Did you know?

Heart disease in children is the leading cause of death, accounting for more than 30% of childhood deaths?  Or that 200 children under the age of 14 are diagnosed with leukemia each year, with treatment taking approximately 2 years?

What would happen if this was your child, or grandchild? Would you have adequate funds available to cover costs of hospital and treatment? Would you or your partner be able to stop work indefinitely to care for your sick child? Unfortunately for most people there would not be sufficient funds simply ‘lying around’ to eliminate the financial stress of coping with a sick child.

Thankfully, there is great news, a low cost solution that will ensure dollars are available to you when needed most – Child Trauma Protection.

Trauma Protection is designed to pay a lump sum amount in the event of a specified illness or event, for example, cancer, stroke or heart attack. It is now possible to not only ensure your health, but the health of your children.

In the event your child suffers a major illness or dies, you will receive a lump sum payment (as determined by you) to ease the financial burden and help allow for:

• Parents to stop work and take care of the child full-time
• Funding for medical treatment & hospital costs
• Funding to provide for ongoing care or other objectives (e.g. family holiday)
• How much does peace-of-mind cost?

Child Protection must be taken out in combination with trauma protection for an adult, the cost is approximately $150 per annum. Once the child is age 18, they are eligible to convert the policy to an adult policy without any health assessment.

Are you interested in gaining a better understand of protecting your children? Do you want make sure you have the right insurance to protect all of your family members? 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.

Financial scams are not uncommon in Australia. You may think that this will not happen to you or your family, but it could.

Scams come in all shapes and sizes from investment schemes, inheritance scams, betting and sports investment schemes to dating and romance scams.

Recently, a client was phoned by someone claiming to be from the Australian Tax Office who advised they were following up amounts owing for previous tax years. For the client, there was some credibility for this as previous tax returns were outstanding. Once the caller realised they had an ‘’in’’ they were incredibly persistent and even threatening to the point that they persuaded the client to go and purchase iTunes cards to pay the supposed debt. They obtained the numbers of these cards over the phone and were quick to cash them in.

The client became suspicious when they rang for more money, and she then rang us. We advised that it was a scam, and to be sure she should phone the tax office, who confirmed they had not called.

Not giving up, they phoned again and this time advised they were from Centrelink and provided a contact number to call in Canberra for verification. On talking to us, she rang the general number for Centrelink (not the number the caller provided) who again confirmed that they had not called.

If you ever have a phone call from someone claiming to collect money from a government agency, please be aware of this scam. A government agency will not collect money over the phone and are unlikely to make contact by phone unless responding to a call. They will also not use urgency tactics for payment.

If in doubt call the agency back on a general number, or call your adviser and if they are unavailable talk to another adviser. Scams can also be checked at scamwatch.gov.au and acorn.gov.au.

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.

What is HECS-HELP?

Australian citizens studying in Commonwealth supported places are eligible to apply for assistance to fund the student contribution amount for each unit in which they are enrolled.  This assistance is in the form of a HECS-HELP loan.  There is no real interest charged on the loan but the debt will be indexed each year in line with the Consumer Price Index.  The adjustment is made on 1 June each year and applies to any part of the debt that has been unpaid for 11 months or more. Eligible students can use a HECS-HELP loan for the whole amount of their student contribution.

I’ve finished studying – how much do I owe?

The Australian Taxation Office manages all HELP debts and this information can be viewed online through the myGov website once a myGov account has been created.  You can also call the ATO to find out the details and you will need to quote your TFN to access the information.

Paying back my loan

Even if you are still studying, you will need to begin repaying a HELP debt as soon as your income, as reported on your income tax return, is above the compulsory repayment threshold.  This amount is adjusted annually and for the 2016/17 financial year, the amount is $54,869 and above.  Repayments are made through the taxation system at a percentage of your annual income.  The percentage increases as your income increases.  For example, someone earning between $54,869 and $61,119 will repay the loan at the rate of 4% per annum, while someone earning in excess of $101,900 will repay 8% of their annual income.

