Are you Paying Super on Annual Leave Loading?

Are you Paying Super on Annual Leave Loading?

Are you Paying Super on Annual Leave Loading?

On 12 March 2019, the Australian Taxation Office (ATO) issued a note regarding its view as to whether annual leave loading attracts Superannuation Guarantee (SG) contributions. This depends on whether leave loading is ordinary time earnings (OTE).

There is a commonly held view that annual leave loading is not OTE because its initial purpose was to compensate for the lost opportunity to work overtime when annual leave is taken.

However, since the inception of this entitlement this historical rationale has largely been lost.

The ATO has now confirmed that, in the absence of some evidence showing the loading is to compensate for the lost opportunity to work overtime, the loading will be OTE.

Most awards do not specifically state the reason the annual leave loading entitlement is provided.

If employers have self-assessed on the basis that their annual leave loading is not OTE, and there is a lack of evidence to demonstrate the purpose of the entitlement, there is a risk that they may have historical SG shortfalls and be liable for the SG charge.

The ATO has said it will not take issue with non-payment of SG contributions on annual leave loading in past quarters, where:

  • the employer self-assessed that the annual leave loading was not OTE, with the reasonable position that their annual leave loading was for a notional loss of opportunity to work overtime, and
  • there is no evidence that is less than five years old (the statutory period employers are expected to keep records relating to their SG affairs) that suggests the entitlement was for something other than overtime.

The employer can prove an entitlement to annual leave loading arising under an award or agreement is demonstrably referrable to a lost opportunity to work overtime, if there is written evidence related to the entitlement; i.e. in the express words of the award or agreement or other written evidence (for example, a documented policy) that clarifies the reason for the entitlement, and reflects the mutual understanding of both parties to the agreement that gives rise to the entitlement.

If employers do not have this evidence, the ATO expects them to ensure they obtain it as soon as practicable, or alternatively assess their future entitlements on the basis that their annual leave loading falls within OTE.

Where employers have obtained this evidence as soon as practicable, the ATO will not look at the purpose of the leave loading for quarters before they obtained the evidence.

If you need any assistance or clarification , please contact us on 03 5833 3000

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Market Insights – 29th of July 2019

Market Insights – 29th of July 2019

Market Insights

 

29th July 2019

Top Stocks

Market and Exchange Rates

Commodities

Major Market Announcements

The Australian share market has finished broadly lower, despite gains for the mining and energy sectors.

The S&P-ASX 200 index finished down 24.6 points to 6793.4 points Friday, while the all ordinaries was down 22.6 points to 6879.3 points.

“Not the best Friday, but you have to put this into context, because it’s only the second fall this week,” said CommSec market analyst Steven Daghlian.

For the week the ASX200 finished up 1.4 per cent, and up 2.6 per cent so far this month.

Barring a major crash early next week it will finish July solidly ahead, its seventh straight month of gains, Mr Daghlian noted.

Telecom stocks had the biggest losses on Friday, down one per cent, with Telstra falling one per cent to $3.84 and Speedcast down 8.4 per cent to $1.85, making it the worst-performing ASX200 component on the day.

Tech stocks were also down, collectively by 0.9 per cent, with financial software company Bravura Solutions down 2.8 per cent to $4.85 and Appen down 2.1 per cent to $30.38.

Mineral Resources was the best-performing ASX200 stock, up eight per cent to a three-month high of $16.60 after saying it had refinanced its debt and was increasing its iron ore production.

The mining sector was up 0.5 per cent as a whole, with BHP up 0.6 per cent to $40.85Rio Tinto up 2.1 per cent to $98.26 and Fortescue Metals gaining 0.5 per cent to $8.29.

OceanaGold fell 7.1 per cent to $3.93 after the Melbourne-based mid-tier gold producer said its profit for the second quarter was down 42 per cent to $22 million, with production down and operating costs up.

The energy sector was up 0.3 per cent, with Santos gaining 0.7 per cent to $7.13 and Origin Energy up 1.2 per cent to $7.85.

All the major banks were lower, with Westpac falling one per cent to $28.57,Commonwealth down 0.5 per cent to $82.59NAB down 0.4 per cent to $28.49 and ANZ down 0.6 per cent to $27.78.

Macquarie Group fell 1.4 per cent to $128.68.

The Aussie dollar is buying US69.42¢, from US69.69¢ on Thursday.

Looking forward, the US will release figures on economic growth later on Friday, and next week the US Federal Reserve will announce its decision on interest rates midweek, with many observers expecting a rate cut.

Rio Tinto will announce its earnings for the half-year on Thursday afternoon, kicking off earnings season.

In the United States, a number of major companies are also set to announce their results, including Apple on Tuesday.

