Summer Savings l For An Endless Summer

2020, the year that was, then wasn’t, then was, then wasn’t again.  It is certainly a year to remember and to be forgotten.  Physically, emotionally, mentally and financially very testing for different reasons.  Bring on 2021!  We’ve pulled together some Summer Savings for an endless summer you really deserve!

One of the main things that I’ve been focusing on with my clients during the pandemic was budgeting.  Things became a lot tighter, and people had to really focus on what to spend and where.  Obviously, with the restrictions, it was a lot easier in some cases of where to cut expenses, but I don’t know about you, but we seemed to be getting packages delivered every few days!

BUDGETING

The important thing now that the restrictions are easing, and we return to some kind of (new) normal, is that we don’t go spending crazy!  It’s especially harder with Christmas around the corner.  We have to be mindful that we don’t undo any of the budgeting skills we’ve learnt by overspending, and accumulating a pile of credit card debt to start 2021.

According to the RBA in December 2018, spending on credit boomed to $30M.  If you calculate that on average, it is estimated that 27% of people will still be paying off this debt two years later, the interest accrued on this alone, is in excess of $100M.  This is why you can’t get too far ahead of yourselves, as you don’t want to ruin your summer, and the start of the year.

CREDIT CARDS

For those with credit cards, there is always the option of looking at those companies that let you roll over debt on to a 0% interest repayment for a period of time.  What you can do then, is every repayment you make, you are paying off 100% principal.  For example:

  • EDWINA had a $2,000 debt that was rolled over with a 0% interest rate for 18 months
  • Budgeting, she could pay $111 per month, and ensure that that debt was cleared entirely in that interest free period.

As a comparison;

  • PHOEBE had a $2,000 debt with a 17% interest rate
  • Budgeting, she could pay the minimum repayments on the debt and it would take 17 years to fully pay off that card.

This path is not trouble free though, because in some cases, any spending that occurs on these cards get placed behind the 0% interest rollover, meaning that you will not be paying off the debt that has high interested accrued on it.

SAVE SAVE SAVE!

A fun way to get the kids in to saving I’ve found useful is the Coke Bottle challenge.  Basically this is where you collect your $2 and keep them in a used (and cleaned) Coke bottle.  People have done the testing;

  • 600mL bottle you can get around $1,000 saved
  • 1.25L and 2L varieties, you can save $1,900 and almost $3,000 respectively

You can have them do it individually, or as a family and put it towards a holiday now that the pandemic is basically over!

Another one I like is where you start out by saving $1 in week one, $2 in week two, $3 in week three for example, for each week of the year.  By doing this, you will accumulate $1,378 over the year.  A fun way to do it is have a tally board off and cross off each donation.  That way you can spread out the weeks that you have to pay more in, as your budget dictates, especially as where you have November/December payments where money may be tighter due to upcoming Christmas.

UPDATE YOUR BENEFICIARIES!

Lastly, I’ve had a few cases recently where new clients have had no or invalid binding death nominations on their life insurances and superannuation funds.

Superannuation is a non-estate asset, so unless you have a beneficiary that is your Estate, your Will will not deal with your superannuation benefits.  This causes issues at time of claim, which is already a tough enough time for your loved ones, without delays and trouble with accessing funds at a time where it is urgent.  Take 5 minutes and check to make sure that you;

  • Have a beneficiary listed +
  • Make sure that it is a valid beneficiary

Give us a call to discuss whether or not the beneficiary is valid or not because your nominated superfund will not tell you if you have listed an invalid beneficiary.  Naming the incorrect person can be very costly!  Our team of experts can help you ensure you’re not making unknown costly decisions, get in touch now and we can help you with your Summer Savings for a stress-free endless summer you wont forget!

Have a great Christmas and a Happy New Year, and we’ll see you in a hopefully brighter and better 2021.

 

Steve Reynolds – Certified Financial Planner

BComm, Dip.FS(FP)

Financial Mistakes To Avoid During A Crisis

Although none of us could anticipate the world going into lock down due to a pandemic, I cannot help but wonder how many of us were financially prepared for a crisis.  Prepared or not, I have witnessed some mistakes that people are making as a result of Covid-19.

1. MAKING EMOTIONAL FINANCIAL/INVESTMENT DECISIONS.

When the share market suffers sharp falls, it is a natural reaction for many to panic, or at least lose confidence in the market.  However, history shows that after every financial crisis, the market experiences a recovery.  It is important that you regularly review your investment strategy and stick with it for the long term, rather than make rash decisions as a result of market fluctuations.  When you sell assets during a downturn, you are essentially crystallising that loss.

