Pinnacle Road Monthly Newsletter Edition #4 Welcome to our fourth edition of the Pinnacle Road monthly newsletter. We break down what’s been happening in the market over the past month and how it’s affecting each of our services.   Accounting & Advisory   Lower Taxes For Individuals Personal Tax Cuts As of 6 October 2020, personal income tax cuts have been announced – meaning low to middle income earners will receive immediate tax relief of up to $2,745 for singles and $5,490 for couples compared with 2017-18;   For employees, these tax cuts will be realised throughout the year on their payslips, as less PAYG Withholding will be withheld on the Gross Income;   Other individual taxpayers (e.g. Non-employees) will observe the tax cuts in when lodging their 2020/21 Income Tax Returns next year;   Further tax cuts are scheduled for future tax years – with 95% of taxpayers facing a marginal tax rate of 30% or less by 2024-25;   For Businesses Instant Asset Write Off Extension – Temporary Full Expensing Expanding on the current $150,000 Instant Asset Write Off (currently available until 31 December 2020), the Federal Government announced that businesses with turnover up to $5 billion will be able to deduct the full cost of eligible depreciable assets with no threshold limit* so long as they are acquired and ready for use from 7:30pm 6 October 2020 to 30 June 2022; *Limits apply to Motor Vehicles; Loss Carry Back Losses incurred during the 2019/20, 2020/21 and or 2021/22 can be carried back against profits made in or after 2018/19. Eligible companies may elect to receive a tax refund when they lodge their 2020–21 and 2021–22 tax returns; R&D Tax Incentive The Government will enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive (R&DTI). For small claimants (turnover less than $20 million), the Government will increase the refundable R&D tax offset to 18.5 percentage points above the claimant’s company tax rate, and there will be no $4 million cap on annual cash refunds. For larger claimants, the Government will streamline the intensity test from three to two tiers and increase the non-refundable R&D tax offset rates. The new rates will be the claimant’s company tax rate plus 8.5 percentage points for initial R&D expenditure up to 2 per cent R&D intensity, and 16.5 percentage points for R&D expenditure above 2 per cent R&D intensity. The Government will also proceed with the increase in the cap on eligible R&D expenditure from $100 million to $150 million per annum. These changes apply from 1 July 2021 and will support more than 11,400 companies that claim the R&DTI.   Supporting Job Creation & Sustainability Jobmaker Hiring Credit The JobMaker Hiring Credit was announced in the 2020 Budget to assist to accelerate growth in the employment of young people during the COVID-19 recovery, aiming at reducing long-term unemployment. Subject to passage of legislation, the incentive will be available from 7 October 2020 for 12 months for eligible employers creating new jobs for eligible employees aged between 16 to 35. The JobMaker Hiring Credit will be: $200 per week for each eligible employee aged 16 to 29 $100 per week for each eligible employee aged 30 to 35   Employers are eligible to receive the JobMaker Hiring Credit if they: - Have an Australian Business Number (ABN); - Are up to date with tax lodgement obligations; - Are registered for Pay as You Go (PAYG) withholding; - Are reporting through Single Touch Payroll (STP); - Meet the additionality criteria; - Are claiming in respect of an eligible employee; and - Have kept adequate records of the paid hours worked by the employee they are claiming the hiring credit in respect of.   To be an eligible employee, the employee must: - Be  aged either 16 to 35 years old at the time their employment started; - Have worked at least 20 paid hours per week on average for the full weeks they were employed over the reporting period; - Commenced their employment between 7 October 2020 and 6 October 2021; - Have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one month within the past three months before they were hired; - Be in their first year of employment with this employer, reflecting that the hiring credit is only available for 12 months for each additional job; and  - Must be employed for the period that the employer is claiming for them. - Employees may be employed on a permanent, casual or fixed term basis. - An employer cannot claim JobKeeper and JobMaker Hiring Credit at the same time.   For more information on your business and employee eligibility for JobMaker Hiring Credits, please contact our Accounting Team.   Apprentice Wage Subsidy The federal government announced that they will extend funding to support 100,000 new apprentices and trainees through the proposed wage subsidy program. The subsidy will provide employers with 50% of an apprentice’s wage, up to a cap of $7,000 per quarter, for commencing apprentices and trainees, until 30 September 2021.   Fringe Benefit Tax Exemptions for Retraining Staff In an effort to encourage re-skilling and retention of staff who may have otherwise been made redundant under current COVID-19 working conditions, the federal government has provided businesses with an exemption from Fringe Benefit Tax on staff training and education so that they can be given a new role within the business. The costs towards training for a completely new role are normally not deductible, so this provides employers with incentives to re-train and re-skill staff to keep them working within the business, rather than making them redundant.   