Scott Tully, General Manager, Investments Colonial First State shares his view on market trends and economic updates for the June 2020 quarter in this short 2 minute video.
Source: Colonial First State, Market Updates
For most Australians, this tax time will be unlike any other.
If you’ve lost your job, had to work reduced hours due to COVID-19, or met other eligibility criteria, you may have received government assistance like JobKeeper, extra JobSeeker, or accessed some of your super early to help cover expenses.
So how will this new source of income affect your tax return—and do you need to disclose it?
JobKeeper payments
JobKeeper payments (up to $1,500 per fortnight) will be treated the same way as wages or income. This means these payments will be taxed and must be disclosed in your tax return.
If you’ve received JobKeeper payments from your employer, those payments will be included as part of your income statement which your employer provides to the ATO. You can view this statement in your MyGov account or your tax agent can access it on your behalf.
Be aware that if you previously earned less than the JobKeeper amount, your income may go over the tax-free threshold.
For example, if your salary increases from $800 to $1500 a fortnight as of March 2020 because of JobKeeper, you may be required to pay more tax due to earning a higher income. On the flip side, you may also get a larger refund if you earn more money but still fall under the $18,200 tax-free threshold.
JobSeeker payments
If you received a JobSeeker payment from Services Australia (previously known as the Department of Human Services), this amount will be taxed as regular income and will need to be included in your tax return.
The ATO should automatically populate this information for you under the ‘government payments and allowances’ section in your tax return. But it won’t necessarily be there from 1 July 2020.
If you find that this information is missing, you or your tax agent will need to populate it yourselves or complete your tax return once the information appears.
Small businesses
If your business received JobKeeper payments to help make up for a fall in turnover, you’ll need to disclose these payments as part of the assessable income of the business for the financial year.
The ATO is also allowing businesses to vary PAYG instalments if the business believes that the current rate is too high given the effects of COVID-19 compared to the previous estimated tax for the year.
Insurance, redundancy and leave payouts
Any payments you may have received because your income was disrupted —such as an income protection insurance payout, sickness, or accident insurance claim—must be declared in your tax return in the normal manner for such payments. This also goes for a redundancy payout and paid leave.
As the tax treatment of these vary, it’s best to follow the instructions that are provided against each of these items if you are completing your own tax return, and talk to your tax agent.
Early release of super
If you accessed part of your super under the COVID-19 early release of super payment, you won’t be required to pay any tax on the payment so you don’t need to disclose it in your tax return.
It may be worth discussing your government support payments with your accountant or financial adviser to make sure you get maximum benefit with minimal workload.
There are also some useful EOFY tax and financial planning tips available on the MLC website.
Article source – https://www.mlc.com.au/personal/blog/2020/07/tax_treatment_ofcov
The Coronavirus impacted businesses, households and individuals worldwide, resulting in the shutdown of much of the world’s economy. In response to the rapid slowdown in economic activity, investments experienced volatility on an unprecedented scale. But to help stabilise conditions, world governments and central banks deployed billions of dollars’ worth of financial support and monetary policy stimulus – leading to a slow recovery in financial markets. So, what could happen next? As we approach the half-year mark, our Investments team reveals where investment opportunities could exist and shares insights into the possible path to recovery for financial markets in the future.
The safer the investment, the lower the potential returns – so when it comes to investing in the current low interest rate environment, investors may need to consider their need for safety with their desire for higher returns. This applies to traditionally conservative fixed interest investments such as government bonds (lower risk for lower return) and corporate bonds (higher risk for higher return). Looking ahead, safer government bonds will likely remain flat over the near term. But there may be investment opportunities available at the higher end of the risk spectrum – particularly corporate bonds, which are riskier and have the potential to default on their payments to investors.
