Mondy Financial Services

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..

Three phases of retirement.

Phase 1: Carefree Years – Travel, Renovations, Grandkids, Social activity

Phase 2: Quiet Years – Less travel, health issues, spending more time at home

Phase 3: Needing some assistance – Home care, Residential Aged Care

According to Association of Superannuation Funds of Australia this is the amount you need for retirement.

 

Comfortable retirement

Modest retirement

Age Pension

Single

$43,901

$27 987

$24,552

Couple

$62,083

$43,901

$37,014 


Phase 1: Carefree Years

How to Boost Your Money

Superannuation: you can have up to $1.6M in super in a 100% tax-free environment. In pension phase all income on earnings is tax free and all pension payments are tax free.

Keep working: Age pensioners have access to the work bonus of $300/fn before any reduction in pension. This accumulates if not used so if doing a block of work all unused work bonuses can be used in one go.

Invest: in more ‘growthy’ investments than a bank account or term deposit (be aware that your money will be exposed to volatility and may go down).

Look into investing in an annuity: this would give you a regular guaranteed payment with a guaranteed death benefit

Maximise your Age Pension: Funeral bonds, Granny Flat interest, spend money on your home

Phase 2: Quiet Years

How to Boost Your Money

Reverse Mortgage: Can access equity in your home eg on a $700K home

  • Age 60 – can access $105 000
  •  Age 70 – can access $175 000
  • Only pay for what you take but not until the home is sold.

Downsizer Contribution into Super: Can put $300K (each if a couple) when downsizing or simply changing homes (conditions apply)

Phase 3: Needing some assistance

Home Care packages: Will assist people to stay in their home longer – Gov subsidised but must be assessed and go on waiting list

Residential Aged Care: Provides accommodation, support with daily living activities and personal care – Gov subsidized but must be assessed by ACAT

Paying for Aged Care

Accommodation

  1. RAD (Refundable Accommodation Deposit) – lump sum
  2. DAP (Daily Accommodation Payment) – like paying rent or interest on the RAD
  3. Combination of the 2

RAD

  • Fully refundable (unless you’ve asked the facility to deduct some of the fees)
  • Government guaranteed
  • Exempt for Age pension asset test
  • Becomes part of the estate

Paying for Living expenses & Care – actual cost is up to $111K per year but is government subsidised.

  • Basic Daily Fee – 85% of single Age pension (everyone pays)
  • Means tested fee – calculated on assets and income (not everyone will pay this)
  • Extra Services Fee – pays for extras such as wine with meals, newspaper (not always compulsory)

 

Regardless of your starting point, there are things you can do to maximise your retirement benefits. Basically, the more assets, the less debt, the more retirement income.

According to Association of Superannuation Funds of Australia this is the amount you need for retirement.

 

Comfortable retirement

Modest retirement

Age Pension

Single

$43,687 

$27 902

$24,552 

Couple

$61 909 

$40 380

$37,014 

 

We are often asked “How much money do I need to produce this income?”

Single: $485 000 for a comfortable retirement (includes Age Pension)

Couple:  $690 000 for a comfortable retirement (includes Age Pension)

As you can see you will need some extra funds to give you a more comfortable retirement.

How to generate extra funds?

Risk & Reward are Always Related – We call it the ‘Sleep at Night’ test.

The higher the risk, the higher potential returns (and losses).

You need to decide which blend of investments matches your attitude to risk.

Growthy (risky) investments include: Australian Shares, Overseas Shares and Listed Property

Defensive (safer) investments include: Cash, Fixed Interest and Term Deposits

 

Cash

100% defensive

Mod Conservative

40-60% growth

Balanced

60-75% growth

High Growth

80%+ growth

Best 1 yr return

7.8

17.1

22.8

33.5

Worst 1 yr Return

0.7

-10.6

-18.1

-31.2

20 years to Sept 2020

Why is Super such a good investment?

As you approach retirement age you might consider putting more into your super account. After the age of 67 (or 60 if you retire or change jobs) your super can be in a tax free account – no tax on growth of your super and no tax as you pull it out.

Money can be added to super in 2 ways

  • Concessional Contributions (Subject to Limits) –
    • Salary Sacrifice and save income tax
    • tax deductable personal contributions and save income tax
  • Non-Concessional Contributions (subject to limits)–
    • Up to $300K after tax contribution
    • Downsizer contribution up to $300K (each) when selling home after age 65

Super Fees matter

All funds offer the same kind or investment options therefore you have the potential to make the same return in each fund. What can make a difference are the fees you pay.

