Insuring Your Most Valuable Asset

There is a good chance that your largest, most valuable asset is underinsured. It is not your car, it is not your home, it is your ability to generate an income. Income protection insurance can replace up to 75% of your income through your inability to work due to injury or illness. Knowing what cover is appropriate for yourself is an important step in safeguarding your financial life goals. If there are people dependant on you to provide an income, we recommend a review of your existing insurance cover.

Many Australians may not be concerned with insuring their largest financial asset, as it does not immediately impact them. A 2015 report completed by Rice Warner ‘Underinsurance in Australia’ states that, existing levels of Income Protection Insurance for Australians only meets 16% of their needs.

It is possible that you have some default cover within your Superannuation account.

This can be checked by calling you Superannuation provider or reading your Annual Superannuation Statement.

However, this level of cover may only provide you with Income Replacement for a period of two years. There is a possibility that you might not be able to return to work after a period of two years.

  • What then?
  • Can you still achieve your personal financial goals with no income?
  • What happens if you cannot work because of injury or illness?
  • Where will you get an income to meet your daily living expenses?

These are important questions you should ask yourself if others rely on you to provide for them. The best time to act is now.

By taking the time to talk to a Financial Advisor or completing an online insurance calculator you can determine what cover amounts and period is sustainable for your needs.

Do not put others in a worse off position because you did not take the time out to check what level of cover is appropriate for you.

Rice Warner. (2018). Australia’s relentless underinsurance gap. [online] Available at: http://www.ricewarner.com/australias-relentless-underinsurance-gap/
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way
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TAX TIME – Child Care Benefit & Child Care Rebate

Lee Nickelson is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

It’s that time of year again, time to hunt around for your MyGov username and password in order to log in and update Family Income details (see my previous Blog on how to avoid Family Tax benefit overpayments).  This year for those utilising subsidised child care, there is an additional form, to be completed PRIOR to 2 JULY 2018 – the Child Care Subsidy Assessment.

This requirement has arisen because from 2 July 2018, the Child Care Subsidy and Additional Child Care Subsidy will replace the current Child Care Benefit and Child Care Rebate.  The new payment system will pay directly to your approved child care provider to reduce the fee you pay.

You should complete a Child Care Subsidy assessment or claim before 2 July 2018 to ensure you don’t miss out on child care fee assistance from 2 July 2018. The new subsidy cannot be paid to your service on your behalf if you do not complete the assessment [1].

What will they ask?

Three things will confirm a family’s level of Child Care Subsidy.  The assessment will confirm:

  • Combined family income – A tiering system will apply to determine percentage of eligible subsidy, which fully phases out for income above $351,000
  • Activity level of parents – the parent with the lowest level of activity will determine the hours of subsidised care
  • Type of child care service – this determines the hourly rate cap [2]

Example

Judy works 3 x 8 hour days per week earning $60,000.  John works full time, and earns $80,000 giving them an adjusted taxable income of $140,000.  They have two kids aged 2 and 3, attending day care 3 days, where the centre is open 11 hours per day.  Centre based day care fees are $125 and $129 per child per day – gross fees per week $762.

Current rules mean Judy and John receive up to 50% of their child care fees back each week up to the annual cap of $7,500 per child – so for approximately 40 weeks of the year, Jim and Judy will receive $381 back per week in child care rebate.

Under the new rules, the estimate of subsidy for the above example would result in approximately $455 per week (up from $381) without an annual cap.  Judy and John will be significantly better off. [3]

Things start to change if Judy and John earn more than $251,248 – their percentage subsidy rate starts to decrease from 50%.  If they earn more than $186,958, a $10,000 subsidy cap is also applied per child. [4]

If you would like to know more, the sources below provide some great detail about the changes.

We are also here to help if you have any questions as well as help to complete the Centrelink assessment.

 

[1] https://www.education.gov.au/new-child-care-package-transition-families

[2] https://docs.education.gov.au/system/files/doc/other/the_new_child_care_package-2_0.pdf

[3] https://www.goodstart.org.au/subsidy-estimator/other

[4] https://www.education.gov.au/child-care-subsidy-combined-family-income-0

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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Are You Engaged With Your Super?

