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[av_heading heading=’The News Brief_20210127′ tag=’h1′ style=’blockquote modern-quote modern-centered’ subheading_active=’subheading_below’ show_icon=” icon=’ue800′ font=” size=’6vw’ av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’20’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=’custom-color-heading’ custom_font=’#000000′ icon_color=” margin=’0′ margin_sync=’true’ padding=’0′ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kkejp71d’ admin_preview_bg=’rgb(34, 34, 34)’][/av_heading]

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[av_section min_height=” min_height_pc=’25’ min_height_px=’500px’ padding=’no-padding’ shadow=’no-border-styling’ bottom_border=’no-border-styling’ bottom_border_diagonal_color=’#333333′ bottom_border_diagonal_direction=” bottom_border_style=” margin=’aviaTBmargin’ custom_margin=’50px’ custom_margin_sync=’true’ custom_arrow_bg=” id=’tax1′ color=’main_color’ background=’bg_color’ custom_bg=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” attachment=” attachment_size=” attach=’scroll’ position=’top left’ repeat=’no-repeat’ video=” video_ratio=’16:9′ overlay_opacity=’0.5′ overlay_color=” overlay_pattern=” overlay_custom_pattern=” av_element_hidden_in_editor=’0′ av_uid=’av-qet8u’ custom_class=”]

[av_one_full first min_height=” vertical_alignment=’av-align-top’ space=” custom_margin=’aviaTBcustom_margin’ margin=’0px’ margin_sync=’true’ row_boxshadow_color=” row_boxshadow_width=’10’ link=” linktarget=” link_hover=’opacity80′ title_attr=” alt_attr=” padding=’0px’ padding_sync=’true’ highlight_size=’1.1′ border=” border_color=’#f2f2f2′ radius=’3px’ radius_sync=’true’ column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’diagonal_bt’ src=” attachment=” attachment_size=” background_position=’top left’ background_repeat=’no-repeat’ animation=’left-to-right’ mobile_breaking=” mobile_display=” av_uid=’av-9wkhy’ custom_class=”]

[av_heading heading=’Budget 2020-21 tax changes’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kkejqo9h’ admin_preview_bg=”][/av_heading]

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The 2020–21 Budget brings forward all components of stage two of the 2018 and 2019 tax changes to the 2020–21 financial year. This stage was originally intended to come into effect in 2022–23.

In addition to bringing forward stage two, the LMITO is retained for the 2020–21 income year. This means that for the 2020–21 income year only, LMITO will apply on top of the stage two reductions (where it would have formerly ceased at the introduction of stage two in 2022–23).

As indicated in Table 1 below, this means that relative to the 2019–20 year:

Table 1: tax cut relative to 2019–20

Taxable income ($) 2020–21 2021–22

2022–23

2023–24

20 000
30 000 255
40 000 580 100
50 000 1 080
60 000 1 080
70 000 1 080
80 000 1 080
90 000 1 080
100 000 1 530 750
110 000 1 980 1 500
120 000 2 430 2 250
130 000 2 430 2 430
140 000+ 2 430 2 430

Source: Parliamentary Library analysis, based on the Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Act 2019 and the Treasury Laws Amendment (A Tax Plan for The Covid-19 Economic Recovery) Bill 2020.
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[av_heading heading=’Melbourne property market heats up over summer amid pent-up demand, no overseas travel’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kkejsg7s’ admin_preview_bg=”][/av_heading]

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Ray White Victoria and Tasmania chief executive Stephen Dullens says that pent up demand saw the company break sales records in December, at a time when auctions are typically winding down, and continue in January.

“We had our first auction on January 7, when normally our first auctions would be on the last weekend of January or the Australia Day weekend, but buyer activity has kicked off a good two or three weeks earlier than usual,” he said.

Transactions over the summer holiday period have been boosted by the fact that far fewer people are travelling.

Open for inspection attendance was up 13.5 per cent for Melbourne houses over the four weeks to January 17 than during the same period a year earlier, Domain data shows.

“The year has definitely kicked off a lot earlier than it normally would,” says Andrew Crotty, from Biggin & Scott Richmond.

“We’ve already sold 10 properties in January; we sold more than 30 in December when normally we’d do about half of that.

“One of the factors at play in that is that people aren’t travelling overseas at the moment, so they’re still keeping an eye on properties, and they’re on the phone to us, even if they are down the beach.

“It’s a lot easier to do that from the beach than it is from Europe. We’re even finding that a lot of people didn’t even want to take the risk of travelling interstate.”

