News:
Next Level Financial Services provide up to date financial information to our clients in the form of newsletters and articles via email.
July 2021
Covid-19 Victoria government update:
As per Victoria Government Covid-19 restrictions, all staff at Next Level Financial Services are working from home.
We are continuing to offer our full range of services via telephone calls, emails and online Zoom meetings. Please get in touch on 03 9188-4254 if you require any assistance.
Once government restrictions are eased and we return to the office, we're taking steps to protect our clients, staff and business by:
- Staying home if unwell
- Using the Victorian Government QR Code Service at point of entry
- Keeping our fitted masks handy at all times
- Keeping our distance from others where possible
- Washing our hands regularly
- Cleaning used surfaces frequently
- Having a COVIDSafe Plan for our business
We are continuing to offer our full range of services via telephone calls, emails and online Zoom meetings. Please get in touch on 03 9188-4254 if you require any assistance.
Once government restrictions are eased and we return to the office, we're taking steps to protect our clients, staff and business by:
- Staying home if unwell
- Using the Victorian Government QR Code Service at point of entry
- Keeping our fitted masks handy at all times
- Keeping our distance from others where possible
- Washing our hands regularly
- Cleaning used surfaces frequently
- Having a COVIDSafe Plan for our business
16 August 2021
The housing affordability crisis
The last 18 months has been unprecedented in a number of ways, but the rebound in the housing market has taken most by surprise.
There are number of reasons why the market has rebounded including low interest rates, some relaxation in lending restrictions and low supply in some areas.
The outcome is that many younger people are being priced out of the market, which isn’t a new problem but one that’s intensified in recent months and one that’s likely to gain increasing media attention as we approach the next federal election.
The intent here is to summarise some recent government initiatives that are intended to assist young people enter the housing market and also some commentary about what might happen if this or future governments determine that more intervention is needed (with reference to a recent initiative from the New Zealand government).
Firstly, there were some announcements in the most recent federal budget dealing directly with housing affordability for younger people:
The First Home Loan Deposit Scheme (New Homes)
The FHLDS is a government guarantee offered to first home buyers who have at least a 5% deposit to purchase (off the plan) or build a home. Under the scheme the government provides the lender with a guarantee of up to 15% of the loan value, which avoids the lender applying Lenders Mortgage Insurance on the loan.
In the budget the government announced a further 10,000 places to be available to eligible first home buyers. Buyers need to meet various other criteria to be eligible.
Family Home Guarantee
The FHG is a loan guarantee provided by the government and is specific to single parents who have a deposit of at least 2%. Applicants don’t have to be first home buyers.
A further 10,000 guarantees were announced in the recent federal budget.
First Home Super Saver Scheme
The FHSSS permits applicants to voluntarily contribute and withdraw up to $30,000 from superannuation to put towards their first home. The advantage of the scheme is that the tax rate on earnings within superannuation (15%) is likely to be less than the marginal tax rate applicable to savings outside superannuation.
The government announced in the budget that the withdrawals available under the scheme will be increased to $50,000 (from 1 July 2022).
Other initiatives
The above measures are additional to various schemes at state level for first home buyers including grants and stamp duty concessions (these vary by state).
The reasoning behind the above initiatives:
Helping first home buyers and single parents enter the market is an obvious priority, but the government is also hoping to support the residential construction industry by targeting new homes in some of the schemes.
The question is - will it work? Time needs to be given for the above initiatives to have an impact but the effect of previous similar initiatives has generally been modest. While they provide some assistance to help those who need financial assistance to buy a home, they do little to address the fundamental issue of housing affordability.
It’s likely that this will become an even hotter topic in the media as we head towards the next federal election.
Is New Zealand a guide to what might happen here?
House prices in New Zealand are up by over 25% since the beginning of 2020. As the RBA has done in the past, their central bank (RBNZ) has implemented some constraints on the banks’ capacity to lend in an attempt to constrain demand, however the impact has been relatively minimal.
In late March 2021, the NZ government made the policy decision to remove the tax deductibility for interest payments on residential housing.
The laws will apply to residential investment properties acquired after 27 March 2021, although the deductibility for properties acquired prior to that date will be gradually phased out over the next 4 years.
The intent of the policy is clear. Firstly, the government is counting on investors deciding against buying property (thus reducing overall demand as investors count for around 25% of housing loans in NZ). Secondly, the government hopes that existing investors will sell up thus increasing supply.
It’s too early to tell whether this will be successful or not. Supporters suggest that it will lower prices and make housing more affordable for all. Opponents predict that it will damage the NZ economy by reducing consumer confidence (through lower housing prices) and thus reduce spending.
Will the same happen in Australia?
At this stage we consider it unlikely. The opposition went into the most recent federal election with a proposal that would have restricted deductibility on investment properties, but this was one of the policies blamed for their defeat.
So what will the Australian government (current and future) do to improve housing affordability?
Aside from the initiatives already in the market, which aren’t expected to have a material impact, it’s worth noting that there was one other budget initiative that could be beneficial.
Specifically, the government announced that the downsizer contribution scheme will be extended from 1 July 2022 to those aged 60 or older (currently 65 or over).
The scheme permits those who meet the eligibility criteria to contribute up to $300,000 each from the sale of their home ($600,000 as a couple) to their superannuation.
The idea is to encourage those who are close to or who are in retirement to downsize their homes.
However, while this may be of some benefit it’s unlikely to have a significant impact on housing affordability for younger buyers.
What else might happen?
Often governments allow market forces to dictate the housing market. If increased house prices lead to increased spending and thus inflation then interest rates might rise to combat that, which might constrain demand for housing.
However, in the wake of COVID the RBA has indicated that they intend to leave rates on hold for the foreseeable future and it’s unlikely that strategy will change unless there’s a significant and rapid rise in inflation.
So, the more likely outcome is further constraints on lending, which were imposed after the Royal Commission in 2018/19, but were then relaxed during COVID to encourage banks to lend to stimulate economic activity.
It’s probable that this will be extent of any intervention in the market in the short term, but the housing experiment in NZ will be watched closely to see what impact it has.
This discussion is general in nature and does not include any recommendations of any sort. If you would like more information or wish to consider any of the above in relation to your personal circumstances, then please contact our office to make an appointment with one of our advisers.
There are number of reasons why the market has rebounded including low interest rates, some relaxation in lending restrictions and low supply in some areas.
The outcome is that many younger people are being priced out of the market, which isn’t a new problem but one that’s intensified in recent months and one that’s likely to gain increasing media attention as we approach the next federal election.
The intent here is to summarise some recent government initiatives that are intended to assist young people enter the housing market and also some commentary about what might happen if this or future governments determine that more intervention is needed (with reference to a recent initiative from the New Zealand government).
Firstly, there were some announcements in the most recent federal budget dealing directly with housing affordability for younger people:
The First Home Loan Deposit Scheme (New Homes)
The FHLDS is a government guarantee offered to first home buyers who have at least a 5% deposit to purchase (off the plan) or build a home. Under the scheme the government provides the lender with a guarantee of up to 15% of the loan value, which avoids the lender applying Lenders Mortgage Insurance on the loan.
In the budget the government announced a further 10,000 places to be available to eligible first home buyers. Buyers need to meet various other criteria to be eligible.
Family Home Guarantee
The FHG is a loan guarantee provided by the government and is specific to single parents who have a deposit of at least 2%. Applicants don’t have to be first home buyers.
A further 10,000 guarantees were announced in the recent federal budget.
First Home Super Saver Scheme
The FHSSS permits applicants to voluntarily contribute and withdraw up to $30,000 from superannuation to put towards their first home. The advantage of the scheme is that the tax rate on earnings within superannuation (15%) is likely to be less than the marginal tax rate applicable to savings outside superannuation.
The government announced in the budget that the withdrawals available under the scheme will be increased to $50,000 (from 1 July 2022).
Other initiatives
The above measures are additional to various schemes at state level for first home buyers including grants and stamp duty concessions (these vary by state).
The reasoning behind the above initiatives:
Helping first home buyers and single parents enter the market is an obvious priority, but the government is also hoping to support the residential construction industry by targeting new homes in some of the schemes.
The question is - will it work? Time needs to be given for the above initiatives to have an impact but the effect of previous similar initiatives has generally been modest. While they provide some assistance to help those who need financial assistance to buy a home, they do little to address the fundamental issue of housing affordability.
It’s likely that this will become an even hotter topic in the media as we head towards the next federal election.
Is New Zealand a guide to what might happen here?
House prices in New Zealand are up by over 25% since the beginning of 2020. As the RBA has done in the past, their central bank (RBNZ) has implemented some constraints on the banks’ capacity to lend in an attempt to constrain demand, however the impact has been relatively minimal.
In late March 2021, the NZ government made the policy decision to remove the tax deductibility for interest payments on residential housing.
The laws will apply to residential investment properties acquired after 27 March 2021, although the deductibility for properties acquired prior to that date will be gradually phased out over the next 4 years.
The intent of the policy is clear. Firstly, the government is counting on investors deciding against buying property (thus reducing overall demand as investors count for around 25% of housing loans in NZ). Secondly, the government hopes that existing investors will sell up thus increasing supply.
It’s too early to tell whether this will be successful or not. Supporters suggest that it will lower prices and make housing more affordable for all. Opponents predict that it will damage the NZ economy by reducing consumer confidence (through lower housing prices) and thus reduce spending.
Will the same happen in Australia?
At this stage we consider it unlikely. The opposition went into the most recent federal election with a proposal that would have restricted deductibility on investment properties, but this was one of the policies blamed for their defeat.
So what will the Australian government (current and future) do to improve housing affordability?
Aside from the initiatives already in the market, which aren’t expected to have a material impact, it’s worth noting that there was one other budget initiative that could be beneficial.
Specifically, the government announced that the downsizer contribution scheme will be extended from 1 July 2022 to those aged 60 or older (currently 65 or over).
The scheme permits those who meet the eligibility criteria to contribute up to $300,000 each from the sale of their home ($600,000 as a couple) to their superannuation.
The idea is to encourage those who are close to or who are in retirement to downsize their homes.
However, while this may be of some benefit it’s unlikely to have a significant impact on housing affordability for younger buyers.
What else might happen?
Often governments allow market forces to dictate the housing market. If increased house prices lead to increased spending and thus inflation then interest rates might rise to combat that, which might constrain demand for housing.
However, in the wake of COVID the RBA has indicated that they intend to leave rates on hold for the foreseeable future and it’s unlikely that strategy will change unless there’s a significant and rapid rise in inflation.
So, the more likely outcome is further constraints on lending, which were imposed after the Royal Commission in 2018/19, but were then relaxed during COVID to encourage banks to lend to stimulate economic activity.
It’s probable that this will be extent of any intervention in the market in the short term, but the housing experiment in NZ will be watched closely to see what impact it has.
This discussion is general in nature and does not include any recommendations of any sort. If you would like more information or wish to consider any of the above in relation to your personal circumstances, then please contact our office to make an appointment with one of our advisers.
7 October 2020
A brief overview of the federal budget
The much anticipated budget was handed down by federal government last night.
As expected the focus is expansionary to pump money into the economy. Below is a brief overview of the key issues that we expect will most impact individuals. Many other initiatives were announced that are targeted specifically at businesses, which we won't detail here but if you would like more information on any business related matters then please contact our office and we'll be very happy to provide that detail.
The key initiatives are:
Tax cuts:
Not a new initiative as such as cuts to personal tax rates have already been legislated. However, cuts that were intended to commence in the 2022/23 financial year will now commence in the current financial year (ie: backdated to 1 July 2020).
