In what seems to be the ever-changing world of superannuation, the Commonwealth Government has amended the regulations that result in closer alignment to the age pension age, which is a good thing.

The eligibility for the government age pension was increased from 65 in line with the following table:

Soon enough, the eligibility for the age pension will be upon turning 67, however, this is out of whack with the superannuation rules, which principally revolve around turning 65.

Under the current superannuation rules, once you turn 65 the only way you can make a voluntary contribution into super is if you satisfy the work test. This involves working at least 40 hours in a consecutive 30-day period in the financial year the contribution is made.

The current system disadvantages those retirees who have turned 65 as they are not yet eligible to apply for the age pension, however, unless they work, they are restricted from being able to make a voluntary contribution into super.  If an asset was realised or they acquire the winning lottery ticket a voluntary contribution into super is not an option.

It’s highly undesirable to expect a retiree to have to go back to work in order to be able to make a contribution into super hence, quite rightly, this mismatch in the system has been removed.

From the 2020/21 financial year people aged 65 and 66 will be permitted to make a voluntary contribution into super without having to satisfy the work test.  This will permit a ‘non-concessional’ contribution to be made up to the $100K maximum limit.

Similarly, the age at which the ‘bring-forward’ rule for non-concessional contributions is before parliament to be increased from 65 to 67.  The bring-forward rule permits two future years of non-concessional contributions to be brought-forward resulting in a maximum of $300K that can be voluntarily contributed into super instead of $100K.

These are positive steps to alleviate gaps in the retirement system that make it fairer for everyone.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Isn’t it interesting how life forces you to adapt?

Over the last several months, the  COVD-19 situation has spun off many examples of how we’ve been obliged to adapt. However, the one example that I’m specifically thinking of is adapting to ‘virtual meetings’ with clients using ZOOM.

Now, I’ve been aware of ZOOM for some time. I’ve occasionally participated in a ZOOM meeting (organised by someone else), and I have thought to myself, every now and again, ‘I really must find out more about this ZOOM thing…some day.’

Well, that day arrived with a thud in mid-March when, following Government direction, we went from having zero staff working remotely to having 90% of staff working remotely. That presented us with a challenge. A significant aspect of our value proposition to clients involves meeting with them on a regular basis to review their circumstances and preferences and to make any adjustments to their strategy as may be required. These sorts of meetings are best held in person. In the first week or so I tried to replicate these meetings via telephone calls. But of course, now you can’t see your client and you can’t share written reports or data with them.

Then I started watching YouTube videos about ZOOM, and they helped, a little. I only really started to make progress in my understanding of, and comfort with, ZOOM by just trying different things and asking work colleagues lots of ‘dumb’ questions.

So now only a few weeks later I’m feeling pretty proficient at using it. I can now readily organise meetings, adjust the security settings, share a screen, as well as recording the meeting. I particularly enjoy personalising my virtual background (my favourite is the standard beach back-drop.)

And clients love ZOOM! In fact, I look after some clients whom I think we might never see in our offices again. They can get all they need out of our meetings without ever leaving the comfort and safety of their home. Of course, as I mentioned above, sometimes you just need to sit across the table from someone, but going forward I really do think that ZOOM meetings are going to represent a significant part of our interaction with clients.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

We are hurtling towards the end of another financial year. What better time to get your house in order?! Super still remains a low-tax savings environment designed to fund your retirement.

Here is a useful 10-step super checklist that will help you maximise your entitlements:

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.

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 for you.

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.

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.

Co-contribution

If you earned less than $38,564 during the 2019/20 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!

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.

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.

Transition to retirement

If you’re aged between 57 and 64 and still working, a Transition to Retirement (TTR) strategy might be right for you. Despite some of their gloss coming off due to the 2017 super changes, a 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.

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: head to www.ato.gov.au/super/self-managed-super-funds and search for “SMSF videos”. It’s very important to get the right advice before proceeding.

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. An 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 30^th June. 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 provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Given the escalating numbers of COVID-19 cases in Australia, we have had to change our lifestyle very quickly to incorporate social distancing and more recently put up with state-wide lockdowns. The government has made a series of announcements on the 22^nd of March 2020 which are designed to provide support to people impacted by the virus.

The new measures announced are predominantly in the area of Superannuation legislation and social security.

Summary of these measures;

• Reduction in minimum pension
• Early access to super benefits
• Reduction in social security deeming rates for the incomes test

Reduction in minimum pension

Across the board, minimum pension drawdown rates for market linked income streams are reduced by 50% for the 2019/20 and 2020/21 financial years. The aim of this measure is to support retirees who are not required to draw the current pension minimums and can reduce pension drawdowns to avoid selling investments in a depressed market.

This will not affect you if you need the current minimums to survive, already drawing above the minimum pension or currently drawing an income from a complying lifestyle pension.