Market Update

– Robust earnings from Alphabet and Starbucks pushed the S&P 500 and Nasdaq indexes to record highs on Friday, with support from data showing U.S. economic growth slowed less than expected in the second quarter.

– Reserve Bank governor Philip Lowe says the central bank has not been hindered by the Federal government’s ambition to deliver the first budget surplus in 12 years, pointing to the Coalition’s recent tax relief package as an important economic stimulant.

– Respiratory face mask and machine maker ResMed has posted a 28 per cent increase in full-year profit to $US404.6 million ($A582.2 million). The dual-listed firm said on Friday that revenue for the 12 months to June 30 rose 11 per cent to $US2.6 billion ($A3.7b), and its gross margin was up 80 basis points to 59 per cent.

– ASIC confirms that it has now commenced proceedings in the Federal Court against Australia and New Zealand Banking Group Limited (ANZ). In these proceedings, ASIC will allege ANZ was not entitled to charge certain periodic payment fees under the Bank’s contracts with its customers.

– Casino and hotel operator Crown Resorts went into business with tour operators backed by Asia’s most powerful organised crime syndicates as part of its program to attract Chinese high rollers to its casinos. Crown, which is part-owned by one of Australia’s richest men, James Packer, may also have exploited weaknesses in Australia’s visa processes to fly VIP gamblers into Australia without sufficient vetting.

Downside Protection of your Portfolio

Who does not want to retire early?!  No, I don’t mean retiring a year early, I am referring to retiring in your 50s or even 40s. If you’re looking to retire early, or just become financially independent, then ETFs can be a great way to do it.

Obviously the first step to retire early is that you need to get your budget in place, identify your “surplus cash flow” and regularly invest into ETFs. The younger you start, the better off you are. If you’re going to accomplish something that not many people do, you need to do things differently with your finances to make it work.

Why ETFs are great for retiring early

ETFs make great buy-and-hold investments because they usually provide good diversification. The good ETFs usually give you exposure to dozens, hundreds or thousands of different businesses.

They also usually come with lower management fees, meaning there’s more net returns for your portfolio – bringing you to early retirement quicker.

In-fact, studies show that a lot of fund managers underperform the market over the short-term and long-term, particularly after fees. That’s not the case with every fund manager, but it does show that a lot of people may have been better off simply by investing in a diverse, low-cost ETF.

Before moving forward with a strategy consider the following;

Risk Profile; better understand investment markets, and what you are comfortable with.

Time Horizon for Investment; Risk Return trade off, are you willing to ride the ups and downs of the market over a longer-term period.

Trading Costs; Make sure you are not paying too much in fees.

All Ordinaries (XAO) 5 Day Chart

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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Email Scams – 8 Ways to Avoid Them!

Email Scams – 8 Ways to Avoid Them!

Email Scams – 8 Ways To Avoid Them!

Spam emails make up approximately 45% of all emails every day, that’s 14.5 billion messages (spamlaws). This means it’s a large issue for almost all internet users, business and personal.
Below we will go over the best tips for picking out those pesky emails so you can best protect yourself and your business. The biggest key to defeating spam emails are education of users, you can have the best spam filter in the world but it’s not guaranteed to block all scam emails without blocking legitimate emails.

1. Don’t Trust The Display Name

Email addresses can be ‘spoofed’ and what I mean by that is they can be altered to make it appear like they have come from a legitimate source even though it has come from the scammer. The email address might even appear to be exactly the same!

For example, look at the below from address in a scam email we received;

The email appears at first to be a legitimate email from a Xero email address but they have actually spoofed Xero’s domain and the actual email is from stephen@aetherworkbooks.com.

2. Hover Over Links Within The Email

A key part of scammers emails are malicious links within emails. Often, they will make it appear like a legitimate link, maybe it has the correct logo or the wording is exactly the same as NAB’s for instance but the link will very often redirect to site where the criminals can capture your data. Sometimes there is only very small differences in the URL address of the fake links compared to the real link.

 Have a look at the below example taken from the same scam email as shown above;

When I hovered over the INV-7309009 link it shows clearly that it doesn’t go to a Xero address but this unknown aetherworkbooks address. A standard rule to follow is if you don’t recognise the link’s address don’t click it.

3. Email Is Not Personalised

The salutation of the email can often be a giveaway, scam emails a majority of the time will not address the recipient personally (as the are sent in bulk by nature) and will say something similar to “Dear Client” or “Dear Valued Customer”.

4. Grammar Mistakes

Email scammers are getting better at these mistakes but its an easy way for us to pick out a good chunk of illegitimate emails. Often these scammers don’t have a native English language so their vetting process of emails isn’t great. Remember these scam emails can come from organised groups too, so they can also be quite close to the real thing.

5. Sense Of Urgency

Scammer like to use a fear tactics where they make you think you are in immediate danger, for example a particular software has expired or your Microsoft account has been hacked. This aims to make you act irrationally without thinking through the situation and follow the scammer’s requests to resolve the issue quickly.

