In the 2017 Budget, the Government announced several measures designed to ease the pressure on spiralling housing prices, particularly in the East Coast capital cities of Melbourne, Sydney and to a lesser degree, Brisbane.
I will provide an update on two of the key measures contained in the 2017 Budget.
On 7 September, the Government tabled a Bill in the House of Representatives covering its first two measures.
- The First Home Savers Super Scheme (FHSSS)
This initiative is designed to allow intending first home buyers to save for their home deposit through superannuation and then withdraw the savings when the time comes to buy.
A broad outline of the scheme will allow additional contributions of up to $15,000 to be made each year with the maximum amount that may be withdrawn being $30,000 plus investment earnings. For a couple, multiply this by two.
Contributions may be concessional contributions, such as those made under a salary sacrifice arrangement or personal contributions where a tax deduction has been claimed. Or, they may be non-concessional contributions made from after-tax income. All contributions made under the scheme are subject to the usual contribution caps.
Contributions made by an employer in fulfilling their superannuation guarantee obligations – the 9.5% contribution – cannot be withdrawn under the scheme. Only voluntary contributions may be withdrawn.
The FHSSS came into effect on 1 July 2017, however, at the time of writing, the legislation has not been passed by the Parliament.
With that is mind, it might be prudent to wait until there is legislative certainty before making additional voluntary contributions that may be required for a home deposit.
Whether the FHSSS is an appropriate strategy will be very much dependent on individual circumstances. Some appropriate advice, before putting extra money into super, is vitally important.
- Downsizer Contributions
In an attempt to free up housing that is currently occupied by older Australians, the Government has introduced legislation that will enable people aged 65 and over, who have owned their home for at least 10 years, to contribute up to $300,000 of the sale proceeds of their home to superannuation as a non-concessional contribution.
These contributions will not be subject to the usual restrictions that apply to making non-concessional contributions.
Once legislated, this initiative is due to come into effect from 1 July 2018. It will only apply to home sales occurring on or after that date.
Whether this measure will make a meaningful difference to the supply of housing is questionable.
One of my biggest concerns is that the primary residence is currently exempt from the assets and income tests for the age and Veterans Affairs pensions. With a very high proportion of older Australians receiving either a part or a full pension, the implications of downsizing could be significant.
Selling the family home and investing any surplus proceeds from the sale into superannuation, or most other types of investment will see money that was previously exempt from means testing now being caught under the assets and income test.
In fact, a couple of modest means who own a valuable home could lose their age pension entirely if they sold their family home and contributed $300,000 each to superannuation as a non-concessional contribution.
However, contributing the surplus proceeds from the sale of a family home, to super will be quite appropriate for some.
Like so many of these initiatives that at first glance seem very attractive, the devil lies in the detail. Whether selling the family home and downsizing simply to get more money into super is an appropriate strategy, will depend on individual circumstances.
Source: Peter Kelly | Centrepoint Alliance
Home Care/Help – what a blessing
/in Financial Advice General Info /by Fil-BattistiDo you have elderly parents living on their own, in their own home? Have you noticed their ability to look after themselves has declined, although certainly not to the extent where you need to consider placing them in residential aged care?
What are your options?
As a first step, you can research the services available through the Commonwealth Home Support Program.
Your parents will need to talk to a local assessor from the Regional Assessment Service about the care they require and develop a comprehensive support plan to assist and make their life a little easier.
The services available through the Commonwealth Home Support Program are very comprehensive covering domestic assistance, personal care, home maintenance, transport, social support and food services including helping to shop, cook and delivering meals to the home.
A couple of very important points regarding the Commonwealth Home Support Program is that even though the government subsidies a range of services available through this program, you do not need an income assessment – the fees you pay are negotiated between yourself and the provider. Secondly, an assessment carried out by the Regional Assessment Service is quite different and not as comprehensive as an assessment carried out by the Aged Care Assessment Team.
These teams will provide a written assessment of the help required and make a recommendation as to the level of support a person is eligible to receive. The levels are as follows:
The government provides a different amount of subsidy for each level. This amount is paid to the provider that you select. The subsidy contributes to the cost of the service and care, however, depending on your circumstances, you will be required to contribute to the cost of this care.
Your level of contribution will depend on the financial details provided by you to either Centrelink or Veterans Affairs. They will assess your circumstances and based on a complicated formula, advise you in writing of your daily financial contribution. This income-tested amount is on top of the standard contribution of $10.17 per day, which everyone pays regardless of their finances.
