When bankruptcy is the best way forward

As interest rates and debt levels rise, many individuals and small business owners are feeling the pinch. Most will make it through with some belt-tightening, but some may need to take further action.

As a last resort, a debt agreement or bankruptcy may be an option. But what are the implications?

Solutions to financial pressure

There are many reasons consumers and businesses are finding it harder to pay their bills, with pandemic closures, natural disasters and now an energy crisis piling on the pressure.

Figures from the Australian Financial Security Authority (AFSA) show in April 2022 there were 700 new personal insolvencies across the country, with the majority (61.4 per cent) being bankruptcies. Within these, 37.7 per cent were business-related bankruptcies.

But bankruptcy is not the only option. If you find yourself unable to pay your debts, you can also consider making a debt agreement, a personal insolvency agreement, or seeking temporary debt protection (TDP).

A TDP prevents creditors from seizing your assets or wages and gives you time to seek advice, while the other formal insolvency options (such as debt and personal insolvency agreements) are a longer-term answer for pressing financial problems.

Debt and declaring bankruptcy

The best-known formal insolvency option is bankruptcy. This is a legal process where you are released from most of your debts and can make a fresh start with your finances.

In 2020-21, around 6,800 Australians declared bankruptcy. This was 46.7 per cent down on the previous year, due largely to the special debt forgiveness rules in place due to COVID-19.

Although bankruptcy is tempting when you or your business are drowning in unpaid bills, it’s a serious step so please speak to us to understand the consequences before taking any action.

Once you file for bankruptcy, a Trustee is appointed to manage your ‘bankrupt estate’ and dispose of assets to pay your debts. If you earn over a set amount during your bankruptcy, you may be required to make compulsory ‘contributions’ from your income to your Trustee.

Impact of bankruptcy

Bankruptcy has serious consequences. Your name will permanently appear on the National Personal Insolvency Index, which is likely to affect your ability to obtain credit in the future. When applying, you must inform any credit provider you are bankrupt and credit reporting agencies will keep a record of your bankruptcy for five years from the date you become bankrupt.

You are required to request written permission from your Trustee to travel overseas, even if it’s for work. Travelling without permission could extend your bankruptcy or result in a prison sentence.

Bankruptcy doesn’t stop you from working and normally the AFSA doesn’t inform your employer, but there are limitations when operating as a sole trader. Court permission is required to be a company director or manage a company.

Your Trustee may sell your assets to help repay your debts, although you are able to keep ordinary household goods, tools up to a set amount used to earn your income and vehicles valued under a threshold.

Recoverable debts

Once you are discharged from bankruptcy (which usually lasts for three years and one day), your creditors can’t recover any remaining pre-bankruptcy debts.

Bankruptcy doesn’t, however, release you from all your debts. If you have secured debts (such as a mortgage over your home), creditors have the right to take possession of your property even if you are in bankruptcy.

While most unsecured debts (such as credit cards, personal and pay day loans, utility bills and unpaid rent) are covered by bankruptcy, some debts must be paid. These include court-imposed penalties, child support and debts incurred after your bankruptcy starts.

Tax and bankruptcy

If you declare bankruptcy, you still need to lodge a tax return and outstanding personal returns and Business Activity Statements must be filed.

The ATO ranks equally with other unsecured creditors, so if it’s one of your creditors, your Trustee will not necessarily pay this debt first. The only priority tax claims are unpaid Superannuation Guarantee Charge (SGC) debts if you have employees.

If your Trustee decides to sell some of your assets to clear your debts, this may create a capital gain or loss and the CGT event must be recorded in your annual tax return. The ATO may also offset any tax refunds you become entitled to against any tax, child support or family assistance debts.

If you are experiencing financial difficulties, please contact your adviser to discuss your options via email or call us on 03 5120 1400.

Source: Australian Financial Security Authority

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.

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.

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.


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.


Future proofing your career with professional development

“The only thing that is constant is change” – so said the ancient Greek philosopher Heraclitus and it continues to ring true today.

Industries are changing, continuing to evolve in response to challenges (such as the COVID-19 pandemic), technological disruptors and customer expectations. As a result, there is a greater need for the workforce to continue to adapt and develop. We need to be agile to stay on top of these changes, continue developing and learning, which will work towards future proofing our careers.

