Archive for the ‘Australian Financial News’ Category

Insurance in super – is your cover adequate?

Friday, January 5th, 2018

If you’ve got super, you probably have some life insurance included. It’s an easy way to get a basic level of cover, but is it enough to give you and your family true peace of mind?

More than 70% of Australians hold life insurance policies, and more than 13.5 million separate policies, through their super funds.¹ Yet despite this, under-insurance remains a huge problem in Australia.

Rice Warner estimates that the median level of life cover in super meets only 60% of the basic needs for the average household, and less for families with children. The position is even worse where total and permanent disability (TPD) and income protection cover are concerned. The median level of cover in super will provide just 13% of TPD needs, and 17% of income protection needs.

Of course, some insurance is better than no insurance, and insurance in super is convenient to set up and pay for. But it comes with a couple of points to be aware of, and this is where professional advice is invaluable.

Limited cover

Firstly, a portion of your super is used to pay the insurance premium. This can help your cash flow if money is tight, but it also means you may not be contributing as much to your retirement savings as you thought.

It’s also worth keeping in mind that super funds offer standardised ‘off the shelf’ policies that may not suit your needs. This helps keep costs down, but that’s no consolation if your policy falls short when you need it most.

Because the insurer pays your super fund which then pays you, it may take longer to receive the money. What’s more, unless you make a binding nomination, the fund trustees have the ultimate say in who receives benefits when you die. Your beneficiaries may also be taxed more heavily than they would if you held the insurance outside super.

A tailored solution

Your insurance needs are as individual as you are, and should be reviewed regularly along with your other financial affairs. Whenever your circumstances change – if you marry, have a child, or buy a new home for instance – your life insurance should be reviewed.

It’s easy to underestimate what it would cost to ensure your family is able to maintain their current lifestyle, come what may. It’s important not to forget partners who don’t earn an income and may not necessarily have cover in their super, particularly where dependent children are involved.

Take the example of Mark, whose wife Suzy, 43, passed away suddenly after an illness. Thankfully, the couple had arranged a full suite of insurance cover in and outside their super. Mark claimed on Suzy’s life insurance which covered his mortgage, credit card and car loan repayments; it also allowed him to hire a part-time nanny to help with their two children.

Getting additional insurance outside super can be a little more expensive, but you will have access to a wider range of policies that can be tailored to your individual needs. Some policies, such as Trauma insurance, can only be bought outside super.

Even if you have some level of cover inside super, it’s important to do your sums to work out exactly how much your family would need to maintain your current lifestyle if you or your partner were to die or become seriously ill. It may take a little time, but with so much at stake, guesstimates won’t do, and we would be only too happy to assist. 

¹ Ricewarner, Insurance through superannuation, 20 April 2016.

Article by TAL

The benefits of consolidating your super

Friday, January 5th, 2018

If you’ve had a few jobs over the years, it’s possible that you’ve got a few different super funds with small balances in each. It’s easy to forget all about them until the annual statements arrive, but the sudden influx of paperwork can often leave you feeling dazed and confused.

The Australian Securities and Investment Commission reports that there are billions of dollars sitting in unclaimed or “lost” superannuation accounts as at 1 January 2017, with thousands more accounts added to the list each month. Inactive accounts with balances of less than $6,000 are transferred to the ATO, so if you think you might have some old superannuation accounts, don’t hand it over the government, claim it!

This year, instead of ‘filing’ your statements in the bottom drawer and forgetting all about it until next year, take the plunge and consider consolidating your accounts. That way, you’ll be saving fees, reducing your paperwork, and making it easier to keep track of arguably one of the most valuable investments you’ll ever make – your retirement savings.

Here’s a few steps to get you on your way:

Choose your fund – talk to us so we can sit down and help you decide which super fund is best for you.

Check your insurance – before you start closing your accounts, we can help you make sure your insurance needs are covered in your chosen fund.

Advise your employer – make sure your employer knows where to pay your super guarantee contributions – speak to your payroll or HR about any paperwork they may need from you or your fund.

Rollover your other accounts to your chosen fund – you can do this online through the myGov website, or you can transfer your super by using a form and sending it to your chosen fund. Some funds have an online process for combining your super too, so it’s a good idea to check what’s going to be easiest.

Visit the SuperSeeker service at or via your MyGov account at for more info.

As always, we’re here to help, you so if you’d like to talk this though, give us a call. We would love the opportunity to assist you in your journey to a better financial future.

