On Tuesday 9 May 2017, the Treasurer, Scott Morrison, released the Government’s 2017-18 Budget.

This year’s Budget won’t significantly impact retirees; however, there were plenty of changes announced that could affect you. For further information regarding these proposed changes, speak to your financial adviser who will look at your personal circumstances and assess how you will be affected.

It’s important to note that at this point in time, these proposed measures are not yet law and may be subject to change.

Superannuation

Additional super contributions for downsizers

From 1 July 2018, individuals aged 65 and over will be able to make an after-tax super contribution of up to $300,000 ($600,000 for couples combined) from the proceeds of the sale of their home. This measure will only apply following the sale of a principal home held for a minimum of 10 years.

This new measure will not attract any special Centrelink treatment but it will allow eligible individuals to make contributions above the super caps, without being subject to work or age test requirements.

First home super saver scheme

To reduce pressure on housing affordability the Government will allow voluntary superannuation contributions to be withdrawn for a first home deposit.

• From 1 July 2017, individuals can make voluntary contributions of up to $15,000 per year, up to $30,000 in total, to superannuation for the purposes of this measure. Voluntary contributions can be made before or after tax and are subject to the relevant contribution caps.
• From 1 July 2018 those voluntary contributions (along with deemed earnings) can be withdrawn for a first home deposit.
• Withdrawals will be taxed up to an individual’s marginal rate, less a 30% offset. Withdrawals of after-tax contributions will not be taxed.

Social security

Pensioner Concession Card reinstatement

From 9 October 2017 the Government will reinstate the Pensioner Concession Card (PCC) for former pensioners who lost their Age Pension as a result of the 1 January 2017 Age Pension changes. Those affected will receive the PCC and retain the Commonwealth Seniors Health Card, to ensure they continue to receive the Energy Supplement. Where they received the Low Income Health Care Card, that card will be deactivated.

Energy Assistance Payment

From 26 June 2017, the Government will make a one-off Energy Assistance Payment of $75 for single recipients and $125 per couple for those eligible for qualifying payments on 20 June 2017, and who reside in Australia. The payment is not taxable and will not be counted as income.

Qualifying payments include:

• Age Pension
• Disability Support Pension
• Parenting Payment Single
• Veterans’ Service Pension, Veterans’ Income Support Supplement, Veterans’ disability payments
• War Widow(er)s Pension, and permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 (including dependent partners) and the Safety, Rehabilitation and Compensation Act 1988.

Revised residency requirements for pensions

The Government will revise the residency requirements for claimants of the Age Pension and the Disability Support Pension (DSP) from 1 July 2018. Generally, claimants will now need to have 15 years of continuous Australian residence before being eligible to receive the Age Pension or DSP unless certain conditions or an exemption applies.

Working age payments reforms

The Government will progressively consolidate seven working age payments and allowances into a new JobSeeker Payment or transition recipients to Age Pension.

The working age payments affected are:

• Newstart Allowance
• Sickness Allowance
• Widow Allowance
• Partner Allowance
• Widow B Pension
• Wife Pension
• Bereavement Allowance.

If you are receiving one of these payments, speak with your financial adviser to find out how these changes may affect you.

Liquid assets waiting period increasing

From 20 September 2018, the period that a person must wait before being paid an allowance (for example Newstart), if they have ‘liquid’ assets will increase from 13 weeks to 26 weeks.

Family Tax Benefits

The Government will continue to keep the Family Tax Benefit (FTB) payment rate fixed until 1 July 2019. Indexation in line with the Consumer Price Index will resume from that date.

From 1 July 2018, all families with total income over $94,316 will have their Family Tax Benefit (FTB) Part A reduced by 30 cents for every dollar above $94,316.

Tax
0.5% increase in Medicare levy

From 1 July 2019, the Medicare levy will increase by 0.5% to 2.5% of taxable income. The increase ensures the National Disability Insurance Scheme (NDIS) is fully funded.

