King & Whittle April 2024 Newsletter
It’s April already and as we head back to work after Easter, we hope you enjoyed a peaceful and relaxing holiday weekend.
Expectations of interest rate cuts later this year in Australia and the United States fuelled activity in the markets last month. The S&P/ASX 200 ended March on another all-time high. Mining shares are driving the market with gold, iron ore and lithium all rebounding. In particular, gold’s rise and rise saw it close at its highest ever US$2,230 an ounce as investors seek a safe haven from geopolitical tensions and interest rate falls.
In the US, the month was slightly less active for markets but since the beginning of the year, the S&P500 has put on just over 10%, the Nasdaq more than 9% and the Dow 5.6%.
The Australian dollar continues to fall with the just released CPI figures for February unchanged from the previous two months at 3.4%. Meanwhile the US dollar is strengthening.
Amid the mixed bag of economic indicators, household wealth has risen for the fifth straight quarter, up by 2.8%. That’s largely due to house price increases but share market growth has also played a part.
Retail turnover rose 0.3% in February thanks to the Taylor Swift phenomenon with her sell-out concerts in Sydney and Melbourne boosting spending. Taking Swift out of the equation, spending has stagnated after the excitement of the Christmas sales.
As we enter the last Quarter of the Financial Year, our attention at King & Whittle will turn to Tax Planning and Minimisation strategies that must be implemented before 30th June 2024.
This is a good time to contact King & Whittle and arrange a meeting to discuss and assess your current structures and implement strategies. To be proactive to help reduce tax.
It is also a good time to "Health Check" your financial future and our Wealth Management Team can guide you to ensure your situation aligns with your financial goals and aspirations. Please call our office to organise a meeting.
We look forward to assisting you!
Market movements and review video – April 2024
Stay up to date with what's happened in markets and the Australian economy over the past month.
Expectations of interest rate cuts later this year in Australia and the United States fuelled activity in the markets last month.
Australian shares reached a new record high at the end of the month, driven by mining shares with gold, iron ore and lithium all rebounding.
US markets also reached new highs during March, leaving the benchmark index up more than 10 percent so far in 2024.
Click the video below to view our update.
Please get in touch if you’d like assistance with your personal financial situation.
New increased super contribution caps
As the end of financial year gets closer, some investors are thinking about the most effective ways to boost their super balance, particularly with an increase in the caps on contributions from 1 July.
The concessional contributions cap, which is the maximum in before-tax contributions you can add to your super each year without paying extra tax, is increasing to $30,000 from $27,500 in the new financial year.i
The cap increases in line with average weekly ordinary earnings (AWOTE).
It is also useful to be aware of payment and reporting timelines. For example, your employer can make super guarantee contributions up until 28 July for the final quarter of the financial year and salary sacrifice contributions up until 30 June.
Any amounts showing on the ATO website for your account are based on when your fund reports to the ATO.
Carry forward unused amounts
If you haven’t made extra contributions in past years, you may have unused concessional cap amounts.
These can be carried forward, allowing you to contribute more as long as your super balance is less than $500,000 at 30 June of the previous financial year.
You can carry forward up to five years of concessional contributions cap amounts.
Getting close to exceeding the cap?
If you’re worried about going over the cap, you may wish to stop any further voluntary contributions based on an assessment of the extra tax you will pay.
For those with two or more employers, you may opt out of receiving the super guarantee from one of the employers.
Meanwhile, if special circumstances have caused you to exceed your cap, it’s possible to apply to the ATO for some or all of the contributions to be disregarded or allocated to the next financial year.
But, if all else fails and you have exceeded the cap, the excess contributions will be included in your assessable income and taxed at your marginal rate less a 15 per cent tax offset. The good news is that you can withdraw up to 85 per cent of the excess contributions from your super fund to pay your tax bill. Any excess contributions left in the fund will be counted towards your non-concessional contributions cap.
Timing is everything
The upcoming Stage 3 tax cuts, which commence on 1 July 2024, may affect the value of your concessional contributions. For some, tax benefits may be greater if contributions are made before the tax cuts begin.
Please check with us about your circumstances to make sure you make the most effective move.
Non-concessional cap also increased
The non-concessional contributions cap is the maximum of after-tax contributions you can make to your super each year without paying extra tax.ii
The non-concessional cap is exactly four times the amount of the concessional cap so it increases from $110,000 to $120,000.
If you exceed the cap, you may be eligible to use the ‘bring forward rule’, which allows you to use caps from future years and possibly avoid paying extra tax. It means you can make contributions of up to two or three times the annual cap amount in the first year of the bring forward period. iii
If your total super balance is equal to or more than the general transfer balance cap ($1.9 million from 2023–24 and 2024-25) at the end of the previous financial year, your non-concessional contributions cap is zero for the current financial year.
