Mondy Financial Services

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

 

What are these changes & why are they being introduced?

From 1 July 2019, new ‘Protecting Your Super’ laws come into effect. These laws include several measures designed to ensure that super account balances are not being unnecessarily eroded by fees and insurance premiums, particularly for accounts that have a low balance or have been inactive for a certain period.

One of these measures relates to automatic cancellation of insurance cover for inactive super accounts. These rules prevent super funds from providing insurance cover to you if your super account is inactive, unless you specifically elect to keep your cover. Under these rules, an account will be considered ‘inactive’ if it has received no contributions or rollovers for 16 consecutive months.

Important things to think about before deciding to keep, cancel or change your cover

Just like your home or car, your life and your ability to earn an income can be some of your most important assets. Having insurance cover may provide some financial protection if you are unable to work due to disability or if you die.

There may be some advantages of having insurance through your super, e.g. group premium rates may be more cost-effective than individual insurance rates, and paying for premiums through your super rather than your after-tax money may be tax-effective in some cases. However, it’s important to be aware that insurance premiums that are deducted from your account balance will reduce the amount of super that is available when you retire.

Your insurance needs can change over time so the cover you had in the past may or may not still be suitable for you today. For example, your needs for financial protection as a young single may be different to your needs if you have dependants or a mortgage. And if you’re downsizing or an empty-nester, your needs may be different again.

It’s important that you regularly consider and understand your current needs to make sure any insurance cover remains appropriate. This should include any cover for death and disability that you have through super, as well as any cover you have with an insurer.

It’s also important to understand the features of your cover, such as premium rates, when a benefit may or may not be paid, and exclusions that may apply. These features will generally be different between super funds or insurers, so you’ll need to consider what’s right for you.

You should also keep in mind that premium rates will generally increase as you get older.