Article by TAL

Helping you navigate this year’s Federal Budget

Wednesday, 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 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 to arrange an appointment.


Make your super last

Friday, November 18th, 2016


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

Volatile and weak sharemarkets

Tuesday, July 12th, 2016

Graph being drawn

Cash rates and bond yields globally are low and are likely to remain lower for longer, while equity market returns over the 2016 fiscal year have been generally poor. In this article we look at what’s been driving weaker returns and consider the outlook for returns over the medium term.

Sharemarkets were volatile during 2015/16 and delivered poor returns for the period. Sharemarket performance was adversely impacted by a number of concerns, including falling commodity prices and lacklustre global growth. Of particular note, economic growth in China has been weaker than expected; while in Europe, growth has been so sluggish that policy makers in many European countries have turned to negative interest rates to stimulate growth. In June, Britain’s decision to leave the European Union, or ‘Brexit,’ also contributed to market volatility and pushed most global share markets lower.

Australian equities ended the financial year with an annualised return of 0.6%. International sharemarkets delivered an annualised return of -1.4% on a fully hedged basis.

On the positive side, Australian listed and global listed property continued their positive trend, benefiting from the chase for yield, delivering annualised returns of 24.6% and 18.7% respectively. Australian and international bond returns also delivered solid positive returns.

Return on assets

Past performance is not a reliable indicator of future performance
Source: Bloomberg, AMP Capital, as at 30 June 2016; Australian shares: S&P ASX 200 Accumulation (AUD); International shares (unhedged): MSCI World ex AU Accumulation (AUD); International shares (hedged): MSCI World ex AU Accumulation Hedged AUD; Australian listed property: S&P ASX 200 A-REIT Accumulation; Global listed property (hedged): FTSE EPRA/NAREIT Developed Rental Hedged AUD; Global listed infrastructure (hedged): Dow Jones Brookfield Global Infrastructure Net Accumulation Index Hedged (AUD); Australian bonds: Bloomberg AusBond Composite 0+ Yr Index; International bonds (hedged): Barclays Global Aggregate Index Hedged AUD; Cash: Bloomberg AusBond Bank Bill Index.

Looking ahead – expect lower for longer

With cash rates and bond yields already so low, sharemarkets are likely to be a key source of return for investors.

However, as global growth and inflation are likely to remain subdued for some time, investment returns are likely to remain relatively muted. We anticipate that single-digit super returns are likely over the next few years.

Keep your focus on what really matters

With market volatility expected to continue in the near term, investments in well-diversified, actively managed portfolios will help to smooth out returns.

We expect active positions in the Australian dollar will be important going forward, but so too will investment in alternative assets, such as infrastructure, absolute return strategies and private equity, which have a low correlation with mainstream markets, such as shares.

Final thoughts

Recent market volatility has made it more important to review your investments and ensure they are still delivering against lifestyle and retirement objectives while being mindful that long-term – not short-term – performance needs to be the focus.

Article by D Alliston – Head of Multi-Asset Portfolio Management AMP

Brexit – “Breaking up is hard to do”

Monday, June 27th, 2016

Global insight

By Ron Bewley*. Brought to you by Infocus

History and the vote
When Neil Sedaka had his 1962 hit “Breaking up is hard to do” it was only four years after the signing of the Treaty of Rome – from where the European Union (EU) was born. France strongly objected to Britain joining for many years, which was the catalyst for many boys in secondary schools across England to question why they had to learn French.

So with Brexit winning the referendum on Thursday, did Britain get what it wanted or needs? We thought the bookies would have got it right with a ‘Remain’ win. Even Boris Johnson (Tory MP and former Lord Mayor of London) and Nigel Farage (MP and Leader of the UKIP party) – the two most prominent “Brexiteers” – didn’t think they would make it on the morning of the referendum – but they did. With the vote at about 48% : 52% and a total casting vote of about 70% (voting is not compulsory in Britain), the people who didn’t vote came in a very close third in the race: 33.6% = 70% x 48% for ‘Remain’; 36.4 = 70% x 52% for ‘Brexit’; and 30% = 100% – 70% didn’t vote)!!

This was not a resounding victory, but it was enough to start the exiting process.

Many of us were glued to the telly all day on that Friday, June 24th. Our reaction changed markedly as the results flowed in. Our first reaction was unrest, because the consequences of leaving hadn’t really been discussed in the media. But we felt calmer as the day progressed. The shock subsided.

