Self-managed super funds (SMSFs) have had a challenging year, with COVID-19 linked market uncertainty affecting income and returns. But SMSF trustees haven’t been sitting on their hands.

One of the main reasons people give for wanting to establish an SMSF is to have greater control of their investments and taking control of a difficult situation is exactly what they’ve been doing.

Changes to asset allocation

According to the 2020 Vanguard/Investment Trends SMSF investment report, nearly half of SMSFs made substantial changes to their asset allocation this year.

The survey of over 3000 SMSF trustees shows most reacted defensively, with 55 per cent increasing their cash and property holdings, mainly at the expense of equities. Direct shares now represent 31 per cent of SMSF portfolios, their lowest level since 2009 during the GFC.

The report found that one-third of SMSF have fixed income exposure. Hybrid securities remain the most popular product, although more trustees are investing in bonds which has become easier with the profusion of bond ETFs (exchange traded funds). In fact, bonds were among the better-performing asset classes in the year to June 2020. International bonds returned 5.4 per cent while Australian bonds returned 4.2 per cent.ⁱ

However, the search for a reliable income stream that is better than you can get from bank deposits remains a challenge. The hunt for yield

With interest rates on the decline for several years, and currently at or near zero, investors have turned to shares for their dividend income as well as capital growth. But this source of income is also under threat from the economic impact of COVID-19 on company profits.

The Vanguard/Investment Trends survey also found that SMSFs expect dividend yields to fall from 4.8 per cent pre-COVID-19 to 3.6 per cent this year. While the actual decline in dividend income will depend on the shares you hold, many SMFS will already be feeling the pinch.

In July, the Australian Prudential Regulation Authority (APRA) ordered Australian banks and insurers to restrict dividend payments to 50 per cent of their earnings. Given the banks generally payout up to 90 per cent of their earnings, this will have a big impact on SMSFs who often rely heavily on bank shares.

In the latest company reporting season, many popular blue-chip companies cut or suspended dividends. According to CommSec, 68 per cent of companies issued dividends in the year to 30 June 2020 but dividend payments were down 32 per cent on aggregate.

Yet despite this setback, SMSF investors are already positioning themselves for the future.

The Vanguard/Investment Trends survey showed SMSFs were poised to buy back into the share market, with 37 per cent willing to increase their allocation to blue-chip Australian shares, and 23 per cent to increase investment in international shares.

Diversification is key

In these uncertain times, having a well-diversified portfolio with multiple sources of income as well as capital growth is more important than ever.

As well as Australian shares, many SMSFs also have relatively high exposure to property, either through residential real estate or listed property. But property also faces challenges.

Listed property was the worst-performing asset class last year, down 13.4 per cent.ⁱ Although past performance is not a reliable guide to the future, commercial property faces challenges due to falling demand for retail and office space during the pandemic, as well as falling rents.

While residential property held its value last year, the outlook there is also uncertain given rising unemployment, falling rents and a halt to immigration. It’s also yet to be seen how many investors who temporarily deferred loan repayments will eventually decide to sell their properties.

A time to revise strategy

All in all, SMSF are performing well. However, with reduced dividend income and low-interest rates in the medium term, SMSFs in retirement phase may need to make decisions that were not anticipated, such as drawing on their capital to cover their income needs.

At the very least, this is a good time to ensure that your SMSF is well diversified and positioned for continuing market volatility. If you would like to discuss your SMSF investment strategy, retirement planning or tax planning, reach out to the JBS Financial to help to discuss your situation.

i Vanguard: The power of diversification

Are you guilty of putting your health and wellbeing last? Whether it’s for financial or family reasons, you could be costing yourself more than you think.

Whether it’s down to a lack of time or money, we’re all guilty of neglecting our own health from time to time. This can be especially true during challenging times, like we’re experiencing with the COVID-19 pandemic.

