Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess in the future.

Your will gives you a say in how you want your possessions and investments to be distributed. But importantly, it should also include enduring powers of attorney and guardianship as well as an advance healthcare directive in case you are unable to handle your own affairs towards the end of your life.

At the heart of your estate plan is a valid and up to date will that has been signed by two witnesses. Just one witness may mean your will is invalid.

You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.

Keep in mind that an executor’s role can be a laborious one particularly if the will is contested, so that might affect who you choose.

Around 50 per cent of wills are now contested in Australia and some three-quarters of contested wills result in a settlement. ⁱ

The role of the executor also includes locating the will, organising the funeral, providing death notifications to relevant parties and applying for probate.

Intestate issues

Writing a will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid will in place. ⁱⁱ

If you don’t have a valid will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.

The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.

Is probate necessary?

Assuming there is a valid will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.

Probate is a court order that confirms the will is valid and that the executors mentioned in the will have the right to administer the estate.

When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses, upon death your share automatically transfers to your surviving spouse. It does not form part of the estate.

However, if the house is only in your name or owned as ‘tenants in common’, then probate will need to be granted. This process generally takes about four weeks.

Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.

You will also require probate if there is a refund on an accommodation bond from an aged care facility.

Rights of beneficiaries

Bear in mind that beneficiaries of wills have certain rights. These include the right to be informed of the will when they are a beneficiary. They can also expect to hear about any potential delays.

You are also entitled to contest or challenge the will and to know if other parties have contested the will.

Estate planning can be tricky and emotional, particularly when your circumstances are a little more complex. So, get in touch with us to ensure your estate plan meets your wishes and takes account of all the issues, and be sure to revisit it if your circumstances change.

Sources

 i Success rate of contesting a will | Will & Estate Lawyers

ii If you don’t, who will? 12 million Australians have no estate plans | Finder

On 12 September 2024, the Government proposed legislation and aged care fee changes aimed at enhancing the quality of aged care in Australia. These proposed reforms are also set to impact the fees associated with home care and residential care services.

Whether you’re currently receiving care or supporting a loved one on their care journey, it’s essential to understand what these changes could mean for your situation. This article will guide you through the recent fee adjustments and the proposed changes to the aged care system from 1 July 2025. We’ll break down everything you need to know so that you can feel confident and well-informed.

Aged care fee changes from 20 September 2024 (existing residents)

As of 20 September 2024, existing aged care residents will experience changes to the aged care fees charged.

• The Basic Daily Care Fee has increased to $63.57 per day (previously $61.96).
• The thresholds for means-tested fees have been raised, which may result in a reduction in your means-tested care fee.
• For residents assessed with a Daily Accommodation Contribution (DAC), this amount may also change.

The Basic Daily Care Fee is set at 85% of the single age pension rate. On 20 March and 20 September each year, this fee is adjusted in line with cost-of-living changes. Means-tested fees, including the means-tested care fee and/or Daily Accommodation Contribution, are calculated based on your assessable assets and income, using specific thresholds. These thresholds are reviewed quarterly, so even if your assets and income remain unchanged, your means-tested fees may vary.

Proposed aged care fee changes from 1 July 2025

On 12 September 2024, the Government proposed legislation for a new aged care system, expected to come into effect on 1 July 2025. For residents already in the current system, fees are expected to remain unchanged under the new legislation.

Accommodation

The main changes proposed:

1. Refundable Accommodation Deposit (RAD) retention: From 1 July 2025, providers will be able to apply a retention (non-refundable) fee of 2% per annum on the RAD for up to 5 years, with a maximum retention of 10%.
2. Indexing daily accommodation: For residents choosing to pay a daily fee instead of a RAD, the Daily Accommodation Payment (DAP) will be indexed twice a year in line with CPI.
3. There will be no changes to the treatment of the family home in the aged care means test assessment process. If a spouse or “protected person” resides there, it remains exempt; otherwise, approximately $208,000 of its value (indexed) will be included in financial assessments.

Daily Care Fees

Home Care (Support at Home)

From 1 July 2025, the Home Care Package framework will transition to the Support at Home Program, with funding categorised into three areas: Clinical Care, Independence, and Everyday Living.