Within the alternatives asset class – which comprises a range of “alternative” investments that don’t conform with traditional investments, such as commodities (like oil and agriculture) or currency – there are risks but also investment opportunities. A particular area of focus for managers of alternatives funds will be identifying new risk management tools and risk mitigation strategies for portfolios. That’s because traditional hedging strategies (which involve strategically including defensive assets to help offset or lower risk) weren’t particularly effective last quarter. For example, there may be some discussion about gold as a better hedge in portfolios compared to the US Dollar given the high level of debt the United States currently holds – reportedly in the trillions of dollars.
As lockdowns gradually loosen and as people transition back into society, we are seeing signs of a recovery across transportation infrastructure stocks hit hardest by social-distancing and lockdowns – i.e. toll roads and airports. However, some people may continue staying indoors and working from home. So over the coming months, this could mean a persistent demand for utilities servicing residential premises and telecommunications towers – sectors that retained their strength when the broader market was volatile. After the pandemic impacted how people travel and gather, the values of some of these investments were discounted. This means that in the current low interest rate environment, there may be opportunities to access infrastructure investments at a lower price.
In coming months, we could see continuing challenges for property – particularly the retail sector which, prior to the Coronavirus, already struggled with the shift away from physical shopping centres and toward online retailers. This trend, accelerated by the pandemic, could benefit industrial property for warehousing. The good thing is that property is an adaptive and convertible asset class that comes in all shapes and sizes, meaning we could see unused retail space converted into office or residential buildings in future, particularly for property hotspots in CBDs, though this may be offset by an oversupply of office space as a result of changing working habits.
Progress is unlikely to be linear in future, and it’s possible that there will be a sharper recovery in some market segments compared to others. For example, parts of the Consumer Discretionary sector have begun showing strength, particularly domestic air travel and tourism stocks like Webjet or Flight Centre as Australians are slowly able to travel again – even if only nationally. Casinos could also rebound when lockdowns are loosened. So far, the likes of Crown and the Star have significantly cut operating costs and are preserving their cash while readying themselves to reopen. Across other areas, iron ore has remained resilient as Chinese demand has remained strong, but this has the potential to change given the escalation in trade tensions between China and Australia. And banks could continue to face challenges as reflected in the higher provisions they’ve made for Coronavirus-related losses – with some banks reducing or deferring their dividend payments.
Given the uncertainty surrounding the world economy, financial markets appear to favour sectors and industries that can continue operating in this non-standard environment. For example, strength has been observed across the Information Technology sector and for companies that have been able to continue operating regardless of the circumstances. This was also noted for the Healthcare sector as companies raced against the clock (and each other) to improve testing solutions or to develop a vaccine. Compared to developed nations, emerging markets may face more challenges due to the less developed state of their infrastructure and health facilities. Their recovery could depend on how well they are able to manage the pandemic from an economic perspective, with governments needing to provide large financial stimulus support to fill the void of lost economic activity.
The pandemic has highlighted the interconnected relationship between world economies and financial markets – each of which were impacted in unique ways. As a result, some investments haven’t performed the way they normally would, suggesting that a recovery for some asset classes may differ from previous experiences – for example, following the Global Financial Crisis.
But while there are still many unknowns, what we do know is that the path to recovery in markets will depend largely on how quickly world governments can curb the spread of the virus to reopen their economies and restart activity. At this time, governments continue working towards carefully balancing the health of their economies with the health of their citizens. So, considering the above developments, our consensus for a global recovery is a slow one that extends well into 2021.
As conditions continue to unfold, The Colonial First State Investments team continues to communicate closely with investment managers to identify the risks and opportunities in markets and help members achieve their individual retirement goals. Before making any changes to their investments, it can be important for members to consider their risk appetite, wealth objectives and seek appropriate financial advice.
Contact Dev Sarker today at 1300 717 136!
Economic and market update video – 15 June 2020
Bob Cunneen, Senior Economist at MLC Asset Management, discusses the continuation of the May share markets rally in Australia and overseas in anticipation of a reopening of economies, despite COVID-19 infections accelerating in Latin America.
