Mondy Financial Services

An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the S&P/ASX 200 index. An index fund is said to provide broad market exposure, low operating expenses, and low portfolio turnover. These funds follow their nominated benchmark index regardless of the state of the markets[1].

An index investment fund seeks to deliver a similar return, less fees, as the index it has chosen to benchmark. In its simplest form, an index fund purchases the same shares in the same proportions as its index. For example, an S&P/ASX 200 index fund will hold shares in Australia’s 200 largest companies. An MSCI BRIC index fund will invest in major companies in Brazil, Russia, India, and China. Index funds cover shares, commodities, precious metals, and other asset classes.

With a vast range of indices to choose from, index funds are a useful tool for investors seeking access to both broader and more narrowly focused segments of global investment markets.

The alternative to index (or passive) investing is to either pick individual shares or invest in an active fund. Through stock picking and active trading, active fund managers seek to outperform their selected indices.

Both index and active funds may be listed, in which case units are traded on a stock exchange in much the same way as shares. Or they may be unlisted, with investors buying and redeeming units directly with the fund manager.

What are the advantages of index funds?

There are several reasons why index funds have become so popular:

  • Lower fees. Without expensive investment analysts picking shares, and with relatively low levels of buying and selling, it costs less to run an index fund.
  • More tax efficient. Active funds have higher turnover rates of their underlying shares, which triggers more capital gains tax events. Tax paid along the way can reduce the total capital pool on which compound interest can work its magic.
  • Better returns. Many studies have shown that, on average, index funds do better than active funds. In part that’s because of the lower fees and tax efficiency, but it also reflects how difficult it is to pick winners in the share market.

What are the disadvantages of index funds[2]?

Index funds do have some downsides:

  • No outperformance. Some active managers do have good records of beating the market. However, it’s difficult to identify who these are in advance.
  • More risk in a falling market. Index fund managers don’t use stop-losses, hedging, or shorting to protect their portfolios when things head south. Index funds follow the market down, as well as up.
  • Lack of choice. You invest in the assets that make up the index, even if that includes companies you don’t approve of, perhaps due to poor records on environmental or social responsibility.
  • They’re boring. Many people enjoy backing their investment hunches, either through direct stock picking or selecting specialist managed funds. That fun isn’t available to the pure index investor.

How can index funds be accessed?

Index funds can be held directly, just like any managed fund. Many investment platforms include unlisted index funds on their investment menus and may also provide access to listed index funds. Public offer superannuation funds that provide a wide range of investment options will usually have index funds on their lists.

What’s right for you?

At one extreme there will always be determined DIY stock pickers with no interest in managed funds of any variety. On the other hand, there are investors for whom index funds provide all the tools they need to construct well-diversified, low cost investment solutions.

Between them is a large group of investors who use index funds to build the foundation of their portfolio, while looking to add some icing to the cake via active funds or share selection.

There are many ways in which index funds may be used to help you reach your investment goals. To find out more, talk to your financial planner.   

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

 

[1] https://www.investopedia.com/terms/i/indexfund.asp

If you are an employee, there are two ways in which you can optimise the tax-effectiveness of your additional super contributions:

  1. opt for a salary sacrifice arrangement, whereby your employer makes additional superannuation contributions beyond the compulsory superannuation guarantee (SG) amount from your pre-tax earnings and reduces your salary accordingly; or
  2. make a personal contribution and claim a tax deduction when you submit your tax return.

Generally, higher income earners gain the greatest benefit from either of these strategies. Lower income earners may be better off not claiming the tax deduction and receiving a government co-contribution if eligible.

Which option?

For starters, employers don’t have to offer salary sacrifice. If they don’t, claiming a tax deduction on personal after-tax contributions is the only option.

You would need to set up a salary sacrifice arrangement with your employer. If your arrangement is not put into place until after you have performed the work, it may be ineffective.

From 1 January 2020, your salary sacrificed contributions are no longer able to be considered as superannuation guarantee (SG) contributions from your employer. This pretty much levelled out the playing field between salary sacrifice and tax-deductible personal contributions, but some subtle distinctions remain.

Let’s look at Jenny and Brian. They both earn $120,000 a year and want to contribute an extra $12,000 pa ($1,000 per month) to superannuation as concessional contributions. Jenny opts for salary sacrifice and will receive SG contributions based on her pre-sacrifice salary. Brian decides to make his own contributions and later claim them as a tax deduction.

Both will see their overall annual income tax bill[1] drop by approx. $4,500. After allowing for 15% tax (or $1,800) on the super contributions, they are each better off by $2,700 for the year.

The key difference is that Jenny will enjoy her tax benefit each payday. Brian needs to wait until the end of the financial year and submit his tax return before he can receive any benefit from his choice.

On the other hand, Brian’s regular pay will be more than Jenny’s as his gross income remains at $120,000 pa compared to her $108,000. This gives him more flexibility. For example, he can wait to make his entire contribution just prior to the end of the financial year – if he hasn’t been tempted to spend it in the meantime. However, if he makes regular contributions to his super fund, his net disposable income each month will be lower than Jenny’s. Only when he receives any tax refund might they be back on equal terms.

Beware the rules

While the greatest benefit of extending tax deductibility on personal contributions goes to employees who are unable to access the salary sacrifice option, it’s still a positive move that provides everyone with flexibility and choice.

However, whether you opt for salary sacrifice or claiming a tax deduction on personal contributions, there are rules to be followed, including observing the contribution cap levels or maximum amounts you are allowed to contribute each year. Talk to your financial planner about the best superannuation contribution strategy for you.    

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

 

[1]  FY 2021-22, Including Medicare levy and Low and middle income tax offset (LMITO).

With inflationary pressures, in addition to possible interest rate increases, you could find yourself amongst a growing number of Australians struggling to meet their home repayments.

Research by the University of NSW suggests the proportion of households in financial stress has surged to 42% this year, up sharply on the start of 2020, when less than a third of households were in financial stress. Calculations by the fintech company, Digital Finance Analytics, suggest just a 0.5 per rise in home loan interest rates could push a further 220,000 Australian households into financial difficulties.

While these figures are daunting, there are some simple effective steps you can take if you are concerned about your financial position. As always, start with understanding where your money comes (income) and goes (expenses), by drafting or updating your budget.

If you’ve tried and failed to create a meaningful budget, speak with Adam, or your financial planner as some very simple, cheap, and clever software programs can help you get one in place.

