Dear Politicians (to all political parties),

I am writing this open letter to you in hope that this time you sit up and pay some attention to the public.

Remember us? The people that you are supposedly representing?

Over the past few years, we have seen some major policy changes that can only be viewed as revenue grabbing. As a self-employed accountant, I see the outrage each and every day. From my clients to the general public, who are sick of having their hard earned money attacked again and again.

It is about time that you look at your job like any business owner should. After all, you are in the business of running a country!?! If you haven’t noticed, you are racking up a heap of debt. You need to look at your spending and see where all the money is going. This constant increase in debt may not feel like your problem but it is our children that will bare that burden. A burden they do not deserve to inherit.

As people, we have been subjected to some major taxation changes over the last few years, and yet we haven’t even got to the election yet. I am sure you will make many promises, but can we really afford it as a country?

Firstly, you attack the superannuation industry. You want people to save more for their retirement through superannuation. Then, at the same time, if we do the right thing and save (supposedly too much), you will penalise us with extra taxes. Please Explain? Both the general public, our industry and I are very confused.

Please explain how I should be advising my clients when you won’t guarantee them a secure and comfortable retirement but penalise them for establishing their own retirement fund?

As an accountant, let me give you some free advice (or maybe I should charge you – please provide an address where I can send an invoice too)? If you can’t see the bleeding obvious, maybe you should have a look at your spending rather than just saying that tax revenue has dropped.

It is quite simple; no business can spend more than they earn and survive in the long run. Along with this, every business should always have a buffer in their bank account to cover unexpected occurrences that may arise. Why do our Federal government’s, that you are supposedly in control of, consistently spend more than what is coming in? Would any other business owner get away with such ludicrous discrepancies?

Finally, as with any business, if the team or people you surround yourself with can’t make this happen, then coach them. If it still doesn’t resolve your issues, perhaps get a better team around you to help!

The last few years would show that it is time to get a team around you that can control spending and balance the books in the positive rather than the negative. Surely this would be a better strategy than continually attacking the Australian public with different taxes or levy hikes because you can’t manage your books and get this country into a surplus.

On behalf of my clients and the Australian public, I plead that leading into the election, you revisit the budget, cut the wasteful spending of our money, and work towards creating a surplus.

Politicians, feel free to visit my business website at www.financiallysorted.com.au and download some of the free brochures and resources on how to run a business and manage your money successfully. Alternatively, I am happy to organise a meeting with a few of my clients (taxpayers), that would be more than happy to explain how the real world works and the difficulties they face – just let me know!

Regards

Peter J. Locandro 

 

A proposed election could bring changes. Click below for a further look at the potential changes that could be on the horizon…

Australians face dramatic wholesale changes to the way they get mortgages, insurance, financial advice and superannuation after a damning royal commission report that exposed years of misconduct in the nation’s finance industry.

Our treasurer, Josh Frydenberg, has immediately welcomed the report, describing it as a “scathing assessment of conduct driven by greed and behaviour that was in breach of existing law and fell well below community expectations”. He said the message to the financial sector was “misconduct must end and the interests of consumers must now come first – from today the sector must change, and change forever”.

The report recommends sweeping changes to the system, including:

  • Tearing up the way mortgage brokers are paid, pushing to end trailing commissions and replaced with a fee paid by the home loan borrower;
  • Forcing mortgage brokers to “act in the best interests” of borrowers for the first time;
  • Ban dishonour fees on basic accounts;
  • Making financial advisors renew their contracts annually to end “fees for no service”;
  • Giving workers a superannuation account that will follow them from jo-to-job to get rid of multiple accounts eating their savings;
  • Regulators – retain APRA & ASIC, but there needs to be a new authority, independent of government, to oversee the “twin peaks”;
  • Car dealers offering finance should be covered by consumer credit protections;
  • Banning unsolicited “hawking” of superannuation and insurance products.

In summary, the customer can no longer come second to profit – this is the theme guiding the report into misconduct in banking, superannuation and other financial services. The message should be to ask questions at all times, and if still not sure, get further advice. Speak to us today if you have any doubts on any financial advice or products that you currently have or are looking at!

Accountants and financial advisers have been advised to prepare for further upheaval in the superannuation regulatory landscape in light of the upcoming federal election and the possibility of a change in government, according to SMSF experts.

Smarter SMSF co-founder and chief executive Aaron Dunn explained to accountants and advisers that they should be considering how potential policy changes to super by a Labor government could impact on their clients and plan accordingly.

Specifically, Dunn said Labor has clearly stated it expects to lower the annual non-concessional cap from $100,000 to around $75,000, which would lower it from four times the concessional cap to three times the cap.

