrifice and superannuation guarantee contributions exceed the annual cap ($27,500 for 2021/22) the amount above this limit will be added to your assessable income and taxed at your marginal tax rate with an offset.

 

The forties are an important decade for wealth creation as there are many things to consider. So, ask your licensed financial adviser to help you make sure the next 20 years are the best for you and your super.

 

Ali Roshan is an Authorised Representative (ASIC No. 000378611) of Lifespan Financial Planning

ABN 23 005 921 735 AFSL Number 229892

 

No Advice Warning / General Advice

 

The purpose of this article is to provide general information only and the contents of this website do not purport to provide personal financial advice. KNP Solutions strongly recommends that investors consult a financial adviser prior to making any investment decision.

 

The contents of this KNP Solutions article does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions.

The information is selective and may not be complete or accurate for your purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.

 

1. Future value of $62,828 – the income calculated to provide a couple with a “comfortable” level of income as calculated by The Association of Superannuation Funds of Australia (ASFA) March 2021) – in 22 years at 3% inflation.

Super is now following new employees

 

The ATO is reminding employers that, as of 1 November 2021, there is an extra step they may need to take to comply with the choice of super fund rules.

 

If a new employee does not choose a super fund, most employers will need to request the employee's 'stapled super fund' details from the ATO to avoid penalties.

 

A stapled super fund is an existing super account which is linked, or 'stapled', to an individual employee so that it follows them as they change jobs.

When a new employee starts, employers need to:

  • offer eligible employees a choice of super fund;
  • if the new employee does not choose a super fund, the employer will need to request stapled super fund details using Online services for business; and
  • pay super contributions into one of the following:

       - the super fund they choose;

       - the stapled super fund the ATO provides if they have not chosen a fund; or

       - the employer's default fund (or another fund that meets the choice of fund rules) if the employer cannot pay into the two above.

ABN 'intent to cancel' program

 

The ATO is reviewing Australian business numbers ('ABNs') to identify potentially inactive ABNs for cancellation, and it has introduced a new automated process to allow taxpayers (or their tax agents) to confirm if their ABN is still required via a secure voice response system.

 

An ABN may be selected if the taxpayer has not reported business activity in their tax return, or there are no signs of business activity in other lodgements or third-party information.

 

The ATO reminds taxpayers that any income earned under an ABN needs to be reported in their tax return, regardless of the amount.  By keeping their tax obligations up to date, the ATO can see they are actively undertaking a business (so, therefore, their ABN should not be cancelled).

Managing business cash flow

 

The ATO has issued a reminder to businesses that paying regular attention to their record-keeping and reporting tasks will help them better manage their cash flow and allow them to plan for the future.

 

The best way to make sure a business has enough cash available to meet its tax and other obligations is to do a cash flow budget or projection.  This information will help the business to:

  • see its likely cash position at any time;
  • identify any fluctuations that may lead to potential cash shortages;
  • plan for tax payments;
  • plan for any major expenses; and
  • provide lenders with information.

 

Accounting for income and expenses can help keep a business running smoothly — by giving it an overview of when it can expect money to come in and when it may go out, and highlighting where the business may need to direct its money.

 

The ATO provides resources about record keeping for business, and there is also information on business.gov.au regarding how to create a budget, and how to improve a business's financial position.

Data-matching program: Services Australia benefits and entitlements

 

The ATO has advised it will acquire Medicare Exemption Statement ('MES') data relating to approximately 100,000 individuals from Services Australia for the 2021 financial year through to the 2023 financial year inclusively, and compare it with claims made by taxpayers on their tax returns.

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

 

Happy Holidays!

 

Everyone at the knp team wishes you all a safe and enjoyable break across the holiday period. 2021 has proven again to be a year full of challenges and an untraditional approach to our work and personal lifestyles. However, once again we were able to quickly adapt to our working from home environments, maintaining our excellent solutions!

 

Our offices will be closed from Thursday 23rd December at 12:00pm and reopen on Monday 17th January 2022 at 8:30am.

Super is now following new employees

 

The ATO is reminding employers that, as of 1 November 2021, there is an extra step they may need to take to comply with the choice of super fund rules.

 

If a new employee does not choose a super fund, most employers will need to request the employee's 'stapled super fund' details from the ATO to avoid penalties.

 

A stapled super fund is an existing super account which is linked, or 'stapled', to an individual employee so that it follows them as they change jobs.

When a new employee starts, employers need to:

  • offer eligible employees a choice of super fund;
  • if the new employee does not choose a super fund, the employer will need to request stapled super fund details using Online services for business; and
  • pay super contributions into one of the following:

       - the super fund they choose;

       - the stapled super fund the ATO provides if they have not chosen a fund; or

       - the employer's default fund (or another fund that meets the choice of fund rules) if the

         employer cannot pay into the two above.

Super is now following new employees

 

The ATO is reminding employers that, as of 1 November 2021, there is an extra step they may need to take to comply with the choice of super fund rules.

 

If a new employee does not choose a super fund, most employers will need to request the employee's 'stapled super fund' details from the ATO to avoid penalties.

 

A stapled super fund is an existing super account which is linked, or 'stapled', to an individual employee so that it follows them as they change jobs.

When a new employee starts, employers need to:

  • offer eligible employees a choice of super fund;
  • if the new employee does not choose a super fund, the employer will need to request stapled super fund details using Online services for business; and
  • pay super contributions into one of the following:

       - the super fund they choose;

       - the stapled super fund the ATO provides if they have not chosen
         a fund; or

       - the employer's default fund (or another fund that meets the
         choice of fund rules) if the employer cannot pay into the two
         above.

Super is now following new employees

 

The ATO is reminding employers that, as of 1 November 2021, there is an extra step they may need to take to comply with the choice of super fund rules.

 

If a new employee does not choose a super fund, most employers will need to request the employee's 'stapled super fund' details from the ATO to avoid penalties.

 

A stapled super fund is an existing super account which is linked, or 'stapled', to an individual employee so that it follows them as they change jobs.

When a new employee starts, employers need to:

  • offer eligible employees a choice of super fund;
  • if the new employee does not choose a super fund, the employer will need to request stapled super fund details using Online services for business; and
  • pay super contributions into one of the following:

       - the super fund they choose;

       - the stapled super fund the ATO

         provides if they have not chosen a

         fund; or

       - the employer's default fund (or another

         fund that meets the choice of fund

         rules) if the employer cannot pay into

         the two above.