Early Access to super benefits

Access to superannuation benefits will be opened up from mid-April. The temporary access allows affected individuals to access up to $10,000 in each of the 2019/20 and 2020/21 financial years for a maximum of $20,000 of tax-free superannuation withdrawals.

You must meet the following criteria’s to qualify;

• You are unemployed
• You are eligible to receive a JobSeeker Payment, Youth Allowance for job seekers, Parenting Payment, Special Benefit or Farm Household Allowance
• On or after 1^st of January 2020, you were made redundant or your working hours were reduced by 20% or more or if your businesses was suspended as a sole trader.

This is designed to be a last resort for those with no other means of attaining funds to meet their current living expenses.

However, this could be a huge trap for those who utilise the withdrawals by meeting the above conditions but do not actually require the funds. Younger Australians in the early stages of building their super could be most at risk, as they could take funds out of super just for the sake of security. Given the power of compound interest, removing $20,000 from a super fund 20 or 30 years prior to retirement access could have a devastating impact on their final retirement balance.

Reduced social security deeming rates

A direct loosening to Centrelink’s income test, whereby the upper and lower social security deeming rates will be reduced from 1^st of July 2020 to 0.25% up to the threshold and 2.25% above the threshold. This is an overall reduction of 0.75% from the default 1% up to the threshold and 3% above the threshold.

An individual with $550,000 in financial assets on the default deeming rates of 1% and 3% will have their age pension reduced by $65 each per fortnight. Under the new transitional deeming rates, their pensions will only be reduced by $32 per fortnight. The key to consider is that deeming is only a part of the incomes derived by the client, which is dependent on the level of financial/investable assets and the loosening of the deeming rates will not help if your prevailing test is the Assets test.

Further measures are set to be announced in the coming weeks, however, it seems as though these initial changes will provide relief to those who are impacted.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Well…who saw that coming!!

Just when you think you’ve seen it all, how quickly things can turn from chocolates to boiled lollies…

For the golfers out there, spring in the northern hemisphere gets us fired up for the 1^st major of the year, the Masters Tournament played at the mighty Augusta National Golf Club in Georgia. Sadly, the Masters won’t be played in April…it may get a run later in the year, however, it won’t be the same.

The speed at which equity markets dropped from peak to trough in about 4 weeks brings to mind how quickly damage has been inflicted over the years to some of the finest golfers in the world on the 140 metre, par 3, 12th hole at Augusta National, known as “Golden Bell”…the middle of “Amen Corner”.

Many have arrived at “Golden Bell” on the final round on Sunday appearing to be in total command of their game and on path to secure that highly sought after ‘green jacket’ when from nowhere, Raes Creek comes to life and mysteriously drowns those green jacket aspirations before the poor sod can catch his breath and ask his caddie; “what happened there?”

This year, COVID-19 has done to the world what Raes Creek would surely have been doing to some unsuspecting golfer or two had the Masters been on track.  Just as those golfers must dust themselves off and ‘get back on the horse’, we must play the hand of cards COVID-19 has dealt us whether we like it or not.

In relation to superannuation, COVID-19 has necessitated the following changes to assist with the financial consequences it has brought.

Early release of superannuation

Individuals in ‘financial stress’ can access their superannuation savings (i.e.; accumulation mode accounts) up to a cap of $10K in 2019-20 and again in 2020-21, from 1 July 2020 to 24 September 2020.

To qualify for this:

• You must be unemployed.
• You must be eligible to receive a jobseeker payment, youth allowance for jobseekers, parenting payment, special benefit or the farm household allowance.
• On or after 1 January you were; made redundant, or your working hours were reduced by at least 20% or if you were a sole trader, your business was suspended or turnover reduced by 20%.

If someone is considering this option, attention needs to be given to how the withdrawal might impact personal risk protection insurance held inside their super such as; income protection, life, and total permanent disability cover.

Reducing the minimum amount required to be withdrawn in pension mode

The government has announced a temporary 50% reduction in the amount a superannuant is required to withdraw from account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities for the 2019-20 and 2020-21 financial years.

This initiative is designed to avoid investments being sold down at the worst possible time to meet annual minimum withdrawal requirements and thus increasing longevity risk i.e.; the risk of running out of money.

To promote the longevity of your retirement savings, revisit or complete a budget for your living costs.  The amount you need to pull out of super to fund your lifestyle will drop out naturally which can then form the base for your pension withdrawal.  Additional or ‘one-off’ withdrawals can always be taken as and if needed.

If there’s a positive out of this we should be spending less because we can’t damn well do anything or go anywhere and the minimum required to be withdrawn in 2020-21 should be reset lower due to depressed asset prices.

Isolation might be a good time to dust of the playing cards for a good old-fashioned game of ‘patience’…or perhaps 500, which would be my preference…but restricted to a group of 4 of course.