Voluntary repayments can be made at any time and for any amount, and before 31^st December 2016, there is a bonus of 5% for doing so.  This means that if you repay $500 by a voluntary payment, an additional credit of $25 is applied to your loan.

What if I can’t afford repayments?

You can apply to the ATO to have your payments deferred if you believe that your compulsory repayments would cause serious financial hardship.  In making this application, you will need to substantiate your claim by providing a detailed statement of income and expenditure.  It is possible to appeal should your application be unsuccessful.

Do I have to repay the loan and what happens to the debt if I die?

There are certain special circumstances that may result in cancellation of a debt for a particular unit if the unit has not been completed. You need to apply to have the special circumstances taken into account.  In the case of death, any compulsory repayment relating to the period up to the person’s death must be paid from the estate, but the remainder of the accumulated debt is cancelled.

Are you interested in gaining a better understanding of your HECS-HELP debt? Do you want to put a plan in place to make sure the loan is paid off as soon as possible? Contact us today for your free initial consultation, one of our advisers would be delighted to assist you.

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.

There have been a lot of questions from clients lately about why they need all the different types of personal risk insurance; Life, Total & Permanent Disability (TPD), Trauma and Income Protection.  Each insurance covers something different and it is important to understand how all of these insurances work together.  Below I’ve detailed a brief summary about the different types of insurance and how they work together.

Life

Life insurance is pretty straightforward.  A lump sum amount will be paid out in the event of death or terminal illness.  The purpose of life cover is to pay down any debts, provide an income to your surviving spouse or children, contribute to future education expenses if you have children, and assist with funeral expenses.

Total & Permanent Disability

Total and Permanent Disablement (TPD) is payable in the event you become totally and permanently incapacitated due to sickness or injury, and it is unlikely that you will ever be able to return to work.  Again, this cover will provide a lump sum to reduce or extinguish debts, and provide an income to you and your family.  It may also help with home and car modifications following your disability and can assist with ongoing medical bills.

Trauma

Trauma cover also pays a lump sum should you be diagnosed with a serious medical condition, or if you suffer from an event covered under the contract. Trauma insurance covers a wide range of conditions such as Heart attack, Heart surgery, Cancer, Stroke and other neurological conditions, organ failure and various blood disorders.  Benefits can assist with the costs of specialist treatment and medication which are not covered via Medicare or private health cover.  Trauma protection can help with every day costs of living, and offer support financially should you or your partner need to take time off work to assist in recovery.

It is important to note that some people who suffer from a trauma event return to work before they can claim on their Income Protection policy.  Due to advances in medical technology, and less invasive treatment for many of the diseases covered via a Trauma policy, there is also a reduced likelihood of becoming totally disabled and a much higher survival rate.

Income Protection

Income Protection (IP) covers you for partial or total disability based on a waiting period and a benefit period.  If you suffer an injury or illness that leaves you unable to work for longer than your waiting period, you will be eligible to claim on your policy.  Income Protection typically provides a monthly payment whilst you are unable to work.  Your claim will continue until you are able to return to work, or you have reached the end of your benefit period.  It is important you know what your waiting and benefit periods are. The maximum entitlement for IP insurance is 75% of your taxable income, and you may also be able to cover ongoing superannuation contributions under some contracts.

As always, if you have queries or concerns about your insurance you should speak with your friendly adviser. We are here to help.

Are you interested in getting your current insurance reviewed or wanting to get the right cover for you and your family? Contact us today for your free initial consultation, one of our friendly advisers would be delighted to speak with you.

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.

Picture this. You’ve recently retired, and you’re reasonably confident you’ll have enough savings to fund the comfortable lifestyle you’d always hoped for.

Then you receive a phone call with some bad news – your daughter has been diagnosed with a serious health condition, cancer. More than half of all death in Australia is due to cancer.

