Category Archives: Australia

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.

Punch and Judy do Super Splitting

This one is for our Aussie readers and a great strategy for some couples to help manage their retirement savings.  If you’re an international reader, does your government offer something similar?  I’d love to hear how it’s done in your country.

A spouse contribution split can help reduce a member’s total superannuation (retirement savings) balance below a trigger point or, when used as an ongoing annual strategy, can help achieve a measure of account equalisation between spouses.  It can also be helpful to reduce a super balance where one spouse is somewhat older than another.

Firstly, to be eligible, the receiving spouse must be under 65 and, if over preservation age, not retired. (Where the receiving spouse turns 65 during the year of the split, action will need to take place before their birthday and is paid as a rollover super benefit.)

Too much jargon right?   So what does it look like?

Punch and Judy are married.  Punch is now the sole breadwinner as Judy wants to stay home for a couple of years while The Baby is still cute.  She’s not earning and her Super retirement savings will be impacted.

Punch is on a good wicket and gets a hefty amount paid into his Super fund by his employer.  Because Judy is amazing, and doing a brilliant job with their kid, Punch wants to make sure she’s not disadvantaged and chooses to split his super with her.

Punch has a sufficient account balance and as his boss has put in a $25,000 contribution, he can pass over up to 85% or $21,250 to Judy’s fund.  Happy wife, happy life!

Punch is a good partner, be like Punch… (ok, he’s usually a tosser, but this time he’s nice!)

Contributions splitting does not reduce the contributions originally made for the member for reporting and contribution caps purposes.

If you think Super Splitting could be beneficial for your family, it’s worth chatting with an adviser to find out more to find out the tips and traps and whether it’s right for you.

The Federal Budget for Accumulators

Are you an Accumulator?

That is someone who is still stashing their wealth prior to retirement?  Chances are, you may have kids, debt and be pretty time poor!

So what did the Federal Budget 2019 include for you?

We’ve summarised the key takeouts so you can understand the tax cuts, social security and superannuation issues that may impact you.

It’s only two pages tops, so if you’d like to know more, check it out here:

Federal_Budget_2019_Accumulators.

Look for help to get into the housing market

Governments across the country are offering incentives for first-home buyers. You just have to know where to look.

Buying your own home is the largest purchase most people will make in their lives.

However, a long run of low interest rates has fuelled spectacular dwelling price growth, record housing debt and phenomenal asset values, particularly in Sydney and Melbourne. According to the Reserve Bank of Australia, housing prices nationally have increased 7.25 per cent a year, on average, over the past 30 years.

In its Perceptions of Housing Affordability Report 2017, financial analysis and advisory firm CoreLogic says it now takes 1.5 years of household income to save for a 20 per cent deposit on a dwelling compared with 0.8 years 15 years ago.

Nevertheless, there are government incentives to help prospective first-home buyers. Last year’s Federal Budget proposed allowing individuals to make voluntary contributions to their superannuation to save for a deposit.

Super contributions and earnings are taxed at 15%, rather than higher marginal rates. Contributions are limited to $30,000 per person in total and $15,000 per year and both members of a couple could take advantage of the scheme.

Currently, the NSW and Victorian governments are offer first-home buyers:

  • no stamp duty on all homes worth up to $650,000 in NSW and $600,000 in Victoria
  • stamp duty relief for homes worth up to $800,000 in NSW and $750,000 in Victoria
  • a $10,000 grant for builders of new homes worth up to $750,000 and purchasers of new homes worth up to $600,000 in NSW
  • no duty on lenders mortgage insurance in NSW

Most states have first-home buyer grants, and some are making it harder for foreign investors by increasing duties and land taxes and introducing other measures to reduce competition for first-home buyers.

SEEK ADVICE

There are many investment options that can help you build a deposit, but you don’t have to make financial decisions by yourself.

Chat with your Adviser today… or I’m more than happy to help!

The end of another Financial Year

It’s hard to believe we’ve just clocked the end of another financial year.  It really doesn’t seem that long ago we just completed our last round of tax returns!  I hope you managed to make the most of your deductions and income.

And it’s been a big year too for what was formerly known as the financial planning industry.  2016 is the year the Government began to view us as a profession… although, you may agree that that still needs a bit of work.

Now is the time where many advisers will have to choose whether or not they will earn the right to continue as planners.  The proper qualifications will be needed and recognised, ongoing training and accountability measures will be put into place, and all are aimed at protecting the consumer.  That’s a win, right?

Building consumer trust has always been the end game and following in it’s wake, better recognition and respect for professional planners.

We’ve also managed to have enshrined the terms Financial Planner and Financial Adviser which will make it easier for the public to find professionals to provide them with advice.  From 1 January, 2019, anyone claiming to be a financial planner without the qualifications to do so, will be breaking the law, so you’re less likely to end up in the wrong hands.  Another win!