But scrimping on your mental and physical health to save a few dollars is a false economy. Not only does poor health affect those around you, it has serious financial costs of its own.

Poor health has been linked with lower earnings and savings; and higher out-of-pocket medical expenses. Research in the US showed that those in poor health earnt one-third less over their lifetimes than those in good health. They were also able to save and invest less, meaning that by the age of 65, the gap had blown out to $150,000. That’s a hefty price to pay for poor health.

On the flip side, numerous studies have shown the benefits that physical exercise, eating well and getting enough sleep can have on your lifestyle – and life expectancy.

The good news is, taking care of your mental and physical health doesn’t need to cost you the world. Here are five easy ways to improve your quality of life, without draining your wallet.

1. Eating healthy on a budget

If you have a hectic work and home life, ready-meals can sometimes feel like the easiest option. But buying pre-made and processed foods will never be as affordable as fresh food over time.

For example, according to Dieticians Australia’s guide, one serve of fresh potatoes costs around 50 cents, while frozen chips are 70 cents and hot cooked chips are $3.75!

So stock your pantry with a few key essentials like flour, pasta, rice, legumes and potatoes and you’ll be able to cook a range of nutritious low-cost meals for your family. Try to purchase in bulk and on special to amplify the savings. Meal planning and prepping are also a lifesaver when it comes to eating healthy on a budget.

For more budget-friendly recipe ideas and practical tips check out this guide.

2. Exercise for free

Getting regular exercise is essential for your health. Luckily, there’s an endless variety of free workout videos on YouTube. Here are a few to try:

Yoga with Adrienne – Down to earth yoga instructor offering free yoga videos for all levels.

Kayla Itsines – In addition to her BBG workouts in the SWEAT app, homegrown success story Kayla Itsines has a range of how-to videos and workouts on her YouTube channel.

Les Mills – The Les Mills channel serves up their signature variety of intense cardio workouts, all set to the latest hit music.

Blogilates – One for pilates fans! Fitness instructor Cassey Ho has been pumping out her unique style of POP Pilates and sculpting workouts for over 10-years.

Exercising outdoors is another free option with boundless health benefits. Try to get outside for a walk or run at least once or twice a week. Why not join a local walking or running groups and make it a social activity? Use the Heart Foundation’s Walking website to find a group near you.

3. Explore health apps

There are loads of health apps available nowadays and most are free or low-cost. Here are some of our favourites:

• Fitness: For a huge range of audio-based workouts try Aaptiv. Or for workouts and meal plans give 8fit a go.
• Calorie tracker: MyFitnessPal has an extensive food list, is simple to use and links with several other apps.
• Running and cycling: Nike Run Club offers GPS run tracking, audio guided runs, customised goals and challenges. Strava is another popular running and cycling app with advanced GPS features, data analysis and it syncs with most devices.
• Meditation: Calm is a top-rated app offering guided meditations, sleep stories, breathing programs, stretching exercises and relaxing music. Or you could try Headspace, which teaches you the skills of mindfulness and meditation.
• Inspiration: Stay motivated with the Motivation: Daily quotes
• Sleep tracking: SleepScore offers a non-contact sleep tracker, with sleep sounds, smart alarm, sleep cycle analysis and more.
• For fun: Use Meetup to find a local event or group that shares your interests.

4. Use support groups and online resources

There’s no doubt we can all use a little extra support from time to time and fortunately, nowadays, it doesn’t need to cost the earth.

You can find a local face-to-face support groups, or if you prefer, there’s a wide range of resources, groups and tools online.

The myCompass tool from the Black Dog Institute is a good place to start if you like to work at your own pace. It’s a free online self-help program for people with mild to moderate depression, anxiety and stress. It’s also suitable for anyone looking to build good mental health.

Beyond Blue is another organisation offering a range of free online support services and information. You can chat with others in your situation through an online forum, or find a range of free national helplines and websites.

Apps like Turn2Me and 7 Cups also offer online support groups and low-cost counselling.

