Archive for the ‘Retirement Planning’ Category

Are you over 30? You need to read this…

Monday, August 21st, 2017

Superannuation is, and will continue to be, a hot topic in the financial advice industry. No matter what your age, once you begin your working life superannuation should be in the back of your mind, but MoneyTalk magazine have uncovered some confronting statistics that it’s worth thinking about if you’re around the age of 30.

If you’re 30 years old today, you have 35 years left in the workforce and need to save enough superannuation to fund you for 35 years of retirement. Now, many of you may be thinking – ‘Hold on a minute, I don’t need to save for that many years!’ well, with the ever increasing medical improvements you just might. The median age of death is increasing by 0.6 years every year, and currently sits at age 84. If this rate continues, by the time today’s 65 year old’s reach their mid 80’s, life expectancy could have been bumped up to around 94 years old!

If you’re in your 30’s or 40’s today, it’s not unlikely that you could need to fund your retirement until the age of 100 – an intimidating prospect for many. If you’re going to live to 100, and only work until you’re 65 it is estimated that you’ll need a nest egg of $3,000,000 – but how are you going to achieve this?

1. Review your superannuation fund now

When reviewing your superannuation fund, take a detailed look at the investment returns and any fees to be paid. Take special notice of tax being deducted from your account before payment needs to be made, this can equate to thousands of dollars’ worth of lost investment returns over the years.

2. Consider making extra contributions

The younger you start contributing extra funds to your superannuation account, the better off you will be. However, there are strict limitations of how much money you can contribute to your fund, and in what capacity you can contribute- familiarise yourself with these rules so as to avoid any mistakes.

3. Build up non-superannuation investments

Think about bettering your financial situation as a whole, rather than focusing solely on your superannuation. Think of how best to build your investments outside of your superannuation, with a view to eventually transferring them into your super in the most tax efficient way. You Financial Adviser can help you to plan this out.

4. Consider gearing

Borrowing to invest money is not suitable for everyone, be sure to speak to you Financial Adviser if you are considering this as an option to boost your superannuation. If done correctly, gearing can be used both inside and outside superannuation.

No matter what your current age, you must consider and plan for your financial future – invest your time as well as your money into superannuation planning.

Source: Money Matters Magazine, December 2016.

An article by Infocus Securities

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 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.

 

Make your super last

Friday, 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

Being prepared for surprises – good and bad – is a smart financial strategy

Wednesday, November 2nd, 2016

worried-man-with-hands-on-head

While none of us can predict the future, we can do a lot to lessen the shock that can arise from unexpected events and emergencies at any time of life. For retirees relying on investments for day-to-day living, having a contingency plan means you’ll be prepared for any surprises that could derail your financial security and lifestyle goals.

Your financial plan has you on the right foot, but it can be a good idea to make sure you have a sufficient safety net to protect your retirement income, and other long-term investments, from one-off or cascading personal life events that can crop up at any time, which especially affect people at or after retirement. Examples include sudden illness, an accident or disability, the death of a spouse, or those same events affecting close family members such as children, siblings or aging parents. It’s also not unusual for changes to superannuation benefits or pensions to affect retiree expenses.

Other surprise expenditures that can interrupt your income stream might be emergency repairs to your home and investment properties due to everyday wear and tear or a severe weather event; maintaining the family car; or if a beloved pet racks up a large bill from the veterinarian. Having a savings safety net can also come in handy should you need to help out a relative, such as a son or daughter losing a job, or suffering unexpected health or life costs.

Your financial plan may already include a savings safety net – if so, that’s great news. However if you set your plan in place some time ago, you may want to consider talking to your financial planner to ensure that you have enough flexibility in case of a rainy day. Insurance provides another form of safety net, helping you to deal with unexpected losses.

From general insurance covering fire, flood and theft of property and vehicles to life insurance that provides important financial support to a family, many of us take a set and forget approach to our policies. But take the time to review your protection, checking that values are still up to date, perhaps organising for new quotes on policies, and making sure that you are covered for the events of concern to you.

Mind the gap

Preparing for events that may never happen can be overwhelming, but it’s really a matter of managing the gap between enough funds to cover your retirement goals, and a safety net of savings to protect those funds. That’s the ideal scenario, but many retirees and those approaching retirement are carrying more debt than ever before. Average mortgages and other property loans held by people approaching age 65 have more than doubled since 2002, and credit card debt is up 70 per cent, according to a report by Kellyresearch. 1

The report also shows that “increases in wealth through rising asset values, easy credit, and higher earnings” have led to a higher standard of living for working households.2 But a higher standard of living based on debt is unsustainable. That’s why retirees need to be careful about debt liability and having a focus on building up superannuation to the detriment of other forms of saving, because both approaches lock up funds that may need to be accessed quickly. That’s where contingency planning comes in.

1. Household savings and retirement: Where has all my super gone? A report on superannuation and retirement for CPA Australia by KELLYresearch, October 2012.
2. Ibid.

SOURCE: Colonial First State Investments Limited

 

How to make insurance more affordable at tax time

Monday, June 27th, 2016

piggy bankDid you know you can save money by buying your insurance in super? This is because super can offer both cash-flow benefits and tax concessions.

Most super funds offer insurance that can help you, or your dependants replace your income if the unexpected was to happen. This includes Life, Total and Permanent Disability (TPD) and Income Protection insurance.

While these types of insurance can also be bought outside super, you’ll have to fund the premiums from your own cash-flow and you probably won’t get any tax breaks if you buy Life and TPD insurance.

On the other hand, when you insure inside super, the premiums are deducted from your super balance. This means you can arrange the amount of cover you need without having to pay the premiums from your cash-flow.

This may mean you’ll use up some of your super money which could help you meet your living expenses in retirement and while this could make a difference when you’re no longer working, it’s important to think of what could happen to your family’s lifestyle in the meantime if you don’t have the right level of cover.

If you or your family faced financial difficulty you could run out of savings very quickly, well before your intended retirement date. So insuring in super could be a great solution if you don’t have enough cash-flow to pay for the premiums.

Even if you think you could pay the premiums outside super, there are still cost-effective benefits of insuring inside super. This is because if you make super contributions, there are some tax concessions, regardless of whether the contributions are used to buy insurance. For example:

  • if you’re an employee and eligible to make salary sacrifice contributions, you may be able to buy insurance through a super fund with pre-tax dollars
  • if you earn less than 10% of your income from employment (eg if you’re self-employed or not employed), you can generally claim your super contributions as a tax deduction, and
  • if you earn less than $49,488 each year, of which at least 10% is from employment or a business, and you make personal after-tax super contributions, you may be eligible to receive a Government co-contribution of up to $500 in 2014/2015. That could help you cover the cost of future insurance premiums.
    To find out more about insuring inside super, please contact our office.

Source: MLC