6. Time The Email Was Sent

Ever notice how you receive a lot of junk mail at night? Well this is a key sign the email isn’t legitimate, how many contacts do you know that would email you at 4am in the morning? 2 out of the 3 biggest country spam sources are the United States and Russia (Spamhaus), obviously being in completely different time zones to Australia.

7. Asking For Personal Information

This might seem like an obvious point but many people continue to get tricked into giving their details to strangers claiming to ‘help’. Remember legitimate companies will never ask for your personal data over email and even if it looks like a trusted organisation like the NAB or Government you should never give personal information out. If the scammer doesn’t use your personal details you give them, they will often sell your details on the black market for other illegitimate organisations to pickup and abuse.

8. The Sender Doesn’t Know The Addressee

One of the key things to think about with any suspicious email whether it be yourself or someone you know; is whether the recipient is expecting and email from this person and/ or do they know the sender’s address? So many scam emails can be eliminated by simply asking yourself that question. Although this doesn’t cover all bases and as mentioned above email addresses can be spoofed to make it look like an address you know, it still gives you a good starting point and gets you in the frame of mind to question these scam emails.

All of these tips can be followed quite easily by anyone, and honestly the biggest hurdle to continually beating scammers is awareness and education which I hope this article has provided!

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Are we at Risk of a Recession?

Are we at Risk of a Recession?

Are we at Risk of a Recession?

There seems to be a lot happening in the world right now with many economists predicting that a recession is on the horizon.

Interest rates at record lows, markets at record highs, trade wars, record debt levels, Brexit, global economic growth slowing and the Australian property market decline has led to many gloomy economic predictions.

In Australia, the interest rate has been cut twice in the past two months to a record low of 1.00%, while the US Federal Reserve last week hinted at a rate cut in the short term.

Generally, interest rates are cut when there is a need to stimulate economic growth as when rates are lower, it decreases financing costs, which can spark more borrowing and investing.

This seems to be working, with the major US market indices of the Dow Jones, S&P 500 and the Nasdaq all hitting record highs last week, while back home, the All Ordinaries is also approaching its all-time high, which we haven’t seen since before the Global Financial Crisis.

With markets at record highs, some are concerned that we will see a crash, as markets cannot keep going up forever. That is true, however, just because we are at record highs does not mean we cannot go higher for some time yet.

Of course, there are more reasons than increasing borrowing and investing as to why Reserve Banks cut interest rates. Rate cuts can also assist with creating more jobs and boosting wage growth which are all ways in which to boost the economy.

Furthermore, in Australia, there is a considerable amount still in the pipeline which should stimulate the economy with the election result reducing policy uncertainty, tax cuts and some loosening on lending for housing all positive contributors to the economy.

While the property market in Australia has fallen, most notably in Melbourne and Sydney, it hasn’t fallen off a cliff like many predicted. The market has definitely corrected, which it needed to, as house prices were getting out of hand. The re-election of the Coalition – and therefore the removal of the threat to abolish negative gearing and capital gains tax, along with the RBA’s recent rate cut – has seen a resurgence in buyer interest.

Our population growth is still strong which helps the economy through supporting demand growth and while the cash rate is at its lowest levels, there is still some room to move if need be.

Moreover, if the RBA does not want to lower rates any further, they also have the option of quantitative easing. Quantitative easing would involve boosting the economy by injecting more cash into it using printed money. This could be done by using printed money to finance fiscal stimulus such as increasing spending on infrastructure. However, we believe that Australia is a long way off needing to do this.

So, what does this all mean? Yes, Australian and global economic growth is going through a rough patch right now and may for a little longer yet. However, there is also a lot of good things the economy has going for it as well. It is not all doom and gloom as some may lead you to believe.

In saying all of this, it remains important that your investment portfolios remain well diversified and in line with your risk profile. During times of economic uncertainty, it is vital that you are best prepared for anything that may happen. No one can predict what that market is going to do, however, we can ensure that we are not over-exposed to growth investments if something does happen. This does not mean selling out of your growth investments and have all of your money sitting in cash. What it does mean is to ensure you are comfortable with how you are invested.

If the economy does happen to go into recession and share markets do fall, it is important to remember that you are invested with a long-term view. Do not make decisions based on emotion and sell at the worst possible time. We all know that the share market can produce negative returns in some years, however, we also know that markets do recover and riding the ups and downs is all part of it.

If you are concerned with the current economic state and would like to discuss your options, please feel free to contact us at the office on (03) 5833 3000 and we can organise a time to discuss.

