General Information about Financial Advice

2014 End of year Superannuation Strategies

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imagesEnd of year superannuation strategies

The lead up to the end of the financial year is an opportune time to review your financial situation and avoid the last minute rush. We can help you with a number of strategies that can improve your financial position including the potential to reduce tax and take advantage of the concessional superannuation environment.

Here are some super strategies worth considering.    

Superannuation co-contribution is a government incentive to help low income earners build their superannuation balances. If you earn less than $48,516 (2013/14) and make personal contributions to super you may be eligible for up to $500. The amount depends upon your income with the government contributing 50 cents for each dollar you contribute, up to a maximum of $500. 

 

Personal deductible superannuation contributions is a helpful strategy for eligible individuals as contributions are generally taxed at a concessional rate of 15% compared to a higher marginal rate. This strategy can be particularly helpful if you have sold an asset during the year and realised a significant capital gain, as you may also be able to reduce the any personal income tax been payable on the capital gain.

Generally, this strategy can be implemented by the self-employed, retirees and employees whose employment ‘income’ is less than 10% of their total ‘income’.

 

Super Salary sacrifice involves an agreement between an employee and an employer to forgo a portion of salary in exchange for payment as a super contribution. The attraction of this strategy is ‘swapping’ a higher marginal tax rate for the concessional rate of 15% that is generally charged on super contributions.

 

If you’re due for a pay rise or an end-of-year bonus, you may be able to salary sacrifice this into super. Also if you are still within your concessional contributions cap (see important note below) you may be able to increase your salary sacrifice contributions to take full advantage of this concession.   

Important note: the ‘concessional contributions cap’ limits the amount of concessional contributions (including salary sacrifice and personal deductible) before tax consequences may apply. The concessional contributions cap for 2013/14 is $25,000 if you are under 60, or $35,000 if you are 59 or older as at 30 June 2014.      

 

Non-concessional contributions often called ‘after-tax’ contributions are another way to increase investments in the concessionally taxed super environment.

The non-concessional contributions cap is $150,000 (2013/14). However, if you are under age 65 at any time during the financial year, you can bring forward the next two years’ non-concessional contributions caps to allow larger contributions to be made (providing you haven’t already done so in the two previous financial years). The ‘bring-forward’ cap is $450,000 and is automatically triggered when your after-tax contributions are more than $150,000 (2013/14).

The non-concessional contributions and ‘bring-forward’ caps have been increased for 2014/15 to $180,000 and $540,000 respectively. A strategy of triggering the ‘bring forward’ in 2014/15 rather than this financial year may enable increased amounts to be contributed to superannuation over time. Timing of contributions including when to trigger the bring-forward is an important consideration to optimise contribution levels and avoid tax penalties. 

 

Spouse contribution provisions allow taxpayers to make after tax super contributions to their spouse’s superannuation account. Advantages include:

  • Investing for a spouse who may have little or no superannuation; and 
  • A tax offset for contributions for a low income earning spouse

A spouse tax offset worth up to $540 is available for a taxpayer who contributes for a spouse who earns less than $10,800. The offset reduces to nil when income reaches $13,800.

 

Spouse contributions splitting may help you and your spouse to accumulate more tax-effective wealth for retirement. 

Generally, contributions splitting allows a member to split up to 85% of their employer and personal tax deductible super contributions made in the previous financial year to their spouse’s super. Splitting has a number of advantages including maximising superannuation withdrawals via two ‘low rate caps’.   

Amounts up to the ‘low rate cap’ of $180,000 (2013/2014 & $185,000 2014/15) are included in assessable income but taxed at a zero rate of tax, so splitting contributions to a spouse’s account enables up to $360,000 to be withdrawn by a couple with zero tax payable on the withdrawal. 

 

Source | OnePath

You can afford Life Insurance!

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YouCanAffordSuperIn 2010, a study by Lifewise found that 95% of families didn’t have adequate levels of insurance. The typical Australian family will need to cope on half or less of their income as a result of underinsurance.

Understanding their finances are one of the main reasons Australians fail to protect themselves and their families. Here is how you can afford the premiums:

 

INSURANCE THROUGH SUPER

Did you know that you can pay your insurance premiums through your super? This may assist you with paying insurance premiums when you have a low disposable income.

OTHER WAYS TO PAY FOR COVER

You can make contributions to your super fund and gain tax benefits:

•             If you’re eligible to salary sacrifice to super, you can have premiums paid from pre-tax dollars. And because your super fund may be able to claim a tax deduction for the premiums, you may not need to pay tax on the contributions.

•             If you’re self-employed, making a personal contribution to super from after-tax income to cover premiums lets you claim a personal tax deduction.

YOU COULD ALSO:

•             Take advantage of tax offsets of up to $540 by making a super contribution to your low-income spouse.

•             Make personal contributions to super, and if eligible, qualify for a Government co-contribution of up to $500.

BE AWARE:

•             A benefit payment under superannuation is paid to the fund trustee.

The trustee will only pay benefits to you or your beneficiaries if you meet a superannuation condition of release.

•             Tax on death benefits is determined by who receives the benefits. You may need to ensure a binding death nomination is in place so that benefits are paid to those intended.

• Paying premiums from superannuation may erode your retirement funds so think about topping up your superannuation fund when you are able.

 

To take the first step to getting the right cover for you- call Fil today

 

Source IAIA

Shift to Shares

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ShiftToSharesOver the last couple of years, a lot of Australians have been wary of risk when investing and have invested in cash or term deposits. But the latest figures show that shares have outperformed cash and property, so is it time to think about different investment options?