5. Get more from your health insurance

With the right health insurance, you could actually save money. Health insurance helps offset the cost of common medical services like dental, optical and physio. So choose wisely and you could enjoy a range of health benefits. Depending on your income, private health insurance can save you money at tax time, by helping you avoid paying the Medicare levy surcharge.

Definitely shop around and compare policies to find the right level of cover for you and your family.

Read more: How to choose the best health insurance

With so many free and low-cost options available, there’s really no excuse to scrimp on your health and wellbeing! So put your health first for once and enjoy the rewards.

Source: Money & Life

Receiving an inheritance is always welcome, but people often forget the taxman will take a keen interest in their good fortune.

When ownership of an asset is transferred, it triggers a capital gain or loss with potential tax implications. So what are the tax rules when you inherit a property, or another investment asset like shares, and when you eventually decide to sell?

Tax and your inheritance

The main tax applying to the transfer and sale of an asset is capital gains tax (CGT). This is added to your tax bill in the financial year in which you sell an asset acquired on or after 20 September 1985.

CGT is not a separate tax but forms part of your normal income tax and is imposed at your marginal tax rate. It applies to the sale of assets such as residential and investment properties, shares and managed funds.

The tax is calculated based on any increase in the value of the asset between the time you acquire or buy it and when you eventually sell.

Inheriting an asset

Fortunately, when someone dies, a capital gain or loss does not apply when an asset passes to the deceased person’s beneficiary, their executor, or from the executor to a beneficiary.

This means if you inherit a property, shares, or an interest in an investment asset, the capital gain on the asset is disregarded by the taxman.

There are also exemptions for personal use assets you inherit that were purchased for less than $10,000. This includes furniture, household items and the like.

Generally, CGT is not payable if you inherit collectables such as art, jewellery, stamps or antiques, provided their market value is $500 or less.

Selling your new asset

Although there is no CGT when you inherit a property, that’s not the end of it, as there may be a tax bill when you eventually sell. If the asset is a dwelling, special rules such as the main residence exemption apply in part or full.

Generally, if you sell an inherited property within two years of the person’s passing and it was either purchased before September 1985 or was the deceased’s main residence at the time or just before their death, and in most cases, not rented being at the time of their death, CGT does not apply.

The two-year period relates to the time from the date of death to the settlement – not exchange – of the sales contract. In some cases, it’s possible to apply to the ATO for an extension to this two-year period.

Special tax rules may also apply if the property was not the deceased’s main residence but it was purchased prior to 20 September 1985. This may result in a full or partial exemption from CGT, so it’s important to talk to us about your particular situation.

After the two-year deadline

If you decide to sell your inherited property after the two-year exemption period has elapsed, you will generally have to pay CGT on the capital gain on your property unless it has become your main residence.

The amount of CGT you pay is based on the increase in your property’s value from the date of the deceased’s death to the date of the sale.

When working out the capital gain on an inherited property asset, CGT is calculated based on the sale price less the cost base of the asset. In most cases, the cost base is equal to the market value of the asset at the date of the deceased’s death, although this will depend on when the home was purchased (before or after 20 September 1985).

If CGT applies when selling an asset, you normally receive a 50 per cent discount on the amount of tax payable if the asset is owned for over 12 months.

CGT is a complex area of taxation, especially as it applies to inheritance, so if you would like help with handling the tax matters relating to an inherited asset, reach out to the JBS Financial to help to discuss your situation.

Superannuation is a handy way of saving for retirement so that you’ll have an income to live on once you’re no longer working.

Your employer must pay a portion of your earnings into your superannuation fund, which invests them on your behalf.

How much superannuation will I be paid?

In Australia, your employer is required by law to pay your super contributions once a quarter.

The current superannuation guarantee (SG) rate is 9.5%. So, your employer must pay a minimum of 9.5% of your ordinary time earnings (OTE) to a complying superannuation fund or retirement savings account.

