Happy New Year from all the team at The Investment Collective.

What is your New Year’s resolution? Is 2018 the year you achieve it? I’d like to say that the odds are on your side, however, statistics from 2016 show that only about 8% of people achieve their New Year’s resolutions.

Setting goals is always tricky. Many New Year resolutions are either financial or fitness related. Financial and fitness goals are challenging at the best of times, especially if sacrifices or a change in regular behaviour need to be made. Is there another approach?

Setting only one goal will allow you to focus all your energy on achieving a positive outcome. Your financial New Year’s resolution may, for example, involve paying off a credit card. Setting up a regular cash transfer from your spending account after each payday will gradually reduce the amount you owe. These small steps will help in the long run to pay off the credit card by the end of 2018.

Paying off your mortgage is a big hairy audacious goal (BHAG) and an unlikely achievement in one year. However, you can make some simple steps to reduce years of repayments and thousands in interest. Firstly, get your mortgage reviewed from one of our mortgage specialists. Our team will compare a range of lenders to find you the best offer. Secondly, set a monthly repayment amount that is above the minimum required mortgage payment.

Have you set a fitness goal? The same way you consult a financial adviser to help you reach your financial goals, I suggest talking to an expert who can assist you step by step to help you achieve your fitness goals.

Personally, I have only set one goal that is not a BHAG – I’m getting married next year! My goal is to save an additional $10,000 before the wedding. I have also stepped out how I’m going to achieve this goal. The wedding is in one year, so I have a definitive timeframe. My goal is $10,000 and I intend on saving an additional $200 per week. To help me reach this goal, I have taken on an additional job that is flexible and manageable.

As you can see, each step is measurable, time-based and realistic. 2018 is the year I will achieve my goal. Will you achieve your goals, whatever they may be?

Please note this article is prepared as general advice only. It has not taken into account your personal circumstances or financial goals. If you would like financial advice tailored to help you achieve your goals, please contact us and talk to one of our friendly advisers today.

Small business forms a significant part of the Australian economy. You may recall that one of the focuses of the 2016-17 Federal Budget included a raft of initiatives to simplify tax and compliance, encourage investment and increase the level of economic activity in our economy.

Australian small businesses employ over 3 million workers and added over $340 billion in 2013-14 to the Australian economy[1] it is therefore crucial for all levels of government to support small businesses, however, ultimately the buck stops with you.

So what can you do to make your business more successful?

1. Review your business.

Taking the time to stop and analyse your current business and areas of improvement, could lead to new ideas, new revenue streams and a reduction in costs.

Reviewing market trends and other factors affecting your business will help you to innovate and be a step ahead of your competitors.

2. Overstocked?

Business owners are enticed to buy in bulk and save, failing to recognise that excess stock will have additional costs, including the requirement for additional storage space, the increased likelihood of perishables, and in many cases, increases in the funding costs required to pay suppliers.

Implementing a policy of buying stock when needed will keep stock refreshed, reduce the need for storage space and improve cash flow.

3. Keep a close eye on your debtors.

It’s great making sales or providing a service on credit, but not chasing up money owed will lead to greater losses. Have a look at your outstanding debtors right now, did you realise that there was so much money outstanding? You should be looking at this weekly; if your customers think they can get away with not paying you, they will!

The information provided is general advice only. It has not taken into account your objectives, financial situation or need. If you would like to learn more or receive more tailored advice, uur business consulting team are experts in the small to medium enterprises (SMEs). If you would like to have a free consultation regarding your business needs, contact The Investment Collective today.

Funding your children’s education expenses can be costly. The money you spend on your kids’ education could be one of your family’s biggest expenses.

Research conducted by The Australian Scholarships Group (ASG) on education costs, provides some context. The research is based on a child starting pre-school today and suggests that opting for the private school route from Prep – Year 12, will set you back a cool $367,569 per child. Even if you decide on a government school for primary years and private for secondary, you will still need to come up with $244,822. Ouch!

For most families, at the time when kids are starting out at school, household budgets are already stretched with mortgage repayments, bills and living expenses proving challenging enough. What this means is that some careful forward planning is required to make sure you have enough money to give you, and your children, the full array of options for education.

