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]]>Earning and saving money from your salary is all very well. But setting up an alternative income stream from an investment portfolio can help you make the most of your personal wealth potential. So, what is it that holds people back from taking their first steps into investing? According to recent surveys, 70% of millennials would rather keep their savings in cash1 instead of investing it and getting the benefit of compound interest. And one of the main reasons for their reluctance is their fear of losing what little money they have.
Fear is certainly one of the biggest reasons for avoiding the risks. Large or small, that come with investing money. And no-one has a magic wand to eliminate these risks altogether. But with advice from a professional who understands your financial circumstances and goals, you can get off to a successful start in investing that builds your confidence as well as your wealth.
It’s all too easy to just wait for someone else to sort out your financial future. You might keep saying that you’ll start building your savings and wealth when that golden goose lays its egg for you. And that egg you’re counting on – whether it’s a higher salary, bonus or redundancy payout for your employer or a gift or inheritance from your family – may never arrive.
If this is the fairy story you’ve been telling yourself, it’s time to rewrite it with yourself as the hero. By sticking to a budget, coming up with your most important goals and creating a financial plan to help you reach them, you’ll soon become your very own golden goose.
We’re all busy people and we all have a comfort zone. And that’s why inertia can so often stand in the way of spending less and saving more. In fact, inertia is considered, such a big problem for personal financial security in the UK that a new Institute of Inertia has been established at the University of Sheffield to study behaviour that’s estimated to cost the nation £7.6 billion2.
Inertia can mean spending more than you need to on your energy or grocery bills. It could also be stopping you from tracking down lost super and/or bringing together all your super savings in a single fund to save on fees. Or it could mean sticking with the same mortgage when you could be saving thousands in interest by switching. Whatever it is that you’re not getting around to doing to save money, having a financial coach – personal or professional – can keep you accountable in taking small steps towards big savings.
The “earn more, spend more” phenomenon has been dubbed “lifestyle inflation” and it’s something that can really get in the way of preparing for a better financial future. The dangers of behaviour that comes from lifestyle inflation are twofold. The first is what’s known as the Diderot effect3. This happens when you buy something new, stylish and beautiful and it makes all your other stuff seem shabby and old. So, you start to replace everything else as well.
The second issue is your new level of wealth can’t last forever. Even if you keep earning more a time is going to come when you’ll stop. We call it retirement and if you’re not saving and planning for it, the fall in your spending and standard of living is going to be very steep indeed. So, if you’re finding it hard to save even when you’re earning more, try looking in to the future and imagining how much you’ll be enjoying life when you must budget carefully to pay for food and other essentials, let alone buy anything new.
Leaving your finances to chance won’t bring you the peace of mind that comes with prosperity. Having the money to back future choices – for your career, family and lifestyle – isn’t going to happen by accident. People who make it look easy have probably put in quite a lot of time and effort to ensure they’re in a good place financially.
If you’re naturally a happy go lucky kind of person you’re probably well-liked for your carefree generosity. Especially when you’re the first among your friends to open your wallet and pay the lion’s share of the bar or restaurant bill. Sticking to a budget doesn’t have to mean being stingy. It’s more a case of picking and choosing your generous moments so you can still cover your day-to-day expenses and put some of your money towards providing for your future.
Whatever obstacle you’re trying to overcome on the path to financial success, a financial planning professional can offer valuable advice on making changes to get you in control of your finances.
Contact us today for a free initial meeting with us, and we will give you a plan to make your business worth a lot more when you decide to eventually sell it.
Source: Financial Planning Association Money & Life
General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
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]]>The post 2017-2018 Federal Budget Update appeared first on Wealth Definition.
]]>In prior years, there were many changes to superannuation and small business taxation. This year’s Budget only had a few changes in these areas.
Here’s a brief summary of what the Wealth Definition team believes are the key changes that may affect many of our clients.
The Government will extend by 12 months (to 30 June 2018) the ability for businesses with aggregated annual turnover less than $10 million to immediately deduct purchases of eligible assets costing less than $20,000, first used or installed ready for use by 30 June 2018. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool (the pool) and depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the closing balance of the pool at 30 June 2018 is less than $20,000 (including existing pools). From 1 July 2018, the immediate deductibility threshold will reduce back to $1,000.
From July 2019, the Medicare levy will increase by half a percentage point from 2.0 to 2.5 % of taxable income. Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.
From 1 July 2018, a new minimum threshold of $42,000 will be established with a 1% repayment rate and a maximum threshold of $119,882 with a 10% repayment rate.