FIND OUT HOW THESE CHANGES CAN AFFECT YOU & YOUR BUSINESS   Residential Finance It has been an exciting month for the team at Pinnacle Road. With restrictions easing, plus a drop in interest rates on Tuesday, we are busier than ever with homebuyers getting well and truly ready to pounce in the forthcoming months. We are also working hard to take advantage of the decrease in rates, making sure our clients are being refinanced into better structured loans that save them money. September was a tough month for everyone in Victoria. Heavy lockdowns meant there were no open for inspections, and certainly no auctions. Now with restrictions easing and auctions back on, this has caused a backlog in properties and buyers which means the market is very hot at the minute. We are seeing properties being sold at auction for well over their reserve and predicted price. Because of this is it very important to know your limit and stick to it. Obtaining a pre-approval will confirm the bank will lend you the money, taking as much stress out of the purchasing process as possible. It will also allow you to know your absolute max borrowing capacity which will allow you to narrow down your search accurately to properties you can afford. Different banks mean different borrowing capacities as well, so it is important you apply at the most suitable for your situation. If you are in the market, we recommend talking to us about this and we would be more than happy to help you apply at the best bank, preparing you properly for that purchase. On Tuesday, the RBA announced a further rate cut to a record low rate of 0.10%. We have seen a few banks pass this one meaning we now have some fixed rates at as low as 1.97%. This is as low as we have seen. The banks are also very keen for business and are still offering up to $4,000 for refinancing your existing loans.        Home Loan Savings          If a 0.15 basis point cut happens         If you have a rate in the 3’s or haven’t had a look at your loan structure for over a year, we strongly recommend giving us  call to see if we can get you a lower rate and save you potentially thousands a year to pay for a well-earned holiday after this crazy year! NEED GUIDANCE WITH YOUR NEXT PURCHASE OR REFINANCE? CALL NOW   Wealth Management Risk Management – What is Income Protection?   “Unprecedented” and “uncertain” times could well be the slogan of 2020, a year which if nothing else has shown us we definitely can’t predict the future and what might happen.  With this in mind, we think it is essential that every holistic financial plan takes into account risk.  Risk can appear in some many different – interest rates, inflation, markets, specific stocks, governments etc. One risk that people often don’t consider fully enough is what would happen to them financially if you suffered a serious illness or injury. The reality is that your health and your ability to work is your greatest asset and so it is essential that you protect “your asset”.  Research has shown that 83% of Australians insure their car but only 33% of Australians insure their income.  The same data indicated approximately 20% of mortgage defaults were due to ‘illness or accident in household’. An alarming one in ten individuals across all age groups admitted to not knowing what income protection was with 65% of Gen Y and 50% of Baby Boomers not understanding what it covered. As such, we’ve given you a quick ‘Income Protection 101’ below;  You can cover up to 75% of your pre-injury/illness income. Your ‘waiting period’ is the length of time you need to be out of work before a benefit is payable to you – generally between 30-90 days but can be longer.   Your ‘benefit period’ is the length of time a benefit will be payable to you should you make a successful claim – this can be for 1, 2, 5years and even up to age 65.   An ‘Own-Occupation’ policy will pay a benefit where the life insured cannot work in their usual occupation – e.g. a surgeon who injures their hand may still be able to work but cannot perform their usual surgery and so the benefit is payable.   An ‘Any-Occupation’ policy will only pay a benefit under circumstances where the life insured cannot work in any occupation – e.g. they are so ill that they cannot reasonably perform any duties   Income Protection is just one of the areas of insurance that you need to look at, it is also important to look at Life Insurance, Total and Permanent Disability and Trauma insurance.  Unfortunately, bad things happen to good people so it is important that you have a holistic plan.  Establishing a risk management strategy is a key component in any financial plan and at Pinnacle Road our approach is to quantify your financial risk, determine the most cost effective way to manage the risk and then proactively manage your risk over time. We hope that none of our clients will ever have to claim on an insurance policy but if you need to make a claim and aren’t insured, well you simply can’t claim. Ultimately, we aim for our clients not to have any insurance because they have accumulated sufficient assets that they are financially independent and don’t need insurance. Should you have any queries regarding income protection or your risk management strategy please feel free to get in touch. Economic and Market Commentary The fourth quarter of the 2020 calendar year brought with it one of the most crucial budgets our government ever released, one of the most dramatic US elections we’ve witnessed and signs of sustained recovery for Australia among the chaos.  The Morrison government announced an unsurprisingly jobs focused budget which will bring the total level of support during the Covid crisis to $507billion.  The US election, at the time of writing, has become closer than anticipated and overshadowed threats of legal action on recounts and fraud.  While it looks like the process could be drawn out over weeks, the markets have been responsive over the session demonstrating the ripple effect of the US on the globe. On election day Australian time, we saw a surge in the Australian dollar to 72.21US cents and a subsequent slump back to 70.5 US cents as Trump closed the margin and the outcome became more uncertain.  