Here are 5 tips to consider:

1. Plan for your children’s education.

It is important to have the discussion with your partner, do your research and estimate how much it is going to cost you. Open up dialogue with your better half about what you want your children’s education to look like is the number one priority. Is it through Private or Government schooling? Do one of you want to send them to the school you attended as a child? Does your child have any special needs? The sooner you have these conversations the better.

All schools have websites. Check out those that you’re interested in. Most should include information about fees and advise you whether there is a waiting list.

There is a heap of great resources out there to help you on your way. The ASIC Money Smart website and the Australian Scholarship Group’s online calculator are a couple to try out.

2. Start saving early!

Like any other long-term savings goal, the sooner you start, the better! The best time to start saving is when your child is born or possibly even earlier. Make a budget and decide how much you can put aside each week. Look to increase the amount each year to ensure you’re keeping pace with inflation.

To get you started there are a few ways you can go about it. It could be as simple as setting up a direct debit from your everyday account into your savings. You could also make a lump-sum contribution, such as your annual tax return or end of year bonus.

The sooner you start, the longer you reap the rewards of compounding interest.

3. Structuring things right and invest in the name of the parent earning the lower income.

If one member of a couple isn’t working and staying at home to look after young children, or working part-time, chances are their marginal tax rate is low. Therefore, holding investments or savings accounts in their name may be of benefit. Keep in mind any future plans of that person returning to full-time work.

4. Once you have a little bit of savings behind you, look to get that money working harder for you.

An investment in blue chip Aussie shares and managed funds can be a great way to accelerate your savings. Bear in mind that these investments are riskier than leaving your money in the bank and that you won’t get rich overnight. A 5 year plus time frame is appropriate.

An alternative investment vehicle is the use of Investment Bonds or Tax Paid Bonds as they are sometimes referred too. They provide a variety of investment options such as shares, property and fixed interest. The reason why investment bonds are referred to as a tax paid investment is because any earnings get taxed at the company tax rate of 30% within the investment.  As long as money remains invested for 10 years, the investment provider pays the tax on the investment earnings so you don’t have to report the earnings in your tax return.  If you withdraw before 10 years, then you would need to include earnings in your personal income tax return.

Note – minimum investment amounts and costs such as brokerage, or entry and ongoing management fees will apply with the above-mentioned investments.

5. An alternative – saving in an offset account against your home loan.

Another simple, but potentially a very effective way of saving for education costs is through your home loan. An offset account allows you to make extra repayments into a bank account attached to your home loan. It operates much like a normal bank account with some special features. Namely, the amount you have in the offset account effectively reduces the loan balance the bank uses to work out your interest payable on your home loan. For example, if you have a home loan of $300,000 with $100,000 in an offset account, the bank calculates interest based on only $200,000.

The money you have in an offset account is generating an after-tax return equal to the interest rate of your home loan. For instance, if your bank is charging you 5.00% interest on your loan, the funds in your offset account save you this rate of interest being charged. If you compare this to saving money in an ordinary bank account, the bank may (if you’re lucky) pay you 3.00% interest on your savings, from which you still need to pay tax.

The key to using this option is discipline. Money in an offset account can often provide a temptation to use the money for other purposes; renovations, car upgrades, holidays etc. If you plan to use these funds in the offset account to save for education costs, then you must resist temptation.

My advice is to start early, work out how much you will require for education costs, how much you will need to save to get there and then select the appropriate savings vehicle. Seek the help of a good financial planner to set you on the right path.

Are you interested in planning for your children’s education? Are you currently juggling education costs and need a plan yesterday? Contact our office for your free initial consultation. Call our office today, toll free on 1800 679 000 for our Rockhampton office and 1800 804 431 for our Melbourne office.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s Individual objectives, financial situation or needs.  Before acting on anything in this article you should consider if it is appropriate for you, having regard to your objectives, financial situation and needs.

Business owners are usually aware of the need to protect assets such as the business premises, plant & equipment, vehicles and stock via general insurance.  However, few owners consider the risks to the future of the business by not appropriately covering its most important asset – the people within the business!

