Quarterly Economic Update: April – June 2024

Quarterly Economic Update: April – June 2024

Updated on Economy, Finance, Investing

The economy continues to slow, with inflation remaining sticky, the new federal budget making waves, and global events that may have a significant impact. Uncertainty at home and abroad The current outlook indicates uncertainty both domestically and internationally, making it unlikely that inflation will reach the target range of 2-3 per cent in the near future. May forecasts suggested that inflation would return to the target range by the second half of 2025 and reach the midpoint by 2026. However, recent indicators point to weak economic activity, such as slow GDP growth, an increase in the unemployment rate, sluggish wage growth, and uncertain consumption growth. Advanced economies are experiencing a slowdown in growth, although there are signs of improvement in the Chinese and US economies, along with increased commodity prices. Nevertheless, geopolitical uncertainties remain high, which could potentially disrupt supply chains. The Federal Budget focuses on social matters Treasurer Jim Chalmers presented the 2024-2025 Federal Budget on May 14, 2024. The government aimed to alleviate the cost of living without worsening inflation. Key announcements included: Interest rates remain steady, but the pain may not be over The Reserve Bank of Australia (RBA) kept interest rates on hold and the cash rate steady at 4.35 per cent throughout the quarter. At the June RBA board meeting, Governor Michele Bullock stated that the board has not dismissed the possibility of further rate hikes. Interest rates will stay at this level until the RBA’s next board meeting in early August. Inflation persists, despite slowing Inflation remains persistent, with the RBA predicting that it will take some time to consistently stay within the target range of 2-3 per cent. Although inflation has decreased significantly since its peak in 2022, the rate of decline has slowed. At the same time, economic growth has been limited as households cut back on non-essential spending due to income constraints. What are we spending on? Households are continuing to limit their spending on non-essential items. Spending on discretionary goods has shown a slow increase, rising by only 0.6 per cent over the year. On the other hand, spending on non-discretionary goods and services has risen by 5.8 per cent, mainly due to higher fuel and food costs. Household spending on health has significantly increased, showing a 15.7 per cent rise compared to this time last year. Health spending made the largest contribution to the overall 3.4 per cent rise in household spending in April. China lifts Aussie beef bans China has lifted bans on most beef and other exporters. The bans began in 2020 when China suspended beef exports from eight processors and imposed official and unofficial trade barriers on barley, coal, lobster, wood, and wine, costing exporters $20 billion Australian dollars ($13 billion) a year. These measures were viewed as politically motivated actions to penalise Australia, although China claimed they were related to trade issues. With the lifting of these bans, less than $1 billion worth of Australian exports are still being impeded. This marks a significant reduction from the previous $13 billion impact on Australian exporters. Trump down but not out Donald Trump’s conviction on 34 felony counts of falsifying business records has not stopped his campaign for President. As the November election looms closer, economists have expressed concerns about Trump’s campaign promise to impose a 10 per cent tariff on all US imports. If implemented, this and other trade policies could trigger another round of trade wars, disrupt international trade, and impact global growth. The information provided in this article is general in nature only and does not constitute personal financial advice.

How to avoid scams when completing your tax return

How to avoid scams when completing your tax return

Tax

CPA Australia Australians should always be wary of online scams, but we are particularly vulnerable at tax time. Cyber criminals use a mix of tried-and-tested and new methods to attempt to defraud taxpayers, which is why CPA Australia is urging Aussies to be extra vigilant and take some simple measures to help protect themselves. Speaking on CPA Australia’s With Interest podcast this week, the ATO’s Assistant Commissioner of Cyber Governance, Joda Walter, said that ATO-branded SMS and emails containing links to fake myGov web pages remain one of the most common types of scams. Mr Walter also warned Aussies to be wary of fake social media accounts using the ATO and myGov brands. Most prominent on Facebook and X, these fake accounts interact with users and try to trick people into clicking links. How to spot tax time scams Distinguishing between legitimate and scam messages from the ATO is becoming increasingly difficult, however there are signs. “Scammers take advantage of any situation, and at tax time that means targeting unsuspecting individuals through unsolicited messages claiming to be the ATO or another reputable organisation – known as ‘phishing’ scams,” says CPA Australia spokesperson Gavan Ord. “These messages trick individuals into acting quickly and letting their guard down on the promise of financial gain or by convincing them they have done something wrong and need to rectify the situation quickly to avoid penalties. These scams prey on our natural instincts, which is why we need to stop and think before we click any links or give over any personal information.” “If in doubt, always stop, think, and don’t share any personal information, including your tax file number or bank details.” Young Aussies being caught out The ATO says that young Aussies aged 25-34 have been most likely to inadvertently share personal information to ATO impersonation scammers, but everyone is a target. “It can be hard for anyone to spot tax time scams and the fact that young, tech savvy Aussies are most likely to be the victim of ATO impersonation scammers should be a wake-up call to everyone,” said Mr Ord. “It’s definitely a good idea to check in with elderly and vulnerable family and friends to make sure they are aware of common scam types, but also remain vigilant yourself. It only takes a momentary lapse in judgement to be a victim.” Source: CPA Australia The information provided in this article is general in nature only and does not constitute personal financial advice.  

Navigating the reality of divorce after 50

Navigating the reality of divorce after 50

Updated on Budgeting, Education, Retirement

Adjusting to life after divorce, particularly later in life, is akin to navigating through some of life’s most challenging events, psychologists say. It’s a journey comparable to coping with loss, relocation, major illness or injury, or job loss. While these upheavals are often beyond our control, how we choose to manage them greatly impacts our recovery. Is grey divorce on the rise? Unfortunately, yes. Despite overall divorce rates declining since the 1990s, both the age at divorce and the rate of divorces among couples in long-term marriages are on the rise. According to data from Australian Seniors and the ABS, 32% of divorces now occur after the age of 50. What are some of the key financial impacts of divorce? Superannuation is typically regarded as part of the assets in any pre-divorce financial settlement. Understanding that superannuation can be divided without the need for fund withdrawals or meeting specific conditions is crucial if no prior agreement has been reached with your partner. While splitting it isn’t obligatory, ensuring its inclusion in the settlement is vital due to its significant role in overall wealth. However, dividing it can substantially diminish what was once a solid nest egg, potentially impacting retirement plans. Aside from the emotional toll of asset division, the process can be difficult. Factors like investment properties, primary residences, or self-managed super funds (SMSFs) with less liquid assets—such as business holdings, real estate, closed funds, or art—can further complicate matters. Selling assets without proper advice can trigger capital gains, while shifting assets from tax shelters like superannuation or trusts can result in hefty tax liabilities. Centrelink entitlements and thresholds will also alter with your changed circumstances. Seeking the professional advice of more than just a lawyer is the smartest thing to do. Divorce is also expensive Many shared expenses, such as utilities, become the sole responsibility of each party post-divorce. For instance, while the average monthly living expenses for an Australian couple total around $4,118 ($2,059 per person), for a single person living alone, it’s estimated at $2,835. In essence, each individual spends roughly 70% of what a couple would spend. After divorce, with each person potentially having only half of their assets but needing around 70% of their income to cover living expenses, budgets become tight. So, how can you rebuild financial stability post-divorce? In other words, review your financial plan and seek professional advice. A qualified financial adviser can help you learn to take control of your finances and plan your future. Remember, the benefits of compounding mean that the sooner you start, the better off you’ll be! The information provided in this article is general in nature only and does not constitute personal financial advice.  