Can I add to my super?  

Yes, you can! Making personal contributions to your superannuation is a great way to reach your retirement goals sooner.

One way to do this is through a salary sacrifice arrangement with your employer. This simply means that you pay an agreed amount from your pre-tax salary into your chosen superannuation fund with each pay.

It’s a very tax-effective way to add to your super, as these contributions only attract tax at 15% (up to a certain level), which is generally less than your marginal tax rate.

How much to contribute depends on several factors, including how long until you want to retire and your retirement goals. Speaking to a financial planner can help you evaluate the best options for you.

Superannuation co-contribution 

You may also be eligible for contributions from the government to help you save for retirement. The super co-contribution and the low-income superannuation tax offset are both ways the government can add to your super. Find out more about government contributions on the ATO website.

How much super do I need to retire comfortably?  

Research shows that many of us underestimate how much we’ll need to live comfortably in retirement.

According to the MoneySmart website, how much you’ll need depends on your big costs in retirement and the type of lifestyle you want to have. “If you own your own home, a rule of thumb is that you’ll need two-thirds (67%) of your pre-retirement income to maintain the same standard of living.”

The Association of Superannuation Funds of Australia (ASFA) estimates that single people will need just over $44,000 a year to be comfortable, while a couple will need just over $62,000 (excluding housing costs).

A ‘comfortable’ lifestyle is defined as one where you’re able to take part in a range of leisure and recreational activities while maintaining a good standard of living i.e. you can afford to purchase household goods, private health insurance, a reasonable car, clothes and domestic or occasional international travel.

When can I access my superannuation?

You’ve spent years building up your nest-egg, so when can you make use of it? You can access your super once you meet one of the following conditions:

• when you turn 65 (even if you haven’t retired)
• when you reach the preservation age and retire; or
• under the transition to retirement rules, while continuing to work.

There are also some special circumstances where you may be able to access your super early, such as severe financial hardship, including COVID-19.

Reach out to the JBS Financial to help to discuss your situation.

Source: Money & Life

Whether you breeze through tax time or dread the extra admin, receiving a tax refund makes the effort worthwhile.

For many of us, getting a financial boost will be even more welcome this year, and you might be looking around for the best ways to use it.

These simple actions can help you figure out how to make a plan for your tax return. And if you’re looking for inspiration for how to spend it, we suggest some ideas to consider, too.

Plan to succeed

Never underestimate the power of a well-crafted plan – it’s easy to watch funds dwindle when you haven’t given them a clear direction. Recent research has revealed that 81% of us admit to splurging an average of $1,430 annually as a result of comfort spending and that one in six Australians struggle with credit card debt.

Like any goal, your ambitions for this year’s tax return can be more easily realised if you have a concrete plan in place. In fact, studies have found that taking the time to write down your goals and plans can actually improve your chances of making them happen.

Once you’ve lodged your tax return, you should have a decent idea about the amount of your refund. Use the time before you receive the money to give yourself a financial check-up and decide exactly where you plan to put your tax refund to avoid excitement spending once it lands in your account. This includes any money you’re hoping to use for a holiday or other splurge – work it into your financial plan to avoid spending beyond your means.

Anticipate your upcoming living expenses

When making your plan, you might want to consider your upcoming living expenses, particularly any large, irregular bills such as car insurance and registration costs, utility bills and general home maintenance.

Putting aside some of your tax return as a cushion for upcoming expenses or an emergency fund helps you avoid reaching for other financial support – such as personal loans and credit cards – when the bills start to build up.

Reduce outstanding debt

If you have some debt to pay down, you’re not alone: the average Australian household debt-to-income ratio is around 190%, meaning we owe almost twice as much as we earn each year. Putting your tax return towards any outstanding debts, including mortgage repayments, personal loans and any credit card debt may help reduce any interest charges.