Business owners should also contemplate the financial loss if personnel responsible for the equity, credit or ongoing revenue exit the business unexpectedly due to sickness, accident or death.

Business risk protection strategies for key personnel within a business include:

Buy/sell protection; Also known as partnership protection.  Allows shareholders in a business to insure for the value of their equity to cover death, total & permanent disability or serious medical conditions such as heart attack, cancer stroke etc.  If a partner suffers from an insurable event and exits the business, the proceeds of a claim will be paid to the disabled owner, or their family in the event of death.  The cover will ensure that the departing owner or family receive fair value for their share.  In addition to the insurance, a legally binding buy/sell agreement should be completed by the shareholders.  The buy/sell agreement or ‘business will’ provides the legal mechanism by which the shares of the deceased/disabled owner can be acquired by the surviving shareholder.  Buy/sell cover is a vital part of your business succession planning, as it ensures that the ongoing ownership and control of the business remains in the hands of the original shareholders.

Business Loan cover; In order to obtain a loan or credit facilities from a bank, business owners will need to provide guarantees, and may use business &/or personal assets to secure the debt.  The debts are usually ‘at call’ and the bank can request payment in the event of the death or incapacity of the guarantor.  By obtaining adequate cover, their guarantees/securities are protected, and the surviving business owner(s) &/or family will not have to sell off assets to clear the debt.

Revenue protection cover; Also known as key person cover. The loss of a key person due to disability or death may create costs to locate, recruit and train a replacement, and result in a loss of revenue until the new staff member is operating at the capacity of the disabled or deceased employee.  This cover will offset the replacement costs and the expected reduction of revenue until the business can recover from the loss of the key person.

Business overheads cover; Provides the replacement of the fixed operating costs of a business if the owner is unable to work due to sickness or injury. Overheads which are covered include loan repayments, rent, utilities and salary costs.

Please note that this has been prepared as general advice. It has not taken into account your personal or business circumstances, insurance needs or current coverage. If you would like to learn more about business insurance, contact one of our Risk Advisers today.

Small businesses are vital to our economy and their sale can help fulfil their owners’ retirement dreams.  Since September 1999, there have been a number of Small Business Capital Gains Tax (CGT) Concessions available to allow business owners to cash in on years of hard work, blood, sweat and tears.  However, it is important that these concessions are correctly navigated; otherwise, there is a good chance that the “Taxman” will walk away with a big chunk of your hard work.

Business and Active Assets

The CGT provisions give a number of concessions to clients who sell a business or active business assets.  An active asset is:

• an asset the taxpayer owns and uses or holds ready for use in carrying on a business and has been active for the lessor of 7.5 years or 50 percent of its life;
• an intangible asset inherently connected with the business (e.g. goodwill); or
• an interest or shares in a resident company or trust where the market value of the underlying active asset is up to 80 percent of total assets for at least half of the ownership period of the interest/shares.

Eligibility

To be eligible for the concessions the following conditions must be met:

• you are an individual, partnership, company or trust;
• you are carrying on a business;
• you are a small business, defined as having an aggregate annual turnover of less than $2 million; and
• your net assets value plus the net asset value of the client’s associates must be less than $6 million (excluding home, personal use assets, life policies and superannuation.

The Concessions

15-year Exemption

If the business or active asset was owned continuously for 15 years, and you are over age 55 and retiring, you can sell the asset or business without being assessed for capital gains.  In our example above, the Smiths would be able to take home $270,000 each.

50% Active Asset Reduction

There is a 50 percent reduction on the capital gain from the sale of an active asset or business.  This is in addition to the 50 percent CGT discount if the asset has been held for 12 months or more.  If Mr and Mrs Smith implement this strategy they would incur a $43,875 tax bill and take home $496,125.

Retirement Exemption

A client can elect to have a capital gain of up to $500,000 from the sale of an active asset or business treated as a superannuation benefit payment.  If you are under 55, then this amount must be contributed into a superannuation fund and will add to the tax-free component. Once you reach the age of 60, all superannuation benefits are exempt from the tax, provided you meet the conditions of release.  This strategy can be applied after the CGT discount and would allow the Smiths to contribute $135,000 to each of their superannuation accounts.