1. New classification system: Recipients will be assessed into one of the ten funding classifications to better align funding with individual needs.
2. Independence and Everyday Living Contributions: While the government will pay 100% of clinical care services, individuals may be required to contribute up to 50% of the price for independence services and up to 80% of the price for everyday living services. The amount payable will be based on Age Pension status or Commonwealth Seniors Health Card eligibility.
3. Home Care grandfathering: Individuals with a Home Care Package on 30 June 2025 will keep the same funding and any unspent funds under the new Support at Home program. Those on the National Priority System or approved for a package by 30 June 2025 will get a Support at Home budget equal to their approved package level when available. If a future assessment entitles a recipient to more funding, they will move to the new Support at Home classification when it’s available.
4. Contribution arrangements: If you were receiving a Home Care Package, on the National Priority System, or assessed as eligible for a package by 12 September 2024, you will not pay more because of the reforms. Your contributions will stay the same or be lower than before. When you move to residential care, your contribution arrangements will remain the same unless you choose to switch to the new program. However, changes to accommodation payments in residential care will still apply, as these are agreed upon between the resident and their provider.

What does this mean for those already in care?

If you’re already part of the current aged care system, fees are expected to remain unchanged under the new legislation. The proposed legislation includes grandfathering provisions, ensuring that the existing rules continue to apply.

It’s helpful to reflect on what happened the last time the rules changed. The current aged care laws, which came into effect on 1 July 2014, did not impose the new fee arrangements on those already in aged care or receiving a home care package. Those looking to move between aged care homes were given the choice to either opt into the new system or stay under the existing rules.

Where can I find out more?

On 12 September 2024, the Australian Government introduced the Aged Care Bill 2024 to Parliament. Once passed, this Bill will become the new Aged Care Act, expected to take effect from 1 July 2025. You can find additional details by clicking the following link. https://www.health.gov.au/our-work/aged-care-act

We are here to help, every step of the way

The proposed reforms to residential aged care and home care are significant. If you’re unsure about your current situation or how these reforms might impact your care situation moving forward, our advisers can put you in touch with Alteris’ Lifestyle and Care team.

Alteris’ specialist division of financial advisers are accredited in aged care advice and can talk you through all available options and explain the various financial considerations. The team can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments. Learn more about Alteris’ accredited aged care financial advisers.

As parents, one of the most valuable legacies you can leave your children is the gift of financial literacy. Providing practical, tailored advice can set your children on a path to financial stability and success.

Here are five essential financial tips to share with your children:

Importance of insurance

Insurance is a critical safety net that protects against unexpected events. Encourage your children to consider various types of insurance:

• Health Insurance: In Australia, while Medicare provides basic health coverage, private health insurance can offer additional benefits, shorter waiting times, and coverage for services not covered by Medicare.
• Income Protection Insurance: This can provide a percentage of their income if they are unable to work due to illness or injury.
• Life Insurance: Especially important if they have dependants, life insurance can provide financial support to loved ones in the event of their untimely passing.
• Home and Contents Insurance: Protects their home and belongings from damage or theft.

Managing cash flow

Effective cash flow management is the foundation of financial health. Guide your children through these steps:

• Create a spending plan: Help them create a realistic plan that includes all their regular income, essential living expenses (housing, food, utilities), savings, and an allowance for discretionary spending (entertainment, travel, hobbies).
• Emergency fund: Encourage setting aside at least three to six months’ worth of living expenses to cover unexpected costs.
• Review regularly: Advise them to review and adjust their spending plan regularly to accommodate any changes in their financial situation.

Setting and achieving financial goals

Goal setting is vital for financial success. Encourage your children to:

• Define clear goals: Whether it is saving for a house deposit, a car, or a holiday, having specific, measurable, and achievable goals can make saving easier and more motivating.
• Short, medium, and long-term goals: Help them categorise their goals to plan appropriately. Short-term goals might include saving for a holiday, while long-term goals could be saving for a home or retirement.
• Regularly review goals: Encourage them to review their goals regularly, adjusting them as needed to stay on track.