Look for costs you can reduce, or better still, do without entirely. Downsizing to one car in the family rather than two, for example, is estimated to save between $8,178 for a light car to just over $20,000 for an all-terrain vehicle each year in related costs[1]. These savings could be re-directed to help pay off your mortgage.

When was the last time you reviewed your mortgage? You could speak with Adam, a certified mortgage broker to determine whether there are better and cheaper home loans on the market that you can take advantage of. Remember every dollar of interest you save, means an extra dollar reducing the total size of your mortgage

If interest rates do increase and you can no longer meet your monthly repayments, it’s better to be proactive and speak to your bank or home loan provider as soon as you become aware that there may be a problem and ask for their help to find a way forward.

There may be some simple steps you can take such as consolidating expensive credit card debts or personal loans into your low-cost home loan to reduce your overall repayments.

The most important thing to keep in mind is to not wait until you’ve fallen behind on your mortgage repayments. You will always be better off financially if you take control of the situation rather than wait until the bank steps in and sorts the situation for you.

Here at Mondy Financial Services we not only are a financial planning buisness, Adam is also a certified mortgage broker. 

Do not hesitiate to contact us with any questions or queries regarding your budgeting and mortgage needs. 

*The information provided herein is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation, and needs, and it is important for you to consider these matters and to seek appropriate legal, tax and financial advice.

[1] https://www.datocms-assets.com/49357/1626740597-2020-vehicle-running-costs-v2.pdf (RACT Report 2020)

 

Each year in early May, the Treasurer delivers the Federal Budget and many people across Australia listen intently. The Budget tells us how the government plans to spend its revenue in the coming year, whether it can afford to give us tax cuts, and whether it expects to spend more (creating a deficit) or less (creating a surplus) than it receives.

Budgets are also important on a personal level, as you need to be spending less than you earn to start generating wealth.

Save more or spend less?

They might sound like the same thing. After all, saving is what we do with whatever’s leftover after spending, isn’t it?

Well, not quite. You see, it’s easy for spending to get out of control, and many people find it easier to focus on reducing their spending, before focusing on saving towards a goal.

Take control

To begin with, work out where your money goes. Start by keeping track of everything you spend and what you spend it on. There is a vast number of apps that can help you do this, but it can be just as effective using pen and paper or a simple spreadsheet.

Record your spending under categories based on necessity. Things like rent or mortgage repayments, utilities, and essential food go in the ‘needs’ group. The money you spend outside your needs are your ‘wants’. Some things you want will be ‘optional but important’, and others will fit into the ‘frivolous’ category.

Do I really need this?

After a few weeks, you’ll have an idea of where your money is going then it’s time to start asking yourself a couple of questions:
 

  1. Is this really where I want to spend this money?
  2. When I over-spend, what can I do to make better choices next time?

 

It’s worth remembering that every year in Australia we spend billions of dollars on food we don’t eat, clothes we never wear, and services we don’t use. So, for many people, gaining control overspending doesn’t mean ‘doing without’, it just means being prioritising to make better choices about how and where we spend our money.

Watch debt

Pay off credit cards every month to avoid high interest costs. If that’s not immediately possible, you may want to investigate consolidating credit card debt into your home loan or personal loans with lower rates. When borrowing, always make sure you leave a ‘comfort zone’ to ensure you can meet your commitments and any emergencies that arise.

Being aware of and then in control of how you spend your money is the first step to successfully managing money and paving the way to improved financial outcomes.

If you need assistance in preparing a personal budget that doesn’t force you to do without or give up everything you love, talk to us.

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

Aged care seems expensive, and comes at a time when your finances may be dwindling. This might make you worry about whether you can afford to pay for care.

In Australia, we are lucky that government subsidies can help with the costs, but you will have to jump through hoops to be approved. And you may have long waiting times before the government money becomes available (particularly home care).

This article takes a quick look at the three steps for approval.

Step 1 – Register with MyAgedCare

You first need to register with MyAgedCare. You can lodge an application online at myagedcare.gov.au or you can call on 1800 200422. MyAgedCare complete a quick eligibility check by asking basic questions about your health and how you are coping.

It is a good idea to have a family member (or friend) with you to help with the answers. You can also nominate this person to be the MyAgedCare contact point for the rest of the process.

Step 2 – Referral to ACAT

If you pass this first assessment, MyAgedCare pass on your contact details and the information collected to an Aged Care Assessment Team (ACAT). If it is determined that your needs are quite simple, a different pathway may be taken with a referral to a Regional Assessment Service (RAS) to talk about home services through the Commonwealth Home Support Program.

You should expect a call from the assessor to arrange a face-to-face assessment, usually in the home, but it might also be done while you are in hospital. Through the COVID period, these may be done via teleconferencing.

Assessors prefer to do the assessment in your home so they can see what the home environment is like and how well you are coping. This can help with the discussion around whether home care or residential care might be more appropriate.

If the ACAT teams are busy, you may find several weeks delay between your first contact with MyAgedCare and your assessment appointment.

Step 3 – Assessment results

After the assessment, you will receive a letter in the mail detailing the results. If approved, it will indicate approval for a Home Care Package – at Level 1, 2, 3 or 4 – and/or respite residential care and/or permanent residential care.

You can be approved for more than one care option, which may give you flexibility to adapt as circumstances change. For example, if you want home care, but find the wait is too long you can switch and start looking at residential care, if approval for residential care was also given. If not, a new assessment would be required.

Ask us for help

Government support to help cover costs is good news, but be aware that subsidised services may not be enough to cover all your needs, or may not be available where and when you want.

Helping older people and families to understand the options available and strategies for funding your costs, while protecting your estate values, is what we do. Whatever stage of retirement you are in, whether planning ahead for your frailty years or approaching that time, we have the expertise and experience to help you. Or you might be the child of an older parent who is approaching frailty.

Call us on 0431 517 455 to discuss your needs. Financial advice and good decision-making are the keys to getting the care you need at a price you can afford.

Disclaimer: The information in this article is general and does not take into account your particular circumstances. We recommend specific tax or legal advice be sought before any action is taken and refer to the relevant Product Disclosure Statement before investing in any product. If you have a parent, partner or relative moving into Aged Care and would like some help call Heather (0408 608 509) or Adam (0431 517 455) or email This email address is being protected from spambots. You need JavaScript enabled to view it.

While the standard of living is constantly improving in Australia, economic disruptions, stagnant wage growth and continually increasing house prices are putting more and more people under financial stress.