Invest in growing your wealth

If you don’t need the money for immediate expenses, paying off debt (or the occasional luxury), you might be looking to make a long-term investment with the extra money. You might consider contributing some or all of your refund to boost your super, or add it to a term deposit or savings account.

Make tax-deductible purchases

If you’ve been holding off buying specific equipment for work, such as a new laptop or desk, now could be a good time to make the purchase. For purchases over $300, tax deductions are calculated on the depreciation of the ‘effective life’ of the item. If you purchase them at the beginning of a financial year, the item has almost a full year to depreciate before you do your next tax return.

Donate to a charity

Although this has been one of the most difficult years in living memory, Australians have shown extraordinary generosity by donating to bushfire appeals and other charities. If you plan to support a charity or not-for-profit organisation, don’t forget that any donations over $2 to eligible organisations in Australia are tax-deductible. Just remember to keep a receipt for when you start preparing next year’s tax return.

Reach out to the JBS Financial to help to discuss your situation.

Source: AMP Insights

If you’re in or approaching retirement, you may be prioritising things such as living costs, utility bills, health care and even potentially helping the kids out with their future financial goals.

With many Australians looking at a retirement (which in reality, could span a few decades), another thing to give some thought to is keeping some money aside for your own recreation and social life.

What activities are on your to-do list?

Think about what you enjoy doing, what you’re likely to want to do more of, or even get into with more time on your hands.

• Eating out– restaurants, beach barbecues, picnics, food fairs
• Travel – interstate breaks, overseas holidays, road trips, caravanning
• Entertainment – cinemas, concerts, events, stage shows
• Sport – golf, tennis, cycling, yoga, pilates
• Hobbies – fishing, sailing, photography, drawing, woodwork
• Volunteering – hospitals, soup kitchens, animal shelters
• Club associations– Rotary, Leagues, Surf Life Saving
• Tournaments – trivia, bridge, chess.

How can you budget for the things you enjoy?

If you need a guide, the Association of Superannuation Funds of Australia (ASFA) benchmarks the annual budget needed to fund a comfortable and modest standard of living in retirement, with figures based on an assumption people own their home outright and are relatively healthy.

According to June 2020 figures, individuals and couples around age 65, looking to retire today, would need an annual budget of $43,687 and $61,909 respectively to fund a comfortable lifestyle, or $27,902 and $40,380 respectively to live a modest lifestyle.

According to ASFA, a comfortable retirement lifestyle would enable an older, healthy retiree to be involved in a broad range of leisure and recreational activities, whereas a modest retirement lifestyle would enable an older healthy retiree to afford more basic activities.

How much are you likely to spend on recreation anyway?

According to research, singles and couples (aged 65 to 85) living a comfortable lifestyle in retirement would spend about $184 and $277 of their weekly budget respectively on leisure and recreation.

This takes into account a broad range of recreational activities, including:

• Lunches and dinners out
• Domestic and international holidays
• Movies, plays, sports and day trips
• Things like streaming services
• Club memberships.

Making your money go further for the fun stuff

• Make use of your Senior’s Card or transport concessions and other discounts
• If going overseas isn’t in your budget, you could consider a road trip interstate
• Pack a rug, food basket and esky, and head to the park or beach for a picnic
• Swap a visit to the day spa with a DIY manicure and candle-lit bubble bath
• Have the troops over for a poker night or take turns hosting dinner parties
• Find cheap accommodation on Airbnb or consider listing your own place to earn money while you’re away.

Reach out to the JBS Financial to help to discuss your situation.

Source: AMP Insights

In times of uncertainty, when share markets and interest rates are falling, along with declines in consumer and business confidence, investors often question if their money is safe and if it’s still going to meet their long-term investment goals.

But whether it’s a period of sustained volatility due to a global financial crisis, a medical pandemic, or a recession, the basic rules of investing hold true.