50 percent Asset Reduction + Retirement Exemption

If you have multiple business assets that you wish to sell to fund your retirement, you may be at risk of exceeding the $500,000 limit.  To circumvent this limitation, it is possible to apply the 50 percent asset reduction as well as the Retirement Exemption.  This strategy allows the Smiths to contribute $67,500 to each of their superannuation accounts, providing breathing room for an additional contribution of $432,500 to each down the track.

Rollover

If you sell an active asset, you can defer all or part of the capital gain for two years.  You can defer this even longer if you utilise the proceeds to acquire a replacement asset, or if you spend money to improve an existing asset.  This concession can also be applied after the 50 percent asset reduction.

It is vital that your personal financial position is carefully analysed when considering these concessions, as the above is provided as general advice only and should not be taken to be personal advice. Even if your circumstances are similar one of the above examples, please speak contact us to a business consultant today.

The last thing you want is to see the proceeds of your hard work end up at the ATO when you had access to professionals that could have navigated you through this tricky process.  So if you are a small business owner with an eye on retirement, please come in to see one of our helpful Consultants or Financial Advisers to get a plan specifically tailored to your financial goals and objectives.

As with every aspect of our business, there is no greater importance than the opportunity to strengthen our relationships with clients by helping them navigate towards their financial goals.  Quite a number of our clients are business owners and it has been an exciting year for our business consulting team, which provides business advisory services for all sorts of challenges faced by owners and managers.   Current projects have drawn us into the agriculture, digital media sharing, solar power, consulting, and construction industries.

Late last year we were approached to establish and raise capital for a start-up engineering firm in Brisbane.  The first few months of the project involved us working with the Managing Director conducting a thorough analysis of expected future costs and revenue.  We analysed the industry’s dependence on broader macroeconomic factors such as commodity prices and Government expenditure. Once we had a clear picture of the expected performance of the firm, we prepared an Information Memorandum ready to present to potential investors.  We are now assisting the client in finding investors.

Some time ago, we were engaged to facilitate the sale of an extremely successful building materials manufacturer.  The business’s directors have spent over a decade growing the business in a rapidly growing market and are ready to reap the rewards of their hard work.  We built a financial model for the business and prepared an accompanying Information Memorandum ready for presentation to potential purchasers.  We also prepared a contingency plan, in case we could not find a buyer willing to commit to suitable terms.  In that case, we will look to recapitalising the business and installing new management.  The processes take time – you have to be tenacious to see it through, and not panic when faced with various setbacks.  Our personal and professional experience is completely aligned with these requirements and we are confident of achieving an excellent outcome for all involved.

A successful grain and oilseed farming enterprise required our assistance after separating from the previous ownership structure.  Our responsibilities broadened as the enterprise began to encounter financing restrictions and flooding of their crops.  Luckily, we had already built a detailed financial model that facilitated the preparation of contingency plans including seeking additional financing.  Our consulting team also investigated and completed an application to receive “cheap” funding from the NSW Rural Assistance Authority Farm Innovation Fund to build a much-needed machinery shed.  Now, eight months into their new cropping season, our clients’ business is completely stand-alone and this year’s crops are looking very promising.

As with our financial planning work, our help for businesses is hands-on.  We do our homework properly, and we get involved.  We are a professional resource, a trusted advisor and a friend to lean on.  We do not give up and our team is always available.

The above are just some examples of what The Investment Collective can do for you and your business. It has not taken into consideration your business or your business’ needs. Contact us today for a consultation where your personal financial circumstances and business goals will be discussed in more detail and advice will be customised to your current situation.

Your home loan is most likely your largest financial commitment over the period of your working life. Given the ever-increasing variety and complexity of products, it makes sense to review your mortgage every couple of years. Considering the suitability your mortgage regularly will ensure that your home loan keeps up to date with your changing needs and priorities.

Examining your home loan regularly is a sensible practice which could potentially save you a significant amount of money through reduced interest rates and loan fees, or by obtaining an improved loan product which offers the benefits of offset accounts and greater flexibility.

