Spring 2024
Welcome to Spring, a season that might be motivational for personal, business and financial renewal. We hope you enjoy the sunshine and warmer weather.
Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.
It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the dramas, the S&P/ASX 200 closed 1.28% higher for the month marking a gain of just over 10% for the 12 months to date.
Bottrell Business Consultants
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E office@bottrellbusiness.com.au
W https://www.bottrellaccounting.com.au/
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East Maitland 2323, NSW
A slight drop in inflation figures – down to 3.5% in July from 3.8% the previous month – had investors checking the Reserve Bank’s reaction but most economists agree there’s no chance of an interest rate cut this year. The RBA’s not forecasting inflation to get to its preferred levels until late 2026 or early 2027.
While the cost of living has dropped ever so slightly (and partly due to $300 federal government rebates on electricity bills), wages have risen. The Australian Bureau of Statistics reports that wages rose by 4.1% in the year to June. It means that wages are now keeping up with the cost of living.
The good news from the markets and inflation data contributed to a small upswing in consumer confidence although there’s still much ground to recover after the losses caused by Covid-19.
This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.
Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
Authorised Representative No. 1243642 and Bottrell Wealth Pty Ltd is Corporate Authorised Representative No. 1243427 of lnterPrac Financial Planning Pty Ltd (AFSL 246638).
HOW DO
retirement income options
CQMPARE?
Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.
Innovative Retirement Income Stream
An Innovative Retirement Income Stream
You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.i
Account-Based Pension
An account-based pension (ABP) using your superannuation is one of the most common retirement income options.
The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.
Some considerations:
- Tax benefits – Investment earnings, capital gains and withdrawals are tax-free, unless you have an untaxed component within your super.
- Payment flexibility – Subject to pension minimums, most super funds allow you to adjust the payment amount and frequency, and even make partial or full lump sum withdrawals if needed. You can also return to work and continue to receive a pension.
- Longevity and market risks – You might outlive your account balance, especially if your withdrawals are high or your investment returns are poor.
Transition to Retirement
A transition to retirement (TTR) strategy allows access to some of your superannuation while still
working, if you have reached age 60 (based on current rules).n
Some considerations:
- Flexible work options – You can reduce your working hours and supplement your income from your super.
- Limits on pension rates – Similar to an ABP, there is a minimum annual pension rate. However, there is also a maximum annual withdrawal of 10 per cent of your TTR account balance.
- Reduced retirement savings – Drawing on your superannuation while still working means your retirement savings might grow more slowly.
Annuities
An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.
Some considerations:
- Predictable income – Provides a stable income stream, which can be reassuring for financial stability and provide an income for as long as you live.
- Lack of flexibility – Once you purchase an annuity, the terms are generally fixed and you cannot alter the income There’s a restriction on capital withdrawals or in some instances no access to capital at all.
- Inflation risk – Fixed non-inflation-linked annuities may not keep pace with inflation unless specifically indexed to inflation.
(IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.
Some considerations:
- Age Pension benefits – Centrelink only counts 60 per cent of the pension
payments received as assessable income and only 60 per cent of the purchase price of the product counts as an assessable asset until age 84 when it is reduced.
- Certainty – Some IRIS products offer a stable guaranteed income stream, providing financial
- No minimum requirements – IRIS products do not require an annual minimum amount, instead just requiring at least one annual payment.
- Complexity – Features vary widely between different IRIS products and may involve complex terms or conditions.
Next steps
How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits
your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.
- https://ato.gov.au/individuals-and-families/jobs-and- employment-types/working-as-an-employee/leaving-the workforce/planning-to-retire#ato-Afteryouretire
- https://ato.gov.au/individuals-and-families/jobs-and- employment-types/working-as-an-employee/leaving-the workforce/transition-to-retirement
New deductions and employer obligations
Employers need to check that payroll systems reflect recent legislative changes, and the ATO is highlighting deduction opportunities available to some small businesses. Here’s your roundup of the latest tax news.
Updated employer obligations
The ATO is reminding employers to stay on top of legislative changes affecting payroll systems.
The Super Guarantee rate increased on 1 July 2024 to 11.5 per cent of ordinary times earnings, so all payments (starting with those for the July to September quarter) to super accounts for eligible workers must reflect the new rate.i
Individual income tax rate thresholds
and tax tables changed also changed on 1 July 2024 so you may need to check calculations for your Pay As You Go Withholding obligations.
Claims for energy expenses
Many small business are eligible for a bonus 20 per cent tax deduction for new assets (or improvements to existing assets), that support more efficient energy usage.
The Small Business Energy Incentive applies to eligible assets first used or installed ready for use between 1 July 2023 and 30 June 2024.ii
Eligible expenditure for external training courses for employees incurred between 29 March 2022 and 30 June 2024 could also qualify for a 20 per cent bonus tax deduction from the Small Business Skills and Training Boost.i,i
Pay less capital gains tax {CGT)
While a business can reduce capital gains made during a tax year by offsetting
them with capital losses from the same
or previous income years, not all capital losses are eligible.iv
Capital losses carried forward from previous years need to be used first, with losses from collectables (such as artwork and antiques) only permitted to be offset against capital gains from collectables.
Losses from personal use assets (such as boats or furniture), CGT exempt assets (such as cars and motorcycles), paying personal services income to yourself through an entity you set up, and leases producing income (such as commercial rental property), are ineligible as offsets.
Fuel tax credit rates change
Before claiming fuel tax credits in your next Business Activity Statement (BAS), check you are using the latest rates as they have changed twice in the new financial year.v
On 1 July 2024, the rate for heavy vehicles travelling on public roads changed due to an increase in the road user charge, with the rate altering again on 5 August 2024 due to a change in fuel excise indexation.
