Working from home? How to boost your next tax return

Working from home? How to boost your next tax return

Updated on Tax

With the range of technology and software available today, it’s become easier than ever to work from home. Employees can efficiently complete calls using teleconferencing software, many collaboration tools are now cloud-based, and work devices, including laptops and tablets, are light and portable. If you’ve been working from home, you’ve likely also set up a dedicated work area, and you’re using your own electricity and resources to power your workday. But which of these items can you claim in your next tax return to ensure you maximise your return? How many Australians work from home? Working remotely has become more common as companies began providing the technology to enable employees to work from anywhere. Research from Roy Morgan found that in early-2020, at the height of the COVID-19 pandemic shut down, 32 per cent of Australian workers were working from home. This equates to over 4.3 million people. It’s easier for employees in certain industries to work from home, such as finance and insurance, public administration and defence, and communications. In contrast, more “hands-on” industries such as retail, manufacturing, transport and storage and agriculture still require staff to be present in-store. Tax deductions available if you work from home Home office expenses you may be able to claim include: – electricity; – cleaning costs for your dedicated work area; – phone and internet expenses; – computer consumables – such as printer paper and ink cartridges; – stationery; and – home office equipment – including computers, printers, phones, furniture, and furnishings. The Australian Taxation Office (ATO) provides a complete list of the available deductions and how to calculate each on its website. How to calculate your home office expenses There are three methods employees can use to calculate their home office expenses: – Shortcut method: 80 cents per work hour – only available from 1 March 2020 to 30 June 2021 – Fixed-rate method: 52 cents per work hour – Actual cost method Be careful with home office expenses If you include home office expenses in your next tax return, ensure you calculate and apply your deductions correctly. For example, you can claim the full cost of home office equipment up to $300, but you need to claim the decline in value (depreciation) for any items that cost over $300. Regardless of the method you use to calculate your expenses, you will need to have records. You’ll need to keep receipts for any purchases you’ve made and a record of relevant utilities and bills. You’ll also need to keep a timesheet, roster or diary that shows the hours you’ve worked from home. If you can, keep your relevant records and receipts aside and updated throughout the year to save yourself a significant administrative workload at tax time. Have a professional prepare your tax return to maximise your refund With the range of deductions that may be available to you, plus the different calculation methods for home office expenses, having a registered tax professional prepare your tax return can be worth the investment. Quite often, your maximised refund will more than cover the cost of having a professional prepare your return. If you’re unsure about the home office deductions you’re entitled to, contact an accountant or qualified financial professional for advice.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Six super hacks to retire richer

Six super hacks to retire richer

Updated on Retirement, Superannuation

While it’s easy to be discouraged by superannuation and fear you will never have enough money saved to stop working, remember even a modest superannuation balance can make a big difference in retirement. For every $100,000 saved in superannuation, you can expect these funds to generate a return of 6%, or $6,000, a year. When this is paid out as a pension, it equates to $500 a month tax-free. Of course, this is doubled if both you and your partner have $100,000 each in super. Depending on your overall financial situation, this can be paid in addition to you receiving a full age pension. Here are six super hacks to help you maximise your super balance: Hack 1. Consolidate your accounts Consolidate all your superannuation accounts into one account best suited to your needs. The Australian Tax Office says some 6 million Australians have multiple super accounts, wasting millions of dollars in duplicated charges. These unnecessary fees will needlessly erode your super balance. Consolidating multiple accounts is easy. Simply log on to the ATO’s website and with one click, choose one account to accept all your funds. This alone could save you thousands of dollars. Hack 2. Review your super contributions Check your employer is contributing the right amount to superannuation from your wages each week. If you believe there is a shortfall, contact the ATO to investigate on your behalf. Hack 3. Take advantage of co-contributions If you earn less than $52,697 a year, consider making additional after-tax super contributions to take advantage of a matching contribution from the government, called a co-contribution. Under this scheme, you can contribute up to $1,000 of after-tax money and receive a maximum co-contribution of $500. This is a 50 % return on your investment. The government will determine how much you are entitled to when you lodge your tax return, and if you are eligible, the government will then pay the co-contribution directly to your fund. You don’t need to do anything more than make the original contribution from after-tax savings. Hack 4. Benefit from spouse contributions Review whether you can benefit from making additional contributions to your partner’s super. If you do make contributions to your partner’s super and they are on a low income or not working, you may be able to claim a tax offset of up to $540 a year. Hack 5. Contribute any long-term savings to super There are rules concerning how much you can contribute to super, and when, but any savings put into superannuation will be held within a tax benign environment. While your fund is in accumulation mode, these assets’ income and capital growth are taxed at 15%, rather than your marginal tax rate. Once you start receiving an income stream, these assets are held within a tax-free environment, making your superannuation your own personal tax haven. Hack 6. Seek professional guidance Of course, there are a raft of rules around superannuation that you must be aware of. To maximise your retirement nest egg, be sure to seek expert advice from a financial adviser or qualified accountant. While it is never too early to start making additional contributions to super, it is also never too late. Even small steps towards the end of your working life can and will make a difference to the way you live in retirement. Contact us today to get started.     The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: January-March 2021

Quarterly Economic Update: January-March 2021

Updated on COVID-19, Economy, Investing

The global COVID-19 jab-fest gathered pace with some countries, including Israel and the United Kingdom, achieving high rates of immunisation. However, the rollout has had some issues. Rare side effects linked to the AstraZeneca vaccine saw a number of countries suspend its use for a period of time, and Australia was slow off the mark with its immunisation rollout. The longer it takes to vaccinate the world, the slower the economic recovery. Hot property Pushing COVID-19 off the front pages was the big jump in residential property prices. Nationally, CoreLogic’s home value index jumped 5.8% for the quarter. Sydney led the jump with a 6.7% lift. In March alone the index rose 2.8%, the biggest rise in 32 years. Most of the action was on the first home and owner-occupiers front, though investor purchases were also up. The main fuel being added to the property price fire is ongoing low interest rates. With the RBA indicating rates will most likely remain low for years, that could continue to inflate property values and see more people priced out of the market. Helping to fuel the market was good employment numbers. Seasonally adjusted, the ABS reported an unemployment rate of 5.8% in February, down from 6.3% in January. However, this counts people on JobKeeper as employed. Taking this into account, Roy Morgan put unemployment at 13.2% in February, with 21% of the workforce either unemployed or under-employed. Blocked artery In late March the container ship Ever Given provided a graphic example of how small things can have a huge impact. Strong wind gusts saw the giant ship wedge itself bank to bank across the Suez Canal, one of the world’s main shipping arteries. Suddenly 30% of world container shipping ground to a halt. Fortunately, the ship was freed after a few days, and the backlog of ships was cleared a few days after that, but it was a stark reminder of how vulnerable large parts of the economy are. Key numbers The pace of recovery in the local and international share markets slowed during the quarter as prices crept close to or exceeded their pre-pandemic levels. The S&P/ASX200 rose 3.1%, trailing the MSCI All-Country World Equity Index, which was up 4.2%. Tech shares ran out of puff with the NASDAQ only gaining 1.4%, while the S&P500 surged late in the quarter to gain 6.1%. The outlook Many countries are experiencing third and fourth waves of COVID-19, and it’s a fair bet that the virus will continue to dictate the way we live for some time to come. But it’s not the only game in town. US President Joe Biden has taken climate change off the back burner and moved it front and centre. That means our government and businesses will need to pay it a lot more attention too. Expect carbon tariffs to become a hot topic. On the local front, with interest rates all but ruled out as a tool for managing the residential property boom, talk is turning to the use of regulatory methods to dampen demand. These could involve requiring bigger deposits or limiting the rate of credit growth. And with JobKeeper now wound up employment figures will come under close scrutiny. Expect to see a jump in unemployment this current quarter.   The information provided in this article is general in nature only and does not constitute personal financial advice.