Is your number up this tax time? Claims the ATO will scrutinise

Is your number up this tax time? Claims the ATO will scrutinise

Updated on Tax

CPA Australia No one likes being treated as just a number, but with millions of returns and tens of billions of dollars at stake, that’s the reality when it comes to how the Australian Taxation Office (ATO) assesses tax returns. The ATO uses data-driven profiles based on things like employment type and financial investments to identify where some people may be pushing the boundaries. If your claims are disproportionate to what the ATO would expect from someone in a similar job to you, or with similar financial investments, you may be asked to provide additional evidence to validate your claims. That’s why CPA Australia is urging Aussies to be thorough with their tax returns, including declaring all earnings and having evidence to back up any deductions. Anything that stands out from the crowd may attract the ATO’s attention. “It’s important that everyone pays the right amount of tax and claims what they are entitled to,” said CPA Australia spokesperson Gavan Ord. “The ATO uses highly sophisticated analytics to scrutinise all claims, including those relating to working from home and motor vehicle expenses, income from rental properties, as well as undeclared income from investments like cryptocurrency. “Your tax return is your personal responsibility, and you should be as thorough as possible when declaring your income and claiming deductions. Failure to properly declare all of your income, or over-the-top expense claims, may set off alarm bells and your claims could be rejected if you don’t have the evidence.” Work-related expenses  Work-related deductions are the biggest deduction in most Australians’ tax returns, and some individuals may be tempted to overstate their expense claims in this area. Others may put in claims without sufficient evidence to support them. The ATO is focused on ensuring the correct apportioning of expenses between work and private use, including when you work from home. Keeping a diary of all your work-related activity and having the corresponding receipts is crucial. Your record should include: There are two ways to calculate working from home deductions – the fixed rate method (when you can claim a set rate of 67 cents for every hour worked from home) and the actual cost method. Having records mean you can choose which works best based on your individual circumstances. Motor vehicle expenses There are two methods of claiming a tax deduction for motor vehicle use for work purposes, but whichever is used, you must ensure the claim is accurate and properly evidenced, whether it’s for fuel, servicing or lease payments. If you use a motor vehicle for both business and private use, you must be able to correctly identify and justify the percentage you are claiming as business use. The percentage that is for private use isn’t claimable. To claim accurately, you will need to use a logbook or diary to record private versus business travel. Travelling from home to work is considered private use, unless you are a home-based business and your trip was for business purposes. Income from rental properties For rental property claims, the ATO is focusing on owners who make claims for renovations as repairs. Repairs to the property because of wear and tear or damage from tenants are tax deductible. However, if the work results in an improvement rather than just repairing damage, or results in the replacement of an asset, the expenses will be capital in nature and you can only claim a depreciation expense, not for the entire cost in the year it was spent. Claiming mortgage interest in full when there were drawdowns for private purposes, as well as declaring net income after expenses from annual rental summary of real estate as gross income, will also be under the microscope. Undeclared income (e.g. crypto profits) The ATO is also focused on undeclared income, now including money made from cryptocurrency. The most common use of crypto is as an investment, in which case the crypto asset is subject to capital gains tax (CGT). If you acquire a crypto asset as an investment, transactions such as disposal, exchange or swaps are a CGT event, and you may make a capital gain. If you hold the crypto asset as an investment, it will not be exempt from CGT as a personal use asset. You will make a capital gain if the proceeds from the disposal of your crypto asset is more than its cost base. To work out if you made a capital gain or capital loss from each CGT event, keep your records for each crypto asset and your transactions. You may be able to reduce capital gains using the CGT discount if you hold your crypto asset for at least 12 months. Source: CPA Australia The information provided in this article is general in nature only and does not constitute personal financial advice.  

5 ways to boost your super (with contributions) before EOFY

5 ways to boost your super (with contributions) before EOFY

Updated on Superannuation, Tax

Looking to give your super a boost before the end of the financial year? Look no further! Follow these five strategies to maximise your contributions and make the most of your superannuation savings: 1.Consider additional Concessional Contributions (Pre-Tax Contributions) Why? Because these contributions are taxed at just 15%, potentially lowering your taxable income. It’s like giving less to the taxman and more to future you! You’re allowed up to $27,500 annually, including your employer’s 11% contribution. However, there is one exception to this… 2.Catch-up on Unused Concessional Contributions If you haven’t maxed out your concessional contributions from previous years, legislation now allows you to make ‘catch-up’ contributions if your super balance is under $500,000. Look back up to five years to see if you’ve got unused caps you can access. 3.Take Advantage of Non-Concessional Contributions (After-Tax Contributions) If you’re a low- or middle-income earner, the government co-contribution scheme is a great way for you to contribute to superannuation personally AND get a little bonus top up from the government. It’s also a great way to add larger amounts to super, because you’re allowed to contribute up to $110,000 per year (or $330,000 if you are eligible to ‘bring forward’ future contributions). 4.Sharing the Super love with Spouse Contributions If your partner’s income is on the lower side, contributing to their super could earn you a tax offset of up to $540. It’s a win-win: you help increase your family’s total super savings while scoring a tax perk for yourself. 5.Or consider Contribution Splitting with your Significant Other You may be able to split up to 85% of your concessional super contributions with your spouse. This strategy can help even out your super balances, potentially reducing the tax paid on super pensions in the future. It’s a smart move, especially if one of you is taking a career break or working part-time. With the end of the financial year fast approaching, now is the perfect time to reach out to your Financial Adviser and take action to grow your retirement nest egg and boost your super. The information provided in this article is general in nature only and does not constitute personal financial advice.  

ATO flags 3 key focus areas for this tax time

ATO flags 3 key focus areas for this tax time

Tax

Australian Taxation Office As ‘tax time’ approaches, the Australian Taxation Office (ATO) has announced it will be taking a close look at 3 common errors being made by taxpayers: • Incorrectly claiming work-related expenses• Inflating claims for rental properties• Failing to include all income when lodging ATO Assistant Commissioner Rob Thomson said the ATO is focused on supporting taxpayers to get their lodgment right the first time. ‘These are the areas that people are most likely to get wrong, and while these mistakes are often genuine, sometimes they are deliberate. Take the time to get your return right.’ Work related expenses In 2023 more than 8 million people claimed a work-related deduction, and around half of those claimed a deduction related to working from home. Last year, the ATO revised the fixed rate method of calculating a working from home deduction to broaden what is included, increase the rate, and adjust the records you need to keep. These changes are now in full effect this financial year, meaning you must have comprehensive records to substantiate your claims as you would for any other deduction. To use this method, you need records that show the actual number of hours you worked from home (like a calendar, diary or spreadsheet), and the additional running costs you incurred to claim a deduction (like a copy of your electricity or internet bill). ‘Deductions for working from home expenses can be calculated using the actual cost or the fixed rate method, and keeping good records gives you the flexibility to use the method that works for you, and claim the expenses you are entitled to.’ ‘Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.’ Mr Thomson said. Remember, there are 3 golden rules for claiming a deduction for any work-related expense: Rental properties Rental properties continue to remain in the ATO’s sights. Our data shows 9 out of 10 rental property owners are getting their income tax returns wrong. ‘We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this.’ ‘This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit,’ Mr Thomson said. Performing general repairs and maintenance on your rental property can be claimed as an immediate deduction. However, expenses which are capital in nature (like initial repairs on a newly purchased property and any improvements during the time you hold the property) are not deductible as repairs or maintenance. ‘You can claim an immediate deduction for general repairs like replacing damaged carpet or a broken window. But if you rip out an old kitchen and put in a new and improved one, this is a capital improvement and is only deductible over time as capital works.’ ’We encourage rental property owners to carefully review their records before lodging their return and take care to ensure they are claiming deductions correctly,’ Mr Thomson said. As reporting rental income and deductions can be complex, many individual rental owners choose to use a registered tax agent to help them prepare their income tax returns. ‘Ensuring you provide full and complete records to your registered tax agent allows them to prepare your tax return correctly, so you claim everything you’re entitled to and nothing that you’re not,’ Mr Thomson said. Get it right – Wait to lodge The ATO is also warning against rushing to lodge your tax return on 1 July. If you have received income from multiple sources, you need to wait until this is pre-filled in your tax return before lodging. ‘We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,’ said Mr Thomson. For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and help you get your tax return right. ‘By lodging in early July, you are doubling your chances of having your tax return flagged as incorrect by the ATO.’ ‘We know some prefer to tick their tax return off the to-do list early and not have to think about it for another 12 months, but the best way to ensure you get it right is to wait for just a few weeks to lodge.’ ‘You can check if your employer has marked your income statement as ‘tax ready’ as well as if your pre-fill is available in myTax before you lodge. That way, an amendment doesn’t need to be made later, which could result in unnecessary delays,’ Mr Thomson said. Source: Australian Taxation Office The information provided in this article is general in nature only and does not constitute personal financial advice.  

