What does a good financial adviser do?

9 June, 20212 June, 2021 Updated on2 June, 2021 Aged Care, Budgeting, Economy, Finance, Insurance, Investing, Retirement, Superannuation

Some people may think that a financial adviser’s role is to forecast the direction of the share market from month to month and invest clients’ money accordingly.

This is not the reality, of course. Investments are only one small part of what your financial adviser can provide for you.

Consider for a moment the number of websites, newsprint and broadcast time dedicated to financial topics these days. Australians seem to have an insatiable appetite for understanding finance.

Whether it’s the latest share market activity, economic news or the constantly changing tax and superannuation rules, a licenced financial adviser can help answer your burning questions and save you the hassle of finding it yourself.

Usually, the benefit you receive from a financial adviser can be spelt out in dollar terms. It might be the income tax you have saved by re-structuring your salary, or a new concession from the Australian Tax Office (ATO) or Centrelink that you didn’t know you could get.

The finance section of your newspaper or online magazine probably includes a regular “advice” or “Q & A” column. By law, these columns must warn readers that the advice does not consider your personal situation or needs, and you should consider its appropriateness before acting.

In setting your financial strategy, a good financial adviser will take the time to get to know you and your circumstances. This means that everything recommended to you—the investment portfolio, super contribution strategies, savings plans and insurance advice—is tailored to your personal needs, goals, and tolerance to risk.

As the years go by, your financial strategies will need adjusting due to changes in the broader environment or something closer to home. Whatever the case, your adviser is there to help you make the most of the good times and the bad.

And a regular financial review doesn’t always mean major changes, but at least you’ll know that you’re on the right track – and not having to do it alone.

Quality, knowledgeable advice is critical, and wherever you are on your financial path, now is always the best time to talk to us.

The information provided in this article is general in nature only and does not constitute personal financial advice.

Investing 101

1 July, 202021 December, 2020 Updated on21 December, 2020 Finance

Whether it’s taking a more active interest in our superannuation, starting to build an investment portfolio, or even trying our hands at playing the stock market, we can all benefit by understanding the language and key concepts of investing. Asset classes There is a huge range of potential investments out there, and these can be grouped together in asset classes that are based on shared characteristics. There are many asset classes, however the major ones that most mainstream investors focus on are shares, property, fixed interest and cash. Shares give investors part ownership in specific companies. The share market sets the value of each share and prices can fluctuate significantly, even from day to day. This price volatility means that, relative to other asset classes, shares are higher risk, particularly in the short term. However, investors expect to be rewarded for taking on this risk by the potential for shares to deliver higher long-term gains than the other asset classes. Property also provides investors with full or partial ownership of growth assets. Income is received in the form of rent, and property can also provide capital growth. As property can, at times, fall in value, it is considered a medium to high-risk asset class. Fixed interest refers to investment in government or corporate bonds. Bonds are a type of loan, and each bond has a maturity date (the date the loan is repaid), a maturity value (the amount returned at the maturity date), a coupon rate and a market value. The coupon rate is fixed for the life of the bond (hence the term ‘fixed interest’), but the market value can fluctuate depending on movements in interest rates. Cash covers bank accounts and term deposits. Returns are in the form of interest payments, and cash is generally considered to be a low risk asset class. Why are asset classes important? One of the golden rules of investment is that when seeking higher returns, investors must take on a greater degree of risk. Quality fixed interest investments provide a high certainty of a particular return. They are low risk, and the returns they offer reflect this. However, for any given share, we don’t know what its price will be in a week, a month or a year. Prices may be volatile, the return is uncertain, so a share is a higher risk investment. However, that risk can be a positive thing – upside risk – which is the potential for the share to generate a higher than expected return. Asset classes bundle together investments with similar risk and return profiles. By blending these asset classes together in different proportions – a process called asset allocation – investors can construct portfolios that provide levels of risk and return that suit specific needs. This blending of different asset classes results in diversification, which is a critical risk management tool. As different asset classes over and under perform at different times, mixing different asset classes lowers the volatility, and hence the risk, of a portfolio. As far as returns are concerned, studies have shown that over 90% of a portfolio’s performance is determined by the asset allocation. It’s vastly more important than individual investment selection or the timing of purchases and sales. Help is at hand Of course, there’s more to investing than can be conveyed in a short article, but that’s no reason to delay putting the various markets to work. Speak to us today and we can help you understand your risk comfort level and design an investment strategy that’s right for you. The information provided in this article is general in nature only and does not constitute personal financial advice.

