May is here and in cooler regions, like our Gisborne office, the colours of autumn are all around. In Canberra, Treasurer Josh Frydenberg is putting the finishing touches to the May 11 Federal Budget which will no doubt dominate the national conversation in coming weeks. We will cover this with a detailed analysis sent 12 May, so keep an eye out.
Australia’s economic recovery gathered steam in April, despite a spike in coronavirus cases overseas and vaccine delays. Australia’s trade surplus stood at a healthy $8.5 billion in March, underpinned by strong export prices for our commodities. Iron ore prices rose 16% in April and 21% over the year to date, due largely to renewed demand from China. China’s economic growth rebounded an extraordinary 18.3% in the year to March. Prices for our oil, copper, coal and beef have also recorded strong gains.
Higher commodity prices pushed the Aussie dollar up 2.4% in April to US77.72c, although record low interest rates are keeping stronger gains in check.
Australian consumers are gaining confidence in the recovery, despite the winding back of government stimulus payments. The Westpac-Melbourne Institute Index of Consumer Sentiment rose 6.2% in April to its highest level since 2010. One reason could be booming house prices, up 2.8% in March and 6.2% over the year, according to CoreLogic. Not so welcome are rising petrol prices which hit a 13-month high in April. While higher prices lifted inflation by 0.6% in the March quarter, it is still running at a low annual rate of 1.1%.
Rising employment is also a cause for optimism. The jobless rate fell from 5.8% to 5.6% in April and the Federal Government has announced it is targeting a rate beginning with a 4, supported by big spending initiatives in its upcoming Budget.
In the background, the King & Whittle team have been working hard finalising last minute lodgements, having in-depth tax-planning meetings with clients and recruiting for our ever expanding firm. Over on the Wealth Management side, Bruce has been busy ensuring his clients are well placed to make the most of the current economic climate. Wealth Management was also in the top 10% of Australian advisors in an independent review and audit.
As ever, if you know anyone in need of leading accounting, business services or wealth management advice please refer them through.
Until next month,
Your King & Whittle Team
SMSF member limit to rise
While it’s not yet in force, the limit on SMSF member numbers is set to increase from the current four to six members later this year.
For some SMSFs, this will be a welcome change and will mean additional family members can join their existing fund.
Implications of the rule change
The new legislation is currently before Parliament and should come into force in the second half of 2021.
Although 93 per cent of SMSFs only have one or two members, for larger families the reforms will provide greater flexibility to add extra members. This could include adult children and their partners.i
While adding members to your SMSF will be easier, there are potential drawbacks as well as opportunities to including multiple generations in the one fund. So it’s important to think through the ramifications and get professional advice before acting.
Separation and divorce can be a challenging time, often made all the more difficult when you have to divide your assets. So how do you go about decoupling your superannuation?
In years gone by, superannuation was not treated as matrimonial property, so divorce settlements typically saw the woman keeping the house as she generally had the children and the man keeping his super. In a sense, neither party won. She ended up with a house but no money for her retirement while he had nowhere to live but money for his later years.
To remedy this situation, since 2002 super can be included when valuing a couple’s combined assets for a divorce settlement. After all, these days super is probably your second largest asset after your family home.
While super is counted in the calculation of the total property, that does not mean it is mandatory to split the super – the choice is yours.
Unlike the early 2000s, both partners are likely to have superannuation these days although traditionally women will still tend to have lower balances.i On average, women retire with just over half the super balance of men and 23 per cent of women retire with no super at all.
As a result, many divorcing couples may end up splitting super along with their other property.