While some industries have formal professional development programs, there are many ways to foster your own development for those who don’t have formal pathways. Here is how you can take the lead to future proof your career.

Enrol in a course

Some workplaces offer both in-person and online courses, for example LinkedIn Learning, so take advantage of what’s on offer. You can also seek out professional courses relevant to your industry to upskill, keeping you abreast of the changing environment – not to mention that further education is a great additional to your CV as it showcases your engagement within the industry and your proactive approach to your career.

Attend webinars or seminars

While COVID restrictions have halted many in-person seminars, there are plenty of online webinars you can attend, some which are specifically on the topic of future proofing your career. While there are a number of free webinars you can attend, others may be offered by organisations to their members. Paid membership to these organisations be they industry groups, or groups centred around a common goal, can be a worthwhile investment assisting with not only educational sessions but networking opportunities.

Not only are webinars accessible from your office or living room, they tend to be more budget-friendly than seminars. However, seminars offer face-to-face learning and networking opportunities, so they are great to utilise where possible.

Pick up a book or listen to podcasts

It doesn’t get easier than picking up a book to arm yourself with new knowledge. There is a wealth of information out there, some which will be general advice discussing trends and management styles, others that will be tailored to your industry.

If you don’t have much time to read, opt for an audio book to listen to in the car or during exercise. Podcasts are also excellent ways of getting helpful information in a format that is convenient and can be tapped in and out of. As they are regularly created, you’re likely to get more up-to-date information this way.

Enlist the help of a mentor

It’s clear that a mentor can help you stay on top of your industry or explore new opportunities by providing support and guidance. A 2019 survey showed that while 76% of people thought mentors are important, only 37% actually have one.i

The study also found that 61% of mentor-mentee relationships developed naturally, with 25% happening after someone offered to mentor, and 14% when someone asked for a mentor. This means that there’s likely to already be someone in your life who could be your mentor. Think about who is dynamic in facing industry changes and don’t be shy to ask if they’re open to mentoring you.


Join peer groups

An extension of having a mentor, peer groups provide you with the support of others who are also dedicated to professional and personal growth. If you are someone who thrives on peer support, it will be invaluable to be part of a group of people rather than going it alone.

You can give each other feedback, check in on each other’s goals and share helpful experiences and resources such as great books or webinars. This is also a fantastic way to make real-life connections – you might even meet someone who helps you land a new job or open doors to a new industry. Online tools such as Meetup can help you find a group near you and keep an eye on industry meetups as well.

Life is full of change, but rather than feeling overwhelmed, embrace it. By furthering your education, you’ll future proof your career and feel more empowered tackling the changes you face.


https://online.olivet.edu/research-statistics-on-professional-mentors

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.

Investing lessons from the pandemic

When the coronavirus pandemic hit financial markets in March 2020, almost 40 per cent was wiped off the value of shares in less than a month.i Understandably, many investors hit the panic button and switched to cash or withdrew savings from superannuation.

With the benefit of hindsight, some people may be regretting acting in haste.

As it happened, shares rebounded faster than anyone dared predict. Australian shares rose 28 per cent in the year to June 2021 while global shares rose 37 per cent. Balanced growth super funds returned 18 per cent for the year, their best performance in 24 years.ii

While every financial crisis is different, some investment rules are timeless. So, what are the lessons of the last 18 months?

Lesson #1 Ignore the noise

When markets suffer a major fall as they did last year, the sound can be deafening. From headlines screaming bloodbath, to friends comparing the fall in their super account balance and their dashed retirement hopes.

Yet as we have seen, markets and market sentiment can swing quickly. That’s because on any given day markets don’t just reflect economic fundamentals but the collective mood swings of all the buyers and sellers. In the long run though, the underlying value of investments generally outweighs short-term price fluctuations.

One of the key lessons of the past 18 months is that ignoring the noisy doomsayers and focussing on long-term investing is better for your wealth.

Lesson #2 Stay diversified

Another lesson is the importance of diversification. By spreading your money across and within asset classes you can minimise the risk of one bad investment or short-term fall in one asset class wiping out your savings.

