July is here along with freezing temperatures and good snowfalls in the south and east of the country. Meanwhile, temperatures are sizzling in Russia for the football World Cup where the finals are looming, although not for the Socceroos who are headed home.
As the financial year ended, Australian investors had reason to be optimistic despite ongoing global tensions. Our economy grew 1 per cent in the March quarter, lifting the annual growth rate from 2.4 to 3.1 per cent, marking 27 consecutive years of growth. Unemployment eased from 5.6 per cent to 5.4 per cent in May while inflation is a benign 1.9 per cent. The cash rate remains at a record low of 1.5 per cent while the 10-year government bond yield finished the year little changed at around 2.6 per cent.
The Australian dollar fell below US74c, down from its January high of US81c, due largely to the stronger US dollar. This helped push Australian shares to 10-year highs in June, with annual total returns from share prices and dividends up 14 per cent. Commodity prices are also broadly higher for the year, with Brent Crude oil up 63 per cent to US$77 a barrel and iron ore firming 8 per cent to US$67 a tonne.
Despite modest annual wage growth of 2.1 per cent, rising petrol prices and falling home prices, consumers remain positive. The ANZ/Roy Morgan consumer confidence rating was up 6 per cent over the year to 121.4 in late June. The CoreLogic Home Value Index fell 1.1 per cent in the year to June, with Hobart, Adelaide and Brisbane the only capital cities posting gains in May.
We all know what it feels like to be stressed. For most of us, it is a hallmark of our daily lives. While the word has very negative connotations, stress can actually drive us forward. That surge of adrenaline we get when tackling something out of our comfort zone helps us to achieve our goals. The challenge is managing stress so that it helps rather than hinders us.
In our lives we move between brief periods of 'fight or flight' and longer periods of 'rest and digest'. These are governed by the levels of cortisol and adrenaline in our system, and all sorts of things can trigger them. Obviously, these days we are very rarely in mortal peril, so more often than not stress is triggered by simpler things in our lives; our job, our relationships, and our ability to achieve our goals.
What is good stress?
Known as eustress by psychologists, good stress gets us off the couch and helps us get things done. It is a driving force in our life: that feeling of getting excited by a new challenge, a scary ride, or the burgeoning phase of a new relationship. By definition eustress comes in waves, meaning you will have brief periods of it followed by a sense of accomplishment and relaxation. These brief periods of stress have been found to be beneficial to our health in that they can improve cognitive function and protect us from some effects of aging.i
It is when stress moves from being acute and short term to chronic and longer term that it becomes harmful to our health and well-being.
When good stress turns bad
Bad stress develops when we have no breaks from the stress in our lives. Rather than motivating you, this type of chronic stress can leave you depressive and unable to cope with the problems in your life. If we do not have adequate lengths of ‘rest and digest’, the resulting excess of cortisol in our system and depleted adrenals can leave us at risk of longer term health problems such as high blood pressure, insomnia, cardiac arrest, diabetes and depression.
Is there such thing as too little stress?
Indeed there is. People without a healthy level of stress in their lives can end up feeling unmotivated, directionless and passive. We all need a bit of excitement in our lives to feel like life has meaning, and a dearth of healthy stress can lead us into a rut.
So how do we maintain a healthy level?
Given that our adrenal systems that respond to stress are built to handle a sprint not a marathon, it’s important that we relax and recharge in between stressful events.
A common cause of long term stress is a perceived disconnect between a situation and our resources to deal with it. Often if we are in periods of distress it might mean some of our circumstances need to change. If you’re under the pump at work, you may need time off or a distraction in the form of a hobby.
Changing the way we perceive the obstacles in our lives is also an important step towards maintaining a healthy amount of stress. Instead of seeing obstacles as insurmountable, reframe them as short term challenges to be overcome, and equip yourself with the tools to do this.
Another tool that has been proven to combat stress is mindfulness, as when we are faced with only our immediate concerns we are able to function in a rational and calm manner. When we live in dread of future outcomes or regretting past mistakes eustress becomes distress.
We shouldn’t be afraid of stress. In short bursts it helps us to get things done and realise our dreams. We need to find ways to manage and get respite from constant, unrelenting stress. These tools are harder to put in place once you are already in a place of extreme anxiety, so why not start thinking about it today? It might just make a huge difference to your long term wellbeing.
People often think their superannuation will be treated as part of their estate when they die and distributed according to their Will, but that’s not the case. Unless you have nominated your beneficiaries, the decision as to who receives your super is in the hands of the trustees of your fund.
When that happens, the trustees normally direct all funds to your dependants – your spouse, your children, financial dependents and people with whom you had an ‘interdependency relationship’ such as living together.
But wouldn’t it be better to nominate exactly who you want to inherit your super death benefits? (Death benefits is the term for all of the money in your super account plus any life insurance.) You can generally nominate beneficiaries with either a binding or a non-binding nomination, although some super funds only provide a member with the ability to make non-binding nominations.
Make your wishes binding
For binding nominations, the trustees have to carry out your wishes, provided you have nominated eligible recipients. If a nomination is non-binding, it tells the trustee how you would like your benefits distributed, but leaves the ultimate discretion with the trustee, taking into consideration your circumstance and relationships at the date of death.