A recent report by the social research group, the Melbourne Institute, ‘Taking the Pulse of the Nation’, found one in three Australians reported being under financial stress while one in five reported experiencing mental distress. It found that those on fixed-term contracts and anyone self-employed were particularly vulnerable to feeling financial stress, as were people employed in the hospitality and IT sectors.

That niggling feeling that you’re not in control of your financial situation can keep you up at night.  It may be as simple as being unsure whether you will have sufficient savings in super to retire in the way you were hoping to, or it might be that you feel you’re drowning in debt. Many people haven’t put aside the time to focus on their financial position, so the constant pressure of earning money and paying bills can easily spin out of control.

If you find yourself spending a large part of the day worrying about your finances, if you have trouble sleeping at night or if your financial position is causing repeated arguments between you and the people you care most about, it is important that you reach out for help. The earlier you act, the better. Often the simple step of reaching out can help you feel better about your financial situation.

A good place to start is completing this Three-Minute Financial Check-Up. If you answer no to any of the questions on this list, you could benefit from taking the time to discuss your financial situation with a qualified financial planner.

They will be able to tell you how you can take steps immediately to improve your financial position and help you get back on track, so you do feel more in control.

This will allow you to move into the new year with confidence and peace of mind, and you can embrace life with more enthusiasm and gusto.

Your Three Minute Financial Check-Up

Action

YES

NO

Do you pay all your credit cards off in full by their due date?

 

 

Do you sleep easy knowing all your bills will be paid when they fall due?

 

 

Do you have a budget, and do you stick to it?

 

 

Are you making all your loan repayments on time?

 

 

Do you know exactly how much your home loan is today?

 

 

Do you know what you would do financially if you lost your job tomorrow?

 

 

Are you confident about your children’s financial future?

 

 

Do you have life and total and permanent disability insurance in place?

 

 

Do you have income protection in place?

 

 

Do you know how much you have in super?

 

 

Are you and your partner in agreement about your finances?

 

 

Do you feel confident about your overall financial position?

 

 

 

If you’ve answered ‘no’ to any of these questions, then you could benefit from speaking with a financial planner. The sooner you can, the closer you will be to achieving peace of mind regarding your financial position.

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. 
We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

 

As we approach the end of another year, many people will be looking forward to the festive season and the chance to slow down and catch up with family, particularly older parents. Busy lives and distant homes can make it easy to feel out of touch. But this may be a time when adult children notice changes in their ageing parents and can also be a time for parents to take control over their future with advice and family discussions.

The signs of ageing may be distressing and worrying for many people, but they are a natural part of life, especially with our increasing longevity.

The problem is not getting old. The problem is not having an effective plan for how to grow old. This plan needs to consider strategies to ensure the home environment and care supports are appropriate, as well as how to fund quality levels of care.

Don’t wait until a crisis has occurred to take action. Planning ahead and professional advice are the keys to quality care and effective decision-making.

The journey may not be easy, and hard decisions may need to be made. Seeking objective advice from an Accredited Aged Care Professional TM can help to convert the mountain of data on aged care into meaningful and relevant information and ultimately into appropriate decisions.

It might be time for a family meeting

New Year is traditionally a time to take stock and plan ahead. And the festive season might be one of the few opportunities during the busy year for discussions with all those people who are important to you

If you have older parents, take the time this year to raise the issue with your parents and your siblings or other family members and seek advice to start building a family action plan. If you are that older person, the festive season provides you with an opportunity to bring your adult children together to discuss your care needs. Make yourself heard whilst you are still able to maintain your control and independence and put strategies into place.

    Did you know:

Many older Australians live alone, and families may not notice the decline in an older person’s ability to live independently. The festive season can be a time when families come together and have an opportunity to observe how well a parent is coping.

  

The value of a family meeting

A family meeting is an essential step in planning for aged care and may help to minimise conflicts within your family. Emotional conflicts between family members can make the transition to care more distressing for an older parent and have the potential to rip families apart.

A well-run family meeting can allow parents, children and other family members to discuss issues and preferences, express concerns and make decisions that work for your family as a whole.

As an Accredited Aged Care Professional ™ I can assist with arranging and running a family meeting to help your family see the big picture more objectively. Together we can consider the options for your parents’ care, security and happiness.

The earlier you take this step, the better. Planning ahead ensures that parents are fully involved in the decision-making and removes some of the stress from other family members. With a well organised plan in place, your family can respond more quickly and effectively when an event requiring a move to aged care occurs.

Talk to me today.

If you have a parent, partner or relative moving into Aged Care and would like some help call Heather (0408 608 509) or Adam (0431 517 455) or email This email address is being protected from spambots. You need JavaScript enabled to view it.

*Disclaimer: The information in this article is general and does not take into account your particular circumstances. We recommend specific tax or legal advice be sought before any action is taken and refer to the relevant Product Disclosure Statement before investing in any product.

More than $3.5 trillion in inherited funds are expected to change hands within Australia during the next 20 years[1], with Australians enjoying one of the highest inheritance payout rates anywhere in the world.

According to investment bank HSBC’s Future of Retirement report, Australians pass on average US$502,000 (AU$662,532)[2] to their heirs, almost four times the global average of US$148,000, with 69%[3] of Australian retirees interviewed planning to leave an inheritance. People don’t often leave their entire estate to one person, so what legacy does the average beneficiary receive? Approximately AU$79,000, according to research from the Australian Housing and Urban Research Institute (AHURI)[4].

This payout rate is significantly higher than has been the case for previous generations, with higher property prices and ever-increasing retirement savings creating larger and larger estates to be handed from one generation to the next.

Does Australia have a death tax?

Unlike most OECD countries, strictly speaking, Australia hasn’t had an inheritance or estate tax (sometimes known as a ‘death tax’) for the past few decades, so this has also encouraged Australians to hold on to their estates until they pass, rather than distributing assets to the next generation while they’re alive.

The exception to this is where funds are inherited through superannuation.

If, for example, a person inherits funds from a loved one’s superannuation account and they are not a dependant, the transfer can trigger a superannuation death benefit tax. The definition of dependant is slightly different for who you can pay a death benefit to (superannuation law) and how the death benefit will be taxed (taxation law). The ATO also explains that a super death benefit can be made up of tax-free and taxable components, depending on how the contributions were initially made into superannuation.

The ATO advises that when someone dies, who their super balance gets paid out to, how the money was initially contributed into the super fund, and whether the benefit will be paid as a lump sum or an income stream can all impact how this benefit is treated for tax purposes.

