Benefits of Cloud Accounting

It seems like everything happens in the cloud these days. Social media, file storage in Dropbox or Google Drive, collaboration tools like Slack or Trello… they all live in the cloud. 

But don’t be fooled into thinking the power of the cloud is limited to crazy cat videos and real-time chat.

Currently, over 42% of Australian businesses are using cloud computing. That number continues to grow every year as software companies develop products at a rapid pace to fill the increasing demand for cloud-based solutions. 

So it’s not surprising that accounting software providers like Xero, Quickbooks, or MYOB have all thrown their weight behind developing their online services. 

Cloud accounting software has evolved to offer all the functionality of your trusted old desktop system, with a number of additional benefits that only online technology can provide.

If you’re wondering whether moving to the cloud will be beneficial for your business, keep reading. 

Why Use Cloud Accounting?

There are many benefits of cloud accounting that you may not be aware of. 

Ease of Access

In today’s 24-hour workday world, accessibility is key. Cloud-based accounting allows you to access your accounts and key financial information anywhere, at any time. All you need is an internet connection.

That means no more being tied to your desktop computer at the office. Just use your phone, tablet, or laptop to work wherever is convenient to you. Not only does this set you free to work remotely, but it makes it easy to collaborate with colleagues, partners, and employees from anywhere in the world. 

Reduced Cost 

Desktop-based systems require an investment in hardware. You need a server to house your application data, and that server needs regular maintenance. Plus you must factor in the running costs of a server – which is most notable on your electricity bill!

But what if anything goes wrong with your server? You’ll require an IT expert to come out and have a look. They might need to order parts, they might take hours to repair your problem… all of which adds to your invoice!

Cloud accounting is carried out entirely online. There is no costly infrastructure for you to maintain – that’s the provider’s problem, not yours. 

All that’s required of you is some setup fees as you get established, and then the rest is all taken care of in a monthly subscription fee. No nasty surprises, no huge electricity bill, and no costly service call-out fees. 

Water-tight security 

One of the top things on your mind must be the security of your business’ data. With all of that information flying through your wifi connection, it’s normal to ask yourself… is cloud accounting safe? 

Accounting software providers understand the critical security of your organisation’s – and your clients’ – data. They spend millions of dollars a year making sure that the highest levels of encryption are used, and also ensure that their servers are protected from fire, theft, or damage by using state-of-the-art security. 

Compare that to having your company data file on someone’s laptop which can be easily lost or stolen, and you’ve got a clear winner.

Seamless backups and updates 

Time consuming daily backups are a drain on your staff’s time and patience! On the cloud platform, manual backups are a thing of the past. The software does it for you in real-time.

Not only does this mean that your risk of data-loss is minimised, but it also means that you can rest assured that everyone’s working from the same file version. File updates made by Sarah in her Sydney home office are instantly applied, saved, and accessible to all stakeholders across the world. 

Cloud accounting software also updates automatically, and those updates are included in your subscription fee. So once again, there are no sudden bills for your software upgrade, nor the hassle of getting a tech out to install and update your computers. 

Increased productivity 

A 2019 Deloitte survey revealed that 78% of users have reported improvements in productivity since using cloud services. This is largely due to the reduced paperwork and increased automation of cloud accounting software. 

Traditional accounting processes involved dealing with messy paperwork, manual data-entry and financial admin that eats into business time. With an online accounting system, you can significantly reduce your reliance on paperwork, as well as automate many repetitive admin tasks. Great for the environment, and great for your business’ productivity. 

Time to Make the Switch? 

I’m sure you’re beginning to see the benefits of cloud accounting software. If you’re currently using a desktop-based program and are looking to move online, get in touch with us at National Accounts. 

Call 8166 6705 to or email info@nationalaccounts.com.au to see how we can help you make the switch.