2024-25 Federal Budget Recap 

2024-25 Federal Budget Recap 

Centrelink, Economy, Superannuation, Tax

In his 2024 Federal Budget speech, treasurer, Jim Chalmers, announced that ‘The number one priority of this government and this Budget is helping Australians with the cost of living’.  But what exactly does that mean?   Let’s take a closer look at what the 2024 Budget proposes –   An average tax cut of $1,888 in 2024-25  The budget proposes significant tax relief for ALL Australian taxpayers to alleviate cost-of-living pressures, including reduced tax rates, adjustments to the income thresholds, and increased low-income thresholds for the Medicare levy.   This measure aims to boost disposable income and encourage economic activity by allowing Australians to retain more of their earnings.  $300 back in the pocket for ALL Australian Households  To combat rising energy costs, the government has allocated $3.5 billion for a one-time $300 energy bill rebate for all Australian households, designed to directly reduce headline inflation by about 0.5 percentage points in 2024-25 without adding to broader inflationary pressures.  This initiative also extends to one million small businesses, receiving a $325 rebate.  Superannuation contributions on paid parental leave  The 2024 budget integrates enhancements to parental leave and childcare into comprehensive support for families. It includes a $1.1 billion investment to extend superannuation contributions to government-funded Paid Parental Leave, improving financial security for new parents.   Additionally, the budget boosts childcare support, aiming to make childcare more affordable through increased subsidies, reducing the financial burden on families and supporting parents’ return to work.   These measures are part of a broader effort to provide more robust support for families and promote gender equality.  $3 billion in student debt… wiped  In an effort to alleviate the burden of education costs, the budget proposes a change to the way the government calculates HELP debt indexation, erasing $3 billion in student debt for over 3 million Australians.   An investment in education for Australians  The budget commits to reforming tertiary education and increasing vocational training funding, aligning skills training with market needs.   Specifically, it allocates $88.8 million to provide 20,000 new fee-free TAFE places, including pre-apprenticeship programs relevant to the construction industry.   Additionally, the government is introducing Commonwealth Prac Payments to support students undertaking mandatory placements, offering $319.50 per week to more than 73,000 eligible students, which includes those in fields like nursing and social work.   This investment is part of a broader effort to align skills training with labor market demands and support sectors critical to economic growth.  Supporting small businesses  To aid small businesses, the 2024 budget extends the $20,000 instant asset write-off for an additional year, enabling continued investment in necessary business equipment. This extension is designed to enhance the cash flow of small enterprises and encourage further economic activity among local businesses.   Additionally, the budget includes investments to support the mental and financial well-being of small business owners, recognising the unique challenges they face and bolstering the resources available to them for sustainable operation.  Access to affordable medicines  The budget allocates up to $3 billion to reduce the maximum PBS co-payments. This includes a one-year freeze on the maximum patient co-payment for everyone with a Medicare card and a five-year freeze for pensioners and other concession cardholders, ensuring that no pensioner or concession card holder will pay more than $7.70 for PBS-listed medications until 2030.  … And an increase to health funding  The budget allocates $888.1 million to expand mental health services. This includes funding for new and existing programs that provide critical support for individuals facing mental health challenges.    An additional $2.2 billion is directed towards improving the aged care system, and investments are made in strengthening Medicare with a focus on urgent care clinics, reducing hospital admissions, and supporting regional and remote health services.  This expansion aims to provide wider access to necessary health services, significantly improving health outcomes and making healthcare more affordable and accessible to more Australians.  A 10% increase to Commonwealth Rent Assistance  In response to the housing affordability crisis, the budget increases Commonwealth Rent Assistance by 10%, benefiting nearly 1 million households. This follows a 15% increase from the previous year, marking a substantial boost to aid renters, especially given the rising rental market costs.  Housing affordability  The government is investing $6.2 billion in new housing initiatives to tackle affordability and accessibility.   This funding supports the construction of more homes, including affordable and social housing options, addressing critical housing shortages and supporting community infrastructure development.   The 2024-25 Federal Budget is strategically focused on alleviating financial pressure through targeted support measures. By understanding and applying these benefits, Australian households can better navigate the challenges of rising living costs.  For tailored advice on how to adjust your financial plan in light of the new budget measures, consider consulting with a financial adviser or accountant. They can help you understand the specific impacts on your personal finances and strategise accordingly.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Get ready for June 30 now!

Get ready for June 30 now!

Updated on Superannuation, Tax

When it comes to getting the most (money) from your annual tax return, there is usually a lot to think about, so we’ve identified a few options that could open the door to some opportunities to save on tax. The key here is to plan ahead. Deductions — lower your tax liability If you have some spare cash available, paying for certain expenses before June 30 could mean you get your tax break back from the ATO earlier. Expenses paid in July could leave you waiting more than 12 months for the return. A popular expense in this category is prepaying interest on an investment loan, but be careful because not all expenses qualify for a tax deduction in advance. This year the ATO is focusing on work-related expenses. If you are planning to claim expenses for things like a home office, mobile phone, tools and equipment, etc, make sure you claim only eligible expenses and have the paperwork to substantiate them. You can claim the premiums you have paid for your income protection insurance as a tax deduction. Note that you can only claim the portion of the premium that covers you for loss of income, not for any benefits of a capital nature. Premiums for other personal insurance cover such as life, critical care or trauma cannot be claimed. You also can’t claim deductions for premiums that are paid from your superannuation contributions if your policy is held in your fund. Super contributions — don’t waste the limits June 30 is not just about deductions for expenses. It’s also a good time to review your superannuation contributions to date and take advantage of the annual caps. The annual limit for these types of tax-deductible contributions is $27,500 per annum, regardless of age. If you’re an employee, this limit covers both employer super guarantee and salary sacrifice contributions. How much has your fund received in contributions so far this year? Do you need to review and adjust your current arrangements? Anyone under 65 (whether working or retired) can contribute $110,000 each year to super as after-tax or non-concessional contributions. You can also contribute $330,000 in a single year by bringing forward the limit for the following two years. But – when it comes to super there’s usually a ‘but’ – check your total super balance to ensure any extra contributions do not exceed the general balance transfer cap which is currently $1.9 million. And one final point on super contributions – the total contributed is based on how much is received by your fund, not when you sent it to the fund. Another reason why planning ahead is crucial. These are just a few ways to manage how your money is taxed. Depending on your circumstances, other options may be available. Your licensed adviser can work with you to help you achieve what is best for you this financial year. But please don’t leave it too late. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Regaining financial control after a scam 