Stay COVID-19 free out there and see you on the other side of COVID-19.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Recently, I saw the alter-ego of Barry Humphries, Dame Edna Everage, in performance at the Melbourne Arts Centre. It was, as you might expect, a deliciously irreverent, and ‘politically incorrect’ show played to a capacity audience of some two and a half thousand people.

While enjoying the show I was wondering about the fact that here’s an 85 year old, who apparently ‘retired’ from the business 5 years ago, up there on stage for over 2 hours. What was also very evident was the sheer joy that the Dame exuded – you could see that she was enjoying herself immensely, and, I’m assuming, hadn’t returned to the stage because she’d run out of money!

So what does ’retirement’ mean anyway? It’s clearly different to the retirement of earlier generations where it generally meant stopping work altogether and pursuing interests in travel, social activities and more time with family.

As an aside, do you know why the age of 65 was selected as the ‘retirement age’? It dates back to 1880 when the German Chancellor, Otto von Bismarck, introduced a social security system to his country. He selected that age because he knew that most Germans would either not reach age 65 or if they did, wouldn’t live much past it. So the social security system wouldn’t really cost much!

Nowadays, retirement will generally include travel, social activities and family but also, for many people, some form of ‘work’. In conversations we have with our clients we increasingly learn of preferences people have to keep working for a few days a week – but at something that gives them pleasure and for which any income earnt is simply a ‘bonus’.

Clearly, retirement means different things to different people and there’s no right or wrong. Our role as your financial adviser is to help build and structure your wealth such as to provide you with ‘options’ in terms of pursuing whatever retirement may mean for you.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

For the last 13 years I have guided my clients through their retirement preparations and into the non-working phase of their lives.

I’ve seen a lot of fear in their faces – fear of the unknown, fear of running out of money, and probably lots of other fears that I haven’t experienced at this stage of my working life.

But now it’s almost my turn! I’m taking the easy road first by reducing my working hours later in the year, to about half time. The preparation for that isn’t very easy as I have to say goodbye to a lot of people who have become friends, and there is quite a bit of work in the lead-up to handing them to a new adviser.

I have no doubts that the new advisers will continue on with the job that I began for these people and so I don’t have any worries about the farewells, and I will still see the friends outside of the office.

Working only a few days each week is something I am excited about, and I have lots of plans for my future away from work.

The thing that I still don’t know though, is the strength of my own financial plan. Just by looking at it, I don’t know if it is sufficiently robust, but my experience tells me that it will work, in the same way that the retirement plans of my clients have worked. It is really only until it is put to the test that any of us knows if the plan is workable.

I can look back to conversations with my clients before they resigned and committed to life without a salary, to a few months afterwards, where the relief and happiness I see is rewarding. They have come to terms with the fact that they still get paid each month, albeit from a different source. They have freedom to do things that they couldn’t while a fulltime employee, and they can take life at a slower pace if they want.

Markets can and will affect everyone’s retirement fund in some way, but again, experience tells me that being invested properly in a diversified portfolio of good quality investments, will ensure that we can weather the storm. The important things are the quality of the investments and the ability to remain calm (and invested) when markets are volatile.

So, I am content with the decision that I have made. For a time, I will still have a salary coming in and won’t be fully reliant on investments to fund the green fees and the rates. I will be free to spend time doing the things that I like, including with my family and probably on the golf course. Perhaps it’s the best of both worlds for me for the future!

Our experienced team of advisers are ready and able to guide you through the lead-up to your own retirement. Don’t be tied down with worry about whether you have enough put aside for retirement.  Give us a call so that we can begin to help you gain the confidence for your own financial future, whether you are considering retirement or you are still fully immersed in your working years, with a mortgage and young family.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Over the years I’ve lost count of the number of conversations I’ve had with clients about money; how they think and feel about it, how much they might need and so on.

It seems to me that there’s really only one value of money, and that is that money gives you options – more money, more options, less money fewer options.

Interestingly, having more money, and therefore more options, doesn’t seem to mean much more than that. In my experience, it doesn’t mean you’re smarter, funnier, or even better looking than anyone else. It simply means you have more options.

Having more money also doesn’t seem to mean that you’ll choose the right option. A large part of what we do as financial advisers is to help our clients confirm and clarify their objectives, and help them to work out what their realistic options are. I underscore ‘realistic’ because sometimes we need to confirm to clients that some options simply are not realistic, or if achievable, may have ‘unintended consequences’.

As an adviser, I’m never, ever, going to tell a client how to spend their money – that’s just rude! The end result I’m seeking to achieve is to ensure my client has a clear understanding of what their realistic options are, and how to achieve them, such that they can make informed decisions.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

I can see how having children can be the most rewarding and life-fulfilling experience for parents. Spending time with my niece and nephew and seeing them grow gives me great joy and insight into parenthood.