So why did Europe want Britain to stay as much as they implored? They must be getting a better deal than Britain! If they trade with Britain now, why wouldn’t they want British goods when they are ‘sans Europe’?

Changes ahead
Of course Britain may stop making Airbus wings in North Wales which then have to navigate canals, the River Dee, the Irish Sea and the English Channel, and more canals to be delivered to Toulouse, and stuck on the bodies of planes. But Britain won’t have to subsidise all of those small farmers any longer in France, Greece and elsewhere. Britain won’t have to pay for our euro MPs to live on the gravy train in Brussels. It is a nontrivial problem to solve and the answer is not known by anyone – yet!

The Bank of England and the European Central Bank have stated they will pour oil on any troubled financial waters. This is certainly not a Lehman Brothers or GFC type event. It is also clear that it will take up to two years for Britain just to exit Europe – it doesn’t change straight away. Indeed, the full transition to renegotiate trade deals could take up to a decade.

So what are the pros and cons? On the downside, the biggest risk is what will happen to London as a financial centre. That could be a big down-side and it could also affect Australian banks in their funding (yes – we borrow from the world, and not the RBA for home loans, so that’s why mortgage rates shouldn’t simply shadow the RBA rate).

But Britain will no longer be told how to regulate its economy by Europe. A Cornish pasty can once again be ‘crimped’ on the top, and not just the side to be properly classified as a “Cornish” pasty. And they can again grow any variety of apples they want! They can even take control of the style of sausages they make and sell!

Continental Europeans freely working in Britain may have to go home. Economic refugees in Britain would not as easily get government benefits. Britain can regain control of its borders. People will have to show their passports to travel and get visas to work – just as young Australians do who work in Britain now, and vice versa.

Australia has recently made important bilateral trade deals with the likes of China. It can now make some with Britain without having to convince the other 27 counties that the same rules should apply to them. For example, one deal with Europe was recently scuppered because the Italians didn’t like our proposed anti-dumping laws for their tinned tomatoes.

Domino effect
But who will be the next cab off the rank? Britain joined the then European Economic Community (EEC) when there were just a handful of countries “in Europe” – then some peripheral countries joined – then the far eastern, poorer European countries such as Bulgaria and Romania joined in 2007.

We don’t think Britain would ever have joined if there was a common currency and 27 other countries. The current EU is so different from its forerunners, and is largely led by Germany – and to some extent France – and Brussels.

The EU has a common currency, the euro, across 19 of the 28 countries, but no common fiscal policy. That is, unlike in Australia where Canberra controls much of taxing and spending across the separate states, 28 governments in the EU have no strict common goals. Hence, we got problems with Greece and its debt problems. Greece couldn’t devalue, as it used to without leaving the euro and the EU subsidies it gets.

Scotland is now talking about having a second bite at being a separate nation after Brexit. Scotland largely voted to ‘Remain’ in Europe – as did the south east of England – but the more working class north of England, swamped the ‘Remain’ votes in the single aggregated British vote.

And there has been talk of a referendum to decide where, if anywhere, should be the border between the Republic of Ireland and Northern Ireland (in the UK).

Denmark and others who are not in the common currency but in the EU might be watching closely. If Britain starts to look better off, why wouldn’t they follow suit?

The EU morphed into a grab-bag of unlikely bedfellows. The initial reason for making the union was almost certainly to give Germany and France a voice on the world stage. But they needed to add some chums to make it seem like a real union. Shades of 1989, and the falling of the Berlin Wall are now so close.

Stock markets
Markets usually over-react and they probably have done so this time. It looks like there will be big buying opportunities ahead, but not in our banks until we better know what will happen in that space.

We couldn’t help but notice that the falls on the ASX 200, the London FTSE and the S&P 500 on Friday were all around ?3.5%. But over the week the ASX 200 was only down ?1.0%. We got a bit ahead of ourselves in predicting a ‘Remain’ and then unravelling some positive momentum.

The London FTSE was actually up +2.0% for the week, even after Friday’s big sell-off! The S&P 500 on Wall Street was down only ?1.6% for the week.

The Frankfurt Dax was only down ?0.8% for the week after tumbling over ?6% on Friday night.

With our SPI futures (an indicator of how the ASX 200 is likely to open on Monday as it is traded overnight) up +3 pts for Monday, it is possible order could quickly return to markets.