4 simple techniques to reduce your tax

22 June, 202216 June, 2022 Updated on16 June, 2022 Tax

Here is a list of tips to help you minimise the amount of tax you pay this end of financial year: 1. Keep records Even if you use an accountant to prepare your tax return, you are responsible for the information you provide and for keeping your tax records for a minimum of five years. So, to ensure that you don’t have to pay any more tax than you are obliged to: Keep receipts of all your tax-deductible expenditure. If you are audited by the tax office, you will need to be able to prove the expenses were incurred. Keep track of all your medical expenses. If net medical expenses relating to disability aids, attendant care or aged care exceed the threshold for the year, you may be eligible for a tax offset that takes the form of a credit against tax payable. Keep detailed records of income and capital gains. Required details include date the investment was purchased, how much was paid, when it was sold and how much was received. 2. Claim all available tax deductions You may be able to claim a tax deduction for many of your expenses. These include: donations to registered charities or non-profit organisations; self-education expenses; premiums on income protection insurance; work-related expenses. You should bear in mind that the range of permissible work-related expenses varies widely from occupation to occupation. Refer to the Australian Tax Office (ATO) website www.ato.gov.au for full details. 3. Contribute to superannuation Contributions to superannuation can reduce the level of tax you would otherwise have to pay on your investments because super is taxed at a maximum of 15%. In addition, some people are eligible to claim a tax deduction for contributions made to super. The rules surrounding superannuation tax deductibility provisions and contribution limits are complex, so it pays to seek advice from your financial planner. 4. Manage capital gains When you sell an investment for a profit, you are considered to have made a capital gain. For non-professional investors, capital gains will be included on your annual income tax return. Assets acquired before 20 September 1985 are exempt from Capital Gains Tax (CGT) considerations. When you sell an asset for less than you initially paid for it, you make a capital loss. When your total capital losses for the year outweigh your total capital gains, you will finish up with a net capital loss for the year. If you have a potential CGT liability, there are some strategies that you could consider to reduce the amount you need to pay: a. Keep an investment for at least 12 months Investors are entitled to claim a 50% discount on capital gains made on assets held for longer than a year. So, by holding on to the investment for more than 12 months you will halve the CGT payable. b. Use carry-forward tax losses to reduce CGT Capital losses incurred in previous tax years that have not already been offset against capital gains may be carried forward in future tax years and can mitigate the effect of any CGT liability. Check your past income tax returns or ask your accountant to determine whether this is an option for you. Remember that this information is not personal tax advice. Always consult a professional adviser to help you determine the best strategies for your personal circumstances. The information provided in this article is general in nature only and does not constitute personal financial advice.

“Tap and go” and then what?

2 March, 202224 February, 2022 Updated on24 February, 2022 Budgeting

Talk about hammering the plastic. In November 2021, Australia’s 13.2 million credit card accounts were used to make over 292 million transactions with a total value of $31.9 billion. Card holders who don’t pay their balances in full every month are currently paying interest on more than $18 billion worth of credit card debt. Interest rates range from 10% to 22% per annum so that adds up to billions of interest owing – and growing! It’s not just the easy money that cards provide; it’s the easy form of delivery via “tap and go” that’s pushing our debt to extraordinary levels. The quicker the transaction, the less thought or planning required. Pay now and think about it (and deal with it) later. Don’t become a statistic – here are some things to look out for plus a few tips. Traps Over 40% of credit card spending goes on groceries and utilities. While this isn’t a problem if you pay off your card balance in full each month, if you’re paying interest just so you can buy the necessities of life, it’s a real danger sign that you may be living beyond your means. Most credit limits are well beyond cardholder needs. On average, Australians only use about a third of their available credit limits each month. However, by giving you a higher credit limit card issuers hope temptation will get the better of you. If that means you can’t pay off your entire balance each month you’ll end up paying them lots of interest. Tips Financial institutions can only offer to increase your credit limit if you specifically ‘opt in’. This can be done in writing or over the phone. However, it’s prudent to withhold this permission to keep your limit under control. You can always apply for a once-off increase if you really need to. Switch to a reloadable (prepaid) credit card. Like a debit card it means you are using your own money with the added advantages that you can pre-set a limit on your spending and reduce the risks associated with buying online. Prepaid cards are available from banks, other financial institutions, and Australia Post. Make sure you check any fees and charges before buying one. If you sign up for a new card for an interest-free purchase, pay it off during the interest-free period then cancel the card before the renewal fee is automatically charged. There is no point paying an annual fee if you’re not going to use the card. And a myth Many people think that it is only lower income earners who are susceptible to the siren call of easy credit. But like the Sirens of Greek folklore themselves, it’s a myth. In fact, higher income earners also rack up huge balances on gold, platinum and diamond cards, and can experience real difficulty in paying them off. If your credit cards are more an enemy than a friend, a financial adviser will be able to suggest a range of solutions to get you back on track. The information provided in this article is general in nature only and does not constitute personal financial advice.

