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[av_heading heading=’The News Brief_20210324′ 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=” template_class=” av_uid=’av-kf3kagyk’ sc_version=’1.0′ 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=”]

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[av_heading heading=’Australian small businesses remain in the ‘digital dark ages’’ 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=” template_class=” av_uid=’av-kf3kleh1′ sc_version=’1.0′ admin_preview_bg=”][/av_heading]

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A CPA Australia survey of 4,227 businesses in 11 markets across the Asia-Pacific found Australian small businesses were stunted by a refusal to embrace technology, as only 22.3 per cent of Australian respondents recorded growth, compared to a survey average of about 46 per cent.

The survey of businesses in Australia, China, Hong Kong, India, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, Taiwan and Vietnam found that Australian small businesses were the least likely to begin or increase online sales during COVID-19, and the least likely to invest in technology in 2020.

The businesses that recorded growth in 2020 also reported investment in technology, said Andrew Hunter, chief executive at CPA Australia, who believes that Australian small businesses are likely to lose business to overseas competitors if they refuse to transform. 

“This digital divide will make Australia’s road to economic recovery longer and tougher than it needs to be,” Mr Hunter said. “If Australian small businesses don’t transform, sales will go to more innovative competitors overseas.”

The survey outlined Australian small businesses as being least likely to use social media, invest in or profit from technology, or review their cyber-security protocols.

“There is a clear link between innovation and performance,” Mr Hunter said. “Our survey shows that growing businesses are more likely to use new technologies, e-commerce and social media. These are areas in which Australian small businesses performed poorly.”

Compared to their APAC counterparts, Australian small businesses reported the highest rate of inaction in response to the pandemic, too, with 36 per cent of businesses making no major changes as part of their response plan, and only 17 per cent seeking government support and subsidies.

Mr Hunter said the results were disappointing, as other markets set a high standard for making innovative digital changes to grow their businesses and boost their earnings. But that, in part, he said, comes as a result of insufficient government support.

“Clearly, Australian small businesses need more help than they’re getting to leave the digital dark ages behind,” he said. 

“While businesses should play an active role in digital transformation, the government needs to play a bigger role in helping businesses manage this change.

“Ad hoc financial support for digital transformation isn’t sufficient. There needs to be a significant commitment of public funding to help Australian small businesses transform.”

Australian small businesses are expected to underperform compared to others in the APAC region again in 2021, according to the survey. Only 41.4 per cent of Australian small businesses are expected to record growth this year, compared to the market average of 60.8 per cent. 

Innovation is also expected to hold them back, with only 6.7 per cent of Australian small businesses likely to introduce a product or service unique to their market — or the world — in 2021, compared to a 23 per cent market average.
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[av_heading heading=’Housing lending may be cheap, but regulators argue it is not yet risky’ 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=” template_class=” av_uid=’av-kf3kbbkp’ sc_version=’1.0′ admin_preview_bg=”][/av_heading]

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New data suggests changes to mortgage lending rules in the near future are unlikely, despite rapidly rising home values. Recent data from the Australian Prudential Regulation Authority (APRA) suggests that while the proportion of loan originations that could be ‘higher risk’ showed a slight increase through the December quarter, the regulator saw no evidence of a “material relaxation in lending standards”. 

Indicators of lending standards are being watched carefully. Borrowing for the purchase of residential property hit a record $28.8 billion in January 2021, up 34.8% from the decade average. This has also contributed to housing values reaching a new record high.

So far however, the December 2020 quarter has not shown any major deterioration in lending standards, suggesting there is no need for interventions in the form of tighter credit policies. The December 2020 quarter is of particular importance, because it marks a positive turn in Sydney and Melbourne dwelling values coming out of COVID-related restrictions. Select metrics from the publication are discussed below. 

The share of interest only loans as a portion of new home loans ticked up to 19.2%

The portion of new mortgages lent on interest only terms hit 19.2% in the December 2020 quarter, up from 18.5% in the previous quarter. 

This is not far from the 18.7% average seen over the past two years. It is also is well below the record high of 45.6%, which was recorded over the June 2015 quarter. However, it is worth noting there have been improvements to collection of banking statistics, and the historic series is not directly comparable with recent data. 

Interest only lending was noted as a potential risk to broader financial stability in the years to 2017. At that time, it was becoming more common for borrowers to originate their loans on interest only repayment terms, or refinance and extend their interest only term period. This was leading to a delay in the paying down of loan principals, at a time when house prices and household debt were rising. 

Interest only loan structures have generally been more popular among investors, who are eligible for tax deductions on their interest payments. Considering investors remain around record lows as a share of total lending, the risk to financial stability from interest only lending to this segment of the market remains low.  