It’s not too late for super planning in your 60s

It’s not too late for super planning in your 60s

Updated on Education, Retirement, Superannuation

For most Australians, their 60s is the decade that marks retirement. For some this means a graceful slide into a fulfilling life of leisure, enjoying the fruits of a lifetime of hard work. However, for many it means a substantial drop in income and living standards. So how can you make the most of the last few years of work before taking that big step into retirement? How are we tracking as a nation? In 2015-2016, 50% of men aged 60-64 had super balances of less than $110,000. For women the figure was a more alarming $36,000 – not even enough to provide a single person with a ‘modest’ lifestyle. Last minute lift If your super is looking a little on the thin side there are a few ways to give it a boost before retirement. – Make the most of your concessional contributions cap. Ask your employer if you can increase your employer contributions under a ‘salary sacrifice’ arrangement. Alternatively, you can claim a tax deduction for personal contributions you make. Total concessional contributions must not exceed $25,000 per year. – Investigate the benefits of a ‘transition to retirement’ (TTR) income stream. This can be combined with a re-contribution strategy that, depending on your marginal tax rate, can give your retirement savings a significant boost. – Review your investment strategy. A common view is that as we near retirement our investments should be shifted to the conservative end of the risk and return spectrum. However, in an age of low returns and longer life expectancies, some growth assets may be required to provide the returns that will be necessary to support a long and comfortable retirement. – Make non-concessional contributions. If you have substantial funds outside of super it may be worthwhile transferring them into the concessionally taxed super environment. You can contribute up to $100,000 per year, or $300,000 within a three-year period. A work test applies if you are over 65. – The 60s is often a time for home downsizing. This can free up some cash to help with retirement. The ‘downsizer contribution’ allows a couple to jointly contribute up to $600,000 to superannuation without it counting towards their non-concessional contributions caps. Get it right This important decade is when you will make the key decisions that will determine your quality of life in retirement. Those decisions are both numerous and complex. Quality, knowledgeable advice is critical, and wherever you are on your path to retirement, now is always the best time to talk to your licensed financial adviser. Contact us today for a chat.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Push the super pedal down in your 50s

Push the super pedal down in your 50s

Updated on Education, Retirement, Superannuation

If 50 really is the new 40, then life has just begun. The kids are gaining independence or may have left home, and the mortgage could be a thing of the past. Bliss. But galloping towards you is… retirement! Here are some ways to boost your retirement savings. Increase your pre-tax contributionsYou can ask your employer to reduce your take-home pay and make larger contributions to your super fund. If you are self-employed, you can increase your level of tax-deductible contributions. This strategy is commonly known as ‘salary sacrifice’. If you are earning between $120,001 and $180,000 per year, any income between those limits is taxed at 39%. Salary sacrifice contributions to your superannuation fund are only taxed at 15%. Sacrificing just $1,000 per month to super will, over the course of a year, see you better off by $2,880 on the tax differences alone. Plus, the earnings on those super contributions will be taxed at only 15%, compared to investment earnings outside of super being taxed at your marginal rate. Don’t overdo it though. If your salary sacrifice plus superannuation guarantee contributions add up to more than $25,000 this year, the excess is added to your assessable income and taxed at your marginal tax rate. Retiring slowlyOnce you reach your preservation age you might start a ‘transition to retirement’ (TTR) pension from your superannuation fund. The idea is to allow people to reduce working hours without reducing their income. Keep your money workingThere is a tendency to opt for more secure, but lower-return investments as we approach retirement. However, even at retirement your investment horizon may still be decades. With cash and fixed interest producing some of their lowest returns in history, it may be beneficial to keep a significant portion of your portfolio invested in growth assets. Insurance and death benefitsWith the mortgage paid off or much diminished and a growing investment pool, your insurance needs have probably changed. This is a good time to review your insurance cover to ensure it continues to be a match for your changing circumstances. It’s also a good idea to check the death benefit nomination with your super fund. By making a binding nomination you can ensure that your death benefit goes to the beneficiaries of your choice, and may mean they receive the money more quickly. Get a plan!Superannuation provides many opportunities for boosting your retirement wealth. However, it is a complex area and strategies that benefit some people may harm others. Good advice is absolutely essential, and the sooner you sit down with a licensed financial adviser, the better your chances of having more when you reach the finishing line. Contact us today to get started.   The information provided in this article is general in nature only and does not constitute personal financial advice.