Get ready for June 30 now!

7 May, 202428 May, 2024 Updated on28 May, 2024 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. 

Five reasons to refinance your home loan

11 September, 20198 September, 2022 Updated on8 September, 2022 Finance

Many people treat their home loan as a set-and-forget, riding out whatever the original loan terms and prevailing interest rates dish up. They may be doing themselves a disservice, as there are several ways in which borrowers can benefit from refinancing their mortgage. 1. Find a lower interest rate.Whether interest rates are rising or falling, in a competitive mortgage market you may be able to refinance your mortgage at a lower interest rate. The benefits are that you can then… 2. Reduce your home loan repayments. For a given loan term the lower the interest rate the lower your repayments. This then frees up some of your income for other purpose. Or you can… 3. Shorten the term of your loan.If you maintain your current repayments with a lower interest rate loan, you’ll pay it off sooner and save heaps on interest. 4. Switch from a fixed to a variable rate mortgage (or vice versa).A fixed rate home loan can help you lock in an interest rate for several years into the future. This can provide some protection against rising interest rates. Conversely, when interest rates are falling, a variable rate loan is the better way to go. Be aware, however, that even the experts often get it wrong when it comes to predicting the direction of future interest rates. 5. Consolidate debt or access equity.If your home has increased in value then refinancing may allow you to access some of the greater equity you have in your home. This may allow you to pay off higher interest debt, such as credit cards, take a holiday, or pay for renovations. Take careWhile refinancing a home loan can be a winning strategy that’s not automatically the case. There will likely be costs involved in both paying off the existing loan and in establishing the new loan. If the difference in interest rates between the old and new loans is small, it may be hard to gain a benefit. And take care when refinancing for debt consolidation or to free up equity. If you promptly max-out the credit card you’ve just paid off, you could be digging a deeper debt hole for yourself. To find out what would work best in your circumstances, please contact us today. This is general information only

Federal Budget Highlights 2022-23

13 April, 20226 April, 2022 Updated on6 April, 2022 Economy

The Federal Government has delivered a big-spending 2022 budget, taking immediate steps to reduce cost of living pressures for working Australians while implementing a range of massive infrastructure and defence spending measures. The Government will slash the fuel excise by half, effective immediately, as well as provide a one-off cash hand out of $250 to a range of social security recipients, and a $450 additional tax offset for low- and middle-income earners. Productivity will be boosted across the nation by enhanced training incentives, dramatic tax measures to drive greater digital adoption and improve computer-based efficiencies as well as steps to boost the nation’s overall level of self-sufficiency. Concerns about the growing budget deficit, which has now reached $78 billion, have been largely put on the back burner with confidence placed in the fact that as the economy grows, this will naturally reduce. A bounding economy The Australian economy has posted astonishing growth. It has come roaring out of two years of pandemic induced lockdowns, to post strong growth across the nation, spurred on by higher prices for coal, iron ore and wheat. Gross domestic product is expected to expand by a massive 4.2% this year while wages are expected to grow by 2.75% and surge by 3.25 % in the following year. Unemployment is currently 4%, but this is expected to drop to 3.75 % over the next six months – its lowest level since 1974. An extra 100,000 Australians have found work compared to employment numbers recorded when the pandemic first hit in March 2020. This is expected to help slash welfare payments by $11 billion across the next four years. A focus on increased productivity Training and improved productivity remains a key focus, with the Government implementing a $365 million extension to the existing apprentice wage subsidy scheme, in an attempt to further boost apprenticeship training. The Federal Government is continuing its focus on boosting business productivity allowing a $120 tax deduction for every $100 spent on digital adoption technology, such as portable payment systems, cyber security measures and subscriptions to cloud based services. A similar tax measure will be introduced for businesses providing external training courses to staff whether online or in-person, to increase productivity throughout the economy. This will be supported by a raft of Government driven efficiencies such as digitalising trust income reporting, improved PAYG systems and automatic reporting of taxable payments. And a more efficient economy The 2022-23 budget also includes a raft of infrastructure projects that will drive greater efficiencies and economic growth across Australia in the decade ahead. In addition, the Government has announced steps to develop a circular waste economy, support low emission technologies including hydrogen, extended gas pipeline infrastructure and more efficient environment approval strategies. Source: budget.gov.au The information provided in this article is general in nature only and does not constitute personal financial advice.

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