Mike Wilczynski

I am an unusual Chartered Accountant. That is, I have a passion for helping clients achieve the best outcomes. Strangely (for an accountant) I’m an excellent communicator, highly organised and work hands-on with clients, I love helping generate wealth and streamline their processes. Being a results orientated person I enjoy incorporating new technologies into businesses to increase efficiencies and harness opportunities for my clients in this ever-changing world of finance.

How To Claim Tax Back On Work Expenses

The time’s approaching to lodge your tax return. Have you started thinking of any work-related expenses you paid this last financial year?

You may be able to claim some expenses as tax deductions and reduce your taxable income. Which means more money back in your pocket. Here at National Accounts, that’s something we love to see for our clients.

If you’re planning on claiming some of your work expenses back this year, here are some things you should know.

How do tax deductions work? 

Most people are aware that tax deductions can help increase your tax refund. But not everyone knows exactly how that works. 

Claiming a tax deduction doesn’t mean you receive that entire amount back from the Australian Tax Office (ATO) when you lodge your tax return. 

Instead, the money gets deducted from your assessable income. So the total amount of income you pay tax on is reduced. 

How to claim the most back on tax 

You are entitled to claim deductions for some expenses incurred while working. These are known as work-related deductions. 

To claim a work-related deduction, you must have a record to prove the expense and it must be related directly to your job. You must also have spent the money yourself and not received a reimbursement for the cost.

But that doesn’t mean that anything you spend at work is claimable. It’s important to understand which deductions you can claim, and which you can not.

Tax deductions for work-related expenses

Travel and vehicle expenses 

If you use your car for work-related activities such as delivering stock or attending multiple workplace locations, then you are entitled to claim the travel expenses that relate to those work-related activities. 

You can also claim accommodation expenses if you’re required to travel for work.

But driving to and from work in your car is not a claimable expense. Nor are minor tasks you do on the way to work, traveling home after overtime, or attending security call-outs at night. 

Clothing and laundry expenses 

Clothing that is specific to your occupation is considered a work-related expense and therefore claimable. For example, if you are required to wear a uniform at work that has your company’s logo on it, or if you need protective clothing and footwear in your occupation.

However, you cannot claim the clothes you buy to wear to work. Non-compulsory work uniforms may not be claimable either, so make sure you check your employer’s dress policy to find out if your uniform is compulsory. If it is, the ATO will view it as a work-related expense and you may be able to claim both its purchase and ongoing laundering costs. 

Work from home deductions

This last year has certainly seen many more people work from home than usual due to the COVID-19 pandemic. If you have worked from home, there are certain home office expenses you may be able to claim. 

These include – 

• Internet and mobile phone use
• Stationery, printer ink and other consumables
• Equipment such as computers, furniture, phones and printers

Tools and equipment 

If you require tools for work purposes, you can claim a deduction for up to 100% of the cost depending on their ratio of work vs private use. Generally, you can claim an immediate deduction for items that cost $300 or less.

For items that cost over $300 or form part of a set, you can claim a deduction for their decline in value over time, and you can also claim the cost of insuring and repairing them also. 

Tax preparation expenses  

That’s right, professional fees you pay to an accountant to prepare your tax is actually claimable on your next tax return. You can also declare your travel costs for getting to and from your tax appointment with a registered accountant also. 

The ATO wants you to get it right, and so do we! So they make it easy for you to have your tax done by a professional. The way we see it, getting your tax done by an accountant instead of doing it yourself (and potentially making a costly mistake) is a no-brainer.

Where to get specialist advice 

Nobody likes paying more tax than they have to, which is why it’s important to make sure you’re not missing out on any deductions at tax time. 

At National Accounts, our tax accountants can help you work out what deductions you can make, and which calculation methods are going to work more in your favor when reporting to the ATO. 

Call us on 8166 6705 to or email info@nationalaccounts.com.au to see how we can help you make the most of your tax return.

