Diamond Blue Financial Services

2019 June Newsletter

by Diamond Blue Financial Services | June 22, 2019

The end of the election uncertainty and the investor-friendly policies of the Coalition produced a relief rally on financial markets in May. The Australian dollar bounced back above US69c after falling to three-year lows the day before the election, but still finished the month down 1 percent. Local shares surged to an 11-year high before losing some of their gains to finish up 1 percent for the month.

The Australian dollar more broadly has suffered from a flight to safety as trade tensions between the US and China escalate, pushing the US dollar higher.

In Australia, the Reserve Bank has trimmed its economic growth forecast for 2019 from 3.0 percent to 2.75 percent where it is expected to stay until at least June 2021, despite rising iron ore prices. This is against the background of a lift in the unemployment rate from 5.1 percent to 5.2 percent in April and a slide in business sentiment. The NAB business conditions index fell from 7.2 points to 3.1 points in April while the business confidence index remains below zero. New vehicle sales, a bell weather for consumer confidence, fell to their weakest level in 9 years in April, down 8.9 percent over the year.


Election 2019: A vote for continuity in an uncertain world

The Liberal/National Party Coalition has been returned to government, as Australians chose continuity over change and cautious economic management over Labor’s ambitious reform agenda. 

The Coalition is promising sweeping tax cuts for individuals and continuity for investors with no big changes to existing investment or superannuation policies. 

One of the first items of business for Prime Minister Scott Morrison will be to reconvene Parliament to pass legislation on a low and middle-income tax offset. 

Individuals to pay less tax

Providing the legislation is passed quickly, from 1 July Australians earning less than $37,000 will receive a tax offset of up to $255 (effectively a cash rebate) with their tax returns. If you earn between $48,000 and $90,000 you will get the maximum amount of $1080. The offset then scales down to zero for those earning $126,000 or more.i  

Further planned tax cuts could depend on the Coalition winning the next federal election. 

From July 2022, the Coalition plans to raise the top threshold of the 19 per cent income tax bracket to $45,000. Then from July 2024, it plans to reduce the 32.5 per cent tax bracket to 30 per cent and do away with the 37 per cent rate entirely. 

If adopted, these proposals will result in a flat 30 per cent tax rate for anyone earning between $45,000 and $200,000. 

Support for first home buyers

In a proposal that could also help stimulate the flagging residential property market, the Coalition has promised help for first home buyers trying to get a foot on the property ladder. 

From January 2020, the proposed first Home Loan Deposit Scheme would allow eligible first home buyers with income of up to $125,000 (or $200,000 for a couple) to buy a home with a deposit as low as five per cent without incurring lenders mortgage insurance.ii  

Help for small business

Small business has not been forgotten. As announced in the recent Budget, the popular instant asset write-off will be increased and extended to businesses with a turnover of up to $50 million (previously $10 million). 

Eligible businesses will be able to write off assets up to the value of $30,000 (previously $25,000) against their taxable income. 

Investment tax concessions to stay

Investors can breathe easy now that controversial changes to dividend franking credits and negative gearing proposed by Labor will not go ahead. 

Individuals, including those with a self-managed super fund, will continue to be entitled to a cash refund of franking credits attached to their share dividends if the franking credits exceed their tax liability. 

Property investors have also earned a reprieve, with no changes to negative gearing rules. 

Super changes at the margins

Australians hoping to boost their super in the run-up to retirement will continue to enjoy existing tax concessions. 

You will still be able to make catch-up concessional (pre-tax) contributions if you meet certain conditions. From the 2019-20 financial year, individuals who have not used their full $25,000 annual concessional contributions cap will be able to carry forward the shortfall for up to five years and claim a personal tax deduction. To be eligible, your total super balance must be below $500,000 on June 30 the previous financial year.iii  

The non-concessional (after-tax) contributions cap will remain at $100,000 a year for people with a total super balance below $1.6 million. Those under 65 can still bring forward up to three years’ contributions (or up to $300,000) with a proposal to increase the age limit to 67 from 1 July 2020.iv  

The Coalition also plans to allow older Australians to make voluntary contributions until age 67 without meeting the work test. Subject to legislation, this measure would also begin on 1 July 2020. 

Looking ahead

With the election out of the way, Australians can get back to the business of planning their finances with more certainty. 

The initial response from financial markets was positive, with the Aussie dollar and local shares both up on the first day of trading after the election. However, the jury is still out on whether the Government’s tax cuts and spending promises will be enough to boost economic momentum. 

If you would like to discuss your overall financial plan in light of the election result, please give us a call. 


ii https://www.liberal.org.au/latest-news/2019/05/12/helping-australians-buy-their-first-home
iii https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Super-contributions---too-much-can-mean-extra-tax/?page=2#Concessional_contributions
iv https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Super-contributions---too-much-can-mean-extra-tax/?page=3#Non_concessional_contributions


Paving the way for a smooth EOFY

As the end of the financial year draws closer, thoughts turn to tax. No doubt you can think of more enjoyable ways to spend your time than preparing for your annual tax return. So how can you streamline the process while ensuring you take advantage of all the claims that are possible? 

First, you need to collect all your records of both your income and your expenditure throughout the year. 