Football (soccer)

England lives to fight another day in the Euro 2016 football competition. England faces the mighty Iceland at 5am on Tuesday in the last 16. England has only played them once before and England won 6-1. But has Iceland improved or did the other teams just capitulate in the group stage matches? We hadn’t really thought of Iceland as being in Europe. Are they in the EU? No! And Australia entered Eurovision and we are certainly not in Europe.

But if England gets through, it will probably meet France in the quarters – and in the unlikely event England progresses to the semis, it then faces its arch-rival in football, Germany. For England to possibly face France and Germany only days after Brexit, the mettle of these footballers will surely be tested.

What to watch for

Simply watching the finance news on TV might not give you the information you really need. The media has a seeming predisposition to focus on bad news and draw a long bow when connecting some events.

The end of the financial year on June 30th usually brings with it some extra temporary volatility on our stock market as fund managers ‘window dress’ their portfolios to look as good as possible for reporting purposes.

Our general election on July 2nd could cause some volatility in its own right depending on how the voting goes. A hung parliament is the worst result. Our government – of whichever political flavour – needs the power to enact good economic policy.

The Reserve Bank of Australia deliberates on interest rate settings on July 5th. It might cut rates. It might change its interpretation of how the economy is travelling. So more volatility is possible!

On July 14th (Bastille Day!), our June Labour Force data will be released by the Australian Bureau of Statistics. The recent trend in full-time employment has been falling to the extent that changes in f/t employment have been negative for four consecutive months.

No one really seems to be talking about this – except us at Infocus for the last few months – so if we get another fall and it gets picked up? You’ve guessed it – more volatility.

And in August most listed companies on the stock exchange report their final or half-year results. Since companies must give guidance about changes in performance, many companies upgrade their prospects in July – the so-called ‘confession season’.

Even without Brexit, we would expect a few weeks of heightened uncertainty in our markets. The fundamentals are quite strong – but not brilliant. We anticipate looking back on June and July later in the year, as another blip but no more.

The UK Prime Minister has flagged he will leave office in a couple of months and Boris Johnson, the enigmatic former Mayor of London, will probably succeed. He is a very smart, charismatic man who is likely to steer Britain through change as good as anyone could.

We need to watch for any of the big international banks, like Morgan Stanley and Deutsche, to see if they feel a need to relocate some of their offices, etc.

And at home, the only likely downside to the Brexit seems to be an impact of funding for our banks. Perhaps we can strengthen our relationship with Britain. That should not stop us continuing to have good relations with continental Europe.

Of course, dual citizens (Australian and Continental European) might be less able to go and work in Britain. But plenty of Americans holiday in Britain each year without being EU members.

So it’s time to take a deep breath, put the kettle on and have a cuppa to settle the nerves – just as they are probably doing across Britain right now.

*Ron Bewley(PhD,FASSA)– Director, Woodhall Investment Research

Important information

This information is the opinion of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523 trading as Infocus Wealth Management and may contain general advice that does not take into account the investment objectives, financial situation or needs of any person. Before making an investment decision, readers need to consider whether this information is appropriate to their circumstances.

Monetary Policy Decision

Wednesday, May 4th, 2016

Markets fluctuatuations

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.75 per cent, effective 4 May 2016. This follows information showing inflationary pressures are lower than expected.

The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently. While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies. China’s growth rate moderated further in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.

Commodity prices have firmed noticeably from recent lows, but this follows very substantial declines over the past couple of years. Australia’s terms of trade remain much lower than they had been in recent years.

Sentiment in financial markets has improved, after a period of heightened volatility early in the year. However, uncertainty about the global economic outlook and policy settings among the major jurisdictions continues. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.

In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom. GDP growth picked up over 2015, particularly in the second half of the year, and the labour market improved. Indications are that growth is continuing in 2016, though probably at a more moderate pace. Labour market indicators have been more mixed of late.

Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.

Monetary policy has been accommodative for quite some time. Low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector. Credit growth to households continues at a moderate pace, while that to businesses has picked up over the past year or so. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.

In reaching today’s decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate. At present, the potential risks of lower interest rates in this area are less than they were a year ago.

Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.

Media and Communications
Secretary’s Department
Reserve Bank of Australia

Media ReleaseStatement by Glenn Stevens, Governor

Are you a Small Business owner? If so, are you SuperStream compliant?

