Helping you navigate this year’s Federal Budget

May 10th, 2017

Last night the Australian Government handed down its Federal Budget for 2017. It’s important that you take the time to understand what the Budget proposals mean – and how they might affect you personally.
According to Federal Treasurer Scott Morrison, this year’s Budget is founded on the principles of fairness, security and opportunity. Mr Morrison claims that the government’s proposed measures will raise almost $21 billion in revenue over the next four years, returning Australia’s budget to surplus by 2021.Here are some of the key Budget announcements. Note that each of these proposals will only become law if it is passed by Parliament.

Additional non-concessional cap for retiree downsizers
From 1 July 2018, people aged 65+ will be able to contribute up to $300,000 into super from the sale of their principal home, if they’ve owned their home for at least 10 years. The existing restrictions for contributions over age 65 won’t apply for these non-concessional contributions.
What this could mean for you
You may be able to contribute an additional $300,000 to super (or $600,000 for couples), over and above your existing concessional and non-concessional caps. However, if you or your partner receives the age pension, this could cause your entitlements to be reduced.

Super savings scheme for first home buyers
From 1 July 2017, individuals will be able to make extra voluntary super contributions of up to $15,000 a year beyond their employer’s Super Guarantee payments, up to a total of $30,000. These contributions will be taxed at 15% and can be withdrawn to go towards the deposit on a first home. Withdrawals will be allowed from 1 July 2018.
What this could mean for you
When you withdraw your extra contributions to pay for a deposit, they’ll be taxed at your marginal tax rate minus a 30% tax offset. While the tax concessions for these contributions may allow you to save a larger deposit, you won’t be able to access your money until retirement if you decide not to buy a home.

A 0.5% Medicare levy increase from 2019
From 1 July 2019, the Medicare levy will increase by half a percentage point from 2% to 2.5% of an individual’s taxable income. The Medicare levy low-income thresholds for singles, families, seniors and pensioners will increase from the 2016–17 financial year.
What this could mean for you
The increased levy may also result in increases to many tax rates linked to the top personal tax rate, including fringe benefits tax and excess non-concessional contributions tax. Certain lump sum super payments that attract the levy may also be impacted, such as disability benefits paid to people under preservation age.

Extension of the deductibility threshold for small businesses
The government will extend the existing accelerated depreciation allowance for small businesses by 12 months to 30 June 2018.
What this could mean for you
If your small business has aggregated annual turnover below $10 million, you’ll be able to immediately deduct the purchase of eligible assets costing less than $20,000 where they are first used or installed ready for use by 30 June 2018. After that date, the immediate deductibility threshold will revert back to $1,000.

New levy for major banks
A major bank levy will be introduced for authorised deposit-taking institutions (ADIs) with licensed entity liabilities of at least $100 billion (indexed to Gross Domestic Product (GDP)). The levy will equate to an annualised rate of 0.06% – for example, the levy on a bank deposit of $500,000 will be approximately $300 pa. Superannuation funds and insurance companies won’t be subject to the levy.
What this could mean for you
It’s unclear at this stage how the levy will be implemented, and what the impacts might be on clients/customers and shareholders.

Incentives for investment in affordable housing
From 1 January 2018, resident individuals who invest in qualifying affordable housing will be eligible for an increase in the capital gains tax (CGT) discount from 50% to 60%. This increased discount will also apply to eligible Managed Investment Trusts (MITs) as of 1 July 2017.
What this could mean for you
To qualify for the higher discount, your residential property must be rented to low-to-moderate income tenants at a discounted rate and be managed through a registered community housing provider. You also need to hold the investment for at least 3 years. If you invest in an MIT, you’ll be eligible for the 60% discount if the trust invests in affordable housing that is available to be rented for at least 10 years, and you hold the investment for at least 3 years.