It’s time to get focused on super in your 40s

It’s time to get focused on super in your 40s

Updated on Budgeting, Education, Finance, Investing, Retirement, Superannuation

Typically your forties is a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget, but by this age there’s a good chance there’s some spare cash that can be put to good use. A beneficial sacrificeAt this age, a popular strategy for boosting retirement savings is ‘salary sacrifice’ in which you take a cut in take-home pay in exchange for additional pre-tax contributions to your super. If you are self-employed, you can increase your tax-deductible contributions, within the concessional limit, to gain the same benefit. Salary sacrificing provides a double benefit. Not only are you adding more money to your retirement balance, these contributions and their earnings are taxed at only 15%. If you earn between $90,001 and $180,000 per year that money would otherwise be taxed at 39%. Sacrifice $1,000 per month over the course of a year and you’ll be $2,880 better off just from the tax benefits alone. It’s important to remember that if combined salary sacrifice and superannuation guarantee contributions exceed $25,000 in a given year the amount above this limit will be added to your assessable income and taxed at your marginal tax rate. What about the mortgage?Paying the mortgage down quickly has long been a sound wealth-building strategy for many. Current low interest rates and the tax benefits of salary sacrifice, combined with a good long-term investment return, means that putting your money into super produces the better outcome in most cases. One caveat – if you think you might need to access that money before retiring don’t put it into super. Pay down the mortgage and redraw should you need to. Let the government contributeLow-income earners can pick up an easy, government-sponsored, 50% return on their investment just by making an after-tax contribution to their super fund. If you can contribute $1,000 of your own money to super, you could receive up to $500 as a co-contribution. Another strategy that may help some couples is contribution splitting. This is where a portion of one partner’s superannuation contributions are rolled over to the partner on a lower income. Your financial adviser will be able to help you decide if this strategy would benefit you. Protect what you can’t afford to loseWith debts and dependants, adequate life insurance cover is crucial. Holding cover through superannuation may provide benefits such as lower premiums, a tax deduction to the super fund and reduced strain on cash flow. Make sure the sum insured is sufficient for your needs as default cover amounts are usually well short of what’s required. Seek professional adviceThe forties is an important decade for wealth creation with many things to consider, so talk to us and we’ll help you make sure the next 20 years are the best for your super.   This is general information only

Pay attention to super in your 30s

Pay attention to super in your 30s

Updated on Education, Superannuation

If you are in your 30s, chances are life revolves around children and a mortgage – not super. And as much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which repayments are generally at their highest, relative to income. And on top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade. Don’t be alarmed, but by the time a 35-year-old couple today reaches retirement age in 32 years’ time, the effects of inflation could mean that they will need an income of about $150,000 per year to enjoy a ‘comfortable’ retirement. To support that level of income for up to 30 years in retirement they will want to have built a combined nest egg of about $2.7 million! If you are on a 30% or higher marginal tax rate, willing to stash some cash for the long term, and would like to reduce your tax bill, then consider making salary sacrifice (pre-tax) contributions to super. For most people super contributions and earnings are taxed at 15%, so savings will grow faster in super than outside it. Even if you can’t make additional contributions right now there is one thing you can do to help achieve a comfortable retirement: ensure your super is invested in an appropriate portfolio. With decades to go until retirement, a portfolio with a higher proportion of shares, property and other growth assets is likely to out-perform one that is dominated by cash and fixed interest investments. But be mindful: the higher the return, the higher the associated risk. For any young family, financial protection is crucial. The loss of or disablement of either parent would be disastrous. In most cases both parents should be covered by life and disability insurance. If this insurance is taken out through your superannuation fund the premiums are paid out of your accumulated super balance. While this means that your ultimate retirement benefit will be a bit less than if you took out insurance directly, it doesn’t impact on the current family budget. However, don’t just accept the amount of cover that many funds automatically provide. It may not be adequate for your needs. Whether it’s super, insurance, establishing investments or building your career, there’s a lot to think about when you’re thirty-something. It’s an ideal age to start some serious financial planning, so contact us today about putting a plan into place.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Super in your 20s: Boring? Doesn’t have to be!

Super in your 20s: Boring? Doesn’t have to be!

Updated on Education, Superannuation

Superannuation is for the oldies, right? In some ways that’s true, but even in your twenties there are good reasons to take a bit more interest in your super. The average 25-year-old has around $10,000 in super, but the decisions you make now, even with relatively small sums of money, could earn you hundreds of thousands of extra dollars over your working life. Are you getting any? Earn more than $450 in any given month? Then every three months your employer should be paying 9.5% of that into your super fund. Usually you can choose your fund; if you don’t, it gets paid into a super fund of your employer’s choice. If you don’t know if your super is being paid, or the fund it’s being paid into, ask your employer. If you think you’re missing out, search ‘unpaid super’ on the tax office website (ato.gov.au) to see what you can do. This is your money. Where have you got it? Had more than one job? If you have a lot of little super accounts the money can disappear in a puff of fees and insurance premiums. Simple fix – combine your super into one account. Is it working for YOU? Your money is going to be stuck in super for a long time, so you want it to be working hard for you. Most funds offer a range of investment choices and some will do better than others. What do you want? Buying a new car. Travelling, Having fun. Let’s face it, there are lots more exciting things to do with your money than sticking it into super. The choice is yours but think about this: If Mum and Dad retired this year, they would need a minimum of around $61,909 per year to enjoy themselves. If that doesn’t sound like much now, by the time YOU retire inflation could have pushed that annual amount to around $214,248. That means you will need to have at least $3.71 million in savings! Sure you’ve got 40-plus years but that’s still a lot of money to save up! It can be done if you start early enough – and you don’t need to miss out on enjoying life now. Starting early and adding a bit extra when you can makes a big difference. Let’s work on another 40 years before you can retire. If you start now by making an extra post-tax contribution of just 1% of your annual income to super, ($350 from a $35,000 salary – and the government could add to that with a co-contribution) at an 8% investment return could add an extra $149,000 to your retirement fund. If you wait 20 years before starting to make that extra contribution, you’ll only get a boost of $49,000. $100,000 less! Continuing this small extra contribution as your salary increases will turbo boost your super fund balance. Imagine your retirement party?! So, still find super boring? That’s okay; you’re not alone. But instead of finding the time to organise all this yourself, contact us today and we will review your current super, any insurance required, the investment choices and prepare a strategy to get your super into shape – then you can get back to enjoying life!   The information provided in this article is general in nature only and does not constitute personal financial advice.