Wednesday, May 4th, 2016

hand holding bag of money

The SuperStream Data and Payment Standard introduces a streamlined method of sending payments and associated information electronically within the superannuation system.

The objective is to standardise the way employers pay super contributions so that information can be transmitted consistently across the super system – between employers, super funds, service providers and the Australian Taxation Office (ATO). It allows employers to make all their super contributions in a single transaction, even if they’re going to multiple super funds.

If you or your clients are an employer with 19 or fewer employees the SuperStream standard must be met by 30 June 2016 (assuming the business is not already compliant).

The ATO has begun contacting businesses with 19 or fewer employees about SuperStream. You or your clients may receive a reminder email, SMS, or letter from the ATO about the importance of getting ready for SuperStream by the 30 June 2016 deadline.

Larger employers should have been using SuperStream since 31 October 2015.

The link to set up your account with the Superannuation Clearing house is:

Excerpt from article published by AIA

How will the Budget affect you?

Wednesday, May 4th, 2016

Hand holding dollar notes

This was not your typical Budget. Instead, the Treasurer, Scott Morrison, attempted to build an election platform for the Government and overall, this Budget is quite fair to most people. While there were certainly some major alterations to superannuation, in other areas, such as Centrelink, there were only minor changes.

We’ve summarised some of the key points from the Budget below, but remember these are proposals only and are subject to the passing of legislation, and should be discussed with your Financial Adviser.

  • Introduction of a $500,000, lifetime, non-concessional superannuation contribution cap.
  • A new transfer balance cap of $1.6 million on superannuation that can be held in pension phase.
  • Changes that reduce the tax-effectiveness of transition to retirement strategies.
  • Reduction of the superannuation annual concessional cap to $25,000, regardless of age.
  • Introduction of ‘catch-up’ superannuation concessional contributions for those with super balances under $500,000.


Changes to super were wide-ranging and aimed to help those on lower incomes while trimming some of the more generous concessions available to those on higher incomes.

Lifetime cap on non-concessional contributions

The Government is replacing the previous cap of $180,000 per year (or $540,000 over 3 years under the ‘bring forward’ provisions) with a lifetime cap of $500,000. This will be indexed, presumably on an annual basis. While this change is effective from Budget night, importantly it is also retrospective as it will take into account all non-concessional contributions made since 1 July 2007.

If you’ve already contributed more than $500,000 during this time, the extra amount will not be taxed but you won’t be able to make any future contributions. If you breach your lifetime cap, you can have the excess refunded to avoid penalties.

Reduced concessional contributions cap

The Government intends to reduce the annual concessional contributions cap to $25,000 for everyone, from 1 July 2017. The cap is currently $30,000 for people under age 50 and $35,000 if over age 50.

Concessional contributions catch-up

For those people who have a super balance under $500,000, the Government proposes to allow them to make ‘catch-up’ concessional contributions. The aim of this change is to help people who have irregular work patterns, such as, contractors, the self-employed or women, to grow their super. Unused concessional cap amounts can be carried forward on a rolling basis over a consecutive five-year period. Under the current system, a strict application of annual concessional contributions caps means that those people with irregular work patterns are at a distinct disadvantage, so this addresses that issue. The changes will become effective from 1 July 2017.

Transition to retirement strategies less effective

The tax exemption on earnings in a transition to retirement (TTR) pension will be removed, thereby reducing the tax-effectiveness of a TTR strategy. Withdrawals from TTR pensions will also not be able to be taxed as lump sums. If you are over 60 you will still benefit from receiving tax-free pension payments.

New limit on amount transferred to retirement accounts

In a move to limit the amount of tax-free earnings on your super, the Government intends to place a cap of $1.6 million on the amount you can transfer into your pension account. Any future earnings generated in your pension account will not be affected, even if the balance goes over $1.6 million.

Those people already in retirement will need to reduce the balance of their pension account to $1.6 million by 1 July 2017. The $1.6 million cap will be indexed in $100,000 increments in line with the consumer price index. If you breach the limit then the excess will be taxed at the highest marginal tax rate, a very harsh penalty!

Removing the work test

The government has decided to remove the work test for people aged between 65 and 74 who want to make voluntary superannuation contributions. The advantage for those affected is that they no longer need to satisfy a work test and can receive contributions from their spouse. This measure also applies to small business owners who often want to contribute the proceeds from their business after age 65. This change takes effect from 1 July 2017.

