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What you need to know about BFAs

Posted on December 11, 2019 by admin

A Binding Financial Agreement (BFA) is the Australian equivalent of a prenup. It is used to agree in advance on how a couple’s property and other assets would be distributed should their marriage or de facto relationship break down. The Agreement can cover financial settlement, spousal maintenance and any other incidental issues. BFA’s can be entered into at any stage of a relationship, i.e. before, during or after a marriage or de facto relationship. Couples may consider entering into a BFA if one party has more property, assets or is expected to receive an inheritance at a later stage. Some benefits of entering a Binding Financial Agreement include: Establishing a level of reassurance if one or both partners has been through a separation or divorce before. Protecting some or all of the assets from each party. Being able to specify the ground rules when it comes to how the couple will acquire property, who will pay the bills, and where weekly wages or income will be saved. Preserve family or other businesses for future generations. Properly drafted and executed BFA’s are particularly beneficial for those who want to establish a level of reassurance that there would be a harmonious division […]

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Doing market research for your business

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Market research is key to developing relevant and effective business strategies as it helps you understand your industry, customers, competitors and market trends. Undertaking both primary and secondary market research can allow you to boost your business’ success if you utilise the information to improve your product/service and marketing strategies. There are a variety of sources you can use to begin your research. To research areas such as your customers, competitors, industry and location, you can conduct primary research through things like: Surveys (postal, online or face-to-face). Focus groups. Customer feedback. Meanwhile, useful secondary research can be conducted through: Academic journals and research. Social media and websites. Industry and trade publications. Identify the best research methods for your goals and whether you will conduct the research yourself or if you will want to use a professional company. It is also important to consider the time frame and appropriate budget for your research. When conducting research questions and strategies, make sure that you are open-minded and don’t let your preconceived opinions or preferences affect your tactics.

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Proposed measures to increase retirement savings 

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Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they meet the ‘work test.’ This means they must report themselves to be working a minimum of 40 hours over a 30 day period within the financial year to qualify. The government has proposed that from 1 July 2020, individuals aged 65 and 66 will be able to make voluntary concessional and non-concessional superannuation contributions without meeting the work test. This approach will enable participants nearing retirement to increase their superannuation savings regardless of their working arrangements. As well as this, the government also proposes to increase the age limit for receiving spouse contributions from 70 to 74, to be implemented on 1 July 2020. Currently, people aged 70 and over cannot receive any contributions made by another person on their behalf, and the change will give older Australians greater flexibility to save for their retirement.

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Tax on gifts and donations

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Individuals can claim tax deductions when giving gifts or donations to organisations that have the status of deductible gift recipients (DGR). To be eligible to claim a tax deduction for a gift, the ATO stipulates that it must meet the following four conditions: The gift must “truly be a gift”; that is, a voluntary transfer of money or property where the giver receives no material benefit or advantage. The gift must be made to a deductible gift recipient (DGR). The gift must be money or property, this can include financial assets such as shares. The gift must comply with any relevant conditions. For some DGRs, the income tax law adds extra conditions affecting the types of deductible gifts they can receive. What you can claim:The amount an individual can claim for a gift or donation depends on the type of gift given. For gifts of money, individuals can claim the total amount of the gift, as long as it is $2 or more. Different rules exist for gifts of property, and the amount of the tax deduction depends on the value and type of property. There are special circumstances where donations to Heritage and Cultural programs can also be deductible […]

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Pros and cons of hiring an intern 

Posted on December 4, 2019 by admin

With so many eager school-leavers looking for employment opportunities, hiring an intern can seem like a good way to offer work experience to someone without the risks of a long-term commitment of a regular employee. However, you should consider whether hiring an intern would be the best move for your business. Here are some pros and cons you may run into: Pros: Potential employment: If you feel that the intern fits into the workplace well, you could offer them employment later on. This is often a smoother introduction to employment as they are already trained and familiar with the business. However, you are not obligated to offer them a job if you don’t feel they are a good fit. Social media insight: Most interns are young and tech-savvy and could offer important insights into the world of social media for the new generation. They could help you devise relatable, trendy content for your social media that you may not have considered. Cons: Inexperienced: If you’re looking for some to take on roles that require knowledge and experience, an intern may not be the right choice as they often have limited work experience in career based roles. Less flexible: If an […]

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2019 Updates to the Pension Loan Scheme 

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Changes have been made to the Pension Loan Scheme (PLS) under the federal government that came into effect 1 July 2019. The updates aimed to improve the previous scheme and help more retirees boost their retirement income and pay for extra expenses such as home care. The key features of the new Pension Loan Scheme are: Extended eligibility to all Australians of age pension age, now including those currently received the maximum rate age pension. The maximum PLS income stream will be the difference between your current age pension payment and 150% of the age pension rate. A single person will be able to borrow up to $36,000 a year and a couple could potentially borrow up to $54,000 per year, paid in monthly instalments. PSL loans are not taxable and are not counted in the age pension income test. The interest rate is 5.25% pa compound, which has been the same since 1997. There are no establishment fees or monthly account fees. To be eligible for the PLS, the following criteria must be met: You or your partner have reached age pension age. You own real estate with enough equity to secure a loan. You have adequate insurance covering […]