From 1 July 2017, the Government will disallow deductions for travel expenses related to inspecting maintaining or collecting rent for residential rental property. Also, plant and equipment depreciation deductions will be limited to outlays actually incurred by the investors in residential real estate properties. These changes will apply on the prospective basis, with existing investments grandfathered. Plant and equipment forming part of residential investment properties as of 9 May 2017 (including contracts already entered into at 7:30PM (AEST) on 9 May 2017) will continue to give rise to deductions for depreciation until either investor no longer owns the asset, or the asset reaches the end of its effective life. Subsequent owners will no longer be able to claim deductions for plant and equipment purchased by its previous owner.
From 7:30PM (AEST) on 9 May 2017, Australia’s foreign resident capital gains tax (CGT) regime will be extended to deny foreign and temporary tax residents access to the CGT main residence exemption. However, existing properties held prior to this date will be grandfathered until 30 June 2019.
From 1 July 2017, there will be an increase in the CGT withholding rate foreign tax residents from 10% to 12.5%, and a reduction of the CGT withholding threshold from $2 million to $750,000.
From 1 July 2018, the courier and cleaning industries will join the building and construction industry in needing to complete taxable payments reporting each year. More red tape!
The ATO now have an additional $32 million to target the cash economy. Expect more ATO audits with the data matching capabilities. Cafés, restaurants and other businesses that accept cash should ensure their point of sale systems have proper audit trails that match their cash deposits.
In an approach designed to crack down on some property developers failing to make GST payments to the ATO, property developers will no longer manage the GST on sales of newly constructed residential properties or new subdivisions. Instead, the Government will require purchasers to remit the GST directly to the ATO as part of the settlement process.
From 1 July 2018, a person aged 65 or over will be able to make a non-concessional contribution of up to $300,000 from the proceeds of selling their home. These contributions will be in addition to those currently allowed under the existing rules and caps and will be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions.
* This measure will apply to sales of a principal residence owned for the past 10 or more years and both members of a couple will be able to take advantage for the qualifying home. *
To encourage home ownership, voluntary contributions to superannuation made by first home buyers from 1 July 2017 can be withdrawn for a first home deposit, along with associated deemed earnings. Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30% offset. Under the measure, up to $15,000 per year and $30,000 in total can be contributed (within existing contribution caps). Contributions can be made from 1 July 2017. Withdrawals will be allowed from 1 July 2018 onwards. Both members of a couple can take advantage of this measure to buy their first home together.
There has been lots of news recently about the removal of the 457 visa program. Businesses that employ foreign workers on certain skilled visas will pay a levy that will be channelled into the Skilling Australians Fund. From 1 March 2018, Businesses with turnover of less than $10 million per year will make an upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa and make a one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nomination Scheme.
This is just a general summary of how the Budget may affect you. If you haven’t met with us yet, now is the time to contact us to arrange an End of Financial Year meeting, so we can help you limit your tax payments, discuss your goals and plans for the next year, and grow your wealth. Remember, we both need time to implement any appropriate tax savings strategies for you well before 30 June 2017.
General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]
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]]>The post Freelancing: Need to knows! appeared first on Wealth Definition.
]]>Freelancing: an easy way to make good money when particularly skilled in a specific field or industry. It is also a great way to be your own boss and balance a work lifestyle you desire. With continuing advancements in technology and younger generations craving autonomy, freelancing ticks all the boxes! So, let’s look at common questions asked by Freelancers!
Freelancing is the contracting of an individual to a business engaged to perform a project for an agreed upon fee. In layman’s terms; you have an ABN and people pay you for jobs they need done. Because the individual is not an employee of the contracted organisation, there can be tax implications.
Firstly, income tax is not withheld from payments to most contractors such as in the case of an employee. As a result, if a freelancer earns over the tax free threshold ($18,200) they will be liable to pay tax. The amount of income tax a freelancer is liable for depends on how much money made in the financial year. This is not only in their freelancing business but from all their individual income sources. If you are unsure of your taxable position consult a tax agent to help assess your situation. Furthermore, it is highly recommended that any freelancer earning more than $18,200 save a portion of their income to meet their tax liability.
Note: if you are a freelancer and you do not earn over the tax free threshold ($18,200) in a financial year, you are not liable to pay income tax. The exception to this rule however is if you are liable to pay the private health insurance rebate surcharge. However, this is only in cases where an individual’s spouse earns more than the joint spousal income tax tier for private health insurance rebate claimed. For more information on this exception click here.
