Our changing relationship status…with our devices
If your New Year’s resolution was to spend less time glued to your phone, you’ve probably found that unexpectedly challenging this year. While the impact of COVID-19 differs from state to state, many of us have experienced social isolation and the call to stay and work from home where possible, resulting in an increase in the amount of time we are spending online.
In fact, data demand over the NBN increased by more than 70 to 80 per cent during daytime hours in March compared to figures calculated at the end of February. Due to greater usage, internet speeds across Australia slowed to cope with the uptake.i
It’s not just the time we are spending online that’s being impacted, our relationship with technology is evolving as we adapt to the changing world around us.
The benefits of technology
While technology usage often gets a bad rap when it comes to mental health, it has also brought positives into many of our lives, especially during 2020: greater work flexibility, connection to loved ones, and access to online resources and support groups.
During social isolation, many of us relied on technology to keep our lives as normal as possible. For some that meant working from home, keeping up a regular exercise regime with online classes, or having a regular video chat scheduled with family and friends.
Changing nature of how we use our devices
Technology has stepped up and is filling the gap in areas we previously hadn’t relied on it for. With gyms and boot camps off limits across many parts of Australia during stages of lockdown, online workouts started popping up on platforms such as Zoom and Facebook.
Online shopping is understandably booming as the trend away from ‘bricks and mortar’ retail quickens pace and people embrace the convenience and safety of shopping online during pandemic conditions. Based on Australia Post deliveries, there was an 80% increase in online shopping during the months of April and May.ii
When concerts were cancelled and movie theatres and galleries closed, we also turned to our devices increasingly for entertainment. Netflix saw a boom in their subscribers, up a whopping 15.8 million users in April, while Instagram Live was up 70% in the US in March.iii, iv
Transforming how we work
Many workplaces have had to put in place processes to support working remotely. Prior to the pandemic, besides face-to-face meetings, most workplace correspondence was done via email or phone. Due to social isolation and increased feelings of loneliness as a result, video meetings and catch-ups have become more of the norm. The cameras on our phones and computers have been able to make us feel more ‘in person’ as a result.
Collaboration has also been on the rise, with collaborative platforms and online communities such as Slack, Asana and Trello making it easier to work together while we’re apart.
Looking out for others
Much of our online activity has tended to be a reflection of our self-absorption. The ‘it’s all about me’ approach of many influencers and content creators was tempered during the crisis by a more giving approach. We saw an outpouring of generosity, from entrepreneurs offering time to listen to pitches, master yoga instructors teaching free classes and musicians performing regular concerts. People have banded together to keep us feeling connected.
Local communities used technology to engender a sense of support and inclusion, with groups springing up to assist others in a myriad of ways such as offering to shop for those who were in isolation, providing free produce from gardens, or toilet paper for those who missed out in the panic buying frenzy early in the pandemic, to just making sure that everyone in the community had a ‘voice’.
Our relationship with our devices and the way we conduct our digital lives is ever-evolving. If we take the positives that have come from the way the crisis has influenced our lives in the digital realm, we’ll continue moving in a direction that not only makes our lives easier but also supports genuine human interaction.
Tax Alert September 2020
Many small business owners and sole traders will be breathing a sigh of relief following the extension of the JobKeeper scheme until March next year. At the same time, however, the ATO is stepping up its compliance activities.
Here’s a roundup of some of the key developments in the world of tax.
JobKeeper extended to March 2021
The government has announced its JobKeeper scheme, which was originally due to wind up on 27 September 2020, will now continue until 28 March 2021.
The $1,500 per fortnight payment to eligible businesses, not-for-profits and the self-employed will, however, drop to $1,200 per fortnight from 28 September 2020 and to $1,000 per fortnight from 4 January 2021.
From 28 September 2020, if your business claims JobKeeper, you will also be required to demonstrate it has suffered a decline in turnover using your actual GST turnover rather than the prior method, which was based on projected GST turnover.
ATO data matching support payments
The tax man is also starting to put JobKeeper support payments under the microscope using information from a new data matching arrangement with Services Australia (formerly Centrelink).
Information about JobKeeper payments reported to Services Australia for social security payment purposes will also be provided to the ATO. This will help the ATO identify people who are receiving both JobKeeper and social support payments.
JobKeeper still open to businesses
Although most businesses suffered an immediate decline in turnover when the COVID-19 crisis started, some businesses are finding things are tougher now the new financial year has commenced. The renewed lockdown in Victoria has also dealt a new blow to many businesses, so it’s worth remembering it’s still possible to apply for the JobKeeper subsidy.
If your small business has experienced a drop in turnover of more than 30 per cent and you meet the eligibility requirements, you are still able to apply for financial support through JobKeeper.
Expenses shortcut extended
For employees who have been using the shortcut method to calculate their working from home expenses, the good news is the end date for this scheme has been extended from 30 June to 30 September 2020.
The ATO announced the new three-month extension and said a further extension may be considered.