Increase to Medicare levy low-income thresholds

The 2016-17 financial year Medicare levy low-income threshold will be increased as follows:

Reduced residential property deductions

From 1 July 2017, the Government will no longer allow deductions for travel expenses related to inspecting, maintaining or collecting rent for residential rental property. However, investors can continue to deduct those types of expenses incurred by third parties such as real estate agents and property management services.

In addition, from 1 July 2017, depreciation deductions on plant and equipment (for example dishwashers and fans) will be limited to outlays actually incurred on residential properties. For plant and equipment purchased after 9 May 2017, deductions are claimable over the effective life of the asset only by the investor who bought the items.

For investors with existing investments as at Budget night, grandfathering rules will apply, broadly allowing deductions to continue until either the investor no longer owns the asset or the asset reaches the end of its effective life.

Aged care

The Government will make a number of changes over the next two years impacting the operation of aged care, including extending the Commonwealth Home Support Program, Regional Assessment Services funding arrangements and palliative care services.

The programs contribute to essential home support services, such as meals, personal care, nursing, domestic assistance, home maintenance, and community transport to assist older people who would like to remain in their home for care.

Small business

Extending the immediate deductibility threshold for small businesses

The Government will extend the accelerated depreciation rules for small businesses by 12 months to 30 June 2018. This allows small businesses, with aggregate annual turnover of less than $10 million, to immediately deduct purchases of eligible assets up until 30 June 2018, provided the asset costs less than $20,000. Assets valued over $20,000 or more can be depreciated at 15% in the first income year and 30% each income year thereafter.

Foreign investors and property

From 7.30pm on Tuesday 9 May 2017 there will be a number of changes affecting property investments by foreign residents. These include an additional charge if the property is left vacant for more than six months in a year, the removal of the main residence capital gains tax exemption (for properties purchases after Budget night) and from 1 July 2017, a 12.5% capital gains tax withholding regime for property transactions of $750,000 or above.

To find out more about these proposed changes and how they may affect you, speak to your financial adviser. Contact The Investment Collective today.

Women face unique challenges when it comes to retirement savings. Time out of the workforce to care for children is likely to affect your income and your ability to accumulate superannuation.

Here are some simple strategies that make it possible for women to overcome these hurdles.

Government Co-Contribution

• If you earn less than $36,021 during the 2016-17 financial year and contribute $1,000 of your own money to super, the government will put $500 in your fund shortly after you submit your tax return – a sweet 50% guaranteed return!
• In addition, if you earn less than $37,000 you will have your super contributions tax refunded to your fund to a maximum value of $500.

Spousal Contribution

• This is a fantastic and under-used strategy particularly for women working part-time which will provide your spouse with a handy tax break. It works like this… If you are earning less than $10,800 a year, get your partner to make a $3,000 contribution into your super and receive a $540 tax rebate.
  • Note: the spouse income threshold will rise to $37,000 from 1 July 2017 making this strategy more accessible and attractive.

Spouse Contribution Splitting

• Another underutilised strategy but a great one for rebalancing super accounts and topping up a low super balance. It is a simple process, allowing up to 85% of your spouse’s contributions made to their super fund being transferred into your account.

If you are not sure how to apply these strategies to your situation, it may be worth consulting an adviser to ensure your super keeps rolling in during periods of absence from the workforce.

Please note, this article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to access more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.

The birth of a child is one of the toughest occasions in anyone’s life, but also one of the most rewarding.  I will never forget the moment I realised that I was now responsible for the wellbeing of another human being who could not survive without my help, and that this responsibility remained through the rain, hail or shine regardless of my own state of health or mind on any given day.

The responsibility for having a child doesn’t end with the nurturing, but also extends to financing the child’s needs for many years after their birth.  This can be a very costly exercise, but like everything else, mothers take it in their stride and adjust their own financial and other needs to cater for the needs of the child.