2. ACCESSING YOUR SUPER EARLY DUE TO COVID-19

This measure was introduced to provide relief for those experiencing genuine hardship as a result of Coronavirus, but have you considered the long-term effects?  Depending on your age and current super balance, accessing the maximum $20,000 under the temporary Covid-19 early access to super could end up resulting in a loss of up to $100,000 by the time you retire.  Also, if the withdrawal results in your fund being left with $6,000 or less, this may result in a loss of insurance cover also.

3. NOT HAVING AN EMERGENCY FUND

Everyone will have a different amount they are comfortable with having access to any point in time for those unplanned expenses.  Ideally, you would have enough to cover between three and six months of non-discretionary expenses.

4. NOT HAVING A BUDGET

Having control over your expenses and having an understanding of where your money is going, will hold you in good stead at all times, but particularly during a financial crisis.  Knowing where you could save money during difficult times can help reduce the possibility of increasing household debt.

5. NOT HAVING A WILL

Over half of Australians do not have a will.  Passing away intestate creates havoc for your loved ones.  Establishing a will is a simple process and help to ensure your assets are distributed according to your wishes.

Our team at Canny Group are here to help you and support you with all financial aspects of your life.  Nobody was able to predict what a year 2020 would be, but what we are able to do now (if you haven’t already) is plan ahead and do it the right way.  Get in touch with our team to find out how we can help you set and achieve your financial goals.

 

Samantha Butcher – Financial Adviser

BComs Dip FS

2020 Tax Returns + 3 Ways To Make The Most Out Of It!

It’s that time of year again, Tax Time!  For individuals who have a tax agent, like our team at Canny Group and their accounting team on hand, we will lodge your tax return for you on your behalf and you have until 15 May 2021 to do this.  However, if you lodge your own tax return you have until 31 October 2020 to have it lodged.

Either way, we have put together some tax tips that you should consider before 30 June 2020 to help; reduce your taxable income, maximise deductions, take advantage of tax offsets, accessing free money from the Government as well as COVID-19 in many different ways, and we have put together these tips to help you be as prepared as possible and hopefully empower you to maximise your refund when it comes to lodge your tax return.

TAX TIP #1 // WAYS TO REDUCE YOUR TAXABLE INCOME

  • SUPER CONTRIBUTION // make a personal deduction superannuation contribution. Check with payroll to determine how much has been contributed so far.  The concessional contribution cap is $25,000 for the 2019/20 income year.
  • UNUSED CONTRIBUTION // do you have any carry forward unused concessional contribution from the 2018/19 income year? If your total superannuation balance is under $500,000 at 30 June 2019, you may benefit from making a catch-up deductible super contribution.  This may be especially beneficial to those who have additional income due to sale of investments such as shares or property.
  • DEFER INCOME // are you nearing retirement? It may be worthwhile to defer you income until after 30 June if your income will be smaller in the subsequent year.

TAX TIP #2 // MAXIMISE DEDUCTIONS!

  • MOTOR VEHICLE EXPENSES // individuals who use their car for work related travel can claim 68 cents per kilometre up to 5,000km for business travel or claim under the logbook method of car expenses. Canny Group’s team of accountants will be able to determine which method yields the greatest deduction for you.
  • WORK-RELATED EXPENSES // consider if you need any work-related items such as tools for trade, computer, subscriptions or work clothing and whether you could purchase or pay for those expenses before 30 June to increase your deductions.
  • DONATIONS // or gifts of $2 or more to a deductible gift recipient are tax deductible. Where spouses are on different marginal rates, consider making donations by the spouse that is in the higher tax bracket to maximise the benefit of the deduction.
  • HOME OFFICE // if you have been working at home due to COVID-19, you may be eligible to claim a rate of 80 cents per hour for all of your running expenses from 1 March to 30 June. Multiple people living in their house could each individually claim the 80 cents per hour rate.
  • PROTECTIVE CLOTHING // did you buy protective items such as gloves, face masks, sanitiser to use at work due to COVID-19? If your specific employment duties require you to have physical contact or be in close proximity to customers or clients while carrying out your duties or you are involved in cleaning premises, you can claim a deduction for protective items.  The ATO considers those that work in the following industries or occupations are exposed to the risk of illness in the course of working:
    • Medical Industry
    • Cleaning Industry
    • Airline Industry
    • Hairdressing + Beautician Industry
    • Retail, Cafe + Restaurant Industry

TAX TIP #3 // TAX ADVANTAGE OF TAX OFFSETS!

