🌟 Superannuation Alert: Secure Your Future with Smart Contributions! 🌟
When it comes to securing your financial future, your superannuation is your secret weapon. Don’t just set it and forget it – regularly review and optimise your contributions for a comfortable retirement. Here’s your guide to financial freedom:
🔍 1. Understand Your Super Fund: Get to know the ins and outs of your super fund – performance, fees, and investment options. Knowledge is power!
💰 2. Review Your Contribution Rate: Check if your contribution rate aligns with your retirement goals. Even a small increase can make a big difference in the long run.
📊3. Max Out Employer Contributions: Your employer might match your contributions – free money towards your retirement. Don’t miss out!
📉 4. Explore Salary Sacrifice: Boost your retirement savings and potentially reduce taxable income by exploring salary sacrifice options.
🔄 5. Consolidate Multiple Accounts: Streamline and simplify – consolidate multiple super accounts for clearer financial management.
📊 6. Diversify Your Investments: Mitigate risk and maximise returns by reviewing and diversifying your superannuation investments.
📣 7. Stay Informed About Changes: Superannuation rules can change. Stay in the know and adapt your strategy accordingly.
🔄 8. Regularly Review Your Super Plan: Your financial goals evolve – make sure your super plan evolves with them. Regular reviews keep you on track.
Your superannuation is a powerful tool for a secure financial future. Take charge by reviewing and optimising your contributions. Stay informed, make strategic decisions, and enjoy the peace of mind that comes with a path to a comfortable retirement. Your future self will thank you!
🌟 Optimise Your Finances By Planning Around Your Pay Cycle! 🌟
Ever felt like your money slips through your fingers? The key to financial control is syncing your budget with your paydays! 💸 Follow these steps to master the art of aligning your finances with your income:
📅 Step 1: Know Your Pay Cycle Identify when those paycheques hit your account. Weekly, fortnightly, or monthly – know your rhythm!
💡 Step 2: Fix the Essentials List your unmovable monthly costs like rent, utilities, and insurance. Assign them to pay periods to make sure they’re covered! 🏡💡
💰 Step 3: Tackle Variable Expenses Budget for the fun stuff! Allocate money for groceries, dining out, and entertainment. Adjust your spending based on your payday frequency. 🍔🎉
🚑 Step 4: Emergency Fund Always be ready for surprises. Save a little from each paycheque for that unexpected expense. It’s your financial safety net!
📈 Step 5: Savings and Investments Set aside a portion of your income for savings and investments. Whether it’s a dream holiday or building wealth, make it a part of your plan! 💰🌐
🔄 Step 6: Regular Reviews Don’t set it and forget it! Regularly review your budget, adapt to changes, and stay on top of your financial game. 🔄💪
🔍 Conclusion: Aligning your budget with your pay cycle brings peace of mind. Say goodbye to financial stress, stay on top of bills, and make progress towards your goals. Master your pay cycle, allocate smartly, and watch your financial future flourish! 🚀💼
Stay up to date with what’s happened in markets and the Australian economy over the past month.
Consumer prices eased by more than expected in October. The news that inflation may have been tamed means interest rate rises may be behind us, for now.
Even the Organization for Economic Cooperation and Development (OECD) is optimistic about our economic recovery, predicting rate cuts from late 2024.
The ASX200 regained most of its October losses through November. Hopes the US may be ceasing its interest rate hikes impacted investor sentiment, as did the better than expected inflation figures locally.
Australia is a giving country, but we often give in kind rather than financially.
Whenever there is a disaster here or overseas, Australians rush to donate their time, household goods and cash. However, we still lag New Zealand, the US, Canada and the United Kingdom when it comes to giving money.
According to Philanthropy Australia, our total financial giving as a percentage of Gross Domestic Product is just 0.81 per cent, compared with 0.96 per cent for the UK, 1 per cent for Canada, 1.84 per cent for New Zealand and 2.1 per cent for the US.i
Only 53 per cent of Australians with an income of more than $1 million give to charity and receive a tax deduction. In the United States that figure is 90 per cent. So, Australians have some catching up to do.ii
Currently the number of Australians making tax deductible contributions is at its lowest levels since the 1970s.iii Despite this, the Australian Tax Office reports that deductible donations claimed by individuals rose from $0.74 billion in 1999-2000 to $3.85 billion in 2019-20.iv
Given that an estimated $2.6 trillion will pass between generations over the next 20 years, the opportunities for increasing our financial giving abound. Philanthropy Australia wants to double structured giving from $2.5 billion in 2020 to $5 billion by 2030.v
The five main reasons people like to give are that they want to make a difference, they want to give back to the community, they like the personal satisfaction it gives them, they have philosophical beliefs, or they just want to set an example.
