October at Plus 1

October at Plus 1

OCTOBER AT PLUS 1

VFF Dairy Farmers Grant entries closing 29th October

Dairy farmers located in Victoria, the Riverina area of New South Wales, eastern South Australia and Tasmania may be eligible for grants of $5,000 to $10,000 to spend on projects to improve their farming business. Priority will be given to projects which promote infrastructure development, resilience building, management planning and sustainability of the industry particularly in context of drought and dry conditions. Applications close on the 29th of October 2018, so please give us a call if you would like any further information.

Due Dates for November

7th – Lodge and pay October 2018 monthly payroll tax
21th – Lodge and pay October 2018 monthly Business Activity Statement
25th – Lodge and pay September 2018 Qtr Business Activity Statement
28th – Lodge and pay September 2018 Qtr Superannuation Guarantee Charge Statement

ASIC Drought Relief for Effected Farmers

ASIC are offering relief to drought effected farmers with regards to company-related fees which may be payable. If you are currently effected by the drought, you may be able to review your fees with ASIC and organise alternative payment options.

Depending on your circumstances, ASIC will either set up an alternative payment arrangement or waive the fee altogether. To receive this relief from ASIC you must provide them with details of your current situation and evidence supporting this.

For more information on what  ASIC are offering, please view the below link.
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-289mr-asic-fee-relief-and-financial-counselling-for-the-drought-affected/

Fairwork Ombudsman – Preparing for Christmas and New Years

Are you gearing up for the holiday period?
Christmas casuals can help you get through the end of year madness, but its important to get the right person for the job. Our guide will help you through each step of the hiring process and make sure they hit the ground running. Full article here.

 

 

Or are you winding down?
Before you shut up shop for the holidays read this. It’ll make sure you’re up to date about shut downs, public holidays and directing staff to take leave. Full article here.
Myth: Out of hours meetings aren’t paid
Just because it’s out of hours and catered, doesn’t mean it’s not work time. All compulsory meetings are paid work time. Check out some other workplace myths we’re busting. Full article is here.

 

 

Note: The above articles are provided to you by fairwork.gov.au

EMMA’S FINANCIAL PLANNING QUOTE OF THE DAY

As you near retirement, it’s natural to become a more conservative investor with a desire to preserve your investment. We can help you understand the difference between income and total-return investment strategies, and why maintaining a balanced approach is key to preserving your portfolio through your retirement.

Looking for financial advice? Contact Emma for your FREE Financial Planning consultation on (03) 5833 3000.

PLUS 1 – PROUDLY SUPPORTING

If you have any sponsorship queries contact us at hr@plus1group.com.au 

Disclaimer: The advice provided is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. Where quoted, past performance is not indicative of future performance.

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Monday to Friday
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Closed Public Holidays

If you need to get us documents quickly, access remote support, or the MYOB Portal click the button above.

Contact Us

27 Welsford Street
Shepparton, VIC 3630

T: (03) 5833 3000
F: (03) 5831 2988
E: info@plus1group.com.au

Fixed Interest

Fixed Interest

Fixed Interest

How does it work? Do I know what I have? Is it safe?

When we invest in Cash Based or Fixed Interest type investments these are generally regarded as DEFENSIVE ASSETS in our investment portfolios, whereas shares and property are regarded as GROWTH ASSETS and are considered to be more volatile assets.

The aim of this article is to go deeper into the whole Cash Based or Fixed Interest landscape to cover the various types of investments available to investors and importantly cover the RISK of the various types. In particular as these type of investments are generally regarded as Defensive or Safe investments it is important to highlight the differences and clarify the safeness thereof – so to speak.

Firstly, let us list the various types of Cash and Fixed Interest type investments. For the purposes of this article I have excluded Cash based “Day to Day” bank accounts as they are essentially just transaction accounts.

