Boosting Super with the Work Test Exemption

If you’re a recent retiree and looking to increase your superannuation savings, here’s some good news!

The Australian Government is proposing to make it easier for recent retirees to save more super by allowing them to contribute for a year without having to show that they’ve been ‘gainfully employed’.

The former rules

Anyone below 65 can contribute to their super regardless of whether they work or not. But those aged between 65 and 74 need to meet the work test before they can make super contributions. To pass the test, they have to show that they’ve been gainfully employed for at least 40 hours over 30 consecutive days in the financial year they plan to contribute.

The government has already given members with a total super balance of less than $500,000 some flexibility to further grow their super. These individuals can carry forward any unused amount below the concessional contribution cap of $25,000 on a rolling basis for five years starting from 1 July 2018. They can use their unused cap amounts from 1 July 2019.  But people between 65 and 74 must still meet the work test before they can make these ‘catch‑up’ contributions.

The new measure

Now, to encourage this age group to save more for retirement, the government is proposing to give individuals who don’t meet the work test an extra year to beef up their super savings. From 1 July 2019, those aged between 65 and 74 with a super balance below $300,000 are able to make voluntary contributions in the first financial year that they don’t satisfy the work test requirement. Once eligible, they don’t have to remain under the $300,000 balance cap during the 12‑month period.

The annual concessional and non-concessional contributions caps will continue to apply, but members can access any unused concessional contributions cap amounts they have carried forward.

The government will assess total super balances at 30 June of the financial year in which members last met the work test.

Seek professional advice

If you’re considering contributing to your super under the proposed work test exemption, it may be wise to speak to your adviser to see how making additional super contributions may work to your advantage.

What a brilliant idea!

Did you know that it’s been almost 30 years since the superannuation guarantee was introduced in Australia, yet 40% of single women are retiring in poverty, and the fastest growing demographic of homelessness is the 55 year old woman?

In the financial services profession, there’s a couple of lovely ladies I know, who truly believe that it’s shameful a country as rich as ours has let its elderly women, after a lifetime of service and caring for others, go without enough money to care for themselves.  They’re also:

  • tired of hearing empty promises on policy change
  • overwhelmed by frightening statistics on super / gender equality
  • worried for our daughters’ futures.

So, they got to thinking!!  ‘What if we could monetise the $2.2 trillion p.a. of unpaid work performed by the 1.8 million women? What if we could create an income stream into super for the 76% of women who either don’t work or work part-time?’

Together, they’ve come up with the brilliant concept Super Rewards. 

Super Rewards is cash rewards, for women, for super.

Super Rewards is compatible with any super fund or SMSF. It’s free to join, and there are no upfront charges.  How beyond cool is that?

Each time you shop at the 120+ retailers on the Super Rewards platform, you earn money into your super. The more you shop, the more super you earn. So a percentage of what you earn, is going straight to your retirements savings, simply for doing what you may do best… SHOP!

There are some incredible brands on the platform, many of whom are Australia’s leading retailers, including Woolworths, The Iconic, Country Road, Apple, Booktopia, etc.  I had a bar fridge break down recently, so signed up and got shopping!

There are 6.7 million women in Australia aged 18-64 years old, and all of them would benefit from knowing about Super Rewards.  Together, they’re hoping to set generations of women free and improve their futures.  Together, they’re hoping to help women build their super the way it was originally intended: to live your best life, the way you choose, free of fear, doubt or financial worries.

And don’t you just love the tagline?

We are Super Rewards. Helping all women find their super power.

Check it out for yourself and see what you think!! I’d love to hear your thoughts.

Four ways to teach kids healthy money habits

DO as I say, not as i DO!

Set a good example for your little ones, with just a few simple changes.

As a parent, I’m sure you try to ensure your children have the skills to make smart financial decisions.  You know, the things you wish your parents had told you about.  Maybe you’ll tell them about the importance of savings or the power of compounding interest! But did you know that you could be sending them negative money messages without even meaning to?

Here are four common ways you could teach your children healthy money habits.

1.     Reveal the magic behind digital money

Your children have likely seen you pay for hundreds of transactions without glimpsing cash changing hands. For smaller children, it can seem like money problems are solved with magic – just tap a plastic card and the goods are yours! This makes it vitally important to discuss the value of money with them. A good way to start is to explain how your earnings get deposited into your bank account and how you use this account to pay bills. For older children, consider showing them how taxes are deducted from your salary.  Helping them understand how long you need to work to cover the groceries could be of interest.  If you’re on $30 per hour, it could take 7 hours to feed your family.  That nearly a full day, just for food!

