Your wealth during the COVID-19 pandemic

6 May, 202021 December, 2020 Updated on21 December, 2020 COVID-19, Finance, Investing

There isn’t a single person in the world who hasn’t been impacted by COVID-19. As new case numbers start to slow in Australia, so too is our economy. This time presents new challenges as everyone gets used to a “new normal” and figures out the best way to weather the coming months. This article provides an overview of different measures the Federal Government has announced to support individuals and businesses, current market performance and what you should be thinking about when it comes to your finances and continuing to build long-term wealth.

Government support for individuals and businesses
The Federal Government has announced two economic stimulus packages and the JobKeeper Payment to support individuals and businesses. An overview of the Federal Government’s measures announced to date is detailed below.

Support for individuals
The Federal Government has announced a range of measures to help individuals. Eligibility to access these measures is determined on criteria such as your employment status or loss of income due to COVID-19. Some of the key measures include:

two $750 payments to social security, veteran and other income support recipients (first payment from 31 March 2020 and the second payment from 13 July 2020);
access to the JobKeeper Payment from your employer (if eligible) equal to $1,500 per fortnight;
a time-limited supplementary payment for new and existing concession recipients of the JobSeeker Payment, Youth Allowance, Parenting Payment, and Farm Household Allowance equal to $550 per fortnight;
early release of superannuation funds (see overview below); and
temporarily reducing superannuation minimum drawdown rates (see overview below).

Full details about the Federal Government’s measures to support individuals are available on the Treasury website.

Early release of superannuation
Eligible people will be able to access up to $10,000 of their superannuation in the 2019-20 financial year and a further $10,000 in the 2020-21 financial year. To access your super early, you need to meet ONE of the following five criteria:

You are unemployed
You are eligible for the JobSeeker payment, Youth Allowance for jobseekers, Parenting Payment special benefit or the Farm Household Allowance
You were made redundant on or after 1 January 2020
Your working hours have reduced by at least 20 per cent after 1 January 2020
You are a sole trader, and your business activity was suspended, or your turnover has reduced by at least 20 per cent after 1 January 2020

If you are considering early release of your superannuation, you need to consider what the potential long-term impacts may be to the growth of your super fund and retirement income. While $20,000 may not seem like a lot of money now, it could have significant compounding value if left in your fund. Understandably, people may not have any other choice to support themselves financially. Make sure you speak to a financial professional to understand your risks and if this is a suitable option for you. If you are eligible, you can apply for early release of your superannuation directly with the ATO through the myGov website.

Temporarily reducing superannuation minimum drawdown rates
The temporary reduction in the minimum drawdown requirements for account-based pensions has been designed to assist retirees who do not wish to sell their investment assets, while the value of those assets is reduced. The minimum drawdown rates have been temporarily halved.

Support for businesses
The Federal Government has announced a range of measures to help businesses facing financial difficulty. Eligibility to access these measures depends on factors such as your turnover and how much your business’s revenue has decreased due to the COVID-19 pandemic. Some of these measures include:

increasing the instant asset write-off threshold for depreciating assets from $30,000 to $150,000;
allowing businesses with turnover below $500 million to deduct 50 per cent of eligible assets until 30 June 2021;
PAYG withholding support, providing up to $100,000 in cash payments which allows businesses to receive payments equal to 100 per cent of salary and wages withheld from 1 January 2020 to 30 June 2020; and
temporary measures to reduce the potential actions that could cause business insolvency.

Full details about the Federal Government’s measures to support businesses and eligibility criteria are available on the Treasury website.

How the banks are approaching home loans
Banks have announced that homeowners experiencing financial difficulty can pause their mortgage repayments for between three and six months. It’s important to remember that, in most cases, interest will still be capitalised and added to your outstanding loan balance. When payments restart, your lender may require increased repayments, or the term of your loan may be increased. These are important factors you need to discuss with your lender.

What should you focus on when it comes to personal finance?
While it can be tempting to sell all your investments now as the market declines, this locks in your losses and puts your wealth in a weak position. If you haven’t already defensively positioned your investments, speak with a financial adviser about how to best adjust your investing over the coming months. You should also consider how to maximise your returns as the market recovers. Investing and building wealth is a long-term game. As such, you should be investing with a long-term time horizon in mind.

What should I do next?
During this time, you may face some challenges with your finances. Your ability, however, to understand the options available to you and what the current period means on a long-term basis is key to getting through this challenging time productively. Further, making well thought out decisions now will give you the strong foundations you need in your health and wealth as the world recovers and embarks on a new period of growth.

Before you make any big changes to your financial situation, speak to us to obtain personalised advice for your unique situation.