Many ways to give
There are many ways of being philanthropic from the $2 donation to someone who knocks on your front door, to regular donations of five or six figures plus.
In between, people give direct donations to charities, not-for-profit organisations and community groups, participate in crowd funding and giving circles and/or volunteer.
Giving circles are more prevalent in the US but they are growing in Australia. Basically, people with shared values come together to pool their money for a particular cause.
Donating large sums of money regularly is known as structured giving.
You can choose a number of ways to establish a structured giving plan including through a public or private ancillary fund (PAF), a private testamentary charitable trust or giving circles.
Whichever way you choose, there are attractive tax incentives to encourage the practice.
The type of vehicle will depend on:
the timeframe of your giving
the level of engagement you want
whether you want to raise donations from the public
whether you want to give in your lifetime or as a bequest
whether you want to involve your family to create a family legacy.
Private ancillary fund
A private ancillary fund is a standalone charitable trust for business, families and individuals. It requires a corporate trustee and a specific investment strategy. Once you have donated, contributions are irrevocable and cannot be returned. To be tax deductible, the cause you are supporting must be a body identified as a Deductible Gift Recipient by the Australian Tax Office.
The benefits of a PAF are that contributions are fully deductible, and the deductions can be spread over five years. The assets of the fund are exempt from income tax.
The minimum initial contribution to a PAF is at least $20,000. The costs of setting up a PAF are minimal and ongoing costs are usually about 1-2 per cent of the value of the fund.
Each year you must distribute 5 per cent of the net value of the fund to the designated charity.vi
Testamentary charitable trust
An alternative to a PAF is a testamentary charitable trust, which usually comes into being after the death of the founder. The governing document is either a trust deed or the founder’s Will.
With a testamentary charitable trust, trustees control all the governance, compliance, investment and giving strategies of the trust. The assets of the trust are income tax exempt. The minimum initial contribution for such a fund is usually $500,000 to $2 million.vii
Philanthropy through structured giving still has a long way to go in Australia. The latest figures for total giving in Australia is $13.1 billion, of which $2.4 billion is structured giving. Currently the number of structured giving entities stands at just over 5400.viii
As the baby boomers pass on their wealth to their families, there is a wide opening for some of this money to find their way into charities and causes through structured giving.
If you want to know more about structured giving and what is the right vehicle for you to help the Australian community at large, then give us a call to discuss.
How Australians give
How Australians give
Value of non-structured and structured giving in Australia, 2018-19ix
Aging at home with government-subsidised funding is made possible through the Home Care Packages program.
However, a crackdown on what the funds can be used for and a shortage of support workers, can make it challenging to understand the funding available.
If you are approved for a Home Care Package you will be assessed at one of four levels. These levels acknowledge the different types of care needed. Approval for a package is determined by a health professional from the Aged Care Assessment Team (ACAT) following an assessment.
Current annual funding for packages is $10,271.10 for level one (someone with basic care needs); $18,063.85 for level two (low care); $39,310.50 for level three (intermediate care); and $59,593.55 for level four (high care).i
It can take up to six months for a Home Care Package to be assigned following the initial assessment. Once assigned, a provider must be chosen to design a package of aged care services that is best and most appropriate for you – within the home care package guidelines.
Providers charge care and package management fees, which were recently capped at a combined 35 per cent of the package funds.
Income tests apply
The packages are income tested, with part pensioners paying no more than $6,543.66 a year and self-funded retirees paying no more than $13,087.39 a year in fees. Full pensioners do not pay an income tested fee.
An individual’s contribution may not seem like much if you are receiving a high level package and are using all the allocated funds to buy equipment and services to keep you at home. But if your income is high and you are therefore required to pay the highest fees, you may be better off paying privately for one or two services.
Older Australians can apply for a package directly, or through their GP, via the government’s My Age Care aged care gateway.
