Tag Archives: education

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.

Saving for the Kids’ Education

Preparing for higher education

Like most parents, you want your children to have the best education possible, yet school and university expenses and fees are undeniably costly. The money you spend on your kids’ education could be one of your family’s biggest expenses.  Depending on where you’re based, it may be right up there with your Mortgage repayments.

Not that many of us begrudge the spend, viewing it more of an investment in our children’s futures.

Some will need to decide whether 12 years of formal schooling will be undertaken in the private space or whether just the high school years will be funded.  Others are also happy to help with University costs and some allow Fee Help (formerly known as HECS) to pick up that tab.  Whatever you choose, there’s costs attached and it’s best to be prepared.

Once you’ve worked out your family’s preference, starting to save early will help your children have a high-quality learning experience.

It pays to do your homework.  Research what schools in your area charge each term so you have an understanding of what is required.  Will you need to move to be in the catchment area of your preferred school?  Do you know other parents or students of the school you can ask for testimonials about their experience there?  Do you need to register your child years in advance to get into your preferred school?  Knowing your costs early will give you greater time to save and help avoid disappointment.

The decision to send your children to public or private schools and then to university will determine just how much you need to put aside to start saving.  Despite your wishes, it’s also hard to know whether your children will want to go on to University until they’re some way into their academic career and begin to form some idea about what they’d like to do for a living.  Will a gap year needed to figured into the equation with money for travel?  Or will they fund that by working a part-time job from when they’re able.

What will you need?

As an example… if you send two children to private high school for six years each, which costs around $20,000 a year for each child, by the time they graduate you’ll have spent $240,000 on school fees. And that doesn’t take into account any extras like school uniforms, textbooks, trips and excursions, tutoring, extra-curricular activities, sporting clinics and the like.  This could see costs closer to $275,000 by the time they’re through.

If you only wish to save only for high-school years, you’ll have around 11 to 12 years to save for each child.  If the figures seem out of reach, you may need to rethink what you have to put aside, or review the schools your child will attend.

Public schools are much cheaper but there’s still no such thing as ‘free education.  There are extra fees for textbooks, uniforms, trips, stationery and school camps to pay for. These can easily add up around $1,000 per annum.

Trade Colleges are dearer than public schooling but for those looking to enter trade’s or take over dad’s business, these can be a great option for later high school years.  Often they’re around $4 – $7,000 and only two years is required.

The cost of going to university or college can also vary. If your child is eligible for HECS-HELP (a government loan available to tertiary students) they can choose to defer payment of university fees until they’re earning a living.  Entering the work force with large student loans may not be ideal, but in many cases is unavoidable.

Even if you (or they) aren’t paying upfront tuition fees, there’s still books, textbooks and materials, union and sports fees, lunches, accommodation and transport costs. Contact the university or college and find out how much each of these things will cost each semester, so you have an idea of how much money you will need to save.  And if you’re thinking ahead, don’t forget to allow for inflation too.

The earlier you start saving for your children’s education, the better. Education costs are usually a long-term goal that can take more than 5 years to achieve so stashing early is your best bet.

Then, once you’ve got a ballpark figure in mind to reach for, work out where you’ll put that money.  Are you happy with high interest, web based savings accounts and term deposits or want to invest in education funds or bonds for the longer term?  With interest rates at historical lows, it’s hard to find good returns on conservative styles of investments.

If there’s a top tip to getting set for education costs, it would be to research, plan, track and manage your savings goals on the go.  And be sure to review on at least a half yearly basis to make sure you’re on target.

“I wonder what are the poor people doing?”

If you’ve ever made that throw away comment whilst floating around a resort pool with a cocktail waiting for you on the side… I can now give you an answer…

For a complete change of pace, we headed to Majete 5.  A new community for The Hunger Project bordering a game reserve in southern Malawi (and yes, it’s the 5th surrounding the reserve.)