The one thing that doesn’t cost anything in raising a child is the amount of love that you have available – it is limitless!  My children have brought me so much joy over the years and the rough patches are forgotten.  Also forgotten are the things we ‘did without’ in order to give our family a good education.  They simply don’t matter.

I am reflecting on motherhood as we near the annual celebration of Mother’s Day.  It now has an added significance for me because my daughter is also a mother, making me a grandmother.

Being a grandmother brings a whole new dimension to life.  Those little people make my heart sing!  The pride I feel as I see my daughter and her other young mother friends thoughtfully guiding their youngsters through childhood is immense.

I see these young mothers coping with exactly the same issues that I faced, and the financial struggle is just the same for them as it was for me.

The difference for me as a grandmother is that I don’t have to cope with sleepless nights, the school run, seemingly bottomless stomachs, the washing and so on. I can enjoy the laughter and the fun and games, and then I just go home and leave ‘em to it.

Having a budget in place will help you manage the expenses during your children’s early days and through their education years.  The costs are significant and having a plan for managing expenses will mean that you keep on top of the costs in an organised way.

There are many tools available, such as those on ASIC’s MoneySmart website that will assist you in establishing your budget. There are also apps that allow you to track expenses so you can see where your money is being spent.  Every one of these tools will assist in making ends meet and I suggest that you take advantage of these.  My budget lets me help my kids financially every once in a while because I know what they are experiencing.

Please note, this article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to access more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.

Concessional superannuation contributions are contributions made by (or on behalf of) a person that is included in the assessable income of the fund.

As such, they attract tax of up to 15%. However, for those individuals’ earning more than $300,000 per year, the applicable tax rate is 30%.

The term ‘concessional’ reflects the fact that someone is claiming a tax deduction or tax ‘concession’. That is either the employer or the individual, depending on the type of contribution being made.

Paying tax at 15% (or 30%) may be a ‘concession’ if the individual’s marginal tax rate is higher than this. For example, if you’re earning over $37,000 per year, your marginal tax rate is 32.5%. For every $1 you salary sacrifice to superannuation (salary sacrifice is a type of concessional contribution), this will save you 17.5 cents in tax. Of course the money is inside superannuation now and you may not be able to access it until retirement (over the age of 60). Compulsory preservation is, if you like, the ‘price’ of the tax concession.

In view of these tax concessions, the Government places a cap, or limit, on the amount that can be contributed to superannuation on this basis.

For the current 2017 financial year (ending 30 June 2017), the concessional superannuation caps are as follows:

Coming into the end of the 2017 financial year, you may wish to consider optimising the amount you contribute to superannuation on a concessional basis. Particularly in view of the fact that from 1 July 2017 (that is, the start of the 2018 financial year), the concessional contribution cap will reduce to a flat $25,000 regardless of age.

Please note, this article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to access more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.

When do you need some super tax tips? When we are hurtling towards the end of another financial year. The perfect time to get your house in order! After recent legislative changes, super remains a low-tax savings environment designed to fund your retirement.

We have put together a useful checklist that will help you maximise your entitlements.

1. Do a “Lost Super” search

With more than $17 billion in lost super, there’s a chance a few of these dollars might be yours. Google ‘superseeker’ and it will take you to the ATOs Super search tool. Simply enter your name, date of birth and tax file number in the search filters and you’re set.

2. Consolidate your super funds

Make sure you have undertaken step 1 and have a flick through your past statements. Use this opportunity to consolidate your funds into one account to make life simple. Ensure you’re not missing out on any insurance or other benefits before you close any accounts. Rolling over existing accounts into one account is a simple process with many superannuation funds providing this service.

3. Salary sacrifice

You’ve probably heard the term before but what does it actually mean? Salary sacrificing is when you ask your employer to redirect a portion of your pay as a contribution to super. By ‘sacrificing’ some of your before-tax salary into your super, you are taxed at the concessional tax rate of 15%. These before-tax contributions reduce your taxable income so you pay less tax at a marginal tax rate.