• Set long-term investment goals
• Keep investing (if you can)
• Don’t try and time the market
• Spread your risk through diversification
• Don’t panic

Keep a level head

It’s almost thirty years since Australia last experienced a recession, so for many investors where to put money during a recession isn’t something they’ve had to think about before.

We understand you’re probably concerned about your investments and wondering what to invest in if Australia does enter a recession. Volatility isn’t something investors enjoy.  The pain of losing is significantly more powerful than the pleasure of gaining, which makes us more likely to overreact during market downturns than when the market is booming.

To help your investments continue to work hard for you, we’ve outlined four simple strategies you could consider.

1. Invest for the long term

If you’re a long-term investor (with a time horizon of 10+ years), don’t let emotion get in the way of sensible decision making. Selling out of your investments and moving to cash may seem like a safe option, but you’ll potentially be crystallising your losses and missing out on any opportunities that could arise when the market rebounds.

We recommend you seek good advice at the start, so you have a plan to realise your investment dreams, leaving you to get on with enjoying your life. You’re not a professional investor, it’s not what you do for a living, so there’s no need to fear every daily movement in the share market.

2. Try to invest regularly

Volatility doesn’t necessarily result in poor investment outcomes. It can present opportunities. The principle of investing regularly, regardless of whether the market is rising or falling, allows you to buy more of an asset when prices are low and buy less when prices are high.

Known as “dollar cost averaging”, not only will this average out over the long term, resulting in a better average price for the assets, but you’ll also potentially hold more of an asset, which will be beneficial when prices rise again.

3. Be sensible and leave the decisions to the professionals

Market timing is an investment strategy used to try and ‘beat’ the share market by predicting its movements and buying and selling accordingly. It’s the exact opposite of the long term ‘buy-and-hold’ strategy, where an investor buys shares or assets and holds them for a long time, designed to ride out periods of market volatility.

According to Morningstar, investors would need to be correct 70% of the time to get any benefit from an active market timing strategy. This is almost impossible to achieve, even for market professionals. You’re more likely to miss some of the best days of the market rather than picking them correctly.

4. Allow diversification to spread your risk

Not only is it difficult to time the market correctly, but it’s also hard to predict which asset class will perform best in any given year. Last year’s best performing asset class can easily become next year’s worst, or vice versa.

Many investors choose to manage this by diversifying their investments across different asset classes (shares, bonds, cash etc.) and create a portfolio that’s based on their risk tolerance, time horizon and investment goals.

However, it’s important to understand that diversification doesn’t mean you’ll avoid market volatility completely. Even with a well-diversified portfolio, your investments could still potentially experience periods of what you’d probably deem underperformance.

Staying positive during market downturns

The most important thing you can do during market downturns is not panic.

Stay emotionally strong and ensure your investments remain aligned to your investment goals.

Reach out to the JBS Financial to help to discuss your situation.

Source: BT

Australians enjoy one of the highest life expectancies in the world, which means you can look forward to a long and comfortable retirement.

While that’s fantastic news, it also makes saving for retirement more important than ever. Indeed, the majority of Australians over age 40 who are yet to retire are concerned about not having enough money to live on, with many recognising they need professional assistance to reach their retirement goals.

But by getting good advice and planning ahead now, you can take control and enjoy the peace of mind that comes from knowing your future may be secure.

The first step is to figure out how much income you want to receive each year in retirement, and how much you may need to save in order to get there. It’s also important to think about how your spending patterns may change during your retirement, and to plan ahead accordingly.

For example, in the early stages when you’re at your most active, you’re likely to need more funds for travel, sports and recreation. Then, as you enter a more relaxed phase of retirement, you’re likely to need to be ready for possible health issues, so you can afford the care you need as medical treatments are becoming more sophisticated and more expensive every year.

You may also want to keep your options open for the later years when you may need more intensive health support, including specialised accommodation.