Can you avoid the death benefit tax?

The death benefit tax can be reduced if the person leaving the funds withdraws the money and places those savings outside superannuation as part of their general estate before they pass. But given most people don’t know exactly when they will die, this is a rare event. In any case, doing so may also have other unintended consequences, as funds within super are not treated as part of your general estate.

The only other way of avoiding this death benefit tax is to establish a family trust. However, establishing a family trust can be a complex and expensive option and requires sophisticated legal and tax advice before being implemented.

Receiving an inheritance

Receiving an inheritance can also be complex, and professional advice should be obtained regarding how to best manage and invest any funds received. For example, regarding any Centrelink entitlements, inherited funds are included for the purpose of the asset test. Therefore, they are subject to the normal deeming regulations and will impact pension entitlements accordingly.

For most people, the biggest challenge is to find a way to transfer these inherited funds into their own superannuation, where they can be invested within a tax benign environment. The rules governing just when and how much can be contributed to super will vary depending on your age, whether you are still working or not, and how much you already have in super.

This is where you need to seek good professional advice.

Managing your legacy

As estates become larger, it is increasingly important to get good advice to ensure your assets are distributed in line with your wishes. The simpler and more straightforward your Will, the more likely it is to be successfully implemented.

In addition, many advisers encourage clients to put in place a living Will, where, either in writing or via a conversation with your beneficiaries, you outline precisely what your wishes are and the reasons behind them.

By doing this, you are likely to discourage any challenges to your Will - challenges that can be extremely costly. Moreover, given that challenges can be financed by funds held within the estate, the prospect of challenges can in themselves sharply decrease the remaining assets to be distributed.

 

Whether you are planning on leaving an inheritance, or need some advice if you may be receiving an inheritance, talk to us today.

 

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. 
We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

Unfortunately, too many people fail to set aside emergency or ‘rainy day’ savings to help see you through life’s hiccups. So when an unexpected expense arrives, you find yourself under financial pressure. This pressure can lead to decisions to max out credit cards and apply for expensive short-term loans. And so begins a cycle of falling behind on essential bills and other regular payments.

The Household Financial Comfort Report, published by ME Bank in August 2021, found 21 per cent of Australian households had less than $1,000 in cash savings. Additionally, 24% of households reported that if they lost their income, they’d only be able to maintain their current lifestyle for one month, and 11% for just two weeks, which is the equivalent of living life on the financial edge.

How much should be put aside?

As financial professionals, we recommend having emergency savings set aside for life’s unexpected bills. But how do you go about doing this, and just how much money should you set aside for rainy day expenses?

The best place to start is to work out just how much money you have now and what income you can expect to earn over the next twelve months. Against this, determine what your expenses are likely to be, and hopefully, they are less than what you earn. If not, you need to cut back.

Then decide how much you need in an emergency fund. Just how much you set aside will depend on your circumstances. Most experts suggest you should have the equivalent of between three to six months of living expenses set aside.

How can this be achieved?

The best way to achieve this is to break it down into achievable goals. For example, try to set aside an initial goal of $1,000. That means saving $50 a week for around 5 months or going without two takeaway coffees each day. Once you’ve achieved that, try to save a second amount of $1,000, until you reach your goal.

To fast-track this you may look at putting aside your tax refund, or think about selling those things you have sitting around that you no longer need, perhaps even take up a part-time job or side-hustle for a few hours each week and put this money into your emergency fund.

Where to keep these savings?

The next step is to decide where you should keep these savings. Ideally, you want them to be separated from your day-to-day finances but still within easy reach, should you need them in case of emergency.

If you have a home loan, one option may be to establish a mortgage-linked offset account. In doing so, these savings will not attract interest, which would be taxed at your marginal tax rate, but instead will work to reduce the cost of your overall mortgage. Another option is to establish a ‘micro’ savings account. The rules on these vary, but most are based on rounding up every purchase made on a debit card and setting these ‘cents’ aside in a free savings account.

Developing a better understanding of where your money is going and starting to set aside a small amount for your rainy-day emergency fund are the first steps to a better financial future.

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. 
We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

For most Australians, their 60s is the decade that marks retirement. For some this means stepping into a fulfilling life of leisure, enjoying the fruits of a lifetime of hard work. However, for many it means a substantial drop in income and living standards. So how can you make the most of the last few years of work before retirement?

Are we there yet?

Allowing for future age pension entitlement the Association of Superannuation Funds of Australia (ASFA) calculates that a couple will need savings of around $640,000 at retirement to maintain a ‘comfortable lifestyle’[1]. ASFA equates ‘comfortable’ to an annual expenditure of $62,828 for a couple.

How are we tracking as a nation?

According to ASFA figures, in 2015-2016, 50% of men aged 60-64 had super balances of less than $110,000. For women the figure was a more alarming $36,000.

Last minute lift

If your super is looking a little on the thin side there are a few ways to give it a boost before retirement.

  • Make the most of your concessional contributions cap. Ask your employer if you can increase your employer contributions under a ‘salary sacrifice’ arrangement. Alternatively, you can claim a tax deduction for personal contributions you make. Total concessional contributions must not exceed $27,500 per year, although from July 2018 certain individuals have been able to carry forward any unused portion of this cap for up to five years.
  • Investigate the benefits of a ‘transition to retirement’ (TTR) income stream or retirement income stream. This may be able to be combined with a re-contribution strategy that, depending on your marginal tax rate, can give your retirement savings a significant boost and also tax concessions to you and your non-dependent death beneficiaries.
  • Review your investment strategy. A common view is that as we near retirement our investments should be shifted to the conservative end of the risk and return spectrum. However, in an age of low interest rates and longer life expectancies, some growth assets may be required to provide the returns that will be necessary to support a long and comfortable retirement. However, be aware that growth assets will be subject to greater volatility.
  • Make non-concessional contributions. If you have substantial funds outside of super it may be worthwhile transferring them into the concessionally taxed super environment. From 1 July 2021 you can contribute up to $110,000 per year, or $330,000 within a three-year period if certain requirements are met. A work test applies if you are over 67.
  • The 60s is often a time for home downsizing. This can free up some cash to help with retirement. The ‘downsizer contribution’ allows a couple to jointly contribute up to $600,000[2] to superannuation, without it counting towards their non-concessional contributions caps.

Bye-bye tax, hello aged pension?