Starting a family or a growing family brings a roller coaster of emotions and financial stress as parents assess the upcoming changes in their life and finances. I’ve recently met with a couple expecting their first child and they are confused about how to do this and what financial support is available to them. Additionally, while focus is on immediate income and expense needs, other financial considerations such as superannuation and insurance can get left behind.

Should planning for a baby start after conception?

From my experience expecting parents tend to focus on the cost of having children in the sense of preparing for the babies arrival, prams, cots etc. – and longer-term education costs. In reality though, the most significant cost of having children is the loss or reduction in employment income, during both the initial maternity/paternity leave and also via reduced working hours over the longer term.

From a planning point of view, it’s important for a couple thinking about starting a family to know what that future cash flow shortfall will look like. This will show how much a couple will require to save in cash before the baby is born in order to get through the child-raising year without having to drastically change their standard of living.

The government provides a range of financial support initially which can supplement or replace reduced cash flow. Note that this is only very short term and it is important to discuss with your partner what happens after these payments stop.

Parental Leave Pay

The government offers 18 weeks of minimum wage payments (currently $740.60 per week) to the main caregiver of a new baby.

To be eligible, the primary carer of the newborn must have worked 10 out of the 13 months before birth (or adoption) of the child and at a rate of least 330 hours over the 10 months (equivalent to approximately one day per week on average). Have individually earned less than $150,000 in the last financial year.

Don’t worry, dads or partners are not forgotten!

Dad and Partner pay

The government offers two weeks of minimum wage payments (currently $740.60 per week) to the dad or partner of the primary carer.

Any initial financial stress is generally forgotten by parents as the majority of conversations I’ve had with clients is about their child’s achievements. I’ve often heard how sleep-deprived new parents are once their baby is born and planning for the new one’s arrival by removing some of the financial stress will help a couple to focus on caring for the newborn.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Credit cards have long been helping people pay for things they need or want. You may be very familiar with them or you may be a newbie in the world of credit who is contemplating applying for your first card. Effective utilisation or misuse of credit cards can make or break your financial well-being.

Before we go through the complexities of credit cards, you must first understand what credit is. Credit is the means to borrow money/access goods or services with the mutual understanding that you’ll pay later. Have you ever borrowed money from a friend for lunch or a colleague paid for your coffee because you left your wallet at home? That effectively is them giving you credit! Of course, with the intention and trust that you’ll pay them back later. We use credit all the time and credit cards are just one of many financial tools used to attain a set amount of credit, commonly via a licensed financial institution such as a bank.

One of the defining benefits of credit cards is the fees, charges and interest associated with using the card. Commonly there would be a fee to set-up the card which is generally charged annually, there are late payment and overdraw fees and also varying levels of interest depending on how you’ve spent the credit. There are often substantial fees associated with taking cash out using a credit card and in general, if you don’t pay off your card in full at the end of each month interest will be charged and backdated too!

Pros of credit cards

• Easy to carry and use – Easily fit in your wallet, pocket or phone case!
• Safer than cash – With the exception of contactless payments, it’s generally quite limited before you have to enter a pin for the purchase.
• Buy now, pay later – Which is the one crucial benefit of a credit card. As of late, there have been a series of different options in the BNPL space but we’ll touch on that in a different session.
• You’re protected – Fraud protection and monitoring are generally facilitated by the card provider and you’re generally not held liable if your card is stolen or misused.
• Freebies! – Which to some is the one major benefit of using a credit card. Rewards and frequent flyer points are commonly associated with mid-top tier credit cards and the benefits can easily outweigh the associated fees if used correctly.

Cons of credit cards

• High-interest payments – Credit card interest rates are applicable if you don’t clear the outstanding balance at the end of each month. These rates are generally much higher than a standard home loan or personal loan and it would be wise for any financial minded individual/family to avoid these payments at all costs.
• The associated debt spiral – A common trap of the credit card is that you only have to miss one payment and interest will start to add up. Unless you pay off the FULL amount each month, interest will be charged on the FULL amount owing regardless if you’ve paid off half of the balance, 80% of the balance of 99% of the balance. If you get into the habit of not paying it off in full, your debt situation will quickly spiral out of control.
• Additional fees – As well as interest there is generally annual fees, overdrawn fees or late payment fees. These can sting quite a bit and more importantly, you may have to pay interest on it!
• Expensive to use abroad – Some cards are a bit friendlier and designed for travellers but most cards will charge excess fees when used in a different country than its origin. Often an additional 1-3% of fees on each purchase which can add up whenever you decide to go on a nice holiday!

To conclude, there are a ton of benefits in owning a credit card, such as flexibility with managing your cash flows and access to additional free benefits. But this can come at substantial a cost if not managed correctly and you can easily fall into financial stress if you get silly and spend on things that you cannot afford!

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.