Restrictions on deductions for residential property investments
From 1 July 2017, depreciation deductions for residential plant and equipment (e.g. dishwashers and ceiling fans) will be limited to investors who actually incur the outlay – not subsequent owners. Also from that date, investors will be unable to deduct travel expenses related to inspecting, maintaining or collecting rent for a residential rental property.
What this could mean for you
If you’re a subsequent investor in a property, the acquisition of existing plant and equipment will be reflected in the cost base for CGT purposes. Grandfathering applies to plant and equipment that forms part of a residential investment property as at 9 May 2017 and will continue to give rise to depreciation deductions under current rules. The new rule around travel expense deductions applies to all property investors, including SMSFs, family trusts and companies.

Tax changes for foreign tax residents and property owners
Foreign or temporary tax residents will no longer have access to the CGT main residence exemption on properties acquired after 7.30pm AEST on Budget night (9 May 2017). Also from Budget night, foreign owners of residential property that is not occupied or genuinely available on the rental market for at least six months per year will be subject to an annual levy of at least $5,000.
What this could mean for you
If you’re a foreign of temporary tax resident and you held an existing property before Budget night, the property will be grandfathered and you’ll be able to continue claiming the CGT main residence exemption until 30 June 2019. However, from 1 July 2017, the CGT withholding rate that applies to foreign tax residents will increase from 10% to 12.5%.

New thresholds for HELP debt repayments
From 1 July 2018, income thresholds for the repayment of HELP debts will be revised, along with repayment rates and the indexation of repayment thresholds.
What this could mean for you
A new minimum threshold of $42,000 will apply, with a 1% repayment rate. A maximum threshold of $119,882 will apply, with a 10% repayment rate. Currently, the maximum repayment threshold for the 2017–18 financial year is $103,766 with a repayment rate of 8%.

Reinstatement of Pensioner Concession Card entitlements
Pensioners who lost their Pensioner Concession Card entitlement due to the assets test changes on 1 January 2017 will have their card reinstated. Those who lost their entitlement were instead issued with both a Health Care Card and a Commonwealth Seniors Health Card. However these cards provided access to fewer concessions than the Pensioner Concession Card.
What this could mean for you
If your Pensioner Concession Card entitlement is reinstated, you’ll have access to a wider range of concessions than those available with the Health Care Card, such as subsidised hearing services. Your Pensioner Concession Card will be automatically reissued over time with an ongoing income and assets test exemption. You’ll also retain the Commonwealth Seniors Health Card, ensuring you continue to receive the Energy Supplement.

Increased pension residence requirements
An individual currently needs to have at least 10 years’ residence in Australia (at least 5 of which are continuous) to qualify for the age pension or disability support pension. From 1 July 2018, they’ll need to have at least 15 years’ residence in Australia or either a) 10 years’ continuous residence including 5 years during their working life, or b) 10 years’ continuous residence and not in receipt of an activity-tested income support payment for a cumulative period greater than 5 years.
What this could mean for you
This measure may impact you if you have less than 15 years’ residence in Australia or less than 5 years’ residence between age 16 and age pension age. However, existing exemptions will be maintained for humanitarian reasons or if you became unable to work while you were an Australian resident.

Other proposals
• A new Jobseeker Payment will replace 7 existing working age payments from 20 March 2020
• Job seekers and parents who receive working age income support will have increased activity test requirements from 20 September 2018
• The maximum length of the Liquid Assets Waiting Period will increase from 13 weeks to 26 weeks from 20 September 2018
• A one-off Energy Assistance Payment of $75 for single recipients and $125 for couples will be paid for those who qualify on 20 June 2017
• Family Tax Benefit rates will not be indexed for 2 years from 1 July 2017
• A new upper income threshold of $350,000 pa will apply to the child care subsidy from 1 July 2018.

Article provided by Colonial First State

Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at colonialfirststate.com.au or by calling us on 13 13 36. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

Supporting you through the changes
Depending on your circumstances, the Budget proposals could have an impact on your financial situation and your financial plans for the future. If you have any concerns, or would like to discuss your financial strategy, please don’t hesitate to get in touch with us on 08 93492700 or admin@activewealthmanagers.com.au to arrange an appointment.