We’d be happy to help with advice about how the changes in contribution caps might affect you and whether you are eligible for the bring forward rule.
i, ii Understanding concessional and non-concessional contributions | Australian Taxation Office (ato.gov.au)
iii Non-concessional contributions cap | Australian Taxation Office (ato.gov.au)
Markets love certainty, but what happens next?
Financial markets can be like finely tuned racehorses, poised to gallop ahead under ideal conditions but often highly reactive to unexpected events.
It’s often said that the markets love certainty. Investors feel more confident when economic conditions are stable and predictable.
But certainty in financial conditions is never a sure thing. Uncertainty is always just around the corner with the possibility of changes in interest rates, new laws or regulations, upheavals in overseas markets, a breakdown in Australia’s relationship with a major trading partner, and wars and political instability.
As a result, stability and predictability are most often fleeting with peaks and troughs in prices inevitable.
Look at the past few years. Between 2020 and 2022, we were dealing with the side effects of COVID-19 on the economy and markets. Since 2022, interest rate rises, increases in the cost of living and conflicts in Ukraine and the Middle East have caused further market volatility.
This year, global political stability may be affecting markets with almost 50 per cent of the world’s population due to head to the polls to choose new governments including the United States, India, Russia, South Korea and the European Union.i Interest rate movements in Australia and overseas are another focus.
In this dynamic environment, investors find themselves grappling with crucial decisions about how to safeguard and optimise their portfolios.
It could be useful to know that making hasty decisions, reacting quickly to the latest event, may not be the best move.
Consider the performance of various assets classes over 24 years. If you had invested $10,000 in a basket of Australian shares on 1 February 2000, for example, your portfolio would have been worth $67,717 at 31 January 2024, delivering a return of 8.3 per cent each year.ii The same amount invested in international shares over the period would have provided a 5.4 per cent annual return with your portfolio then at $35,373.
US investment advisers Dimensional have calculated the risk to a portfolio of being out of the market for even a short period.
An investment of US$1,000 in 1998 of stocks that make up the Russell 3000 Index, a broad US stock benchmark in 1998, would have turned into U$6356 for the 25 years to 31 December 2022. But if you had decided to sell up during the best week, before later reinvesting, the value would have dropped to $5,304. Miss the three best months, which ended June 22, 2020, and the total return dwindles to $4,480.iii
In other words, reacting to events by quickly selling up can have an unwelcome effect on your portfolio.
Trying to time the market by identifying the best and worst days to buy and sell is almost impossible. Investing for the long-term in a well-diversified portfolio can better suit some investors.
Historically, long-term investors who have weathered short-term storms have been rewarded. Markets have shown they tend to recover over time, and a diversified portfolio allows investors to capture the upside when conditions improve.
And there’s a bonus. The compounding effect of returns over an extended period can significantly enhance the overall performance of a portfolio if they are reinvested.
Why diversify?
Different asset classes – such as shares, bonds and cash – perform differently at different times.
By diversifying investments across different asset classes, regions and companies, can work towards reducing the effect of a poorly performing asset on the overall portfolio, providing a buffer against volatility and lowering risk.
Appreciating the lessons learned from the past while also understanding that past performance may not predict future performance, is a helpful way of navigating the uncertainties of the global markets.
We can help you stay committed to a robust investment strategy, design a portfolio that meets your objectives and help navigate the complexities of the markets. Reach out to us to help you invest confidently.
Market uncertainty caused by key historical events
i The Ultimate Election Year: All the Elections Around the World in 2024 - Elections Around the World in 2024 | TIME
ii https://insights.vanguard.com.au/VolatilityIndexChart/ui/retail.html
iii What Happens When You Fail at Market Timing | Dimensional
iv Vanguard Index Volatility Charts
Finding grants to help your business
Many small business owners are feeling the pinch after the tough years of COVID and high inflation, but receiving a business grant could be the helping hand you need.
If you know where to look, some extra dollars from the federal or your state/territory government could make all the difference between merely getting by and a flourishing business.
What grants are available?
Grants for small businesses range from a few hundred dollars to around $10,000. Some also provide support with securing loans, business introductions, or mentoring services.
The best place to start searching for a business grant is GrantConnect, a free database listing all Australian Government grant opportunities currently open to applicants.
Another important resource is the business.gov.au Grants and Programs Finder tool, which can help you find grants, funding and support from Australian Government agencies.
The government’s Australian Small Business Advisory Services program delivers tailored advice on adopting digital tools to save time and money, and to help expand your business. Businesses with fewer than 20 full-time (or equivalent) employees, as well as sole traders are eligible.
Tech companies can check out the government’s Landing Pads program. This helps tech businesses expand into new markets by providing valuable market insights, expansion strategies, network introductions and venture capital contacts.
Each state and territory offers a range of grants to encourage local businesses. Grants vary between states, so check the online database listing the programs for your state/territory to see if any are suitable for your business.