4. Non-concessional contribution

If you’ve recently sold an asset, received an inheritance or received a bonus from work, then a non-concessional or after-tax contribution might be worth considering. It is referred to as a ‘non-concessional’ contribution because you don’t receive a tax deduction. Non-concessional contributions are the simplest way to add to your super as you simply deposit your personal money into your super fund.

5. Co-contribution

If you earned less than $36,021 during the 2016-17 financial year and make a non-concessional contribution of $1,000 towards your super, the government will also contribute $500. That’s a guaranteed 50% return on your money!

6. Spousal contribution

If your spouse earns less than $10,800 and you make a $3,000 non-concessional contribution to their super, you may be eligible for a tax rebate of up to $540.

7. Super splitting

If you or your partner take time off work or reduce working hours to look after the kids, keep the super contributions rolling by splitting. It allows the working spouse to have up to 85% of their super contributions placed into the account of the non-working spouse. It helps keep a couple’s accounts evenly balanced and is simple to implement.

8. Transition to retirement

If you’re aged between 57 and 64, a Transition to Retirement (TTR) strategy might be right for you. Despite recent budget announcements, TTR remains a solid strategy that lets you draw tax-effective funds from your super while you’re still working. You can then use your normal income to make concessional contributions to super. The simplest way to think about it is that you’re recycling your retirement benefits to reduce tax and boost super.

9. Set up a self-managed super fund

For those of you with more than $250,000 in accumulated super, a self-managed super fund might be the way to go. The Australian Tax Office has helpful videos click here and search for “SMSF videos”. It’s very important to get the right advice before proceeding.

10. Seek advice from a professional

Financial advice can help you identify and plan to achieve your financial goals so you can enjoy the lifestyle you want. A financial adviser will help you assess your current circumstances, identify your goals and priorities, and recommend financial strategies and products that will help you reach your goals.

So there you have it: the essential 10-point super checklist to tick-off before the end of the financial year. If executed consistently every year, it can make a big difference over the long-term. It is never too late to start!

Please note, this article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to get more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.

Small businesses are the engine room of our economy. They are the home of Australian enterprise and opportunity and are where many big ideas begin. The Federal Government’s 2016 budget announced that it will reduce the tax burden and increase access to concessions for small businesses.

Small business entity turnover threshold

From 1 July 2016, the small business entity turnover threshold increased from $2 million to $10 million. The current $2 million turnover threshold will be retained for access to the small business capital gains tax (CGT) concessions.

Lower Taxes

The Government has further backed small businesses by reducing their tax rate to 27.5%, starting with businesses with a turnover of less than $10 million from 2016-17 income year. The Government will progressively decrease the tax rate for all companies to a flat 25% by 2026-27.

As many small businesses are not companies, the Government will also extend the unincorporated tax discount to unincorporated businesses with annual turnover of less than $5 million and increased the discount to 8% from 1 July last year, up to a maximum value of $1,000. After this initial increase, the discount will be increased in phases to a final rate of 16% in 2026-27.

Over 3 million businesses have accessed either the lower tax rate or higher discounts during 2016-17.

Expanding access to small business tax concessions

By increasing the small business entity turnover threshold to $10 million, the Government will provide over 90,000 businesses with access to a range of small business tax concessions. From July 2016, all small businesses with annual turnover of less than $10 million will have access to:

Instant asset write-off – simplified depreciation rules.

• Small businesses can immediately deduct the business portion of most assets if they cost less than $20,000 until 30 June 2017.

Deductions for professional expenses for start-ups

• Small businesses are entitled to certain deductions when starting up (i.e. professional legal and accounting advice and government fees and charges).

Small business restructure rollover

• From July 2016, small businesses can change the legal structure of their business without incurring any income tax liability when active assets are transferred by one entity to another. This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.

Lower taxes and expanded access to tax concessions will mean increased opportunity to grow a small business, employ more Australians and increase wages.