 

The Reserve Bank of Australia has reduced the official interest rate several times and it is now as low as it was in 2008 at the height of the GFC when businesses such as Lehman Brothers were collapsing. Mortgage holders have been rejoicing, hoping that the banks will pass on some of the interest rate cuts.

Meanwhile, investors with significant cash or term deposit holdings have been experiencing lower returns.

CASH AND TERM DEPOSITS

With the interest rates so low, six month term deposit rate are now sitting at less than 4 per cent. This has fallen significantly from the high of 2008 when they were around 9 per cent. This means that people who are relying on cash or term deposits to provide income or returns have not had as much discretionary income as they would have liked. The predictions are that interest rates will continue to fall, and if this happens, returns from cash and term deposits are going to continue to fall as well.

PROPERTY

Over the last couple of decades, property was a significant way to generate great returns, but after the GFC confidence fell and there were a lot of forced sales. Over the last 10 years, property has only returned 5.5 per cent*. One of the major deterrents right now is that with the taxes and levies on purchasing a property, the cost of buying is around 6 per cent of the purchase price*. Some experts are predicting property growth to slow even more going forward, saying that the late 90s boom was a once in a lifetime high.

SHARES

Over the last five years the share market has been pretty low, it is down a third from their highs in 2007, but when you look at the ten year return rate of shares it has returned 8.7 per cent, which looks pretty good.*

SO WHAT SHOULD YOU DO?

The key is to look at diversifying across cash, shares and property. You need to understand the historical information, your appetite for risk and where you are in the investment cycle. By balancing long and short term investments with your objectives you will be on the path to success.

We would love to talk to you about the different options to find one that suits your needs.

Source : IOOF

* http://www.news.com.au/money/investing/shares-still-beat-property-and-cash-analysis-finds/story-e6frfmdr-1226545416014

Time to reflect

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imagesCA814TBQReady or not, the end of the year is fast approaching and now is the perfect time to start thinking about the year ahead.

 

 

 

In particular, this time of the year presents a great opportunity to meet with us to review your financial strategies and goals.

 

Many people use the Christmas/ New Year period to reflect on the year that has just passed, often in a blur and to begin thinking about the year(s) ahead. In particular, this time of year presents a great opportunity for you to review your financial strategies and goals in preparation for 2014 and beyond.

THE IMPORTANCE OF REVIEWS

Reviews should take place on a regular basis, where you have the opportunity to make informed decisions and factor any changes into your financial plan.

Below is a simple guide to tidy up your finances for the year ahead.

1.         HAVE YOUR KEY FINANCIAL GOALS CHANGED?

Our lives are not constant and our goals change slightly (or greatly) from year to year. Also, major life events such as serious illness, the birth of a child, inheritance, marriage and the death of a parent or spouse can all result in significant changes to our wealth management goals.

2.         PRIORITISE YOUR GOALS

It is important to rank and prioritise goals and decide in what timeframe you want to achieve them. Being realistic about your timeframe is essential to ensuring that your goals will be achieved.

3.         SHORT, MEDIUM OR LONG TERM?

Most industry experts agree that a short-term goal is one that can be achieved within a year or so. Medium- term goals typically require two to five years, and long-term goals usually take longer than five years.

For example, reducing credit card debt is likely to be a short-term goal, whereas saving for a home deposit would often be a medium-term goal. Depending on your age, providing for retirement is a long-term goal.

4.         IF YOUR FINANCIAL GOALS HAVE CHANGED, HOW WILL THIS AFFECT YOUR FINANCIAL STRATEGY?

This is where the advice of a financial adviser is critical. An adviser has the tools and knowledge to create projections that take into account changes to your goals and changes to your timeframes for achieving them. These projections will help you to see where your plans for savings, investment contributions or assets may need updating.

5.         BE SAVVY

Make sure that your investments and level of protection support your level of risk and your goals. An adviser can develop a tailored analysis that best suits your individual needs and provide ongoing portfolio advice.

Reflecting and thinking about your financial position, as well as setting a clear path, is critical to making sure you can reach your goals. You don’t have to wait until the first day of January to review your financial situation. Contact us today so that you can get the help you need to achieve your “New Year” resolutions.

Source I Zurich

Investing for your Children’s Future

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kidsplaying-6Every parent wants the best for their children. If you are in a position to invest money specifically for your children’s future, you should follow the same approach as if you were investing for yourself.

 

 

The first step is to clearly identify why you are investing, then set yourself a goal and put a strategy in place to achieve that goal. Your strategy needs to suit your circumstances, risk tolerance and investment timeframe.

Whether you have short-term goals and want a high interest earning savings fund or you have long-term goals with a focus on managed funds, one vital question you need to consider is ‘Whose name should the investment be held in?’

Children are taxed at penalty rates on unearned income.

There are other tax-effective investment options available including:

  • Investment bonds — income is taxed at up to 30 per cent within the bond and reinvested each year. The proceeds of the bond are tax-free after 10 years and the child can be named as the beneficiary.
  • Investments can be held by, and in the name of, the parent on the lowest marginal tax rate. Although all income is declared in that parent’s tax return, the tax payable on this income may be reduced considerably with franked dividends paid from investments in Australian shares.
  • Implied trusts — the investment is held in the parents’ name in trust for the child. Beware that the investment must be used for the benefit of the child, otherwise the Tax Office can attribute the income to the parents and tax them personally.

As there are a number of options to choose from, make an appointment with us today to determine the right choice for you and your children.

Source | IOOF