Managing and reducing debt

Debt can be a significant financial burden if not managed properly. Share these strategies for effective debt management:

• Understand different types of debt: Explain the difference between good debt (e.g., student loans, home loans) and bad debt (e.g., high-interest credit card debt and car loans).
• Prioritise high-interest debt: Advise your children to focus on paying off high-interest debt first to minimise the amount paid in interest over time.
• Avoid unnecessary debt: Encourage living within their means and using credit cards responsibly.
• Consolidate debt: If they have multiple debts, consolidating them into a single loan with a lower interest rate might be beneficial.
• Seek professional advice: If debt becomes overwhelming, suggest seeking advice from one of our financial advisers.

Understanding superannuation

Superannuation (super) is a crucial part of the Australian retirement system. Superannuation is an asset that you need to take care of, so understanding the principles outlined below is vital:

• Choosing the right fund: Advise them to research and choose a super fund with low fees and good performance.
• Investment options: Educate them on the different investment options available within super funds and the importance of choosing a fund that aligns with their risk tolerance and retirement goals.
• Super contributions: Explain the importance of making additional contributions and taking advantage of employer contributions.
• Regularly review super: Encourage them to check their super statements regularly and make sure their employer is making the correct contributions.

By instilling these financial principles in your children, you are equipping them with the tools needed to build a secure and prosperous future. Financial literacy is a lifelong journey, and the sooner they start, the better prepared they will be when navigating the complexities of the financial world.

Discussing financial literacy and practical tips with your financial adviser can help you create a roadmap that supports your children’s financial future while ensuring your own financial wellbeing remains secure. If you have a friend or family member who could benefit from personalised financial advice and literacy, please reach out to us—we’re here to help.

Interest rate speculation is rife after the Reserve Bank of Australia (RBA) kept rates on hold at 4.35% last month. Economists now predict it may be several months before rates fall. It’s a different story in the United States, where the Federal Reserve slashed interest rates by half a percentage point in September and forecast two more cuts before the end of the year.

Australia’s inflation rate fell to 2.7% in August, down from 3.5% the previous month, marking the lowest reading in three years. Falling petrol prices and energy bill relief helped drive the slowdown. The jobless rate remained steady in August at 4.2%, with the number of unemployed people falling by 10,500 in seasonally adjusted terms. While spending may be down, our net worth rose for the seventh consecutive quarter. Total household wealth was 9.3% higher than a year ago, largely due to rising house and land values. Consumer confidence is also positive, with an increase in the ANZ-Roy Morgan index compared with last year’s figures.

The S&P/ASX 200 index hit an all-time high near the end of the month at 8,862 points, after reaching a low of 7,687 a few weeks earlier. It closed the month at a respectable 8,266, up 2.2% for the month and 7.89% for the year. China’s plan to stimulate its economy has led to stronger commodity prices, with mining and energy stocks being the main beneficiaries.

If there is something affecting your financial situation that you would like to discuss, please do not hesitate to reach out to our team.

Navigating complex family relationships and blended families can be challenging at times and particularly when a family member passes away.

A good estate plan can help to make sure your wishes are carried out. An estate plan, of which a will is the first and most important part, can ensure your estate is distributed in the way you want. It can also help if you become incapacitated, particularly when it includes an enduring power of attorney and a medical power of attorney that indicate who should oversee your affairs and any relevant instructions.

Professional advice is vital in estate planning to make sure that you have considered all the issues, including tax matters, and that your loved ones are protected. It is also important to clearly communicate your wishes, particularly when there are complex family dynamics involved, so that your wishes are clearly understood.

Your adviser would discuss any relevant matters with you. Here is a reminder of some of the issues to consider.

Superannuation

Deciding who gets your super when you pass away is more complicated than deciding what happens to your personal assets like property through a will. This is because superannuation is held in a trust by the super fund’s trustee, not in your name directly.

A binding death benefit nomination should be at the top of your list when you are considering the distribution of your superannuation funds.

This makes certain that your super death benefit is paid to those you choose because without one, the trustee of your super fund will make their own decision.

The nomination is usually valid for three years before it lapses and must be renewed. It’s a good time to review your nomination if your family dynamics change.

Blended families

If you have been married more than once and/or have children with more than one partner, your will helps to effectively provide for those you choose.