STOP PRESS: On the very day of sending this, it is significant to note that the All Ordinaries Index today broke its previous all time high of 6,873 previously reached on 31st October 2007

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Market Insights – 29th of July 2019

Market Insights – 22nd of July 2019

Market Insights

 

22nd July 2019

Top Stocks

Market and Exchange Rates

Commodities

Major Market Announcements

– Wall Street’s main indexes fell on Friday following a report that the Federal Reserve plans to cut interest rates by only a quarter-percentage point at the end of the month.

– Uber Eats will amend its contracts to remove unfair terms that penalise restaurant owners, following an ABC investigation which triggered a probe by the consumer watchdog last year.

Market Update

The Australian share market has rallied to end a mostly lacklustre week a tad higher than where it began.

The benchmark S&P/ASX200 index finished up 51.2 points, or 0.77 per cent, to 6,700.3 points at 1615 AEST on Friday, while the broader All Ordinaries was up 50.8 points, or 0.75 per cent, to 6,786.2.

The Aussie dollar is at its highest level against the greenback since April, buying 70.68 US cents, from 70.33 US cents on Thursday.

The Australian share market looks set to open lower following a subdued end to the week on Wall Street. According to the latest SPI futures, the ASX 200 index is poised to open the day 0.4% or 26 points lower this morning. On Wall Street on Friday the Dow Jones fell 0.25%, the S&P 500 dropped 0.6%, and the Nasdaq tumbled 0.75%.

Downside Protection of your Portfolio

Individuals who want to invest in shares need to understand the risk associated with Investing. Investing in shares can be highly rewarding and can set you up for a bright financial future. However, understanding the risks and benefits associated with buying shares is a vital step for your education.

Investing in shares, like any investment, comes with a certain amount of risk. Shares are often described as “high-risk asset classes” when compared to other types of investments. The primary risk of investing in shares is that it can result in a capital loss. Unforeseen events outside of your control or negative developments within the company can significantly affect share prices and the value of your portfolio. In saying that, this is not to scare you away from investing in shares, but merely a necessary understanding that all investors must have.

There are ways to reduce the risk associated with investing in shares, the following are common measures that investors should have in place to control the risks associated with buying shares;

Diversify Your Portfolio
Not having all your eggs in the one basket is a saying that strongly applies when it comes to buying shares. Probably the worst mistake a new investor can make is to not diversify. Diversification means an investor has shares in several companies of different industries/sectors/countries etc, thereby reducing the risk relative to the return.

Know What You Own and Know Why You Own It
It is important to understand the company you are buying a share in. These days many investors forget that when they buy a share, they are actually buying a part of a business and not just a digital ticker code.

Investors Should Have a Long-Term Outlook
Different strategies can lead to success, however generally investors have the greatest chance to succeed in the stock market by taking on a long-term approach. Your Investment time horizon is crucial when it comes to investing. The shorter the investment time horizon, the harder it is to predict the direction of the stock. Market fluctuations are regular, and are hard to predict. Don’t try to time the markets, have long term outlook and invest in good companies.

Control Your Emotions  
Emotions are likely the number one challenge investors face on a day to day basis. Media speculation, your mates stock tips, fear of missing out or running with the crowd are all factors that affect our emotions and in turn our investment decisions. Having an investment strategy and the discipline to stick to it, can reduce the risk of emotional decision making. 

Negative Correlation
If you already have a well-established, diversified portfolio, you could consider adding another layer of portfolio diversification by investing into a fund that seeks to generate returns that are negatively correlated to the returns of the Australian share market (S&P/ASX 200 Accumulation Index).

The BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR) provides investors with a simple way to profit from, or protect against, a declining Australian share market.

Advantages
Access – obtain returns that are negatively correlated to the Australian share market as simply as buying any share.
Convenience – avoid complications and costs of CFD’s, futures and short selling.
No Margin calls for investors – cannot lose more than initial investment.
Liquidity – available to trade on ASX like any share.

As outlined on the below chart, the BEAR ETF has performed poorly over the past 5 years, when compared to the ASX 200 which has performed very well over the past 5 years. Hence the NEGATIVE CORRELATION.

Are we recommending you invest into this ETF? No, definitely not, this is general advice only and does not take into consideration your personal, or financial situation. This ETF is providing an option to further diversify and to protect against a declining Australian Share market.  


Exactly how much you should put into this type of investment would be determined by looking at your overall portfolio, how long you have had your portfolio, where you see the market at present and the level of extra protection you desire.

All Ordinaries (XAO) 5 Day Chart

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.

Open Hours

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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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27 Welsford Street
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T: (03) 5833 3000
F: (03) 5831 2988
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Sentinel Wealth Unit Trust T/As Plus 1 Wealth Advisors (ABN:11 408 695 672) is an Authorised Representative of Sentinel Wealth Managers Pty Ltd
(ABN: 73 108 328 294) AFS Licence 322211 | Financial Services Guide