Refinancing your home loan to consolidate personal loans and credit card debt, may also free up your cash flow by accessing a lower interest rate. If you are looking to renovate your home, or borrowing to invest, you could also consider unlocking some of the equity in your home by refinancing.

If your existing home loan has not been reviewed for some time, your current interest rate may be much higher than the competitive rates offered by other providers. If your loan was previously at a fixed rate, it may have defaulted to a much higher variable rate on the expiry of the fixed rate period.

In the event that your financial situation has improved, or if your credit score has increased since you had applied for your home loan, you may be eligible for more favourable terms, or improved features with another loan.

Alternatively, you may have signed for your loan on an ‘introductory’ or ‘honeymoon’ rate. These reduced rates typically revert to a higher rate at the end of the discount period, and may include termination fees, should you decide to switch lenders.
As we have been in a record low-interest rate environment for some time, rates are more likely to increase over the longer term. We have noticed in recent months that some banks are increasing interest rates outside of the Reserve Bank of Australia’s cycles. If you are concerned about interest rate increases, you may wish to ‘lock in’ a fixed rate on all, or part of your home loan.

In addition to offset accounts, which will reduce your interest payments, many providers also offer the ability to make additional payments without any penalties. A handy feature to consider on your loan is the ability to be able to withdraw extra payments that you have made. A redraw facility may be beneficial if you need to access funds for one of life’s many surprises. Having a home loan with flexibility should your circumstances change, can provide the ability to access funds as required, or repay your loan much faster.

Before deciding on refinancing, consider the following:
• Are there any penalties or break costs when refinancing your home loan?
• What are the legal and administrative fees to discharge your current loan?
• What are the establishment fees and ongoing costs with a new loan?
• Should I apply for a variable rate, or fix all, or part of my loan?

At The Investment Collective, our mortgage broking team is able to compare home loan providers and determine the costs and benefits of reviewing your home loan. If you, or someone you know, would like to discuss lending needs, or review their current home loan, please do not hesitate to contact one of our lending specialists for a free, no obligation consultation.

Please note that the above information has been prepared as general advice only. It has not taken into account your personal financial situation or financing needs. In order to get tailored advice, specific to your circumstances and financial needs, please contact either office to set up an appointment.

Happy New Financial Year! To celebrate the new financial year, here’s a tip: Tax planning doesn’t start in June. If you want to increase the likelihood of a ‘good tax year’ this year, tax planning starts, well…now.

Here’s a few things to keep in mind:
1. Contribute as much as you can to your retirement nest-egg. In addition to the 9.5% your employer puts into superannuation, think about adding to this (up to a total of $25,000). Starting now, you probably won’t miss the money, and you could save tax.
2. Have a place to store your tax deductible receipts. There’s nothing that wastes your time more than hunting down all your receipts for the financial year in June!
3. Buy tax deductible assets earlier in the financial year. This is because the amount you can claim for these assets depends on how long you’ve held the assets. Buying a new computer on 29 June doesn’t give you much of a tax deduction.
4. Don’t buy or invest in anything just for the tax deduction. It’s the wrong reason.
5. Get a good accountant, and, of course, a good financial advisor (you know where to find a good one!)

Good luck!

Please note this advice is prepared as general advice only. It has not taken into account your personal financial objectives, current situation or future financial needs. If you would like more tips or specialised advice, or to hear about how the above advice could apply to you, please contact one of our skilled and friendly financial advisers today.

A power of attorney is a legal document that allows another person, the attorney, to act on your behalf to make financial decisions for you.  For example, an attorney may sell real estate, buy & sell shares or use money in your bank account to pay your medical bills.

It is crucial to make a power of attorney before you need it because once you have lost mental capacity you cannot make a power of attorney because, for it to be effective, you must be able to fully understand what you are signing.

Just picture this…

Your spouse suffers a stroke and is hospitalised.  The medicos inform you that he is suffering from memory loss and the prognosis is not good.  Some weeks later his condition worsens; he loses mental capacity and is transferred into full time care.

You live on a farm outside of town which you are now forced to sell to enable you to purchase a small unit in town to be close to your spouse and to also meet ongoing medical bills.