You may wish, for example, to ensure that your children receive the proceeds of your estate rather than your spouse or ex-spouse. Alternatively, you may need to ensure your will protects your current spouse from the claims of previous spouses.

When it comes to the family home, the type of home ownership is important. If you have purchased as ‘joint tenants’, the entire asset will pass to the surviving spouse. On the other hand, if you have purchased as ‘tenants in common’, each spouse can distribute their share of the house to others.

You may also wish to include a ‘life interest’ in the home so that your current spouse can continue to live in the home until their death before it ultimately passes to your other beneficiaries.

Trusts

Any existing family trusts should be reviewed with a blended family in mind. Check that the trust deed provides clear instructions for succession, if you want to ensure your children from past relationships are catered for.

Your will can also establish new trusts, known as testamentary trusts, to provide for any dependents with disability, if you are worried that a child may misuse your assets, or to allow for young children.

A testamentary trust can also help to protect your adult child’s interests if they were to divorce a partner or are facing bankruptcy. Any inheritance they receive from you would become part of their property and can be considered in a divorce settlement or called on by creditors.

Handing on a business

If you are in business with partners or would like to hand on the family business to one child but not others, a life insurance policy may be a useful strategy – sometimes known as estate equalisation – to even the distributions from your estate.

In the case of a business partnership, you would name your partner or partners as beneficiaries of the life insurance policy, to effectively ‘buy you out’ of the business. Where it’s a family business due to be handed on to one child, your life insurance would go to your other children to match the value of the business.

Note that it is crucial to continually review the value of the business and the value of the life insurance to ensure they remain current.

Estate planning can be tricky and emotional, particularly when your circumstances are a little more complex. Get in touch with our team of experienced financial advisers to help guide you through the planning stages so that your estate plan meets your wishes and takes account of all the issues.

Occasionally, people want to change aged care homes. Moving to a new aged care home can offer many benefits for residents, such as being closer to family or enhanced services. However, it is crucial for decision-makers to fully understand the financial implications of moving to another aged care facility, especially if the resident’s circumstances have changed since the initial financial assessment by Services Australia.

What are the financial implications?

Potential increase in fees

• Accommodation Costs: The cost of accommodation can differ greatly between facilities. A new aged care home may charge higher accommodation fees, including a Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP). It’s important to compare these costs to understand how they might affect your budget.
• Additional Services: Some facilities offer services or amenities that may come with additional costs. Make sure you are clear about what is included and what extra charges may apply. It is important to note that homes that accept low-means/concessional residents may have lower-quality fittings and fixtures, but the level of care you receive should be the same as homes that do not accept concessional residents.

Reassessment of financial status

Moving to a new aged care home often triggers a reassessment of your financial status by Services Australia’s residential aged care department. If your financial situation has changed since your initial assessment, the outcome of the reassessment can significantly affect the fees you will be required to pay. The reassessment may lead to one of three outcomes:

• No change: If there have been no significant changes in your financial situation, your status will remain the same. For instance, if you were originally assessed as a low means resident, your accommodation cost will be assessed the same.
• Loss of low means status: If your assessed assets have increased, you might lose your concessional (low means) status, resulting in higher fees as you would be classified as a financial resident. This is explored further in the scenario below.
• Change from financial to low means/concessional: If your financial situation has worsened, you might qualify for concessional status, which could lower your fees if the government assessed accommodation contribution is lower than your current DAP.

Scenario: Supported resident transferring to a new aged care home

To highlight the importance of these financial implications, let’s look at a recent case Alteris’ Lifestyle and Care Team handled for a supported resident.

Initial financial status

The resident originally entered permanent care as a partially supported (concessional) resident. They were paying a low Daily Accommodation Contribution (DAC) because while they had a modest level of savings, their former home was exempted from aged care fees, thanks to a Protected Person living there.

Change in financial circumstances

Later, the resident’s financial situation changed when the Protected Person status ended. This meant their home was no longer exempt from aged care fees. While still receiving subsidised accommodation, the change led to an increase in the DAC to the maximum rate of $68.14 per day. Additionally, a means-tested care fee could also apply at this stage.