 

Protecting the life (and people) you love

March 13th, 2017

With more Australians having children later in life, starting a second family and carrying significant levels of debt well into their 50s and 60s, life insurance has never been more important.

Life is full of unexpected twists and turns and you never quite know what is around the corner. Protecting your family against the loss of all the things you have worked hard for over the years is the cornerstone of a sensible strategy to defend your wealth and current lifestyle.

Although most people know this, being ‘underinsured’ – or holding insufficient life-related insurance cover – remains common across all age groups in Australia.

The underinsurance problem

Australians are famous for their laidback attitude and, unfortunately, that attitude often extends to taking out life insurance protection for their families. While research shows more than three-quarters of us understand the need for life related insurance, rating it as important or very important, only 52 per cent of those surveyed said they actually held some form of life insurance.i

Consulting firm Rice Warner has calculated that Australians should hold a total of $4,581 billion in life insurance to be considered adequately protected, but the actual figure held is only $1,811 billion.ii

Although the typical middle-income Australian family with two children needs an estimated $680,000 in life insurance cover to be considered adequately protected, Rice Warner found that the median level of life insurance held by these families is only $258,000.

Paying your bills and protecting your dreams

Without adequate life insurance protection, the financial burden arising from a serious illness, accident or death can cause severe financial hardship.

Such an event is not uncommon, with the Lifewise/NATSEM Underinsurance Report noting 18 families in Australia lose a working parent every day of the week. One in five families is affected by the death of a parent, a serious accident or an illness that renders a parent unable to work.iii

Increases in the number of second and blended families and ageing parents also mean many breadwinners now have more people than ever relying on them financially.

Life insurance protection is also essential for singles, as they often have fewer resources to fall back on to pay their debts and ongoing commitments such as rent and mortgage repayments if they become seriously ill or disabled.

Guarding your wealth

When it comes to developing a comprehensive strategy to protect your financial position, life insurance is a key component as it creates a safety net to protect your current lifestyle and the wealth you have accumulated.

Without adequate insurance protection, many families find themselves facing real financial hardship if the main or secondary income-earner, or the primary carer of the children, becomes sick or dies.

It’s important to look at your options in terms of life-related insurance as part of your financial goal setting. These products provide a highly effective way of protecting assets such as the family home, covering commitments such as credit card debts, paying large medical bills and avoiding being forced to sell off investments assets cheaply.

Life insurance benefits can be used in different ways depending on your personal circumstances and health, with the lump sum payment they provide easing the financial burden during what can be a very difficult time.

A tailored approach

For a complete wealth protection strategy, death cover is usually combined with other life-related insurance products such as critical illness and total and permanent disability (TPD) protection.

  • Life insurance pays a lump sum on your death or diagnosis of a terminal illness, 
  • Critical illness (or trauma) cover pays an agreed amount if you are diagnosed with a specified critical illness, such as cancer or heart disease,
  • TPD insurance provides you with a tax-free lump sum if you are permanently unable to work due to accident or illness.
    These life-related insurances are designed to provide protection against the most common adverse life events and provide you with peace of mind so that if the unexpected happens, you and your loved ones have some protection.

If you would like some advice on the right mix and amount of life insurance for your family and financial circumstances, don’t hesitate to give us a call.

i www.tal.com.au/about-us/media-centre/life-insurance-lacking-in-those-with-most-to-lose

ii http://ricewarner.com/wp-content/uploads/2015/10/INFOGRAPHIC-UnderinsuranceinAus2014.jpg

iii www.lifewise.org.au/downloads/file/aboutthelifewisecampaign/2010_0203_LifewiseNATSEMSummaryA4FINAL.pdf

General Advice Warning This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Michael J Berinson Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

New year, new start

March 13th, 2017

how to make New Year’s resolutions that stick

How many of last year’s New Year’s resolutions did you keep? If you can’t even remember them all a year later, let alone whether you stuck to them, you’re not alone. One survey found that 58% of Aussies break their resolutions within the year. And 15% of those do so because they forgot what they promised they’d do in the first place.i

That doesn’t mean that you can’t set and achieve things you actually want. You just have to be smart about the way you do it.