A key area regulators are likely to be watching is the proportion of interest only lending to owner occupiers.  The number of interest only loans to owner occupiers increased by 32.5% over the September quarter and comprised a series high 45.7% of interest only loan originations.  A sustained lift in owner occupiers not paying down their loan principal, could place upwards pressure on household debt levels, creating stability risks when interest rates eventually rise.

Debt to income ratios of greater than, or equal to 6, hit a two year high

APRA has previously cautioned lenders on exposure to loan-to-income ratios, and debt-to-income ratios, exceeding 6.

The portion of new home loans originated on a loan-to-income ratio of greater than, or equal to 6 times reached 7.0% of loans over the December 2020 quarter. This is the highest across the series, which commences from March 2019. Loans originated with a debt-to-income ratio of 6 or more made up 17.2% of mortgages originated in the quarter, which was also a series high. APRA did not express concern around this metric in their report, arguing the share of debt to income lending was “within its historical average”.  

Increased demand across Sydney and Melbourne property markets, as is being seen at the moment, will test debt to income ratios. This is because the house price to income ratio across Sydney has averaged around 8.5 since 2013, and has averaged 7.5 across Melbourne since 2015.  As housing prices rise at a time when incomes are expected to remain relatively flat, there is the potential for both loan-to-income and debt-to-income ratios to lift further, which is likely to be seen as a riskier outcome by regulators.

The proportion of loans originating on high loan to value ratios (LVRs) also rose for owner occupiers and investors

The portion of new home loans originated on a loan to value ratio of 80% or more increased to 42.0% across all borrowers in the December 2020 quarter, up from 39.9% in the previous quarter to be the highest proportion on record. The jump was greater in the owner occupier space, where 45.7% of loans were originated on an LVR of greater than or equal to 80%, and 14.1% of loans were greater than or equal to 90%. 

The regulator argued this increase reflects greater participation of owner occupiers in the market, particularly first home buyers. First home buyers may be accessing housing through loan guarantors, or even the first home loan deposit scheme, which reduced the risk of low-deposit home loans. 

The latest data from APRA indicates there is no blow out of risk in mortgage lending, despite the recent surge in property prices across Australia. The publication follows a recent address from RBA governor Phillip Lowe, who reiterated the strategy of maintaining a low cash rate for years to come, which is likely to continue supporting housing demand. 

But a deterioration in lending standards can be mitigated, as we’ve witnessed before. This could be achieved by tightening serviceability assessment rates, loan sizes relative to incomes or debt (LTI or DTI ratios) or loan sizes relative to home valuations (LVR ratios). In a recent statement, the Council of Financial Regulators reiterated that while lending standards were generally being maintained at this stage, they have responses up their sleeves if lending conditions do become risky. 

While APRA’s December quarter statistics show a trend towards ‘riskier’ styles of lending, the magnitude is not likely to be large enough to trigger a regulatory response; but if this trend continues, or indeed accelerates, it becomes more likely we will see a regulatory intervention aimed at curbing financial stability risks related to the housing sector.
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[av_heading heading=’How to consolidate debts’ 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=” template_class=” av_uid=’av-kf3khdcm’ sc_version=’1.0′ admin_preview_bg=”][/av_heading]

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If you’ve found yourself spending a little bit too much recently, it might be worth considering some form of debt consolidation.

Put simply, consolidating debt means taking out a new loan to pay out your other debts. Ideally, the new loan will come with better terms and a lower interest rate, helping you to get on top of your debts. 

Generally speaking, short-term finance, with things like credit cards, comes with very high rates of interest. Even in the current environment of low interest rates, a credit card can still have an interest rate that is above 20%, and that excludes all the ongoing costs and fees.

Similarly, other types of finance, including personal loans and car loans, are also likely to attract higher interest rates, which certainly apply if the debt is unsecured.

Depending on your personal situation, you might be able to take out a new loan to cover your other debts, which would also have the added benefit of letting you pay down those debts faster, saving a significant amount of interest. 

It is important to note that you will need to assess, not only the interest rates and fees that you are currently paying, but also the costs of paying out any of your other debts, to determine whether it is worth consolidating your debt. A mortgage broker is the best person to talk to, as they can assess your situation quickly.

How to Consolidate Debt

Personal Loan

One of the most common ways to consolidate your debts is by taking out a new personal loan to pay out the other debts.

A personal loan can be either secured or unsecured, depending on your personal situation, and this is normally a good option for someone with a lot of credit card debt.