If we are able to provide the care and assistance to a person in the home either through the Commonwealth Home Support Program or one of the levels of the Home Care Packages, this should always be the first option.
Source: Mark Teale | Centrepoint Alliance
Should I retire?
/in Financial Advice General Info /by Shellie FisherMark and I have written about aspects of retirement on many occasions over the past three years. Mark describes retirement as ‘my time’.
In a couple of weeks, I will be celebrating 50 years since I first started working. In case you were wondering, I started working when I was very, very young.
When you get to my age, it is fairly common for people ask me when I intend to retire. The truthful answer is ‘I honestly don’t know’.
At this stage, I still enjoy getting up and going to work each day. I really enjoy the work I do and the people I get to engage with on a regular basis. I have met some wonderful people and got to travel to some amazing places, all in the name of work.
However, I do think about retirement from time to time, and there are those moments when the thought of not having to sit in front of a computer all day looks attractive. But the feeling soon passes.
Retirement requires careful and well-thought-out planning. It is not something that should be rushed into blindly.
The most fulfilling retirements I have observed are those where people have planned out what they want to do. It doesn’t mean having to plan every moment of everyday but having an idea of the sorts of things you would like to achieve in retirement and a deciding on a rough time frame is important. Whether retirement includes travel, ongoing education, voluntary or community work, or pursuing a hobby or business endeavour, they all require some planning.
On the other hand, the most unfulfilling retirements seem to be those that are lacking any plans. They not only erode the will to embrace life but sadly, contribute to a decline in physical and mental health.
While it is great to be able to plan ahead, that is not always going to happen. Occasionally, life throws a curveball that catches us off-guard. We may find ourselves leaving the workforce as a result of circumstances over which we have little control. Perhaps we are unable to continue to work as a result of sickness, or we are made redundant, or a change in economic or family circumstances impacts our business.
Even though we may not be able to control these situations, having a contingency plan in place may help to minimise the disruption that an unplanned exit from work life may inflict.
As retirement will last 20 to 30 years for many Australians, investing some time in planning sound like a perfectly sensible idea to me.
Source: Peter Kelly | Centrepoint Alliance
Affordable housing – Is super the answer?
/in Financial Advice General Info /by Shellie FisherIn the 2017 Budget, the Government announced several measures designed to ease the pressure on spiralling housing prices, particularly in the East Coast capital cities of Melbourne, Sydney and to a lesser degree, Brisbane.
I will provide an update on two of the key measures contained in the 2017 Budget.
On 7 September, the Government tabled a Bill in the House of Representatives covering its first two measures.
This initiative is designed to allow intending first home buyers to save for their home deposit through superannuation and then withdraw the savings when the time comes to buy.
A broad outline of the scheme will allow additional contributions of up to $15,000 to be made each year with the maximum amount that may be withdrawn being $30,000 plus investment earnings. For a couple, multiply this by two.
Contributions may be concessional contributions, such as those made under a salary sacrifice arrangement or personal contributions where a tax deduction has been claimed. Or, they may be non-concessional contributions made from after-tax income. All contributions made under the scheme are subject to the usual contribution caps.
Contributions made by an employer in fulfilling their superannuation guarantee obligations – the 9.5% contribution – cannot be withdrawn under the scheme. Only voluntary contributions may be withdrawn.
The FHSSS came into effect on 1 July 2017, however, at the time of writing, the legislation has not been passed by the Parliament.
With that is mind, it might be prudent to wait until there is legislative certainty before making additional voluntary contributions that may be required for a home deposit.
Whether the FHSSS is an appropriate strategy will be very much dependent on individual circumstances. Some appropriate advice, before putting extra money into super, is vitally important.
In an attempt to free up housing that is currently occupied by older Australians, the Government has introduced legislation that will enable people aged 65 and over, who have owned their home for at least 10 years, to contribute up to $300,000 of the sale proceeds of their home to superannuation as a non-concessional contribution.
These contributions will not be subject to the usual restrictions that apply to making non-concessional contributions.
Once legislated, this initiative is due to come into effect from 1 July 2018. It will only apply to home sales occurring on or after that date.
Whether this measure will make a meaningful difference to the supply of housing is questionable.