As expected the focus is expansionary to pump money into the economy. Below is a brief overview of the key issues that we expect will most impact individuals. Many other initiatives were announced that are targeted specifically at businesses, which we won't detail here but if you would like more information on any business related matters then please contact our office and we'll be very happy to provide that detail.
The key initiatives are:
Tax cuts:
Not a new initiative as such as cuts to personal tax rates have already been legislated. However, cuts that were intended to commence in the 2022/23 financial year will now commence in the current financial year (ie: backdated to 1 July 2020).
2020-21 Marginal Tax rate |
2020-21 Tax Bracket (Current) |
2020-21 Tax Bracket (Proposed) |
NIL |
Up to $18,200 |
Up to $18,200 |
19% |
$18,201-$37,000 |
$18,201-$45,000 |
32.50% |
$37,001-$90,000 |
$45,001-$120,000 |
37% |
$90,001-$180,000 |
$120,001-$180,000 |
45% |
$180,000+ |
$180,000+ |
Percentages exclude the Medicare Levy.
Source: Challenger Federal Budget Report 2020-21
Workers on lower incomes will gain from an extension of the Low and Middle Income Tax Offset for a further 12 months until 30 June 2021 and an increase in the Low Income Tax Offset.
The pull forward of the changes needs to be legislated, however the opposition has indicated their support. Once the changes pass parliament employers will alter the tax deducted from their employees' wages to reflect the altered tax rates.
There were also changes the Medicare Levy thresholds, which increase the level of income that an individual or family can earn before paying the levy.
Cuts legislated for the 2024/25 financial year remain in place and will replace the 32.5% and 37% rates with a 30% rate.
Support for older Australians, low income earners, welfare recipients and job seekers:
Those receiving support from Centrelink - including the age pension, carer payment/allowance, disability support, family benefit and concession cards (including the Commonwealth Seniors Health Card) - will receive two $250 payments that will be additional to their normal benefits. The first will be made in early December 2020 and the second in March 2021.
Incentives have been announced to encourage employers to hire eligible unemployed people aged between 16 and 35 (to be known as 'JobMaker'). Employers will receive $200/week for eligible new employees aged under 30 and $100/week for those aged 30-35. The scheme commences today and runs for 12 months from the time that the new employee is hired.
No changes were announced to the JobSeeker or JobKeeper initiatives.
Superannuation:
A new package known as 'Your Future, Your Super' will commence on 1 July 2021, subject to legislation passing parliament. In summary:
The 2nd and 3rd of the above initiatives will initially be limited to 'My Super' products but may be rolled out more widely thereafter.
The detail of these initiatives is yet to be revealed so we'll provide more information when announced.
No announcement was made of any extension to the temporary early access to superannuation rules permitting those eligible to draw up to $10,000 from their accounts. The existing allowance remains in place until 31 December 2020.
The previously announced halving of the minimum superannuation pension drawdown will remain in place for the 2020-21 financial year.
Aged care:
Changes will be made to the capital gains tax (CGT) arrangements for granny flats, permitting an exemption from the tax in some instances (specifically where a formal written agreement is in place). This measure requires legislation and if passed this financial year will become effective from 1 July 2021.
Further to ongoing changes that will arise from the Royal Commission into aged care, the government will provide funding for an additional 23,000 home care packages.
In summary:
The initiatives will significantly expand the federal budget deficit, however given the ongoing impact of COVID-19 and the resultant recession it's generally agreed that additional government spending is required. The government is also able to borrow at very low rates of interest, which minimises the impact of borrowing on the bottom line.
We're not expecting any further announcements in the near term given that the next budget will be handed down in May 2021 (this year's budget was delayed due to COVID). However, the government will be keeping a close watch on the economic impact of the pandemic, which is not yet fully apparent. The ongoing lock down in metropolitan Melbourne will also be carefully monitored.
Please contact our office for any further information required.
Source: Challenger Federal Budget Report 2020-21
- Those earning between $50,000 and $90,000 will be around $41/week ($2,132 pa) better off;
- Those earning more than $120,000 pa will be around $49/week ($2,548 pa) better off.
Workers on lower incomes will gain from an extension of the Low and Middle Income Tax Offset for a further 12 months until 30 June 2021 and an increase in the Low Income Tax Offset.
The pull forward of the changes needs to be legislated, however the opposition has indicated their support. Once the changes pass parliament employers will alter the tax deducted from their employees' wages to reflect the altered tax rates.
There were also changes the Medicare Levy thresholds, which increase the level of income that an individual or family can earn before paying the levy.
Cuts legislated for the 2024/25 financial year remain in place and will replace the 32.5% and 37% rates with a 30% rate.
Support for older Australians, low income earners, welfare recipients and job seekers:
Those receiving support from Centrelink - including the age pension, carer payment/allowance, disability support, family benefit and concession cards (including the Commonwealth Seniors Health Card) - will receive two $250 payments that will be additional to their normal benefits. The first will be made in early December 2020 and the second in March 2021.
Incentives have been announced to encourage employers to hire eligible unemployed people aged between 16 and 35 (to be known as 'JobMaker'). Employers will receive $200/week for eligible new employees aged under 30 and $100/week for those aged 30-35. The scheme commences today and runs for 12 months from the time that the new employee is hired.
No changes were announced to the JobSeeker or JobKeeper initiatives.
Superannuation:
A new package known as 'Your Future, Your Super' will commence on 1 July 2021, subject to legislation passing parliament. In summary:
- An individual's superannuation account will be 'stapled' to them meaning that they can use the same fund across different jobs. This will eliminate multiple funds tied to different employers.
- An online comparison tool will enable people to compare the performance of their fund with other funds.
- Funds that under-perform will be held accountable by APRA and may not be able to take on new members.
The 2nd and 3rd of the above initiatives will initially be limited to 'My Super' products but may be rolled out more widely thereafter.
The detail of these initiatives is yet to be revealed so we'll provide more information when announced.
No announcement was made of any extension to the temporary early access to superannuation rules permitting those eligible to draw up to $10,000 from their accounts. The existing allowance remains in place until 31 December 2020.
The previously announced halving of the minimum superannuation pension drawdown will remain in place for the 2020-21 financial year.
Aged care:
Changes will be made to the capital gains tax (CGT) arrangements for granny flats, permitting an exemption from the tax in some instances (specifically where a formal written agreement is in place). This measure requires legislation and if passed this financial year will become effective from 1 July 2021.
Further to ongoing changes that will arise from the Royal Commission into aged care, the government will provide funding for an additional 23,000 home care packages.
In summary:
The initiatives will significantly expand the federal budget deficit, however given the ongoing impact of COVID-19 and the resultant recession it's generally agreed that additional government spending is required. The government is also able to borrow at very low rates of interest, which minimises the impact of borrowing on the bottom line.
We're not expecting any further announcements in the near term given that the next budget will be handed down in May 2021 (this year's budget was delayed due to COVID). However, the government will be keeping a close watch on the economic impact of the pandemic, which is not yet fully apparent. The ongoing lock down in metropolitan Melbourne will also be carefully monitored.
Please contact our office for any further information required.
22 July 2020
Coronavirus update - JobKeeper and JobSeeker Payments extended
The Federal Government yesterday announced that the JobKeeper and JobSeeker payments will be extended beyond the previously announced end-dates in September 2020.
This is a positive development, although the level of the benefit available and some of the terms applicable to the schemes has changed.
This is the link to the government announcement (https://treasury.gov.au/coronavirus?utm_source=ExactTarget&utm_medium=Email&utm_term=6106632&utm_campaign=&utm_content=), which also contains further detail and links to further resources.
This follows earlier communications (further down the news page) that provide detail on the above schemes, hence the detail below focuses only on the key changes that were confirmed yesterday. As always, if you're unsure about the impact of the changes on your situation or if you'd like more information then please contact our office.
In summary:
What is JobKeeper
It's a business support package with payments made to employers, not employees (however the payments must be on-paid to employees). The overall design of the policy is to assist employers in keeping employees on their books.
How has JobKeeper worked until now?
Employers become eligible if their business turnover has reduced by more than 30% vs last year (if the business has less than $1 billion in turnover) or has reduced by more than 50% vs last year (if the business has turnover above $1 billion).
Eligible employers have qualified for a payment of $1,500 per fortnight per employee. This rate will continue until 27 September 2020.
The JobKeeper payment rate will change after 27 September 2020:
The rate of the JobKeeper payment will reduce in two tranches:
Tranche 1 - 28 September 2020 to 3 January 2021:
The maximum payment will be:
The maximum payment will be:
Eligible employees are those who worked in the business in the 4 week period prior to 1 March 2020 (ie: during February 2020). The ATO has indicated some discretion for employees who were on leave or otherwise absent during this period.
Otherwise eligibility remains the same as the initial phase of JobKeeper and responsibility will fall to the employer to keep records of those employees receiving the benefit and the amount being received.
Note changes to the turnover test:
Businesses will need to show a continued declined in turnover to remain eligible for the JobKeeper payment:
For Tranche 1 - 28 September 2020 to 3 January 2021:
The business will need to prove a decline in GST turnover in the June and September 2020 quarters in comparison with the same quarters in 2019.
For Tranche 2 - 4 January 2021 to 28 March 2021:
The business will need to prove a decline in GST turnover in the June, September and December 2020 quarters in comparison with the same quarters in 2019.
The ATO will have discretion to assess individual circumstances to determine eligibility. Where uncertainty exists business owners should approach the ATO or seek clarification from their tax adviser.
A reminder - the impact on superannuation, tax and social security:
The JobKeeper payments won't be eligible for superannuation contributions.
The JobKeeper payments will be treated as taxable income.
The JobKeeper payments will be assessable income for Centrelink purposes.
What should you (or anyone you know) do if they're currently financially impacted?
As JobKeeper payments are only paid to registered businesses, it's suggested that those impacted by the crisis contact their employer to check if the employer qualifies and if they intend to register. Those who are self-employed can apply via the ATO.
If their employer won't register or is unable to register for any reason then individuals whose employment has been impacted by COVID-19 are advised to see if they qualify for JobSeeker benefits.
JobSeeker Payment.
What is JobSeeker ?
JobSeeker (previously known as 'Newstart' or the 'dole') is a payment to individuals who qualify on the basis of being unable to find paid employment or earning below a certain level of income.
How has JobSeeker worked until now?
In March 2020 the government announced that the usual JobSeeker asset test requirement and the 'mutual obligation' requirement would be temporarily removed in recognition of the impact of COVID-19.
Generally speaking those who are single would qualify for a JobSeeker benefit if their income were less than $28,249 pa, though it could be up to $55,243.50 pa if caring for dependents.
Those who are a member of a couple would qualify if their income were less than $25,831 pa (depending on their partner's income) or if they had no income and their partner's income were less than $79,788.80 pa.
The amount of the JobSeeker entitlement was also increased by $550 per fortnight (known as the 'coronavirus supplement') meaning that the benefit increased to $1,115.70 per fortnight (for singles without dependents) and up to $1,340.10 per fortnight (for those with dependents).
The above rules and rates remain valid until 25 September 2020.
Changes to the 'coronavirus supplement' from 25 September 2020:
From 25 September 2020 until 31 December 2020 the JobSeeker benefit will be boosted by a coronavirus supplement of $250 per fortnight (instead of $550 per fortnight).
The government has indicated that they will review the supplement again ahead of the conclusion of the newly announced period.
Changes to JobSeeker income test requirements from 25 September 2020:
From 25 September 2020 until 31 December 2020 those receiving a JobSeeker benefit will be able to earn up to $300 per fortnight (the current rate is $106 per fortnight).
Entitlement to JobSeeker will reduce by 60 cents for every dollar of income per fortnight over the $300 threshold level (the rate is 40 cents per dollar for those who are principal carer parents).