The announced changes present good opportunities for businesses and individuals to save on tax. If you think you may be eligible and want to take advantage of some of the new measures introduced, please contact our office to speak to one of our business consultants.

This article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to get more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.

Many small business owners rent their premises and pay rent to a landlord.

However, since 1998 self-managed superannuation funds (SMSF) have been permitted to invest in business real property, and since 2008, they’ve been able to borrow money to do so.

Many small business owners don’t like paying rent, and if they could, would much prefer to buy their business premises and pay it off.

Assets they may have built up in their superannuation accounts can now be used to help fund the purchase of their business property. However, this would need to be structured through a self-managed superannuation fund.

And if you need to borrow funds to purchase the property in your SMSF, the 9.5% compulsory super you pay yourself as an employee together with the rent your business pays your SMSF can help pay it off.

At retirement you’ll have additional options. For example, you could sell your business but your SMSF could retain the business premises, continuing to collect rent from the new business owner. The rent could be tax free provided you’re over age 60.

Alternatively, if you retire after the age of 60 your SMSF could sell the business property free of capital gains tax.

While the strategy holds lots of appeal, there are many issues to consider, particularly in terms of ensuring that the arrangement makes sense and is properly structured. It’s definitely something worth seeking professional advice on.

If you are a small business owner or know someone who is currently renting their business space, contact us today toll free on 1800 679 000 for our Rockhampton office and 1800 804 431 for our Melbourne office.  We would be delighted to speak with you about self-managed super funds.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

Finding it hard to manage your business’s finances? Unsure of how to price your products or services? Don’t know how much you can afford to spend on wages and expenses? Want to gain an accurate value of your business? Sounds like you need a financial model.

All business operators are concerned with the profitability of their business, but it is difficult to gain an accurate grasp of its real financial position purely from monitoring bank balances and receipts. So often is the case that business owners in successful times lose incentive to monitor their financial position. This can come back to haunt management once times start to become gloomy as they ponder “How did this happen?” “What were we doing right before?”. As silly as it sounds, sometimes an Excel spreadsheet can answer all of these questions (and more!).

Financial models are a key element in most major business decisions. A financial model is prepared whenever any organisation is considering project finance, bidding for a project, evaluating acquisition targets, carrying out monthly financial planning and budgeting, conducting capital structure studies, or just to monitor the business’s profitability.  Accurate financial models are also a staple requirement if you are trying to source financing from investors or lending entities.

They are useful tools that allow business options and risks to be evaluated in a cost-effective manner against a range of assumptions, identify optimal solutions in evaluating financial returns and understand the impact of resource constraints to make the most effective business decisions. A truly effective financial model is one that dynamically updates as the economic and business climate changes.

Our Consulting team has extensive experience in developing financial models which draw from historical performance and management’s expectations for the future. Once a tailored financial model has been created, sensitivity tests are run to generate accurate forecasts and budgets to allow management to determine how they should operate in the future. From here, we can provide recommendations on other business functions.

Businesses from agriculture, engineering, finance, heavy machinery and retail industries have approached us to construct conservative financial models that enable business owners to “hope for the best, but plan for the worst”. In 2016 we had the pleasure of constructing a dynamic model for a grain and oilseed farm in NSW. The original need for the model was to gain a value of the enterprise for the purpose negotiations and restructuring. However, as new problems were encountered, such as restricted access to financing, falling crop prices and even flooding, management quickly realised the true power of a financial model: it’s a tool that provides insight into how to develop clear contingency plans. Similarly, a sports store facing a severe cash flow crisis was able to trade their way out and re-finance through using our no-nonsense approach and financial modelling.

If you or anyone you know owns a business that needs to review their financials to take their business to the next level or faces increasing uncertainty, then now is the time to deal with it. Contact us today, toll free on 1800 679 000 for our Rockhampton office and 1800 804 431 for our Melbourne office to have a free initial consultation.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

When a couple presents for financial planning advice, one of the first things I’ll ask them to do for me is a risk profile questionnaire.