One of my biggest concerns is that the primary residence is currently exempt from the assets and income tests for the age and Veterans Affairs pensions. With a very high proportion of older Australians receiving either a part or a full pension, the implications of downsizing could be significant.
Selling the family home and investing any surplus proceeds from the sale into superannuation, or most other types of investment will see money that was previously exempt from means testing now being caught under the assets and income test.
In fact, a couple of modest means who own a valuable home could lose their age pension entirely if they sold their family home and contributed $300,000 each to superannuation as a non-concessional contribution.
However, contributing the surplus proceeds from the sale of a family home, to super will be quite appropriate for some.
Like so many of these initiatives that at first glance seem very attractive, the devil lies in the detail. Whether selling the family home and downsizing simply to get more money into super is an appropriate strategy, will depend on individual circumstances.
Source: Peter Kelly | Centrepoint Alliance
Why I use a financial planner
/in Financial Advice General Info /by Shellie FisherOn 12 December 2017, I will have been working in the financial services sector for 50 years.
With all that experience you would think I had all the answers and didn’t need to use a financial planner. Some years ago I bit the bullet and decided I needed a financial planner.
I needed discipline. I needed someone who could guide me and make me accountable for the decisions I wanted to make. Like a sounding board – a counsellor.
Selecting a financial planner is not necessarily an easy process. I had specific needs.
I needed someone who could keep me on the straight and narrow, someone who would challenge me when it became necessary, and someone who experienced financial success in their own life. Not ‘in your face’ wealthy, but someone who was financially comfortable and had mastered their own work/life balance. Someone who practised what they preached.
They had to be younger than me, or someone who at least had a robust business succession plan in place – as I didn’t want a planner who would be retiring when my wife and I needed them most.
On top of all that, I needed to find someone my wife was comfortable to deal with, and someone who could guide her if there came a time when I was no longer around.
When looking for a financial planner, I didn’t need someone who could tell me about salary sacrificing into super, making spouse contributions, claiming the government low-income co-contribution, or even the benefits of commencing a transition to retirement pension.
What I needed was someone who could guide me on investment selection. What managed funds should I be using, what shares should I be buying, and the fixed interest and hybrid securities to consider?
A couple of weeks ago I met with my financial planner for our review.
Now, we didn’t need to discuss the investment returns as I keep on top of that through my online access to my account. We did discuss the state of the market and general concerns about the investment decisions that might need to be made in the coming weeks and months.
Most of the conversation revolved around what my wife and I wanted to do with our lives, rather than with our finances. Given my circumstances, the conversation naturally turned to our retirement plans.
When this question comes up, I either brush the question off or say something vague like ‘in a couple of years’. It is quite confronting and frankly, it is something I don’t really want to think about at this stage.
If I enjoy my work and my life, and if I am able to continue to deliver a quality service to my clients, then why should I have a fixed retirement date in mind? After our conversation, I felt liberated.
Having a financial planner who is willing to have some of the more awkward conversations is, to me, where the value lies in the relationship. They are a counsellor or coach first, and a financial planner second. To me, my financial planner is worth their weight in gold!
Source: Peter Kelly | Centrepoint Alliance
When should you really start planning for my retirement?
/in Financial Advice General Info /by Fil-BattistiWhether it is planning for retirement, buying a new home, deciding what school to send the kids to, what job to take, or where to go for holidays, there are simply numerous variables that need to be taken into account.
For many of us, retirement will last for 20 to 30 years, so getting it right becomes very important indeed.
The short and simple answer to the question posed is ‘as early as possible’. Retirement planning is something we should start to think about as soon as we start working.
I am not saying for one moment that retirement should be at front of mind for a 25-year-old, however a couple of simple steps put into action very early in working life, that form part of a ‘set and forget’ strategy, may be the difference between a bleak or a comfortable retirement.
Superannuation is the Government’s preferred retirement savings structure, and it provides for some very attractive tax benefits.
Employers currently contribute 9.5% of their employee’s salary to super and many employees think that is enough, particularly as this will increase to 12% over the coming years. But will that be enough?
I have always held the view that, coupled with the good and robust investment of superannuation savings, in a low-cost super fund, extra money should be contributed to super. And what is the magic number?
If someone were to have somewhere between 15% and 18% of their salary contributed to super over their entire working life, their accumulated super at retirement would have a significant impact on the type of lifestyle they can afford in retirement.
Source: Peter Kelly | Centrepoint Alliance