Economic Update: October-December 2020

Economic Update: October-December 2020

Updated on COVID-19, Economy, Investing

COVID-19 update Finally, some good news on the COVID-19 front: several vaccines have been rolled out in a number of countries. While a huge step forward in bringing the pandemic under control, it comes at a time when, globally, more people are being infected with the coronavirus, and more people are dying from it than at any previous point in the pandemic. There is a long way to go before victory can be declared. Meanwhile, Victoria squashed its second wave of COVID-19 infections, sparking a bounce in its economy as it enjoyed an extended period of no community spread of coronavirus. Unfortunately, the virus found a way back into both Victoria and NSW, kicking off fresh border closures and holiday chaos. The local view As was widely anticipated, the RBA cut the cash rate target by 0.15% to 0.1% in November. While welcomed by borrowers the cut put additional pressure on net savers by making it even harder to find low risk income yielding investments. Some are turning to peer-to-peer lending platforms, or even high yielding shares, which may partly explain the strong recent performance of the ASX. The official unemployment rate in November was 6.8%, the same as in August. However, using a different methodology, Roy Morgan calculated unemployment to be 11.9% in November, with a further 9.1% under-employed. While hardly cause for celebration, this was the first time since the pandemic began that both figures showed a month-on-month drop. The world stage The US election delivered a change of president, with markets responding positively as the result became clear. As the year came to a close, a sigh of relief was heard from millions as the US Congress approved a coronavirus relief package worth $US892 billion ($1.18 trillion). The package includes $US600 payments to most Americans. After years of negotiation and with just days to spare, the UK and EU managed to agree on a BREXIT trade deal. While it will keep the goods flowing between the UK and Europe, the agreement doesn’t cover the huge services sector. The markets It was a good quarter on the markets with the main global and US indices zooming past pre-COVID-19 levels. The MSCI All-Country World Equity Index rose 13.4%. The Australian market followed suit, with the S&P/ASX200 rising 13.3%. However, the Aussie market has yet to return to its February high. In the US the S&P500 rose 11% and tech stocks continued to attract buyers with the NASDAQ up 15.5%. The A$ gained strength rising 8.2% against the greenback. While partly due to a weakening of the US$, the A$ was also up 2% against the British Pound, 3.4% against the Euro and 5.6% against the Yen. The outlook Beyond direct health effects much of COVID-19’s economic impacts have been due to fear. It will take many months, but as vaccines are rolled out, and provided they bring the pandemic under control, much of that fear will dissipate. As it does economic activity should pick up strongly. Less likely to see any positive developments in the immediate future is the tense relationship between Australia and China. Australian coal miners, winemakers and barley growers will continue to bear the brunt of the dispute. Fortunately, China is still highly dependent on Australian iron ore, the price of which has soared by 78% since the start of the year. For current market conditions and further economic analysis, contact our financial advisers. We’re here to help!   The information provided in this article is general in nature only and does not constitute personal financial advice.

Market crashes: The good, the bad and the ugly

Market crashes: The good, the bad and the ugly

Updated on Economy, Investing

Just as night follows day, it seems part of the regular cycle of the world’s share markets that market crashes and falling prices follow good times and rising prices. The impact of the COVID-19 Global Pandemic has been typical of such downturns, prompting a 35 per cent sell off in world share markets and a dramatic fall in economic activity. For many, it has prompted memories of other equally, and sometimes more devastating, downturns in the world’s share markets. The most famous was “Black Thursday” in 1929, which led to an 80 per cent collapse in share prices and sparked the Great Depression, lasting for more than 10 years. What caused it? The wild excesses of the roaring twenties when consumer confidence was at a record high and the introduction of margin loans, where people could borrow up to 80 per cent of the value of shares. This created a classic investment bubble, where optimism overwhelmed caution, and people started buying shares with the mistaken belief they would always increase in value. A drop in agricultural production due to droughts and a fall in economic production caused a sudden reversal in sentiment. A similar situation occurred 60 years later in 1987 where panic selling on Black Monday wiped approximately 30 per cent from the value of the key US market index, the Dow Jones – its biggest one-day fall. It put an end to the ‘Greed is Good’ mentality of the eighties and prompted a review of the relatively new, computerised share trading systems. Yet it seems investor’s memories are short. Not long after this, markets got caught up with a new investment bubble prompted by the development and growth of the Internet. Companies raced to find their place online, and suddenly, all Internet companies were considered a sure bet. This speculative buying ran out of steam when the Dot Com Bubble finally burst in 2000, wiping 45 per cent off the value of shares. Whilst sharing commonalities with previous crashes, the Global Financial Crisis of 2008, was also in many ways unique. It was the direct result of dodgy lending practices in the US housing market, which created a toxic class of home loans, commonly referred to as sub-prime loans. Typically, these lenders ignored the individual’s ability to repay the loans and instead focused on the belief property prices would continue to rise, and there would always be people prepared to rent these properties. It created a typical investment bubble in the US housing market. Eventually, people found they could not meet their repayments, nor could they sell the properties held as securities. Causing enormous problems within the US banking system and the collapse of several international banks. The lesson to be learnt from all these devastating crashes is that while no two were the same, they were all similar in nature. All were created by exaggerated investor beliefs that prices would never fall. Therefore, it is essential to think carefully before investing, ensuring each investment is made with a long-term mindset, and that sudden market corrections do not lead to panic selling. As history has shown, market downturns follow upturns, but as long as the investment is fundamentally sound, it will fully recover any lost value. Contact us today for sound investment and financial advice to withstand market volatility.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Why seeing a financial adviser could be your best Xmas gift

Why seeing a financial adviser could be your best Xmas gift

Updated on Economy, Investing

The run-up to Christmas is usually a hectic time. Aside from the shopping and Christmas parties, there are deadlines to meet, loose ends to tie up and, for many farmers, the last of the crop to harvest. Whatever Christmas looks like for you, it’s essential you spend your time and money in a way that brings you and others around you joy and deeper connection. This is a time of year where there are rarely work and other commitments that need attention, leaving us with the space to focus on deepening the special relationships around us. Put simply, Christmas is about quality time with loved ones, not overextending yourself by spending too much. Once the big day is over many of us are able to slip into a more relaxed mode, but as your focus turns to leftover turkey and pudding, or lounging on the beach, why not spare a thought for your financial situation? With everyone else relaxing, the Christmas holiday period can be an ideal time to check your finances and start the New Year with everything in order and heading in the right direction. As their clients hit the beach, the holiday period is often a quieter time for the financial advisers who remain on deck. That’ll make it easier to see a busy adviser. And while there’s always plenty to do down on the farm, that post-harvest period may be the perfect time for farmers to sit down with their financial advisers. If a rainy day puts a dampener on your holiday fun, why not dip into the filing cabinet and tidy up the paperwork? You may be able to get rid of old documents you no longer need (make sure you dispose of them securely), find new opportunities, or discover important things that you’ve overlooked. Is your cash working hard enough for you? Has your portfolio become unbalanced? Are your personal insurances all in order? Are you saving enough? So why not make a Christmas resolution, to call us and make an appointment to review your financial situation. You’ll come away well equipped with some New Year resolutions to keep your finances humming along for the year to come.   The information provided in this article is general in nature only and does not constitute personal financial advice.

How does Australia’s pension plan stack up?

How does Australia’s pension plan stack up?