Nelson Alexander director Nicholas West, who says the company had a record month in December, adds that people’s changing circumstances post-lockdown have also led to increased transactions over the summer holiday period.

“We’ve seen people coming out of lockdown who are reassessing all sorts of things when it comes to their living arrangements and accommodation needs,” he said.

“You know, they’re thinking ‘do I work down the coast, do I work from home, do I work some of the time in Melbourne and some down the coast or in the country?’

“People were rethinking all those things, while there was that pause in the market, which has brought about a whole wave of activity since lockdown.”

Mr West says the large volume of foot traffic so early in the year shows that people are prepared to forego some time at the beach to make the property and lifestyle changes they decided to make while in lockdown.

“We had some opens last weekend, and while every price point is a bit different, in that $800,000-$900,000 price range, we had some homes that had 40 or 60 groups through them,” he said.

“We haven’t had a huge amount of activity in terms of auctions just yet, but we’ve certainly sold a number of properties right through Christmas and early January, so people are still committed to making decisions and making changes at a time of year that is traditionally that little bit quieter.”
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[av_heading heading=’Should you be using Buy Now, Pay Later?’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kkejtx70′ admin_preview_bg=”][/av_heading]

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In recent years, one of the biggest changes for consumers has been the move towards ‘buy now, pay later’.

In years gone by, most people simply purchased with credit cards, and before that, it was using lay-by. Things have changed dramatically in the past five years and now, we’re seeing more Australians turn to buy now, pay later services.

Before you start buying with buy now, pay later services, it’s worth asking yourself if it’s a good idea or if will it hurt you down the track? Especially if you’re wanting to get a loan.

Advantages

The largest segment of the market that uses buy now pay later services are millennials. Many have grown up with this type of payment being an option and most love the ability to get something quickly and easily.

Another big advantage is how fast it is to set these services up. Unlike a credit card, that requires a number of checks to take place and a long application process, involving a credit check.

Another appealing feature is the fact that buy now, pay later companies don’t charge interest. Credit cards attract some of the highest interest rates and this makes them far less appealing.

Disadvantages

Buy now, pay later services work by paying off your purchase in a series of instalments. They generally only charge fees when you miss payments. However, there is evidence to suggest, these late payment fees make up a huge portion of their profits.

These companies also don’t let you choose the schedule to make the repayments. That means paying off your debts, might not fit in all that well with your next paycheck and could cause you to miss a repayment if you’re not careful.

One of the other major grey areas surrounding buy now, pay later services, is exactly how lenders will assess your application for finance if you have a history of using these types of products.

Generally speaking, buy now, pay later companies don’t impact your credit history, but you can be sure that lenders will be closely monitoring your bank statements. If you have a long track record of not managing your money well, and using various forms of credit that you don’t pay back, this will be a red flag.

Similarly, some lenders might even assess the money you owe to these companies, as a line of credit, which would impact your borrowing capacity.

One of the other key tests that lenders will look at, is whether you have been able to put together any genuine savings. This means having a track record of saving money or paying off good debts over a long period of time. To a lender, this suggests you are a person who is able to manage money well, and therefore a strong chance you will pay back the money they lend to you.

If you’ve been busy adding to a growing pile of debt over the Christmas period, this might be the perfect time to get you financials in order – especially if you are looking to get a home loan this year.

Consider cutting back on your spending, reducing your credit card limits and stop buying with buy now, pay later services. Start saving money and depositing it into a savings account and your odds of getting finance approved when you want to buy a house will dramatically improve.
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[av_heading heading=’2020–21 Mid-Year Economic and Fiscal Outlook (MYEFO) ‘ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kkekl2mg’ admin_preview_bg=”][/av_heading]

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The Government handed down the 2020–21 Mid-Year Economic and Fiscal Outlook (MYEFO) on 17 December 2020, with several proposed changes to tax and superannuation laws.

Measure name Proposed start date Developments
Alcohol Taxation — automatic remission of excise duty for alcohol manufacturers 1 July 2021 TBA
Changes to foreign investment monetary thresholds and fees 1 January 2021 Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020

 (Act No. 115 of 2020)

Royal assent 10 December 2020

COVID-19 Response Package — further updates to making Victoria’s business support grants non-assessable, non-exempt income for tax purposes 12 December 2020 Treasury Laws Amendment (2020 Measures No. 5) Act 2020

 (Act No. 118 of 2020)

Royal assent 11 December 2020

JobMaker Plan — temporary full expensing — expansion of eligibility and minor amendments 1 January 2021 Treasury Laws Amendment (2020 Measures No. 6) Act 2020

 (Act No. 141 of 2020)

Royal Assent 17 December 2020

Superannuation — KiwiSaver accounts  12 months after Royal Assent (11 December 2020) or by proclamation Treasury Laws Amendment (2020 Measures No. 5) Act 2020

 (Act No. 118 of 2020)

Royal Assent 11 December 2020

Superannuation — amendments to commutation rules for certain income stream products Royal Assent TBA

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[av_heading heading=’Retirees proceeding with downsizing plans as confidence rises’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kkekp95i’ admin_preview_bg=”][/av_heading]

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During the December quarter, one of the most frequent questions received by the BT technical services team, who fielded over 2,000 adviser queries, related to downsizer contributions.