Due to high demand for Home Care Packages, you may be offered a lower level package while you wait for the one you are approved for. You may also be given access to the entry level government support known as the Commonwealth Home Support Program – where individual referral codes are allocated to you to access interim support such as cleaning, transport or personal care at highly subsidised rates.
Describe your worst day
A good way to ensure approval for the Home Care Package is to describe to the assessor all the challenges faced in carrying out daily activities due to your (or your loved one’s) advancing age.
Key to the process of getting the maximum benefit of a package when it is assigned is the initial care plan, worked out with your provider, which outlines your assessed care and service needs, goals and preferences and details how the care and services are to be delivered.
A revised manual released earlier this year by the Department of Health clarifying what a Home Care Package can be used for is presenting additional challenges for some package recipients looking to maximise what they can get.ii
Generally, a requested support or service must meet an individual’s “ageing related functional decline care needs”. The main categories of care and services you can get from a Home Care Package are services to keep you:
well and independent (nursing, personal care, food),
safe in your home (home maintenance, goods and equipment) and
connected to your community (transport and social support).
Exclusions and inclusions
One area that is becoming more difficult for those with Home Care Packages is gardening – which is one of the most popular subsidised service requests.
Once a regular prune and possibly some new planting was an approved service, but now only minor or light gardening services can be provided and only where the person was previously able to carry out the activity themselves but can no longer do so safely. For example: maintaining paths through a property or lawn mowing.
Other exclusions causing angst amongst recipients are recliner chairs (unless they support a care recipient’s mobility, dexterity and functional care needs and goals); heating and cooling costs including installation and repairs; whitegoods and electrical appliances (except items designed specifically to assist with frailty, such as a tipping kettle).
With an aging population it is no secret that there is a shortage of support workers. While there are government programs to try and fix this, a back-up plan is needed for when support workers call in sick or are unavailable and no replacement can be found.
Most people’s preference is to remain living independently at home for as long as possible. If you would like to discuss your options to make this happen, give us a call.
Government subsidy level for Home Care Packagesiii
Aged Care Services for People with
Yearly amount paid by the Australian Government up to approximate* value of
Basic care needs
Low level care needs
Intermediate care needs
High level care needs
Figures are rounded and current as at 20 September 2023. The maximum government contribution increases each year.
*The individual amount paid will depend on whether you are asked to pay an income-tested care fee.
Evan has more than 18 years of experience in financial services. Focused on investment product distribution and leading national sales teams, over the years Evan has built a strong reputation as a retirement income specialist.
Evan holds a Bachelor of Economics & Finance, a Masters in Applied Finance from Macquarie University and is currently completing his Graduate Diploma of Financial Planning.
With a passion and desire to help Australians with their financial goals, Evan made the life changing decision in 2023 to transition into advice. He is thrilled to join Intergenerational Wealth, learn from the team whilst also bringing a unique perspective from his diverse range of experience.
On a personal level, Evan and his wife Nikki have two beautiful children that mean the world to them. Evan is an avid fan of all sports, especially AFL and he loves spending his weekends hanging out with family and friends.
Residential property investors have been on a wild ride in recent years as prices slumped during the pandemic then quickly skyrocketed before losing ground again.
Now, with prices levelling out or slowly increasing, there is good news around the corner, according to some analysts.i
A combination of positive indicators for housing could help to fuel further price rises.
With a widespread view that the Reserve Bank’s interest rate increases are beginning to work to ease spending, some believe we may see the first rate cuts as early as next March. Add to that the increase in migration and the fall in new house construction, and residential property gains may follow. CBA Chief Economist Stephen Halmarick is forecasting a 7 per cent rise in house prices this year and another 5 per cent in 2024 claiming that, by this time next year, prices will return to “all-time record highs”.
The sustained levels of high demand clashing with historically low levels of for-sale listings are also pushing prices up, according to the Property Investment Professionals of Australia (PIPA).ii
In the meantime, some investors are doing it tough with rising interest rates and the end of fixed interest rate mortgages sometimes a contributing factor. The number of short-term property resales made at a loss has jumped, according to property analysts CoreLogic, from 2.7 per cent a year ago to 9.7 per cent in the June quarter this year.iii The median loss was $30,000, for houses sold within two years, compared to a median profit of $75,000.
PIPA’s annual survey to gauge property investor sentiment found just over 12 per cent of investors sold at least one investment property in the past year.iv Less than a quarter of those houses sold went to other investors, continuing a trend that has been happening for several years.