Diversification also helps smooth out your returns in the long run. For example, in the year to June 2020, Australian shares and listed property fell sharply, but positive returns from bonds and cash acted as a buffer reducing the overall loss of balanced growth super funds to 0.5%.

The following 12 months to June 2021 shares and property bounced back strongly, taking returns of balanced growth super funds to 18 per cent. But investors who switched to cash at the depths of the market despair in March last year would have gone backwards after fees and tax.

More importantly, over the past 10 years balanced growth funds have returned 8.6 per cent per year on average after tax and investment fees.ii

The mix of investments you choose will depend on your age and tolerance for risk. The younger you are, the more you can afford to have in more aggressive assets that carry a higher level of risk, such as shares and property to grow your wealth over the long term. But even retirees can benefit from having some of their savings in growth assets to help replenish their nest egg even as they withdraw income.

Lesson #3 Stay the course

The Holy Grail of investing is to buy at the bottom of the market and sell when it peaks. If only it were that easy. Even the most experienced fund managers acknowledge that investors with a balanced portfolio should expect a negative return one year in every five or so.

Even if you had seen the writing on the wall in February 2020 and switched to cash, it’s unlikely you would have switched back into shares in time to catch the full benefit of the upswing that followed.

Timing the market on the way in and the way out is extremely difficult, if not impossible.


Looking ahead

Every new generation of investors has a pivotal experience where lessons are learned. For older investors, it may have been the crash of ’87, the tech wreck of the early 2000s or the global financial crisis. For younger investors and some older ones too, the coronavirus pandemic will be a defining moment in their investing journey.

By choosing an asset allocation that aligns with your age and risk tolerance then staying the course, you can sail through the market highs and lows with your sights firmly set on your investment horizon. Of course, that doesn’t mean you shouldn’t make adjustments or take advantage of opportunities along the way.

We’re here to guide you through the highs and lows of investing, so give us a call if you would like to discuss your investment strategy with a financial adviser on 03 5120 1400.

https://www.forbes.com/sites/lizfrazierpeck/2021/02/11/the-coronavirus-crash-of-2020-and-the-investing-lesson-it-taught-us/?sh=241a03a46cfc

ii https://www.chantwest.com.au/resources/super-funds-post-a-stunning-gain

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 COVID-19 relief schemes explained

As we navigate ongoing lockdowns due to COVID-19 across Australia, here is a guide to the latest benefits you may be entitled to from the Federal and State Governments.

Australia-wide initiatives

The Pandemic Leave Disaster Payment (PLDP) is a program to support you, if you find yourself in a situation where you are unable to earn an income because you are required to self-isolate, quarantine, or are caring for someone with COVID-19. The payment provides a lump sum of $1,500 per fortnight and you will need to meet certain criteria, which does vary between states and territories.

COVID-19 Disaster Payment (CDP) is available for workers who are adversely affected by a state public health order including a lockdown, hotspot or movement restrictions. Again, the eligibility criteria vary by state, as can the amounts.

In addition, Centrelink provides a one-off Crisis Payment for National Health Emergency payment for those affected by COVID-19. You would need to already be eligible for income support or in severe financial hardship and are required to quarantine or self-isolate or are caring for someone required to be in quarantine or self-isolation. You will only be able to access 2 Crisis Payments for National Health Emergency in a 6-month period.

New South Wales
  • The Pandemic Leave Disaster Payment will provide $1,500 for each 14 day period you must self-isolate or quarantine, or are caring for someone who has COVID-19 or must quarantine or self-isolate, and unable to earn an income.
  • From July 14, there is a 60-day moratorium on evictions for residential tenants who have lost 25% or more of their income due to stay at home orders.
  • Businesses who suffer a 30% reduction in revenue due to the restrictions, which have a turnover between $75,000 and $250 million, can now apply for up to $100,000 in JobSaver grants a week.
  • For businesses with a turnover between $30,000 and $75,000, the COVID-19 Micro Business Grant provides a fortnightly $1,500 payment, if your revenue has declined by more than 30%.
  • Businesses now have the option to defer the payment of their payroll tax, including the 2020-21 annual reconciliation, July and August 2021 monthly return periods until 7 October 2021. Interest free payment plans will be available for up to 12 months.

