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Archives for May 2019

Need To Know: Wages And Superannuation Compliance

One of the hot button topics for a lot of businesses this year has been superannuation compliance.  We have seen headline after headline about business not paying super and then declaring bankruptcy leaving employees owed thousands.  It is important that employers are aware of their obligations regarding super payments and ensure they strictly adhered to.  It is also vitally important that employers ensure they are paying their staff the appropriate wage for the position they are performing.  Again, we have seen a number of high-profile large businesses being found guilty of not paying staff accordingly and this can have a detrimental effect on the business not just in penalties and the back pay but also the damage it does to the reputation of the business.

For the majority of businesses, superannuation must be paid at least quarterly and this is what most businesses will stick to.  For many small and medium enterprises quarterly is a big hit to the cashflow.  Its recommended businesses transfer the superannuation amounts weekly or fortnightly when the payroll is done to another account making it easier for cashflow.  With the majority of accounting packages offering direct superannuation payments to funds with a simple click of a button the process to pay the superannuation weekly or monthly rather than wait for the end of the quarter has become much easier.

Employers also need to be aware that a modern award can specify when superannuation should be paid and also to what fund it needs to be paid.  There are also certain industry funds that will have their own rules on how often payments need to be made.  Failing to meet these deadlines has serious consequences.  If the superannuation is not paid within the quarter the employer is then liable for and SGC Charge as well as interest and administration fees.  When calculating the SGC Charge it is necessary to include all wages paid to the employee during the period, not just ordinary time earnings which can add a significant amount to the amount owed to employees.

Making sure as an employer that you are aware of what award your employees are covered by in this current climate is vital.  Regularly reviewing the award and ensuring that your employees are being paid correct entitlements is part of the obligation of being an employer.  Most Awards are reviewed once a year for wage increases but there are awards that allow for that wage increase to be staggered over two increases throughout the year.  It is also important to understand the different levels contained within an award and also any allowances that may be applicable.  If you are unsure it is extremely important to have expert help.  The excuse of ‘I didn’t understand’ will not be accepted if Fair Work Australia start an investigation.

As a business owner, compliance with both of these issues is vitally important and something that your bookkeeper should be able to help you with or point you to an expert that will be able to help.  These are the types of issues that can stop you from being able to work on your business rather than in your business.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored financial, bookkeeping or business consulting advice, please contact us today.

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What Does My Super Statement Mean?

“I’ve just received a letter from XYZ Superannuation Fund saying I have an account with them. What does this mean and how did I get any money in the account?”

This is the annual benefits statement provided each year by all superannuation funds.  It is a report to members of the fund that tells the member:

  • How much their employer has paid into the fund during the last financial year
  • How much was paid to the fund for the administration of your benefit
  • What insurance is held through the fund
  • How the investments performed during the year
  • What investment option your benefits are invested in
  • Your total balance
  • Whether you have made a beneficiary nomination

“I can see all of that stuff but I don’t know what it means. Can I draw this money out for a holiday?”

No, superannuation is accumulated through compulsory contributions made by your employer during your working life, and you can’t draw from it until you reach at least 60 years of age.

“Wow that’s a long time, and a bit of a waste of time if you ask me.”

Yes, it is a long time but it is not a waste of effort.  Your employer must pay 9.5% of your salary every year into the fund of your choice – imagine how much that might be in 40 years’ time!  Let’s say that your salary is $55,000 per year now – that means your employer has to add at least $5,225 to your fund every year, and the contributed amount will increase every time you get a pay rise. Some of the amount contributed is paid out in tax, and the rest is invested with the object of growing over time. How much it grows will depend on the investment option or asset allocation that you choose.

The Fund must advise you how much you have paid to them in administrative fees during the year. This section is important.  Take some time to compare the fees you have paid in your account with fees in other funds. If your fund is very expensive compared with others, then consider switching funds.

You must compare ‘apples with apples’ – don’t look at a High Growth fund and compare that with a Moderately Conservative fund. The rate of growth may be significantly different and the fees may also be different.

Has your fund performed as well as or better than the fund you compare it with? For example, if your Balanced fund has returned 7.8% in the last financial year and other Balanced funds you have checked are returning 10% for the year, it may be prudent to look a little closer at your own fund and potentially consider a switch.

Check performance over a longer timeframe – 1 year out-performance is good, but has your fund outperformed over 5 years or more?  If not, you may want to look more closely and potentially find a fund that has a better longer-term performance.

Switching decisions should be based on long term performance coupled with the rate of fees you pay each year. Remember that switches come with a cost so you need to have good reason to do so.

“How did I get all of these super funds?”

When you begin a job, you should advise your employer where you want your contributions paid. If you don’t do this, then the employer will send your contributions to the fund it uses by default and that creates a new super account. If you have had a number of jobs and you now have more than one account, you should research all the funds to discover the better performing or lower cost fund, and consolidate (rollover) your benefits into the one account. Make sure you advise your employer if this account is not the one where they are currently paying your contributions.