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Paying tax on term deposits

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The interest you earn from term deposits is subject to tax, just like your regular income. You have to declare investment income on your tax return, including interest in the year it was credited or received. The amount of tax you need to pay depends on the amount of interest you earn on your term deposit as it is part of your overall taxable income and will, therefore, be taxed at the same marginal tax rate that applies to the rest of your income. The ATO’s marginal tax rates for the current financial year are: $0 for an income of $18,200 19c for each $1 over $18,200 for an income of $18,201 – $37,000 $3,572 plus 32.5c for each $1 over $37,000 for an income of $37,001 – $90,000 $20,797 plus 37c for each $1 over $90,000 for an income of $90,001 – $180,000 $54,097 plus 45c for each $1 over $180,000 for an income of $180,001 and over If you decide to roll over your interest earnings into a new term deposit, you will still need to declare the interest on your tax return if you choose to reinvest the money instead of accessing it. Term deposits run under […]

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What you need to know about investment bonds

Posted on November 27, 2019 by admin

Investment bonds are a practical investment option for those who earn a high income and seek long term tax efficiencies. Investment bonds, also known as tax-paid, insurance or growth bonds, work similarly to a managed fund, except they are combined with an insurance policy. There is a ten year rule which allows tax free earnings on the bond if no withdrawals are made in the first ten years and contributions do not exceed 125% of the previous year’s contribution. Most investment bonds offer a range of investment options to cater for differing risk levels such as cash, fixed interest, shares, property or a range of diversified investment options. Investment bonds are particularly suitable for high income earners with a marginal tax rate higher than 30% who want to build wealth without increasing their personal tax liability. They are also useful for estate planning purposes as beneficiaries other than dependants can be nominated and will not incur tax upon receiving proceeds. Investments held in an investment bond are generally not subject to capital gains tax (CGT). Where an investment does not qualify for a CGT discount, the maximum tax rate of 49% may apply on earnings whereas an investment bond generates […]

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What to include in a business partnership agreement

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Entering into a business partnership can come with conflicts and misunderstandings between you and your new associate. This is why having a written agreement that clearly outlines your rights and responsibilities is important for maintaining a healthy business relationship between partners. Here are some key areas to include in your partnership agreement: Name of partnership: agree on a name for your business. This may seem simple but many partners have different ideas for what they think the business should be called. Contributions to the partnership: work out and record how much each person initially contributes to the business, whether it’s cash, property, or services, and decide what percentage each owner will have. Admitting new partners: agree on a procedure for admitting new partners so that you can equally decide on a new person. Distribution of profits/allocation of losses: decide how profits and losses are allocated to partner shares. Death, disability, or withdrawal: if a member of the partnership wants to withdraw from it, or is forced to due to death or disability, then a buy/sell agreement is needed to manage the situation. Consider who you trust to make decisions on your behalf, who would inherit the shares of your company […]

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Does your SMSF meet the sole purpose test?

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If you have a self-managed super fund (SMSF), then you need to meet the sole purpose test to be eligible for the tax concessions that are normally available to super funds. The sole purpose test aims to ensure that SMSFs are maintained for the purpose of providing benefits to members upon retirement or for beneficiaries if a member dies before retirement. When a sole purpose test is contravened, the fund will lose its concessional tax treatment and be subject to the highest tax rate. Members could also be disqualified as a trustee and face civil and criminal penalties such as fines or imprisonment. The test is divided into core and ancillary purposes, where regulated funds must be maintained for at least one core purpose and can add one or more ancillary purposes but cannot be run only for ancillary purposes. The core purposes are paying benefits to: Members on or after retirement from gainful employment. Members when they have reached a prescribed age. Dependents if the member dies. The ancillary purposes are: Termination of a member’s employment where the employee made contributions to the fund on behalf of the member. Cessation of employment due to physical or mental health reasons. […]

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Using your tax return wisely

Posted on July 8, 2019 by admin

Getting your tax refund back is exciting, but as tempting as it is to splurge, consider other ways you can put that money to good use. It is easy to get caught treating your return as extra money when you shouldn’t see it any differently than your regular paycheck. Give the money a purpose by thinking about your personal financial situation and determining your needs.

Emergency fund:
An emergency fund can make all the difference if a difficult financial situation comes up, acting as a backup in the case of an emergency such as losing your job or medical costs. Building an emergency fund with enough money to cover at least three months worth of expenses is a good starting point. Make sure the money is added to a high-interest savings account to utilise compound interest. If you are contributing regularly to this fund, adding money from your tax return can boost it above schedule.

Make debt repayments:
With a bit more money at your disposal, now is the time to make repayments on debts you may have. Start with the higher interest debts and work down, your interest repayments will drop when you lower your outstanding balance. These debts can be things like credit cards, personal loans, outstanding bills or mortgage repayments.

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