Victoria
  • The COVID-19 Disaster Program is available for eligible Victorians between July 16 and 27th period. Although this period has lifted you still may be able to access this payment if you are eligible. The opportunity to claim closes on August 12th for the July 16-22nd July period and on August 19th for the July 23-27th period.
  • The Pandemic Leave Disaster Payment will provide $1,500 for each 14 day period you must self-isolate or quarantine or are caring for someone who has COVID-19 or must quarantine or self-isolate.
  • The Business Continuity Fund provides relief for up to around 30,000 business, that continue to be impacted by capacity limits on businesses with a $5,000 grant. There are 24 eligible sectors (including restaurants & cafes, gyms and hairdressers).
    For CBD businesses, that are also impacted by reduced foot traffic due to restrictions on staff allowed back into offices, you may also be eligible for an additional $2000 grant. To be eligible, for the Business Continuity Fund businesses must have received, or be eligible for the Business Cost Assistance Program round two.
  • The Licensed Hospitality Venue Fund 2021 will receive extra funding to provide grants of up to $20,000, to support licensed venues that continue to be impacted by the current restrictions. This grant recognises the higher operating costs of larger licensed venues. Licensed venues that have received or were eligible for the previous Licensed Hospitality Venue Fund. CBD venues will again, also have an additional $2,000 grant available.
  • The Small Business COVID Hardship Fund provides grants of up to $5,000 to small businesses with a payroll of up to $10 million where the current restrictions have resulted in at least a 70% reduction in revenue.
  • The Alpine Business Support Program will provide $5,000 – $20,000 grants to 430 Alpine based businesses, recognising the impact of restrictions of movement and limited interstate travel, throughout peak season. There is also an additional $5 million support to alpine resort operators and management boards.
  • The Commercial Tenancy Relief Scheme has been reintroduced to assist eligible tenants with proportional rent relief and to support landlords assisting tenants. Eligible businesses must have experienced at least a 30% reduction in turnover and have an annual turnover of less than $50 million. Again tenants and landlords are encouraged to reach an agreement directly, the Victorian Small Business Commission (VSBC) will be available to provide mediation.
Queensland
  • In addition to the PLDP, workers in Queensland may be eligible for support and relocation incentives.
  • Small and medium businesses impacted by the South East Queensland lockdown commencing 31 July 2021 may be eligible for a $5000 grant to use on business expenses. To be eligible, the business needs to have a turnover of more than $75,000 and an annual payroll in Queensland of up to $10 million and need to have at least a 30% reduction in turnover as a result of the lockdown.
  • Grants are also available for large hospitality and tourism businesses operating in the 11 local government areas in lockdown, eligibility criteria apply. Applications open mid-August.
Australian Capital Territory

While the ACT has a number of smaller support packages in place to help the community, the primary COVID-19 relief scheme available is the $1,500 Pandemic Leave Disaster Payment.

Northern Territory

Similar to other states, if you can’t earn an income because you need to self-isolate or quarantine for 14 days, or need to care for someone with COVID-19, you may be eligible for the $1,500 Pandemic Leave Disaster Payment offered to Territorians.

Western Australia

On top of the state’s one-off 2020 $600 electricity bill credit, WA now offers the Pandemic Leave Disaster Payment.

South Australia

In addition to PLDP, one-off grants of $300 are available to eligible workers required to self-isolate.

Tasmania

In addition to PLDP, grants are available to eligible low-income casual workers or self-employed Tasmanians required to self-isolate.

As you know things can change rapidly, so please call us if you have any questions about the grants available or whether you are eligible – Contact us on 03 5120 1400 so we can assist you further.

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.


Post COVID-19: How Business Will Change Forever

Joe Auciello RGM Partner

COVID-19. Coronavirus. Daily press conferences from our Premier. Stage 4 lockdown. Who would’ve thought 8 months ago that this is where we’d be? 

That thought in itself is scary because, in all honesty, who knows what the world will look like in 2021. Will face masks form part of what we will come to know as the ‘new normal’? At a local level, what will Gippsland look like? How will our interactions change between one another? On a broader level, how will Australia recover financially from the multitude of State and Federal monetary intervention?