So, we’re pretty sure you’ve had a big financial year, and we hope you’re set for an even more cracking year ahead.

It’s time to take a load off and enjoy the weekend.

Happy EOFY everyone!

 

How Budget 2017 may affect Small Businesses

The announcements in this update are proposals unless stated otherwise. These proposals need to successfully pass through Parliament before becoming law and may be subject to change during this process.

What’s in and what’s out!

• Small businesses with a turnover up to $10 million can write off expenditure up to $20,000 for a further year

• No changes to negative gearing or capital gains tax

• Depreciation deductions for plant and equipment on residential investment properties will be limited

• Accommodation and travel deductions for residential rental property will be disallowed

• An annual foreign worker levy of $1,200 or $1,800 will apply per worker per year on temporary work visas and a $3,000 or $5,000 one-off levy for those on a permanent skilled visa

• The Government will spend $75 billion in infrastructure funding and financing over the next 10 years

• A $472 million Regional Growth Fund will be established.

The main change for small businesses with aggregate annual turnover of less than $10 million was the extension of the ability to immediately deduct eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2018. Certain assets are not eligible, for example horticultural plants and in-house software. Assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools). From 1 July 2018, the thresholds for the immediate deduction of assets and the value of the pool will revert to $1,000. A major new levy on the five biggest banks with liabilities above $100 billion will raise $6.2 billion over the Budget forward estimates. It will not apply to additional Tier 1 capital and deposits of individuals, businesses and other entities protected by the Financial Claims Scheme. The Australian Competition and Consumer Commission will undertake a residential mortgage pricing inquiry until 30 June 2018 in conjunction with the levy.

Legislation to support a reduction in the company tax rate over 10 years starting on 1 July 2016 passed Parliament on 9 May 2017. The first companies to benefit were those with turnover of less than $10 million, which moved to the 27.5% rate on 1 July 2016. The tax rate for companies with annual turnover below $25 million will be 27.5% from 1 July 2017 and those with turnover of less than $50 million will be taxed at 27% from 1 July 2018. Legislation to support an increase in the tax offset for unincorporated small businesses over 10 years to 16% from 5% passed Parliament on 9 May 2017. This offset applies to the tax payable on the business income and it benefits unincorporated small businesses that do not receive a reduced company tax rate.

Housing and superannuation

Individuals will be able to make voluntary contributions to their superannuation accounts to help buy their first home from 1 July 2017. Generally, pre–tax contributions (personal deductible or salary sacrifice) of up to $15,000 per year and $30,000 in total can be made. First-home super saver scheme contributions must be made within the concessional contributions cap ($25,000 in 2017-18) and will be taxed at 15%. Contributions and deemed earnings can be withdrawn from 1 July 2018 and will be taxed at the member’s marginal rate less a 30% tax offset. Non-concessional contributions can also be made but will not benefit from the tax concessions apart from earnings being taxed at the concessional super rate of 15% and these will be tax-free when withdrawn.

Housing supply target

The States will be required to deliver on housing supply targets and reform their planning systems and a $1 billion National Housing Infrastructure Facility will aim to remove infrastructure impediments to developing new homes. In Melbourne, Defence Department land at Maribyrnong will be released for a new suburb that could cater for 6,000 new homes. A new National Housing Finance and Investment Corporation will be established by 1 July 2018, to provide long-term, low-cost finance for more affordable rental housing. States and Territories will be encouraged to transfer stock to the community housing sector and managed Investment trusts will be allowed to develop and own affordable housing. The incentive for investors will include a capital gains tax discount of 60%, and direct deduction of welfare payments from tenants.

There are no changes to negative gearing, but tougher rules on foreign investment in residential real estate remove the main residence capital gains tax exemption and tighten compliance. An annual levy of at least $5,000 will also apply to all future foreign-owned properties that are vacant for at least six months each year. As well, developers also won’t be allowed to sell more than 50% of new developments to foreign investors.

Education and health care

This Budget will invest $18.6 billion in extra schools funding over the next 10 years, in accordance with the Gonski needs-based standard. Funding for each student across all sectors will grow at an average of 4.1% a year. However, university fees will rise by $2,000 to $3,600 for a four-year course and students will have to start paying back their debt when they earn more than $42,000 from July next year, down from the current level of $55,000. A 2.5% efficiency dividend will be applied to universities for the next two years. In health care, the Medicare levy will increase on 1 July 2019 by 0.5% to 2.5% of taxable income to help fund the $22 billion National Disability Insurance Scheme (NDIS). The Treasurer says all Australians have a role to play in supporting the disability scheme, even if they aren’t directly affected. The Budget lifts the freeze on the indexation of the Medicare Benefits Schedule and reinstates bulk billing for diagnostic imaging and pathology services. Hospital funding will increase by an additional $2.8 billion over four years and an additional $115 million will be spent on mental health initiatives. Another $1.4 billion will be spent on health research over the next four years.

