In response to the recommendations of the Banking and Financial services Royal Commission and the ASIC Enforcement Review Taskforce Report, the government has proposed new enforcement and supervision powers for ASIC to restore consumer confidence in the financial system, particularly in relation to financial advice. These new powers include enhanced licencing, banning, warrant, and phone tap powers, all designed to ensure that avoidable financial disasters uncovered during the Royal Commission never repeats again. While the Banking and Financial Services Royal Commission seems long ago in the minds of many, the people that have been financially affected by dubious practitioners will no doubt carry the scar of mistrust for life. This then, is precisely why the government has introduced new laws which will give ASIC new enforcement and supervision powers in relation to the financial services sector to weed out the “bad apples” and restore consumer confidence.

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Approximately one-third of our adult life can be spent at work. Importantly, without work and the income derived from it, many of us would find it difficult to: maintain our present living costs, and, execute plans in relation to accumulating wealth to fund our future living costs. However, income is often just one reason (albeit a key one) why we front up to work each day. Other reasons can include enjoyment/satisfaction in what we do and a feeling that we are making a difference. From an income perspective, this is why insuring against its loss due to sickness, injury or disablement, is a vital consideration. And, we aren’t just insuring against a potential physical health event. For example: 45% of us will experience a mental health condition in our lifetime*, and mental health conditions are the second most common cause of income protection insurance claims, and the third most common cause of total and permanent disability (TPD) insurance claims^.

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After a shaky start to the December quarter, Australian shares rebounded in November, returning 3.3%, but lost momentum in the first week of December. November’s gains were driven by strength in Health Care (+8.9% and +51.7% over 1 year), while Materials (+4.7% and +31.9% over 1 year) continues to support the index. This despite weakness from the major Financials sector, which slipped 2.1% over the month as the major banks were marked down due to the lower interest rate outlook, which doesn’t bode well for lending margins. Meanwhile, Westpac (-13.1%) was the latest to be hit with negative headlines. If returns in December hold up, the ASX 200 will be on track to deliver a return of around 26% for the 2019 calendar year, which would be the highest return investors have seen since 2009. 

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As we start to think about retirement, one of the first questions many of us ask is “Will I qualify for the Age Pension?” To help you understand your eligibility, we outline the basic thresholds that apply under the different means tests and what types of assets and income sources are included. Knowing whether you’ll be entitled to the Age Pension is an important part of your retirement planning. Once you reach Age Pension age (66 years from 1 July 2019), you’ll also need to pass two tests: the assets test and income test. If your eligibility works out differently under the two tests, the less favourable result applies. If you own your own home, to qualify for the full pension your “assets” must not be worth more than $258,500 (for singles) or $387,500 (for couples). For non-homeowners, these limits are $465,500 and $594,500. Above these thresholds, you may qualify for a reduced pension. However, your entitlement to the pension ceases if your assets are worth more than $567,250 (for single homeowners) or $853,000 (for couples). For non-homeowners, these limits are $774,250 and $1,060,000.

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Previously, it was thought that any benefit provided directly or indirectly to members or related parties of an SMSF from an investment would contravene the sole purpose test. However, a Full Federal Court decision has reframed the sole purpose test which will provide some flexibility to trustees on certain investments. Notwithstanding this decision, investments in SMSFs remain a complex area with many pitfalls and getting it wrong could mean the fund loses concessional tax treatment along with civil and criminal penalties for trustees. To be eligible for superannuation fund tax concessions, SMSFs are required to be maintained for the sole purpose of providing retirement benefits to members, it is what is known as a sole purpose test (s 62 of the SIS Act). Failing the test could expose trustees to civil and criminal penalties in addition to the SMSF losing concessional tax treatment. Therefore, it is important when making SMSF investments that the investment does not provide a benefit directly or indirectly to members or related parties.

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The ATO has expanded the tax avoidance taskforce to include top 500 private groups, high wealth private groups, and medium and emerging private groups. Perhaps the most interesting is the inclusion of medium and emerging private groups which cover around 97% of the total private group population. These consist of Australian resident individuals who, together with their associates, control wealth between $5m and $50m, and businesses with an annual turnover of more than $10m. Business captured will be receive a notification letter of the next steps. The Tax Avoidance Taskforce has recently been expanded by the ATO to private groups and high wealth individuals. Originally conceived in 2016 to ensure that multinational enterprises, large public and private business pay the right amount of tax, this has now been extended to cover more taxpayers.

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If you don’t hold private hospital cover – or are thinking about dropping it – make sure you understand the financial consequences. You could be hit with an extra tax surcharge of up to 1.5% or cost yourself extra premiums in future. Don’t get stung! Read our guide to help you make an informed decision about taking out private health cover.

Levies, surcharges and loadings – the terminology around health insurance and tax can be bewildering! But if you don’t hold private hospital cover, you need to understand how this may affect your tax.

The Medicare levy surcharge (MLS) is a tax penalty you must pay if you earn above a certain amount and don’t take out a sufficient level of private hospital cover for you and all of your dependants. It’s designed to give you a financial incentive to insure privately. The MLS is applied by the ATO at tax time and included in your assessment.

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Unpaid super is a big problem, and the compliance landscape is changing. If you’re an employer, now is the time to take action and protect yourself against penalties. Find out how enforcement activity will pick up under Single Touch Payroll reporting and learn about a new extended amnesty for disclosing past unpaid super.

The government is getting tough on unpaid compulsory super guarantee (SG) contributions, but fortunately for businesses it has recently announced a revised “grace period” to rectify past non-compliance. All businesses should review their super compliance to consider what action they may need to take.

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The building defects saga that’s happening all around Australia has understandably caused public uproar and forced state governments to act. It is unsurprising then that this issue was at the forefront of the Federal government’s attention when it decided to enact an exception to disallowing deductions for holding vacant land. Having the exception available provides peace of mind to investors that if things do go wrong in a major way, they will not lose the ability to negatively gear their property.

As a testament to the far-reaching consequences of recent residential building defects crisis, the government has recently decided to change the legislation on vacant land deductions to exclude structures affected by natural disasters or other exceptional circumstances such as substantial building defects.

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