Making your wishes known

While Australia’s handling of the COVID-19 pandemic was among the best in the world, the speed and spread of the illness underlined just how fragile life can be.

It was also a solemn reminder of the importance of ensuring your affairs are in order, so your wishes are met – in life and death.

The centrepiece of any estate planning is your Will, which sets out who you would like to receive your assets when you die, and how they are to be distributed. But you also need to consider what will happen to your superannuation as well as who will act on your behalf if you are unable to make decisions about your finances, health or wellbeing.

Expressing your Will

Despite the importance of a Will, it’s estimated that nearly half of Australians don’t have one.i If you die intestate (without a Will), your assets will be distributed according to a legal formula within each State, which may not be in line with your wishes. In an era where complex family situations and blended families are common, this can create unnecessary conflict at what is already a difficult time.

Even if you have a Will, it’s not a set-and-forget document. You must make sure it is up to date and reflects major changes in your life, such as marriage, divorce, the birth of a child or the purchase of a home.

Super is not part of your Will

It is not widely understood that superannuation is not covered by your Will unless you specifically direct it to be by nominating a legal personal representative (LPR) as your beneficiary.

Unless you nominate a valid beneficiary, the fund’s trustees will determine who receives your super. Even if you don’t have much money in super yet, chances are you have life insurance with your super which is paid out to your beneficiaries on your death.

To be valid, a beneficiary must be your LPR or a dependent, defined under super legislation as your spouse, child, someone in an interdependency relationship with you or a financial dependent. If you don’t nominate anyone, or your nomination is not valid, generally the money will go to your dependants or your LPR – but it’s always good to make sure.

The best way to ensure your super and any insurance payout ends up with the people you want to receive it is to make a binding death benefit nomination. There may be a small charge and you need to renew it every three years to remain valid. A non-binding nomination is only a guide so the trustees can overrule your nomination.

It is also worth remembering that if your beneficiaries are adult children, there may be tax implications for them.

Living Wills

Estate planning isn’t just about planning who gets what when you are gone. You should also consider putting in place directives to let your family and others know how you want to see out your days.

An enduring power of attorney will allow you to nominate somebody to act on your behalf if you are no longer capable of conducting your own financial matters. A general power of attorney is not sufficient as it is usually for a set period and becomes invalid once you can no longer make your own decisions.

You should also organise enduring guardianship to appoint somebody to take control of any lifestyle or medical issues should you become incapacitated. And it is worthwhile introducing an advance care directive which states exactly what medical treatment you do and don’t want to receive towards the end of your life.

Spread the word

Once you have prepared an estate plan, it’s a good idea to gather all your documentation in one place and tell your family and legal representative where they are. Also, consider giving someone you trust your online passwords to avoid complications down the track.

Getting your affairs in order can provide great peace of mind for you and your family, now and in the future and we are here to assist – please contact us on 03 5120 1400.

i https://www.contestingwills.com.au/how-many-people-die-without-writing-a-will/

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.


Tax deductions for your home-based business

Using your home as the base for your business is increasingly popular, particularly due to COVID-19, with many of Australia’s 2.1 million enterprises with four or less employees now based at home.

As a result, the ATO is busy revisiting the rules on the tax deductions you can claim for a home-based business. Your claimable expenses will depend on how you operate your business, so it’s worth checking the current rules to ensure you know what’s what.

Your business structure matters

The structure (sole trader, partnership, trust or company) you use to operate your business affects your entitlements and obligations when claiming expense deductions.

Sole traders and partnerships can claim a deduction for the costs of running their business from home. What you can deduct is governed by whether or not you have an area of your home set aside as a ‘place of business’.

Trusts and companies, however, must have a genuine market-rate rental contract or agreement in place with the property owner covering which expenses the business is responsible for paying.


Different types of expenses

For home-based sole traders and partnerships, there are two main types of claimable expense.

Running expenses are the increased costs from using your home’s facilities for your business, such as heating, cooling, cleaning, landline phone and internet, equipment and furniture depreciation, and equipment repairs.

These can be claimed if you have a separate study or desk in a lounge room, even if the area doesn’t have the character of a place of business.

You can only claim deductions for the portion of your expenses related to running your business. Any part of an expense related to personal use cannot be claimed.

You may also be able to claim motor vehicle expenses between your home and other locations if the travel is for business purposes.

Claiming your business costs

When you calculate your running costs, you can choose the actual cost, fixed rate or temporary shortcut method. Each one is acceptable provided it’s reasonable for your circumstances, excludes your private living costs and there are appropriate records for your calculations.