One reward, just for turning 60, is that any withdrawals from your super account will generally be tax-free. This applies to both lump sum withdrawals and income stream payments. Depending on the preservation status of your funds you may need to meet a condition of release to access your superannuation.

Based on your date of birth, somewhere between age 65 and 67 you’ll reach age pension age. The age pension is subject to both an assets test and an income test and some advanced planning can boost your eligibility for the pension. For example, the family home is exempt from the assets test. Releasing cash by downsizing may reduce your eligibility for the age pension.

Get it right

This important decade is when you will be making key decisions that will determine your quality of life in retirement. Those decisions are both numerous and complex.

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

 

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. 
We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 


[2] Subject to certain requirements being met.

Typically your forties is a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget, but by this age there’s a good chance there’s some spare cash that can be put to good use. As you pass the halfway mark of your working life, it’s time to give retirement planning a bit more attention.

How much?

A 45-year-old today will reach ‘retirement age’ in 22 years. Taking inflation into account a couple will, by then, need around $120,385 per year if they want to enjoy a ‘comfortable’ retirement[1].

A beneficial sacrifice

At this age, a popular strategy for boosting retirement savings is ‘salary sacrifice’ in which you take a cut in take-home pay in exchange for personal tax concessions and additional pre-tax contributions to your super. If you are self-employed, you can increase your tax-deductible contributions, within the concessional limit, to gain the same benefit.

Salary sacrificing provides a double benefit. Not only are you adding more money to your retirement balance, these contributions and their earnings are taxed at up to 15% within superannuation. If you earn between $120,001 and $180,000 per year that money would otherwise be taxed at 39% including Medicare Levy. Sacrifice $1,000 per month over the course of a year and you’ll be $2,880 better off just from the tax benefits alone.

It’s important to remember that if combined salary sacrifice and superannuation guarantee contributions exceed the annual cap ($27,500 for 2021/22) the amount above this limit will be added to your assessable income and taxed at your marginal tax rate with an offset.

What about the mortgage?

Paying the mortgage down quickly has long been a sound wealth-building strategy for many. Current low interest rates and the tax benefits of salary sacrifice, combined with a good long-term investment return, means that putting your money into super can produce the better outcome.

One caveat - if you think you might need to access that money before retiring don’t put it into super. One option is to pay down the mortgage and redraw should you need to.

Let the government contribute

Low-income earners can pick up an easy, government-sponsored, up to 50% return on their investment just by making an after-tax contribution to their super fund. Not surprisingly, there are limits[2], but if you can contribute $1,000 of your own money to super you could receive up to $500 as a co-contribution.

Another strategy that may help some couples is contribution splitting. This is where a portion of one partner’s superannuation contributions are rolled over to the partner on a lower income.

Protect what you can’t afford to lose

With debts and dependants, adequate life insurance cover is crucial. Holding cover through superannuation may provide benefits such as lower premiums, a tax deduction to the super fund and reduced strain on cash flow. Make sure the sum insured is sufficient for your needs as default cover amounts are usually well short of what’s required.

Also look at insurance options outside super. They may provide you with greater flexibility and other benefits, which might be better value in the long run.

Finally, review your superannuation death benefit nominations to ensure they remain relevant. You can make binding nominations that may see your dependants receive their benefit more quickly than waiting for probate to take its course.

Seek professional advice

The forties is an important decade for wealth creation with many things to consider, so ask us, a licensed financial adviser, to help you make sure the next 20 years are the best for you and your super.

 

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. 
We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

 

*[1] Future value of $62,828 – the income calculated to provide a couple with a “comfortable” level of income as calculated by The Association of Superannuation Funds of Australia (ASFA) March 2021) – in 22 years at 3% inflation.

*[2] The super co-contribution upper income threshold for 2021-22 is $56,112.

If moving into residential aged care, do you really have to sell your home? What are your choices? Myths and misunderstanding about the rules can add to anxiety and confusion.

The stress of moving into residential aged care can be compounded by anxiety around selling the family home. Some people may find it hard to part with their home or may not be ready to sell. This can raise concerns about how to afford the fees.

Knowing that you have choices, and accessing advice to understand these choices may help to reduce stress and create a better outcome.

Do you have to sell?

Some people panic when faced with paying several hundred thousand dollars for a room in aged care. But selling your former home is not your only choice. Some people choose to sell, others don’t.

The move into residential care is effectively just a move to a new home. Anytime you move homes, you can choose to buy or rent. Renting allows you to live in a home you can’t afford to buy, or don’t want to buy.

With residential care you have the same options. Your room price is usually quoted as a lump sum which can be converted into a daily fee using a specified rate of interest. Paying this daily fee (or “renting” the room) may allow you to keep your former home if that is your preference.

            Example:

Catherine agrees to pay $600,000 for her room in residential care. At the current interest rate of 4.04% per annum, this converts to $66.41 per day (plus other ongoing fees). This gives Catherine the choice to “buy” the right to live in the room for $600,000 or “rent” the room for $66.41 per day. She could also choose part buy and part rent.

When to make a choice?

The decision whether to sell or keep the former home has many personal aspects, but accessing advice can help to reduce some stress.

Once you have been offered a room, you will be asked to sign a Resident Agreement. This is a contract outlining your rights and responsibilities and the obligations of the care provider. It includes the fees you can be asked to pay.

This agreement should specify the room price and show what this converts to as a daily fee. But you don’t have to make a choice then. You have 28 days after moving into care to let the provider know whether you want to pay the full price as a lump sum (refundable accommodation deposit – RAD) or daily rent (daily accommodation payment – DAP) or a combination of the two.

The 28 days gives you time to seek good advice to make an informed choice.

As Accredited Aged Care ProfessionalsTM we have helped many clients to make this choice. We help to find a choice that is affordable, as well as works best for the family and protects the value of the estate.

Advice is key

The information in this article is general and does not take into account your particular circumstances. Everyone’s situation is unique so advice from an adviser accredited in aged care advice is key. The advice needs to look at the full impact on your financial situation as well as map out the flow of money to understand how you and your family may be impacted. Contact us today on 0431 517 455 or 0408 608 509 to make an appointment.

Adam Mondy

Mondy Financial Services

Authorised Representative (No. 337751) of

Lifespan Financial Planning Pty Ltd

Australian Financial Services Licence Number: 229892

 

If you are in your thirties, chances are life revolves around children and a mortgage. As much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which, despite record-low interest rates, repayments are generally at their highest, relative to income. On top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade.

Are you really expected to think about super at a time like this? Well, yes, there are a few things you need to pay attention to.