Mike Wilczynski

I am an unusual Chartered Accountant. That is, I have a passion for helping clients achieve the best outcomes. Strangely (for an accountant) I’m an excellent communicator, highly organised and work hands-on with clients, I love helping generate wealth and streamline their processes. Being a results orientated person I enjoy incorporating new technologies into businesses to increase efficiencies and harness opportunities for my clients in this ever-changing world of finance.

Are Charity Donations Tax Deductible?

Most Australians have one or two charities that they feel passionate about. On the whole, we’re pretty generous when it comes to giving too – over 80% of Australians give to charity every year. 

Whether your charity is a grass-roots community initiative, an issue that’s touched you or your family, or a cause that aligns with your personal values, it feels good to contribute. 

But along with the satisfaction of knowing you’re making a small difference, donating to charity is a great way to boost your tax return.

That being said, not all donations are claimable. Here’s what you need to know to correctly claim tax donations in your tax return.

Is giving to charity tax deductible?

As a general rule, a tax-deductible donation must meet three criteria:

1. Made to an organisation that is registered with the ATO as a deductible gift recipient (DGR)
2. Be money or property including financial assets
3. Be of $2 or more

To be classified as a deductible gift recipient organisation, charities must be not-for-profit organisations that meet specific definitions outlined by the ATO. 

You can find out if a charity is a DGR by searching the Australian Business Register. 

Just look up the name of the charity you want to donate to. On their details page, you’ll see a heading titled Deductible gift recipient status. If the charity is registered as a DGR, you’ll see its endorsement in this section. 

What can’t I claim at tax time?

If you receive anything of material value in exchange for your donation, then the donation is not tax-deductible. 

So if you receive a ticket, get chocolates or wine, or receive anything with material value, your donation can’t be claimed as a deduction. 

Think of it this way: the donation must truly be a gift. It must be a voluntary transfer of property or money where you don’t receive anything in return.

You also cannot claim any time spent doing volunteer work at tax time. Your donation must be of monetary value to be an eligible deduction.

Fundraising events and contributions 

If you make a cash contribution or attend a fundraising event such as a balls, fete, gala, dinner, or performance, you may still be eligible to claim a tax deduction. 

According to the ATO, the donation must be for a DGR fundraising event conducted in Australia. The benefit you receive must be:

• Of no more than $150 and, 
• No more than 20% of the value of the contribution.

For more information about event-related criteria, visit the ATO’s website here.

Are charity raffle tickets tax deductible?

When you purchase a book of raffle tickets from a charity, you are receiving something of material value in the exchange. So it cannot be claimed as a tax-deductible donation.

If you enter a competition and receive a single raffle ticket, that is not eligible as a tax-deduction either, because you have received something of value in return for your entry.

Are overseas charity deductions tax deductible?

The Overseas Aid Gift Deduction Scheme (OAGDS) enables Australian organisations to issue tax deductible receipts for donations to their overseas aid activities. 

But not all international charities meet the criteria for the scheme. The best way to check if your overseas charity is part of the OAGDS is to check their DGR status on the Australian Business Register. 

How do I claim my charity donation at tax time? 

Make sure you keep your receipts from any tax-deductible donations you make throughout the year, just like you would for any other tax-deductible purchase. DGRs will usually give you a receipt. If they don’t (they are not legally required to), you can always ask for one for your records. 

But if your charity donation was less than $10, you do not require receipt proof. You can claim the deduction by using your bank or credit card statement instead. 

Just make sure you remember to tell your accountant about it at tax time. Keep a note somewhere with your other tax-related documents.

The ATO advises to keep records of donations to DGRs for 5 years after lodging a claim in your tax return, as they can request proof within that time frame.

If you’re looking for expert advice for your next tax return, we’re here to help. Call us on 07 8166 6705 or email info@nationalaccounts.com.au to see how we can help you make the most out of your money at tax-time.