Changes to JobSeeker partner income test requirement from 25 September 2020:
From 25 September 2020 the partner of those receiving a JobSeeker benefit will be able to earn up to $80,238.89 pa before the JobSeeker benefit reduces to nil.
For every dollar that a partner earns over $300 per fortnight, the recipient's JobSeeker benefit will reduce by 27 cents (currently 25 cents, although the increase in the income threshold to $300 per fortnight means that no JobSeeker recipient will be worse off as a result).
Changes to JobSeeker asset test requirement from 25 September 2020:
The assets test will be reinstated from 25 September 2020 for all recipients (new and existing). There's no change to those assets that qualify for assessment (ie: the recipient's primary residence is excluded from the test).
For singles the maximum level of assets that can be held to qualify for JobSeeker is:
Reintroduction of the mutual obligation requirement:
Those applying for JobSeeker will now need to meet mutual obligation requirements. This necessitates various activities to continue to be eligible for the benefit - please refer to this link for more information (https://www.servicesaustralia.gov.au/individuals/topics/mutual-obligation-requirements/29751).
How are JobKeeper and JobSeeker working together?
The rules that apply until 27 September 2020 mean that it's unlikely that an individual who's receiving JobKeeper will also qualify for JobSeeker as their income level will be too high (JobKeeper benefits are assessable income for Centrelink benefit purposes).
However, with the reduction in the JobKeeper benefit level it's possible that an individual may qualify for both benefits (with their JobSeeker entitlement impacted by the level of their JobKeeper entitlement).
Additionally, Centrelink has indicated that those who lose their concession card entitlements due to JobKeeper benefits will retain their cards for a period of time in recognition of the temporary nature of the JobKeeper program.
Please contact our office if any further information is needed and we'll respond ASAP.
This is a positive development, although the level of the benefit available and some of the terms applicable to the schemes has changed.
This is the link to the government announcement (https://treasury.gov.au/coronavirus?utm_source=ExactTarget&utm_medium=Email&utm_term=6106632&utm_campaign=&utm_content=), which also contains further detail and links to further resources.
This follows earlier communications (further down the news page) that provide detail on the above schemes, hence the detail below focuses only on the key changes that were confirmed yesterday. As always, if you're unsure about the impact of the changes on your situation or if you'd like more information then please contact our office.
In summary:
- The JobKeeper program is being extended until March 2021, however the level of the benefit is being reduced and the test for eligibility (a reduction in business income) is being tightened.
- The 'coronavirus supplement' (which applies to JobSeeker and other Centrelink benefits) is being reduced from $550 per fortnight to $250 per fortnight from 25 September 2020 and is due to expire on 31 December 2020.
- The assets test and mutual obligation requirements will be reintroduced for the JobSeeker benefit, however the income test requirements are being adjusted in favour of applicants.
What is JobKeeper
It's a business support package with payments made to employers, not employees (however the payments must be on-paid to employees). The overall design of the policy is to assist employers in keeping employees on their books.
How has JobKeeper worked until now?
Employers become eligible if their business turnover has reduced by more than 30% vs last year (if the business has less than $1 billion in turnover) or has reduced by more than 50% vs last year (if the business has turnover above $1 billion).
Eligible employers have qualified for a payment of $1,500 per fortnight per employee. This rate will continue until 27 September 2020.
The JobKeeper payment rate will change after 27 September 2020:
The rate of the JobKeeper payment will reduce in two tranches:
Tranche 1 - 28 September 2020 to 3 January 2021:
The maximum payment will be:
- $1,200 per fortnight for employees working more than 20 hours per week (on average); or
- $750 per fortnight for those working less than 20 hours per week (on average).
The maximum payment will be:
- $1,000 per fortnight for employees working more than 20 hours per week (on average); or
- $650 per fortnight for those working less than 20 hours per week (on average).
Eligible employees are those who worked in the business in the 4 week period prior to 1 March 2020 (ie: during February 2020). The ATO has indicated some discretion for employees who were on leave or otherwise absent during this period.
Otherwise eligibility remains the same as the initial phase of JobKeeper and responsibility will fall to the employer to keep records of those employees receiving the benefit and the amount being received.
Note changes to the turnover test:
Businesses will need to show a continued declined in turnover to remain eligible for the JobKeeper payment:
- Businesses with a turnover of more than $1 billion need to show a decline of at least 50%;
- Businesses with a turnover of $1 billion or less need to show a decline of at least 30%;
- Australian based charities and not for profits (excluding schools and universities) need to show a decline of at least 15%.
For Tranche 1 - 28 September 2020 to 3 January 2021:
The business will need to prove a decline in GST turnover in the June and September 2020 quarters in comparison with the same quarters in 2019.
For Tranche 2 - 4 January 2021 to 28 March 2021:
The business will need to prove a decline in GST turnover in the June, September and December 2020 quarters in comparison with the same quarters in 2019.
The ATO will have discretion to assess individual circumstances to determine eligibility. Where uncertainty exists business owners should approach the ATO or seek clarification from their tax adviser.
A reminder - the impact on superannuation, tax and social security:
The JobKeeper payments won't be eligible for superannuation contributions.
The JobKeeper payments will be treated as taxable income.
The JobKeeper payments will be assessable income for Centrelink purposes.
What should you (or anyone you know) do if they're currently financially impacted?
As JobKeeper payments are only paid to registered businesses, it's suggested that those impacted by the crisis contact their employer to check if the employer qualifies and if they intend to register. Those who are self-employed can apply via the ATO.
If their employer won't register or is unable to register for any reason then individuals whose employment has been impacted by COVID-19 are advised to see if they qualify for JobSeeker benefits.
JobSeeker Payment.
What is JobSeeker ?
JobSeeker (previously known as 'Newstart' or the 'dole') is a payment to individuals who qualify on the basis of being unable to find paid employment or earning below a certain level of income.
How has JobSeeker worked until now?
In March 2020 the government announced that the usual JobSeeker asset test requirement and the 'mutual obligation' requirement would be temporarily removed in recognition of the impact of COVID-19.
Generally speaking those who are single would qualify for a JobSeeker benefit if their income were less than $28,249 pa, though it could be up to $55,243.50 pa if caring for dependents.
Those who are a member of a couple would qualify if their income were less than $25,831 pa (depending on their partner's income) or if they had no income and their partner's income were less than $79,788.80 pa.
The amount of the JobSeeker entitlement was also increased by $550 per fortnight (known as the 'coronavirus supplement') meaning that the benefit increased to $1,115.70 per fortnight (for singles without dependents) and up to $1,340.10 per fortnight (for those with dependents).
The above rules and rates remain valid until 25 September 2020.
Changes to the 'coronavirus supplement' from 25 September 2020:
From 25 September 2020 until 31 December 2020 the JobSeeker benefit will be boosted by a coronavirus supplement of $250 per fortnight (instead of $550 per fortnight).
The government has indicated that they will review the supplement again ahead of the conclusion of the newly announced period.
Changes to JobSeeker income test requirements from 25 September 2020:
From 25 September 2020 until 31 December 2020 those receiving a JobSeeker benefit will be able to earn up to $300 per fortnight (the current rate is $106 per fortnight).
Entitlement to JobSeeker will reduce by 60 cents for every dollar of income per fortnight over the $300 threshold level (the rate is 40 cents per dollar for those who are principal carer parents).
Changes to JobSeeker partner income test requirement from 25 September 2020:
From 25 September 2020 the partner of those receiving a JobSeeker benefit will be able to earn up to $80,238.89 pa before the JobSeeker benefit reduces to nil.
For every dollar that a partner earns over $300 per fortnight, the recipient's JobSeeker benefit will reduce by 27 cents (currently 25 cents, although the increase in the income threshold to $300 per fortnight means that no JobSeeker recipient will be worse off as a result).
Changes to JobSeeker asset test requirement from 25 September 2020:
The assets test will be reinstated from 25 September 2020 for all recipients (new and existing). There's no change to those assets that qualify for assessment (ie: the recipient's primary residence is excluded from the test).
For singles the maximum level of assets that can be held to qualify for JobSeeker is:
- $268,000 for homeowners. $482,500 for non-homeowners.
- $401,500 for homeowners. $616,000 for non-homeowners.
Reintroduction of the mutual obligation requirement:
Those applying for JobSeeker will now need to meet mutual obligation requirements. This necessitates various activities to continue to be eligible for the benefit - please refer to this link for more information (https://www.servicesaustralia.gov.au/individuals/topics/mutual-obligation-requirements/29751).
How are JobKeeper and JobSeeker working together?
The rules that apply until 27 September 2020 mean that it's unlikely that an individual who's receiving JobKeeper will also qualify for JobSeeker as their income level will be too high (JobKeeper benefits are assessable income for Centrelink benefit purposes).
However, with the reduction in the JobKeeper benefit level it's possible that an individual may qualify for both benefits (with their JobSeeker entitlement impacted by the level of their JobKeeper entitlement).
Additionally, Centrelink has indicated that those who lose their concession card entitlements due to JobKeeper benefits will retain their cards for a period of time in recognition of the temporary nature of the JobKeeper program.
Please contact our office if any further information is needed and we'll respond ASAP.
9 July 2020
After-tax contributions to superannuation can now be made up to age 67
After-tax contributions to superannuation can now be made up to age 67 and the legislation was partially implemented on 1 July 2020.
Background:
The change in legislation pertains to after-tax contributions to superannuation – these are amounts that can be contributed to superannuation tax-free from accumulated savings, sale of assets etc. It doesn’t include employer contributions, salary sacrifice or tax deductible contributions, all of which are taxed when they reach your superannuation fund.
Prior to 30 June 2020 the rules that pertained to after-tax contributions were:
Background:
The change in legislation pertains to after-tax contributions to superannuation – these are amounts that can be contributed to superannuation tax-free from accumulated savings, sale of assets etc. It doesn’t include employer contributions, salary sacrifice or tax deductible contributions, all of which are taxed when they reach your superannuation fund.
Prior to 30 June 2020 the rules that pertained to after-tax contributions were:
Age Group |
Maximum annual contribution |
Potential pull-forward contributions |
Those aged 64 and under |
$100,000 |
Maximum $300,000 over 3 consecutive years |
Those aged 65-74 |
$100,000 if meeting the work test |
Not available |
Those aged 75 and older |
Nil |
Not available |
Those aged 64 and under could make after-tax contributions of up to $100,000 pa or up to $300,000 over 3 consecutive financial years. The latter refers to a ‘pull forward’ rule allowing the contributor to make a contribution of more than $100,000 in a financial year but then limiting the contributions that they can make over the next 2 financial years to an aggregate amount of no more than $300,000 over 3 consecutive years. For example, if the contributor used the pull forward rule to contribute $250,000 to superannuation in one financial year then they’d be limited to a maximum of $50,000 in additional after-tax contributions over the next 2 financial years.
Those aged 65-74 could make post-tax contributions of up to $100,000 pa but only if they met the work test. The work test requires the contributor to have been gainfully employed for a minimum of 40 hours in any consecutive 30 day period in the year in which the contribution is made. Those in this age bracket were limited to after-tax contributions of $100,000 pa (ie: they can’t use the pull forward rule).
What changes apply from 1 July 2020?
Hence, from 1 July 2020 the rules pertaining to after-tax contributions are:
Those aged 65-74 could make post-tax contributions of up to $100,000 pa but only if they met the work test. The work test requires the contributor to have been gainfully employed for a minimum of 40 hours in any consecutive 30 day period in the year in which the contribution is made. Those in this age bracket were limited to after-tax contributions of $100,000 pa (ie: they can’t use the pull forward rule).