For freelancers you are obligated to register for GST if you are running a business earning over $75,000 in a financial year. Note: this is $75,000 in gross revenue, not the money in your pocket after expenses. An individual can also voluntarily elect to register for GST. If anyone is registered for GST all invoices issued through a freelancing business must include GST. It also means that an individual can claim the GST paid on work related expenses incurred. For example, if the freelancer is working as an artist, what can they claim? They can claim the GST paid on paint, pencils, canvas’, or any other materials used to create the art for sale. Speak to a tax agent to ensure you are up to date with all relevant GST lodgements required.
The deductions claimable depends on what work you perform and what is considered realistic for your chosen industry. Remember, the ATO now uses benchmarking. Therefore, any deductions considered to be outside the industry standard will be flagged by the ATO. Here is a list of common freelancing deductions:
Is more than 50% of your income the direct result of your personal skills or expertise? If so, then the ATO will determine your income to be personal services income (PSI). If this is the case, there are additional expenses a freelancer can claim:
For more information contact us here at Northern Beaches Accounts Consultancy.
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]]>The post Small Business & Mental Health appeared first on Wealth Definition.
]]>Approximately 1 in 5 Australians experience symptoms of a mental illness each year (according to the ABS). These cases of mental illness vary from depression and substance abuse, to psychotic and eating disorders. Maybe you do not fit into any of these mental issues. However, it is likely that you know someone who does! And these people may be people you employ and depend upon in the running of your small business.
Being able to recognize the warning signs is the first step. Mental health could be impacting your employees, contractors, partners or clients. Or it may be impacting you yourself!
Here is a list of warning sign you need to be aware of:
These can have a huge impact on efficiency, product and service quality, and customer satisfaction. If they are ignored and not addressed they can potentially snowball into serious issues! This issues can extend beyond just the individual. As a result, it can adversely effect obligations the business holds to the government.
Firstly, it is important as a business owner to recognize the warning signs. Do you think that the issues involved may impact tax lodgements or superannuation obligation? Then it is recommended to talk to the ATO as soon as possible. The ATO can be very understanding when it comes to these types of issues. They are willing to help you before the situation escalates!
I once heard this from a psychotherapist: “I often ask my clients: if you were suffering from an illness would you see a doctor? If you broke a part of your body would you seek professional help? Then why not seek help when dealing with a mental illness or issue?” So, if you believe these types of issues are beginning to effect you or others, we recommend seeking professional help.
There are a number of different resources and contacts that can help. If you need more information or you need immediate help contact Lifeline, Beyond Blue or Psych Central.
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]]>The post Four New Efficiencies You Can Implement Right Now! appeared first on Wealth Definition.
]]>As small business accountants we see cases of the following: when a manager is looking through the accounts a manager will be one of two different types of people:
I remember my father once telling me about a boss he had in the 80s. This man would walk around the office at the end of the day and pick up paper clips. His rationale – “If I pick them up that stops the cleaners throwing them out, and that saves me buying more paper clips”. Seems like it would help the accounts, right? Let me remind you, one paper clip in the 80s would have cost approx $0.00005. On the other hand, you have Jim (changed his name). He would pump the air-conditioner of his office all day, with all the windows and doors open. He did not care, he believed it did not really matter and it would have a very minor effect on his accounts. Now this screams to me of clear energy wastage! So….. what?
Well I am not advocating you go picking up paper clips or start air-conditioning the street. However, as one of many small business accountants there are a few little things I believe you can focus on to help minimise your business expenses. That is, without going too over the top! ‘In The Black’ outline four strategies to manage your resources more efficiently and they are easy to implement. To read on and help increase your bottom line click here
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]]>The post Tax Scams & How To Spot Them! appeared first on Wealth Definition.
]]>With the continuing advancement of technology, it is difficult to know what is legitimate and what is a scam. This has become an increasing issue for the ATO and many taxpayers. As a taxpayer, you need to be made aware of illegitimate persons attempting to defraud you and your business. Remember, tax scams use very deceptive means to access you money and information. There are many reports from many small business accountants that have encountered countless attempts at this type of tax deception!
I have spoken to many people that have had persons claiming to be the ATO calling and asking for direct payment of debts. Not only that, there have been cases of persons giving private information to illegitimate persons out of fear of prosecution. Maybe you have experienced this too! You need to know the tricks and steps these tax scams use and how to spot the truth from the lies. Watch this video provided in this link by the ATO to help you avoid falling into these traps!
In the case that you ever receive a suspicious contact from an unknown source regarding your tax, debts or any other personal information – STOP! Either speak to small business accountants or you can call the ATO directly and ask if this contact is legitimate. It is better to be too cautious than allow these scams to catch you.
Would you like more information in relation to this growing trend? Then talk to us as your trusted small business accountants!
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