  • Cash Management Type Accounts
  • Term Deposits
  • Government and Semi Government Bonds
  • Corporate Bonds
  • Mortgage Trusts
  • Hybrids (being a mixture of some of the above)

Fixed Interest Investments – Risk

Secondly, we need to understand the various risks involved in Fixed Interest Type investments. The type of risks can be classified as follows:

  • Interest Rate Risk (including Time)
  • Specific Company or Organisation Risk

For Interest Rate risk this is best explained by an example.

Let’s say Mary invested in a 5-year Term Deposit of $10,000 at 4% per annum interest. Then Mary would receive $400 every year for 5 years, then receive her $10,000 investment capital back at the end of the 5 years.

Again let us assume that at the time of Mary investing the CPI rate (inflation) was running at about 2% per annum. Let us also assume that after say 2.5 years (half way through) CPI rates had risen to 3% per annum and new 5 year term deposits were now paying 5% per annum interest.

If Mary was to “cash in” or close the Term Deposit half way through its term (perhaps to seek a better current rate) then the provider would effectively value the Term Deposit at the time as follows:

Mary would receive a “pay out” value of approximately $9,750 being the “reduced value” of the Term Deposit half way through its term.

Conversely, if the CPI reduced and interest rates available also reduced over the same 2.5 years then the situation would be as follows:

Mary would receive an increased “pay out” value of approximately $10,250 being the “increased value” of the Term Deposit half way through its term.

Of course if Mary does nothing then the original Term Deposit stands with interest paid each year to maturity when the original capital invested is returned to Mary.

The same principle applies to other forms of Fixed Interest such as Government Bonds, Semi Government Bonds and Corporate Bonds where movements in CPI and Interest Rates available have an effect on the value at any one time.

Specific Company Risk

In addition to Interest Rate risk there is the usual specific company/organisation risk (just like investing in shares) relative to the strength of the company or organisation issuing the Bond.

This market is essentially companies wanting more capital and therefore issuing Corporate Bonds (of varying duration, size and risk) to investors. Government and Semi Government organisations also issue Bonds to investors to mainly fund their Budget deficits. Like investing in a share of a company it is important to understand the risk “Is my Capital safe?” in comparison to the interest rate being provided – Am I being compensated with a good rate of return for the perceived or real risk involved?

Obviously it would be fair to assume that a Commonwealth Government Bond would be “Safer” than just an ordinary company bond. Bond rates for government bonds would be on average lower for the perceived or real lower risk of return of the original capital invested.

Mortgage Type Trusts

So often we see an advertisement that says Fixed Term investment (the wording for the sake of marketing really) which might be paying say 6% per annum interest. This rate might be considered great compared to the current Term Deposit rates on offer of say 4% per annum.

We therefore jump in, but is this really a Term Deposit type investment like those offered by banks etc.? The marketing implies Fixed Term but the question we should ask ourselves is why is it 2% higher than the going Term Deposit and/or Government Bond rates on offer.

In view of this we need to look further and ask the following questions:

  • What type of assets are actually backing this 6% return?
  • Why is this rate on offer so much higher?
  • Is it as safe as a Term Deposit or Government Bond?

Invariably these types of investments are able to offer the higher return because there is more risk involved than say investing in a Term Deposit or Government Bond.

It is important that a good percentage of monies will be invested into Property based investments (could be a mix of commercial/retail/industrial/residential properties or just one type).

Thus the higher yield is able to be paid from higher rents being received into the Mortgage Type Trusts than those available on term deposits/bonds etc.

Therefore, you would essentially have some Growth Based Assets in an investment which may generally be regarded as a Defensive type investment.

Because property values can change at a whim and therefore people owning the properties backing these investments may decide to liquidate, then you can get a run of property sales. If there is a larger than expected run of property sales with perhaps lesser values (some fire sales so to speak) then this will have to be reflected in less liquidity in the overall Trust (to meet investors interest payments) as well as a reduction in the overall capital value of the Trust.