What changes apply from 1 July 2020?
- The age limit for making after-tax contributions to superannuation without meeting the work test has increased from 65 to 67. This means that all those aged 66 and under can now make after-tax contributions to superannuation irrespective of their working status.
- The pull forward rule enabling maximum contributions of up to $300,000 over 3 consecutive financial years is being extended to age 67. Please note that this measure is yet to pass parliament, but is expected to pass in August 2020 – we’ll keep you informed of progress.
Hence, from 1 July 2020 the rules pertaining to after-tax contributions are:
Age Group |
Maximum annual contribution |
Potential pull-forward contributions |
Those aged 66 and under |
$100,000 |
Maximum $300,000 over 3 consecutive years* |
Those aged 67-74 |
$100,000 if meeting the work test |
Not available |
Those aged 75 and older |
Nil |
Not available |
* Assuming that the legislation to permit those aged 65 and 66 to utilise the pull forward rule passes parliament.
Please note:
What impact does this have on your financial plan?
The change in regulations provides further flexibility over coming years to ensure individuals have the maximum possible funds within a tax-free environment at retirement. The main advantage will be the extension to the period of time that everyone will be able to get funds into superannuation even if they are not working past age 65.
For more information book a complimentary initial appointment with our team.
Please note:
- After-tax contributions can still only be made by those whose superannuation balance is less than $1,600,000;
- Any contributions to superannuation via the ‘downsizer provisions’ remain outside the above caps.
What impact does this have on your financial plan?
The change in regulations provides further flexibility over coming years to ensure individuals have the maximum possible funds within a tax-free environment at retirement. The main advantage will be the extension to the period of time that everyone will be able to get funds into superannuation even if they are not working past age 65.
For more information book a complimentary initial appointment with our team.
9 April 2020
Coronavirus update - JobKeeper Payment package passed by parliament
You may have seen that the previously announced JobKeeper proposal was passed by parliament yesterday.
This is critical as it's possible that many people whose employment/income has been impact by the crisis will benefit more from JobKeeper than from other available stimulus measures.
However, unfortunately there remains confusion about how the available support works and what individuals should be applying for. Part of this is because the JobKeeper scheme is named similarly to the JobSeeker scheme, but they refer to different things and apply in different circumstances.
Below are some Q&As that I hope will assist those needing information, but please contact our office if you need more detail or guidance. We're also very happy to speak will family members or friends who may require help - we may not be able to give them specific advice, but we can talk with them generally about the assistance available and where they should start.
We'll focus on JobKeeper and JobSeeker here but summaries of all stimulus initiatives are attached for reference.
What's the difference between JobKeeper and JobSeeker?
Both are designed to assist individuals whose income has reduced or has been totally eliminated. However, JobKeeper is a temporary payment made to eligible employers to pass onto their eligible employees, whereas JobSeeker is a benefit directed to the individual.
JobKeeper is a temporary stimulus package specifically in response to the coronavirus crisis. It's a benefit paid to employers if their business income has declined by a certain amount (please refer below) with the requirement that the payment be passed onto their eligible employees (also more information below).
JobSeeker has been around for a long time - in past lives it's been known as Newstart and the Dole. Usually there are means tests applied such that if the applicant's income or assets (including the income or assets of their partner) are above a certain level then their entitlement will be reduced or eliminated. Those receiving JobSeeker must also meet certain 'mutual obligations' requiring them to complete activities to seek employment.
Who qualifies for a JobKeeper benefit and how much can they receive?
Qualification for the JobKeeper benefit is dependent upon the revenue of the business in which you were employed on 1 March 2020.
A business is eligible for JobKeeper benefits if:
In most cases the measure of the decline in revenue is in comparison with the same month or quarter of 2019.
Those businesses that qualify are required to register (https://www.ato.gov.au/general/gen/JobKeeper-payment/) and if approved by the ATO will receive $1,500 per fortnight for every eligible employee for a period of 6 months from 30 March 2020.
Eligible employees are those aged at least 16 and employed full time, part time or on a casual basis (but casuals must have been employed for a minimum of 12 months as at 1 March 2020). It doesn't matter if the eligible employee is still employed as normal, is working on reduced hours or has been stood down. However, any employee made redundant since 1 March 2020 will only qualify if subsequently re-employed.
The JobKeeper benefit is paid to the employer and must be passed onto each eligible employee in full.
Eligible employees whose income is currently higher than $1,500 per fortnight won't likely receive more, however the benefit will subsidise part of their employment cost thus reducing the financial pressure on their employer.
Those employees whose income is currently less than $1,500 per fortnight (or nil) will receive the full $1,500 per fortnight benefit.
Eligible employees who work for multiple employers can only receive the JobKeeper benefit from one (usually the employer from whom they claim the tax free threshold in their wages). Payments will be made in early May but backdated to 30 March 2020.
Who qualifies for a JobSeeker benefit and how much can they receive?
JobSeeker benefits depend upon individual circumstances, however in response to the crisis the government is temporarily waiving the usual asset test requirement, has loosened the income test requirement and won't impose the 'mutual obligation' requirement for new applicants for the time being.
Generally speaking those who are single and whose income is impacted by the crisis will qualify for a JobSeeker benefit if their current income is less than $28,249 pa, though it could be up to $55,243.50 pa if caring for dependents.
Those who are a member of a couple will qualify if their current income is less than $25,831 pa (depending on their partner's income) or if they have no current income and their partner's current income is less than $79,788.80 pa.
The amount of the JobSeeker entitlement also depends upon individual circumstances, but is up to $565.70 per fortnight for a single person without dependents and up to $790.10 per fortnight for those with dependents.
However, another facet of the current stimulus measures is a $550 per fortnight supplement to the JobSeeker benefit, so for the next 6 months the benefits increase to between $1,115.70 per fortnight and $1,340.10 per fortnight respectively.
What about tax and superannuation?
Both JobKeeper and JobSeeker payments are taxable income and will need to be declared in your tax return for the financial year in which the benefit is received. Your employer should deduct tax from the JobKeeper benefit if required, but tax isn't usually deducted from JobSeeker benefits (although you can apply to Centrelink to change this). If in doubt please speak with us or with your accountant to ensure that you don't end up with an unexpected tax liability.
Neither JobKeeper nor JobSeeker benefits attract superannuation contributions, however you may wish to make superannuation contributions from any JobKeeper benefit that you receive - please speak with your employer to organise this.
Should you apply for JobKeeper or should you apply for JobSeeker?
The JobKeeper benefit ($1,500/fortnight) is higher than the maximum JobSeeker benefit. Hence, if your employer qualifies for the JobKeeper benefit then my recommendation is to approach them to ensure that they register and to stay in touch with them to follow up the payments.
However, if your employer doesn't qualify or if you're unsure then I recommend lodging an application for the JobSeeker benefit with Centrelink. This can be done via MyGov ( go to www.my.gov.au if you don't already have an account) and linking to Centrelink. If you haven't already done this then I recommend doing so ASAP as there's a backlog of applicants and unfortunately the process is detailed. Please contact us if you're having trouble and we'll talk through it.
Can you receive JobKeeper and JobSeeker?
No. As JobKeeper benefits are treated as taxable income, they count in the income test for the JobSeeker entitlement and will preclude an individual from receiving both.
However, as above, if you're unsure whether your employer is going to receive the JobKeeper benefit on your behalf, then I encourage you to apply for JobSeeker as a backup. If you subsequently receive a JobKeeper benefit then you'll need to disclose that to Centrelink and you won't receive JobSeeker, but you'll be no worse off and will have the peace of mind of knowing that you've at least registered for a benefit.
What if you don't think that you qualify for either JobKeeper or JobSeeker?
Please contact our office and we'll discuss your circumstances. There are other stimulus measures that may be appropriate or at the very least we can talk through strategies to manage your cash flow through the forthcoming period.
This is critical as it's possible that many people whose employment/income has been impact by the crisis will benefit more from JobKeeper than from other available stimulus measures.
However, unfortunately there remains confusion about how the available support works and what individuals should be applying for. Part of this is because the JobKeeper scheme is named similarly to the JobSeeker scheme, but they refer to different things and apply in different circumstances.
Below are some Q&As that I hope will assist those needing information, but please contact our office if you need more detail or guidance. We're also very happy to speak will family members or friends who may require help - we may not be able to give them specific advice, but we can talk with them generally about the assistance available and where they should start.
We'll focus on JobKeeper and JobSeeker here but summaries of all stimulus initiatives are attached for reference.
What's the difference between JobKeeper and JobSeeker?
Both are designed to assist individuals whose income has reduced or has been totally eliminated. However, JobKeeper is a temporary payment made to eligible employers to pass onto their eligible employees, whereas JobSeeker is a benefit directed to the individual.
JobKeeper is a temporary stimulus package specifically in response to the coronavirus crisis. It's a benefit paid to employers if their business income has declined by a certain amount (please refer below) with the requirement that the payment be passed onto their eligible employees (also more information below).
JobSeeker has been around for a long time - in past lives it's been known as Newstart and the Dole. Usually there are means tests applied such that if the applicant's income or assets (including the income or assets of their partner) are above a certain level then their entitlement will be reduced or eliminated. Those receiving JobSeeker must also meet certain 'mutual obligations' requiring them to complete activities to seek employment.
Who qualifies for a JobKeeper benefit and how much can they receive?
Qualification for the JobKeeper benefit is dependent upon the revenue of the business in which you were employed on 1 March 2020.
A business is eligible for JobKeeper benefits if:
- It generates less than $1 billion pa in revenue and has suffered a decline in revenue of more than 30%; or
- It generates more than $1 billion pa in revenue and has suffered a decline in revenue of more than 50%; or
- It's a registered charity and revenue is estimated to have fallen by 15% or more.
In most cases the measure of the decline in revenue is in comparison with the same month or quarter of 2019.
Those businesses that qualify are required to register (https://www.ato.gov.au/general/gen/JobKeeper-payment/) and if approved by the ATO will receive $1,500 per fortnight for every eligible employee for a period of 6 months from 30 March 2020.
Eligible employees are those aged at least 16 and employed full time, part time or on a casual basis (but casuals must have been employed for a minimum of 12 months as at 1 March 2020). It doesn't matter if the eligible employee is still employed as normal, is working on reduced hours or has been stood down. However, any employee made redundant since 1 March 2020 will only qualify if subsequently re-employed.
The JobKeeper benefit is paid to the employer and must be passed onto each eligible employee in full.
Eligible employees whose income is currently higher than $1,500 per fortnight won't likely receive more, however the benefit will subsidise part of their employment cost thus reducing the financial pressure on their employer.
Those employees whose income is currently less than $1,500 per fortnight (or nil) will receive the full $1,500 per fortnight benefit.
Eligible employees who work for multiple employers can only receive the JobKeeper benefit from one (usually the employer from whom they claim the tax free threshold in their wages). Payments will be made in early May but backdated to 30 March 2020.
Who qualifies for a JobSeeker benefit and how much can they receive?
JobSeeker benefits depend upon individual circumstances, however in response to the crisis the government is temporarily waiving the usual asset test requirement, has loosened the income test requirement and won't impose the 'mutual obligation' requirement for new applicants for the time being.
Generally speaking those who are single and whose income is impacted by the crisis will qualify for a JobSeeker benefit if their current income is less than $28,249 pa, though it could be up to $55,243.50 pa if caring for dependents.
Those who are a member of a couple will qualify if their current income is less than $25,831 pa (depending on their partner's income) or if they have no current income and their partner's current income is less than $79,788.80 pa.