This area has been working with The Hunger Project for only a short while on their mindset change, and have just had their first Vision, Commitment, Action (VCA) workshop.  Their communities surround a reserve for tourists, now hosting the Big 5 and was once the source of their food and income.  Now, relocated on the outside of the fence, life is harder than ever before.

This means that what we’re seeing is pretty much real Malawi and the lives people lead faced with chronic, persistent hunger.  Many who are fortunate, eat twice at day.  At the moment, there is no Epicentre building, and the work has just begun.  They are skeptical that any real changes can be made in their lives, resigned to the lives they lead and yet hopeful that change can be made by partnering the THP.

We witnessed history in the making during the morning, when locals expressed their hesitance and reluctance to engage, believing that life had always been ‘this way’ and that it probably always would be.  They were also cautiously optimistic that maybe this time, real change could be made, but hardly convinced.   And before our eyes, after a rousing talk by the THP Director of Malawi Rolands Kaoatcha and THP employee Grace shared their passion, changed their minds, so hopeful for their children, that change was indeed possible.  It made us reflect later on how much our own limiting beliefs keep us imprisoned to the ideas we ‘choose’ to partner with.

Maternal and infant health is a huge issue in the area, with women in labour having to walk for 27kms (around 7 hours+) to the nearest health facility to give birth.  Many are too tired to make the full journey and give birth along the way.  Any complications mean possible death for the mother, infant or both.  To say the tears were flowing on hearing their stories is the understatement of the trip so far.  Knowing that I would have died trying to have my daughter without medical assistance made the stories more poignant for me and we were moved to tears with one man begging for a health service and ambulance for their women during our visit.

We were soon divided into four groups and braved epic Malawian heat as we were each welcomed into the homes for four local families who shared their personal stories with us.  One family married their daughter off at 12 (apparently she was willing) so that the dowry could feed the remaining family for the rest of ‘the hungry season.’  Others shared their stories of love and loss, of saving 10 years for iron sheets for their roofs and their struggle to feed their families at least twice per day.

To not be moved by such every day battles, and put our own ‘first world problems’ into stark perspective, we’d have been heartless indeed to have not been touched.

Malaria is still a huge issue, and the Majete Malaria Project is working in tandem with THP to improve the lives of those in the villages.

Despite the confrontational day we had, we too were optimistic about their future based on the Epicentre we have seen reach self-reliance and knowing that the work ahead can make positive and real change in their lives.

Their vision that their children may one day end up as President, or even doctors or nurses is more possible right now they could ever believe.

My question for myself as I settle in to bed with a full belly tonight is, as ever, “what’s holding me back?”

Build Your Confidence Around Money

Most of us have some insecurities… it could be about how we look, how to act in certain circumstances,  or where to invest.

Usually when we don’t understand something, like why people act a certain way, how to put a great meal together or direct shares, superannuation, our mortgage, taxes or insurance, we can also feel insecure.

People who are good with money often use a particular trait to get past the insecurity… they ask for help.  Understand that you don’t know what you don’t know… and ask an expert.

No shame in that!  All of us excel in certain areas, and just aren’t that hot in others… or even interesting in becoming so!

Do you have a friend who keeps their finger on the pulse with finances, studied accounting or has a finance degree?  Or someone who just really has it together financially with low debt and good income producing assets?  And I don’t mean the cabbie with the hot tip for the races!

Not everyone wants to know, or needs to know how managed funds work, the intricacies of Self-Managed Superannuation or the tax advantages of the Transition to Retirement Strategy.  No shame in that!

So, what do you try and conceal about money that you feel you should know?  Are there areas that you’d like to know more about?  Do you know someone who could help you with this? And you then feel you’d make more informed decisions? Or are you happy ‘outsourcing’ to the professionals?  Often the best option of all!

Build up your own confidence around money with education – read some books, take some online courses or ask someone who’s pretty savvy how they manage.

Education is a great healer for all insecurities!  Try it today.