This is general information only

Quarterly Economic Update: Jul – Sep 2023

11 October, 20238 November, 2023 Updated on8 November, 2023 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. 

Why seeing a financial adviser could be your best Xmas gift

30 December, 202017 September, 2021 Updated on17 September, 2021 Economy, Investing

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

Quarterly Economic Update: January-March 2021

14 April, 20217 April, 2021 Updated on7 April, 2021 COVID-19, Economy, Investing

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

A Self-Employed Superannuation Guide

6 December, 20236 December, 2023 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. 

4 financial resolutions to kick start the New Year

18 December, 20198 September, 2022 Updated on8 September, 2022 Finance

The dawn of a new year sees many people setting new year’s resolutions such as losing some weight or giving up smoking. Similarly, the beginning of a new year is the ideal time for setting financial goals, and here are four practical ways you can kick your year off to a great start. Decide what you want to achieve. January is perfect for taking stock of where you’re at financially, particularly as those post-December bills start rolling in. So perhaps you’d like to start by paying off debt or commence a savings plan for a new car or family holiday. The main thing is to be decisive. Setting a realistic household budget will provide understanding of your finances and identify areas of unnecessary spending. This will not only assist in balancing your income and expenses, but will help you clear debt and allocate money to other financial goals like setting up an emergency cash fund. Tidy up your filing cabinet. According to the Australian Taxation Office, you should keep financial records for five years. Shred financial paperwork older than five years and file everything else, including bills, invoices and bank statements. Remember that any filing system you implement should be quickly and easily maintained so you’re motivated to keep your records in order. Review your paperwork; start with insurances – life insurance, house, car etc. Are they current and are you adequately covered? Are your premiums appropriate for your level of cover? Assess your superannuation and nomination of beneficiary. Is your will up to date or have your circumstances changed? While we’re experiencing record-low interest rates, do a few sums and work out whether you’re getting the best deal on your mortgage. Perhaps it’s time to renegotiate with your lender! While the idea of setting a new year’s resolution is common, sticking to resolutions and accomplishing them are less so. The key to achieving any goal is to be SMART about it:S – be Specific. Clearly define your goal.M – ensure it’s Measurable so you know when you’ve achieved it. A – make it Achievable. Planning to complete a marathon in February may not be achievable if you’ve never run before.R – be Realistic; could you really lose 20 kilos in a month?T –set a Time by which you want to achieve your goal. If you’re not sure where to start, talk to us. We can help you put processes in place to get your SMART goals underway. With a little planning and organisation, being clear about what you want to achieve, and mapping out how and by when you expect to achieve it, you’ll be giving yourself the best possible start to a successful year. This is general information only

Making interest-free deals work for you

20 February, 20198 September, 2022 Updated on8 September, 2022 Finance

They have been around for decades, but interest-free deals can still be confusing and costly when not managed correctly. Excitable advertising can make these offers almost too good to refuse, particularly with longer terms applying to higher levels of finance. For example, to get five years’ interest-free on purchases from some retailers, the minimum spend is $1,000. This simple condition could turn a necessary purchase of say, a new fridge, into a multiple purchase prompted by the seemingly innocent question, “do you need to upgrade your TV?”. Five years up your sleeve to pay off a larger purchase may sound too tempting to pass up but never forget the age-tested maxim “buyer beware”. In the case of interest-free it’s not always as simple as it sounds. How do these deals make money? Not to be confused with the newer “buy now, pay later” products where no interest is ever charged, interest-free deals simply defer the interest to the end of the promotional period and then it appears with guns blazing! Interest will be charged on any outstanding amount at ridiculously high levels, often close to 30% per annum. For instance, if you had a loan of $3,000, how would you feel about paying an extra $1,000 interest per year? That’s not smart buying. Although some do, the credit provider is not obligated to warn that the interest-free period is ending. It’s up to you to calculate the monthly repayments to clear the debt during the interest-free period and pay that amount – or more if you can. It’s not just interest It may seem attractive but having a longer period to pay off a purchase will cost you more, particularly when it’s for a relatively inexpensive item, e.g. a $1,000 TV. The monthly account-keeping fee will add up considerably over a longer period. Five years (60 months) at $5.95 is an extra $357 in fees. Reducing the period of the loan will save you money on these fees. There are also late payment fees if you miss the monthly due date. As part of the deal, you will usually be provided with a store card or another credit card for this purchase. The card credit limit may be much higher than your initial purchase as a way to encourage you to spend more, so if you don’t need the extra credit ask for the card limit to match the full purchase price when completing the application. The salesman may explain that you might not be able to increase it later but take control and stick to your decision. The card could also have an annual fee so if you repay the total balance within the first 12 months and don’t plan to use it for another purchase make a note to cancel it before the provider charges another annual fee. Buying smart If you intend to buy using an interest-free offer, check your budget and make sure you can repay the entire purchase price (plus fees) before the expiry of the interest-free period. Managed well, interest will be your friend. If not, it will be a very expensive enemy. Looking to learn more about interest? Check out our free Understanding Credit Cards course – we’ll tell you what you need to know to ensure you never let your credit card get the best of you! This is general information only

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