For example:

  • If you have $100K in a super fund costing 2% it will cost you $2,000 pa in fees
  • If you have $100K in a super fund costing 0.4% it will cost you $400pa in fees meaning you’ll have an extra $1,600pa in your fund to grow towards retirement.

Some common decisions which can help you maximise your retirement benefits.

  • Too much or too little insurance – we can help you decide the right amount for you.
  • Property – whether this is the right decision for you and how to structure your investment debt.
  • Over age 65 and paying income tax – we can help you minimise or eliminate income tax altogether
  • Centrelink – Age differences – there are strategies to help you maximise Centrelink benefits for the older partner
  • Defined Benefit Pensions – are they the perfect choice for all?

Click here to see Adam's video on this topic

https://www.facebook.com/rita.merienne/videos/4646453795396369

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. If you’d like help determining the best way to increase your retirement funds 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.

Three key mistakes we see people make when they don’t get the right advice:

·       Selling the home without understanding the implications

·       Being afraid to pay a lump sum (refundable accommodation deposit) for residential care accommodation and missing out on Centrelink concessions

·       Not generating enough cashflow.

This is where we can help. As financial advisers with aged care advice experience we can help to guide you through the process. Financial advice isn’t just about superannuation and investments.  Advice can help to show you how you can afford the care you need and provide clarity to understand how it all works. 

The good news is we are living longer. This may give you more time in retirement to tick off your bucket list. But at some point, you might expect to slow down and take things easier. At that point, you may need help around the home or with some of your daily needs. Or you may need to make the move to residential aged care.
 
Whatever your needs and choices, identifying your options and making effective decisions can become overwhelming without good advice and an effective plan.
 
Some tasks are too complex and too important to do on your own. Navigating the way through Aged Care and the jargon is not easy – especially if decisions are being made in a time of crisis and emotions are running high. When aged care decisions go badly, the stress can lead to family conflicts, fuelled by the Three G’s of aged care: grief, guilt and greed. Mistakes can be costly.  ​​​

You might be looking for advice for yourself or for a family member. Or you might be planning ahead for the future so you can plan for quality of life, even when care needs start to creep in.

Let us take away some of the stress. Contact us today on 0408 608 509 (Heather) or 0431 517 455 (Adam) to make an appointment to discuss your current or future aged care needs.

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. 

A Reverse Mortgage is a special type of loan for those 60 years and over, using the equity built up in your home to turn into cash to use for whatever you want – i.e. holiday, living expenses, new car, renovations, health costs.                                                    

Watch this short video to see how others use reverse mortgages.                       

This type of loan does not have to be repaid until you choose to sell your home or the last surviving borrower passes away. It does not require any repayments on the life of the loan but voluntary repayments may be made.

You can receive your money in a variety of ways – as a Lump Sum or have your own “cash reserve” limit which you can then draw down as you need the money, or a combination of both. If you have a current mortgage, credit card bill or other loan this may be able to be paid out for you.

The amount you receive will depend on the value on your property and the age of the youngest borrower. eg a 60 year old may only be able to access 15% of the value of the home where a 90 year old may access 45%.

The No Negative Equity Pledge ensures that you (or your estate) will not have to pay any shortfall between the sale price of your home and the outstanding balance owed when the home is sold.

PROS                                                                                                                    

  • You never need to make repayments for the life of the mortgage
  • You have increased cash flow to use however you want
  • Your credit line grows with time as you get older
  • These do generally not affect your Centrelink entitlements (however you need advice on this aspect)

CONS

  • The value of your estate will decrease
  • Interest rates and costs are high 
  • The balance of the loan grows with time as interest is added to the loan value

An example of a reverse mortgage we assisted with:

A client living in a $1.8M home in Sydney, on a pension and struggled to pay her rates and ongoing expenses. She had one son who was well established and suggested a reverse mortgage. After releasing some of the equity in her home she had the cash to comfortably pay her bills and was able to stay in the home she’d lived in for over 50 years. Her son wanted the best for her and wasn’t worried about inheriting a home with some debt.

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. 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..

One of the first things you come across when moving into residential care is the need to pay for your room. With quoted prices of up to $2 million, the numbers may send families into panic. However, they can be less frightening if you understand how these fees work and what choices you have.

So, what are the four (4) key points that you need to know?

  1. The money will be refunded

Let’s start with the name of the fee – refundable accommodation deposit (RAD). This might help you breathe a sigh of relief, because the name is descriptive and highlights that at some point you will get the money back.