  • SPOUSE OFFSET // receive a $540 tax offset by making a person contribution up to $3,000 to super on behalf of your spouse. Only available if your spouse’s taxable income is less than $37,000.  A lower offset may be available if you contribute less than $3,000 or your spouse earns between $37,000 and $40,000.
  • LOW + MIDDLE INCOME OFFSET // individuals on a taxable income of $37,000 or less will receive up to $255 tax offset and those on taxable incomes between $48,000 and $90,000 will receive the maximum of $1,080 offset. Incomes between $90,000 and $126,000 will receive partial offset.  This is not a tax refund but a tax offset.

TAX TIP #4 // ACCESS FREE MONEY FROM THE GOVERNMENT!

CO-CONTRIBUTIONS // receive a Government co-contribution of up to $500 paid into your superannuation by making an after-tax superannuation contribution of $1,000 or more.  Full amount is available to those with taxable income less than $38,564 and a reduced amount is available to those with taxable income less than $53,564.

TAX TIP #6 // RETIREES!

  • REDUCE PENSION // the minimum drawdown requirements for account-based pensions has been halved for the 2019/20 and 2020/21 income year. This will benefit retirees with account-based pension by reducing the need to sell investment assets to fund minimum drawdown requirements.
  • SOCIAL SECURITY // in light of the low interest rates on savings, the Government has reduced social security deeming rates from 1 May 2020. You could be eligible for Centrelink entitlements such as the age pension or Commonwealth Seniors health care card with the lowering of deeming rates.

Now that we have your sorted for maximising your tax return outcome, let’s talk about what you’re going to be doing with the hard-earned money you’re hopefully on the way to receiving back!

Did you know that the average Australian received a tax refund of $2,381?  That’s enough to splurge on some new furniture or an LED Smart TV, right?  Well, before you head down to your local shopping centre with your tax refund in hand, take a look at three ways we’ve come up with to spend your tax return.  We’re confident that the following strategies will help you make the most out of your tax return and create positive change in your life.

STRATEGY #1 // SET UP AN EMERGENCY FUND

Research conducted in the last year’s Financial Consciousness Index found that a concerning 13.4 million Australian’s do not have emergency savings to fall back on if they were unable to earn an income for more than three months.  The study also found that 7.5 million Australian’s struggle to pay their bills and are not saving money regularly.

So, with this in mind, why not use this year’s tax return to set up an emergency fund and make this the start of your savings plan?

STRATEGY #2 // MEET WITH AN ESTATE PLANNING LAWYER

As the saying goes, there are only two certainties in life; death and taxes.  Unfortunately, more than half of Australian adults do not have a Will.

So, with this years tax return, why not protect your loved ones and sit down with an estate planning layers to draw up a Will or Testamentary Trust?

STRATEGY #3 // STARTING YOUR SIDE HUSTLE

If you have an idea of starting a side business, use this year’s tax return to kick-start this one and for all.  It doesn’t take much more than $2,381 to get started these days: a basic website and some Facebook and Instagram paid advertising campaigns to attract your first paying customers.

So, why not make this the start of your side hustle and see if you can generate a return on investment and get your business off the ground?

The question is, how will you spend your tax return this year after you’ve put into place our tax tips on maximising your refund?

COVID-19 + Accessing Your Super Early

As of 20 April 2020, people affected by the COVID-19 pandemic may be eligible to apply to access up to $10,000 of their super in FY 2019-20 and a further $10,000 in FY 2020-21.

ARE YOU ELIGIBLE?

You can apply to access your super if you meet one or more of the following requirements:

  • you are unemployed
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment [which includes the single and partnered payments], special benefit or farm household allowance
  • on or after 1 January 2020, either
    • you were made redundant
    • your working hours were reduced by 20 per cent or more
    • If you are a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more

If you meet these requirements and decide to withdraw super, you won’t pay tax on super you withdraw. It won’t affect Centrelink or Veterans’ Affairs payments.

HOW DO YOU WITHDRAW SOME OF YOUR SUPER?

You can register your interest today through myGov. Applications open 20 April 2020.

People who are eligible will be able to apply online [through myGov] to access up to $10,000 of their super between 20 April and 30 June 2020. Applications to access up to a further $10,000 will be open from 1 July until 24 September 2020.