Impact of moving to a new aged care home

• New Means-Assessment: Upon moving to a new aged care home, a new means-assessment is triggered if it’s been more than 120 days since the original assessment. In our example case, without the protected person status exempting the former home, the resident would now be re-assessed as a financial resident and pay fees at the rate agreed with the new aged care home.
• Accommodation Fees: The resident would then be required to pay for accommodation as a Daily Accommodation Payment (DAP) or Refundable Accommodation Deposit (RAD). Based on an assumed RAD of $500,000 and the current maximum permissible interest rate (8.36%), the DAP would be $114.52 per day.
• Financial Impact: This represents an increase of $46.38 per day above the original maximum accommodation contribution of $68.14 per day. This increase needs careful consideration to ensure it is sustainable for the resident.

Planning

It’s essential to carefully review changes to cash flow requirements and the overall financial situation thoroughly before the move. To comfortably manage the increased accommodation fees over the medium to long term, there may need to be changes, for example, possibly using the former home to pay the DAP/RAD.

We are here to help, every step of the way

Moving to a new aged care home can greatly enhance quality of life, but it’s important to ensure that the resident and their decision makers are fully informed about the financial consequences. Careful planning and consideration of your financial situation will help ensure that your decision supports both your well-being and financial stability.

Our advisers can help by referring you to Alteris Financial Group’s Lifestyle and Care Team. Alteris’ specialist division of financial advisers are accredited in aged care advice and can talk you through all options and explain the various financial considerations. They can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments.

Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.

You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different retirement income options that your adviser will discuss if you or someone you know is approaching retirement. ⁱ

Account-Based Pension

An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.

Some considerations:

• Tax benefits – Investment earnings, capital gains and withdrawals are tax-free, unless you have an untaxed component within your super.
• Payment flexibility – Subject to pension minimums, most super funds allow you to adjust the payment amount and frequency, and even make partial or full lump-sum withdrawals if needed. You can also return to work and continue to receive a pension.
• Longevity and market risks – You might outlive your account balance, especially if your withdrawals are high or your investment returns are poor.

Transition to retirement

A transition to retirement (TTR) strategy allows access to some of your superannuation while still working if you have reached age 60 (based on current rules). ⁱⁱ

Some considerations:

• Flexible work options – You can reduce your working hours and supplement your income from your super.
• Limits on pension rates – Like an ABP, there is a minimum annual pension rate. However, there is also a maximum annual withdrawal of 10 per cent of your TTR account balance.
• Reduced retirement savings – Drawing on your superannuation while still working means your retirement savings might grow more slowly.

Annuities

An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are several types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.

Some considerations:

• Predictable income – Provides a stable income stream, which can be reassuring for financial stability and provide an income for as long as you live.
• Lack of flexibility – Once you purchase an annuity, the terms are generally fixed, and you cannot alter the income amount. There is a restriction on capital withdrawals or in some instances no access to capital at all.
• Inflation risk – Fixed non-inflation-linked annuities may not keep pace with inflation unless specifically indexed to inflation.

Innovative retirement income stream

An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.

Some considerations:

• Age Pension benefits – Centrelink only counts 60 per cent of the pension payments received as assessable income and only 60 per cent of the purchase price of the product counts as an assessable asset until age 84 when it is reduced.
• Certainty – Some IRIS products offer a stable guaranteed income stream, providing financial security.
• No minimum requirements – IRIS products do not require an annual minimum amount, instead just requiring at least one annual payment.
• Complexity – Features vary widely between different IRIS products and may involve complex terms or conditions.

Next steps

Receiving expert financial advice can help retirees to understand the various funding options available to them and whether they align with their lifestyle goals for retirement.

Consulting with your financial adviser can help you understand whether these options suit your personal needs and how they might affect your retirement income. If you know a friend or family member who could benefit from expert retirement planning advice, please contact us so we can assist in structuring a plan to fund the retirement lifestyle they have worked so hard to achieve.

Sources

 i Planning to retire | Australian Taxation Office (ato.gov.au)

ii Transition to retirement | Australian Taxation Office (ato.gov.au)

Employers need to ensure that payroll systems reflect recent legislative changes, while the ATO is highlighting deduction opportunities available to some small businesses. Here is your roundup of the latest tax news.