For example, if you pay a RAD of $400,000 when you leave, the $400,000 is paid back to you or your estate. Only if you allowed the care provider to deduct other fees from this money instead of paying those fees from your bank account, will the amount refunded to you be lower, as you are essentially spending some along the way.

This means you will still be able to pass on an inheritance to your family.

  1. Your money is not at risk

If you paid the RAD to an approved provider, the Federal Government will guarantee the repayment of your money. This takes away the risk that your money could be lost.

  1. You have time to make choices

When you move in you don’t need all the money upfront. You have a choice to pay the lump sum (to “buy” the room) or pay a daily fee (to “rent” the room) or a combination. And you will have 28 days after moving into care to tell the provider which choice you want to make.

If you choose to start with a daily fee you can change your mind at any time and pay all or some of the RAD. If you choose to pay the RAD, you need to stick with this option but the provider needs to give you at least six months to organise your finances to make the payment.

Example: Lorna moves into care in July 2020 and agrees to pay $300,000 for her room. She could instead choose to pay a daily fee of $33.70 (at the current interest rate of 4.1%).   

  1. Your age pension may go up

The money you pay as a RAD won’t count in your age pension assets test or in your income test. This means that you might be able to keep or increase the amount of age pension payable to you, especially if you have decided to sell your former home.

Advice is key

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 0408 608 509 to make an appointment.

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. Current at 1 July 2020.

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.

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 $50 000 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 2020 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.

The maximum co-contribution is payable to those whose incomes are less than $38,564. It then reduces gradually until it phases out entirely when your income hits $53,564.

4. Spouse contribution

Not just a sign of commitment but by making a super contribution on their behalf you could save on tax too.

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. If 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 first step is not to panic, and for most, the next best step is possibly to do nothing.

Mondy Financial Services is still fully operational. We are conducting all meetings via phone or online at this stage. COVID-19 continues to affect financial markets, we anticipate that some clients may be concerned about their investments. Nation-wide social and economic shut-downs in Australia and many other countries are contributing to great uncertainty and volatility in the stock market. Some industries like hospitality, entertainment, education, travel and tourism, for example, have been hit especially hard.

There is no such things as a ‘one-size fits all’ answer on what the best thing to do is.

What we know from past severe market falls, is that they do eventually end, and recoveries follow. But it does take time, there has never been an exception to this rule and it is highly likely the result will be just the same this time around.

The 2008/09 Global Financial Crisis (GFC) did end and was followed by 10 years of strong share market returns as the following statistics show:

  • The Australian share market, as measured by the S&P/ASX 300 Accumulation Index, returned 111% for the 10 years to 31 December 2019.
  • The global share market, as measured by the MSCI ACWI Index (Net dividends invested, in Australian dollars), returned 197% for the 10 years to 31 December 2019.

Our message remains that superannuation and investing is a long-term strategy. History has shown that short-term periods of negative returns and volatility – while very stressful – are entirely expected and part of the normal journey for the growth of long term investments.

You need to keep in mind if you change your investment strategy immediately after a correction, you’re taking losses, which may reduce your chance of making your money back when markets eventually recover.

Good financial advice is invaluable. We recommend you discuss your situation with us if you are worried or your circumstances have changed. Stay safe and see you on the other side.

Adam Mondy,

This email address is being protected from spambots. You need JavaScript enabled to view it.  0431 517 455

With the current market swings, it is easy to lose sight of the potential benefits of staying invested over the long run. While no one has a crystal ball, adopting a long-term perspective and sticking with a plan can heklp investors look beyond the headlines.

The world is watching with concern the spread of the new coronavirus which is having a severe impact on global markets, causing volatility in the Australian share market.

Until mid-January, investors were extremely optimistic, with share markets reaching highs not seen for several years. Now the coronavirus has triggered a large shift in investor sentiment.

Investors and governments are trying to predict the impact the coronavirus is likely to have on the global economy given that it’s impacting a country as big and central to global trade as China.

Apple announced last month that it expected revenue to take a hit from problems making and selling products in China. Australia’s prime minister has said the virus will likely become a global pandemic, and other officials there warned of a serious blow to the country’s economy. Airlines are preparing for the toll it will take on travel. And these are just a few examples of how the impact of the coronavirus is being assessed.

While market downturns and short-term volatility may impact on your short to mid-term superannuation account balance, they’re a regular part of investment cycles. The level of volatility will depend on its exposure to shares.