Short-term plans

As careers start to hit their strides, the thirties can be a time for earning a good income. If children are not yet in the picture, but are part of the future plan, then it’s an excellent idea to squirrel away and invest any spare cash to prepare for a drop in family income when Junior arrives. Just remember that any savings you want to access before retirement should not be invested in superannuation.

Long-term comfort

Don’t be alarmed, but by the time a 35-year-old couple today reaches retirement age in 32 years’ time, the effects of inflation could mean that they will need about $161,787 per year to enjoy a ‘comfortable’ retirement[1].

If you are on a 32.5% or higher marginal tax rate, willing to stash some cash for the long term, and would like to reduce your tax bill now, then you could consider making salary sacrifice (pre-tax) or personal deductible contributions to super. Super contributions and earnings are taxed at up to 15%, so savings will grow faster in super than outside it, provided your marginal tax rate is above 15%. For example, if you’re earning $100,000 per annum, making a concessional contribution of $10,000 from salary to super, will save you paying $3,450[2] in income tax and increase your super balance by $8,500 every year.

Growing the nest egg

Even if you can’t make additional contributions right now there is one thing you can do to help achieve a comfortable retirement: ensure your super is invested in an appropriate portfolio. With decades to go until retirement, a portfolio with a higher proportion of shares, property and other growth assets is likely to out-perform one that is dominated by cash and fixed interest investments. But be mindful: higher returns are usually associated with higher risk.

Another option for lower income earners to explore is the co-contribution. If you are eligible, and if you can afford to contribute up to $1,000 after tax to your super, you could receive up to an additional $500 contribution from the government. Or to keep your partner’s super humming along while she or he is earning a low income, you can make a spouse contribution on their behalf and gain a tax offset of up to $540.

Let your super pay for insurance

For any young family, financial protection is crucial. The loss or disablement of either parent would be disastrous. In most cases, it is wise to have both parents covered by life and disability insurance.

If this insurance is taken out through your superannuation fund, the premiums are paid out of your accumulated super balance. While this means that your ultimate retirement benefit will be a bit less than if you took out insurance directly, it doesn’t directly impact on the current family budget. However, don’t just accept the amount of cover that many funds automatically provide. It may not be adequate for your needs.

Whether it’s super, insurance, establishing investments or building your career, there’s a lot to think about when you’re thirty-something. It’s an ideal age to start some serious financial planning, so talk to us today about putting a plan into place so you can have everything now – and in 30 years’ time.

 

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. 
We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

[1] Value of $62,828 today – the income required to provide a couple with a “comfortable” level of income as calculated by The Association of Superannuation Funds of Australia (ASFA) (March 2021) – in 32 years at 3% inflation.

[2] Based on Marginal Tax Rate of 32.5% plus Medicare Levy of 2%, excluding tax offsets.

Superannuation is for the oldies, right? In some ways that’s true, but even in your twenties there are good reasons to take a bit more interest in your super. The average 25-year-old has around $10,000 in super, but the decisions you make now, even with relatively small sums of money, could earn you hundreds of thousands of extra dollars over your working life.

Are you getting any?

Every three months your employer should be paying 10% of your income into your super fund. Usually you can choose which fund your super goes into; if you don’t, it gets paid into a super fund of your employer’s choice. But that doesn’t mean you don’t get a say in how it’s invested.

If you don’t know if your super is being paid, or the fund it’s being paid into, ask your employer. If you think you’re missing out, search ‘unpaid super’ on the tax office website to see what you can do. This is your money.

Where have you got it?

Had more than one job? If you have a lot of little super accounts the money can disappear in a puff of fees and default insurance premiums. Simple fix - combine your super into one account, but check out what existing insurances you may have inside your super before you roll over your funds.

What about insurance?

If you don’t have any dependents, your super fund could be paying for default insurance you don’t really need just yet. Cancelling unnecessary life insurance leaves more money in your account to boost your savings. On the other hand, if you do need life or disability insurance, then funding these through super could be a better option.

Is it working for YOU?

Your money is going to be stuck in super for a long time, so you want it to be working hard for you. Most funds offer a range of investment choices and some will do better than others.

An investment choice that is expected to produce higher returns over the long term can bounce up and down in value. Some years it may even go backwards in value. However, ‘safer’ investment options usually produce lower long-term returns.

What do you want?

Buying a new car travelling, having fun. Let’s face it, there are lots more exciting things to do with your money than sticking it into super. The choice is yours, but think about this:

  • If Mum and Dad retired this year, they would need a minimum of around $62,828 per year to enjoy themselves (1). If that doesn’t sound like much now, by the time YOU retire inflation could have pushed that annual amount to around $217,429 (2).
  • Fact: Current life expectancies would indicate you’re going to live much longer than your parents and grandparents. Can you imagine living another 30 years without earning an income? A sound investment plan designed to make your super work hard while you’re employed will be the difference between enjoying those decades and surviving on an Age Pension, if they still exist!
  • Starting early and adding a bit extra when you can makes a big difference. Due to the compounding of interest over time, if you start now by making an extra pre-tax contribution of just 1% of your annual income to super (subject to contribution cap limits), continuing this small extra contribution as your salary increases will add significantly to your super fund balance by retirement.

So, still find super boring? That’s okay; you’re not alone. But instead of finding the time to organise all this yourself, contact us. We will review your current super, any insurance required, the investment choices and prepare a strategy to get your super into shape – then you can get back to enjoying life!

 

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. 
We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

(1) Income required to provide a couple with a “comfortable” level of income as calculated by The Association of Superannuation Funds of Australia (ASFA) (March 2021)

(2) Value of $62,828 today in 42 years at 3% inflation.

The key to life is living, not retiring. However, there may come a time in your life when you want, or need, to change what you’ve been doing. To either stop working completely, or take a long holiday and work out what’s next.

To be able to have this choice, it’s imperative that you plan ahead, even if you think retirement is for everyone else.

As a rule of thumb, it’s suggested to aim for a retirement income of between 50% and 70% of pre-retirement salary/wages. Based on this premise, it’s estimated you will need to save around 15% of your income for 40 years. The problem here is that your employer is only compelled to provide superannuation contributions for you at the current rate of 10% of your income each year.

How might this be done? You can start contributing to super earlier in your working life, raise the combined rate of your super contributions to 15% by making personal contributions (keeping under the annual limits of course), and take heed of the following tips throughout your working life.