Also don’t forget to factor in lump sum spending on big ticket items, such as home renovations or a new car. Because, as retirements grow longer, our cars and appliances are increasingly likely to fade away before we do.

Boost your super

When you crunch the numbers, you may find you’re facing a super gap. An effective way to boost your super savings while potentially paying less tax may be via salary sacrifice.

Even a small contribution can make a big difference over time, as you earn concessionally taxed returns on your contributions. When you invest pre-tax income through salary sacrifice, you may also benefit from the 15 per cent concessional tax rate on super contributions (rather than your marginal income tax rate), putting you even further ahead.

As of 1 July 2017, you can contribute up to $25,000 in concessional super contributions before additional tax applies. Concessional contributions include compulsory super guarantee from your employer, other employer contributions such as salary sacrifice, and personal tax-deductible contributions.

Finally, if there is a large sum you would like to contribute to super, for example, if you plan to sell a non-super asset, such as an investment property, you can do this by making a non-concessional personal contributions of up to $100,000 a year from your after-tax income.

You may also utilise the bring-forward rule which allows for members aged 64 or less to bring forward three years’ worth of non-concessional contributions and contribute up to $300,000 at any time over a three year period.

As of 1 July 2017, your total super balance (across all funds) may further limit your non-concessional cap – your cap is Nil if your total super balance is $1.6 million or more, while the amount of bring forward cap you can use is reduced once your total super balance is $1.4 million or more.

Review your investment options

Our super is one of our most valuable assets, so it’s not surprising many of us seek to protect it by investing in a low risk option.

But it’s also important to remember that trying too hard to avoid risk today could expose you to a greater risk — running out of money tomorrow, when your savings don’t produce the returns you need for a comfortable retirement.

So it’s important to choose the right investment option for your goals and investment time-frame. Are you ready to make a difference to you super?

Reach out to the JBS Financial to help to discuss your situation.

Source: Colonial First State

Australian spending habits have changed markedly in the last few months. Consumers continue to worry about the strength of the economy, the duration of the pandemic and overall public wellbeing. But while Australian consumer spending remains slow, we’re seeing signs of recovery across most categories and grocery spending, in particular, is finally stabilising.

With restrictions easing in some states, some Australians can spend more time outside their homes. The rapid increase in online spending has slowed, and, for those in states with eased restrictions, a return to more ‘normal’ consumption habits are resuming. However, it’s likely the increased appetite for spending via online channels will stay with us beyond the pandemic.

Economic impact of consumer spending

Governments face a constant dilemma when managing key economic indicators and the impact of the current pandemic has been no different.

• Should a government stimulate spending to delay or avoid a recession?
• Or should a government cut business taxes to create jobs and increase wages?

The problem is, without spending, businesses will eventually stop trading and be forced to lay off workers, leaving the government with less tax revenue. If the economy is left to rely on exports, which as we’ve seen isn’t sustainable during the global pandemic, this could cause supply chains to grind to a halt.

The only way to support businesses long term is then to rely on borrowing, which creates debt-laden balance sheets and potentially hampers future recovery and growth. To a degree, that’s why we have seen our own reserve bank cut rates to historical lows.

Consumer spending is a more significant influencer on the economy than many people realise. Even a small reduction in Australian spending habits has a dramatic impact.

Digital disruption for retailers

For the retail sector, it’s a story of mixed fortunes. Shops forced to close face the difficult decision about whether it’s still financially viable for them to re-open. But on the positive side, online sales have accelerated rapidly with some digitally-agile businesses recording exceptional uplifts in sales figures and profits.

While retail sales have bounced back since restrictions were initially eased at the beginning of May, online shopping remains the potential saviour for retailers, with many analysts predicting consumer behaviour may have changed permanently. And as we face into a second wave of the pandemic, online sales may prove even more important.

But it won’t be a solution that works for all retailers. The impact and success of individual companies will depend on the types of products they offer online and how much they had invested in the brand’s digital presence before the pandemic.