Regaining financial control after a scam 

Updated on Budgeting, Education, Retirement

A year before retirement, Tess’s superannuation plan was on track, and she was imagining her post-work life. With savings of $34,000 at the bank, she was looking to park it somewhere it could earn better interest while rates were rising.   Considering herself reasonably savvy with money, she began investigating her options.  After hearing about someone who’d made a fortune with cryptocurrency, Tess was intrigued and decided to look into it.   Tess researched crypto-companies and compared what was on offer. When eventually she made her decision, she believed she’d chosen the right investment – how wrong could she be!   Within hours Tess realised she’d been scammed.  Shocked and feeling ill, she reported it to ScamWatch, but over the following days the self-blame settled in.   How could she be so gullible? So naïve?  What was she thinking?! How could she have fallen for such an obvious fraud?   Who knew that financial shame was a thing? But there it was in the form of an empty bank account.  Deeply embarrassed, her financial security shattered, Tess lay awake every night berating herself; through her foolishness she’d lost all her cash savings! She became withdrawn, declined social events and refused to unburden herself, even to close friends.   Finally, in desperation, she decided to speak with a counsellor. Tess discovered organisations like Beyond Blue, ScamWatch and Lifeline offered advice and emotional support. She chose one that felt right for her.  Initially, it was difficult to open up and acknowledge her mistake, but the counsellor explained that part of her recovery was confronting her feelings head-on and realising that victims came from all cultures, backgrounds and levels of education. Feelings of humiliation and shame were normal, although unjustified, as the crooks were highly skilled criminals with access to the latest technology.  Heartened by the counsellor’s words, Tess learned to stop blaming herself and confided in her daughter Louise.  What a relief that was! Louise was gentle and supportive, and introduced Tess to her friend Jarrod, a financial adviser.  Throughout Jarrod’s career, he’d assisted innumerable people who’d fallen victim to scams. Most felt insecure and vulnerable, so his approach was to assist them with practical advice around getting their finances back on track.  He believed that Tess would benefit from a temporary, part-time job. She could rebuild her cash savings, and staying busy would distract her from her worries and help her move on.   When discussing her interests and skills, Tess mentioned she loved animals so Jarrod suggested she consider pet-minding or dog-walking, adding that he could setup the necessary insurance.  Then, Jarrod explained, that while her superannuation was on target, there was a difference between investing for retirement and investing for wealth.  Retirement investing was about saving to fund an income stream that met post-work lifestyle goals. Complying retirement funds offered tax advantages and focused on generating returns.   Conversely, investing for wealth involved accumulating assets beyond what is needed to provide retirement income.   For Tess, financial security was critical, so Jarrod considered her risk tolerance and structured a tax-efficient portfolio of growth assets to support capital appreciation and wealth accumulation.   It also meant that Tess could leave something behind for Louise – a legacy she hadn’t felt was important, until she realised how financially exposed the scam had left her.  Tess’s recovery wasn’t without its challenges. It took time and sacrifice, but along the way she developed a greater sense of independence and resilience.   She delayed retirement by a year, so she could recoup her lost savings and contribute the money from her new side hustle to her wealth portfolio.   In the end, Tess’s Dog Minding and Walking Service continued well after Tess’s retirement, for the sheer enjoyment she derived from hanging out with dogs.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Avoid passing bad money habits on to your children

Avoid passing bad money habits on to your children

Updated on Budgeting, Education

Generally speaking, we Australians are pretty financially savvy, that is, we understand the how and why of effectively managing our money. Unfortunately, that doesn’t mean we’re actually putting that know-how into practise and making astute financial decisions.   According to the Australian Bureau of Statistics (ABS), the average Australian household debt has risen by 7.3% (over $260,000) in the 2021-2022 financial year. As of July 2023, Australians were paying $18.4 billion – that’s billion with a B – in credit card interest every year.  As parents, we’re role models, integral to shaping our children’s values and beliefs. Like little sponges, they absorb our behavioural patterns, pick up on signals and mimic our actions.  For us to replace bad money habits with good ones may be a big ask, particularly as they’ve evolved over the course of our lives. But the trouble is that kids are a cluey bunch, eager to learn from us, and not surprisingly, our money habits are among many characteristics we unintentionally pass onto them.  Of course, we all want the best for our children. But in this busy world, we’re pulled in so many directions at once that sometimes it’s all we can do to juggle our daily work, family, school and social lives. Who has time to consider the inadvertent messages we could be giving out?   Yet, when it comes to ensuring our children are equipped to build themselves a secure financial future, it’s worth the effort, right?   The table below shows a list of good and bad money habits that are commonly passed onto children.  Poor money habits  Good money habits Impulse buying We regularly make spur-of-the-moment purchases. Additionally, we tend to indulge our kids – we want them to be happy.  Impulsive or indulgent behaviour can inadvertently foster in children an attitude of instant gratification, normalising impulse buying.  Lead by example As a family, we discuss the difference between needs and wants. When we see something we want, we walk away and give ourselves a cooling off period to determine whether we genuinely need the item. We encourage our kids to wait for things they want, and suggest that delaying the purchase can lead to smarter choices and savings. When shopping we compare prices and identify items that offer better value.   Not budgeting  We don’t have a household budget, preferring to manage our money as it comes in. But even though we know what bills are due we often seem to have trouble getting the money together. Sometimes we run out of money before pay day.   Not budgeting can engender a culture of living pay-to-pay and children can grow up not understanding the importance of tracking spending and living within their means.  Family budgeting  We involve our children in creating and monitoring our household budget. We discuss decisions around allocating money for different purposes so that when our kids receive pocket money or gift money, they can practise budgeting by setting amounts aside for saving, spending, etc.  Credit card misuse  We rarely use cash; using a card is fast and convenient. Although occasionally we max the card out we make sure we pay off as much as we can every month. Some months, depending on expenses, we can’t manage the full balance. Cards, while useful, can cause children to perceive them as a source of unlimited money.  No free money  We have taught our children how to read our card statements. They know how to check purchases against receipts and understand how interest adds to the card balance. We involve our kids in making card payments and explain the consequences of not paying the full balance each month.  Not saving  We’ve never set up a structured savings plan so have little-to-no savings. We’d like to take a holiday or have a nestegg for emergencies but there never seems to be any money left over at the end of the pay cycle. Children seeing parents struggling to save may not learn the value of saving or setting goals.  Set goals, save We stick to our budget and always try to allocate a portion of income towards savings, and encourage our kids to do the same. We get them to set short-term goals like saving for a new toy or book, and long-term goals like an outing or a larger purchase, and then help them create a savings plan to achieve their goals. We make it fun by using a visual chart to track progress and when they reach their goal, we celebrate the achievement, making a special occasion out of buying the item or attending the event.  Failing to discuss  We never talk about money with our kids. They have a limited understanding of how money is earned and how we use it. Failing to discuss how money is earned can lead to children not grasping the concept of money as a finite resource, and appreciating its value. Widespread use of credit cards or taking cash from ATMs suggests that money is readily accessible.   Have the conversation  We have always been open with our kids about the household finances. We want them to understand that money needs to be earned, and if not used wisely and allocated appropriately, it can run out. We have also provided the opportunity for them to earn pocket money for doing age-appropriate household chores.  If we can make time to examine the way we view and use money, and replace poor habits with good ones, we can positively influence our kids by:  As parents we have a limited opportunity to equip our children with tools like, knowledge, confidence and forward planning skills – before they decide they know more than us!   So, by modelling good financial behaviour ourselves, we can instil the habits that will set our children up for a life of financial freedom.   I don’t know about you, but if I can achieve that, I’ll know that I’ve done what I can to enable the next generation to succeed and thrive.   What a legacy!  The information provided in this article is general in nature only…

Is Worker’s Compensation Enough? 

Is Worker’s Compensation Enough? 