With the bills piling up, and your daughter set to be out of the workforce for an indefinite period, you invite her to move back into the family home. You ask whether she has life insurance to help finance her ongoing living needs, only to find out she’d never gotten around to it.

It’s a natural instinct for a parent to do whatever it takes to help their children when they need you. And luckily for the baby boomer generation, and your children, many of you have the financial resources to help out.

But what if ‘helping out’ meant you had to stay in the workforce longer, or cut back on your retirement lifestyle to help fund your child’s mortgage, medical expenses or living costs?

Or what if you had to provide for your grandchildren? What would that mean for your own financial situation – both now and in the future?

These scenarios may sound extreme, but consider the following statistics:

• One in five families will be impacted by the death of a parent, a serious accident or illness that renders a parent unable to work.
• Two-thirds of families with kids at home couldn’t meet their expenses beyond 12 months of the main breadwinner having passed away.
• 95% of families do not have adequate levels of insurance.

Do your children have it covered?

Generations X and Y are comfortable with the idea of using debt to achieve their goals. And to get into the housing market, they often have to take on considerable mortgages, which can take a decent bite out of their income.

Of course, all of this is sustainable when they’re working full-time. But if your children don’t have adequate protection for their income, their debts, and their dependents, they could be vulnerable to serious illness or injury. Their own families (if they have one) can also be considerably exposed if they die. Raising children is expensive. It estimated to cost $537,000 to raise two children from birth to age 21. This does not allow for private education.

When you consider the maximum disability support pension available from Centrelink is only $877 per fortnight ($22,802 p.a.), an extended period out of the workforce could leave a big hole in their budget. That’s if they’re eligible for any government assistance at all. Qualification is based on the extent of their physical condition and is means-tested.

Talking to your children about life insurance

Many adult children will discuss their major financial decisions with their parents. Major events like getting married, buying a house, or even changing jobs are good opportunities to talk to your children about life insurance.

One of the good things about taking out life insurance from a younger age is that premiums are often very affordable.

For example, a 30-year-old female clerical worker can take out $500,000 life insurance (with Total and Permanent Disability cover), plus $4,000 a month income protection, for around $3 a day (Source: TAL Life Limited ABN 70 050 109 450 AFSL 237848).

This cover will provide some financial relief in the event of serious sickness or injury. It will also make available a lump sum on death that may be used to pay off debts, medical bills or help the family meet ongoing living costs.

The best way to help your children get the right level of protection for themselves (and you!) is to encourage them to discuss their life insurance circumstances with a financial adviser or specialist risk adviser.

Are you interested in getting your life insurance reviewed or do you need to talk to someone about what life insurance is right for you? Contact us today for your free initial consultation, one of our friendly advisers would be delighted to speak with you.

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 its appropriateness to you, having regard to your objectives, financial situation and needs.

Previously, individuals could not access their superannuation until they had reached their preservation age and a condition of release had been satisfied (which was usually retirement from the work force).

Regulations were introduced in 2005 to give effect to the “Transition to Retirement” (TTR) measure which allows individuals to gain access to their superannuation benefits after reaching preservation age while still working and before a condition of release has been met.

Your preservation age is not the same as your pension age. Your preservation age is the age at which you can access your super and depends on when you were born. You can use this table to work out your preservation age.

The TTR measure allows individuals to commence a retirement income stream (i.e. account based pension) while still working. The retirement income stream commenced is non-commutable, which means that the balance cannot be accessed until a condition of release is satisfied. There is a minimum 4% or maximum 10% yearly pension income limit of the account balance, as at 1 July each year.

Commencing a TTR pension can be very tax effective as income and capital gains are tax free and the pension payments are concessionally taxed for those under age 60. Pension payments become tax free for those over age 60.

A popular strategy used by those who have reached their preservation age and intend to keep working has been to use a TTR pension to in fact increase their overall super nest egg whilst still maintaining their cash flow requirements.