Turn visions in to goals

When someone asks you to picture your ideal lifestyle, what you see in your head is actually a collection of dozens of different goals. It’s important to break it down and articulate those goals if you want your vision to become a reality.

This is easier than it sounds. Just say you want to ‘enjoy life more’. To make a start on this, you could write down a list of social activities and hobbies you love doing or would really like to try. Then turn each one in to a task that fits with your schedule and can be planned ahead of time, like ‘Make a date with a friend twice a week’ or ‘Book in for an evening class every month’. If your schedule is jam packed, set corresponding time management goals like ‘Leave work on time at least 3 out of 5 days’.

Tell people

Think of your friends and family as your cheerleaders and supporters in reaching your goals. If you tell them what you’re aiming for and why, they’ll be better able to help you. They might even be able to join you on your way. For example, if you decide you want to lose weight and get fitter, ask around for a gym buddy or someone to join you on walks. Or if you’re ready to make a change in your career, start putting the word out amongst your network, that you’re open to new opportunities.

Give yourself (the right amount of) time

Yearly goals, especially ongoing ones, can be hard to keep track of. Try to work out a reasonable time frame for your goal. Some small things might be quicker, and feel less significant – but you can always build on your results. And some things just take time. For example, you’re unlikely to save up for a new car or lose 20 kilos in a month. But you might lose two kilos, or save X-percent of the amount you need. Consultant Todd Herman reckons the ideal time frame for the brain to plan around is 90 days, and that it’s better to do a series of goals ‘sprints’ rather than one long marathon.

Keep track of your progress

If you’re the kind of person who uses to-do lists – on paper, in an app, or in project management software – you’ll know how satisfying it is to tick something off. If you’re not in the habit of keeping lists, now is the time to start. Your list shouldn’t just be one point – your resolution with a check box next to it. Break it down in to smaller milestones. Say you’ve resolved to improve your diet – set yourself little achievements like ‘went a whole week without eating favourite junk food’. To make it fun, try a smart phone game like Habitica.ii

Don’t wait ‘til December 31st

It might be a New Year tradition, but you don’t have to wait for one particular time of year to set goals and resolve to change your life. With the right attitude and a bit of planning, you can start working your way towards a goal any time.

Speaking of this, we’re here to help you set and achieve your money-related goals. Don’t wait for an annual appointment to chat; drop us a line any time, we’d love to hear from you!

i. finder.com.au, Be a geek and live in Tasmania: How to win at New Year’s resolutions

ii. Habitica

General Advice Warning This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Michael J Berinson Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

Keeping your financial partnership on track

March 13th, 2017

“While money can’t buy happiness, it certainly lets you choose your own form of misery.”

Groucho Marx might have been joking when he said this, but there’s no getting around it: money is a prime source of tension in marriages and domestic partnerships right around Australia. A survey by Relationships Australia found that 70% of couples are affected by disagreements about money. 84% of respondents said money troubles would be more likely to push people apart than bring them together. Cooperating on financial matters is well worth it for most couples. It’s not just your bank balance which will benefit from working together. Working through money issues with your partner can help develop communication skills, improve bonding through a sense of teamwork, and set up shared values to pass on to children.

It’s easy to feel as though you’re drifting apart from your partner when it comes to money management. After all, many of us face the same recurring issues and squabbles: furtive spending, disagreements on priorities, and even hidden accounts. But the good news is that there are simple measures you can take to bring yourselves back on track.

Be proactive, not reactive

When tough times strike, it’s easy to lash out and make big decisions based on emotion. Accidents, illnesses and deaths in the family can set you up to make decisions more based on grief, anger or fear than cold hard facts. When you are faced with grave circumstances, it’s a good idea to give yourself a bit of breathing space before you make any binding choices.