New consumer spending patterns reveal how important the stimulus measures, being primarily JobKeeper and JobSeeker, have been and still are. On July 21, the government announced proposed changes to JobKeeper, including an extension through to 28 March 2021. These changes do not impact JobKeeper payments until after 28 September 2020.

With 56% of households believing their financial situation to be vulnerable or worse because of the pandemic, they are likely to struggle to meet all their financial commitments unless they either reduce spending, draw down on savings or access credit.

Australian consumers have some important decisions to make about both their short-term spending habits and their long-term wealth accumulation and retirement savings.

The temptation to focus purely on immediate needs will be strong but seeking good advice about how to prepare and invest for the future is equally as important.

If you’d like assistance getting control of your money, reach out to the JBS Financial to help to discuss your situation.

Source BT.

Tax time can feel stressful; however, paying close attention to allowable deductions may lower the tax you need to pay on your tax return. Here are some allowable deductions you may wish to consider when preparing your next return.

While every person’s financial circumstances are unique, it can be helpful to be aware of some of the different deductions that may apply to you come tax time.

Tax agent costs

Hiring a registered tax agent to lodge your tax return is a great way of organising your finances, however sometimes it can be expensive. The good news is that you may be able to deduct any fee you incur for your agent to prepare or lodge your tax return in the next financial year.

Charitable contributions

When you next make a donation, check if the organisation is a deductible gift recipient (DGR) and the amount is over $2. If so, then you may be able to claim any donations you have made as a tax deduction. To qualify, the donations must have been made with nothing received or expected to be received in return and be recorded with a receipt.

Insurance premiums for income protection

Generally premiums paid by Australian resident individuals for income protection insurance under a policy they own may be claimed as a tax deduction to the extent that the premiums are paid for benefits that are designed to replace the individual’s lost income. If you claim on your income protection policy, any income replacement benefits received are generally assessable as income and liable for income tax just like your regular income.

Education and training

If you are completing any courses that relate to your current job, lead to formal qualifications, improve your skills or knowledge and are likely to lead to increased income, then these course fees may be deductible. Any other costs associated with undertaking the course may also be deductible such as textbooks, student service fees and travel between home or work and the place of education.

COVID-19 Working From Home

With many people’s working arrangements changing due to COVID-19, the ATO has created a shortcut method to help calculate deductions when working from home. You can claim your working from home expenses for the period between 1 March 2020 to 30 June 2020 in the 2019-20 income year and 1 July 2020 to 30 September 2020 in the 2020-21 income year if certain conditions are met. The deduction which can be claimed is 80 cents for every hour you worked in the 1 March – 30 June 2020 period and applies to electricity expenses, cleaning expenses, internet costs and computer consumables.

Miscellaneous items

Certain job-specific purchases can be valid tax deductions. For example, if your job requires you to spend time outside on a daily basis then you may be able to claim a deduction for sunscreen costs. You may be able to claim a deduction for a handbag or satchel you buy to carry items for work purposes such as laptops, tablets or work papers. The amount of the deduction depends on the extent you use the bag for work purposes. You can find out more information on the ATO website.

Your life is unique and so are your personal finances. There is no one-size fits all approach, so you should take into consideration your individual circumstances when preparing and lodging your tax return and seek expert advice.

Your registered tax (financial) adviser can help with information on tax planning and preparation to help plan for your financial goals and future. If you’re looking for guidance with financial planning, get in touch.

All information refers to Australian resident individual taxpayers and has been informed by the Australian Tax Office website.

Reach out to JBS Financial to help to discuss your situation.

Information was correct at time of writing (July 2020) but may be subject to change.

Information provided in respect of taxation law is given in good faith and for the general information purposes of Australian tax residents only. It is believed to be accurate as at July 2020 but may be subject to change. As the application of tax law depends on each person’s individual circumstances, you should always seek advice from a qualified tax professional.