The amount of the JobSeeker entitlement also depends upon individual circumstances, but is up to $565.70 per fortnight for a single person without dependents and up to $790.10 per fortnight for those with dependents.
However, another facet of the current stimulus measures is a $550 per fortnight supplement to the JobSeeker benefit, so for the next 6 months the benefits increase to between $1,115.70 per fortnight and $1,340.10 per fortnight respectively.
What about tax and superannuation?
Both JobKeeper and JobSeeker payments are taxable income and will need to be declared in your tax return for the financial year in which the benefit is received. Your employer should deduct tax from the JobKeeper benefit if required, but tax isn't usually deducted from JobSeeker benefits (although you can apply to Centrelink to change this). If in doubt please speak with us or with your accountant to ensure that you don't end up with an unexpected tax liability.
Neither JobKeeper nor JobSeeker benefits attract superannuation contributions, however you may wish to make superannuation contributions from any JobKeeper benefit that you receive - please speak with your employer to organise this.
Should you apply for JobKeeper or should you apply for JobSeeker?
The JobKeeper benefit ($1,500/fortnight) is higher than the maximum JobSeeker benefit. Hence, if your employer qualifies for the JobKeeper benefit then my recommendation is to approach them to ensure that they register and to stay in touch with them to follow up the payments.
However, if your employer doesn't qualify or if you're unsure then I recommend lodging an application for the JobSeeker benefit with Centrelink. This can be done via MyGov ( go to www.my.gov.au if you don't already have an account) and linking to Centrelink. If you haven't already done this then I recommend doing so ASAP as there's a backlog of applicants and unfortunately the process is detailed. Please contact us if you're having trouble and we'll talk through it.
Can you receive JobKeeper and JobSeeker?
No. As JobKeeper benefits are treated as taxable income, they count in the income test for the JobSeeker entitlement and will preclude an individual from receiving both.
However, as above, if you're unsure whether your employer is going to receive the JobKeeper benefit on your behalf, then I encourage you to apply for JobSeeker as a backup. If you subsequently receive a JobKeeper benefit then you'll need to disclose that to Centrelink and you won't receive JobSeeker, but you'll be no worse off and will have the peace of mind of knowing that you've at least registered for a benefit.
What if you don't think that you qualify for either JobKeeper or JobSeeker?
Please contact our office and we'll discuss your circumstances. There are other stimulus measures that may be appropriate or at the very least we can talk through strategies to manage your cash flow through the forthcoming period.
| stimulus_package_-_assistance_for_individuals___households_-_update_1.pdf |
| stimulus_package_-_assistance_for_small_and_medium_businesses__1_.pdf |
1 April 2020
Coronavirus update - further stimulus announced - JobKeeper Payments
As you'll have likely seen in the press the government has announced some further stimulus measures in addition to those already announced and have also amended a key component for those seeking the JobSeeker allowance (please see below, towards the end of this email).
We've attached the previously announced measures for reference as they remain relevant, but the key additional measure announced yesterday is the JobKeeper Payment.
Unfortunately there's a bit of confusion around this so there's some further detail below based on what we know, but please contact our office if you need more information or guidance.
The current status of JobKeeper:
The below detail has been announced but it yet to pass parliament so there may be further refinements or detail to emerge.
What is JobKeeper?
It's a business support package with payments to be made to employers, not employees (however the payments must be on-paid to employees). The overall design of the policy is to assist employers in keeping employees on their books.
Eligible employers will qualify for a payment of $1,500 per fortnight per employee for a maximum of 6 months. Assuming that the legislation passes parliament, payments will begin from May 2020 but will be backdated to 30 March 2020.
Which employers are eligible?
Employers become eligible if their business turnover has reduced by more than 30% vs last year (if the business has less than $1 billion in turnover) or has reduced by more than 50% vs last year (if the business has turnover above $1 billion).
Employers can be a company, trust or not-for-profit and the indication is that it will also include the self employed and sole traders.
If the employer is eligible and registers then the payments must be passed onto their eligible employees.
Businesses must register for the benefit:
Only businesses that register for JobKeeper payments will be eligible. If the business doesn't register then they won't receive any payments irrespective of how much their turnover has been impacted by the coronavirus crisis.
Businesses can register via this link - https://www.ato.gov.au/general/gen/JobKeeper-payment/. The business will need to declare the impact on their turnover as well as all employees who are eligible for the payment. This will likely need to be updated monthly.
Which employees are eligible?
Any employee of the business as at 1 March 2020 is eligible if they continue to be employed or continue to be engaged by the business. This includes full time, part time and casuals (provided that the casual was employed by that business for at least 12 months as at 1 March 2020).
Employees who've been stood down are considered to be eligible but those made redundant are not eligible unless they've subsequently been rehired (and were employed at 1 March 2020).
Employees who work for more than 1 employer can only claim the benefit once. The indication is that they'll be able to claim from their "primary employer", which is the employer from whom they claim the tax-free threshold.
Employee earnings:
All eligible employees from all eligible registered businesses will receive the JobKeeper payment.
The benefit is intended to replace lost income for those who've been stood down, those who've have had their income reduced significantly and/or to provide a subsidy to employers to help them pay employees.
If an employee's current gross income is more than $1,500/fortnight then their employer need only pay the difference between the $1,500/fortnight JobKeeper payment and the employee's wage.
If an employee's current gross income is less than $1,500/fortnight (including those currently receiving no income) then they'll receive the full $1,500/fortnight benefit (even if that's more than they would otherwise normally receive).
Impact on superannuation, tax and social security:
The JobKeeper payments won't be eligible for superannuation contributions.
The JobKeeper payments will be treated as taxable income.
The JobKeeper payments will also be assessable income for Centrelink purposes (please refer below).
Can an employee receive the JobKeeper payment and also make a claim for the JobSeeker allowance?
Please note that the JobSeeker allowance was formally known as Newstart and those of a certain age would know it as "the dole".
It's important to note that the JobKeeper payment is assessable income in Centrelink's eyes and those receiving it must report that income to Centrelink.
The current cut off point for JobSeeker eligibility is $1,086.50 per fortnight (for a single person with no dependants). Hence, those receiving the JobKeeper payment won't be eligible for the JobSeeker allowance as their income will be too high.
What should you (or anyone you know) do if they're currently financially impacted?
As JobKeeper payments are only paid to registered businesses, it's suggested that those impacted by the crisis contact their employer to check if the employer qualifies and if they intend to register.
If their employer won't register or is unable to register for any reason then it's best to revert to the assistance available to individuals and families (please refer to the attached).
An important enhancement for those seeking the JobSeeker allowance:
Typically those applying for a JobSeeker benefit need to meet an income test and an assets test.
The government has already announced a temporary lifting of the assets test in response to the crisis but has now also introduced a more lenient (and sensible) treatment of income earned by the partner of someone seeking a JobSeeker allowance.
Previously if the partner of an applicant for the JobSeeker allowance earned more than $48,000 pa then the claim would be rejected. That threshold has now been lifted to $79,762 pa. The purpose of this is to capture some of those whose income has diminished or completely disappeared due to the crisis but who would otherwise have been precluded from support because of their partner's income.
Next steps:
Please contact our office if any further information is needed and we'll respond ASAP.
We've attached the previously announced measures for reference as they remain relevant, but the key additional measure announced yesterday is the JobKeeper Payment.
Unfortunately there's a bit of confusion around this so there's some further detail below based on what we know, but please contact our office if you need more information or guidance.
The current status of JobKeeper:
The below detail has been announced but it yet to pass parliament so there may be further refinements or detail to emerge.
What is JobKeeper?
It's a business support package with payments to be made to employers, not employees (however the payments must be on-paid to employees). The overall design of the policy is to assist employers in keeping employees on their books.
Eligible employers will qualify for a payment of $1,500 per fortnight per employee for a maximum of 6 months. Assuming that the legislation passes parliament, payments will begin from May 2020 but will be backdated to 30 March 2020.
Which employers are eligible?
Employers become eligible if their business turnover has reduced by more than 30% vs last year (if the business has less than $1 billion in turnover) or has reduced by more than 50% vs last year (if the business has turnover above $1 billion).
Employers can be a company, trust or not-for-profit and the indication is that it will also include the self employed and sole traders.
If the employer is eligible and registers then the payments must be passed onto their eligible employees.
Businesses must register for the benefit:
Only businesses that register for JobKeeper payments will be eligible. If the business doesn't register then they won't receive any payments irrespective of how much their turnover has been impacted by the coronavirus crisis.
Businesses can register via this link - https://www.ato.gov.au/general/gen/JobKeeper-payment/. The business will need to declare the impact on their turnover as well as all employees who are eligible for the payment. This will likely need to be updated monthly.
Which employees are eligible?
Any employee of the business as at 1 March 2020 is eligible if they continue to be employed or continue to be engaged by the business. This includes full time, part time and casuals (provided that the casual was employed by that business for at least 12 months as at 1 March 2020).
Employees who've been stood down are considered to be eligible but those made redundant are not eligible unless they've subsequently been rehired (and were employed at 1 March 2020).
Employees who work for more than 1 employer can only claim the benefit once. The indication is that they'll be able to claim from their "primary employer", which is the employer from whom they claim the tax-free threshold.
Employee earnings:
All eligible employees from all eligible registered businesses will receive the JobKeeper payment.
The benefit is intended to replace lost income for those who've been stood down, those who've have had their income reduced significantly and/or to provide a subsidy to employers to help them pay employees.
If an employee's current gross income is more than $1,500/fortnight then their employer need only pay the difference between the $1,500/fortnight JobKeeper payment and the employee's wage.
If an employee's current gross income is less than $1,500/fortnight (including those currently receiving no income) then they'll receive the full $1,500/fortnight benefit (even if that's more than they would otherwise normally receive).
Impact on superannuation, tax and social security:
The JobKeeper payments won't be eligible for superannuation contributions.
The JobKeeper payments will be treated as taxable income.
The JobKeeper payments will also be assessable income for Centrelink purposes (please refer below).
Can an employee receive the JobKeeper payment and also make a claim for the JobSeeker allowance?
Please note that the JobSeeker allowance was formally known as Newstart and those of a certain age would know it as "the dole".
It's important to note that the JobKeeper payment is assessable income in Centrelink's eyes and those receiving it must report that income to Centrelink.
The current cut off point for JobSeeker eligibility is $1,086.50 per fortnight (for a single person with no dependants). Hence, those receiving the JobKeeper payment won't be eligible for the JobSeeker allowance as their income will be too high.
What should you (or anyone you know) do if they're currently financially impacted?
As JobKeeper payments are only paid to registered businesses, it's suggested that those impacted by the crisis contact their employer to check if the employer qualifies and if they intend to register.
If their employer won't register or is unable to register for any reason then it's best to revert to the assistance available to individuals and families (please refer to the attached).
An important enhancement for those seeking the JobSeeker allowance:
Typically those applying for a JobSeeker benefit need to meet an income test and an assets test.
The government has already announced a temporary lifting of the assets test in response to the crisis but has now also introduced a more lenient (and sensible) treatment of income earned by the partner of someone seeking a JobSeeker allowance.
Previously if the partner of an applicant for the JobSeeker allowance earned more than $48,000 pa then the claim would be rejected. That threshold has now been lifted to $79,762 pa. The purpose of this is to capture some of those whose income has diminished or completely disappeared due to the crisis but who would otherwise have been precluded from support because of their partner's income.
Next steps:
Please contact our office if any further information is needed and we'll respond ASAP.
| stimulus_package_-_assistance_for_individuals___households__1_.pdf |
| stimulus_package_-_assistance_for_small_and_medium_businesses__1_.pdf |
23 March 2020
Coronavirus update - government support and stimulus measures
Sadly it seems that barely an hour goes by without further distressing news about COVID-19.