Young, single and independent

  • Retirement is something your parents may be enjoying, but starting small and early lays the foundations for future choices.
  • Maximise your government co-contributions—they can potentially add thousands to your super.
  • If appropriate, take out disability insurance through your super fund. It is often the cheapest and most tax-effective way of providing insurance cover.
  • Choose an investment strategy that suits your long-term risk profile.

A family and a mortgage

  • Your focus may be on repaying the home loan, but don’t forget your super entirely.
  • A mortgage and young children mean insurance is a top priority. Taking out life and disability insurance can be a sound decision at this stage.
  • Check eligibility for a tax offset on spouse superannuation contributions and government co-contributions.
  • Review your investment strategy and risk profile.

The ‘in between’ years

  • A higher income and a smaller mortgage open up the opportunity to boost your super, but take care not to exceed contribution and Total Superannuation Balance limits.
  • Find out if salary sacrifice or personal deductible contributions could boost your super savings and reduce your personal tax liability while you are working.
  • Review your insurance cover and your investment risk profile.

Retirement is looming (maybe)

  • With the mortgage nearly paid off and children leaving home, you may have more money to contribute to superannuation, but keep an eye on your contribution amounts and Total Superannuation Balance.
  • Consider combining salary sacrifice with a transition to retirement pension if beneficial.
  • Review your insurance cover as you may not need that much cover, and your investment strategy and risk profile.
  • Start comprehensive retirement planning, strategies to ease into retirement, or perhaps a new career focus.

Down tools or start anew

  • You’ve made it. For retirees over 60, lump sum withdrawals and pension payments are generally tax free!
  • Review your investment risk. Keep enough growth in your portfolio to help ensure your money lasts as long as you do.
  • Review your insurance needs.
  • Stay active and enjoy life - or launch into your next career. There are no rules!

Remember, it’s never too late – or early - to start

*The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. 
We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

Superannuation funds have bounced back from the early 2020 pandemic slump to deliver outstanding returns in the last financial year. With Super funds continuing their positive run into this financial year combined with the below factors, making sure your superannuation fund and investment profile is tailored to your needs can make a vast difference in your long term savings and your retirement nestegg.

  • From July 1 2021 the amount your employer adds known as superannuation guarantee has been raised to 10% (with further increases of 0.5% per year to come) until superannuation guarantee reaches 12% pa.

  • The world share market is generating strong returns

  • You can now contribute more to your super than previous years (Most people can add up to $27 500 pa into super (and some of this might be tax deductible)

These factors mean taking care of your super now, will see it taking care of you in the future.
It is essential that you take an interest in how your superannuation savings are invested as it is likely to be one of the biggest assets you will own- which is where we can help.
Be sure to contact us today to ensure your superfund is providing all the returns it can for your retirement lifestyle.

Why the changes to income protection?

In response to the $3.7 billion losses experienced in the sector in the 3 years to the end of 2020, and insurer inaction, Australian Prudential Regulation Authority (APRA) has stepped in to try and improve the sustainability of income protection policies. At the end of 2019 APRA informed life insurers they had to make major changes to income protections policies starting from 31 March 2020 to 1 October 2021. One of these changes has been postponed to 1 October 2022.

Who is APRA?

The Australian Prudential Regulation Authority (APRA), licenses banking, insurance and superannuation businesses, and supervises them to ensure that the financial promises made to their beneficiaries (e.g. policyholders) are kept. APRA’s supervision aims to identify potential financial or operational weaknesses as early as possible, and ensure they are rectified before they can threaten its safety and soundness.

What is income protection?

Income protection, also known as ‘salary continuance insurance’ or ‘disability income insurance’, insures one of your most important assets, your income. It’s designed to pay you a benefit if you are unable to work for a period of time due to illness or injury.

Initial changes

 Historically, income protection policies were provided as either an:

  • Indemnity value policy, where the amount you're insured for is a percentage of your salary when you make a claim; or an
  • Agreed value policy, where the amount you're insured for is a percentage of an agreed amount when you sign up for the policy. These are generally more expensive but could be useful if you have income that changes from year-to-year.

The first big change took effect on 31 March 2020, when new applications for Agreed Value income protection insurance were discontinued. This particularly affects self-employed, whose income can vary widely each year.

What other changes are expected?

The following changes are to be implemented no later than 1 October 2021

  • Limits on income protection payments for the first 6 months. Rules will be in place so that benefits cannot exceed 90% of earnings for the first 6 months and drop to a maximum of 70% of earnings after that. This is to encourage retraining, rehabilitation and return to work.
  • Benefits will be based on the last 12 months of earnings, if you have a predominantly stable income. Previously some policies allowed you to look back 2-3 years and make the best 12 month period the basis of your claim. This look back will now be based solely on the past 12 months’ income. Reducing the risk of longer benefit periods. This may mean stricter disability definitions for longer benefit periods.

APRA has recently announced it will postpone implementation of the policy contract term measure to 1 October 2022.

  • Income protection contracts may not exceed 5 years. This means terms and conditions that used to be able to be guaranteed until age 65, now need to be renewed and updated every 5 years, subject to an analysis of changes in your occupation and financial circumstances.

What happens to existing policies?

If you have an existing income protection policy which includes a ‘Guarantee of Renewability’ in the policy wording, that is, the policy is automatically renewed each year, your policy should continue. Existing Agreed Value policies terms and conditions will generally not change, however, the premiums charged may change.

What should I do?

Insurers are starting to develop and release new income protection policies which meet the guidelines set out by APRA. It’s important to remember these changes are all aimed at making income protection a more long-term viable proposition. If you have been considering income protection or would like to have your existing policy reviewed, it may be useful to reach out to us and discuss the options available to you.

Many people don’t think of their super at all during the year, but this is the time to start looking at how you can save tax and help grow your super balance.

1. Check your Super Guarantee Payments

The first thing to do is make sure you have actually been receiving your 9.5% employer contributions by checking your super balance (which can be done through the MyGov website) and calling your employer if there is a problem. If you’ve been working in more than one job, especially casually, then make sure you check with them all. Employers do have until the 28th of July to get these into your super fund.

2. Maximise your contributions

           If you can afford it, maximising your concessional super contributions may be beneficial.

Laws introduced in 2017 allow people to contribute up to $25,000 a year. You will pay tax on contributions at 15% but this may be less than what you would pay taking it as income. In some circumstances people can do more than $25 000 pa.