Tax deductions for personal super contributions

This change means anyone up to age 75 can claim an income tax deduction for personal concessional super contributions up to the proposed $25,000 cap. This change abolishes the 10 per cent self-employed test and benefits people who can’t take advantage of salary sacrifice.

Lower income threshold captures more high income earners

This change means that higher income earners will now have to pay an extra 15 per cent on their concessional contributions when their income is over $250,000, down from $300,000 previously.

Assistance for lower income earners

There are two initiatives that assist lower income earners. The first is the Low Income Super Tax Offset, which provides a tax offset to the super fund of the member of up to $500 and effectively refunds the contributions tax that the member’s super fund has already paid. This only applies for those who don’t earn more than $37,000. The second initiative increases the eligibility for the Spouse Tax Offset so that the spouse who receives the contribution can now earn up to $37,000 instead of only $10,800, as was previously the case.

Anti-detriment provision removed

Anti-detriment payments used to effectively refund the superannuation contributions tax paid by a member who died. This increased the lump sum death benefit paid to spouses, former spouses and children. The government wishes to remove this provision because it reduces the amount of tax they receive from super funds. This change will be effective from 1 July 2017.


Support for unemployed young people was increased with the announcement of a program to encourage them to explore the potential of self-employment, while offering subsidies for businesses to employ young people. Additionally, from 1 October 2016, job seekers will enter the Work for the Dole phase after 12 months of participation in ‘jobactive’, instead of the current six months.


To address bracket creep, the government has proposed an increase in the 32.5 per cent personal income tax threshold from $80,000 to $87,000. Business also benefits, with a proposed reduction of the company tax rate to 25 per cent. This new rate will be phased in depending on the size of the company or its turnover.

Issued by IOOF Investment Management Limited (IIML) | ABN 53 006 695 021 | AFSL 230524. IIML is a company within the IOOF Group of companies, consisting of IOOF Holdings Limited | ABN 49 100 103 722 and its related bodies corporate.

The Big Picture

Friday, April 22nd, 2016


If you feel confused by recent events in financial markets, you are certainly not alone. But, as we tried to convey in recent Economic Updates, some people deliberately put out bad news to grab headlines; some are manipulating markets behind the scenes in short-selling and the like; and calm, informed analysts and commentators get crowded out by the other two groups.

Now that the Quarter One (Q1) ‘volatility cluster’ is behind us we can say we saw what happened. At the time, we could not be certain but – as they say in courts of law – for us it was beyond reasonable doubt.

Whatever was the catalyst – probably the United States (US) Fed rate hike in December or it was just ‘the time was right for a correction’ – commodity prices nose-dived to unsustainable levels in Q1.

When the price of oil got down to the mid 20’s some big houses were calling $10 and $20. But prices jumped to around $40 and stabilised. Iron ore prices also plummeted and bounced back as hard. In fact, on March 8th, the price of iron ore had its best day ever – up +19% in one day!

The calls for a hard landing in China and a recession in the US have come and gone. They will come back again one day and someone will listen – but not us unless there are sound reasons for such calls.

The moral of the story is simple. Events like these happen from time to time so long-term investors should be positioning their portfolios before such events, and then sit tight. The whole point of these ‘squeezes’ is what we call ‘shaking the tree’ in the industry. You shake the tree so some fruit falls and someone picks it up to their benefit. In finance – some force prices down to get people to sell in fear and panic so that they can buy cheaply.

So where is the world heading? It’s fine but not great – just as it was late last year. We discuss the details in the ‘Regional Section’ below. Let’s just focus on the big game in town here.

The Prime Minister got the new Senate voting procedures through both Houses and then flagged a possible election and double dissolution for July 2nd. As we wrote in 2013 the voting procedures needed to change and now they have. People will now get the people they vote for and not those that did backroom deals with almost no first preferences. It was never to Australia’s advantage (whoever won majority) that a clutch of micro parties had to be placated to get any business done in parliament. We are back on track.

But the budget is now to be on May 3rd and the election looks like July 2nd. That means the Reserve Bank is unlikely to change rates at those times. In fact, it now looks like there can be no rate cut until around August/September.

On top of that the US Fed’s talk and US data have pushed back previously expected rate hikes probably to December if not later. These interest rate scenarios amount to a massive change in policy just since last month’s Economic Update! We think this means that the Australian economy will be a little more sluggish than we previously expected it to be.

In summation it is important to understand your investments in good times so that you don’t have to sell in bad. Unless you are a trader it is best to be calm when headlines get gloomy.