Updated on Aged Care, Centrelink, Retirement

One in six people will be over 65 years old by 2050. With the world’s population ageing quickly, it is natural to think about how pension systems around the world will cope, particularly in Australia. Fortunately, Australia’s three-component retirement income system means our age pension system is well-equipped to support older Australians now and well into the future. Is Australia’s age pension adequate for retirement? Comparisons of age pensions around the world are generally made based on three key factors — adequacy, sustainability and integrity. The balancing act is tough, but essential for countries to get right. It is no use having an overly generous age pension if the current funding measures (typically tax revenue) aren’t adequate to maintain the system long-term. Integrity is also critical, ensuring an age pension system adequately protects a country’s older people. What payment types are included in Australia’s age pension? Age pension rates in Australia are based on an income test, assets test and your relationship status. For example, the normal maximum fortnightly rates for an eligible single person are: Maximum basic rate $860.60 Maximum Pension Supplement $69.60 Energy Supplement $14.10 Total $944.30 The Pension Supplement is an extra payment to help eligible retirees pay their utilities, phone, internet and medical expenses. Similarly, the energy supplement is an additional payment which assists pensioners with their household energy costs. What are the means tests for Australia’s age pension? There are two tests to determine age pension eligibility in Australia — the income test and the asset test. The income test assesses all sources of you and your partner’s (if applicable) income, including financial assets. The asset test assesses the value of you and your partner’s assets (excluding your principal home). How does Australia’s age pension stack up against other countries? Australia is typically ranked amongst the best in the world for age pensions, trailing just behind the Netherlands and Denmark. In the Netherlands, for example, the maximum age pension is 50 per cent of the minimum wage for couples, and 70 per cent of the minimum wage for single people. Denmark differs slightly, though their system is still adequate, providing pensioners with a minimum of 40 per cent of a person’s average earnings along with support through the country’s universal healthcare and housing benefits. Despite the Netherlands and Denmark consistently holding the top spots for their respective age pension systems, Australia’s age pension comes quite close. Australia is fortunate to have a stable, well-funded age pension system, with the maximum age pension equating to around 60 per cent of the national minimum wage. Is Australia’s age pension adequate for your desired retirement lifestyle? When planning for your retirement, it is important to consider your desired retirement lifestyle and what this will cost. Your ongoing costs in retirement will be impacted not only by your day-to-day living expenses but also by the value of your assets and any outstanding debt, such as a mortgage. Seeking tailored advice from a financial professional as you plan your retirement will ensure you have adequate income to fund your desired lifestyle. Contact us today to get started.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Super success for women

Super success for women

Updated on Retirement, Superannuation

While women earn less and spend less time in the workforce than men, sharply reducing their super contributions throughout their working lives, there are some simple steps women can take to boost their retirement savings. The Simple Facts This inequality is simply due to women earning and working less. Women in full-time work earn on average 18 per cent less than men, while almost half of all women in the workforce work part-time with an estimated 220,000 women missing out on any super contributions each year simply because they earn less than $450 a month – the lower threshold for super guarantee contributions. Women also miss out on super contributions because they are often absent from the workforce for extended periods while on maternity leave or looking after loved ones, be they children or other family relatives. When they do return to the workforce, it is frequently in casual positions or working for themselves, where the need to make super contributions is so often overlooked. Check your super fund fees and charges The solution lies with women taking control of their super and choosing the best possible super fund, which typically means low fees and good, low-risk investment options. Regularly check what, if any, personal insurance premiums are paid from your precious super savings. While insurance is essential while you are raising a family, as you get older, you might find your need for insurance diminishes. You may be able to reduce your coverage and with it the cost of premiums from your super. (Remember to always check with your adviser before cancelling any insurances.) Make sure you take the time to consolidate your super accounts into one low cost super fund. Visit the Australian Tax Office website to consolidate your super or ask your adviser to do this for you. Wherever possible, ensure you continue to make contributions throughout your working life, starting as early as possible and not neglecting your superannuation during periods when you are out of the workforce, working on a part-time basis or self-employed. Maximise Your Contributions Make sure you speak to your adviser to maximise your contributions, and in doing so, minimise your tax bill at the end of the financial year. If you expect your income to be less than $52,000 in a financial year, make sure you take advantage of the Federal Government’s co-contribution scheme. By putting just $20 a week of after-tax income into super, you will receive up to $500 from the Government directly into your super account as soon as you lodge your tax return. That’s a guaranteed 50 per cent return on your money and the best investment you will ever make. If you are earning less than $37,000 a year, you should receive the Federal Government’s low-income superannuation tax offset of $500. Both payments happen automatically, meaning you don’t have to apply or complete additional paperwork to receive them. Still, you should check your superannuation account to make sure these payments are there. If you need more advice about your super, talk to us today.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Turbo boost your retirement savings

Turbo boost your retirement savings

Updated on Retirement, Superannuation

Once your mortgage and other financial commitments are manageable, it is usually time to put the pedal down on your super. Those prime income years, between age 40 and 50 in particular, should be used constructively. However, the task may not always be easy. Many couples choose to have children later and as a result, parents’ financial responsibilities can now often extend well into their 50s, even 60s. Furthermore, the earning opportunities for many people over age 50 often begin to decline. Other factors can also disrupt retirement savings planning – time out of the workforce to raise a family, periods of unemployment or extended illness are but a few. Is there a logical solution? Usually, the least painful (and most disciplined) option is to use a superannuation salary sacrifice arrangement. For most employed people on high incomes this can represent a useful and straightforward method of bolstering retirement provisions. It works like this You agree to forego a specified amount of future salary and in return your employer makes additional future super contributions for an equivalent amount. This means your extra long-term saving starts to accrue faster, pay by pay. “Sacrificing” salary to super is also a tax-effective form of remuneration because if the arrangement is put together correctly, no personal income or fringe benefits tax is payable on the extra amount of contribution. You do need to keep in mind the impact of superannuation contribution limits however we can provide guidance on this issue. Consider this case study: Michael is 45 and he and his wife Marie have been working away at their mortgage for some time. Now they are beginning to see light at the end of the tunnel. Michael’s employer has been contributing 10% of his $110,000 remuneration package to superannuation ($11,000 per annum). Michael thinks that he may now be able to afford more, but he is not all that happy with the employer’s fund investment options. He discusses the situation with Marie and their adviser. Together they agree that Michael should set up a new super fund with a different provider and increase his contribution to 15% of salary. From the next fortnightly pay, Michael’s pre-tax salary is lower by $211.54 but the amount he actually receives will be lower by only $129.04 (since he will pay $82.50 less personal income tax as well). The $211.54 pre-tax amount was paid directly into Michael’s new super account. This means that his total after-tax super contributions for the next year will be $14,025 net instead of $9,350 and he has been able to select a fund that meets his needs. Salary sacrifice to super is just one way in which you can enhance your retirement provisions. If you would like more information about the options, talk to us today and we can assist you in determining what is right for you.   The information provided in this article is general in nature only and does not constitute personal financial advice.