This strategy involves:

• Arranging with your employer to sacrifice part of your pre-tax salary directly into your super fund,
• Convert most of your super into a TTR pension account, and
• Using the regular payments from the TTR to replace the income you sacrificed into super.

By taking these steps, it’s possible to accumulate more money for your retirement, due to a range of potential benefits. For example:

• Salary sacrifice super contributions are generally taxed at up to 15%, rather than at marginal rates of up to 49%,
• Investment earnings in a TTR are tax-free, whereas earnings in a super fund are generally taxed at a maximum rate of 15%, and
• The taxable income payments from the TTR pension will attract a 15% pension offset between preservation age and 60.

See how it works below:

Assumptions:

SPOILER ALERT! In the 2016 Federal Budget, the government proposed that from 1 July 2017, earnings from a TTR pension will no longer be tax-free. The earnings will be taxed at up to 15%, the same as if they were in accumulation phase. Whilst this proposed measure does take some of the gloss off the TTR strategy it is still a worthwhile strategy, but in more limited circumstances.

If you’re considering taking advantage of the TTR pension/salary sacrifice strategy, or considering reviewing an existing strategy, then we recommend you seek advice on the merits of such a strategy for your personal circumstances, especially the implications post-30 June 2017.

Are you interested in getting your TTR pension/salary sacrifice strategy reviewed or started? Contact us for your free initial consultation today, one of our friendly advisers would be delighted to speak with you.

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.

Changes to superannuation legislation was a key focus of the 2016 / 2017 Federal Budget.  The purpose of this article is to help explain some of the key changes and how they may apply to you.

1. Changes to concessional contributions

Concessional contributions are contributions made into superannuation for which a tax deduction is claimed; such as superannuation guarantee contributions (SGC) or salary sacrifice contributions.

From 1 July 2017, the concessional contributions cap will be reduced to $25,000 pa (indexed) for everyone, regardless of age.

On the positive side, individuals who have total superannuation savings of less than $500,000 who do not fully utilise the cap each year can carry forward the unused cap on a rolling five-year basis starting from 1 July 2018.

The cap is currently $30,000 per annum under age 50 and $35,000 for 50 and over.

2. Reduction of the non-concessional contributions (NCC) cap

Non-concessional contributions are made from after-tax money and are contributions for which no tax deduction has been claimed.

A cap of $100,000 per person will apply. If the individual is under age 65 the 3-year bring forward rule can be utilised, thus contributing up to $300,000.

For the 2016-17 financial year the existing limit of $180,000 per annum, or $540,000 3-year limit, can still be used. In order to access the full $540,000 limit, however, the individual must fully utilise this amount this financial year otherwise transitional bring forward rules will apply. If an individual has not fully used their bring forward limit before 1 July 2017, the remaining bring forward amount will be reassessed to reflect the new annual caps.

If the individual’s super balance is $1.6 million or greater then no further non-concessional contributions can be made. This restriction only applies to non-concessional contributions.

Previously individuals could make non-concessional contributions of up to $180,000 pa into their superannuation, with the ability of bringing forward two years’ allowances (i.e. $540,000 worth of contributions in total) if the individual is under age 65.

3. Introduction of a pension transfer cap of $1.6 million

A $1.6 million transfer balance cap on the total amount of super an individual can transfer into retirement accounts will apply. The cap will apply to current retirees and individuals yet to enter retirement.

Retirees with balances above $1.6m will be required to reduce their balance to the cap by the effective date by transferring any excess back to accumulation or withdrawing the excess from super. If not transferred, an excess tax will be applied at 15% initially and 30% for subsequent breaches of the cap.

The cap will index in increments of $100,000 in line with CPI.

There was previously no limit on the amount individuals could accumulate in pension phase.

A summary of all the reforms and when each measure will take effect from is provided in the table below.

Are you confused about these Superannuation budget changes? For your free initial consultation contact us today, one of our friendly advisers would be delighted to speak with you.