He noted this would have a flow-on effect on the bring-forward rule, which would also reduce it down to $225,000.

Furthermore, he pointed out Labor has proposed to further reduce the high-income super contributions threshold from $250,000 to $200,000.

In addition, the ability to carry forward unused concessional contribution cap amounts is going to be scrapped if there is a change in government, he said.

“We’re only just about to start to see the benefits of this unused catch-up contribution legislation,” he said.

“But Labor have made very clear that they don’t see the benefit of having that piece of legislation in place, so they would look to repeal the use of that, which may in essence disappear before we even have the ability to start to use that legislation.”

Under the carry-forward rules members were entitled to begin using the benefits of from 1 July 2018, they would not have accumulated a year’s worth of unused contributions until the subsequent financial year.

He expressed frustration at the prospect of Labor disallowing the tax deductibility for personal contributions, where the government last year scrapped the 10 per cent rule so anyone who was eligible to contribute to super could claim a tax deduction for personal super contributions within the overall concessional cap of $25,000.

“So in essence, [Labor will be] reinstating the 10 per cent rule, ensuring that contributions can be claimed only for those that would be substantially self-employed.”

Australia’s dividend taxation regime is a complex puzzle at the best of times.

Labor’s proposed Retiree Tax will hurt retirees and low-income earners especially by abolishing tax refunds for share dividends.

It’s estimated that Labor’s $45 billion tax grab will hit 900,000 individuals, 200,000 self-managed super funds and 2,000 super funds.

The current system introduced by the Howard-Costello government – ensures that taxpayers with a zero tax liability and excess imputation credits would be refunded the full amount of pre-paid tax.

This is not a radical idea – millions of taxpayers over-pay their tax and get a refund each & every year.

If the proposed changes become law, in effect, this means that taxpayers with a zero liability, and corporate income, could face a marginal tax rate at whatever the company tax rate was at the time.

A range of arguments have been proposed in support of this reform by Labor. Their argument, “cash refunds are some sort of rort. Shareholders are rich anyway. The money is better spent on public hospitals”.

Supposedly, only 8 per cent of taxpayers are impacted.

Chris Bowen…Labor now proposes to roll back to the first version of the tax.

Case Study

Maybe Nana and Pops, aged over 60, have organised their financial affairs so that their share portfolio is in a SMSF and provides them with a refund of some imputation credits also. They worked hard when they were younger, saved for their retirement, sort proper advice and worked the extra mile to provide a better life for themselves and their family. Now the Labor party want to take that extra income from them and give it to people who refuse to do the same for themselves.

Explain to me how that is fair?

These people are not rich or wealthy, but they are about to face a marginal 30 per cent tax rate under a new Labor government, and will lose a portion of their current income.

The numbers go down once I account for the pension guarantee that Labor has proposed – but not by much. We are being invited to believe that this tax grab on the elderly won’t have any flow-on effects to their children and loved ones.

Capital gains tax will also be a big issue as we approach the next election – the Coalition has promised to leave it unchanged; Labor wants to increase it, by reducing the present discount from 50 per cent to 25 per cent.

Let’s look at the history. Prior to 1985 Australia had no specific capital gains tax but there was still a general agreement within the major parties that some form of capital gains tax was a must.

So in September 1985, the Hawke-Keating government introduced capital gains tax, to apply only to realised gains on assets acquired after that date.

Case Study

    Currently Proposed
Investment purchase price $350,000    
Investment sale price (after 12 months of ownership) $800,000    
Capital Gain $450,000    
Discount   50% 25%
Assessable Capital Gain   $225,000 $337,500
Assume Marginal Tax Rate 45.00%

 

$101,250 $151,875

 

Although this is a simple example, you can see the dramatic change in the taxes; great, extra revenue for the government, bad for investors, as less profit will remain in their pocket.

Questions to arise.

  • Will investors actually sell &/or buy?
  • Will investors expect greater returns, for example, higher rents or dividends?

Again, the government is spruiking the fairness argument. My argument is that if someone is taking a risk and investing their money, they need to be rewarded in the long run. Not pay more taxes!

I believe such policy is very short term focused!

In summary, with superannuation, investments, etc. taxpayers need to be encouraged to do more and invest more. Why limit the amount of contributions into superannuation? They will then not be a burden to the government in the future requesting Centre Link benefits and will probably take care of their loved ones as well.

The 2019 calendar year has started off with some major developments – what will the reminder of 2019 bring us?

(Sources. Herald Sun (05.02.2019))
(Sources. Self Managed Super Magazine (05.02.2019))