BT technical consultant Tim Howard said clients looking to sell the family home are asking their advisers about what the impacts may be on their superannuation and age pension.

“During the worst of the pandemic, it seems many retirees stayed put and delayed any decision to move. With the pandemic situation mostly under control in Australia, along with positive news about the development of viable vaccines, retirees have been feeling more confident and are putting their plans in motion,” Mr Howard said.Mr Howard reminded advisers that clients who are over the age of 65 may be eligible to make a downsizer contribution to their super fund, following the sale of their main residence. Advisers have been asking BT about the details on the eligibility criteria of this measure.

“The downsizer contribution will not count towards a client’s non-concessional contributions cap, so it can still be made even if they have a total super balance greater than $1.6 million. The contribution is, however, limited to $300,000 or the proceeds of sale, whichever is the lower amount,” Mr Howard explained.

“Advisers should keep in mind that clients need to make the contribution within 90 days of receiving the sale proceeds. While this time may seem sufficient at first, the process of buying and selling a home, along with tasks such as making family and healthcare arrangements, can mean that taking advantage of this contribution strategy is placed on the backburner.”

With moving house often a busy and challenging period, Mr Howard said the key is to plan ahead.

“Advisers can encourage their clients to discuss early in the process whether a downsizer contribution to super should be part of their financial plan,” he said.

The second most-received query was the impact of sales proceeds from the principal home on their eligibility for the age pension.

“If a client has sold their principal home, and is intending to use the sale proceeds to buy, build or renovate a new principal home, then the proceeds can be exempt under the assets test for 12 months — and therefore the sale may not adversely affect their age pension entitlement during that time,” he stated.

The technical services team also received a lot of queries regarding the superannuation guarantee amnesty.

Under a one-off amnesty which ended on 7 September 2020, employers could self-correct historical underpayments of the superannuation guarantee (SG). The catch-up payments have resulted in some employees exceeding their concessional caps, leading to questions on how to resolve this problem, Mr Howard explained.

Advisers, he said, can apply to the ATO to disregard or re-allocate the payments to the financial year in which the contribution should have been made, for cap purposes.

“Importantly, if a client receives an excess contribution notice this year, they need to respond within the time prescribed,” he cautioned.

“If they know they are going to go over the cap, it’s best to make an application for an excess contributions determination ahead of time, and not wait for the notice.”

With the bill to increase the age at which a bring-forward non-concessional contribution can be made to super still stuck in Parliament, this topic has also generated a lot of queries.

According to the technical service team, the volume of adviser queries on this subject remains high, as advisers question whether the start date will be amended and whether a grace period will be put in place, and even whether the proposed legislation is still expected to become law.

“The legislative process has been delayed; however, there is still a high level of confidence that the critical component, regarding the bring-forward non-concessional contribution to super, will pass, as it’s not contentious,” Mr Howard said.

The other topic generating a lot of adviser queries was around the treatment of foreign assets, pensions and income streams.

“Many Australians maintain links to another country. Some own property overseas or receive a pension from a foreign government where they may have previously worked. Normally, they may travel to that country regularly and perhaps use their foreign-sourced income to fund their trips,” Mr Howard said.

“Due to the restrictions on travel during COVID-19, some may be leaving their income streams as is, while others are looking into selling their assets. Advisers are being asked how these will be treated by Centrelink in relation to clients’ eligibility for the age pension.”

Mr Howard explained that, generally, foreign assets and income streams are captured in Centrelink’s assessment for eligibility. However, the treatment can be different depending on the country, so, as always, it’s best to thoroughly check each client’s situation.
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Sources: The Australian Taxation Office, Parliament of Australia, Domain, SMSF Adviser and CFH Partners
Disclaimer: This is general information only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product. The Content provided herein has been prepared for informational purposes only. The Content does not constitute tax, legal or accounting advice and should not be relied upon as such. You should seek tax, legal or accounting advice before acting or relying on any Content.

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