You will no doubt have seen the Australian government's response announced yesterday. Given the breadth of the measures we've summarised them into the attached documents - one specific to individuals & households and the other specific to small and medium businesses.
The measures are intended to provide support to those requiring it, while also encouraging businesses to continue trading and, where able, to invest in capital and staff.
These initiatives build on those announced on 12 March 2020 but it's highly unlikely that they'll be the last of the stimulus measures. We'll keep you informed, but the key takeaways from the current measures are:
For individuals & households
For small and medium businesses
The intent of all measures is to minimise the financial burden on those in need and to also boost the economy as much as possible.
We've already been contacted by many clients seeking assistance and we encourage anyone who's in need of advice to please be in touch. Some of the announced measures will apply automatically to those who are eligible, but if you're unsure or need clarity then please let us know.
Likewise we'll do our best to continue to communicate the economic and financial fallout from the crisis, but if you need more information about the specific impact on your financial position then please contact us.
As always please take whatever precautions you feel are necessary to look after your health. The government is taking increasingly stringent steps to manage the spread of the virus and it's likely that these will increase in the coming days, weeks and months.
In line with that we've made the decision that all staff of Next Level Financial Services will work remotely for the foreseeable future.
This means that our offices will be closed, however we have the resources to work from our homes and will be contactable as normal. However, please note that if calling our office line - 03 9188 4254 - it's likely that you'll go through to our voicemail service. Please leave a message and we'll respond ASAP.
We'll also be contacting clients with whom we had scheduled face to face meeting to make other arrangements.
However, it's very much business as usual aside from our physical absence from the office.
You will no doubt have seen the Australian government's response announced yesterday. Given the breadth of the measures we've summarised them into the attached documents - one specific to individuals & households and the other specific to small and medium businesses.
The measures are intended to provide support to those requiring it, while also encouraging businesses to continue trading and, where able, to invest in capital and staff.
These initiatives build on those announced on 12 March 2020 but it's highly unlikely that they'll be the last of the stimulus measures. We'll keep you informed, but the key takeaways from the current measures are:
For individuals & households
- An ability to gain early access to superannuation (up to $20,000) in some cases;
- A reduction in the minimum required drawdown from superannuation pension accounts;
- An additional $750 payment to eligible Centrelink recipients - among other social security enhancements;
- A further reduction in deeming rates from 1 May 2020.
For small and medium businesses
- An extension of the cash flow boost for those who employee staff;
- Support for those who employ apprentices or trainees;
- Bank and government support for businesses that have loans or who are seeking credit;
- Extension of the asset write off and asset depreciation allowances.
The intent of all measures is to minimise the financial burden on those in need and to also boost the economy as much as possible.
We've already been contacted by many clients seeking assistance and we encourage anyone who's in need of advice to please be in touch. Some of the announced measures will apply automatically to those who are eligible, but if you're unsure or need clarity then please let us know.
Likewise we'll do our best to continue to communicate the economic and financial fallout from the crisis, but if you need more information about the specific impact on your financial position then please contact us.
As always please take whatever precautions you feel are necessary to look after your health. The government is taking increasingly stringent steps to manage the spread of the virus and it's likely that these will increase in the coming days, weeks and months.
In line with that we've made the decision that all staff of Next Level Financial Services will work remotely for the foreseeable future.
This means that our offices will be closed, however we have the resources to work from our homes and will be contactable as normal. However, please note that if calling our office line - 03 9188 4254 - it's likely that you'll go through to our voicemail service. Please leave a message and we'll respond ASAP.
We'll also be contacting clients with whom we had scheduled face to face meeting to make other arrangements.
However, it's very much business as usual aside from our physical absence from the office.
| stimulus_package_-_assistance_for_small_and_medium_businesses.pdf |
| stimulus_package_-_assistance_for_individuals___households.pdf |
13 March 2020
Coronavirus and market update
As markets continue to tumble I'd like to provide a brief update below with some discussion on the potential impact and our recommended response.
For those without much time to read, I'll repeat a line that appears below to best summarise our thoughts - our response to this crisis is exactly in line with our previous advice. It's never easy seeing losses, but we need to beware of the potential costs of taking steps that deviate from established strategies. We advocate long term investment and we don't advise being distracted by shorter term events, however much noise there may be in the media or elsewhere.
For those who want to read more:
What's happening and why?
Many global sharemarkets, including our own, have fallen by around 20% in the last week and by around 30% in the last month. The main reason, as you're no doubt aware, is concern about coronavirus.
Share markets fear many things, one of which is uncertainty. While the current mortality rate from coronavirus isn't as high as previous pandemics (eg: SARS), much remains unknown about the disease and its potential spread. Following from that is the inevitable impact that the virus will have on global economies. In crises such this, the market looks to the government and central banks to respond but their ability to do so will be impact by existing debt (governments) and by the fact that interest rates are already very low (central banks).
Hence, the market predicts that global economies will fall into recession, which in real terms could mean the collapse of some businesses and job losses. This will be exacerbated in some industries if travel bans remain in place for an extended period and/or if more stringent bans on public gatherings are enacted.
Markets also trade heavily on sentiment and ongoing media (including social media) comment, the actual or threatened cancellation of high profile events, possible school closures and some high profile people contracting the virus all adds to the market's fears.
And, to top it off, sustained moves in share prices can cause the market to 'feed on itself'. There are some investors who use algorithms or charts to try to predict what the market will do next. A fall or rise in markets to certain levels can trigger these traders to follow the momentum, which only adds to the fall (or rise) already seen.
To put some perspective on what we're seeing.
As I mentioned in our last email on this issue, both the US and Australian markets were at or close to all time highs before the virus hit (which in itself may be a reason for some of the sell off that we've seen). To 20 February 2020, the Australian market (S&P ASX 200) had risen by around 7% since the start of the year and by around 16% over the preceding 12 months.
Our market was last at today's levels in February 2016, after which we saw a largely uninterrupted rally of around 45%. Even allowing for recent falls, we're still around 53% above the low point of the Global Financial Crisis (February 2009) and around 25% above the August 2011 'correction'.
So generally speaking those who've held long term positions in Australian (and global) shares have seen a strong decade of growth even allowing for the current panic.
What does all this mean for your investments?
There are two aspects of investing that we adhere to very strongly. One is diversification (not having 'all your eggs in one basket') and the other is sticking to your 'risk profile'.
These concepts are inter-connected and effectively mean that when we recommend investments we aim to spread risk across a number of investments and across all sectors of the market. Hence, if one investment or one type of asset suffers losses then it doesn't mean that your whole portfolio is impacted.
So while the media focuses its attention on share markets, such investments only make up part of your overall portfolio. 'Conservative' investors will only have around one-third of their portfolios invested in shares (here and overseas). For 'balanced' investors that figure is 50%-60% and for 'growth' investors it will be 70%-90% depending on their appetite for risk.
Very few portfolios will escape losses in these markets, but please remember that not all of your portfolio is directly exposed to share markets. We often recommend PIMCO as a leading fund manager in fixed interest (bond) markets, and they're keeping us regularly updated on the performance of the funds that they're managing. While bond markets aren't immune from the crisis, they're far less volatile than share markets and PIMCO tells us that they're expecting positive returns from their key funds for the financial year to date.
What do we recommend as a course of action?
The best defense against volatile markets is being well diversified and adhering to your risk tolerance - as above. It doesn't mean that portfolios won't decline in value but it does mean that you're not concentrating risk in any one part of the market.
Some commentators suggest that investors should respond by selling up their investments and holding cash. My view is that in many cases such a course of action is likely to be a mistake.
Firstly, the current return on cash investments is extremely low. Most long term cash holdings lose value in real terms when rates are this low (and likely to go lower).
Secondly, those waiting for the market to turn have the problem of finding the right time to buy back in. In the time that I've been writing this our market has recovered 6% of today's losses and is now "only" 1% down. We can expect ongoing extreme volatility and many 'false dawns'.
Thirdly, those selling are locking in losses, incurring transaction costs and possibly locking in adverse tax consequences. These are costs that could have been avoided and that they need to recover when they decide to re-enter the market.
Hence, our response is exactly in line with our previous advice. It's never easy seeing losses, but we need to beware of the potential costs of taking steps that deviate from established strategies. We advocate long term investment and we don't advise being distracted by shorter term events, however much noise there may be in the media or elsewhere.
When will it all end?
Life would be a lot easier if I knew the answer to that question.
However, we can possibly take a cue from China where the reported rate of 'new cases of coronavirus per day' has slowed dramatically since 3 March. In line with that, their share market began a recovery on that same day and, while still trending downwards, has seen nowhere near the same proportional falls as many other markets (including Australia) over the last fortnight.
That's led some to speculate that the same pattern will repeat in other markets, hence a decline in 'new cases per day' here and elsewhere will be a good sign.
Unfortunately it's possible that we're some way off that and that we've not yet seen the worst. Further volatility in coming days and weeks can be expected, but all else being equal we'll maintain the approach of looking at the bigger picture and putting things into perspective.
Lastly.
If you have any concerns at all about your investments and how they're positioned then I urge you to please contact our office and we'll be extremely happy to talk it through with you. Each case is unique and our goal is to ensure that you're as comfortable as possible with how your finances are tracking.
Aside from that please take whatever precautions you feel are necessary to look after your health. We intend to keep our offices open until we're told otherwise but we're always contactable by phone or email.
For those without much time to read, I'll repeat a line that appears below to best summarise our thoughts - our response to this crisis is exactly in line with our previous advice. It's never easy seeing losses, but we need to beware of the potential costs of taking steps that deviate from established strategies. We advocate long term investment and we don't advise being distracted by shorter term events, however much noise there may be in the media or elsewhere.
For those who want to read more:
What's happening and why?
Many global sharemarkets, including our own, have fallen by around 20% in the last week and by around 30% in the last month. The main reason, as you're no doubt aware, is concern about coronavirus.
Share markets fear many things, one of which is uncertainty. While the current mortality rate from coronavirus isn't as high as previous pandemics (eg: SARS), much remains unknown about the disease and its potential spread. Following from that is the inevitable impact that the virus will have on global economies. In crises such this, the market looks to the government and central banks to respond but their ability to do so will be impact by existing debt (governments) and by the fact that interest rates are already very low (central banks).
Hence, the market predicts that global economies will fall into recession, which in real terms could mean the collapse of some businesses and job losses. This will be exacerbated in some industries if travel bans remain in place for an extended period and/or if more stringent bans on public gatherings are enacted.
Markets also trade heavily on sentiment and ongoing media (including social media) comment, the actual or threatened cancellation of high profile events, possible school closures and some high profile people contracting the virus all adds to the market's fears.
And, to top it off, sustained moves in share prices can cause the market to 'feed on itself'. There are some investors who use algorithms or charts to try to predict what the market will do next. A fall or rise in markets to certain levels can trigger these traders to follow the momentum, which only adds to the fall (or rise) already seen.
To put some perspective on what we're seeing.
As I mentioned in our last email on this issue, both the US and Australian markets were at or close to all time highs before the virus hit (which in itself may be a reason for some of the sell off that we've seen). To 20 February 2020, the Australian market (S&P ASX 200) had risen by around 7% since the start of the year and by around 16% over the preceding 12 months.
Our market was last at today's levels in February 2016, after which we saw a largely uninterrupted rally of around 45%. Even allowing for recent falls, we're still around 53% above the low point of the Global Financial Crisis (February 2009) and around 25% above the August 2011 'correction'.
So generally speaking those who've held long term positions in Australian (and global) shares have seen a strong decade of growth even allowing for the current panic.