Mike Wilczynski

I am an unusual Chartered Accountant. That is, I have a passion for helping clients achieve the best outcomes. Strangely (for an accountant) I’m an excellent communicator, highly organised and work hands-on with clients, I love helping generate wealth and streamline their processes. Being a results orientated person I enjoy incorporating new technologies into businesses to increase efficiencies and harness opportunities for my clients in this ever-changing world of finance.

Legally Structuring Your Family’s Small Business

Family businesses make up around 70% of all businesses in Australia. Most family businesses start off organically. Someone has an idea for a new enterprise and starts a side project that takes off. Or perhaps a member of the family buys a store or food outlet, and the rest of the family pitches in. 

While this casual arrangement can be working just fine for now, it’s important to think about the future, and to plan for the growth and challenges that any business – including yours – will face.

Issues that you may not see coming can cause enormous conflict in the future, such as communication difficulties between family members, changes in leadership, family member compensation disagreements and more. 

Part of that due diligence is making sure your family’s small business is structured in a way that protects its longevity. 

Choosing the right business structure 

As with everything in life that’s built to last, your family business must stand on strong foundations. But what suits one type of business won’t necessarily work for another. 

Tax rates, liabilities, operating expenses, control of the entity, access to capital, succession planning, distribution of profits and tax planning are just a handful of the machinations available under each distinct business structure.

Let’s take a quick overview of the main types of structures for small businesses in Australia.

Company

A company is a separate legal entity. It has the same rights as a person. It can incur debt, sue and be sued. The company’s owners can limit their personal liability unless they give personal guarantees. 

A company has –

• A set tax rate.
• Limited personal liability for members.
• Separate assets.
• Its own bank account and money. 
• Wider access to capital.
• Multiple annual reporting requirements.
• Higher setup and ongoing administrative costs.

Company directors must also follow requirements involved in ASIC registration and must comply with legal obligations under the Corporations Act.

Partnership

A partnership is a structure involving 2 or more people who distribute income or losses amongst themselves. There are three main types of partnerships: general, limited, and incorporated. The main difference between them is that each has different levels of liability exposure in certain scenarios.   

Partnerships have – 

• Less setup costs than companies.
• Minimal reporting requirements.
• Shared control and management. 
• Unlimited liability for all partners.
• No superannuation obligations (partners are responsible for their own arrangements).
• No income tax on its income (partners pay tax on their share of the net income they receive.

Trust

A trust is a legal structure with the purpose of holding assets for the benefit of others (beneficiaries). Trustees can be either a person or a company.

Trusts have – 

• A Trustee responsible for everything in the trust.
• Stronger asset protection benefits than partnerships.
• A formal trust deed that outlines how it operates.
• Yearly required administrative tasks.
• Flexibility for tax purposes.
• More complicated setup requirements.

Criteria to consider 

As you can see from the above, there are different pros and cons to each structure. Finding out which suits your business best requires some serious consideration, and it’s best to get expert advice to help assist your decision. 

Because with less than 10% of family businesses making it to the 3rd generation, it’s clear that the assumption that the family can work things out as they go along is fatally flawed.

The most important criteria to consider when choosing the right legal structure for your family business fall around asset protection, the number of family members involved (and at what level of control), and tax planning.

Where to get further advice 

At National Accounts, we understand that every family is different. We provide tailored advice to establish and operate your family business’ structure to grow and preserve your wealth.

To discuss your family office needs, call us on 8166 6705 or email info@nationalaccounts.com.au and set up an appointment with one of our family office specialists.

Mike Wilczynski

I am an unusual Chartered Accountant. That is, I have a passion for helping clients achieve the best outcomes. Strangely (for an accountant) I’m an excellent communicator, highly organised and work hands-on with clients, I love helping generate wealth and streamline their processes. Being a results orientated person I enjoy incorporating new technologies into businesses to increase efficiencies and harness opportunities for my clients in this ever-changing world of finance.

How to Avoid Capital Gains Tax on Your Investment Property 

Selling property can mean making a profit if you manage to sell for more than your purchase price. But, profits can trigger tax obligations. In this blog, we share our top tips on how to minimise or avoid capital gains tax on your investment property.