ASSESS ALL OF YOUR OPTIONS FIRST

Before you withdraw super, it’s important to assess all of the options available to you. Access Government assistance and talk to your bank or lender about how they can help.

GOVERNMENT PAYMENTS

As part of the COVID-19 response, there are specific Government payments to help you:

  • Income support payments – crisis payments and a temporary fortnightly $550 coronavirus supplement
  • Household support payments – two automatic $750 Economic Support Payments
  • JobKeeper Payment – $1,500 a fortnight for 6 months may be available to employers to keep paying eligible employees whose hours have been reduced

CONTACT YOUR BANK

All banks and lenders have hardship teams ready to help customers in tough times.

You may be able change the terms of your loan, or temporarily pause or reduce your repayments for 6 months.

CHECK YOUR CURRENT SUPER BALANCE + CONSIDER THE IMPACTS ON YOUR INSURANCE

Your super balance as displayed through myGov may be as at 30 June 2019. Your super balance may have changed since then, so it’s a good idea to check your current balance by getting in contact with your super fund.

It’s also important to consider the impacts that withdrawing some of your super may have on your insurance. More than 70% of Australians that have life insurance hold it through super. If your super balance falls to zero or is too low, you may lose your life and income protection cover.

CONSIDER THE IMPACT ON YOUR RETIREMENT SAVINGS

At a time when you may be struggling to cover basic costs such as rent, groceries and utility bills, a payment of $10,000 or even $20,000 could be a very welcome injection of cash. However, it’s important to remember that withdrawing some of your super has the potential to make a significant difference to your level of income in retirement.

Your super is your retirement savings. Consider what impact withdrawing super today will have on your retirement by using the simple superannuation calculator available on the moneysmart.gov.au website to work out how much super you’ll have when you retire.

According to Ben Marshan, Head of Policy and Standards at the Financial Planning Association of Australia [FPA], “Conservatively, every $1,000 that you have in super at age 30 will be worth about $4,500 at age 60. If you take $1,000 out now, you have to put in $4,500 over the next 30 years to get back to the same position. Financially, for a lot of people that can be a massive struggle and they’ll never actually catch up.”

WE ARE HERE TO HELP

If you need assistance, our financial advisers at Canny Group are available to help you navigate these changes and discuss your current financial situation, superannuation and retirement savings in more detail.

 

Chris Graham – Client Services

Market Downturns + Your Retirement Savings

The Coronavirus [COVID-19] has had a significant impact on financial markets and global asset prices.  With wider economic and social disruption now evident and expected to continue in the short-term.  We understand that you may have concerns about the effects this pandemic and subsequent disruptions may have on your superannuation balance.  That’s why we’re going to talk about how to remain calm amid this crisis and avoid becoming an ‘April Fool’ when it comes to your retirement savings.

CONSIDERATIONS for investors?

It’s important to remember that superannuation is and always has been a long-term investment.  With that in mind, long-term performance is one of the key factors to consider during events like this.  While it’s confronting to see the global market experience a downturn of this scale, we remain confident this trend will reverse, as we have seen on previous occasions.

There’s no doubt this Coronavirus pandemic is a serious event.  However, as a result of this, we’re likely to see global fiscal stimulus, low valuations on equities and low interest rates for a long time.  Another thing to bear in mind is that the world economy has experienced and overcome many challenging events over the last 100 years, including World War I and World War II, the Spanish flu, the Great Depression and more recently the 2008 Global Financial Crisis [GFC].  The below graph demonstrates how shares climb a “wall of worry” over many years with numerous events pulling them down periodically.  As we can see, the long-term trend of shares is ultimately upward while providing greater returns than other more stable assets.  The takeaway message from this is that periods of volatility are the price we pay for higher longer-term returns from the share market.

Australian Shares "Wall of Worry" - Source ASX, AMP Capital
Australian Shares “Wall of Worry” – Source ASX, AMP Capital

WHAT CAN I DO… to protect my superannuation?

We mention the above because as we experienced during the 2008 Global Financial Crisis [GFC], many investors are now electing to switch their superannuation investments to cash or very defensive options in search of lower volatility and greater stability.  Unfortunately, it’s near impossible to predict when market confidence will return and recover.  As a result, efforts to mitigate risk by attempting to time market movements simply lock-in, and in many cases, magnify losses.  For example, the share market fell some 40% in 2008-9, but recovered near all of the fall in the following 12 months, and subsequently went on to exceed the pre-GFC levels.