These are all questions that quite frankly should concern us all. That’s not to say we won’t recover, but what is evident is that we must find comfort in the eventuality of a ‘new normal’. So, here’s my take on this “new normal”. 

Working from home – is it that bad? 

For those that own or work for a business that operates predominantly with computers, working from home is a concept that you would have had to become accustomed with – and not by choice. Who would’ve thought teachers would be able to work from home? I mean, they can’t teach kids from their lounge rooms so there’s no way that can work, right?  

If this pandemic has taught us anything, it is to expect the unexpected. Business owners around Gippsland were probably of the view that they needed their staff within earshot at all times so they can keep an eye on them for fear of them becoming unproductive. It’s amazing how our perspective changes when we’re forced down a path that we ought not dare go down in normal circumstances, to then find it’s not so bad after all.  

The overall view of our clients is that working from home has actually improved productivity. Yes, that’s right – improved. Why you may ask? Here are some examples: 

  • “I’m far more focused at home with less distractions”; 
  • “I’m not wasting an hour of my day travelling to and from work”; 
  • “My work day is far more flexible with my kids whereby I can work later at night to make up for time I spend with them during the day to home school them”; and 
  • “I’m less anxious because the chance of catching COVID-19 is a lot less at home than being at work.” 

I’m sure there’s a number of other examples but I’ve found these to be the most common. Now of course there are instances where some of you are more productive at work due to supervision, lack of technology available at home or various other distractions at home. By no means am I saying that everyone should work from home! However, what I am suggesting is to be more fluid in your view.

If you own a business, be open to at least considering this as an option for your staff. If you’re an employee, be reasonable in your expectations! Remember, the business owner has many stakeholders to consider. 

But what about post-COVID-19? Should we go back to our old habits and be rigid in our views? Short answer – a blunt no! If you’re more productive now working from home, why change? Perhaps a hybrid approach of working 3 days from home and 2 days from your workplace would appease all parties. With modern technology, the excuses of not being able to work from home are fast diminishing.  

How Zoom and Microsoft Teams have become ‘in vogue’ 

I’d love to know how many new subscribers Zoom has had in the last 6 months. Same goes for Microsoft Teams. For those that are unaware (not many of you I bet), Zoom and Teams are video communication programs that all you to talk to another person or people at one time. If only I was given a dollar every time I’ve heard the remark “imagine if I had invented or owned shares in Zoom!”. 

In Gippsland, it is common to conduct our business face-to-face such is the ease of travel without the added stress of navigating through peak hour traffic. Given this, conducting meetings via video has largely been ignored because it was seen as unnecessary, and fair enough. We’d rather drive half an hour to see someone in Traralgon even if we lived in Drouin. Even one minor glitch in using technology has the propensity to turn anyone off from using it if the default option is available. But, if this year has taught us anything, it is to embrace change.  

Roll forward to the present day. Members of our community of all ages are now Zoom experts! Why? Because they’ve been forced to use the technology that’s always been available to them and more often than not, the feedback is that the experience is not that painful after all. 

Now that more of us are accustomed to using the technology, will that be the default mode of communication post-COVID-19? 

Electronic Signatures – can they be trusted? 

Electronic prescriptions from your doctor. Clicking a button on your email to sign your tax return or sell your house. These are just some examples of how society has had to adapt to continue to transact on a daily basis. When it’s forced upon us we have no choice but to comply, but the question still remains; can electronic signatures be trusted? 

I don’t profess to be a technological wiz, however I think it’s fair to say that an electronic signature will never be as secure as an original, or “wet”, signature. But like anything, we must compare the risk versus the expediency that electronic signatures provide. In my view the risk is only marginally greater than that of a wet signature, but the efficiency it provides is far greater. Society has changed in such a way that we’re all time poor. The more opportunity to save time, the better off we’ll be in my view. 

RGM – an insight to how we’ve changed for the better 

Through crisis comes opportunity. This common saying has never been more appropriate than now. I’ve been in the privileged position to see many different businesses from many different industries adapt to ensure that their financial future wasn’t materially impacted. RGM has been no different, and nor have we been immune to being impacted by COVID-19. 