What is money… really?

What is money… really?

Updated on Economy, Finance

That $50 note in your pocket. What’s it worth? “$50,” you say, probably thinking it’s a dumb question. But is it really? Or a sheet of plastic and a bit of ink that likely cost the note printer less than a cent? Your $50 note only has value because the government declares that it does. This lack of intrinsic value means your $50 note, and the balances of bank accounts that represent most money in circulation, might better be described as currency rather than ‘real money’. Over the past few thousand years all sorts of items have been used as currency, from shells and cocoa beans to soap and cigarettes. But to be considered real money, several key criteria need to be met. The most important are that it is: Recognised as a medium of exchange and accepted by most people within an economy. Durable. Portable, having a high value relative to its weight and size. Divisible into smaller amounts. Resistant to counterfeiting. A store of value over long timeframes. Of intrinsic value, i.e. not reliant on anything else for its value. Throughout history gold and silver have come closest to meeting these and other criteria, though nowadays you’ll have difficulty in paying for your groceries with gold Krugerrands. Also, you’ll want to keep your gold and silver in a safe place, and it was people seeking to do just that which gave rise to paper money and our current system of bank-created money. What started out as a good idea… Centuries ago goldsmiths would take in gold and silver for safekeeping and issue the owners receipts, or notes, confirming the amount of gold held. The depositors soon discovered that these notes could be used for payment in place of the physical gold, but the goldsmiths noticed something else. It was rare for anyone to redeem all their notes at once. They saw the opportunity to issue notes as a loan that borrowers paid back over time, with interest. Provided borrowers paid back their loans on time and only a small proportion of owners wanted their gold back at any given time, all was well, and goldsmiths transformed into bankers. But this didn’t always work out. An economic shock might see everyone wanting their gold back, and if the bank couldn’t deliver the full amount that was demanded, it went broke. To help prevent this, many countries created central banks, with some governments even acting as lender-of-last-resort. While government control and the rules around banking have evolved over time, private banks are still the source of most currency created today. When things get real In economically stable times it’s easy to think of currency and real money as the same thing. However, a couple of examples reveal the difference between the two. One is when a government starts printing money to pay for its programs. Inflation usually results, and the value of currency can plummet. In the case of hyperinflation, paper money and bank deposits can quickly become worthless as happened in Germany in the 1920s. The difference between currency and real money and the issue of intrinsic value has implications for other investments. If you would like to learn more, talk to us. We’re here to help.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: July – September 2020

Quarterly Economic Update: July – September 2020

Updated on Finance, Investing

COVID-19 remained the big story of the last quarter. Tragically, by the end of September the pandemic had caused over one million deaths. That was up by 500,000 since the end of the previous quarter, and many countries were experiencing devastating ‘second waves’. While most of Australia managed to keep case numbers of coronavirus at very low levels, Victoria provided a case study in the severe human and economic impacts of having the virus escape control. Now it is epidemiologists, rather than economists, that we look to for advice on how to transition to a post-pandemic world. Unemployment ups and downs The official unemployment rate from the Australian Bureau of Statistics was 7.5% in July, but showed a welcome drop to 6.8% in August. Meanwhile, NSW claimed that 70% of jobs initially lost in the pandemic had been restored. However, when JobKeeper, people working zero hours but classified as employed, and a big jump in gig workers are taken into account, the real unemployment rate is much higher. Roy Morgan estimated that the actual unemployment rate is closer to 13.8% and the combined unemployment and under-employment rate is 22.8%. Still, both these figures were down from their peak in late March. Property problems The major property markets of Sydney and Melbourne declined for the fourth month in a row, with the ABS reporting that in the June quarter these major city housing markets dropped by 2.6 and 2.8% respectively. And the outlook for housing construction is none too rosy. Australia relies on immigration to generate the population growth that stimulates construction and supports the prices of existing dwellings. With our borders effectively closed that population growth will either be delayed or will fail to materialise. Rental income is also expected to decline, particularly in markets with a high proportion of overseas students who are unable to return to Australia. The markets After a bit of a rally through July and August the local share market ran out of steam, with the S&P 500 index finishing the quarter down by 1.4%. International markets continued to produce some excitement. Despite weakening a little towards the end of the quarter the MSCI All-Country World Equity Index rose 7.2%. Much of this was attributable to the US market with the S&P500 up 7.6% and the NASDAQ up 10.2%. The Aussie dollar also weakened slightly towards the end of the quarter, finishing flat against the Euro and British Pound, up 2% against the Yen, and up 3.8% (from the high 60s to low 70s) against the US Dollar. The outlook If you thought that interest rates couldn’t go any lower, think again. The RBA has flagged the possibility of a further cut in the cash rate with commentators predicting a cut of 15 basis points to take the rate to just 0.1%. Internationally, the US presidential election could see an increase in market volatility with the final outcome anything but certain. For further information on current market conditions, contact us.     The information provided in this article is general in nature only and does not constitute personal financial advice.

Reviewing your insurance as you get older

Reviewing your insurance as you get older

Updated on Insurance, Retirement

So, you are seriously starting to think about your retirement. The kids are finally more independent, the mortgage is less than it was, and the super is more than it was. You look at your monthly bank statements and one particular debit is always there. The insurance premium. You have been paying it diligently for years now, maybe decades. But, for what? You’ve not claimed and ‘gained’ anything so far. At this stage and age, it might be very tempting to cancel your policies and save a few dollars. Before you do, just consider what you could be losing in a future that’s not yet written. It could be hundreds of thousands of dollars. More to the point it could be your home, your lifestyle, or your health – the very thing you are hoping to protect. Statistically you are more likely to claim the older you get. Look at these figures:   Type of cover Average age people cancel policy Average age people make a claim Income Protection 45 46 Total & Permanent Disability (TPD) 49 48 Trauma Insurance 44 49   People often don’t realise an insurance policy is not an ‘all or nothing’ concept and there are options available. For example, as you get older and your debts and commitments reduce, so might the level of cover you require. When cover is reduced, so is the premium. Take care though, once a policy is in place it’s easy to reduce the cover but much harder to increase the amount, particularly as you get older. It often only takes a phone call to lower the amount but countless medical tests to increase it or apply again. Before you rush off and reduce your cover, it’s important to tailor the amount of cover to your potentially changing circumstances, and this is where we can help. There are many other options available including requesting a temporary freeze on the premiums; paying annually instead of monthly; moving your cover into your super fund (this is not applicable to all insurance however); or given that your adult children will usually be the ones who will eventually benefit, ask them to share the cost of the premiums! The basic idea of insurance is not to put you in a better position than you were – it’s there to protect what you have. Regardless of what age you are, think twice about cancelling insurance completely. There are always other options available. Ask us for guidance before you make any decisions.     The information provided in this article is general in nature only and does not constitute personal financial advice.