Credit card debt is usually quite easy to pay back, and by taking out a personal loan, you will generally be able to get a lower interest rate, with the added benefit of having a fixed payment schedule.

It is important to consider the term of the loan when looking at personal loans. You don’t want to take longer to pay off the loan, just because your interest rate drops, as you could then find yourself paying back more interest over a longer timeframe.

Home Loan

If you’ve already got a home loan, whether it’s for your own home or an investment property, it’s possible to use that to consolidate your debts.

Generally speaking, home loans come with some of the lowest interest rates of any form of debt, thanks to the robust nature of the property market, and the fact that a home loan is secured by the property itself.

The simplest way to consolidate debt would be by using funds that you already have to pay down debt, either through a redraw facility or from money that is sitting in your offset account.

If that’s not possible, you could also look at refinancing to free up and spare equity, and use that to pay down the debts.

Using a home loan is a great option for most types of debt, because of the low interest rates they offer. But again, it is worth looking at how much interest you’ll be paying, given the extended duration of a home loan.

It is important to note that there are significant costs that can come with refinancing and taking out new home loans, so it is important to consider them ahead of time. Banks also require valuations, which cost money too.

You will need to have built up equity in your home or investment property as well, as lenders are normally only willing to lend up to 80% before other costs (such as LMI) make debt consolidation too expensive.
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[av_heading heading=’Tax Office outlines STP Phase 2 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=” template_class=” av_uid=’av-kf3kcf91′ sc_version=’1.0′ admin_preview_bg=”][/av_heading]

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Mandatory STP Phase 2 reporting is now set to commence from 1 January 2022, as the government looks to reduce the reporting burden for employers who are currently required to provide employee information to multiple government agencies.

The expansion of STP will see additional information required to be reported each payday, building on basic salaries and wages information reported through the original STP regime that first began in 2018.

The Tax Office has now released a fact sheet for employers, noting that STP reports will soon need to separately itemise the components which make up the gross amount, including bonuses and commissions, directors fees, paid leave, salary sacrifice, overtime, allowances and gross (other).

Employers will also need to report whether an employee is on a full-time, part-time or casual employment basis, the tax treatment for PAYG purposes, and the reason for separation when employees leave.

Income types and country codes will also need to be reported to make it easier for employees to complete their individual income tax returns.

Salary-sacrificed amounts will also need to be included in an STP report, while lump-sum payments will be broken down into two different categories.

Employers will also be able to provide the ATO with previous Business Management Software IDs and Payroll IDs where there has been a change in software or business structure to allow the Tax Office to fix issues with duplicate income statements for employees in ATO online.

‘Nothing you need to do right now’

Employers and practitioners have been advised that there is nothing they need to do at the moment as the ATO works with software providers to update their STP-enabled software.

“It’s important to remember that all STP-enabled solutions have different functions and updates for the expansion will be offered in different ways,” the ATO said.

“What you need to do to set up will depend on what product you use and how you manage your payroll.”

The Institute of Certified Bookkeepers executive director Matthew Addison, who co-chairs the ATO’s Tax Practitioner Stewardship Group, has assured practitioners that transitional arrangements will be introduced in the build-up to the 1 January 2022 deadline.

“What I’m hearing from the ATO is a really good approach of going, ‘We’re talking to the software companies, we’ll get their implementation date and we’re going to allow all their clients X number of months after the launch date’,” Mr Addison said.

“That’s really good because that means we don’t have to go and apply for every one of our clients to get a deferral with an implementation time frame.

“It’s Christmas, it’s January; the world shuts down for January, but it’s not a cold, hard cut-off [date].”
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[av_heading heading=’Getting ready to lodge your SAR by 15 May’ 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=” template_class=” av_uid=’av-kf3kcf91′ sc_version=’1.0′ admin_preview_bg=”][/av_heading]

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If your self-managed super fund (SMSF) annual return (SAR) for 2019-20 is due 15 May 2021, you need to appoint an auditor no later than 1 April 2021, to meet the May deadline.

In preparation for your lodgment, you also need to complete a market valuation of all your assets, prepare your fund’s financial statements and provide signed copies of these to your auditor so they can determine your financial position and your fund’s compliance with super laws.

Remember, if your SAR is more than two weeks overdue, and you haven’t contacted the ATO, they will change the status of the SMSF on Super Fund Lookup to ‘Regulation details removed’. This status will remain until any overdue lodgments are brought up to date.

If you have a status of ‘Regulation details removed’, APRA funds will not be able to roll over member benefits and employers will not be able to make any super guarantee payments to the fund’s members.
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Sources: Accountants Daily, CoreLogic, ATO 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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