2.     Spend wisely

Frequently buying things on an impulse could send the message that it’s fine to spend without planning. Sticking to a budget is key to avoiding impulse-buying.

To set an effective budget, consider working with a professional financial adviser or even investing in an App. Your adviser may help develop a budget that factors in your income, expenses and financial obligations.  Staying on top of it daily with some assistance from your App can help keep you on track to train the kids and kick some goals.

3.     Teach them independence

It’s convenient in those early years to do everything for your children. Seriously, it’ll take much less time, but by giving them a chance to have their own money and decide how and where to spend it, they could learn powerful lessons about budgeting.

For older, even adult children, always offering them financial help can create a cycle of dependency. Letting the wee dears make their own money decisions could just help them develop financial responsibility and realise that the Bank of Mum or Dad isn’t always going to be open for business.

4.     Include them in budgeting

Many parents keep household financial planning and budgeting to themselves, if they even do it.  While you don’t have to fully involve your children in managing all your family’s finances, giving them a role to play, such as getting them to do grocery shopping using a set budget, can teach them lessons about money.

If your children are old enough to earn some income or pocket money, why not get them to pitch in to help achieve a family goal or save for their own spending money for the next holidays.

Use your influence positively

You can strongly influence your children in relation to money, so it’s important to pass on smart money management skills.

If you don’t know where to start, consider reaching out to this  financial adviser to help you stay on top of your finances through proper planning and budgeting.  I may even have some tools to share, so feel free to ask!

Cash flow makes or breaks your business, so safeguard it!

According to a recent survey by research firm East & Partners for lender Scottish Pacific, nearly 80% of owners of small and medium enterprises said cash flow issues caused them the most sleepless nights.[1]

Which then begs the question, what might you do to improve your cash flow and sleep better at night?  Here are five tips you can take that can help!

1.   Build a cash reserve

We’ve often heard “Cash is King” but the truth is, it’s really Cash Flow!  Cash flow is the true lifeblood of any business. To ensure that it makes, not breaks, your business, it’s important to build a robust cash reserve. This may help you meet your financial obligations in difficult times and allow you to take on opportunities to grow your business.  Sometimes, that’s easier said than done, but worth working towards.

2.   Separate business & personal money

Keep business and personal expenses separate!  It makes it so much easier to understand your business’s cash position at any given point. It also ensures that you don’t use money meant for your business on personal expenses; like that holiday or your mortgage.

3.   Get paid on time

If your business hasn’t been actively pursuing unpaid invoices, you may want to make it a practice – and have a strategy – to regularly chase up payment. Finding ways to encourage prompt payment, such as offering a discount to early payers, can help.

And if that’s something that you find cringe-worthy – outsource it.  Ask your book keeper if they’ll make those calls you hate for you each week to stay on top of things.

4.   Control business costs

Controlling costs might help you to maintain a healthy cash flow. Experts suggest taking stock of your business expenses regularly to identify where you can cut costs without sacrificing growth. This may include reviewing your suppliers and negotiating better rates with them.  Review whether they’re items that you can’t avoid (like taxes) to items that you probably should do (like marketing) to the ones that you can go without (like sponsorship.)  Even if it’s just until things turn around.

5.   Protect your business

By taking out business expenses insurance and/or key person insurance, you may help ensure your business can meet its running costs if you or a key employee is too ill or injured to work. Both insurance plans provide a monthly benefit if you or a key person in your business become incapacitated.  Absolutely vital if there’s key people you just can’t do without!

Work with a professional

Your professional financial adviser tailors insurance plans to your business’s cash flow protection needs, safeguarding what you’ve worked so hard to build.  Is it time you had another look at your strategy?

Note

[1] Scottish Pacific and East & Partners, October 2018, ‘SMEs flag higher revenue growth, but prospects could be dampened by declining property market and cash flow issues,’ accessible at: https://www.scottishpacific.com/media-releases/smes-flag-higher-revenue-growth-but-prospects-could-be-dampened-by-declining-property-market-and-cash-flow-issues

Successful Investor Secrets

The investment world can change dramatically from one month to the next.