Update employer obligations

The ATO is reminding employers to stay on top of legislative changes affecting payroll systems.

The Super Guarantee rate increased on 1 July 2024 to 11.5 per cent of ordinary time earnings, so all payments (starting with those for the July to September quarter) to super accounts for eligible workers must reflect the new rate. ⁱ

Individual income tax rate thresholds and tax tables also changed on 1 July 2024, so you may need to check calculations for your Pay As You Go Withholding obligations.

Claims for energy expenses

Many small businesses are eligible for a bonus 20 per cent tax deduction for new assets (or improvements to existing assets) that support more efficient energy usage.

The Small Business Energy Incentive applies to eligible assets first used or installed and ready for use between 1 July 2023 and 30 June 2024. ⁱⁱ

Eligible expenditure on external training courses for employees incurred between 29 March 2022 and 30 June 2024 could also qualify for a 20 per cent bonus tax deduction under the Small Business Skills and Training Boost. ⁱⁱⁱ

Pay less capital gains tax (CGT)

While a business can reduce capital gains made during a tax year by offsetting them with capital losses from the same or previous income years, not all capital losses are eligible. ^iv

Capital losses carried forward from previous years need to be used first, with losses from collectables (such as artwork and antiques) only permitted to offset capital gains from collectables.

Losses from personal use assets (such as boats or furniture), CGT-exempt assets (such as cars and motorcycles), paying personal services income to yourself through an entity you set up, and leases producing income (such as commercial rental property) are ineligible as offsets.

Fuel tax credit rates change

Before claiming fuel tax credits in your next Business Activity Statement (BAS), check that you are using the latest rates, as they have changed twice in the new financial year. ^v

On 1 July 2024, the rate for heavy vehicles travelling on public roads changed due to an increase in the road user charge. The rate changed again on 5 August 2024 due to a change in fuel excise indexation.

Different rates apply based on when you acquired fuel for your business use, so ensure you use the correct rate. If you are unsure, try the ATO’s online Fuel Tax Credit Calculator to work out the amount to report in your BAS.

Records essential for rental expense claims

Rental property investors without correct documentation to substantiate their expense deductions may find their claims declared invalid. ^vi

The ATO is warning investors they need all receipts, invoices, and bank statements plus details of how deductions were calculated and apportioned for a valid claim.

Lodging a ‘nil’ BAS

While taxpayers registered for GST automatically receive a BAS and are required to lodge and pay in full by the due date, businesses with nothing to report are still required to lodge.

If you have paused your business, you are required to lodge a ‘nil’ BAS by the due date either online or via the ATO’s automated phone service. ^vii

By taking proactive measures, staying informed, and seeking professional financial advice, you can navigate the evolving landscape of personal and business tax compliance with confidence. Our financial advisers can work with you to understand your tax situation and safeguard your financial wellbeing.

Sources

i How much super to pay | Australian Taxation Office (ato.gov.au)

ii Small business energy incentive | Australian Taxation Office (ato.gov.au)

iii Small business skills and training boost | Australian Taxation Office (ato.gov.au)

iv Pay less capital gains tax (CGT) | Australian Taxation Office (ato.gov.au)

v From 1 July 2024 to 30 June 2025 | Australian Taxation Office (ato.gov.au)

vi ATO warning to rental property owners: don’t let your tax return be a ‘fixer-upper’ | Australian Taxation Office

vii Cancelling your GST registration | Australian Taxation Office (ato.gov.au)

Welcome to spring, a season that can inspire personal, business, and financial renewal. We hope you enjoy the sunshine and warmer weather.

Global stock markets—including the ASX—largely stabilised by the end of August after a turbulent month.

It was a rocky start, with global markets plummeting following news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the drama, the S&P/ASX 200 closed 1.28% higher for the month, marking a gain of just over 10% for the year to date.

A slight drop in inflation, down to 3.5% in July from 3.8% the previous month, had investors watching the Reserve Bank’s reaction. However, most economists agree that there’s little chance of an interest rate cut this year. The Reserve Bank of Australia (RBA) is not expecting inflation to reach its preferred levels until late 2026 or early 2027.