The Coronavirus pandemic has escalated rapidly during the early months of 2020, resulting in the fastest share market drop of this magnitude in history.  It has left us all questioning how long this will last and when global markets will rebound and return to pre-COVID-19 levels.  The sharp market falls and headlines blaring that billions of dollars have been wiped off the share market are stressful for all of us.  It’s only natural to want to take action and do something about it to protect your retirement savings.  However, if history is any indication, those who are unlikely to draw on their superannuation in the short-term are often best to take no action.  We know it may seem counter-intuitive, but panicking and switching your superannuation investments to cash or very defensive options in the midst of a market downturn can lock-in losses and significantly impact your retirement savings in the long-run.

In times like this, it’s often best to turn down the noise.  We have always recovered, and we’re confident that we will come through this crisis as we have in previous times.  With this in mind, we encourage you to consider your immediate and long-term requirements.  As always, you should also continually consider your own objectives, financial situations and needs which are not addressed in this general article.  If you have any concerns or queries, please don’t hesitate to contact us and we will discuss your personal circumstances in more detail.

Stay healthy + safe!

 

Chris Graham – Client Services

Super Women

RETIREMENT!  The very thought of it appeals to many hardworking persons.  They think about a time for doing the things that bring them pleasure, recreation and fun.  Sadly, many, in particularly women, will not have sufficient superannuation savings to fund the lifestyle they are hoping for in retirement.

On average, women retire with 39% less super than men and surprisingly an estimated 40% of older single retired women live in poverty in retirement.  This group of single retired women are the fastest growing cohort of homeless people in Australia.  What are the reasons for this?  Australia’s gender pay gap is currently 13.9% so on average, women earn less than men and since compulsory employer super is based on wages, women will have less in super in retirement.  Women are also more likely to take time off work for maternity leave and to care for their families.  As a result, a lower superannuation balance may mean a reliance on receiving a government pension.  For some, this may limit their independence and affect their quality of life.

Alan Lakein, a well-known author on personal time management said, “Planning is bringing the future into the present, so you can do something about it now.”

What little steps can you take now to prepare for the kind of retirement you want?

  1. CONSOLIDATION… Do you have multiple super funds?  If so, consolidating your super will likely reduce the management fees you are paying to different funds.
  2. INVESTMENT CHOICE IN SUPER… Most super funds allow you to choose from a range of investment options and asset classes.  These may include, growth, balanced, conservative and cash.  Do you know what investment options are available to you and have you reviewed how your super is invested?  Your investment choice will affect the earnings in your super and ultimately will impact the balance you have in super in retirement.
  3. INSURANCE IN SUPER… Most super funds offer life, total permanent and disability and income protection insurance for their members.  Premiums are deducted from your super to pay for your insurance cover.  Have you reviewed your level of insurance cover?  Do you know if you are over or under insured?  Do you know how much you are paying in insurance premiums for your cover?
  4. CONTRIBUTIONS… You can boost your super and get the power of compounding to work for you by making additional contributions.  If you make personal [after tax] contributions, you may be eligible for the super co-contribution and the low-income super tax offset of up to $500 each.  You can also salary sacrifice part of your salary and have it paid to your super fund.  By salary sacrificing to super, you may be able to reduce your tax because you are only paying 15% tax on your contributions you make rather than your marginal tax rate.  Salary sacrifice to super is considered employer contributions so its important to ensure that you don’t exceed the annual contribution cap of $25,000 for concessional contributions.  From 1 July 2019, if your super balance is less than $500,000 and your employer contributions have not exceeded $25,000 for the year, you are able to carry forward the unused part of the contribution cap for up to 5 years.  This may be a valuable opportunity for those who suddenly have a lump sum assessable income resulting from a disposal of a property.

If you would like to know more or come in for a free 30 minute appointment to speak to one of our team on how you can make the most of your superannuation, get in touch here!

 

Helen Yau – Manager + Financial Planner

CA, BCom, Dip Fp, SSA

New Years’ Finance Resolutions

The new year is a time when a lot of us make well intended resolutions to kick start the year.  It’s common to come up with New Years’ resolutions in January that reflect the way we feel after all the celebrations over the Christmas and New Year period. These resolutions may relate to health, work, family and/or finances with a high number of resolutions being; partying less, eating more healthily and exercising more.  That’s all great, however these generally only reflect only the prior three weeks!