Insurance

No matter what kind of job you have, there is always a possibility of falling sick or getting injured, regardless of the type of work you do.  That’s why every Australian workplace has a health and safety obligation to provide a safe work premises, assess risk and have workers compensation insurance.   What is worker’s compensation?  Worker’s compensation is a form of insurance payment paid to employees if they are injured at work or become sick due to their employment. Payments may cover:   The injury or illness must be work-related to receive worker’s compensation benefits.   Protection at work   A report released by Safe Work Australia in 2023 showed:  Whilst worker’s compensation offers some level of protection, it still only protects you for injuries or illnesses that occur at work or as a direct result of work – and then any claim made must meet eligibility requirements. Entitlements and eligibility for payments vary from state to state in Australia.  If you suffer from an injury or illness that does not qualify for a workers’ compensation payment, there’s a real possibility that you could be left without income to support yourself and pay for the costs of the medical condition.   (An important side note – If you’re self-employed, a sole trader or an independent contractor, you may not be covered under any worker’s compensation scheme, in which case you will need to organise your own protection.)  The best way to cover the gap  While worker’s compensation is beneficial, it may not provide enough financial support for you and your family, even if you have a successful claim.  Considering that the vast majority of Australians suffer from injuries and illnesses not related to work, relying on worker’s compensation alone may leave you short on financial protection.   So, how can you ensure you have the best safety to protect yourself when you can’t work?   Income Protection  Income Protection goes to work when you can’t and can cover you for well beyond what worker’s compensation may provide.  Although worker’s compensation might provide some coverage for injuries and illnesses sustained at work, including Income Protection in your personal protection plan can give you peace of mind knowing that you’re covered in various situations, both at and outside of work. This way, your ability to earn an income will be secured.  If you want to explore your options for Income Protection, get in touch with your financial adviser today.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Charting a course to financial recovery 

Charting a course to financial recovery 

Budgeting, Education, Finance

Australian Bureau of Statistics, (ABS) figures indicate that between 2017-2018 and 2019-2020 total average household debt rose from $190,000 to $204,000.  That’s an increase of over 7% in two years!  The reasons why would make for an interesting study, however a more pressing question might be what can we do about it?   Combine high levels of debt with rising interest rates and a cost-of-living crisis, and it’s no surprise that Australian households are reaching out to Debt Management (DM) companies to help regain control of their finances.  DM companies are private organisations that can assist by:  Sometimes, DM companies repay your debts – to a specified limit – and you repay them under a single loan arrangement. Terms and payment amounts can be negotiated, offering a beacon of hope and a sense that you’re taking back control.  If this sounds like the perfect solution, remember that for every pro, there’s usually a con. For example:  While weighing the pros and cons of a DM service, here are a few do-it-yourself strategies for consideration.  Budgeting  Creating a budget is a 3-step process.  The government’s Moneysmart website lists easy ways of cutting back everyday spending.  Negotiating  Rather than customers defaulting, most banks and utilities companies prefer to negotiate repayment terms, sometimes even offering assistance programs.    The key is to reach out before it’s too late. Be upfront about your situation and willing to arrive at a mutually beneficial arrangement.   Remember, nobody wins when debts are not paid.  Government assistance  The Australian government provides a range of financial assistance packages and interest-free loans depending on circumstances. These include crisis payments for unexpected situations, and income support payments for cost of living expenses.  Of course there are conditions, but further information, including application criteria, is available from the MyGov website.   Financial counselling   Financial counsellors help you understand your financial position and assist you to navigate your way out of difficulty.  Some local communities offer free, or low-cost, financial literacy programs, aimed at providing education about money and debt reduction.  Everyone’s financial position is unique. There’s no one-size-fits-all, so it’s important that your action plan is specific to your needs and that you’re 100% comfortable with any decisions you make.  If you’re uncertain, seek the assistance of a qualified financial planner.   What’s crucial is that you do something; being proactive is empowering and sets you on the path to financial recovery.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Achieving financial freedom 

Achieving financial freedom 

Updated on Investing

What does financial freedom mean to you? The ability to travel the world and build a dream home? Or to be able to enjoy a simple but active retirement, and support some good causes?   We all have different desires and goals in life, but most of us share the dream that one day we would like to achieve our particular version of ‘financial freedom’. The challenge is that most of us don’t really know what it takes to turn our goals, be they vague wishes or burning desires, into reality.   However, with just a little bit of forethought, some expert advice, and by acting on that advice, we are much more likely to reach that goal of financial freedom.  Making the list  Your key ally in achieving financial freedom is your financial adviser, and amongst the most important things your adviser will need to know is what your goals are. So make a list and prioritise it. Which of your goals are essential, and which ones are you willing to compromise on?  Reality check   Just as we have different goals, so do we have different financial resources. One of the first things your adviser will do is run a reality check. Given your income and expenditure, job outlook, health and family situation, are your goals realistic and achievable?   Your adviser will also check if key goals are missing. For example, life insurance can be an essential tool for protecting your family’s future financial freedom, yet many people overlook it.  With the big picture now clear, your adviser can develop strategies that will bring that goal of financial freedom closer to fruition.   Perfect timing  When’s the perfect time to start your journey to financial freedom?  Today.   Because the sooner you get started, the sooner your goals will be achieved.   So think about your goals and desires. Importantly, write them down. Then make an appointment to sit down with your financial adviser, and take those critical first steps towards achieving your financial freedom.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Building financial resilience 

Building financial resilience 

Updated on Budgeting, Education, Finance, Investing

Resilience is the ability to quickly recover from setbacks, and while setbacks can come in many forms most of them will have a financial component. So what can you do to build financial resilience?  Expect the unexpected  Rarely do we get advance warning that something bad is about to happen to us, so the time to develop your resilience strategy is now. And while we don’t know the specifics, we can anticipate events that would throw our finances into disarray. A house burning down or a car being stolen. Not being able to work due to illness or injury. The death of a breadwinner or caregiver.   With some idea of the type of threat we face we may be able to insure against some of them. If you have taken out any type of insurance policy you’ve already made a start on your resilience plan.  Create buffers  You can’t insure against every possibility, but you can build financial buffers. This might simply be a savings account that you earmark as your emergency fund that you contribute to each payday. If your home loan offers a redraw facility you can also create a buffer by getting ahead on your mortgage repayments.   Buffers can be particularly important for retirees drawing a pension from their super fund. Redeeming growth assets for cash in order to make pension payments during a market downturn can lead to a depletion of capital and reduction in how long the money will last. By maintaining a cash buffer of, say, two year’s worth of pension payments, redemptions of growth assets can be deferred, giving time for the market to recover.  Cut costs  The Internet abounds with tips on how to cut costs and save money. In difficult economic times cost cutting can help you maintain your financial buffers and important insurances.   Key to cost cutting is tracking your income and expenditure and yes, that means doing a budget. Find the right budgeting app for you and this chore could actually be fun.  Invest in quality  There are many companies out there that have long track records of consistently pumping out profits and dividends. They may not be as exciting (i.e. volatile) as the latest techno fad stocks but when markets get the jitters these blue chip companies are more likely to maintain their value than the newcomers.  This is important. The more volatile a portfolio the more likely an investor is to sell down into a declining market. This turns paper losses into real ones, depriving the investor the opportunity to ride the market back up again.  The other key tool in creating resilient portfolios is diversification. Buying a range of investments both within and across the major asset classes is a fundamental strategy for managing portfolio volatility.  With a well-diversified portfolio of quality assets there is less need to regularly buy and sell individual investments. Unnecessary trading can create ‘tax drag’ where the realisation of even a marginal   capital gain triggers a capital gains tax event and consequent reduction in portfolio value.  Take advice  Building financial resilience can be a complicated process requiring an understanding of a range of issues that need to be balanced against one another and prioritised. Your financial planner is ideally placed to assist you in developing your own, personalised plan for financial resilience.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Active or Index Funds: What’s Your Best Bet? 