While the cost of living has dropped slightly, partly due to $300 federal government rebates on electricity bills, wages have risen. The Australian Bureau of Statistics reports that wages increased by 4.1% in the year to June, meaning that wages are now keeping pace with the cost of living.

The good news from the market and inflation data contributed to a small upswing in consumer confidence, although there is still much ground to recover after the losses caused by COVID-19.

If there is something affecting your financial situation that you would like to discuss, please do not hesitate to reach out to our team.

If you’re planning for retirement, you’re probably wondering if you’ll have enough saved to give up work and retire comfortably, especially with the rising cost of living affecting basic expenses like energy, insurance, food, and healthcare.

Fortunately, there is already a guide available to help you plan. The Association of Superannuation Funds in Australia (ASFA) updates its Retirement Standard annually, offering a breakdown of expenses for two lifestyles: modest and comfortable. ⁱ

Based on our average life expectancy – for women it is just over 85 years and men 81 – if you are about to retire at age 67, you will have between 14 and 18 years in retirement, on average, depending on your gender. ⁱⁱ

ASFA found that a couple needs $46,944 a year to live a modest lifestyle and $72,148 to live a comfortable lifestyle. That’s equal to $902 a week and $1,387, respectively. The figure is, of course, lower for a single person—$32,666 for a modest lifestyle ($628 a week) or $51,278 ($986) for a comfortable lifestyle. ⁱⁱⁱ

What does that add up to? ASFA estimates that, for a modest lifestyle, a single person or a couple would need savings of $100,000 at retirement age. For a comfortable lifestyle, a single person would require $595,000 and a couple would need at least $690,000 at retirement age. ^iv

A modest lifestyle means being able to afford everyday expenses such as basic health insurance, communication, clothing, and household goods but not going overboard. The difference between a modest and a comfortable lifestyle can be significant. For example, there is no room in a modest budget to update a kitchen or a bathroom; similarly overseas holidays are not an option.

The rule of thumb for a comfortable retirement is an estimated 70 per cent of your current annual income. ^v (The reason you need less is that you no longer need to commute to work, and you do not need to buy work clothes.)

Building your nest egg

So how can you build up a sufficient nest egg to provide for a comfortable life in retirement? There are three main sources: superannuation, pension, and investments/savings. Superannuation has the key advantage, due to the money in your pension being tax free in retirement.

Your superannuation pension can be augmented with the government’s Aged Pension either from the moment you retire or later when your original nest egg diminishes.

Your income and assets will be considered if you apply for the Age Pension, however, even if you receive a pension from your super fund, you may still be eligible for a part Age Pension. You may also be eligible for rent assistance and a Health Care Card, which provides concessions on medicines. ^vi

We understand that building wealth leading into retirement can be challenging. Our financial advisers can work with you to create a plan that will align with your goals and help grow your nest egg leading into retirement.

Money keeps growing

It’s also important to remember that the amount you accumulate up to retirement will still be generating an income, whether its rentals from investment properties or merely the growth in the value of your share investments and the accumulation of money from any dividends paid.

You can also continue to add to your superannuation by, for instance, selling your family home and downsizing, if you have lived in the home for more than 10 years.

If you are single, $300,000 can go into your super when you downsize and $600,000 if you are a couple. This figure is independent of any other superannuation caps. ^vii

Planning for a good life in retirement often requires just that – planning. If you would like to discuss how retirement will work for you, contact our financial advisers. Our team can discuss strategies and create a plan to help grow your wealth and build towards a fulfilling retirement.

Sources

i Retirement Standard – Association of Superannuation Funds of Australia 

ii Life expectancy, 2020 – 2022 | Australian Bureau of Statistics (abs.gov.au) 

iii https://www.superannuation.asn.au/media-release/retiree-budgets-continue-to-face-significant-cost-pressures

iv https://www.superannuation.asn.au/resources/retirement-standard/

v https://www.gesb.wa.gov.au/members/retirement/how-retirement-works/cost-of-living-in-retirement

vi Assets test for Age Pension – Age Pension – Services Australia

vii Downsizer super contributions | Australian Taxation Office (ato.gov.au)