Our biggest challenge was advising our clients on the varying impacts the virus was either having or going to have on their business, not to mention the angst in their voice due to the uncertainty of everything. With face-to-face appointments and onsite visits essentially off the table, we had to find new ways of going about communicating with our clients. We implemented a telephone appointment system, Microsoft Teams and Zoom meetings and for anything that needed to be signed we used our MYOB Portal that has been a raging success.  

Lastly, working from home became necessary due to rules put in place by the State Government but once again we adapted by just changing how we communicated with each other. I must say, not having to put on work clothes on and travel to work was a big winner for the team, and constant Microsoft Team meetings between each other soon became common place.

Whilst we cannot say for sure what the future may hold, you can rely on RGM to support you through it. To get in touch with Joe or any of our other advisers, contact 03 5120 1400.

 

The Economic Stimulus Package: Instant asset write-off threshold increase explained

A key part of the government’s economic response to the coronavirus is to support business investment and cashflow by increasing the instant asset write off threshold and eligibility rules.

So what is the instant asset write-off (IAW) and how can it help your business? 

Claiming an immediate deduction

Put simply, the IAW provisions allow your business to claim an immediate tax deduction for the full cost of a business asset you buy. Normal depreciation requires you to deduct the cost against your business profits over several tax years. 

Under the new rules, you can claim a tax deduction in the same financial year you purchase new or second-hand plant and equipment costing under $150,000. 

The IAW is not a cash refund. You don’t get the amount you spend back from the ATO, but instead get the advantage of bringing forward a tax deduction you would normally receive over several tax years. 

A simple example is a plumber who buys a new $16,000 trailer for his company. Using the IAW he can claim an immediate tax deduction of $16,000, which in turn reduces his business profit so he pays less tax. 

Rules for the IAW

To claim the IAW, the total cost of the asset must be under the relevant threshold. This includes the cost of having the asset installed and ready for use. 

Each asset must be under the threshold, but there’s no limit to the total amount your business can claim. 

If your business is registered for GST, the IAW threshold excludes GST. Otherwise, the threshold includes GST. 

From 12 March 2020, businesses with an aggregate turnover of up to $500 million are eligible for the IAW, up from $50 million previously. 

Eligible assets for the IAW

What you can purchase ranges from furniture through to computers and IT equipment, that may be required to enable staff to work remotely. 

Industry specific kit such as new tools for tradies, or POS devices and security systems for a retail store also meet the rules. 

Although the IAW is generous, assets such as horticultural plants and in house software are ineligible. 

Watch out for the traps

To claim the deduction, your new asset must be fully installed and ready for use before the end of the financial year in which you lodge your claim. 

If you are a sole trader, you also need to apportion any private use. For example, if you purchase a new car and use it for business purposes 70 per cent of the time, you can only claim 70 per cent of the cost. 

You are not permitted to reduce the asset’s price with a trade-in or personal use apportionment to get under the current $150,000 threshold. For example, if your new equipment costs $210,000 and business use is 70 per cent (leaving a claimable amount of $147,000), you can’t claim the IAW as the original cost is still over the threshold. 

If your business is structured as a partnership, it’s important to remember the partnership owns the asset – not the individual partners – so there’s no double-dipping. If a partner buys the asset in their own name and doesn’t qualify as a small business taxpayer personally, they can’t claim the write-off. 

Using simple depreciation

If your business buys an asset valued over the IAW threshold, you can’t claim the immediate deduction. You can, however, allocate it to your general small business pool and use the simplified depreciation rules

The general depreciation rules apply if you are ineligible or choose not to use the simplified rules, or if the ATO classes your business as medium-sized. 

Using a general small business pool allows you to combine the business portion of higher cost assets and claim a 15 per cent deduction in the financial year you start using them, then 30 per cent each year after that. 

Accelerated depreciation initiative

As part of the government’s coronavirus response, medium businesses with a turnover of less than $500 million can use accelerated depreciation rules to deduct 50 per cent of the cost of an eligible asset on installation. Normal depreciation rules apply to the balance of the asset’s cost. 

In these unprecedented times, we are here to assist you. Please don’t hesitate to give us a call on 03 5120 1400 if you have any questions about the instant asset write off or any aspect of the broader stimulus package.

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 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) 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).

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