What is capital gains tax and how much is it?

Capital gains tax is a tax liability triggered by a realised capital gain on the sale of an asset. Generally speaking, capital gains tax is paid at your marginal tax rate, so the amount you pay will be dependent on your other income from the relevant tax year. 

How to reduce or avoid capital gains tax:

Home owner

To be clear, capital gains tax on property is only charged on capital gains from the sale of investment properties. If the property you’re selling is your principal place of residence (PPR), you won’t pay a cent in capital gains tax. If you’ve lived in the property as your PPR and rented it as an investment property at some point as well, this can make things more complicated. Speak to your accountant about how best to approach these types of capital gains.

Tax planning

Since your capital gains tax liability is paid at your marginal rate, you can avoid or reduce capital gains tax by selling your investment property during a low income year. An experienced accountant can help you leverage this type of tax planning among other strategies, to find the most favourable tax environment.

Wait for a year

A key factor in capital gains tax calculations is how long the asset has been held for. If you own the property for more than 12 months, you may be eligible for a 50% discount on the capital gains liability. 

Offset capital losses

Capital losses can be used to offset capital gains, so if you anticipate triggering a capital gains event, consider planning to realise that capital gain in the same income year as a capital loss, to minimise your overall capital gains liability. Your accountant will be able to advise how best to approach capital gains and losses for the most favourable tax outcome.

Self managed superfund

An interesting way to minimise or avoid capital gains tax on an investment property is through a self managed superfund. Owning investment properties within an SMSF carries a suite of tax benefits, many of which apply to capital gains.

For SMSFs in the accumulation phase, a capital gain from an investment property would be taxed at the flat rate of 15%, as it’s treated the same as all other income within the fund. However, the 12 month ownership rule applies in the same way as non-SMSF-owned assets. If the fund holds the property for more than 12 months, a discount of one third is applied to the tax liability – meaning only 10% capital gains tax is paid. Compared with a marginal rate of up to 45% outside of an SMSF environment, this method can provide substantial savings.

For SMSFs in the retirement phase, however, all income is tax free, meaning realised capital gains on investment properties are not liable for capital gains tax.

Need support from accountants who understand how to help you avoid capital gains tax on your investment property? Contact National Accounts today.

Mike Wilczynski

I am an unusual Chartered Accountant. That is, I have a passion for helping clients achieve the best outcomes. Strangely (for an accountant) I’m an excellent communicator, highly organised and work hands-on with clients, I love helping generate wealth and streamline their processes. Being a results orientated person I enjoy incorporating new technologies into businesses to increase efficiencies and harness opportunities for my clients in this ever-changing world of finance.

How to Plan for the Next Financial Year

A new financial year is an opportunity for individuals and businesses to focus on their tax planning efforts. The better you plan, the easier it is at tax time – for you, and your accountant.

The tax planning process

Tax planning differs from standard tax compliance. While tax compliance involves on lodging your tax return in accordance with ATO requirements and maximising your tax return by making appropriate deductions, tax planning leverages legal strategies to make structured savings. At National Accounts, we use a multifaceted approach to help you reduce reportable income, increase deductions and take advantage of available tax breaks and credits.

Tax Strategies

Where standard tax returns are reactive and focus on the financial year passed, tax planning takes a proactive approach to your tax affairs. By utilising legal tax strategies, we organise your finances in a way that’s most favourable from a tax perspective. These strategies include:

• Postponing income or bringing forward income into the more favourable tax year
• Reviewing debtors and writing off debts
• Paying expenses up front, or deliberately deferring them
• Shifting timings of superannuation contributions 
• Distribution of assets between spouses
• Small business restructures
• Sourcing CGT exemptions or reductions

Working with an accountant to effectively shift income and expenses into the most tax efficient structure can save you thousands in tax you’d have otherwise been liable for. A skilled accountant can research several available tax strategies to deliver the best results for you.