This includes:
  • All your income whether it’s from your employer, your super or your pension
  • All your bank statements including interest earned and charges paid
  • Dividends and distributions from your investments
  • Records of investment sales and purchases for capital gains/loss purposes
  • Income from rental properties and associated expenses
  • Foreign income
  • Your private health insurance policy details.
Nowadays, there may also be income to report from your participation in the shared economy such as money earned from Uber or AirBnB. 

Ideally all this documentation should be to hand. If it’s not, then seriously consider using an app to record all these transactions on a regular basis so when June comes around, you won’t spend hours hunting out all the documentation. The Australian Taxation Office, for instance, has a myDeductions app for individuals and sole traders. 

Another way to help monitor your expenses is to establish a separate credit card or bank account for your work-related expenses so that they are easily identifiable. 

What can you claim?

Once you have your documents to hand then you need to consider what you can claim as work-related expenses. But do make sure you only claim what you are entitled to, because the ATO has work-related expenses in its sites this year. 

Basically there are three key criteria:
  • You must have spent the money yourself without having it reimbursed
  • The money must be directly related to earning income
  • You must have a record to prove it.
If your expenses meet these criteria, then there are a host of expenses you may be able to claim. These include vehicle and travel expenses; clothing, laundry and dry cleaning; gifts and donations; home office expenses; self-education; bank interest and account fees; and tools and equipment. 

As an investment property owner, you can claim items such as land tax, rates, body corporate charges, insurance, repairs and maintenance, agent’s commission, gardening, pest control, costs associated with drawing up leases and advertising for new tenants. 

If you have income protection insurance outside super, then tax time is a perfect opportunity to review your cover and maybe prepay your next 12 months of premiums. That way you can claim those premiums as a deduction in the current year and reduce your tax liability. Other types of life insurance are generally not tax deductible outside of super. 

Check your super

Superannuation is another area for attention. If you have not reached your concessional contributions cap of $25,000 (which includes your employer’s contributions and salary sacrifice amounts) then consider putting the shortfall into your super. Any personal concessional contributions you make can be claimed as a tax deduction. But don’t wait until the 11th hour as your contribution may not be processed by the fund until after June 30. You will need to notify your fund of your intent to claim a deduction and there are applicable timing requirements for this notice. 

Taking advantage of the government’s co-contribution can also be worthwhile for those who are eligible. If you earn less than $37,697 in 2018-19 and contribute $1,000 to your super as a personal contribution for which you don’t claim a tax deduction, the government will match it with a $500 co-contribution. That’s an effective 50 per cent return on your investment.i The co-contribution reduces progressively to nil once your income reaches $52,697. You must meet the eligibility criteria to qualify. 

Changes for inactive super accounts

It is also worth noting that come July 1 your super fund will cancel your life insurance policy if no contributions or rollovers have been made to your account in the last 16 months. If you want to maintain insurance cover with such a fund, you need to contact your fund or make a contribution or rollover into that fund to keep your account active. Alternatively, you could speak to us about purchasing cover outside super. ii 

If you would like some help making tax time less taxing this year, speak to your tax agent or give us a call. 


ii https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/insurance-through-super


Did you receive a confusing letter or email from your super fund?

A new legislation was passed by the Parliament in February 2019. This article from Centrepoint Alliance explains what these notifications mean and what action is required from you to ensure your insurances do not cancel.

In May 2019, superannuation fund trustees started writing to selected members of their funds informing them the insurance cover held in their super account may be cancelled. This can have serious consequences for fund members if not addressed promptly.

The action being taken by the super funds is as a consequence of legislation that was passed by the Parliament in February 2019.

Where an individual has a superannuation account, and contributions or rollovers have not been received in the previous 16 months, the account is treated as being inactive.

The February legislation now requires that superannuation fund trustees cancel the insurance cover held in inactive accounts, unless the member has elected to retain the insurance.

What does this mean?

Super fund trustees were required to conduct a review of all members of their fund as at 1 April 2019, and identify those members that had not made contributions or arranged for other super benefits to be rolled into their account, in the previous six months. That is, contributions had not been received since 1 October 2018.  

Where accounts identified in the review include insurance, the super fund was required to write to each member informing them that the insurance cover would be cancelled once a period of 16 months of inactivity has elapsed. Cancellations are to commence from 1 July 2019.

In order to retain the insurance cover, a number of options exist. You can:

  1. Make a contribution or arrange for other super benefits to be rolled over to the account before the 16-month period elapses, or

  2. Write to the super fund informing them that the insurance is to be retained.

If you have received a letter from your super fund informing you that your account has not received contributions or rollovers within the past six months, there is a risk that your insurance may be cancelled as early as 1 July 2019.

You need to take the following steps:
  1. Review your insurance cover to determine if you still need the cover,

  2. If you do, then either:

  • make a contribution to your super fund, arrange for other super benefits to be rolled over to your account, or

  • make an election, in the form provided by your super fund, indicating that you wish to retain your insurance cover.

Better still, contact us and arrange to have a formal review of your insurances carried out.

If you receive a letter from your super fund advising that your account is likely to become inactive, don’t ignore the letter. If insurance cover is cancelled, it may be difficult to replace the cover where it is needed.

Reference : https://blog.cpal.com.au/realiseyourdream/i-just-got-a-confusing-letter-from-my-super-fund/


Please note this information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial advisor, whether the information is appropriate in light of your particular needs and circumstances.

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