Stick to your budget

If your savings are tied together, then your spending should be too. Not agreeing on a household budget is a recipe for disaster. Although it might take some time to agree on everything, having a written budget is essential. To avoid either partner feeling like their freedom is impinged upon, make sure to set aside a small amount each for discretionary spending.

Be conscious of your money personality

Find you’re getting annoyed at your partner’s perceived stinginess or lack of discipline? First, it’s time to step back and acknowledge that you may be a little biased, because we all have our own money management ‘personality’. Being aware of your differences in attitude is the first step towards compromising and changing where necessary.

Keep your Will up to date

This one is not just about the two of you – it’s about your dependants and loved ones. If one of you were to pass away, would everyone be clear on your wishes as to what happens with your estate? It’s worth spending an hour or two with a solicitor to work through your options, and ensure your wishes are enforceable.

Put it in both names

Whether it’s a credit card for bills, a mortgage, or an asset in your investment portfolio, make sure it’s in both names. This way, benefits and responsibilities are split straight down the middle. Neither partner gets to shirk responsibility, overrule the other, or claim all benefits/income in the case of a dispute. It’s an ideal way to generate conversation, communication and cooperation.

Share the fruits of your labour

Being frugal and budgeting well is serious work, so it makes sense to share the rewards of that work with your partner – otherwise, one of you may feel hard done by. When it comes to discretionary spending or saving for big ticket items, think of things you can share: holidays, new vehicles, entertainment etc.

Ready to implement some of these tips in your financial plan? Make an appointment with us to discuss your shared goals and challenges today.

i Relationships Australia, August 2015: Impact of financial problems on relationships

General Advice Warning This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Michael J Berinson Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

Getting By If Your Income Stops

January 9th, 2017

getting-by-if-your-income-stops

Ask yourself this. Would you still be able to pay for your everyday living expenses if you weren’t able to work? A serious injury or illness could put you out of work for months. If you don’t have any other way of earning an income, this could put you and your family under a lot of financial stress.

Your salary may stop but the bills won’t

Without a salary, you may not be able to stay on top of everyday living expenses like mortgage or rental payments, groceries, electricity and petrol.

Not having enough money to pay your bills places an enormous amount of stress on you and your family. Without any other way of earning an income, you may need to fall back on government benefits through Centrelink. While this may provide just enough to get you by, your financial situation will be very strained. And financial pressures are the last thing you need, when you’re trying to recover from an injury or illness.

Protect your income

You can avoid the risk of not having enough money to live on, by having income insurance, also known as income protection. This insurance, replaces your income for a certain period, if you can’t work due to temporary disability or illness.

You may be able to receive up to 75% of your taxable income, plus the 9% superannuation guarantee. This benefit will continue to be paid, until your benefit period expires, or you are able to return to work.

Tax benefits

Income protection insurance premiums are usually 100% tax deductible. This means that if your marginal tax rate is 30%, your overall income will reduce by $31.50, for every $100 that you pay in premium.

For peace of mind, why not book a time to come in and have an obligation free discussion with Michael. This will cost you nothing to start with, as your first meeting with us is absolutely free. 

Centrelink is changing… are you prepared?

January 9th, 2017

centrelink-is-changing

From the 1st of January 2017, more than 300,000 older Australians will be affected by changes to Centrelink’s Age Pension Assets Test. It’s a good idea to be aware of the upcoming changes, because if you will be affected, there are options available to you to reduce your assessable assets for the Assets Test to receive more of the pension. Talk to your Financial Adviser today about protecting your retirement income.

A recap of the changes

From January 2017, the limit to qualify for a full pension under the Assets Test with be raised by the government to $375,000 for couples and $250,000 for single people[1]. That’s a difference of +$83,500 for couples and +$44,500 for singles. Which is great news!