What does all this mean for your investments?
There are two aspects of investing that we adhere to very strongly. One is diversification (not having 'all your eggs in one basket') and the other is sticking to your 'risk profile'.
These concepts are inter-connected and effectively mean that when we recommend investments we aim to spread risk across a number of investments and across all sectors of the market. Hence, if one investment or one type of asset suffers losses then it doesn't mean that your whole portfolio is impacted.
So while the media focuses its attention on share markets, such investments only make up part of your overall portfolio. 'Conservative' investors will only have around one-third of their portfolios invested in shares (here and overseas). For 'balanced' investors that figure is 50%-60% and for 'growth' investors it will be 70%-90% depending on their appetite for risk.
Very few portfolios will escape losses in these markets, but please remember that not all of your portfolio is directly exposed to share markets. We often recommend PIMCO as a leading fund manager in fixed interest (bond) markets, and they're keeping us regularly updated on the performance of the funds that they're managing. While bond markets aren't immune from the crisis, they're far less volatile than share markets and PIMCO tells us that they're expecting positive returns from their key funds for the financial year to date.
What do we recommend as a course of action?
The best defense against volatile markets is being well diversified and adhering to your risk tolerance - as above. It doesn't mean that portfolios won't decline in value but it does mean that you're not concentrating risk in any one part of the market.
Some commentators suggest that investors should respond by selling up their investments and holding cash. My view is that in many cases such a course of action is likely to be a mistake.
Firstly, the current return on cash investments is extremely low. Most long term cash holdings lose value in real terms when rates are this low (and likely to go lower).
Secondly, those waiting for the market to turn have the problem of finding the right time to buy back in. In the time that I've been writing this our market has recovered 6% of today's losses and is now "only" 1% down. We can expect ongoing extreme volatility and many 'false dawns'.
Thirdly, those selling are locking in losses, incurring transaction costs and possibly locking in adverse tax consequences. These are costs that could have been avoided and that they need to recover when they decide to re-enter the market.
Hence, our response is exactly in line with our previous advice. It's never easy seeing losses, but we need to beware of the potential costs of taking steps that deviate from established strategies. We advocate long term investment and we don't advise being distracted by shorter term events, however much noise there may be in the media or elsewhere.
When will it all end?
Life would be a lot easier if I knew the answer to that question.
However, we can possibly take a cue from China where the reported rate of 'new cases of coronavirus per day' has slowed dramatically since 3 March. In line with that, their share market began a recovery on that same day and, while still trending downwards, has seen nowhere near the same proportional falls as many other markets (including Australia) over the last fortnight.
That's led some to speculate that the same pattern will repeat in other markets, hence a decline in 'new cases per day' here and elsewhere will be a good sign.
Unfortunately it's possible that we're some way off that and that we've not yet seen the worst. Further volatility in coming days and weeks can be expected, but all else being equal we'll maintain the approach of looking at the bigger picture and putting things into perspective.
Lastly.
If you have any concerns at all about your investments and how they're positioned then I urge you to please contact our office and we'll be extremely happy to talk it through with you. Each case is unique and our goal is to ensure that you're as comfortable as possible with how your finances are tracking.
Aside from that please take whatever precautions you feel are necessary to look after your health. We intend to keep our offices open until we're told otherwise but we're always contactable by phone or email.
12 March 2020
Government stimulus and changes to Centrelink deeming rates
Among the current panic about coronavirus (which seems to be impacting all facets of life, not just the sharemarket) you may have noticed that the government today issued a stimulus package. The objective is to inject cash into the economy in the hope that people will start spending.
Without listing all facets of the package, one that will have a direct impact is a $750 cash payment to Centrelink income support recipients (eg: those receiving the Centrelink age pension).
There was however another announcement that hasn't received as much press, but which is of importance to all those who are on a Centrelink benefit or who hold a means tested health card (such as the Commonwealth Seniors Health Card - CSHC).
Effective 1 May 2020, the deeming rate that Centrelink applies to financial assets will be reduced.
The 'deeming rate' is the return that Centrelink applies to your financial assets (such as bank accounts, investments and some superannuation accounts) to determine how much income they regard you as earning. In turn this level of income can dictate your entitlement to benefits such as the age pension and is also used in the means test for the CSHC.
Currently, Centrelink deems that you earn 1% on the first $86,200 of your combined assets and 3% on any balance over that amount. So, a Centrelink recipient with $200,000 invested would be deemed to earn $4,276 income (the actual income return is irrelevant for Centrelink purposes).
From 1 May 2020 the deeming rate will be reduced to 0.5% on the first $86,200 of combined assets and 2.5% on any additional balance. Hence, for the same $200,000 invested the income deemed by Centrelink will now be $3,276.
What does this mean?
Firstly, those whose age pension benefit is determined by the income test will likely receive an increase in their benefit payment if they're not already receiving the maximum possible allowance.
Also, those who don't qualify for the age pension but are entitled to the CSHC should find the card easier to qualify for as their deemed income will fall further under the income tested limit. And some who may not currently qualify for the CSHC because their deemed income is too high may now fall under the qualification limit.
What happens next?
The above measures, and others, will be introduced to parliament at the next sitting commencing on 23 March 2020, however given the current environment I'll be extremely surprised if they don't receive bi-partisan support.
Assuming that this is the case then those who are entitled to the $750 payment will automatically receive this in mid-April 2020. Those who will be positively impacted by the change in deeming rates will be advised by Centrelink - we'll let you know as soon as we receive that notification - and changes will be effective from May 2020 onward.
If you're unsure how these measures might impact you or if you'd like more information then please contact our office on 03 9188 4254.
Without listing all facets of the package, one that will have a direct impact is a $750 cash payment to Centrelink income support recipients (eg: those receiving the Centrelink age pension).
There was however another announcement that hasn't received as much press, but which is of importance to all those who are on a Centrelink benefit or who hold a means tested health card (such as the Commonwealth Seniors Health Card - CSHC).
Effective 1 May 2020, the deeming rate that Centrelink applies to financial assets will be reduced.
The 'deeming rate' is the return that Centrelink applies to your financial assets (such as bank accounts, investments and some superannuation accounts) to determine how much income they regard you as earning. In turn this level of income can dictate your entitlement to benefits such as the age pension and is also used in the means test for the CSHC.
Currently, Centrelink deems that you earn 1% on the first $86,200 of your combined assets and 3% on any balance over that amount. So, a Centrelink recipient with $200,000 invested would be deemed to earn $4,276 income (the actual income return is irrelevant for Centrelink purposes).
From 1 May 2020 the deeming rate will be reduced to 0.5% on the first $86,200 of combined assets and 2.5% on any additional balance. Hence, for the same $200,000 invested the income deemed by Centrelink will now be $3,276.
What does this mean?
Firstly, those whose age pension benefit is determined by the income test will likely receive an increase in their benefit payment if they're not already receiving the maximum possible allowance.
Also, those who don't qualify for the age pension but are entitled to the CSHC should find the card easier to qualify for as their deemed income will fall further under the income tested limit. And some who may not currently qualify for the CSHC because their deemed income is too high may now fall under the qualification limit.
What happens next?
The above measures, and others, will be introduced to parliament at the next sitting commencing on 23 March 2020, however given the current environment I'll be extremely surprised if they don't receive bi-partisan support.
Assuming that this is the case then those who are entitled to the $750 payment will automatically receive this in mid-April 2020. Those who will be positively impacted by the change in deeming rates will be advised by Centrelink - we'll let you know as soon as we receive that notification - and changes will be effective from May 2020 onward.
If you're unsure how these measures might impact you or if you'd like more information then please contact our office on 03 9188 4254.
June 2019
EOFY Strategies 2018-2019
| key_eofy_strategies__2018-19_.pdf |
May 2019
ALP federal Election Policies
It’s a little over a week until the Federal Election. As the opinion polls and betting agencies are suggesting a change of government, the below link is to an article that outlines the key financial policies that the opposition (ALP) has put forward as part of their agenda.
https://sway.office.com/jdOCyWTu90YWRhbP?ref=Link
As there's much that's still unknown the content is purely for information purposes only at this time.
It’s a little over a week until the Federal Election. As the opinion polls and betting agencies are suggesting a change of government, the below link is to an article that outlines the key financial policies that the opposition (ALP) has put forward as part of their agenda.
https://sway.office.com/jdOCyWTu90YWRhbP?ref=Link
As there's much that's still unknown the content is purely for information purposes only at this time.
March 2019
Is your Emergency Services Superannuation Plan (ESSS) working for you?
It has come to our attention in recent months that many ESSS members know their funds offer great end results but everything that happens in between commencing work up until retirement isn’t broadly understood.
Next Level has always had a very successful relationship with ESSS members and find most people are unable to answer all the below questions in regards to their own fund:
Do you know how your final benefit is calculated? Are you making the most of opportunities to maximise your retirement savings?
The ESSS is a hybrid scheme consisting of a defined benefit fund component and an accumulation fund component. The key difference between a defined benefit plan and an accumulation plan is the manner in which the final benefit is calculated.
Do you know when you will reach your maximum benefit multiple? Or if working part time will impact your final benefit in the lead up to retirement? What is the difference between your salary and average superable salary?
Are your contributions to the DB plan paying for other members’ retirement benefits?
Once a member reaches their maximum benefit multiple any additional funds contributed will not enhance the member’s retirement balance.
It’s critical to seek advice on how your contributions can be used to benefit you when you are approaching or have reached this point.
Have you given any thought to the options for your superannuation when you retire? Will you be paying too much?
ESSS can be very cost effective at different points in a members working life but is it still the best option for you in retirement? It’s critical to obtain advice on the options for your superannuation in retirement. Even a small difference in fees can make a significant difference to the value of your savings over the duration of your retirement
Will the defined benefit provide sufficiently for your retirement? Are you going to have enough to live on?
Did you know ESSS does not guarantee an income in retirement – it merely guarantees the means by which a retirement or resignation benefit will be calculated.
Will you have enough funds to maintain your lifestyle in retirement? What will you do with your lump sum to ensure it lasts the duration of your retirement? How much income can you expect to earn off your lump sum each year?
These are all questions we answer for clients. We urge people to seek autonomous information and advice when they are approaching their maximum benefit multiple or retirement to ensure they are setting themselves up to meet their goals and sustain their desired lifestyle in retirement.
For further information or to book a complimentary consultation please contact Jessica Check on (03)9188 4254 or [email protected].
Next Level has always had a very successful relationship with ESSS members and find most people are unable to answer all the below questions in regards to their own fund:
Do you know how your final benefit is calculated? Are you making the most of opportunities to maximise your retirement savings?
The ESSS is a hybrid scheme consisting of a defined benefit fund component and an accumulation fund component. The key difference between a defined benefit plan and an accumulation plan is the manner in which the final benefit is calculated.
Do you know when you will reach your maximum benefit multiple? Or if working part time will impact your final benefit in the lead up to retirement? What is the difference between your salary and average superable salary?
Are your contributions to the DB plan paying for other members’ retirement benefits?
Once a member reaches their maximum benefit multiple any additional funds contributed will not enhance the member’s retirement balance.
It’s critical to seek advice on how your contributions can be used to benefit you when you are approaching or have reached this point.
Have you given any thought to the options for your superannuation when you retire? Will you be paying too much?
ESSS can be very cost effective at different points in a members working life but is it still the best option for you in retirement? It’s critical to obtain advice on the options for your superannuation in retirement. Even a small difference in fees can make a significant difference to the value of your savings over the duration of your retirement
Will the defined benefit provide sufficiently for your retirement? Are you going to have enough to live on?