Active or Index Funds: What’s Your Best Bet? 

Updated on Investing

Ever glanced at a list of different managed funds and wondered why some have remarkably low fees compared to others? Chances are, the ones with lower fees are index funds, also known as passive funds.   Over the last couple of decades, index investing has become increasingly popular, with big players like Vanguard and Blackrock managing trillions of dollars in assets (as of 2022).  Before we dive into the reasons and consequences of this trend, let’s break down the two main investment styles:  Active Investing:  Index Investing:  So, why has index investing gained so much ground?  1. Lower Fees: 2. Performance Challenges:  For instance, at the end of 2022, 58% of Australian General Equity funds returned below the index. Over 5-, 10-, and 15-year horizons, the underperformance proportions were 81%, 78%, and 83%, respectively. Similar trends are observed in international equity markets.  While choosing index funds may seem logical, it’s essential to consider their underlying premise. Returns come from income (like dividends) and changes in capital value over time. However, for the latter to happen, there must be market activity—investors trading securities. If everyone exclusively invested in indexes, the market would cease to exist.  Index investing doesn’t screen shares, meaning investors get exposure to both ‘good’ and ‘bad’ companies. Also, there are no exclusions based on environmental, social, or governance (ESG) criteria, which some investors prioritise.  In the active versus index debate, there’s no clear right or wrong. Many investor portfolios combine both approaches. Index funds or ETFs are often used for broad exposure, while active investment may be reserved for specialised exposure, such as smaller companies, property, or infrastructure.  Regardless of your choice—active, index, or a mix—the fundamental principles of investing still apply: diversification and time in the market are key to building long-term wealth.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Nailing your job hunt: A guide for school leavers

Nailing your job hunt: A guide for school leavers

Updated on Education

Every January, countless school leavers across Australia embark on their job-hunting journey. A NSW Government survey conducted in 2021 found that of 42,388 secondary school leavers, approximately 50% continued to higher education, while the remaining 50% chose to seek employment (14% apprenticeship; 13% part-time work; 8% full-time work; 7% looking for work; 5% traineeship; 3% other). That’s roughly 21,000 job-seekers – in NSW alone – hitting the employment market all at once! Extrapolate that across all of Australia, and you see where this is going. Given that a single job advertisement might attract scores of applicants, how can you stand out from the crowd? Drawing attention to your resume is easily achieved with little effort. Consider these points: Soft skills Don’t think you have experience? Think again! Perhaps you’ve done volunteer work, played a team sport, performed in a school play or fed the neighbour’s cat while they travelled. A positive attitude, ability to articulate an idea, reliability, problem solve or work in a team are considered soft skills – and they’re highly prized. Your activities and hobbies tell employers a lot about you. Showcase them on your resume and talk about them during interviews. Resilience and EI Employers value candidates demonstrating emotional intelligence (EI) and resilience. EI behaviours include: taking constructive criticism, displaying empathy and patience with others, resolving conflicts, awareness of cultural sensitivities, etc. Characteristics of resilience include: bouncing-back from setbacks, willingness to change, etc. When you provide examples of these attributes, potential employers gain an insight into how you communicate, develop relationships, support others and motivate yourself and those around you. Digital literacy Get familiar with the corporate software and tools specific to your chosen industry. Study advertised position descriptions to understand what companies are using and their expectations of candidates. Resources like LinkedInLearning have literally thousands of online courses. There may be a subscription fee but – huge tip – many local libraries include free LinkedInLearning access as part of your library membership. Prospective employers will be impressed with your effort to upskill yourself and your commitment to ongoing learning. Your brand Conduct a self-audit of your digital presence. Employers often check social media profiles so it’s important your online views and attitudes align with your professional image. Get active on business platforms like LinkedIn, and share and comment on industry content. Build a network by connecting with professionals in your chosen field and attending business events or workshops. Don’t be afraid to reach out for guidance – most people will be pleased to help. Write a schmick resume Check out the government’s Job Jumpstart website (www.jobjumpstart.gov.au) for hints and a whole lot more on writing effective resumes and cover letters. And here’s another big tip: never underestimate the value of correct spelling and punctuation. If you don’t know the difference between their, there and they’re, or your, you’re and yore, polish your grammar skills and don’t rely on spell-check. And finally… Get interview ready. Anticipate questions and practice responding. Remember that there are very few opportunities in life where you’ll be encouraged to talk about yourself and your achievements. So, without being arrogant or braggy, relax and enjoy the moment. If you’re not successful in securing the job, handle it with professionalism and think about where you might improve. Consider it a learning experience rather than failure! Entering the workforce, applying and interviewing for jobs, can be daunting. But when you do land that gig, there’s no buzz to compare with earning your own money. You’ve made it and you’re announcing to the world: I’m on my way, just try and stop me! The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: Oct – Dec 2023

Quarterly Economic Update: Oct – Dec 2023

Economy, Finance, Investing

Global growth is forecast to slow and remain below its historical average in 2024, reflective of tighter monetary policy in advanced economies, as well as a soft outlook for China. Australians can expect higher prices, higher interest rates and higher population growth, with economic growth and unemployment decreasing. Inflation continues to bite With a new Governor at the helm of the RBA, and inflation tracking down since its peak in the December quarter 2022, public sentiment hoped that rate rises would be paused. However, the RBA delivered another rate hike at the November 2023 meeting, bringing the official interest rate to 4.35% – the highest level since 2011. It is likely that an increase in the monthly CPI indicator was a key trigger for the RBA to raise rates, as the monthly indicator rose to 5.2 per cent in August, and then rose again to 5.6 per cent in the September data. However, the next monthly data point, for October (which came out after the November rate rise) had inflation decreasing to 4.9 per cent. Services inflation remains high and was the primary driver of stronger-than-expected underlying inflation in the September quarter. Interest rates – will they or won’t they? The RBA continues to be cautious about the inflation outlook for Australia for several reasons: high and sticky inflation in the services market, house prices recovering sooner than anticipated, a tight labour market and increasing population growth due to migration. A survey of 40 economists by the Australian Financial Review shows that the median forecast is that the RBA will start cutting rates in September 2024, whilst the bond market is projecting an easing of rates by mid-2024. The RBA will meet only eight times in 2024, reduced from 11, beginning in February – following an independent review ordered by the Treasury. Coupled with the RBA governor’s commitment to return inflation to the target range of 2-3%, more rate hikes may be on the cards. Holiday spending to remain flat A survey by Roy Morgan forecast shoppers to spend $66.8 billion during the pre-Christmas sales period, only up 0.1% from the same period in 2022, likely as a result of cost of living impacts. Sales spending for the Boxing Day period to December 31 was expected to be about $9 billion, including $3 billion on Boxing Day itself, as retailers prepared larger discounts than usual after a slow year. Hot Property House and unit prices grew steadily in 2023, with a national annual growth rate of 5.42% (6.54% in capital cities). The main drivers include the highest net overseas migration levels ever recorded, few vacant properties and stronger demand for established homes due to the construction industry facing capacity and cost issues. This growth forecast is expected to continue as most experts believe demand for housing will continue to outstrip supply. However, Australia’s cost of living increases and interest rate uncertainty will keep biting—leading to weaker price growth than previous years. The rental market remains in a critical shortage of available dwellings according to SQM Research. Due to the ongoing supply and demand imbalance, the market is expecting capital city rental increases of 7-10% for 2024, on top of an average 10% market increase in 2023. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Post Christmas Sales – A Survival Guide 