Currently, for a part pension, the pension rate payable reduces by $1.50 per fortnight for every $1,000 of assets you own above the Assets Test limit. For example, if you own $10,000 worth of assets over the Assets Test limit, your pension will reduce by $15 per fortnight ($7.50 per fortnight each for couples). You may know this as the ‘taper rate’.

From January 2017, the taper rate is going to increase to $3.00 for every $1,000 of assets you own over the Assets Test threshold. So, if you own $10,000 worth of assets over the Assets Test limit, your pension will reduce by $30 per fortnight.

It may not seem like much on a fortnightly basis, however, over a year this equates to $780 which could be used to fund a nice weekend away, your budget for family Christmas presents, or even the regular service on your car.

In addition, the Assets Test limit to receive a part pension (and the pensioner concession card) will decrease. For pensioners who own their own home, the Assets Test limit for a part pension will decrease to $823,000 for couples and $547,000 for singles. If your assets exceed these thresholds, you will no longer qualify for the part pension you have received in the past.

You still have options to improve your pension benefit

There are a number of strategies you can implement that may help you maximise your pension benefit. These include:

Contributing to your spouse’s superannuation if they are under Age Pension Age

When funds are in superannuation (in the accumulation stage), they do not count for the Assets Test, whilst below Age Pension age.

Improving your principal home

Your home is not assessed under the Assets Test, so now might be an ideal time to do the home improvements you had planned such as remodelling your kitchen, or building that patio you’ve been dreaming of.

Gifting early

When receiving a pension, each financial year, you are able to gift up to $10,000, with a maximum of $30,000 over five years, without impacting your Age Pension entitlements. Also, if you are more than 5 years prior to reaching Age Pension age, you can gift larger amounts above these limits.

Investing in a lifetime annuity

Investing in a lifetime annuity can help provide a regular income throughout your lifetime. Your Financial Adviser can help you choose the right option for you and your situation.

Purchasing Funeral Bonds

With a Funeral Bond, you can invest up to $12,250 to cover funeral costs. Investment earnings are tax free, and upon your death, the investment is able to be redeemed for cash. Where the funeral expenses are less than the balance of the investment, the remaining funds are then paid to your estate.

As the changes did not come into effect until January 2017, you should have taken action by now. However, don’t sit back and relax, as many of the options available are time dependent, so it’s important to speak with your Financial Adviser about the options available, sooner rather than later.

Speak call us today about how you might be affected by these changes and if so, how we can help you minimise the impact on your Age Pension benefits.

[1] Homeowners

Protecting Your Family Through Your Super

January 9th, 2017

protecting-your-family-through-your-super_1

If you are looking for a way to protect your family without breaking the budget, life insurance through super could be a good place to start.

When you’re already inundated with bills and expenses, taking out life insurance might seem like an unnecessary luxury. But there is a way you may be able to give your family vital protection, without dipping into the household budget, and that’s by taking advantage of insurance through superannuation.

If you’re an employee, you probably have some automatic death and total and permanent disability (TPD) cover in your superannuation already.

The benefit of this arrangement, is that it allows you to use your pre-tax income (e.g. your employer’s Superannuation Guarantee contributions) to pay your premiums. It’s also easy, as your insurance premiums can just be deducted from your super, rather than having to come out of your household budget.

The problem with having this automatic protection is that it can lull people into a false sense of security. The insurance that is provided by employers, is generally a minimum level of cover based on your age and/or income. It doesn’t take into account things like your debts levels and dependents – which are two of the main reasons this cover is required.

Do you need to increase your level of cover?

If you have a mortgage and/or dependent children, you may need to increase your level of death and TPD cover in super to clear your debts ,and provide an adequate level of ongoing income for your family.

There are also types of insurance that generally are not available in super, or may not be provided automatically, so relying solely on cover inside super could mean you’re missing out on the important protection those policies provide.

Trauma insurance is one type of cover not generally available inside super. It is designed to pay you a benefit, if you are diagnosed with a serious illness like cancer – with the money often used to pay out-of-pocket medical expenses, and possibly help a spouse take time off work to provide care.