Positioning your portfolio in turbulent times

Positioning your portfolio in turbulent times

Updated on Finance, Investing, Superannuation

As any experienced investor knows, all investment markets have their ups and downs. Regardless of investor experience, turbulent times are a cause of anxiety, and that can lead to poor decision-making. So, if turbulent markets are inevitable, even if their timing is not predictable, how should portfolios be positioned in anticipation of and in response to market volatility? What’s your objective? First up, it’s important to go back to your investment objective. Is it to grow wealth over the medium to long term? Or are you more concerned with preserving capital? Your objective also needs to take account of your risk profile. With your risk tolerance and objectives clarified, it’s time to get to grips with asset allocation. This is the process of deciding what proportion of your portfolio will be allocated to each of the major asset classes: cash, fixed interest, property and shares. Asset allocation is the engine room of your portfolio. The amount that you apportion to the major asset classes has the biggest effect on your portfolio performance. It has a greater bearing on your returns than individual asset selection. Asset allocation is also your key risk management tool, the more you allocate to shares and property the greater the volatility, and therefore the risk. However, in this context, risk isn’t always a bad thing. A higher risk portfolio may at times fall more in value than a lower risks portfolio, but over the long term it is also more likely to generate higher returns. Oops, too late Unfortunately, the motivation to position a portfolio for turbulent times is often a sudden upset in investment markets. But this doesn’t mean it’s too late to do anything. If your investment objectives and risk tolerance haven’t changed, rebalancing your portfolio (i.e. bringing the asset allocation back to its ideal position) may help to position it for the next upswing in investment markets. Waiting out the storms While positioning can help with portfolio risk management, many investors opt to wait out any storms. Why? Because for all the ups and downs, bull markets and bear markets, bubbles and crashes, major share markets have delivered solid long-term growth. In fact, it has been claimed that investors have lost more money trying to anticipate corrections, than they would have lost in riding out actual corrections. A detached view Concerned about the financial outlook and your portfolio’s current position? We can provide an impartial assessment of your portfolio, help you identify your objectives and your risk tolerance, and recommend investments to help you weather the turbulent times. Talk to us today to get started.     The information provided in this article is general in nature only and does not constitute personal financial advice.

Unlocking financial secrets for different phases of life

Unlocking financial secrets for different phases of life

Updated on Finance, Investing

One of the keys to financial success is to adopt the right strategy at the right time. As you move through the stages of life, here are some tried and tested ‘secrets’ that will help you build and protect your wealth. Teens and young adults Time is on your side so get saving. Through the magic of compound interest, a little bit invested now can grow into a big amount over time. Most young people don’t want to think about life in 50 years time, but if a 15-year-old starts saving just $10 per week into an investment returning 5% pa (after fees and tax), when they turn 65 their total outlay of $26,000 will have grown to over $116,000. Contributing those savings to a tax-favoured vehicle such as superannuation may provide an even higher final return. Single life Saving is still a key strategy as careers are established, but usually with a shorter timeframe and a specific purpose in mind – buying a home, for example. This is a time when savings strategies can be brought undone by the allure of desirable things and the ease with which one can go into debt. Take care not to indulge in too many luxuries, and avoid taking on any high interest debt, such as credit cards. Rather, commit to working out a budget and sticking to it. Family focus The time of kids and mortgages is also the time of peak responsibility. It’s likely that your most valuable asset is your ability to earn an income, and illness, disability or death could deprive you and your family of that income. The financial consequences of each of these possibilities can be managed with a blend of income protection, total and permanent disability, trauma and life insurances. Preparing for retirement With offspring launched into the world and earning capacity often at a peak, a wealth of opportunities open up for pre-retirees. By all means enjoy some lifestyle spending, but don’t forget to supercharge your super in anticipation of a long retirement. In times of normal interest rates, using surplus income to pay off any outstanding home loan is often recommended, however, when interest rates are very low, investing spare income into super and leaving debt repayments until later may deliver a better outcome. Golden years Australians are up there with the leaders when it comes to enjoying long and healthy retirements. That means retirement savings need to last, so a): don’t go too hard too fast in spending your super, and b): don’t invest too conservatively, particularly in times of ultra-low interest rates. On the plus side, if you’ve employed the above secrets in each phase of life, you should be in good shape to enjoy a long, financially comfortable retirement. Whatever your stage of life, there are many things you could be doing to secure your financial future. To find out more, talk to us today.     The information provided in this article is general in nature only and does not constitute personal financial advice.

Are you investing or gambling?

Are you investing or gambling?

Updated on Investing

The potential financial results of investing can feel limitless, and it can be tempting to think that just one stock pick could make you an overnight millionaire. Yes, stock-picking can have a place in your investment strategy, but if you’re using a “get rich quick” mentality, you may be gambling, not investing. What’s the difference? One of the key differences between investing and gambling is process and strategy. If you don’t have a process and strategy in place, it is a sign that you need to establish or refine your plan. Further, gambling focuses on emotions such as hope. Investing, on the other hand, is all about strategy. With a clear strategy, you know approximately how much your investments will grow and over what time horizons. How do you know if you’re investing effectively? If you’re unsure whether your current investment approach is working to realise your goals, think about your investment process and how many of the below five elements are included in your approach. Completing no research If you’re not completing any research and putting money into assets based on tips from friends or what you see on social media, you’re exposing yourself to increased risk and not doing enough due diligence. Investing in micro-cap stocks only Micro-cap stocks typically have a market capitalisation under $500 million and are ranked from 350 to 600 on the Australian Stock Exchange. With a relatively small market capitalisation, buying stocks in these companies can be cheap. The downside, however, is that these companies are usually in their infancy and experience volatile price fluctuations. There’s a place for micro-cap stocks in your investing. However, if you’re putting all of your money into these companies, you’re likely exposing yourself to unnecessary risk. Investing with short time horizons Putting all of your money into short-term investments or activities such as day trading is an indication that you’re too focused on short-term gains without a long-term strategy. There’s a place for short time horizons in your investing, but only once you’ve mastered the foundations such as establishing a long-term plan and ensuring you have adequate cash buffers. Lack of diversification If all of your money is invested in one asset class, you’ll be over-exposed to volatility in a single market. To ensure your money grows consistently over time, your money needs to be balanced across a range of asset classes and sectors. Having no investment strategy If you don’t have an investment strategy, your investing won’t be as effective as it could be. To start putting together an investment strategy, you need to think about things such as: building up adequate cash buffers; how much money you need invested to live comfortably off your returns; and when you anticipate you’ll start drawing an income from your investments. Moving forward with a long-term wealth strategy Investing in different asset classes such as equities, commodities, and fixed-income assets is a great way to build long-term wealth. To build this wealth, however, you need a strategy and process to follow. If you’re unsure how to develop an investment strategy, be sure to seek qualified financial advice. Investing in this advice now can reap great rewards in the years to come, ensuring your money is working to help you realise your financial and lifestyle goals sooner. Contact us to get started.     The information provided in this article is general in nature only and does not constitute personal financial advice.