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.

It’s an exciting time when you find the property you want, and finally, have approval for the money required to buy it!  Because that’s the reality now, most of us rely on loans to fund our property purchases.

There are significant differences between Variable and Fixed-rate mortgages. There are also some hidden traps to look out for when comparing those loan offers, especially within this low-interest rate environment when Fixed Rate offers are being heavily promoted by lenders.

Always ensure you read the Terms and Conditions before signing on the dotted line, so you know exactly what you are getting yourself into, especially if you are thinking of paying your mortgage off sooner than the contract states.

You might think you’re protected should you need or want to get out of the loan contract. But when the federal government stepped in and banned exit fees on all new variable rate mortgages in 2011, fixed-rate mortgages were not included in the ban.

So, if you are planning on paying your mortgage off sooner than expected, a variable rate mortgage may be a more appropriate loan structure for you, or even better you could split the loan so you have the portion you know you can’t pay back for a period in the fixed portion of your loan, and the amount you believe you can pay back faster in the variable portion.

Fees to watch out for with Fixed Rate Mortgages:

Establishment fee

An establishment fee is a one-off payment when you start your loan. Usually ranging from $600 – $1,000.

Ongoing fee

An ongoing fee is charged every month or year for administering your loan – and this is usually around $10 a month.

Break cost fee 

Break cost fees, also known as exit fees, early repayment adjustment fees or prepayment fees, are charged if you make extra repayments on your loan, pay your loan off in full or decide to switch to another loan type such as a variable rate loan.

Most lenders will allow you to pay a small amount off your loan each year without being charged, this can range from $10,000 to $30,000, however, if you pay more than this amount you may incur a hefty fee.

How are break cost fees calculated?

They are essentially based on three factors: the length that remains on your loan, what interest rate you are paying (compared to your current lender’s current fixed rate), and the amount you initially borrowed. Break costs can run into the tens of thousands of dollars depending on how much interest rates have changed.

Discharge Fee 

A discharge fee, also known as a termination fee or settlement fee, will be charged when you pay your mortgage in full. This is normally $150 and covers the lender’s legal costs.

Purchasing property and using borrowed funds is a big financial commitment and therefore it is incredibly important that you seek independent legal and financial advice.

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. If you would like more tailored advice, please contact us to speak with one of our mortgage brokers today.

With Australian household debt to income ratios at record highs, it is vital to ensure that you have adequate personal risk protection cover in place to provide security for your home loan.  It is also critically important to consider your cover needs if another family member has provided a guarantee to assist you in obtaining the loan.

Unfortunately, in the excitement of buying a home, very few prospective or existing borrowers consider the consequences of not being able to work due to sickness or accident, or the financial impact of death, particularly with loans held jointly with a spouse, or with an additional guarantor.

Loss of income in the event of disability, even for a short period, will place stress on the ability to meet mortgage and/or personal loan repayments, and day to day living expenses.  Without adequate Income Protection cover, you will erode savings, and risk falling behind in your mortgage payments.  If you default on your loan, the bank may commence legal proceedings to repossess your home or pursue a guarantor to seek payment of the liability.

In the event of the death of a borrower, the person who inherits the home, or is a surviving joint tenant will be responsible for the debt.  If the property owner was a sole borrower, the bank may request the payment of the outstanding loan amount.  If there is a shortfall in the sale price versus the loan amount, the bank may sue the beneficiary to recoup the balance of the loan.  Without adequate death cover in place, you may be putting your surviving family at risk!

Many homeowners falsely believe that they will have adequate protection via the default cover offered through their superannuation fund if they are temporarily unable to work, suffer permanent disability, or death.  Unfortunately, there is often a huge discrepancy between the amount owing on the average mortgage, and the cover held via super.

It is crucial to understand that the Death/Total and Permanent cover offered via many funds is unit based, and will decrease significantly as you get older.  The rate at which the cover reduces during your working life is typically much faster than the rate at which a mortgage is paid off!