We say ‘well intended’ because we make them with the best of intentions to commit to them and benefit from them in the long term.  However, come February or March, and we find ourselves feeling guilty because we have not fulfilled our goals.  What if we could put together resolutions that reflected the prior year or several years?  These resolutions could generally revolve around; holidaying more frequently, spending more time with family and friends, purchasing a house or paying off the one we have and becoming more financially independent and secure?

These resolutions are great to work with, and the good news is that they don’t exclude the first set of resolutions – there is no reason why we can’t do both!  Let’s get down to setting New Year resolutions to get you on the road to a “kick-ass” financial future!

WHEN SHOULD YOU START?

NOW, NOW and NOW!  It’s easy to think that you don’t have anything yet and don’t earn a lot so can’t start – but it’s wrong!  One of our directors started saving at 18 years old by putting away $70 a month in a savings plan.  This isn’t a lot but she found she didn’t miss the money.  When it was time to buy a house 12 years later, she was well on the way to a deposit.  Remember, everyone has to start somewhere!

HOW OLD SHOULD YOU BE TO START PLANNING A “KICK-ASS” FINANCIAL FUTURE?

There’s no age required – but as we said before, start NOW!  The sooner you start the sooner you are on your way.  We have probably all heard the Chinese proverb “A journey of a thousand miles begins with a step” and I suspect we all use this when we are gearing up to complete a mammoth task.  Runners often count steps on long runs, cyclists count kilometres, and we all count sleeps to Christmas – the best way to achieve anything, is to simply start!

OK… YOU’RE GOING TO START – WHAT DO YOU DO?

There are several things to do – all steps count and are important on your journey to a “kick-ass” financial future!  Don’t be overwhelmed and don’t think you need to do them all today.  Here are a few things we would recommend aiming to tackle one item per month:

  • INCOME PROTECTION INSURANCE // review it! You may or may not need it, and it totally depends on your circumstances.  However, if you are the main income earner for a family and you have others relying on your income, you at least need to review it!
  • WILLS + POWERS OF ATTORNEY // review it OR prepare it! Again, horses for courses, but if you have children you at least need to consider who will look after them if you are no longer able to.  Make sure you document your wishes and it isn’t enough to verbally pass them on or think that everything will automatically go to your spouse or who you would generally think would be the best or next person in line.
  • DEATH COVER // review it! Once again, you may or may not need it, but if there will be debts within your family should you pass, you need to at least consider whether you should have death cover that is sufficient to pay off the debts.
  • SUPERANNUATION // review it! Your superannuation may be able to include income protection and death cover, so you may want to review this first and see what is going to be most beneficial to you and your circumstances.
  • START SAVING // now! A financial plan. Or even a small savings goal will put you on the right path.  Set a simple budget and put away even a few dollars each week.

You may want to get professional help with your finances, but something stops you from picking up the phone to make an appointment with a financial adviser and you’re left saying to yourself – “I don’t have enough money to invest yet” or “I can’t afford it” – we would argue that you can’t afford not to see one!  In terms of not having enough money to invest, there are many reasons why you could be benefiting from professional advice:

  • SPEAKING TO A FINANCIAL ADVISER // can illustrate the benefits of compounding interest over the long term, even if you are only able to save a small amount each month. It is never too soon to start saving and as we have been saying – you just have to start somewhere!
  • FINANCIAL GOALS // you may have many competing financial goals but with limited funds, and not sure which way to go. For example. Should you start saving or reduce a personal loan?  A financial adviser can provide one off advice relating to a particular question or need you may have.  Financial advisers can help you formulate realistic goals in order of priority.
  • PERSONAL INSURANCE // are they up to date? Even if you have not yet built up a pool of assets, you still need to ensure your family, your income and your lifestyle is protected in case of illness, injury or even death.

Overall it is important to understand that you don’t need a large sum of money before you seek professional financial advice.  What you do need to do is ensure what you are doing, or planning on doing, is the right option for YOU!  Is it the most tax effective option?  Is your superannuation invested appropriately?  Are your insurances adequate?  Are you paying too much for your insurance?  A financial adviser is the person you need to cover off all of these questions and ensure that you are setting yourself up for the best “kick-ass” financial future!

Our team of advisers is able to help you with each and everyone of these steps!  Make the call today to take control of your financial future and set achievable goals so you can see the difference you can have on your own life.  All you have to do is – start!

Superannuation Nominations – Make It Legit!

Don’t be trapped by the pitfalls of superannuation nominations – make it legit!