You make an appointment with a solicitor to affect the sale of the farm.  The solicitor tells you that as you and your husband own the farm in joint names, both of you need to sign the necessary documents.  You explain your husband’s situation to the solicitor, to which they reply; “that’s ok, we can exercise his Power of Attorney, so you can sign on his behalf”.

Your heart suddenly skips a beat as you realise that you and your husband never got around to getting that power of attorney organised after being prompted by your financial adviser every time you’ve seen them over the last half a dozen or so years.

In the above scenario, it is too late for the husband to get a power of attorney as he has lost mental capacity.  The only way to sell the farm now is to make an application for the appointment of a Guardian through the Guardianship Tribunal.  This process can take several months as the tribunal gathers all evidence, makes enquiries and holds a hearing in which a decision to appoint a Guardian is made.

All of this stress and running around, in a traumatic time of your life, could have easily been avoided by having an Enduring Power of Attorney in place.

An Enduring Power of Attorney provides you with the knowledge that your affairs will be managed by someone that you have chosen and can trust to act in your best interests.  An Enduring Power of Attorney can commence immediately or on a pre-determined date in the future or alternatively, upon you losing mental capacity due to: dementia, Alzheimer’s, an accident or illness.

You should appoint someone you trust absolutely and your attorney must also:

• Be over 18 years of age
• Have mental capacity
• Not be bankrupt, and
• Not be your health care provider or a paid carer

You should also consider appointing more than one person in case the first attorney appointed is unable to act for some reason.

So, get that power of attorney in place so you can save yourself the stress.

This above advice is provided as general advice and should not be interpreted as personal advice. If you would like to discuss the suitability of a power of attorney for yourself or someone you know, or to discuss how to/who to set up a power of attorney, don’t hesitate to contact our friendly staff today for a free initial consultation.

What are the aged care options?

• Help at home

Subsidy is available from the government for home care services.   Your adviser will be able to provide you with further information about these services (they are not the subject of this article).

• Care through an aged care facility

Residential aged care provides care on a permanent basis or for a short stay known as respite.  There are different levels of care available and range from a fairly independent lifestyle through to 24 hour nursing care.

What are the costs of entering an aged care facility?

You must first be assessed by an Aged Care Assessment Team (ACAT) to identify your eligibility to receive care and which services you will need.

The costs of entering and living in an aged care facility include:

• Accommodation Contribution (Refundable Accommodation Deposit – “RAD”)
• Daily Accommodation Payment (“DAP”)
• Basic Daily Fee
• Means Tested Care Fee

How much will I need to pay?

The facility will charge you an accommodation contribution, or if your income and assets are below the prevailing threshold, the government will pay your accommodation costs.

If you have been assessed as having the financial means to support your own aged care, the accommodation contribution may be paid by RAD or by DAP or a combination of the two.  Interest charges may apply for any outstanding accommodation payment and residents must be left with at least a minimum amount of assets.  As an example, if your accommodation payment is $300,000 you may pay this:

• in full as by RAD; or
• by DAP; or
• a combination, say $150,000 by RAD and the remainder by DAP.

Every aged care resident will pay the same basic daily fee.  This is a fixed fee, indexed semi-annually for inflation.

The Means Tested Care fee applies only to residents whose assets exceed the asset threshold at the time and it is also paid at the maximum rate if the resident does not complete an annual Assets and Income Review with the Department of Human Services.

How can I get help to make my financial decision?

Contact an adviser at The Investment Collective to assist you in making your decision about aged care so that you have the best financial outcome.  Information is also available on the internet at https://www.myagedcare.gov.au/

Please note the information provided in this article is general in nature only. It has been prepared without taking into account your individual objectives, financial situation or needs. Before acting on anything in this article you should speak with your financial adviser to discuss whether it is appropriate to you in regard to your objectives, financial situation and current aged care needs. An adviser at The Investment Collective to assist you in making your decision about aged care so that you have the best financial outcome. Some of the details in this article may fluctuate from state to state and it is best to speak to an adviser about your specific circumstances before considering any of this information.