With the actual cost method you use the real cost of the expense, while the fixed rate uses a set cost of 52 cents for each hour you operate your business. This covers heating, cooling, lighting, cleaning and depreciation. Other expenses need to be worked out separately.

The temporary shortcut method (available until 30 June 2022), is an 80 cents per hour rate covering all your expenses.

Occupancy expenses can’t always be claimed

Your business can claim occupancy expenses (such as mortgage interest, council rates, and home and contents insurance) if the area in your house set aside for your business has the character of a place of business (even if most of your business is conducted online).

Indicators of a place of business include identification (such as an external sign) it’s a place of business, the area is not easily adaptable for domestic use and is almost exclusively used for your business, or you receive regular client visits.

If you are eligible to claim occupancy expenses, they must be apportioned based on the share of the year your home is used for business and the portion of the floor plan.

Recordkeeping is essential

The ATO expects you to keep records for at least five years to show your business actually incurred the claimed expenses.

You must be able to substantiate your claims with written evidence or receipts for all running costs. If you claim occupancy expenses, you need to substantiate your mortgage interest, insurance, council rates and rental agreement with the homeowner.

The ATO also requires you to demonstrate how you calculated your expense claims and separated them into business and private use.

Capital gains implications

A word of warning though. If you claim deductions for the cost of using your home as your main place of business, there may be capital gains tax (CGT) implications when you sell.

If you claim occupancy expenses, the usual main residence exemption may not apply to the proportion of your home and the periods you used it for your business.

If you have recently started working from home or plan to do so, we can help you work out the best method of claiming deductions for your home-based business.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.


New financial year new perspective

The start of the financial year is always an excellent time to take stock of your current situation and visualise where you’d like to be in the future.

It’s fair to say this year hasn’t been ‘business as usual’! While no-one could have predicted the first six months of 2020, nor want to repeat them, it’s likely there have been lessons learned. So as you review and set new goals, consider any takeaways from lockdown and how they have influenced your goals and path for the future.


Different priorities and new goals

Your priorities may have forcibly changed in response to the change of circumstances, or perhaps you realised that some things are more important to you than others. Do you now want to spend more time with family, improve your connection to your friends, help out in the community? Perhaps you have a reignited passion for your work or have been motivated to look for greater opportunities. Has not being able to travel in the short-term made you more determined to hit the road or jet off to a new destination?

Work/life balance remains a top priority for many people, yet it can feel elusive at the best of times. By identifying what is important to you and what you want more (or less) of, you’ll be better placed to make changes to reach more of a balance.

You might have also discovered a new hobby. If you’re a gym junkie, you might have made the shift to exercising outdoors and discovered a love of trail running or mountain biking. If you love visiting restaurants and cafes, perhaps you started to enjoy more time in the kitchen, trying to replicate your favourite chef-cooked meals. Whatever hobby you’ve picked up or re-sparked, think about how you can keep it up when life returns to a new normal. Perhaps this hobby could even be a side business or has ignited an idea for a new career path?

Awareness of your finances

It’s likely your financial situation has changed in 2020. Your income and expenditure may have altered during the period of lockdown, and while we were all impacted in different ways, the period presented a degree of uncertainty for everyone, highlighting the need for financial security.

The financial goals you established last financial year or in January are likely to have shifted due to the year’s upheaval. And you may also have new goals following the COVID-19 pandemic. Review your finances and your budget to set new objectives, working with your current situation to build a financial safety net and work towards your future goals.

Setting and achieving your goals

The first half of the year has shown us that plans can and sometimes, must change. But don’t let this stop you from setting goals and working towards your vision of the future.

Ensuring your goals are smart, or specifically SMART – Specific, Measurable, Assignable, Realistic and Time-related, will make it easier for you to follow through and achieve them. Whether they’re related to finances, your career or spending more time with family and friends, drill down into the details.

The SMART framework strengthens your goals by making sure they are thought through. For instance, if this has been a time of financial instability for you, your priority could be having more savings behind you. But how much money will you put away and how often, who will make this happen, and is this feasible? With increased uncertainty, it may be beneficial to set micro goals with shorter time frames. This will allow you to be adaptable while still progressing towards your larger goals.

Getting support

This tumultuous year has also highlighted the importance of reaching out for support. This may be a coach, friend or mentor who provides guidance, encouragement and keeps you accountable on your journey. When it comes to establishing your financial goals and working through concerns, you don’t have to go it alone.

We can help keep you on track to achieving your objectives and guide you through the process, so feel free to get in touch today via our contact page or 03 5120 1400.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.