Have your circumstances changed recently?  Have you married, separated, divorced, had kids, or are your kids now over 18 years old?  It may be time to consider and/or review your superannuation nomination.

A superannuation nomination is a notice to your superfund trustee outlining who you want to receive your superannuation benefits after your death.  However, your superfund trustee is only bound by a nomination that is valid [in accordance with superannuation laws].

Many superannuation funds will not guide you through what constitutes a valid superannuation nomination, which makes it all the more difficult.

So, what constitutes a valid superannuation nomination? Your superfund trustee will look at the following hierarchy of people when considering how to distribute your super:

  1. Your spouse or ex-spouse;
  2. Your children [or other financial dependents]; and
  3. Your Estate.

Let’s break these categories down a bit further…

1. YOUR SPOUSE OR EX-SPOUSE

It may seem common sense that a superfund trustee would pay your super benefits to your partner automatically.  And this is true, particularly if you have made a nomination directing the payment to your spouse.  However, if, since making the nomination, you have separated or divorced from your spouse, the nomination is not revoked and, in fact, remains valid. Thus, your benefits may be paid to an ex!

2. YOUR CHILDREN

The intention of superannuation is to fund the retirement of you and your dependents.  Accordingly, a spouse and children who are considered to be financially dependent upon you will receive the most beneficial treatment under superannuation law.  Your children who are under 25 or have a disability will be considered dependents.

You must be careful with nominations to children as there can be pitfalls, including:

  1. You cannot nominate nieces or nephews [invalid];
  2. If the children are under 25 and you have a spouse or an ex-spouse who is alive, that person will be considered the guardians and your super will be paid to them [to hold upon trust for your children until they attain the age of 18];
  3. Children who are over 25 are determined as not being financially dependent upon you, and if the super benefit is paid to them then they will be heavily taxed upon receiving the death benefit.
  4. The taxation consequences can be different for children depending on their ages at the time of your death, which will create an uneven division in real [net] terms;
  5. As long as your children are over the age of 18 years, the superannuation fund will pay an entitlement directly to nominated children, meaning you cannot protect that benefit for your children until they attain an older age.

If you intend for your super benefits to benefit your children, and any of the above issues are in concern in your current circumstances, one solution may be to nominate your Estate as the beneficiary [provided you have an up-to-date Will].  Your Will then controls the distribution of the super death benefits to your chosen beneficiaries and much can be done to reduce or avoid the tax consequences described above!

3. YOUR ESTATE

As mentioned, nominating your Estate is a great way to cover most pitfalls of superfund nominations.  Tax can be avoided or reduced where you have children under and over the age of 25, you can implement asset protection strategies for your personal and superannuation assets for your children, and you can distribute your super death benefits to third parties [who aren’t your spouse or child] through your Will.

The potential consequences of this option are that this can create a further delay between your date of death and the distribution of the superannuation death benefits, and it also has the effect of increasing the value of your estate.  If your Will is challenged after your passing, the superannuation benefits will form part of the asset pool which can be claimed against.  Some food for thought regarding the significant asset that is your superannuation.

So, maybe it’s time to review your superannuation nomination – and for the greatest benefit, we suggest reviewing it concurrently with your Will and Powers of Attorney.

Contact our Legal Team for an appointment to review your Estate Planning to find out how we can help.

 

Katherine Taylor – Solicitor

BCriminology [History], LLB

Superannuation – Is It Still Worthwhile?

The constant changes to superannuation can be frustrating to many as they find it difficult to maintain their confidence in the superannuation industry.  Many have chosen to put the bare minimum into superannuation with their preference to build for their nest egg outside superannuation where they have full control and access without impact from the changes to superannuation.  However, is superannuation still a worthwhile consideration?

Currently, compared to other tax structures available, such as companies, trusts and partnerships, and personal tax, superannuation is still one the best tax structures available for many and should not be discounted.  All income in superannuation is taxed at a fixed rate of 15% and capital gains can be taxed as low as 10%.  If you commence receiving a pension for superannuation then all the income and capitals gains will be taxed at 0% up to the $1.6 million cap.