The market has been swinging between gains and losses as the count looks like it will be dragged out and the polls again proved unreliable.  We would like to touch again on historical market responses to the election, as it does look like the senate will remain with a Republican majority.  Assuming this, markets have previously seen the best returns with a Democratic (Biden) House win and a Republican Senate. The other area in which this would affect Australian markets will be on the increasing trade tensions with China.  With such a rapid recovery from our largest trade partner, the outlook for Australia’s recovery should be very optimistic.  However, this has been in doubt recently by inquiries, custom delays, calls for tariffs and now confirmed suspension on some of our largest exports to China including coal, barley, wine and lobsters.  We’ve witnessed over the past four years the speed at which the Trump administration can escalate tensions internationally.  With the Coronavirus as the apparent source of this friction it is unclear whether a Biden, with more predictable conduct, or Trump, with a harder line on international trade, administration could help or hinder the current trade climate. Returning to the domestic outlook, the remainder of the year and entry into 2021 is looking positive at this stage.  As Victoria emerges from strict lockdowns and maintains good health outcomes, the state looks set to rejoin the rest of the functioning economy.   Australian and Asian markets will likely gain ground on US market performance with the recovery of the manufacturing, materials and financial sectors.  With the heavy focus on jobs in this budget it is expected we will see strong performance in both manufacturing and materials over the next 12 months.   The ANZ-Roy Morgan consumer confidence rating rose 0.2% to an 8-month high of 99.9 this week, confidence not seen since early February this year.   Stay safe Kind regards,  Mark Rice 0435 618 232 IT'S A GREAT TIME FOR EXPERT FINANCIAL PLANNING & WE'D LOVE TO HELP     Equipment Finance Deferrals For those Pinnacle clients who deferred their equipment finance loans back in March for 6 months please be aware of the ramifications of deferring again, if you’re thinking about it then please contact George directly to discuss as it can effect lending in the future. Payments should begin to start for the rest, again if you are having any issues with your lenders please contact our team for assistance. Low Doc Policies Bank of Queensland have just reinstated their true low doc policy for all new to bank clients up to 150k. This means you can obtain finance for tier 1 assets up to 150k without financials. Criteria below;  ABN 2 years registration Director Property backed Clear credit file   Contact George directly on 0408 052 919 Commercial Finance   What is debtor finance?   Debtor Finance is, quite simply, a line of credit linked to and secured by your outstanding accounts receivable. If your business supplies products or services to other businesses on standard trade credit terms, Debtor Finance can help. There are a number of variations in how the service is delivered, ranging from Confidential Invoice Discounting (for larger, more sophisticated businesses with a dedicated finance department) to the option of full management of accounts receivables (which allows many of our smaller clients to focus on growing their businesses rather than chasing outstanding invoices). What are the benefits of debtor finance?   It is a powerful standalone business finance facility, which helps because: As your business grows the facility grows with it Unlike a traditional bank overdraft, there is generally no need for real estate security It is a standalone facility that can sit alongside other business borrowings (such as overdrafts, term loans, and asset finance) It helps you grow your business and increase purchasing power through improved cash flow There are no capital repayment requirements   How does debtor finance work? You invoice your client directly and upload the invoice to us at the same time. Within 24 hours our lender will pay 80% of the value of approved invoices, less our fees. The remaining 20% becomes available to you when the invoice is paid in full. Imagine you are a furniture importer who wholesales to other businesses. You buy a chair for $20 and sell it for $50, BUT you only had $20 and have to wait to get paid (possibly 45 to 60 days) before you can buy and sell another chair. No problem, our lenders can give you up to $40 against the invoice within 24 hours (with the balance on full payment by the debtor), meaning that you can immediately go and buy two chairs for your $40 and sell them for $100… Now we can give you $80 against the second invoice and you can buy four chairs and so on. The math speaks for itself! This is a very simple example, but debtor finance is just that – simple. Without A Debtor Finance Facility - Buy a chair for $20 - Sell the chair for $50 - Wait for payment to buy another chair - With A Debtor Finance Facility  - Buy a chair for $20 - Sell the chair for $50 but rather than wait to get paid, receive $40 the next day, meaning you can - Buy 2 more chairs - Will debtor finance help my business? If you answer “Yes” to these 3 questions, your business could benefit from a debtor finance facility. Do you sell products or services to other businesses on standard trade credit terms? Are your invoices issued for delivered goods or completed services (i.e. not issued on a progress claim/milestone basis)? Does your business have an annual turnover greater than $200,000?   For more information about how we can help your business please contact Pinnacle Road.   CONTACT US HERE TO FIND OUT MORE DURING THIS CHALLENGING TIME