Employees and businessowners who work from home between 1 March 2020 and 30 September 2020 on income producing activities can use the shortcut method to claim 80 cents per work hour for their home office running expenses. This all inclusive rate means you don’t need to calculate and record your actual running costs.
The shortcut is not a free pass, however, as the ATO recently noted this was one of the top three issues it was seeing in returns lodged for 2019-20. To avoid problems in this area, ensure you don’t double up on your shortcut claim by adding, for example, a depreciation claim for laptops and desktops.
Warning on TPAR requirement
The ATO is warning some small businesses may find they need to lodge a taxable payments annual report (TPAR) this financial year if they have started using contracted service providers due to the pandemic.
TPARs keep the ATO informed about payments made to contractors, with the requirement initially rolled out for the building, cleaning and courier industries.
The tax man is now cautioning restaurants, cafes, grocery stores, pharmacies and retailers who have started paying contractors to deliver goods to customers that they may be required to report.
If total payments received for delivery or courier services are ten per cent or more of your business’s total annual business income, you may need to lodge a TPAR for 2020-21.
No tax on ‘robodebt’ refunds
And some good news for taxpayers who receive a refund amount from Services Australia for a debt raised using averaged ATO income information – also known as a robodebt. You don’t need to include the money in your income tax return.
The ATO is advising no action needs to be taken regarding these refunds and tax returns for prior years should not be amended.
SMSFs on the defensive: Is it time to revisit your strategy?
Self-managed super funds (SMSFs) have had a challenging year, with COVID-19 linked market uncertainty affecting income and returns. But SMSF trustees haven’t been sitting on their hands.
One of the main reasons people give for wanting to establish an SMSF is to have greater control of their investments and taking control of a difficult situation is exactly what they’ve been doing.
Changes to asset allocation
According to the 2020 Vanguard/Investment Trends SMSF investment report, nearly half of SMSFs made substantial changes to their asset allocation this year.
The survey of over 3000 SMSF trustees shows most reacted defensively, with 55 per cent increasing their cash and property holdings, mainly at the expense of equities. Direct shares now represent 31 per cent of SMSF portfolios, their lowest level since 2009 during the GFC.
The report found that one third of SMSF have fixed income exposure. Hybrid securities remain the most popular product, although more trustees are investing in bonds which has become easier with the profusion of bond ETFs (exchange traded funds). In fact, bonds were among the better-performing asset classes in the year to June 2020. International bonds returned 5.4 per cent while Australian bonds returned 4.2 per cent.i
However, the search for a reliable income stream that is better than you can get from bank deposits remains a challenge.
The hunt for yield
With interest rates on the decline for several years, and currently at or near zero, investors have turned to shares for their dividend income as well as capital growth. But this source of income is also under threat from the economic impact of COVID-19 on company profits.
The Vanguard/Investment Trends survey also found that SMSFs expect dividend yields to fall from 4.8 per cent pre-COVID-19 to 3.6 per cent this year. While the actual decline in dividend income will depend on the shares you hold, many SMFS will already be feeling the pinch.
In July, the Australian Prudential Regulation Authority (APRA) ordered Australian banks and insurers to restrict dividend payments to 50 per cent of their earnings. Given the banks generally pay out up to 90 per cent of their earnings, this will have a big impact on SMSFs who often rely heavily on bank shares.
In the latest company reporting season, many popular blue-chip companies cut or suspended dividends. According to CommSec, 68 per cent of companies issued dividends in the year to 30 June 2020 but dividend payments were down 32 per cent on aggregate.
Yet despite this setback, SMSF investors are already positioning themselves for the future.
The Vanguard/Investment Trends survey showed SMSFs were poised to buy back into the share market, with 37 per cent willing to increase their allocation to blue-chip Australian shares, and 23 per cent to increase investment in international shares.
Diversification is key
In these uncertain times, having a well-diversified portfolio with multiple sources of income as well as capital growth is more important than ever.
As well as Australian shares, many SMSFs also have a relatively high exposure to property, either through residential real estate or listed property. But property also faces challenges.
Listed property was the worst performing asset class last year, down 13.4 per cent.i Although past performance is not a reliable guide to the future, commercial property faces challenges due to falling demand for retail and office space during the pandemic, as well as falling rents.
While residential property held its value last year, the outlook there is also uncertain given rising unemployment, falling rents and a halt to immigration. It’s also yet to be seen how many investors who temporarily deferred loan repayments will eventually decide to sell their properties.
A time to revise strategy
All in all, SMSF are performing well. However, with reduced dividend income and low interest rates in the medium term, SMSFs in retirement phase may need to make decisions that were not anticipated, such as drawing on their capital to cover their income needs.
At the very least, this is a good time to ensure that your SMSF is well diversified and positioned for continuing market volatility. If you would like to discuss your SMSF investment strategy, retirement planning or tax planning, do give us a call.
Liability limited by a scheme approved under Professional Standards Legislation. This advice may not be suitable to you because contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.