Here’s an example comparison between 3 funds, made on these assumptions:

  • Salary $55,000
  • Starting balance $10,000
  • Life, TPD & Income Protection insurance in each fund

You can see a big difference in the ending balance between the 3 funds because of the rate of fees, the 1-year performance and the insurance premium paid. If you are invested in Fund C, should you be rolling over to Fund A? You must do the homework to ensure that the long-term performance of Fund A is consistently good. You want to have your benefit invested in a fund that can give you a good and consistent return over a longer period than 1 year.

“Why am I paying for insurance?”

Have a look at the insurance section on your statement so that you know what insurance coverage you have.  You may have a default amount of life and/or total and permanent disablement (TPD) cover.  Life insurance pays a benefit to your family in the event of your death, but TPD will pay a benefit that you can draw on if you are totally and permanently disabled. Be aware that the sum for which you are insured is likely to decrease as you age. This is important, as you may be grossly underinsured at a time where it is most needed.

The other type of insurance you may have is income protection – this one replaces part of your salary if you are unable to work through illness or injury.  Check the premium on your insurances, and check waiting and benefit periods on the income protection policy.

If you consolidate funds, you will lose insurance benefits in any of the funds you roll out of so be aware you may then not have sufficient, or any, insurance. You should consult a qualified professional for insurance advice.

Nominating a beneficiary to receive your benefit upon your death, and keeping this nomination current, is important. Many nominations lapse in 3 years from when they were made, so you should regularly check your nomination remains current. Another thing to look out for is a nomination made to an ex-spouse. If you separate from your partner, you should make a new nomination. If you don’t, then your benefit is going to be paid to that ex-spouse, even if you have entered another marriage.

Please note this article provides general advice only and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial or superannuation advice, please contact us today. One of our advisers would be delighted to speak with you.

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What’s Your Most Valuable Asset?

If I asked you, “what is your most valuable asset?” would your answer be your house, investment portfolio, motor vehicle? Maybe. But what about your income? Assuming an increase of 3.5% per annum and continuous income, if your current annual salary is $80,000, over the next 15 years your income is worth up to $1,544,000 or over 30 years it’s worth an incredible $4,130,000.

Now what do you think is your most valuable asset? That’s right, it’s your ability to earn income!

According to TAL Life, the top 5 reasons for claims on Income Protection are, injuries and fractures, mental health, musculoskeletal and connective tissue diseases, cancer and diseases of the circulatory system (heart attack and stroke). These injuries and illnesses are nothing to be messed with and unfortunately no one knows what the future will hold.

Two of my clients never expected to be on an income protection claim, let alone for over 12 months! Both clients have received peace of mind that every month they will receive their benefit to help towards the mortgage, bills and general living expenses. By knowing that they have this regular income, they are able to focus on their rehabilitation without the stresses of money.

There are many factors to consider when taking out an income protection policy. Speak to one of our friendly advisers today to see how your policy stacks up, or if you’re looking for a new policy.

Please note this article provides general advice only and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, contact us today.

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What’s In A Name?

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has seen the Big 4 Banks come under fire for a number of things, including their ‘take it or leave it’ attitude to the Anti-Money Laundering (AML) and Counter-Terrorism Funding (CTF) Act. In 2017, the Australian Transaction Reports and Analysis Centre (AUSTRAC) brought charges against the Commonwealth Bank of Australia (CBA) for contravening the Act, and were treated to a cool $700 million penalty which barely made a dent in CBA’s fiscal 2018 cash profit of $9.9 billion.

The fallout from these charges and others alike, has resulted in an industry-wide crackdown on the enforcement of AML/CTF policies. Among other things, the Act mandates that you must identify and verify a customer’s full name, residential address and date of birth. While this seems pretty straight forward it’s causing headaches for customers who have used aliases in the past. John or Jack, Anthony or Tony, Amanda or Mandy, James or Jim and Susan or Sue are just a few examples of common aliases which have caused problems when adhering to AML/CTF obligations.

Different spelling variations of the same name have also been put under the microscope and in some cases, have required statutory declarations to confirm that the likes of Anne or Ann and Marie or Maree are one and the same person. Some financial institutions have gone as far as requiring your share holdings to be updated if your middle initial is only noted as ‘A’ on the registry, but your identification spells out your full middle name of ‘Albert’.

Locally, one of the problems we have had in the Rockhampton office is the change in suburbs as the city continues to expand. What was once Rockhampton is now broken up into several different suburbs such as Allenstown, North Rockhampton, Koongal etc. Although identification documents (Drivers Licence) might reflect the correct suburb of ‘Allenstown’ long standing bank accounts or shares acquired many moons ago may reflect the original suburb of ‘Rockhampton’. This small difference causes issues under the Act when identifying and verifying a client’s residential address.

It might be a good idea to do a bit of a tidy up of your financial affairs if you’ve had issues in the past with the spelling of your name or if you use an alias. Ensuring your address is up to date and your personal information matches your identification is another good habit to keep. A few places where we have encountered discrepancies include Wills, Power of Attorney documents, Holding Statements and Bank Statements.

Please note this article is provided as general advice only and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, please contact us today. One of our advisers would be delighted to speak with you.

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