This is a multiple choice questionnaire designed to get a gauge of an individual’s attitude to risk. That is, how do they feel and react with movements, sometimes large movements, in the value of their investments. The answers to the questionnaire generate a score, and with this score we can, in broad terms, attribute to the individual a higher or lower tolerance for risk.

There’s no ‘right’ or ‘wrong’ in completing this questionnaire. A low or a high score isn’t good or bad, better or worse. However, it is a vital input when we come to prepare our investment recommendations.

And, it’s very important that each member of a couple completes their own questionnaire. Why? Because if there is a difference in how each member of a couple think and feel about risk, we’d want to identify this, discuss it and agree on the risk we’re prepared to accept in respect of what are, after all, investments that they have a common interest in (even though the assets themselves may be held in different names).

What might happen if we don’t consider each member of couple’s individual risk profile?

Say one member of a couple may have a high tolerance for risk. We might call them a ‘growth’ investor, comfortable with a higher level of exposure to growth assets like shares and property. The other member may have a lower tolerance for risk. We might call them a ‘conservative’ investor, more comfortable with a higher level of exposure to defensive assets like fixed interest.

Ignoring their differences on risk, and simply investing on the basis of ‘growth’ is likely to create all sorts of problems in the future. For example, say after 6 months the growth portfolio, which was constructed taking into account only the ‘growth’ investor’s preferences, drops 20%. The ‘growth’ investor won’t like it. However, he or she may be reasonably comfortable with the situation knowing perhaps that it’s a longer term investment in quality investments and is likely to recover in due course.

Their spouse, on the other hand, may well be fraught with concern and anxiety.

Having each of them complete their own risk profile questionnaire would have provided an opportunity at the beginning of the process to identify their differences on this point; discuss them and agree on an investment approach that met and managed both their expectations. It’s important to agree on risk.

Are you interested in a free initial consultation with one of our friendly advisers to know if your investments are invested for the right amount of risk? Contact us today, one of our friendly advisers would be delighted to speak with you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

Can I give my kids some money?

I hear this question quite often from my clients.  There are several answers to the question.  Underlying it all is the normal parental need to be able to assist our family while they are juggling the usual expenses of home and children, from an income that doesn’t always stretch quite as far as they would like.

The first part of the question is – can I afford it, and your answer to that may be that you think you can.

The next part of the question is – are there consequences for me?

There may be – for instance if you receive a Centrelink age pension there is a limit as to how much you can gift to your children.  The current limit is $10,000 per year up to a maximum of $30,000 over a three year period.

If you are a fully self-funded retiree the consequence could be that your ability to maintain your own lifestyle in retirement is compromised, so it is a question that needs careful thought.  It is recommended that you seek advice from your advisor.

Is giving cash the best way to help?

It is debatable as to whether straight out cash gifts are really the best way to help – you can’t direct where the cash is spent, and it may not be put to its best use.  What if we paid an essential expense instead?  Examples might be to contribute to the grandchildren’s school fees or to pay the life insurance premium for your son or daughter?

Paying a life/TPD (total and permanent disablement) insurance premium for an adult child may mean the difference between them being properly insured, or having little or no life or TPD insurance.  This not only protects your child and his/her family, but it protects you too, as you may be called upon for support should your child become ill or disabled.

I would like to start an investment for my child/grandchild.

This is also an excellent way to give your family a helping hand as it is a long-term solution that will provide some passive income and capital growth in the future.

A small investment in the Capricorn Diversified Investment Fund, with distributions set to be reinvested, is one way you can achieve this, and it is even better if you add extra contributions from time to time.  By the time the newest grandchild is old enough to attend university or wants to buy a car for example, there will be a tidy little nest egg they can draw from.  You can view details of the Fund here or contact us for information and assistance.

Want to learn more about helping out your children/ grandchildren? For your free initial consultation with one of our friendly advisers, contact us today! One of our advisers would be delighted to assist you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.