Under super law, death benefits can only be left to a dependent or your personal legal representative (the executor of your Will), in which case it will pass into your estate for distribution according to the terms of your Will.
It’s important to note that a binding nomination generally only has a limited life. Every three years you need to advise your super fund in writing of your nominated beneficiaries or it becomes invalid.
If you have not nominated a beneficiary and have not yet organised a Will, then your super will be distributed according to a state-based formula which may not reflect your intentions.
It’s also important to take tax into account when nominating beneficiaries. If your spouse is alive then it is likely your death benefits will go to your partner as a lump sum and/or an income stream referred to as a reversionary pension. There is no tax liability if it’s paid as a lump sum unless both you and your spouse are aged under 60 when you die. Also, the maximum your spouse can have in their pension account is $1.6 million. So there are considerations if the death benefit pension causes your spouse to exceed this income.
If your spouse predeceases you then the benefit will be divided between other dependants. Be aware though that there’s a difference in the definition of dependants under super and tax law.
Under super law, a child of any age may receive your death benefit, but under tax law if they are aged over 18 and not financially dependent on you, they will be subject to 17 per cent taxation on the taxable component of the sum they receive. For this reason, your adult children may be better off receiving the money through your estate as they will only pay 15 per cent tax, saving the 2 per cent Medicare levy.
Non-dependent adult children cannot receive a reversionary pension; instead they must take a lump sum.
If you are legally divorced, then your ex-spouse is no longer deemed a dependant under super law. However, if you still want to leave your super to your ex-spouse it must go to your estate and be paid from there. Interestingly, your ex-spouse will receive the money tax free.
For those with a self-managed super fund, you can use a clause in the fund’s trust deed to either nominate a valid dependent who will receive the benefit or else have the money paid to your legal representative who will pay the money into the estate.
Making sure your hard-earned money is distributed according to your wishes is not an onerous task, but it is an important one. Not nominating a beneficiary, or nominating someone who is not eligible to receive your super, can lead to lengthy delays and emotional upset at what is already a difficult time for your family.
Seeking professional and legal advice can help to ensure that your death super benefits are considered as part of your overall estate planning and that your wishes are carried out.
You will have probably heard the expression ‘cash flow is king’ and there is no better time than the start of a new financial year to commit to smarter cash flow management in your business.
There’s a reason many business owners stress a lot more about cash flow than they do about profits or building equity. A steady flow of income, is essential to business success, for start-ups and multinational corporations alike. It has an impact on everything from simple solvency to projections and planning for the future. So when the cash is more trickle or flood than flow, it’s easy to lose sight of the basics. Here’s what you need to remember to take control of your cash flow.
Look for patterns
Looking for patterns is one of the first steps to identifying the real cause of your cash flow issues. For example, your business revenue might be seasonal to some extent. Your clients and customers’ purchasing decisions (and ability to pay) could be affected by factors like end or start of financial year, Christmas and public holidays – even the extreme weather that comes with the seasons. It shouldn’t take years to identify patterns, either; with our help and external data, you can spot statistically significant lulls in cash flow within months. Make sure you also note when tax payments are due.
Don’t wait for monthly or quarterly reporting to find out that your cash flow is less than ideal. Monitor your situation in real time (or as close as possible) with the right software or digital tools. Many accounting software packages have built-in alerts that help you manage your cash flow a bit more proactively. Some business admin tools also help automate accounts receivable tasks. If you’re not already using software you love, take your time to do some research and find an option that’s scalable for your operations.
Review your credit policy
Just because you started your business or outlined your business plan with a particular credit policy, doesn’t mean you have to keep it. Just as your client or customer base grows and diversifies, so to can your credit policy. You might have a few different sets of terms for different types of customers – perhaps more generous for your most trusted long-term customers. The most important thing here is that you stick to your policy. If that means taking a bit of extra time to do your due diligence on potential new debtors, so be it. Then prioritise your collections, to ensure you are getting paid for all the work you’ve completed.
Prepare for all scenarios
Do you have cash flow contingencies built in to your business plan? If not, set them up now. Look at best case scenarios and worst case scenarios. Get together with your business partner/s or a trusted advisor to brainstorm what could happen, and what you’d do in each situation. By having some solutions ready to go and approved by relevant stakeholders, you’ll feel less panicked if you have a temporary lean phase.
One potential option is building up some capital reserves. Just like you might have an emergency fund for your personal or household finances, you can save extra money in good times, instead of distributing it as profits or re-investing it straight back in to operations. There are tons of different business savings account products in Australia. But the fact that 46% of small to medium business failures are linked to inadequate cash flow indicates that some operators aren’t as good at others at building up their reserves strategically.i
Broader business planning
Your plans to combat slow cash flow don’t just have to be reactive. They don’t have to begin and end with the accounts receivable process. Depending on the nature of your operations, you may look at creative ways of getting your business through those slow cash flow times. Could you change your approach to marketing and promotional activities? Is there a new higher-volume product/service you could introduce, so you’ve got money coming in while you wait for payment on big items/jobs?
If you’ve got concerns about how your cash flow is impacting your business, please get in touch. We’re here to help you strategise and put measures in place to feel on top of this important aspect of your business.