Deductible expenses and losses

The first step to effective year-round tax planning is to keep on top of deductible expenses and losses. These form the core of your tax planning strategy and can work to minimise your tax liability by reducing your taxable income. Taking advantage of the instant asset write off facility can allow you to invest in equipment to help your business grow, and reduce your tax liability at the same time. 

Tax deductible losses can also be creatively used to minimise your tax bill. Your business structure will dictate how you can use losses to reduce your liabilities, but in many cases carrying forward a tax-deductible loss from a previous income year triggers a greater tax benefit.

Super contributions

Super contributions are an excellent way to minimise your tax liability, as you’re able to allocate up to $25,000 in deductible contributions to your superfund each year. This means reducing your real time tax liability and increasing your retirement savings in the process. There may also be opportunities to make co-contributions to a spouse’s superfund to reduce tax liabilities and make the most of contribution caps.

Understanding contribution caps, concessional and non-concessional contributions and how this works in tandem with other tax strategies can make all the difference at tax time.

Self Managed Superannuation Fund

SMSF members must pay extra attention to tax planning. SMSFs carry a suite of tax benefits when managed effectively, and ensuring you’re on top of all the available tools can be key to your future retirement wealth creation. For expert advice on tax planning for the 20/21 year, reach out to the talented team at National Accounts. We specialise in tax planning for family businesses, SMSFs, sole traders, partnerships, individuals and companies.

Mike Wilczynski

I am an unusual Chartered Accountant. That is, I have a passion for helping clients achieve the best outcomes. Strangely (for an accountant) I’m an excellent communicator, highly organised and work hands-on with clients, I love helping generate wealth and streamline their processes. Being a results orientated person I enjoy incorporating new technologies into businesses to increase efficiencies and harness opportunities for my clients in this ever-changing world of finance.

Working from home tax deductions explained

The rise of remote working has seen more and more employees switch to working from home. For many Aussie tax payers, this opens up an entire new realm of home office tax deductions. At National Accounts, we’re your trusted tax specialists, here to ensure you’re not paying more tax than you need to. We’ve rounded up all the tax deductions you can claim for working from home in the 19/20

Home office equipment deduction

Working from home often requires you to have an office set up, and that can be costly. From office chairs to laptops and printers, you’re entitled to deduct a portion of your costs. You can claim the full amount of these items if they’re under $300, or the decline in value on items over $300.

Home office utilities deduction

You’re also eligible to claim a portion of the utilities (lighting, heating, cooling) used while working from home. You can either claim these expenses using the fixed cost method (52c per hour for the 19/20 tax year), or you can calculate your actual expenses using the actual cost method.

 For the fixed cost method, you’ll need to keep a record of the hours you’ve worked from home throughout the year, or a diary of a four-week representative period of your working pattern.

 For the actual cost method, you’ll need to work out the actual cost per hour worked and the number of units used for heating, cooling and lighting.

Phone and internet work from home deduction

Employees who work from home can also claim a portion of their phone and internet costs, providing you have paid for them yourself and have reasonable evidence to substantiate their claim.

For claims over $50 in total, you’ll need to reasonably establish the percentage of your phone and internet costs that were for work and personal use. You may then deduct the work related percentage from each bill, ensuring you retain records to back up your claims.

Work from home occupancy deductions

Generally, employees are not eligible to claim a portion of their rent or mortgage expenses for their workspace, except in either of the two scenarios:

–   no other place of work is provided by your employer and you are required to dedicate a space to that employer’s business

–   the space in the home is of a business nature and is not suitable for domestic use

Working from home tax deductions as a result of COVID-19

Employees who are temporarily working from home as a result of the COVID-19 pandemic have the option to use the new shortcut method of deducting 80c per hour they work at home, to cover all their working from home expenses.

If you’re working from home due to COVID-19, you can choose the above-mentioned shortcut method, or you can choose to use the standard fixed costs or actual cost methods available all year round.