What’s next?

Most changes must be legislated and passed through Parliament before they apply. If you think you may be impacted by some of the Budget’s proposed changes, you should consider seeking professional advice. A financial adviser can give you a clear understanding of where you stand and how you can manage your cash flow, super and investments in light of proposed changes.

How Budget 2017 may affect families

The announcements in this update are proposals unless stated otherwise. These proposals need to successfully pass through Parliament before becoming law and may be subject to change during this process. 

  • The Medicare levy will increase by 0.5 per cent to 2.5 per cent from 1 July 2019
  • The Government will spend $37.3 billion on child care over four years
  • Additional education funding has been set at $18.6 billion over 10 years
  • University student fees will increase by 7.5 per cent by 2021
  • University graduates will start repaying their loans when they reach an income level of $42,000 a year, down from approximately $55,000
  • Family Tax Benefit Part A payments will not be indexed for two years
  • Doctors will be encouraged to prescribe generic drugs to save the Pharmaceutical Benefits Scheme $1.8 billion over five years
  • No changes to negative gearing

Overview

Medicare levy

In health care, the Medicare levy will increase on 1 July 2019 by 0.5 per cent to 2.5 per cent of taxable income to help fund the $22 billion National Disability Insurance Scheme. Treasurer Scott Morrison says all Australians need to support the disability scheme, even if they aren’t directly affected.

Child care

The Government will invest $37.3 billion in child care over four years to help about 1 million families, including those that need before and after school care for their children. A single, simplified, means-tested child care subsidy will provide more support for the families who need it the most from 2 July 2018.

The subsidy will introduce hourly rate caps and remove unnecessary regulation to allow providers to offer more flexible hours of care. The child care subsidy will be payable only to families with incomes below $350,000 per annum (in 2017-18 terms) from 2 July 2018. The upper income threshold of $350,000 per annum will be indexed annually by CPI from 1 July 2018.

A further $428 million will be provided to extend the National Partnership Agreement on Universal Access to early childhood education for the 2018 school year to allow access to a quality preschool education.

Schools funding

This Budget will invest $18.6 billion in extra schools funding over the next 10 years, in accordance with the Gonski needs-based standard. Funding for each student across all sectors will grow at an average of 4.1 per cent a year.

However, university fees will rise by $2,000 to $3,600 for a four-year course and students will have to start paying back their debt when they earn more than $42,000 from July next year, down from the current level of approximately $55,000. A 2.5 per cent efficiency dividend will be applied to universities for the next two years.

First-home buyers

First-home buyers will be able to use voluntary contributions to their existing superannuation funds to save for a house deposit. Contributions and earnings will be taxed at 15%, rather than marginal rates, and withdrawals will be taxed at their marginal rate, less 30% tax offset. Contributions will be limited to $30,000 per person in total and $15,000 per year. Both members of a couple can take advantage of the scheme. Non-concessional contributions can also be made but will not benefit from the tax concessions apart from earnings being taxed at 15%.

The States will be required to deliver on housing supply targets and reform their planning systems and a $1 billion National Housing Infrastructure Facility will aim to remove infrastructure impediments to developing new homes.

In Melbourne, Defence Department land at Maribyrnong will be released for a new suburb that could cater for 6,000 new homes. A new National Housing Finance and Investment Corporation will be established by July 1, 2018, to provide long-term, low-cost finance for more affordable rental housing.

States and Territories will be encouraged to transfer stock to the community housing sector and managed Investment trusts will be allowed to develop and own affordable housing. The incentive for investors will include a capital gains tax discount of 60 per cent, and direct deduction of rent from welfare payments from tenants.

Australians over the age of 65 will be able to make a non-concessional contribution of up to $300,000 each into their superannuation fund from the proceeds of the sale of their principal home from 1 July  2018.

Family Tax Benefits

The current Family Tax Benefit Part A payments will not be indexed for two years from 1 July 2017. Indexation will resume on 1 July 2019. A 30¢ in the dollar income test taper will apply under Method 1 for Family Tax Benefit Part A families with household incomes above the Higher Income Free Area (currently $94,316) from 1 July 2018. Entitlements under Family Tax Benefit Part A may be worked out using two income tests, with the one giving the highest rate applying. Method 1 sometimes produces a higher result for larger families.

 

What’s next?

Most changes must be legislated and passed through Parliament before they apply. If you think you may be impacted by some of the Budget’s proposed changes, you should consider seeking professional advice. A financial adviser can give you a clear understanding of where you stand and how you can manage your cash flow, super and investments in light of proposed changes.

 

If any of these proposals raise questions, concerns or potential opportunities for you, please speak with your financial adviser today. These opportunities apply to Australian consumers.