Change for good or change for the sake of change?

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With the significant swing against the Coalition at the October by-election in the Sydney seat of Wentworth, we turn our attention to next year’s Federal Election, expected to be held in May 2019.

If present trends are an indication of the future, we will see a change of government with the Australian Labor Party (ALP) taking the reins of power in Canberra.

So, what will a change of government mean for our super?

Hardly a month goes by without someone proposing that we change some aspect of the superannuation system. It is no wonder that the average super fund member is so disengaged with their super.

In July 2017, we saw the most significant changes to superannuation in the previous 10 years. Some changes were good, and others not so good, depending on your perspective.

Some of the initiatives the ALP has previously expressed opposition to may provide hints to changes that might be made. These include:

  1. Reducing the annual limit (cap) for non-concessional contributions from $100,000 to $75,000 per annum.
  2. Reducing the income threshold, at which the additional 15% tax becomes payable on concessional contributions from $250,000 to $200,000. Interestingly, the ALP originally proposed reducing the threshold from $300,000 to $250,000, but when the Coalition government reduced it to $250,000, the Opposition responded by announcing a reduction to $200,000.
  3. Opposition to the ability of people, with less than $500,000, in super to carry forward the unused portion of their concessional contribution cap.
  4. The ability for people to claim a tax deduction for their personal superannuation contributions.

On the positive side, the ALP recently announced plans to give women a better chance to achieve equality in superannuation by requiring superannuation guarantee contributions (currently 9.5% of salary) to continue to be paid while on government paid maternity leave. This would also be extended to men, who take paid paternity leave following the birth of a child.

Currently, employers are not required to make superannuation guarantee contributions for employees earning less than $450 per month. However, the ALP proposes to remove the minimum income threshold before superannuation guarantee contributions become payable. Unfortunately, this may lead to very small amounts being contributed to super only to be swallowed up in fees and charges by super funds and otherwise being lost to the members.

The Opposition has also made some other significant tax-related announcements, including the controversial plan to eliminate the cash refunds of excess franking credits and making changes to negative gearing for existing properties. By all accounts, negative gearing will still be available for newly-built residential properties, but not for established properties.

Without a doubt, as the next election approaches, we are going to see much posturing by political parties of all persuasions, as they jockey for control over Australia’s $2.7 trillion superannuation nest-egg.

 

Source:  Peter Kelly | Centrepoint Alliance

The Invisible Money Generation

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Today’s kids have a different concept of money to previous generations. Instead of using coins and bank notes, this generation has grown up watching people buy things by tapping and swiping or clicking buttons online. They live in a world where in-app purchases, electronic bank transfers and digital currencies like bitcoin are as common as piggy banks were back in the day.

It’s no wonder that research from the Financial Planning Association (FPA) revealed two in three Australian parents say it’s difficult for their children to grasp the actual value of money.

DIGITAL NATIVES
Generations Z (born 1995 to 2009) and Alpha (born after 2010) are the invisible money generation – citizens of an increasingly digital world with the Internet at their fingertips. They are savvy with technology because they’ve been using it all their lives, and having ready access to all the information they want has made them more curious in matters of money and life than any previous generation.

These digital natives don’t just learn about money from their parents. They gather their information from a wide variety of sources, including grandparents (63%), teachers or coaches (59%), peers (26%) and social media (18%).

How children use digital money Ages 9-13 Ages 14-18
Make online purchases for themselves or their family 30% 68%
Buy a mobile app or in-app purchase, or a console in-game purchase 48% 66%
Transact with debit/credit card or other form of digital money 31% 65%
Make a purchase using a mobile phone 24% 44%

MORE CONFIDENT, BUT WORSE OFF
The FPA research showed parents recognise that their children are more engaged with money than they were at their age. Compared to their own childhoods, 69% of parents say their children are more confident asking questions about money and 57% feel their kids are more financially literate.

Yet, 62% of parents believe their children’s generation will be financially worse off than they were. Uncertain economic conditions and the growing cost of living play a part in this belief, but for many this fear goes beyond external influences. More than two in five parents are concerned that their kids won’t have the financial skills they will need as adults to become financially successful.

FINANCIAL STRESS AND UNCERTAINTY
It’s possible that financial stress and limited financial literacy are affecting people’s confidence when it comes to talking about money. Almost two in three young parents (aged 18-29) say they are very or somewhat stressed, while that number is closer to one in three for those aged 60 or over. People living in regional or remote areas are more likely to be financially stressed than their city-dwelling counterparts, and single parents report a much higher level of stress (67%) than those who live in two-parent households (47%).

Parents who are financially stressed are less likely to talk about money to their kids compared to those who don’t feel stressed – with 32% admitting they’re reluctant to have these conversations because they don’t want their kids to worry about money. But the FPA report revealed that children who participate in conversations about money are more curious, confident and financially literate than those who don’t – even if the conversations aren’t always positive.

WANT TO KNOW MORE?
Seeking advice from a financial adviser can build your financial literacy and confidence. If you would like to know more speak to your financial adviser.

 

Source: Colonial First State