The 19/20 tax year is set to be one of the most complex years for tax returns, with more employees than ever claiming home office tax deductions. At National Accounts, we’re committed to supporting you through your tax return, ensuring every expense you incurred is accurately accounted for. Reach out today for assistance filing your 2020 tax return and claiming those all important working from home tax deductions.

Mike Wilczynski

I am an unusual Chartered Accountant. That is, I have a passion for helping clients achieve the best outcomes. Strangely (for an accountant) I’m an excellent communicator, highly organised and work hands-on with clients, I love helping generate wealth and streamline their processes. Being a results orientated person I enjoy incorporating new technologies into businesses to increase efficiencies and harness opportunities for my clients in this ever-changing world of finance.

Generally speaking, superannuation in Australia must not be accessed until you reach your applicable preservation age and retire from the workforce. That said, there are certain circumstances that permit you to access funds from your superannuation early. In this guide, we’re unpacking the pros and cons of accessing your superannuation early, and what the implications may be if you choose to do so.

When can you access your superannuation early?

There are certain instances in which you are permitted to access your superannuation early. These include compassionate grounds, financial hardship, terminal illness and incapacity. If you are not terminally ill or out of work due to disability, early access to your superannuation will likely only be granted if it prevents the sale of your home or other debt enforcement action on unpaid bills.

New legislation in 2020 also permits eligible applicants to release up to $20,000 of their superannuation over the next two years if their income has been impacted by the COVID-19 pandemic. You’re eligible if you’ve been made redundant, your employment income has been cut by more than 20%, or you’re a sole trader who has suffered losses in turnover of at least 20%.

What are the disadvantages of accessing your superannuation early?

Accessing your superannuation early might sound like an easy way to access money without going into debt. While true, there are some significant downsides to doing so. Consider the impact that the funds from your superannuation would have on your circumstances, and consider whether it’s worth sacrificing potential compounding returns by leaving it in your super.

Your superannuation is invested with long term returns in mind, so while you may withdraw $10,000 now, you could be losing out on much more had you left that money to continue growing in your super fund.

This is particularly important if you’re accessing your super fund to pay mortgage arrears or other debts. If the amount you access can’t fully pay off the debt, you may still end up in danger of having your home repossessed or defaulting on debt repayments – but you’ll still have missed out on the potential returns from your superfund. In addition, funds within your superannuation are protected from creditors. If you withdraw it, you lose this protection.

Accessing your superannuation early can also mean paying higher rates of tax, plus fees from your superfund provider.

What are the advantages of accessing your superannuation early?

Accessing your superannuation early may relieve extreme financial stressors of debt, medical expenses, funeral costs or legal costs. Withdrawing from your superfund would allow you to pay these bills without taking out additional credit.

Withdrawing your superannuation early can also allow you to enjoy time with friends and family if you have been diagnosed with a terminal illness, or help with the financial aspects of temporary or permanent incapacitation.

Accessing your superannuation early due to financial hardship

The main advantage of accessing your superannuation early is to combat financial hardship. If you have exhausted all other options for paying your creditors and are experiencing emotional stressors relating to your bills, accessing your superannuation early can provide relief – but only if it solves the problem entirely.

If the amount you can withdraw from your superfund does not cover the entire debt, you’re simply prolonging eventual debt enforcement action. This leaves you with less in your superfund for retirement and/or another incident of financial hardship.

 It’s important that you weigh up the short term benefit and the long term disadvantages of accessing your superannuation early due to financial hardship.

Mike Wilczynski

I am an unusual Chartered Accountant. That is, I have a passion for helping clients achieve the best outcomes. Strangely (for an accountant) I’m an excellent communicator, highly organised and work hands-on with clients, I love helping generate wealth and streamline their processes. Being a results orientated person I enjoy incorporating new technologies into businesses to increase efficiencies and harness opportunities for my clients in this ever-changing world of finance.