Asset Classes

Australian Equities

The ASX 200 had a bumper month as it gained +4.1% in March. But that was not enough to put the market in the black for the year-to-date. We are still down ?4.0% while Wall Street is up.

Despite the big sell-off near the end of the month for the big banks, that sector led performance over the whole month at +6.3%. The resource sectors also did well with +5.3% for Energy and +5.5% for Materials. At the other end of the spectrum the normally robust Healthcare sector fell by ?0.5%.

Importantly, volatility has subsided to normal levels. Given that we estimate that the market fundamentals strengthened over March but that we have the market a little underpriced, April could also be good for investors.

Foreign Equities

The S&P 500 gained an impressive +6.6% over March but the Shanghai Composite (China) index led the way with a gain of +11.8%.

The VIX ‘fear’ index for Wall Street has fallen to below average levels suggesting that investors are quite relaxed about the future direction of that market.

Bonds and Interest Rates

The Reserve Bank of New Zealand cut rates again by 0.25% in March. But, at 2.25%, New Zealand still has the highest rate in the developed world. We are next at 2%!

At home, the chance of a rate cut by June has been priced down by the markets. The market now has a cut at 30% compared to 60% a month ago. Political considerations make the next move unlikely before the mooted July election.

The US Federal Reserve changed its rate outlook at the March meeting. Last December, when it first hiked in nearly a decade, its ‘dot plot’ representation to the media suggested four hikes this year totalling 1.0%. The March version now has only two hikes for 2016 but again the market thinks that is optimistic. The market consensus has just one hike in December if any at all this year.

Other Assets

Iron ore prices are up +12% over the month and seemingly stable. The power play by the big miners to squeeze out smaller miners seems largely over.

Oil prices too have stabilised and Brent oil is up +12.5% on the month. OPEC is scheduled to meet again on April 17th with Iran to thrash out deals to stabilise prices further.

The price of gold was flat but our dollar appreciated +7.2% against the US dollar in March.

Regional Analysis


Trend unemployment continues to improve but at a very slow rate and trend employment growth has been strong and steady. But here, as around the world, improving labour markets are not resulting in wage or price inflation.

Our overall economic growth – measured by the growth in Gross Domestic Product – came in unexpectedly high at 3.0% for 2015. But digging deeper, the headline number was a little above trend but some of the components were less robust.

Our score card is the same as it has been for months. A rate cut or two would help. A budget that paves the way for solving the long-run problems we face would also really help. There is no impending cliff from which to fall – nor is there a simple solution to our current situation. We will probably jog along at this pace for the rest of the year.


It seems that the China doomsayers have retreated into the shadows but they can easily return unless data get really strong. So far China is much stronger than most thought a month or two ago. Indeed the March Purchasing Managers’ Index (PMI) came in at 50.2, or expansionary territory easily beating expectations of 49.3 and following February’s read of 49.0.

The China policy makers have set a range of 6.5% to 7.0% for growth over the next five years. China is also making overtures in the form of stimulus. China says there is no hard landing and we can’t find any evidence of one. At last, the China economy looks pretty safe.


The US jobs data reported in March were very strong. There were 242,000 new jobs when only 19,000-195,000 were expected. But, importantly, 242,000 jobs were not big enough to make an interest rate hike likely any time soon.

The Fed Chair, Dr Janet Yellen, has taken two of the four mooted rate hikes from last December off the table. And then she may have even taken another off in a speech later in March.


Obviously the Brussels’ bombings dominated March news in Europe and around the world. Sadly these incidents will not go away any time soon but, fortunately, they do not seem to dent market performance and economic conditions.

The so-called ‘Brexit’ referendum slated for June 23rd looks line ball when the UK will determine whether or not it should stay in the EU. Migration issues are front and centre – as we wrote about last year when Germany’s Chancellor, Angela Merkel, wanted to embrace all immigrants. Now countries are reportedly planning to send back 80% of immigrants because they are not ‘proper’ refugees. There is a lot to sort out in that part of the world.

The UK sugar tax caused some interest. In their recent budget they stated they are to tax sugar content in drinks and food in a bid to help health. They just happen to get a nice tax haul as a bonus!

Rest of the World

After a very poor run for nine months into the end of January, Emerging Markets have bounced back strongly. Indeed, the markets’ index grew +8.2% in March.

An article by Infocus Securities