Did you know ESSS does not guarantee an income in retirement – it merely guarantees the means by which a retirement or resignation benefit will be calculated.
Will you have enough funds to maintain your lifestyle in retirement? What will you do with your lump sum to ensure it lasts the duration of your retirement? How much income can you expect to earn off your lump sum each year?
These are all questions we answer for clients. We urge people to seek autonomous information and advice when they are approaching their maximum benefit multiple or retirement to ensure they are setting themselves up to meet their goals and sustain their desired lifestyle in retirement.
For further information or to book a complimentary consultation please contact Jessica Check on (03)9188 4254 or [email protected].
14 February 2019
Our thoughts on the Hayne Royal Commission
You may have recently been reading about the report prepared by Commissioner Hayne following the Royal Commission into the Financial Services industry.
The hearings covered a wide range of issues, including financial planning, and the report will change the landscape of the industry and the manner in which advice is provided.
We've prepared a summary of our thoughts, which can be accessed via this link - https://sway.office.com/oh1GNB1LXoIZ3UTz?ref=Link.
Please contact our office with any queries or concerns.
The hearings covered a wide range of issues, including financial planning, and the report will change the landscape of the industry and the manner in which advice is provided.
We've prepared a summary of our thoughts, which can be accessed via this link - https://sway.office.com/oh1GNB1LXoIZ3UTz?ref=Link.
Please contact our office with any queries or concerns.
October 2018
Market Update
There’s ongoing commentary about the share market, here and overseas.
Despite ongoing “noise” in the press our long term view remains positive and we see opportunities in Australia and globally. We certainly don’t advocate panic or a change of direction.
Our observations are:
However, we expect volatility to continue:
Overall:
Despite ongoing “noise” in the press our long term view remains positive and we see opportunities in Australia and globally. We certainly don’t advocate panic or a change of direction.
Our observations are:
- As at the close of trade on 29 October, the ASX200 is trading at around its long term ‘fair value’ (based on price-earnings multiple of 14.2x). This measure market values since 2000, inclusive of the GFC period.
- Hence, on the whole we don’t consider the Australian market to be significantly over or under valued. Recent movements are as much a result of overseas issues - eg: rising interest rates in the US and some political unrest.
- We use the words “on the whole” as the Australian market needs to be considered on a sector by sector basis. Financial stocks, especially the banks, appear undervalued but there are reasons for that. Resources stocks (eg: miners) are also trading below long term averages.
- The US market has recently fallen victim to a combination of rising interest rates (which is generally a bad sign for stocks) and the impact of economic stimulus such as tax cuts dissipating. We still consider it to be an overvalued market.
- Of other global markets, Asia seems the most undervalued.
However, we expect volatility to continue:
- Major central banks (US & Europe) will continue to unwind their support of their economies. This will create nervousness but at this stage inflationary pressures remain low.
- Political risk remains high. The US mid-terms will be held next week, the US/China trade war could worsen and the Iranian oil embargo comes into force in November. Brexit also remains clouded and will continue to impact the UK and Europe in the short term.
- Our own election is due next year and a protracted, largely negative campaign from the major parties won’t be well received by the market.
Overall:
- We continue to take a long term view and we won’t be distracted by “market noise”.
- Market fundamentals in the longer term remain strong and most key global economies, as well as our own, are on a reasonably strong footing.
June 2018
Key EOFY Strategies 2017-2018
The period to June 30 is the last opportunity to take advantage of strategies to boost superannuation and minimise tax. Below is a quick reference guide to some opportunities to consider – as always please call our office for further information.
| key_eofy_strategies__2017-18_.pdf |
8th September 2017
New Financial Services Guide
All clients have recently been emailed a copy of our updated Financial Services Guide (FSG). The document reflects the appointment of our colleague, Jessica Check, as an authorised financial advisor with Next Level Financial Services. Jess has been with us for the last 3 years and has done an outstanding job as our Client Services Manager in that time. Jess's appointment as an advisor is step in her career and further broadens our capacity to provide pro-active advice across a board range of financial services. Jess will continue with many of her existing tasks while also broadening her role to include the provision of advice. The updated FSG is for your reference only and doesn't require any action or response from you. The document doesn't alter the services that we provide to you in any way. A copy of the document can be found in the Services section of this website. Please contact our office if you have any queries.
15th June 2017
New telephone number for Next Level Financial Services
Next Level Financial Services has a new telephone number for both the Balwyn and Mount Eliza offices.
The new telephone number is 03 9188-4254. The old telephone number will be redirected to our offices.
The new telephone number is 03 9188-4254. The old telephone number will be redirected to our offices.
29th May 2017
New office for Next Level Financial Services in Mount Eliza
Next Level Financial Services is pleased to announce the opening of their new office in Mount Eliza. The office is situated in the Mount Eliza village, upstairs in the Ranelagh Arcarde. You can find us in Suite 10, 20-22 Ranelagh Drive, Mount Eliza. Our new telephone number for both the Balwyn office and Mount Eliza office is 03 9188-4254.
18th April 2017
Senior Financial Advisor joins Next Level Financial Services
We are delighted to advise that Gavin Thompson has joined Next Level Financial Services as a Senior Financial Advisor.
Gavin will be based predominantly in our Balwyn office but will also work from our new Mount Eliza office, which will open in May 2017.
Gavin brings extensive knowledge and experience, incorporating many years working directly with a broad range of clients in financial planning, technical advice and investments.
Gavin's expertise in strategic advice and investments will be invaluable as we embark upon a period of extensive regulatory change amid global political uncertainty.
Gavin will be based predominantly in our Balwyn office but will also work from our new Mount Eliza office, which will open in May 2017.
Gavin brings extensive knowledge and experience, incorporating many years working directly with a broad range of clients in financial planning, technical advice and investments.
Gavin's expertise in strategic advice and investments will be invaluable as we embark upon a period of extensive regulatory change amid global political uncertainty.
6th March 2017
Superannuation changes effective July 2017:
On 1 July 2017, some major changes to the superannuation system will come into force. These are summarised below;
Issue |
Current rules |
Post 1 July 2017 |
Comment / Opportunity |
Pre-tax contributions |
Up to $35,000 pa for those over 49. Up to $30,000 pa for those under 49. |
Up to $25,000 pa for everyone. |
Review your super salary sacrifice arrangements to ensure you do not exceed the new cap. |
Personal tax deductible contributions |
You can only claim a personal tax deduction for a super contribution when your income as an employee is less than 10 per cent of your total income. |
It will be possible to make personal tax deductible super contributions regardless of your employment status. |
A Super contribution can be the simplest and most effective tax deduction available. Consider contributing a capital gain, savings, bonuses or investment proceeds into super and receive a tax deduction. |
Post-tax contributions |
Up to $180,000 pa or $540,000 over 3 years (if under 65) |
Up to $100,000 pa or $300,000 over 3 years (if under 65) |
Given the reduction in the contribution cap, it may be appropriate to make a contribution before 30 June 2017. |
Superannuation ‘transfer balance cap’ |
There’s no limit to the amount that can be transferred from a superannuation accumulation account to a superannuation pension account |
The maximum that can be transferred into a superannuation pension account will be limited to $1.6 million per person |
Those with amounts in excess of $1.6 million will need to determine the most tax effective means of managing the excess – ie: within a superannuation accumulation account or outside superannuation |
Superannuation Lifetime Limit |
No limit |
Anyone who has a total superannuation balance of more than $1.6 million will no longer be able to make post tax contributions to superannuation |
Amounts exceeding $1.6 million won’t have to be withdrawn from super. The earnings on the excess balance will only be taxed at 15%. A couple can have a combined balance of $3.2 million so therefore it may be worthwhile considering superannuation splitting. |
Spouse Offset |
The annual cut-out income threshold that determines eligibility is $13,800. |
The annual cut-out income threshold that determines eligibility will be increased to $40,000. |
You may be eligible for a tax offset of up to $540 if you make a $3,000 contribution on behalf of your non-working or low-income-earning spouse. |
Transition to Retirement Pensions |
Earnings from investments held in ‘transition to retirement’ pensions are tax free. |
Earnings from investments held in ‘transition to retirement’ pensions will be taxed at 15%. |
Review suitability of any existing TTR pension. |
Additional contribution tax |
An additional 15% contribution tax (total of 30%) is payable for people with incomes greater than $300,000. |
The additional 15% contribution tax will apply for people with incomes greater than $250,000. |
A super contribution tax of 30% remains significantly lower than the top marginal tax rate of 49% (Inc. Medicare) |
Comment
While the changes are significant, on balance we believe they are fair and reasonable and that with appropriate planning, superannuation continues to provide the most effective retirement planning structure for investing.
1.Superannuation contributions
The changes to the contribution caps and the introduction of the $1.6 million lifetime limit means changes need to be made to how we utilise super. As a result of the changes we suggest you consider the following;
2.Superannuation is not just for high income earners.
There is a misconception that superannuation only benefits high income earners, however the 3 strategies below are available to low income earners and should be considered;
- Superannuation Co contribution
The Government’s tax-free co-contribution is available for any person who receives income from employment or self-employment and earns less than $51,021 a year in the 2016/2017 financial year, and makes a non-concessional (after-tax) contribution to their super fund.
If you earn $36,021 or less (for the 2016/2017 year), the federal government pays $0.50 (50 cents) for every dollar you contribute to your super fund in after-tax dollars, up to a maximum of $500 a year.
- Low Income Tax Offset
Individuals with an adjusted taxable income of up to $37,000 will receive a refund into their superannuation account of the tax paid on their concessional superannuation contributions up to a cap of $500.
- Spouse Offset
From 1 July 2017, if your spouse earns less than $40,000 and you make a $3,000 super contribution on their behalf you may be eligible to receive a tax offset of up to $540.
Taking advantage of the above concessions provides a total benefit of up to $1,540 pa
If you have any queries about the superannuation changes and how you will be impacted please don’t hesitate to contact one of our Financial Advisors
on 03 9188 4254.
While the changes are significant, on balance we believe they are fair and reasonable and that with appropriate planning, superannuation continues to provide the most effective retirement planning structure for investing.
1.Superannuation contributions
The changes to the contribution caps and the introduction of the $1.6 million lifetime limit means changes need to be made to how we utilise super. As a result of the changes we suggest you consider the following;
- Take advantage of current contribution caps which reduce on 30 June 2017.
- Contribute more regularly and start making extra contributions earlier.
- Your super balance should be viewed together with your spouses account as combined you have an effective lifetime limit of $3.2 million.
- Consideration should be given to contribution splitting and spouse contributions.
2.Superannuation is not just for high income earners.
There is a misconception that superannuation only benefits high income earners, however the 3 strategies below are available to low income earners and should be considered;
- Superannuation Co contribution
The Government’s tax-free co-contribution is available for any person who receives income from employment or self-employment and earns less than $51,021 a year in the 2016/2017 financial year, and makes a non-concessional (after-tax) contribution to their super fund.
If you earn $36,021 or less (for the 2016/2017 year), the federal government pays $0.50 (50 cents) for every dollar you contribute to your super fund in after-tax dollars, up to a maximum of $500 a year.
- Low Income Tax Offset
Individuals with an adjusted taxable income of up to $37,000 will receive a refund into their superannuation account of the tax paid on their concessional superannuation contributions up to a cap of $500.
- Spouse Offset
From 1 July 2017, if your spouse earns less than $40,000 and you make a $3,000 super contribution on their behalf you may be eligible to receive a tax offset of up to $540.
Taking advantage of the above concessions provides a total benefit of up to $1,540 pa
If you have any queries about the superannuation changes and how you will be impacted please don’t hesitate to contact one of our Financial Advisors
on 03 9188 4254.