Almost half of those who sold said they were concerned about governments increasing or threatening to increase taxes, duties and levies.
Where are rents headed?
Will rents continue to rise or stabilise? Experts’ views are mixed about the short-term outlook for the rental market.
The Reserve Bank says the continuing shortage of rental housing is likely to support ongoing increases in rents.v
The rents paid by new tenants provide a good indication of price movements in rental housing. Actual rents paid by new tenants increased by 14 per cent over the year to February 2023. Since the onset of the pandemic in 2020, rents paid by new tenants have increased by 24 per cent.vi
The Reserve Bank says rents for apartments with new tenants have been more volatile than for houses and townhouses over the past couple of years.
Rents for apartments with new tenants fell sharply during the pandemic and remained below pre-pandemic levels until early 2022 but rose 24 per cent over the year to February 2023, whereas the overall index increased by 14 per cent. By contrast, rent for houses and townhouses with new tenants increased by around 10 per cent over the year to February 2023.
But CoreLogic predicts a slowing in rental price growth next year, saying rents rose for the 35th month in a row in July but monthly growth has eased over the past four months. It says the expected drop in interest rates next year combined with softer income growth and stretched rental affordability will contribute to a slowing in rents.
First homebuyers falling
The recent boom in property prices, the positive outlook and the many assistance programs available from federal and state governments have not been helping those looking to get into the market.
The number of first homebuyers has fallen significantly over the past 30 years, a new study has found.vii Published by the Australian Housing and Urban Research Institute, the study says the drop in first homebuyers is down to delayed partnering, higher rates of educational attainment and associated debt, the precarious nature of employment and worsening housing affordability.
The study says various government policy decisions have had little effect on the numbers of first homebuyers.
Australia’s growing build-to-rent (BTR) market is getting a boost from governments eager to increase housing stock. Various state governments have introduced a raft of incentives for build-to-rent projects, mostly in the form of tax concessions.
BTR projects, common in Europe and North American, see landlords build a large-scale residential development intending to hold it for the long-term while renting the apartments for longer-than-usual terms, often as long as three years with rent increases locked in. Rents are often slightly higher than market averages in return for better communal amenities such as roof gardens and gyms.
Institutional investors, such as super funds, are also getting onboard with the projects, favouring the steady income stream.
While Australia’s BTR market is mostly being driven by large developers and global players, smaller private investors are also getting in on the act. On the plus side, BTR offers regular income, often better returns and the chance to minimise expenses, not to mention the government tax concessions.
On the downside, there is the possibility the BTR concept might not take off in Australia and that vacancy rates may be higher as a result. There is also a downside to the promise of regular income – locked in rental increases may not keep pace with rapid market changes.
While we all hope for good health, the reality is that some of us may struggle at times with sickness or injury. And that may affect your family’s financial wellbeing.
Different types of life insurance or personal insurance can provide an income when you’re unable earn or a lump sum to protect your loved ones if the worst happens.
These insurances include income protection, life insurance, and total and permanent disability (TPD) cover. These products are available through your superannuation fund or outside the fund, directly through an insurance company. There are also other products not usually offered by super funds such as accidental death and injury insurance, critical illness or trauma cover and business expenses insurance (when a business owner suffers serious illness or injury).
In fact, most super funds provide a level of automatic cover unless you choose to opt out. Almost 10 million Australians have at least one type of insurance (life, TPD or income protection) provided through superannuation.i
Check what your fund offers
Super funds usually provide three types of personal insurance. These include:
Life insurance or death cover provides a lump sum payment to your beneficiaries in the event of your death.
Total and Permanent Disability (TPD) pays a lump sum if you become totally and permanently disabled because of illness or injury and it prevents you from working.
Income Protection pays a regular income for an agreed period if you are unable to work because of illness or injury.
While these insurance products can provide valuable protection, it’s essential to be aware of circumstances where coverage might not apply. For example, super funds will cancel insurance on inactive super accounts that haven’t received contributions for at least 16 months.ii Some funds may also cancel insurance if your balance is too low, usually under $6000. Automatic insurance coverage will not be provided if you’re a new super fund member aged under 25.
Should you insure through super?
Using your super fund to buy personal insurance has advantages and disadvantages so it’s a good idea to review how they might affect you.