Income protection is another common example. This is a type of policy that typically replaces up to 75% of your income if you can’t work due to sickness or injury. And while some employers offer income protection (or ‘group salary continuance’ insurance) to their employees in super, it often isn’t provided automatically.

Know where you stand

With something as important as your family’s lifestyle at stake, you need to be aware of exactly what you are covered for – taking into account any life insurance policies you already hold inside or outside super.

Most importantly, you need to think about how your insurance would be used if you became seriously ill, or were unable to provide for your family. That includes ensuring your benefit can be passed on to your family in the most tax-effective way.

To find out if you could be using your super to protect your family more cost-effectively, speak to us. It’s easy, as your first meeting with Michael is absolutely free.

Make your super last

November 18th, 2016

3d-person-getting-it-right

Australians enjoy one of the highest life expectancies in the world, which means you can look forward to a long and healthy retirement. Here’s how to make sure your super lasts.

Did you know that Australia is now one of just four countries in the world where both men and women can expect to live into their eighties?¹ While that’s fantastic news, it also makes saving for retirement more important than ever.

Almost half of Australians over age 40 are worried about outliving their retirement savings, while many are confused about the best way to achieve the retirement lifestyle they dream of.² But by getting good advice and planning ahead now, you can take control and enjoy the peace of mind that comes from knowing your future may be secure.

Work out how much you need

The first step is to figure out how much income you want to receive each year in retirement, and how much you may need to save in order to get there.

Plan for different stages of retirement

It’s also important to think about how your spending patterns may change during your retirement, to plan ahead accordingly.

For example, in the early stages when you’re at your most active, you’re likely to need more funds for travel, sports and recreation. Then, as you enter a more relaxed phase of retirement, you’ll need to be ready for possible health issues, so you can afford the care you need as medical treatments are becoming more sophisticated and more expensive every year.

When you crunch the numbers, you may find you’re facing a super gap. An effective way to grow your super savings while potentially paying less tax may be via salary sacrifice.

You may also want to keep your options open for the later years when you may need more intensive health support, including specialised accommodation.

Also don’t forget to factor in lump sum spending on big ticket items, such as home renovations or a new car. Because, as retirements grow longer, our cars and appliances are increasingly likely to fade away before we do.

Boost your super

When you crunch the numbers, you may find you’re facing a super gap. An effective way to grow your super savings while potentially paying less tax may be via salary sacrifice.

Even a small contribution can make a big difference over time, as you earn returns on your contributions. When you invest pre-tax income through salary sacrifice, you may also benefit from the 15% concessional tax rate on super contributions, putting you even further ahead.

Currently you can contribute $30,000 a year up to the age of 50 in concessionally taxed super contributions (which include employer super guarantee contributions), or $35,000 if you’re aged 50 or over. Note – changes to super come into effect in 2017.

Finally, if there is a large sum you will like to contribute to super, you will need advice as there have been dramatic changes to how contributions are made.

Review your investment option

Our super is one of our most valuable assets, so it’s not surprising many of us seek to protect it by investing in a low risk option. But it’s also important to remember that trying too hard to avoid risk today could expose you to a greater risk — running out of money tomorrow, when your savings don’t produce the returns you need for a comfortable retirement. So it’s important to choose the right investment option for your goals and investment time-frame.

That’s where personalised advice from a professional adviser can make a difference. Your adviser can help you calculate how much super you’ll need, then find the best strategy to reach your goal. Talk to your adviser today, call our office to book a meeting.

¹Australian Bureau of Statistics, Aussie men now expected to live past 80, 2014.
² Investment Trends, Retirement Income Report, December 2013.
Article by Colonial First State

Give yourself more flexibility in the lead up to retirement

November 10th, 2016

take-control-your-retirement

Nowadays, we’re living for years longer than ever before. 60 is no longer old age! So it makes sense that you want the flexibility to approach retirement in a way that suits you. A transition to retirement strategy enables you to access part of your super while you are still working and has a number of benefits.