The NSW Government for example, has a searchable Grants and Funding database highlighting financial incentives for businesses, such as payroll tax rebates for employing apprentices and trainees and the $1,000 SafeWork rebate.
In WA, the Grants Assistance and Programs Register includes both national and local grants, including the New Industries Fund: Innovation Booster Grant and regional Local Capability Fund.
For Victorian-based small businesses, check out the government’s Grants and Programs online database.
If you haven’t found a suitable grant or program, another potential source of information is Grants Hub. Although you need to register for access, you can try it out for 14 days for free.
Read the fine print
When ‘free’ money is up for grabs there is always fierce competition, so it’s important to put in a strong application.
The process will be different for each grant, making it essential to read all the information provided before getting started. Also, check that you meet the criteria, as applications will only be considered from businesses meeting the eligibility requirements.
It’s important to tailor your application to meet the grant requirements and check you prepare all the required documentation. This needs to be in the specified format.
Applying for a grant can be time-consuming, so start early and don’t leave it until the last minute to get your documentation together.
Where to start
There are private operators who offer to find business grants for a fee, but details of government grants are freely available on GrantConnect and Business.gov.au, or your state government’s website.
Small business and industry associations sometimes offer grants, so it may also be worth checking the relevant one for your business.
An easy way to find additional funding opportunities can also be to talk to us, as we can help you with government tax programs, such as the small business tax write‑off.
If the grant application process seems too time-consuming, consider hiring someone to help. While a consultant can write your application, grants are awarded on merit and using one will not give you any special access or consideration.
If you need help with finding or applying for a business grant, call our office today.
Dive into deep focus to unlock your true potential
Phone buzzing, emails constantly popping up, ongoing chats with colleagues, responding to meeting invites and all the while trying to work on that report. Sound familiar?
While we’ve all become reasonably proficient at multitasking in this digital age, numerous commentators are pointing to the toll the constant distractions are having on our productivity and the outcomes of our efforts. So, let’s look at the benefits of deep focus – uninterrupted time to work at your maximum potential and create quality work, faster.
What is deep work?
The notion of ‘deep work’ or an intense, productive focus, was first coined by computer science professor and author Cal Newport. Cal suggests that our online tools are making us lose the capacity for focus in a hyper-distracted world. He argues that for your brain to work at its maximum potential, you need to enter a state of focus, with no external distractions.
Multitasking as an impediment to productivity
While multitasking is an essential survival tool, it’s not great for your productivity to be in that state constantly.
When you switch between tasks - for example responding to an ‘urgent’ email while drafting a proposal - some of your attention remains on the previous task so you are still mulling over the email when you go back to your proposal. This is known as attention residue, and it impedes productivity. Research shows that it can take more than 20 minutes to get your train of thought back on track and up to speed after an interruption, which could mean if you are constantly responding to interruptions, you are never working at your full capacity.i
It's also been demonstrated that not only do people take longer to complete tasks when multitasking, they are also far more likely to make mistakes, so accuracy plummets when you are hopping from one thing to the other.ii
Why is deep focus so effective?
Each time you practice deep focus, leads to more effective learning. When you concentrate deeply on a single task, your brain creates pathways to consolidate and reinforce learning which means you are literally rewiring your brain to help you perform at an optimal level.iii
How to dive deeper
Ok, I hear you saying. This all sounds great but how do I fit this into my already busy life when finding an interrupted block of time feels next to impossible?
Once you start to use deep flow as part of your daily routine you may find that you are accomplishing more and getting through your workload a little faster, given the productivity benefits so you’ll free up time.
It’s important to schedule and prioritise how you are spending this precious deep focus time to maximise the benefits. One way to achieve deep focus can be to schedule regular blocks of time to dedicate to important tasks that require focus, followed by short breaks.
A time management technique known as the Pomodoro technique suggests that the optimal time for concentration is 25 minutes, followed by a short five-minute break. Don’t feel that you must set a timer if that feels too restrictive for you, as you can adjust the timings to suit you and your workflow. The idea is to set aside blocks of time and impose time limits on your tasks to focus, taking breaks in between bouts of intense focus to refresh yourself.
Consider when you are at your best to undertake these important deep flow tasks - whether its first thing in the morning, after a bite to eat at lunch, or later in the day.
It’s also important to accept that interruptions will inevitably happen and try not to get angry or upset as that will derail your train of thought.
Finally, don’t be afraid to play around with what works for you and experiment with adding some deep flow into your work processes. You’ve got nothing to lose and everything to gain. So, what are you waiting for - turn that phone onto silent mode and dive deep!
i https://ics.uci.edu/~gmark/chi08-mark.pdf
ii https://news.stanford.edu/2020/10/28/poor-memory-tied-attention-lapses-media-multitasking/
iii https://psycnet.apa.org/