Investors could then experience a freeze on accessing their capital and/or reduced interest payments or a complete closure of the overall Trust with a reduced capital payout of original investment monies. Well known examples were Pyramid and Banksia where people were attracted to higher interest rate returns and were surprised by the reduced capital outcomes.

The bottom line for investing in Fixed Interest Type investments is that we need to ask the following questions

  • How do I view short/medium and long term rates?
  • How do I view the direction of the CPI?
  • What is the makeup of my Defensive Assets and the duration of the fixed interest investments that I hold?
  • What is the make-up of the assets backing the actual investments?

Awareness is the key so there are no future surprises.

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Closed Public Holidays

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If you need to get us documents quickly, access remote support, or the MYOB Portal click the button above.

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Shepparton, VIC 3630

T: (03) 5833 3000
F: (03) 5831 2988
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Investing in Shares

Investing in Shares

Should I Consider Investing in Shares?

When we invest in shares, we can invest in just one company, multiple companies or gain exposure to the whole market (being some 497 companies currently listed on the Australian Stock Exchange – ASX)

The decision to do one or the other will mainly be based on how we balance our thinking between the RISK INVOLVED and POTENTIAL RETURN on the capital we are planning to invest.

Obviously investing in just one company (or 3 to 4 different companies) exposures us to SPECIFIC COMPANY RISK, whereas the investment in more companies DIVERSIFIES the RISK associated with investing in just one or a few companies.

With investing directly in the share market, a spread across at least 8-12 companies would generally be recommended to assist with some risk reduction.

Persons wanting to access the whole market (being all companies listed on the ASX or the majority thereof) can do so by Managed Investments or Exchange Traded Funds (ETF’s) run by professional Fund Managers.

This spread achieves greater diversity across companies and industries, which assists with the management of the specific risk of investing in just one or two companies.  However, you would still be exposed to the volatility of the share market as a whole.

An additional consideration is that one needs to include in your thinking is how the proposed investments will fit in with your TOTAL ASSET ALLOCATION including cash at bank, term deposits, investment properties and superannuation.

If you would like to learn more about Investing, please contact Plus 1 Wealth Advisors on (03) 5833 3000 or visit our website and register for our next FREE seminar in your area.

Open Hours

Monday to Friday
8:00am to 5:00pm

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If you need to get us documents quickly, access remote support, or the MYOB Portal click the button above.

Contact Us

27 Welsford Street
Shepparton, VIC 3630

T: (03) 5833 3000
F: (03) 5831 2988
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October Practice Update

October Practice Update

Practice Update – October 2018

Increased scrutiny of home office claims

Last year, 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’, which includes home office expenses.

Reportedly, due to a high number of mistakes, errors and questionable claims for home office expenses, the ATO has recently advised that it will be increasing attention, scrutiny and education on these claims this tax time.

In particular, the ATO has flagged their concerns relating to taxpayers who are claiming:

  • expenses they never paid for;
  • expenses that their employer has reimbursed them for;
  • private expenses; and
  • expenses with no supporting

Whilst additional costs incurred as a direct result of working from home can be claimed, care must be taken not to claim private expenses as well.

The ATO has indicated that one of the biggest issues they face is people claiming the entire amount of expenses (e.g., their internet or mobile phone), rather than just the extra portion relating to work.

Provided the taxpayer is able to demonstrate that they have incurred additional costs of running expenses (e.g., electricity for heating, cooling and lighting), then these are generally deductible.

In contrast, employees are generally not able to claim any portion of occupancy-related expenses (e.g., rent, mortgage repayments, property insurance, land taxes and rates).

Taxpayers are warned that the ATO may contact their employers to verify expenses claimed for working from home.

In addition, the ATO expects to disallow a lot of claims where the taxpayer has not kept adequate

records to prove that they have legitimately incurred the relevant expense and that the expense was related to their work.