Boost your super and supplement your income

There are two main benefits of a transition to retirement strategy:

Maximising your super – You can continue to work while drawing an income from an account-based pension. By doing this you can salary sacrifice as much of your pre-tax salary to super as possible while receiving an income from your pension. This allows you to increase your retirement savings without reducing your income. This can also be extremely tax-effective because pension payments are generally taxed at a lower rate than your salary.

Supplementing your income – If you want to move into part-time work before you retire but don’t want your income to drop you can use your pension to supplement your salary.

Ease yourself into retirement

You can choose different transition to retirement strategies depending on what is most important to you. If you believe you have enough retirement savings you could still benefit from a transition to retirement strategy. For example, if you wanted to renovate your home before retirement you could keep working full-time and use the extra income from your transition to retirement pension to pay for the work. That way you get your home improvements done before retirement without taking on any debt.

Are you eligible?

You can take advantage of a transition to retirement strategy if you meet the following conditions:

You are aged between 56 and 65 years of age
You are still working
You transfer some, or all, of your super account to a transition to retirement pension

Important considerations for high income earners

It you earn a high income it’s important to consider the concessional contributions cap before deciding to salary sacrifice as part of a transition to retirement strategy. If you exceed the concessional contributions cap, which is currently $35,000 for the 2015-2016 financial year, you may be taxed an extra 31.5% tax on any contributions above the cap.

Set it up right from the start

Transition to retirement strategies can provide significant tax savings and benefits, but they can be complicated. For this reason we strongly recommend that you talk to us in the lead up to retirement, so that the strategy you put in place is right for your personal situation. Come in and have a free, no obligation initial chat, and then take it from there. 

Protecting Your Family Through Your Super

November 2nd, 2016

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When you’re already inundated with bills and expenses, taking out life insurance might seem like an unnecessary luxury. But there is a way you may be able to give your family vital protection without dipping into the household budget, and that’s by taking advantage of insurance through superannuation.

If you’re an employee, you probably have some automatic death and total and permanent disability (TPD) cover in your superannuation already.

The benefit of this arrangement is that it allows you to use your pre-tax income (e.g. your employer’s Superannuation Guarantee contributions) to pay your premiums. It’s also easy, as your insurance premiums can just be deducted from your super, rather than having to come out of your household budget.

The problem with having this automatic protection is that it can lull people into a false sense of security. The insurance that is provided by employers is generally a minimum level of cover based on your age and/or income. It doesn’t take into account things like your debts levels and dependents – which are two of the main reasons this cover is required.

Do you need to increase your level of cover?

If you have a mortgage and/or dependent children, you may need to increase your level of death and TPD cover in super to clear your debts and provide an adequate level of ongoing income for your family.

There are also types of insurance that generally are not available in super, or may not be provided automatically, so relying solely on cover inside super could mean you’re missing out on the important protection those policies provide.

Trauma insurance is one type of cover not generally available inside super. It is designed to pay you a benefit if you are diagnosed with a serious illness like cancer – with the money often used to pay out-of-pocket medical expenses and possibly help a spouse take time off work to provide care.

Income protection is another common example. This is a type of policy that typically replaces up to 75% of your income if you can’t work due to sickness or injury. And while some employers offer income protection (or ‘group salary continuance’ insurance) to their employees in super, it often isn’t provided automatically.

Know where you stand

With something as important as your family’s lifestyle at stake, you need to be aware of exactly what you are covered for – taking into account any life insurance policies you already hold inside or outside super.

Most importantly, you need to think about how your insurance would be used if you became seriously ill or were unable to provide for your family. That includes ensuring your benefit can be passed on to your family in the most tax-effective way.

To find out if you could be using your super to protect your family more cost-effectively, speak to us. We would love to have the opportunity to assist more people to achieve their financial goals, have peace of mind and still maintain the Lifestyle they enjoy along the way. Come in and have a cup of coffee with Michael and see how he can best assist you – no cost at all for your initial meeting.