Post Christmas Sales – A Survival Guide 

Updated on Budgeting, Education, Finance

We’ve all experienced it… the undeniable allure of post-Christmas sales.   No sooner has Christmas wrapped up for the year than the frenzy of Boxing Day Sales descends upon us.  Every store window beckons, and our inboxes overflow with promises of unbeatable discounts.  But before you indulge in some festive leftovers and make a beeline for the air-conditioned wonderland of sales, let’s take a moment to pause and ponder…   Is that shiny, discounted gadget truly a necessity?   Do those new outfits genuinely add value to your wardrobe?   Or might there be a wiser way to allocate your hard-earned money?  The Allure and Reality of Post-Christmas Sales  The holiday season often leaves our wallets feeling lighter than usual.   Australia’s festive spending reached an eye-watering $74.5 billion in 2022, marking an 8.6% increase from the previous year, according to the Australian Retailers Association.   And Boxing Day? A whopping $1.23 billion was spent in just 24 hours!   These figures aren’t just numbers; they paint a picture of our collective weakness for a good holiday sale.  But here’s the other side of the coin: while sales can offer genuine bargains, they also come with pitfalls. The risk of accumulating more debt is a very real reality for many shoppers, especially with credit cards already stretched thin from holiday shopping.   And let’s face it, impulse purchases can often lead to buyer’s remorse and an overstuffed home.  The Merits of Post-Christmas Sales  While the post-Christmas sales period often comes with warnings of overspending, it’s not all doom and gloom.  When approached with a well-thought-out strategy, these sales can be a great opportunity to secure essential items—be it electronics, clothing, or household goods—at a fraction of their original prices.   But how can one truly benefit without falling into the common traps? The key lies in being discerning.   With a bit of planning and restraint, the post-Christmas sales can be both enjoyable and economically rewarding.  Smart Money Moves Beyond Sales  It’s easy to forget about your bigger picture goals when there are neon signs screaming discounts of 50% OFF or more!  But remember, every dollar spent is a dollar less saved… or put towards those bigger picture goals.    Before you fall prey to the post-Christmas sales, consider these alternatives:  Save for a Rainy Day: Life is unpredictable. Having a safety net can make all the difference.  Debt Reduction: Free yourself from the burden of debt, by paying down your credit cards and/or any loans you have.   Invest: Think stocks, bonds, or other avenues to grow your wealth. (Hello Financial Freedom!)  Financial Goals: Would you rather a new outfit?  Or to be one step closer to that dream holiday, new car, or first home?    Post-Christmas sales can be both a treasure trove and a minefield. The choice is yours.   This festive season don’t succumb blindly to the allure of holiday sale discounts. Instead, either purchase your “need to have” items (remember, be discerning here!), or skip the sales completely and opt to put the money towards your financial goals!   Here’s to spending wisely, and a financially savvy new year!  The information provided in this article is general in nature only and does not constitute personal financial advice.  

A Self-Employed Superannuation Guide

A Self-Employed Superannuation Guide

Superannuation, Tax

When you’re at the helm of your own business, it’s easy to get caught up in the whirlwind of the present – chasing sales, generating leads, and growing your business. Often, self-employed people prefer reinvesting back into their businesses, hesitant to stash money away in superannuation. Yet, there’s a compelling case for setting aside a slice of your earnings. The facts don’t lie At present, self-employed Australians are not required to contribute to superannuation. According to the Australian Tax Office’s (ATO) data, while self-employed people make up about 10% of the workforce, their super contributions account for just 5% of the retirement pie in 2014-15. Dive deeper into the numbers, and fewer than 1 in 10 self-employed Australians opted to make tax-deductible super contributions that same year. What is ‘self-employed’? The ATO has clear guidelines on what a self-employed person is: For more information see the ATO website. Why contribute to superannuation? While it’s tempting to pour every hard-earned dollar back into your business, the reality is that not all businesses come with a pot of gold at the end. Some self-employed people and businesses rely solely on their own labour, with no substantial business assets to lean on. That’s where superannuation can come in, providing a great way to plan for your retirement. A nest egg for retirement By contributing to super, you are building a nest egg that will provide you with financial security and income in retirement. Putting a small amount of money into superannuation regularly can provide financial stability over time, allowing you to focus on growing your business knowing that you have another income stream building in the background. Tax benefits Here’s a big one: self-employed people may be entitled to a full tax deduction for contributions made to super. If you’re self-employed, you can make personal contributions up to the annual cap, which is $27,500 per year for the 2023-24 financial year. These contributions are taxed concessionally at 15 per cent, rather than marginal tax rates. So not only are the contributions taxed at a lower rate, self-employed people can also claim a tax deduction on those contributions. To claim a deduction for personal contributions it’s important to note that: Compounding Superannuation remains one of the most tax-effective ways to grow wealth. Over time, your contributions can benefit from compounding growth, as your investments earn returns on both your initial contributions and any earnings generated. Starting early and contributing consistently, even with small amounts, can significantly boost your retirement savings. Diversification Many self-employed people see their business as their retirement strategy. But by putting money away into the tax-effective superannuation environment, with investment strategies that can be tweaked over time, you can diversify your investment, reduce risk, AND plan for retirement. How do I contribute to super if I’m self-employed? Just because you’re self-employed doesn’t mean super has to be complicated! With various tax benefits, flexibility of contribution size and frequency, and having another source of income for your retirement, if you’re self-employed why wouldn’t you be contributing to super?! If you’d like to get started, talk to your adviser today. The information provided in this article is general in nature only and does not constitute personal financial advice.  

The challenges of being a Carer

The challenges of being a Carer

Updated on Aged Care, Budgeting, Centrelink

Caring for a loved one can be deeply fulfilling but brings its fair share of challenges too – as Laura discovered.   When her mother Shelly had a stroke, she didn’t require a nursing facility, but could no longer live alone.   Laura was working part-time while studying a Bachelor of Dental Surgery and dreaming of one day opening her own boutique dental practice. She assumed that moving home to care for Shelly wouldn’t greatly affect her career plans, and, in fact, giving up her rental accommodation would save money.  Unfortunately however, Shelly had had to quit work so the pair only had Laura’s wages to live on. Yet the bills kept coming in, and on top of everyday living costs, expenses such as medicines, transportation and modifications to the home soon added up.  Additionally, helping Shelly attend medical appointments and assisting with errands put Laura behind in her studies. Since Shelly’s condition was not going to improve, Laura deferred her course; telling friends she’d return later.  A great emotional weight settled on Laura’s shoulders as she automatically prioritised her mother’s day-to-day needs above her own.  As expected, Shelly’s condition worsened. Medical sessions often clashed with Laura’s work commitments leaving her no option but to give up her job as well.  While expecting to support her mum physically and emotionally, Laura wasn’t prepared for the financial hit.  Fortunately, the Australian government offers a range of financial assistance packages, such as:  Applicants must meet prescribed criteria and the amount of payment varies depending on the situation.  The Government website www.servicesaustralia.gov.au contains a wealth of information for carers, including eligibility criteria, entitlement estimation calculators and information on how to claim.  Shelly’s doctor provided program leaflets and additional details, and helped Laura gather the medical paperwork and other relevant documents.  For Laura, giving up her job impacted more than just her finances. Having already lost friends after too many declined invitations, she now lost her last source of social interaction.   Resigning herself to a life of care, Laura abandoned all thought of returning to university, along with her dreams for the future.  It was around this time that Laura discovered Carer Gateway www.carergateway.gov.au and Carers Australia www.carersaustralia.com.au.   These websites provided valuable carer resources, information and assistance services. While recognising that financial relief was crucial, their emphasis was on the relevance of self-care, urging carers not to underestimate the importance of their own well-being, particularly their physical and mental health.  Laura found a community of people who understood her situation, and a network of support groups, counselling services and respite programs encouraging carers to balance their care-giving responsibilities with their own needs.   One of Laura’s new friends suggested she seek legal advice around Powers of Attorney, and a financial adviser specialising in estate planning for both her own and Shelly’s peace of mind.  These days Laura says she feels the world opening up as the silence around caregiving is broken. With her mother’s illness, her life took an unexpected turn, yet it has expanded in other ways. Laura’s future is looking brighter; she has even enrolled in an online dental assistant course.  Not exactly what she’d originally planned, it’s nevertheless a pathway to her own future, and more than that, she’s daring to dream again.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Your recession survival guide