Watch the 4 minutes video here.
Source: https://www.mlc.com.au/personal/blog/2020/06/economic_and_market
It’s easy to think you’ll never get ahead when you have mounting bills to pay, on a reduced or lost income and limited savings, all because of a pandemic that no one saw coming.
But, it can be done.
Take confidence in knowing that with determination, understanding the support options available to you and having a realistic plan, debt and bills can be managed.
In this article, we’ll address six steps that could help to get you back on track with managing your debt during COVID-19.
The first step is to add up all of your debt, to get a clear picture of what you owe.
While laying all your cards out on the table can be extremely confronting, especially if you’ve never done it before, it’s a critical step to see the bigger picture of your financial situation.
The next step is to work out how much you can afford to pay to cover your debts.
Having a clear picture about what you earn versus what you spend, can highlight areas where you may be able to pull back spending. Whatever income you’re able to save can then be allocated towards your debt. There are budget planners and phone apps you can use to track your spending. Alternatively, you can simply download your bank statements and keep a record of your receipts. Make sure to include everything from your necessities like rent or mortgage, utilities and transport to what you spend on non-essentials like entertainment.
Depending on your situation, there are a number of ways you can get financial assistance to deal with the impact of COVID-19.
Financial and banking institutions
Some banks are now allowing customers to defer their mortgage repayments temporarily, in addition to refunding late fees and interest for credit card payments.
It’s important to remember that while this option might help with your short-term cash flow, interest will continue to be charged to your outstanding loan amount – meaning more interest could be payable over the term of the loan. It’s also worth checking with your bank to ensure these offers apply to you.
Government response packages
The Federal Government is supporting individuals and families affected by COVID-19 through a range of measures, including:
Read MLC articles for more detail about these measures and if they apply to you.
Now that you’ve identified how much you owe and the financial assistance available to you, the next step is to develop a plan.
Having a debt management plan in place that’s realistic to follow, can help you manage your debt to achieve your goals. But remember to keep a long-term view. You want to ensure that this isn’t a just a temporary fix, otherwise the problems could kick up again.
Set priorities
If you have more than one outstanding debt, consider working out how much you can repay on each, based on the minimum repayment owing.
Alternatively, if you’re able to repay more than the minimum, look at prioritising your debts. You’ll need to think about things such as the type of debt you have -for example, an investment loan, or personal debt – and how much is owing.
For example, if you only have personal debt, you may choose to prioritise repaying debts with the highest interest rate first, given these will be costing you the most to keep them around longer.
At the end of the day, the approach you take is a personal one but it’s important to have a plan and stick to it. And that could mean making other changes.
Whilst you can never prepare for events like COVID-19, there are things you can do to ensure when these types of situations arise, you’re able to get through them.
One approach may be to set up a savings fund for emergencies, where you transfer a small amount of your income to a high interest savings account on a weekly, fortnightly, or monthly basis. This will then provide a financial safety net which you can draw on when you really need it.
Managing debt is not something that comes easily to most people, so sometimes speaking to a professional can help put your mind at ease.
A financial adviser will assess your situation and provide you with a manageable repayment plan, which may see you pay your debt off faster.
Bottom line: the most important thing to remember is that you can get ahead with managing your debt during COVID-19, but it will require some changes and reprioritisation. Use the various resources and support available to you and stick to a plan. You can do it!
We’re here to help, contact Dev Sarker at 1300 717 136 today.
Article source: https://www.mlc.com.au/personal/blog/2020/06/manage-debt-during-covid-19
The Government has announced the HomeBuilder program to help drive economic activity across the residential construction sector by providing grants of $25,000 to eligible owner-occupiers for new home construction and substantial renovations.
Read the full details here – homebuilder_program 4 June 2020
Please speak with a financial advisor at Bluerocke Investment Advisors or call us on 1300 717 136.