Get your super together and save

Get your super together and save

Updated on Superannuation

If you have had different jobs with different employers over your working career you will probably have superannuation accounts in many different funds. Apart from the time it takes to keep track of these accounts, there are three more serious concerns of which you should be aware. Investment strategy Choosing the right investments for your situation is critical to maximising your retirement nest egg. Super is for the long term and just 1% extra in returns every year can make a significant difference. For example, if you were earning $70,000 per annum and your fund was receiving only the 9.5% per annum superannuation guarantee contributions from your employer, you could have $288,000 after 20 years if the fund earned 7% per annum. If it earned just 1% per annum more, you could have $326,000. An additional $38,000! Reports and fees More than one fund means you receive multiple annual reports and statements. Apart from being a nuisance, the big danger is that your super will be eroded by fees. Lost billions An inactive account is one that has not been accessed or contributed to in the past 12 months and the super fund cannot locate the account owner. Superannuation held in inactive accounts with balances less than $6,000 is transferred into the federal government’s consolidated revenue account. As there are billions of dollars held in inactive accounts, this is a huge windfall for the government. Does any of this money belong to you? You can easily find out if you have any lost super by using your MyGov account and linking to the ATO. If there is lost super showing, follow the instructions on the MyGov service to claim it. If you don’t have a MyGov account you can download a form from www.ato.gov.au and submit it to instigate a search. Whichever way you do it, the key is to get your super all together now and make it work for your future. Contact us to get started.     The information provided in this article is general in nature only and does not constitute personal financial advice.

What will you do with your tax refund?

What will you do with your tax refund?

Updated on Tax

Thousands of Australians receive tax refunds every year. Some refunds won’t even cover the cost of a pizza to celebrate, however many are quite substantial. If you’re one of the lucky ones, what will you do with your tax windfall? If you go out and spend it, all you’re doing is giving part of it back to the government in the form of GST. Sure, it’s nice to splurge once in a while but there are other places you can stash your cash and reap a longer term benefit. Consider these options: a) Superannuation contributions Your superannuation fund will surpass any other investment vehicle simply due to the law of compounding… and your contributions are taxed at only 15%. Whilst superannuation funds remain the most tax-effective haven and thus the best way to grow your investments, the downside is that once your money is contributed it’s usually not accessible until you retire. b) Regular investment plan Consider investing the lump sum and setting up a regular savings investment plan to build it up. This will help you meet future objectives such as a new home, education or new car. While a certain amount of money in the bank is helpful for emergencies, now could be the time to consider a longer term plan with assets such as property or shares. You can invest in a managed fund with an initial deposit of $1,000 and make monthly contributions. While such investments are subject to fluctuations in value, you will see them grow over time. c) Reduce your mortgage By paying it straight into your mortgage, you immediately acquire more equity in your home and reduce the interest. Having more equity in your home also means that you can re-borrow that money again for investment, gearing, or to purchase other assets. So that’s an option that could keep on working for you. The moral of this story is to have a plan and then apply it. Work out where your tax refund will work best for you then talk your decisions through with your licensed financial planner.     The information provided in this article is general in nature only and does not constitute personal financial advice.

COVID-19 Economic Update

COVID-19 Economic Update

Updated on COVID-19, Finance

During the last quarter one story has dominated the news – COVID-19. By the end of June at least 10 million people had contracted the disease, and over 500,000 had died. With 8,000 cases and 104 deaths, Australia was amongst the countries that have been most successful in limiting its spread. However, this success came with a major cost. By June, 800,000 fewer people were on the nation’s payrolls than at the start of the pandemic. The travel, hospitality and entertainment sectors were particularly hard-hit. One consequence of this major loss of employment is that many people took advantage of the ability to withdraw up to $10,000 from their superannuation prior to the end of June. As of mid-June, over 2.3 million people had applied, with nearly $16 billion worth of withdrawals processed. A further $10,000 can be withdrawn in the new financial year. While this will prove a real lifeline for the many people who need the money now, those who do withdraw the maximum amounts are likely to be tens of thousands of dollars worse off in retirement, with younger people facing the biggest losses. Key numbers Perhaps surprisingly, investment markets took an optimistic view of the long-term financial consequences of COVID-19. While not returning to its record highs, the S&P ASX200 index rose 16% over the quarter, a little behind the MSCI All-Country World Equity Index (up 18.7%) and the US S&P500 (up 18%). However, the real action was on the tech-heavy NASDAQ, which lifted 30.6% over the three months to set a new high. The RBA cash rate stayed at 0.25%, with no great expectations of a change anytime soon. The Aussie dollar rose steadily, increasing from 61.7 to 69.1 US cents from the end of March until end of June. It enjoyed similar gains against the British Pound and Japanese Yen, and a slightly smaller gain against the Euro. While there are many factors that influence the value of the dollar, this last quarter saw it closely following the fortunes of one of our major export commodities – iron ore. What next? COVID-19 is likely to remain the dominant story for some time yet. Following the initial lockdown, countries around the world, Australia included, are conducting something of an experiment in trying to ease restrictions without triggering ‘second waves’ or other outbreaks. Events in Victoria have shown how challenging this can be, but successfully lifting lockdowns is a critical step towards restoring anything resembling normal economic activity. Another challenge facing the federal government is how to continue to support the millions of people on the JobKeeper allowance and the JobSeeker supplement. With these programs due to end in September, there is concern that their sudden cessation will deliver another blow to the economy.   The information provided in this article is general in nature only and does not constitute personal financial advice.

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