Your recession survival guide

Updated on Economy, Education, Finance

In the ever-fluctuating world of economics, recessions are an inevitable part of the financial cycle.   While they can be daunting, understanding their nature and preparing for their impact can make a significant difference in weathering the storm.   Understanding Recessions  At its core, a recession represents a period where economic activity contracts, often reflected in consecutive quarters of negative GDP (Gross Domestic Product) growth. This contraction is not just a statistic on a chart; it resonates through various facets of the economy.   Employment opportunities might become scarcer, leading to job losses or reduced working hours. Households might witness a dip in their income levels, which in turn affects their purchasing power. Consequently, consumer spending, a significant driver of the economy, takes a hit.  The onset of a recession can occur for various reasons, and often it’s a combination of several factors, rather than just one event.   High inflation rates, for instance, can reduce the value of money, prompting consumers to cut back on spending.    Additionally, rising consumer debt can be problematic. While borrowing can boost economic growth in the short term, too much debt can lead to payment defaults, affecting both households and the banks they borrowed from.   Moreover, unexpected events, such as a global health crisis, can interrupt business operations and reduce consumer demand, leading to economic downturns.   It’s the mix of these local and global factors that highlights the intricate nature of recessions and the importance of understanding them.  Preparing Everyday Expenses for a Recession  1. Budgeting: The cornerstone of financial resilience is a well-planned budget. Track your monthly income and expenses, prioritise necessities, and cut back on luxuries. This will not only help you save but also give you a clear picture of where your money goes.  2. Debt Reduction: High-interest debts can cripple your finances. Focus on paying off high-interest debts first, like credit card balances. Consider consolidating your debts or negotiating with lenders for better terms.  3. Emergency Fund: An emergency fund acts as a financial cushion. Aim to save at least three to six months’ worth of living expenses. This fund can be a lifesaver if you face job loss or unexpected expenses during a recession.  Fortifying Your Savings for a Recession  1. Automatic Savings: Set up an automatic transfer to your savings account each month. This ensures you’re consistently saving, making it less tempting to spend that money elsewhere.  2. Diversify Your Savings: Don’t put all your eggs in one basket. Consider diversifying your savings across different accounts or financial institutions. This can protect your money from bank failures or other unforeseen events.  3. Liquidity is Key: In uncertain times, having access to your savings can be crucial. While long-term deposits or high-yield accounts might offer better interest rates, ensure a portion of your savings is in easily accessible accounts, like a regular savings account or a money market account. This ensures you can quickly access funds without penalties or waiting periods should the need arise.  Navigating Investments During a Recession  1. Review Your Strategy: Recessions are not the time for hasty decisions. Re-evaluate your investment strategy in light of the current economic climate. Ensure your portfolio aligns with your long-term financial goals.  2. Seek Professional Advice: If you’re unsure about your investments, consult a financial adviser. They can provide insights tailored to your situation and help you make informed decisions.  3. Avoid Impulsive Moves: It’s natural to feel anxious during economic downturns. However, making impulsive investment decisions based on fear can lead to significant losses. Stay informed, be patient, and remember that recessions are temporary.  Recessions, while challenging, are a natural part of the economic cycle. By understanding their nature and preparing in advance, you can not only survive, but thrive, during these times.   Remember, the key is to be proactive, stay informed, and make well-considered financial decisions. With the right strategies in place, you can navigate any economic storm with confidence!  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Roadmap to retiring young

Roadmap to retiring young

Updated on Budgeting, Retirement

The dream of retiring young is one that captivates many peoples’ imaginations. The freedom to live life on your own terms, doing what you want, when you want is undeniably appealing, but is it attainable? We say yes! It doesn’t just happen, though. As with any goal, it takes planning and dedication along with a clear understanding of when and how you expect to achieve that goal. Early retirement, as a concept, means different things to different people. Therefore, the first step on the road to your early retirement is to be clear about what it will look like, starting with: With an understanding of what retirement means to you, you can begin the process of charting a course to achieving it. Develop a roadmap to early retirement by considering: Attaining any financial goal requires discipline. Coach yourself to say ‘no’ to indulgences in the present, remembering that with the right roadmap and financial know-how, you really can make your dream of early retirement come true. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: Jul – Sep 2023 

Quarterly Economic Update: Jul – Sep 2023 

Updated on Economy, Finance, Investing

Australia’s annual inflation rate has taken an unexpected step up, increasing pressure on the Reserve Bank to push interest rates higher and once again raising the prospect that Australia will fall into recession sometime over the next few months.  The annual inflation rate for the year to August reached 5.2 per cent, up from 4.9 per cent recorded for the year to July, spurred by higher prices for petrol, financial services, and labour costs, following the 5.75 per cent wage rise for 2.4 million Australian workers in July.  Some analysts believe recent wage increases and the Federal Government’s drive to reduce unemployment levels below their current historic low levels and provide more union friendly workplace regulations, will combine to push wages even higher.  The prospect of further wage hikes, low productive improvements combined with continued high levels of inflation, threatens to return the Australian economy to the dismal economic days of the seventies and with it, stagflation.  Of all the domestic price hikes though, higher petrol prices are seen as the most troubling as they have such significant flow through effects, making everything in the country more expensive to produce and so lifting the cost of living for all Australians.  The prospect of higher oil prices internationally, following a decision by Russia and Saudi Arabia to restrict production to boost prices, has cast gloom across the global economy, putting economies everywhere under pressure of higher energy costs.   Globally, US Treasury 10-year bond yields rose to above 4.5 per cent during the past month, taking them to their highest level since the global crisis started in 2007, as fears mount that climbing inflation will persist for years to come.   This, and the generally accept downturn in growth in the massive Chinese economy, is prompting fears overseas that the US economy will certainly fall into recession next year, with developed countries around the world certain to follow.  While there was hope the Reserve Bank was succeeding in driving down inflation, this latest uptick in prices and overseas interest rates, will put the Reserve Bank under renewed pressure to lift domestic rates yet again.  Although the much talked about fixed-rate mortgage cliff seems to have been averted, where homeowners have faced the end of super low fixed rate loans and been forced to move to higher variable rate loans, pressure is emerging in the housing market.  According to figures from the research house, Core Logic, the number of homes that have been sold at a nominal loss, and which have only been owned for two years or less, has increased from just 2.7% to 9.7% during the June quarter.   Pressure is building most clearly in the sale of home units with 14.4 per cent of all unit sales across Australia selling at a loss during the June quarter, compared to just 3.8 per cent of all homes sold during the same time.  There also seems to be a trend where people who moved to the regions during the pandemic are starting to sell up and drift back to the cities.  Resales within two years of purchase, made up 11.1% of all regional resales, compared to a decade average of 7.2% per year.  A rare bright spot for investors remains the hefty returns to shareholders with Australia’s largest listed companies paying out some $21.7 billion during the last week in September, by way of improved dividend payments.   BHP paid out $6.34 billion to their shareholders via a $1.25 per share dividend, Fortesque Metal paid out $3 billion via a $1 a share dividend and after posting a record-breaking profit, the Commonwealth Bank of Australia paid out $4 billion by way of a $2.40 a share dividend.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

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