Concessional contributions may be particularly useful if you have made a capital gain during the year and are looking for ways to offset the resulting tax bill. This is especially valuable where no contributions have been made previously. Some people may be able receive a tax deduction of $75 000 this year.

If you do make a personal concessional contribution make sure you work out how much your employer is contributing so you don’t go over the $25,000 cap.

3. Make a super contribution... and get up to $500 back!

Looking for a 50% guaranteed return? Then look no further than the government's super co-contribution scheme. It's just a matter of getting in before June 30 this year and is paid after your 2021 tax return is lodged.

To get this you have to make a $1000 non-concessional super contribution - that is, the contribution is paid from your after-tax income and doesn't give you any tax deduction. (Lower amounts maybe contributed but will result in a lower co-contribution).

The maximum co-contribution is payable to those whose incomes are less than $39,837. It then reduces gradually until it phases out entirely when your income hits $54,837.

4. Spouse contribution

By making a super contribution using a spouse code into their super fund you could save tax.

Spouse super contributions can now be made for spouses earning up to $40,000 per year.

If your spouse has earnings below $37,000 you can claim the maximum tax offset of $540 when you contribute $3000 to their super fund. This phases out at over $40,000.

5. Non-concessional contributions

These are after-tax contributions and can be a good way of building a super balance if you have come into a large amount of money such as an inheritance or sale of property. These contributions are capped at $100,000 or $300,000 every three years in one hit (age limits apply), and are limited to people with less than $1.6 million in their accounts.

6. First-time buyers’ and super

If you have not purchased a home previously you can use your super to achieve a boost for your deposit. You need to manage this carefully so get good advice.

7.SMSF

If you have an SMSF you may be able to achieve a personal tax deduction of $50 000 or more in one year (each). This is highly advantageous to anybody who has sold an investment property or assets during the year.

Note: This information is general, before acting upon any of these ideas you should seek professional advice to make sure it suits your personal circumstances.

f you’d like help determining strategies beneficial for you, why not contact me today on 0431 517 455 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

The 2021 Budget Proposal is the next stage of the Government's economic plan to secure Australia's recovery. Find the Breakdown below; 

Superannuation

  • The Government reaffirmed commitment to increase the Superannuation Guarantee (SG) to 12 per cent by 2025 as legislated. Increasing to 10% July 1, 2021
  • Account Based Pension cap to rise to $1.7M
  • Work test for 67-74 year olds to be abolished, meaning retirees will be able to increase their super savings more freely. Under the ‘work tests’, you cannot contribute to super unless you are gainfully employed for 40 hours in a consecutive 30-day period.
  • The budget also abolished the $450 per month minimum income threshold for compulsory Super Guarantee contributions, which will enable low-income earners to save for their retirement with every dollar they earn.

Downsizing scheme

  • As of July 1, Australians aged over 60 (previously 65) will be able to make a one-off contribution of up to $300,000 per person (or $600,000 per couple) to their super when they sell their home.
  • What could this mean for you? For illustrative purposes only (assuming an earnings rate of 7.5 per cent per annum — net of fees and taxes — and the $16,351 in annual income being indexed to CPI each year), a 60-year-old adding $200,000 to their super balance would be able to draw an additional tax-free income of $16,351 per year until age 88.

First Home Super Saver Scheme 

  • First-home buyers can get as much as $10,000 in tax breaks from the government towards their deposit, in measures announced in this year’s budget.
  • The help comes in the form of the First Home Super Saver Scheme, which lets potential buyers save up to $50,000 (previously $30,000) through their superannuation accounts towards their property purchase.
  • First-home buyers can make their own extra contributions to their super, then withdraw those savings in future.
  • Because there is a tax break for pushing the money through the super system, buyers keep more of their own cash than if they had saved it in a bank account.

Aged Care

  • The Federal Government will allocate a record funding increase of $17.7 billion over the next four years.
  • The Government has announced an additional 80,000 Home Care Packages over the next two years.
  • The Government has accepted the Royal Commission’s recommended minimum staff time of 200 minutes per day (including 40 minutes by a registered nurse and will fund this with an additional $3.9 Billion).

Pension Loan Scheme

  • (PLS), which will allow older Australians who own their own home to use the equity to boost their retirement income. The scheme is entirely voluntary and is available to those claiming the age pension and self-funded retirees with the balance of the loan payable when you do eventually choose to sell your home.
  • Essentially the opposite of a mortgage, the PLS allows you to borrow against the value of your home, meaning you can receive a maximum lump-sum advance payment equal to 50 per cent of the maximum age pension, which is about $12,385 for singles and $18,670 for couples.

We are often asked this question and the answer depends on the individual circumstances of the client. Things such as age, income and living expenses will determine the best option for a client.

Salary sacrifice into super is an arrangement with your employer to forego part of your salary or wages in return for your employer contributing it to your super fund for you.

Salary sacrificed super contributions are classified as employer super contributions, rather than employee contributions. If you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate can be less than your current marginal tax rate and therefore save you income tax. The sacrificed component of your total salary package is not counted as assessable income for tax purposes. This means that it is not subject to pay as you go (PAYG) withholding tax so as long as your tax rate is more than 15% you will be saving tax.

For example: A person on $85,000pa would have a take home income of $65,188. If they salary sacrifice $10,000pa then their taxable income will be $75,000 and take home will be $58,620. As a result the super fund will increase by $8,500 (15% tax into super) and the person’s take home income will only reduce by $6,568. So effectively they are better off by $1 932.

Personal Contributions into Super: An alternative to salary sacrificing is to claim a tax deduction for a personal super contribution made to your super fund from your after-tax income, for example, from your bank account directly to your super fund. It is best to contact your financial adviser or tax agent to get an estimate of how much you might be able to claim since, unless you have met a condition of release and can freely access your super, you will not be able to withdraw any excess contributions.

Before you can claim a deduction for your personal super contributions, you must give your super fund a Notice of intent to claim or vary a deduction for personal contributions form (NAT 71121) and receive an acknowledgement from your fund. There are other eligibility criteria that you must meet.

Note: The sum of your Super Guarantee (compulsory employer 9.5% super contributions) plus Salary Sacrifice and/or Personal Contributions you wish to claim a tax deduction for must not exceed $25,000. As in the example above this will reduce a persons taxable income and potentially save them tax.

This information is general, each person has different needs, goals and aspirations so it is important to speak with a financial adviser before acting upon any of these ideas to make sure it suits your personal circumstances. If you’d like to discuss options that could benefit you, why not contact me today on 0431 517 455 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it..