On the plus side
Cost-effectiveInsurance through super can be more cost-effective because the premiums are deducted from your super balance, reducing the impact on your day-to-day cash flow. It’s also said that the super funds’ massive buying power gives them an opportunity to be more competitive on price.
Automatic inclusionMany super funds automatically provide insurance cover without requiring medical checks or extensive paperwork.
Tax benefitsSome contributions made to your super for insurance purposes may be tax-deductible, providing potential tax benefits.
Think about possible downsides
Limited flexibilitySuper funds can only offer a standard set of insurance options, which may not fully align with your needs. For example, income protection insurance inside super can only offer the indemnity cover (you are required to verify your income at the time of claim) while outside super you can opt for the agreed value cover (you are required to verify your income when applying for cover and is agreed to at the start of your policy).
Reduced retirement savingsPaying insurance premiums from your super balance means less money invested for your retirement, potentially impacting your final payout.
Coverage gapsDepending solely on your super fund’s insurance might leave you with coverage gaps, as the default options may not cover all your unique circumstances.
Possible tax issuesBe aware that some lump sum payments may be taxed at the highest marginal rate if the beneficiary isn’t your dependent.
Don’t forget the life admin
Whether you decide to buy insurance through your super fund or not, it is important to regularly review your insurance coverage to make sure they reflect your current life stage. As your circumstances change with marriage, divorce, children or a new job, your insurance needs will also change.
It is also important to keep on top of your super accounts. If you have more than one fund, you may be paying additional insurance premiums. Consolidating your super accounts can help you avoid this pitfall (and save money in extra administration fees). But before you make a move, it can be beneficial to seek advice, so check with us to see that you are making the best decision.
Insurance within super can be a valuable safety net, providing crucial financial support to you and your loved ones. Understanding the types of coverage offered, the pros and cons of insuring inside super and the need for regular reviews are essential steps in making the most of this benefit. If you would like to discuss your insurance options, give us a call.
A lesson in regular insurance review
Sarah, a 35-year-old marketing manager, was shocked to discover that her income protection policy, purchased through her super fund, would only cover her for a limited time.
The policy, part of her fund’s automatic insurance coverage, gave Sarah some peace of mind that she was covered if she became ill. But when her insurance was reviewed closely, it emerged the policy would only pay $3000 for up to two years.
As a result, Sarah opted to pay a higher premium to increase the benefit to continue paying until age 65. Sarah’s decision to review her insurance protection has provided an outcome she’s happy with for now. Her next review might see another change, depending on her circumstances at the time, and she may choose to pay lower premiums.
Set a good example for your children with just a few simple changes.
As a parent, you try to ensure your children have the skills to make smart financial decisions. For example, you tell them about the importance of saving or the power of compounding interest. But did you know that you could be sending them negative money messages without meaning to?
Here are some useful ways you could teach your children healthy money habits.
Revealing the magic behind digital money
Your children have likely seen you pay for hundreds of transactions without glimpsing cash changing hands. For small children, it can seem like money problems are solved with magic – just wave or tap a plastic card. This makes it important to discuss the value of money with them. A good way to start is to explain how your earnings get deposited into your bank account and how you use this account to pay bills. For older children, consider showing them how taxes are deducted from your salary.
Frequently buying things on an impulse could send the message that it’s fine to spend without planning. Sticking to a budget is key to avoiding impulse-buying. To set an effective budget, consider working with a professional financial adviser. Your adviser may help develop a budget that factors in your income, expenses and financial obligations.
Teaching them independence
It’s convenient to do everything for your children. But by giving them a chance to have their own money and decide how and where to spend it, they could learn powerful lessons about budgeting. For adult children, always offering them financial help can create a cycle of dependency. Letting them make their own money decisions could help them develop financial responsibility.
Including them in budgeting
Many parents keep household financial planning and budgeting to themselves. While you don’t have to fully involve your children in managing your family’s finances, giving them a role to play, such as getting them to do grocery shopping using a set budget, can teach them lessons about money. If your children are old enough to earn some income, why not get them to pitch in to help achieve a family goal?
Using your influence positively
You can strongly influence your children in relation to money, so it’s important to pass on smart money management skills. If you don’t know where to start, consider reaching out to your financial adviser to help you stay on top of your finances through proper planning and budgeting.