So are you taking full advantage of the changes to superannuation available to you?  Due to the many changes, it can be easy to overlook what you may be eligible for and what may impact you. Below are some things that may be relevant to you:

  • Tax Deduction for personal contributions – You may claim a tax deduction for personal contributions up to the concessional contributions cap of $25,000. Note, if you aged between 65-75 years you will need to meet a work test in order to claim a tax deduction.
  • Super Co-contribution – you may be eligible for a co-contribution of $500 if your total income is less than $37,697 and you make personal contribution of $1000 to your super. If your income exceeds $37,697 but is below $52,697, you will receive a reduced co-contribution.
  • Low Income Superannuation Tax Offset – a tax offset up a maximum of $500 is available to individuals with an adjusted taxable income of $37,000 or less. As long as your fund has received and reported a concessional contribution and you have lodged your tax return, the ATO will pay this directly to your superannuation account.
  • Low Income Spouse Tax Offset – a tax offset up to a maximum of $540 is available to individuals who make personal contributions to super on behalf of their spouse and their spouse’s income (including fringe benefits and reportable employer super contributions) is $37,000 or less. Where the spouse’s income is $40,000 or less but exceeds $37,000, a reduced tax offset is available.
  • Downsizer contributions – if you are aged 65 years or over and have sold your personal home, you may be eligible to make a downsizer contribution to your superannuation of up to $300,000 from the proceeds of selling your home.
  • Rolling 5 year concessional contributions – If you have a super balance of less than $500,000, you can make additional catch-up concessional contributions if you have not reached your concessional contributions cap in previous years. This applies from 1 July 2018.
  • Division 293 tax – high income earners pay an additional tax if their income exceeds $250,000. Income for the purposes of Division 293 tax includes taxable income, reportable fringe benefits, net financial investment/rental property loss, net amount of which family trust distribution tax has been paid, super lump taxed elements with zero tax rate.

If you have the long term goal to build for wealth and your retirement, superannuation should be considered as part of your financial plan.

If you would like further information on how to do this or would like to discuss a self-managed superannuation fund, please contact our team.

 

Helen Yau – Accountant Manager & Financial Planner

CA, BComm, Dip FP, SSA

Superannuation Beneficiaries and their importance

Not a lot of people are aware that superannuation is a non-estate asset. This means that it will not automatically be dealt with, through your Will if you were to pass away. It could be your wish that your partner receives your superannuation, and you could state in your Will that that is what you want to happen, but without a valid beneficiary nomination on your superannuation fund, the Trustee of the fund may grant your money elsewhere.

There are several varieties of nomination, including non-binding, binding, and non-lapsing binding beneficiary.

Nomination of Beneficiary

A ‘Nomination of Beneficiary’ is a direction that a member provides to the Trustee of the super fund in relation to distribution of his or her funds on death. It can be done by a simple one page document setting out the member’s preference and appropriately signed and witnessed.

A member can choose to make:

A Binding Nomination

  • The Trustees MUST pay the death benefit as nominated.

A Non-binding Nomination

  • The Trustees have the discretion to follow the stated wishes of the member or direct the entitlements to another person (or persons) or pay the entitlement directly to the Estate.

No Nomination

  • If you do not make any nomination, you are not breaking any Laws. The surviving Trustees simply have full discretion to distribute the funds to the Estate or any Dependent that they chose.

As important as it is to ensure that you have nomination made, it is important to make sure that it is a valid nomination.

 

Who can I nominate?

There are restrictions on who you can nominate under the Superannuation Industry Supervision Act (SIS). Valid nominations can be made to:

  1. The Legal Personal Representative in which case the benefit is paid to the Estate; or
  2. A dependant which is defined as follows:
  • Spouse (current or de facto or former spouse and can include same-sex and living with a person in a genuine domestic basis in a relationship as a couple);
  • A child of the member (including adopted, stepchild, ex-nuptial, child of your spouse);
  • Any other person with whom the member has an interdependency relationship, which covers persons where there is a close personal relationship and one or more provides the other with financial support, domestic support and personal care. We recommend seeking advice if you have circumstances that you think may qualify.

Common mistakes that we see are Nominations being made to parents, brothers or sisters or other relatives, but there is no interdependent relationship so the Nomination is invalid. A Nomination can have “if, then” clauses to allow you to nominate persons should certain beneficiaries have already passed away – such as “100% distribution to my spouse. If I survive my spouse, or if I divorce from current spouse, then distribute to my children on equal proportionate basis”.

So please ensure that you review your beneficiaries and ensure that they are the right type for your situation, and valid. If you would like to update your superannuation beneficiaries or have a chat to one of our financial advisors, we are always here to help. Please get in touch with our team.

 

Steve Reynolds – Certified Financial Planner

BComm, Dip.FS(FP)