These secrets of successful investors never go out of style!

Successful investing can be one of your biggest allies in the quest for long-term financial security. Unfortunately, unsuccessful investing can leave you wishing you’d kept your money in the bank, or under the mattress!

So what are the secrets to making your investments achieve what you want them to?  Here are some of the tactics used by successful investors around the world.

1. Start with a plan

Smart investors don’t just look for ‘good’ investments. They look for investments that will help them achieve specific goals.

Are you interested in income or growth or a combination of both from your funds?

You may be seeking a return above that available on term deposits.  There are other investments such as shares and fixed income, which may generate higher returns than cash over the long term, however, they are usually more volatile too, so investors need to consider both the risk and return components of their portfolio.

2. Diversify

One of the main goals of investing may be to ensure you have a mix of assets that are likely to perform well at different times – helping you survive any downturn in a specific market or industry sector.

While many Australian investors are heavily exposed to Australian shares, a well-diversified portfolio will generally hold assets in each of the major asset classes (e.g. Australian and international shares, property, fixed income and cash)And can drill down further, across sectors and industry types.

Even if you want to stick with just one asset class and be a guru at that, diversification still helps.  e.g. Property: considering where you invest (location! location! location!) along with the type of property (land, residential, commercial or industrial) also can make a difference.

3. Watch costs

It’s easy to get fixated on the returns your investments can generate. But successful investors always keep track of, and seek to minimise, fees and taxes associated with owning them.

A ‘buy and hold’ strategy can help avoid transaction costs like brokerage, or buy and sell spreads from managed funds. It can also help you reduce capital gains tax, which generally decreases by 50% when you’ve held an asset for over 12 months.

4. Market Timing

Despite periods of significant volatility on a daily basis, over the long term, investments in assets such as Australian or International Shares have generated strong returns.

Holding when everything is going pear shaped is difficult, but you’re more likely to recover stronger then pulling out and trying to work out when to get back in.

5. Don’t panic!

When share markets retreat (which they inevitably do), smart investors don’t hit the panic button and sell long-term investments based on short term volatility – this is made easier by following Step 1 “Start with a Plan”.

Instead, if you continue to invest during a market downturn, you may be able to buy high-quality investments at a lower price than you could if you waited for markets to recover.

Following the GFC or Global Recession, when the stock market bottomed in early 2009, many investors sold out of equities and held large proportions of cash in their portfolios. The opportunity cost of this decision has meant that some investors have missed a significant rally over the past decade.

6. Protect your assets

Even a carefully constructed investment strategy can come unstuck if you need access to your money in an emergency.

A smart strategy is to ensure you still maintain a sizeable cash reserve (even if it’s offsetting your mortgage), and put in place appropriate risk mitigation insurance plans such as income, TPD and life insurance. Having appropriate insurances in place can help prevent the need for a ‘fire sale’ of your investments if you suffer a serious illness or accident.

Tip: Income protection typically replaces up to 75% of your income if you can’t work due to an illness or accident. 

Your Super is too Important to Ignore

Superannuation is the one thing you could do for your financial future this year, that could make a big difference to your retirement income. But how much do you really need?

That’s the million dollar, half a million dollar…? question.

Everyone’s needs are different.  Unexpected expenses just crop up, life gets busy and none of us have any clue how long we will actually be in retirement.

Of course, we’d like to think that the safety net of the age pension will still be around in years to come, but just how generous the country can afford to be with this payment, and who will be eligible, is also unknown as this may change year to year.  Sadly, none of us have a crystal ball, and we know it isn’t a lot!

So what exactly are some of the big expenses in retirement we need to budget for?

  • Healthcare
  • Aged Care
  • Food and Beverages
  • Utilities
  • Travel
  • Entertainment
  • Planned or unplanned expenses, i.e. a new car or home renovations

What major impacts could affect our superannuation?

  • How long you live
  • Your health
  • The rate of inflation
  • How much you earn on investments
  • Whether or not you have dependents – yes some retirees still have dependents!

It is wise to have a plan when it comes to your retirement income and a professional financial adviser can help you get a plan in place that is easy for you to manage now, and meets the needs of your ideal retirement.

If you want to start to get your super sorted this year, give me a call on 07 5593 0855.

A little bit of life, travel and money… according to Amanda Cassar