As with the claiming of deductions in general, supporting records must be kept when claiming work-from-home expenses, which may include receipts, diary entries and itemised phone bills.

Importantly, only the additional work-related portion of the relevant expense is deductible.

Advancement in technology has allowed the ATO to deploy sophisticated systems and analytics to spot claims that do not ‘add up’ and claims that are out of the ordinary compared to others in similar occupations, earning similar income.

Finally, the ATO has reminded taxpayers of the ‘three golden rules’ to follow when claiming work-from-home deductions, being:

  • the taxpayer  must  have  spent  the  money themselves and have not been reimbursed;
  • it must be directly related to earning the taxpayer’s income, not a personal expense; and
  • the taxpayer must have a record to prove the expense.

More help for drought-affected farmers

As part of the next phase of its drought assistance policy (which includes various other measures), the Government announced that farmers will be able to immediately deduct the cost of fodder storage assets.

Previously, these types of assets (such as silos and hay sheds used to store grain and other animal feed storage) were required to be depreciated over three years.

This measure is designed to make it easier for farmers to invest in more infrastructure to stockpile fodder during the drought.

This measure is available for fodder storage assets first used, or installed ready for use, from 19 August 2018 (being the date of the announcement), and complements the $20,000 instant write-off already available to small business entities.

Editor: The relevant legislation giving effect  to this announcement was fast-tracked through Parliament to provide certainty for these drought- stricken farmers, passing both Houses on 20 September 2018.

Increase in Private Health Insurance excesses

Legislation has been passed by Parliament to implement the Private Health Insurance (‘PHI’) reforms announced by the Government in October 2017.

The measures are designed to simplify PHI and make it more affordable for consumers by improving the value of PHI either in the form of lower premiums and/or improved cover for  certain benefits.

Of particular interest from a tax perspective is the increase in the maximum voluntary excess levels for products providing individuals with an exemption from the Medicare levy surcharge.

The increased levels of voluntary excesses that insurers can apply are:

  • $750 (up from $500) in any 12-month period for singles; or
  • $1,500 (up from $1,000) in any 12-month period for couples/families.

These increases will apply from the 2019 income year, with private health insurers permitted to offer products with the new higher excesses from 1 April 2019.

Editor: This is a positive change, as the excess levels have not changed since 2000.

Whilst there is no requirement for consumers to move  to  products with higher excesses, it is expected that more affordable PHI will encourage more people to take out cover.

Legislation to combat illegal phoenix activity

The Government has announced a package of reforms to tackle illegal phoenix behaviour. By way of background, phoenixing occurs when the controllers of a company strip the company’s assets and transfer them to another company, to avoid paying the original company’s debts. The proposed measures will deter and  disrupt the core behaviours of phoenix operators by:

  • creating new criminal and civil offences, attaching the highest penalties available under the law, to target those who engage in and facilitate illegal phoenix transactions;
  • preventing directors from backdating their resignations to avoid personal liability;
  • preventing sole directors from resigning and leaving a company as an empty corporate shell with no directors;
  • restricting the voting rights of related creditors of the phoenix company at meetings regarding the appointment or removal and replacement of a liquidator;
  • making directors personally liable for GST liabilities, as part of extended director penalty provisions; and
  • extending the ATO’s existing power to retain refunds where there are outstanding tax lodgements.

A new Phoenix Hotline is also being established, which will make it easier to report suspected phoenix behaviour. Editor: According to the Government, the proposed measures are tightly targeted at those who misuse the corporate form, while minimising any unintended impacts on legitimate business restructuring. Whether they will be able to achieve this goal or not is yet to be seen…

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

Open Hours

Monday to Friday
8:00am to 5:00pm

Closed Public Holidays

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If you need to get us documents quickly, access remote support, or the MYOB Portal click the button above.

Contact Us

27 Welsford Street
Shepparton, VIC 3630

T: (03) 5833 3000
F: (03) 5831 2988
Email Us