The Income Protection cover offered by many superannuation funds may only offer a minimal benefit for a maximum period of 2 years, which in many cases will not cover mortgage payments in addition to other costs of living.  In the event of claiming on your Income Protection held via super, the benefit may be reduced based on your pre-disability earnings, and other offset provisions.

Some facts to consider in relation to covering your debts:

• For every home destroyed by fire, 3 are forced to be sold due to death, and 48 are forced to be sold due to disablement.

• 1 in 6 men and 1 in 4 women are expected to suffer a disability between the ages of 35 to 65 that causes a loss of 6 months or more off work.

• 2 out of 5 Australians will suffer a critical illness such as Cancer, Heart attack or stroke before they reach 65.

Here at The Investment Collective, we have friendly advisers who specialise in risk insurance. If you would like to review your personal cover requirements contact us today.

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 its appropriateness to you, having regard to your objectives, financial situation and needs.

Today, more than ever, there’s a huge range of investments to consider. We want to be your partner in searching out great opportunities and bring our professional expertise and proven techniques within easy reach. We think you’ll agree that this is something well worth considering as part of your investment program.

The Capricorn Diversified Investment Fund (CDIF) has been specifically designed to be the perfect complement to the mainstream investments you’re familiar with, bringing additional spread and other benefits to your holdings. Its clear objectives make it easy for you to decide how suitable an investment it could be.

CDIF is a regulated, pooled investment unit trust offered to a limited number of people. There is no entry or exit fee and the on-going fee offers excellent value for money.

The role of the Capricorn Diversified Investment Fund is to complement other investments in your portfolio. It uses a variety of ways to do this.

Some investments are not feasible to own in an individual portfolio, for instance, because of large minimum investment requirements or liquidity issues. Also, some legitimate investment techniques are impractical and expensive to apply at the individual portfolio level. Enhancing income using options and risk management using hedging techniques are examples.

The pooled unit trust structure overcomes these problems and conveniently opens up a wider choice of investments and solutions tailored to your needs.

Adapting another’s slogan: “it’s the opportunities that Capricorn reject that make its Diversified Investment Fund the best”. The investment committee has extensive and varied skills and this along with a comprehensive evaluation process means a highly selective approach is applied to portfolio construction.

The Capricorn Diversified Investment Fund uses its own team of experts to identify and evaluate many investment opportunities. Some of these opportunities are sourced from contacts from within its own network and some are great ideas and techniques that other professionals have developed.

Looking for opportunities around the world as well as in our own backyard makes sense. Using techniques mastered by others as well as our own expertise provides an additional choice of solutions and spread of holdings. A completely open-minded attitude combined with a rigorous evaluation approach leads to the effective identification of potential opportunities and successful selection of those to pursue.

Your adviser can give you more details of how effective blending is achieved and examples of past investment opportunities that have been considered and rejected and considered and adopted

It’s important that you understand the objectives of the Capricorn Diversified Investment Fund so you can make a decision about including it in your portfolio. By the way, a holding of no more than 10% of your overall portfolio in this fund with an investment period of at least 5 years would be a general guide to its position.

The fund’s objectives are:

Consistent annual income distribution of 8% with quarterly distributions.

Low level of volatility compared with share markets.

Longer-term capital growth in line with inflation.

Contact The Investment Collective on today, to set up your free initial meeting to speak with one of our friendly advisers and learn more about CDIF.

The Capricorn Diversified Investment Fund is a registered scheme, number 139 774 646. CIP Licensing Limited is the Responsible Entity for the fund under Australian Financial Services Licence 471728. The issuer of securities in Capricorn Diversified Investment Fund is CIP Licensing Limited. Potential investors should consider the Product Disclosure Statement (PDS) is deciding whether to acquire or to continue to hold, units in the fund. Investments can only be made by completing the application form contained in the PDS available online or by calling The Investment Collective on 1800 679 000.