Different rates apply based on when you acquired fuel for your business’ use, so ensure you use the correct rate. If you are unsure, try the ATO’s online Fuel Tax Credit Calculator to work out the amount to report in your BAS.
Records essential for rental expense claims
Rental property investors without correct documentation to substantiate their expense deductions may find their claims declared invalid.vi
The ATO is warning investors they need all receipts, invoices and bank statements plus details of how deductions were calculated and apportioned for a valid claim.
Lodging a ‘nil’ BAS
While taxpayers registered for GST automatically receive a Business Activity Statement and are required to lodge and pay in full by the due date, businesses with nothing to report are still required to lodge.
If you have paused your business, you are required to lodge a ‘nil’ BAS by the due date either online or via the ATO’s automated phone service.
- https://ato.gov.au/businesses-and-organisations/ super-for-employers/paying-super-contributions/how much-super-to-pay
- https://ato.gov.au/businesses-and-organisations/ income-deductions-and-concessions/income-and deductions-for-business/deductions/small-business energy-incentive
- https://ato.gov.au/businesses-and-organisations/ income-deductions-and-concessions/income
and-deductions-for-business/deductions/small business-skills-and-training-boost?=Redirected_ Skillstrainingboost
- https://ato.gov.au/businesses-and- organisations/small-business-newsroom/pay-less capital-gains-tax-cgt
- https://ato.gov.au/businesses-and-organisations/ income-deductions-and-concessions/incentives-and concessions/fuel-schemes/fuel-tax-credits-business/ rates-business/from-1-july-2024-to-30-june-2025
- https://ato.gov.au/media-centre/ato-warning-to- rental-property-owners-dont-let-your-tax-return-be-a fixer-upper
- https://ato.gov.au/businesses-and-organisations/ gst-excise-and-indirect-taxes/gst/if-your-business changes-or-ceases/cancelling-your-gst-registration
With the cost of doing business continuing to squeeze the bottom line, careful cash flow management has never been more important.
lags between placing and receiving orders, and to identify unwanted or outdated stock.
Not only is the ATO paying extra attention
to timely payment of tax debts, but once the new payday super rules commence, many small businesses will no longer have access to one of their traditional sources of emergency funding.i
The government recognises how important cash flow is in small businesses and allocated an additional $23.3 million in
the May 2024 Federal Budget to boost the adoption of elnvoicing. This electronic system is designed to help improve cash
flow and productivity in smaller operations.
If you don’t have clear insights into your cash flow position and are not careful in managing income and expenses, it’s much harder to pay your bills and meet your tax, super and employer obligations.ii
A cash flow projection or budget helps to ensure there is enough cash available to meet upcoming expenditure. You will be able to understand your likely cash position at any time, identify fluctuations that could lead to potential cash shortages and plan for tax payments and major expenses.
The three main things to consider when creating a cash flow budget are timing, fixed and variable costs, and your income.
While cash flow projection tools can be off-the-shelf digital products or simple templates, we can also work with you to use the ATO’s Cash Flow Coaching Kit to
improve management of this critical area.iii
Improving your position
When you have completed a cash flow projection and understand your position, it is time to work on ways to improve it.
One of the most important ways to improve
cash flow is to ensure your invoices are paid as quickly as possible. Make sure invoices are sent out as soon as you can and,
if possible, ask for immediate payment.
Consider shortening your payment terms, particularly if they are currently longer than 30 days. Some businesses offer an early payment discount or charge interest on overdue accounts to help speed up payments.iv
Setting clear payment guidelines for your customers is also valuable and think about taking action with customers who regularly fail to pay on time.
Review your payment cycle
Check suppliers’ payment terms to make sure you are not paying earlier than required (unless there is a discount on offer!).
Using a business credit card with an interest-free payment period can be an easy way to smooth your cash flow.
Separating your personal and business expenses makes tracking your business cash flow and expenses easier and reduces the time required for reconciliations.
Check stock levels
If you sell or supply products, carry out regular reviews of your inventory to ensure you are only holding the stock needed and are not tying up valuable
cash flow and possibly increasing storage and insurance costs.
An inventory management system can be helpful to automate ordering and reduce
Also review your pricing and margins to see if it is possible to raise prices without losing business.
Reduce your outgoings
Keeping a close eye on regular expenses and one-off spending helps to keep outgoings to a minimum.
Look for opportunities to save money by streamlining operations and reducing operating costs by cutting energy expenses and reviewing existing service
contracts including phone and insurance.
Negotiating better prices with suppliers and more tightly targeting marketing expenditure can also boost your cash flow.
Make your asset work harder
If your business includes expensive assets like vehicles and equipment, ensure they are working hard for you.
Consider leasing or hiring assets to reduce upfront costs, sell assets you no longer need, and review any asset financing to make sure that it is competitive.
While these general tips may help improve your cash flow position, don’t forget we can provide advice tailored to the specific needs of your business. So, call us today if you would like our help.
- https://ato.gov.au/about-ato/new-legislation/in-detail/ superannuation/payday-superannuation
- https://www.gov.au/businesses-and-organisations/preparing- lodging-and-paying/record-keeping-for-business/setting-up-and managing-records/manage-your-business-cash-flow
- https://www.gov.au/tax-and-super-professionals/for-tax- professionals/support-and-communication/in-detail/cash-flow coaching-kit
- https://busingov.au/finance/cash-flow/improve-your-cash-flow