But don’t forget, the share market has been through tough times before. Infections are a bit different to other economic problems, but the result is the same – markets fall. Eventually markets recover. The share market recovered from the GFC. It recovered from the dot com bust. It recovered from world wars. It recovered from the Spanish Flu.

We can’t tell you when things will turn or by how much, but our expectation is that bearing today’s risk will be compensated with positive expected returns. That’s been a lesson of past health crises, such as the Ebola and swine-flu outbreaks earlier this century, and of market disruptions, such as the global financial crisis of 2008–2009. Additionally, history has shown no reliable way to identify a market peak or bottom. These beliefs argue against making market moves based on fear or speculation, even as difficult and traumatic events transpire.

The big question is if investors choose to leave the share market, where are they going to put their money?

 

A Reverse Mortgage is a special type of loan for those 60 years and over, using the equity built up in your home to turn into cash to use for whatever you want – i.e. holiday, living expenses, new car, renovations, health costs.

This seniors loan does not have to be repaid until you choose to sell your home or the last surviving borrower passes away. It does not require any repayments on the life of the loan but voluntary repayments may be made.

You can receive your money in a variety of ways – as a Lump Sum or have your own “cash reserve” limit which you can then draw down as you need the money, or a combination of both. If you have a mortgage on the property this may be able to be paid out for you.

The amount you receive will depend on the value on your property and

the age of the youngest borrower. eg a 60 year old may only be able to access 15% of the value of the home where a 90 year old may access 45%.

The No Negative Equity Pledge ensures that you (or your estate) will not have to pay any shortfall difference between the sale price of your home and the outstanding balance owed when the home is sold.

PROS                                                                                                                    

  • You never need to make repayments for the life of the mortgage
  • You have increased cash flow to use however you want
  • Your credit line grows with time as you get older

CONS

  • The value of your estate will decrease
  • Interest rates and closing costs are quite high 
  • The balance of the loan grows with time as interest is added to the loan value

If you are receiving a pension you should seek advice to find out if it will be affected.

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. 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..

Moving into an Aged Care Facility (nursing home) can be a very emotional time for both the family and the person making the move.

We can help with decisions regarding selling the home, renting the home, paying the full RAD or paying a part RAD, what to do with investments.

Aged Care costs are made up of 4 different fees

  1. Basic daily fee

A basic daily fee is used for your day-to-day living costs such as meals, cleaning, laundry, heating and cooling. Everyone moving into an aged care home can be asked to pay this fee.

The basic daily fee is 85% of the single person rate of the basic age pension.

  1. Means-tested care fee

Your aged care home provider may ask you to pay a means-tested care fee. This will vary based on your assessed income and assets

If you do not need to pay the means-tested care fee, the Australian Government will pay the full cost of your care.

There are annual and lifetime caps in place to limit the amount of the means-tested care fee you can be asked to pay. Once these caps have been reached, you cannot be asked to pay any more means-tested care fees.

  1. Aged care homes accommodation costs

Your income and assets assessment will determine if you will receive assistance with your accommodation costs.

Paying for accommodation

If you are eligible for assistance with your accommodation costs, the amount you can be asked to pay for your accommodation is based on your income and assets, and will be one of the following:

  • No accommodation costs: if your income and assets are below a certain amount, the Australian Government will pay your accommodation costs.
  • An ‘accommodation contribution’: if you need to pay for part of your accommodation, the Australian Government will pay the rest. You can choose if you would like to pay your accommodation costs by a refundable accommodation contribution (RAC), daily accommodation contribution (DAC) or a combination of both.

If you are not eligible for assistance with your accommodation costs and need to pay the full costs of your accommodation, you can be asked to pay:

  • An ‘accommodation payment’. You can choose if you want to pay your accommodation costs by a refundable accommodation deposit (RAD), daily accommodation payment (DAP) or a combination of both.
  1. Extra and additional fees for aged care homes

Extra and additional service fees may apply if you choose a higher standard of accommodation, meals or other care or services.

The Value of Financial Advice at this time?

Mondy Financial Services can do a strategy report showing the following:

Several strategy options regarding the family home and payment of Aged Care fees showing the effect over 5 years on:

  1. Cash flow
  2. Aged Pension payments
  3. Asset value after each year
     

This can help with decisions regarding selling the home, renting the home, paying the full RAD or paying a part RAD and what to do with investments. Some of our clients have saved tens of thousands each year having these figures.

https://www.myagedcare.gov.au/aged-care-homes/working-out-the-costs