Lee Nickelson is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Hands up who knows where their super is invested and what fees they are paying for the administration services they receive?   Anyone..?  You aren’t alone in the unengaged zone.  What is also emerging is that women are less likely than men to regularly engage with their superannuation¹… which is another issue in itself.

Seems crazy doesn’t it.. our superannuation assets have ballooned to $2.3 trillion² yet we aren’t paying attention.  Most rental property owners pay attention to the rent they charge (asset performance) and get quotes on repairs/bargain with real estate agents (manage costs) – so how do we start paying attention to our super?

The ‘Compare the Pair’ advertising campaign for industry super has been around for a couple of years now, but what has become interesting is there has never been a better time to compare superannuation funds.

Recent legislative changes to Regulatory Guide 97 have required superannuation funds, industry funds included, to disclose their fees and costs in a more transparent way resulting in a raft of new Product Disclosure Statements being released.

Many of the clients I have worked with since these changes have been surprised to realise their ‘cheap’ industry funds, aren’t the cheapest option out there anymore.  But on the flip side, it isn’t all about being in the cheapest fund – especially if it is at the expense of asset performance.  Investing in cash because it has low fees is unlikely to be in your best interest long term.

Different assets (cash, term deposits, shares, property) have different performance characteristics, and your superannuation administrator is investing a percentage of your money in each of these assets on your behalf. Make sure you are paying attention to the percentages you have in each asset class as this is one of the main drivers behind investment performance.

So why not log in whilst you are winding down before Christmas and get engaged with your super – check out what fees you are paying and how you are invested.  If you aren’t confident reviewing your superannuation yourself, we are here to help.

1. https://www.commbank.com.au/content/dam/caas/newsroom/docs/2017-06-28-financial-security-report.pdf

2. https://www.superannuation.asn.au/resources/superannuation-statistics

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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Solutions to the Gender Gap in Retirement Savings

Lee Nickelson is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Women in Australia face specific issues when it comes to securing their financial future. Women have significantly less money saved for their retirement – the current average superannuation payout for women is 1/3 that of the payout for men [2]. This results in many women who are retiring on their own facing the possibility of doing so in poverty.
Why is this occurring and how can we help solve this issue?
Lack of superannuation savings can arise from a number of scenarios. Women are more likely to work part time to allow them to perform unpaid work such as caring for family members as well as managing the majority of domestic work at home – whilst the majority of men work full time performing less of these duties.
Women’s employment also tends to congregate in low paid areas such as retail, front line financial services as well as health care and social assistance. Women also often find they sacrifice income for flexibility in working arrangements to allow for their caring obligations.
So how can we address the issue of low super balances?
In my view, one of the ways we can drive cultural change is for both men and women to push for flexible working arrangements. This means challenging the traditional view that men should maintain full time employment whilst women drop to part time employment to raise their young children. If both men and women have access to flexible work hours, then it becomes easier to juggle the caring requirements of young children. This in turn should allow women to work additional hours and build larger superannuation balances in their own right.
What can we do from a practical sense in the mean time?
As a financial planner, we have a number of superannuation strategies we utilise for our clients, each with various benefits. Please seek advice to determine whether these strategies will suit your personal situation.
Contribution Splitting: In certain circumstances, an individual can split up to 85% of their previous years concessional (employer) super contributions with their spouse. This strategy has significant planning benefits including:
• Managing equalisation of superannuation account balances between spouses given the new $1.6 mill cap. Where one client is on track to build a large superannuation balance close to the new $1.6 mill cap, splitting up to 85% of contributions each year can allow the spouse with the lower balance to take full advantage of their cap.
• Where spouses have an age difference, there may be a difference in the years where superannuation can be accessed. Splitting contributions to the older spouse means superannuation benefits that would otherwise not be eligible to be accessed due to age restrictions, will become accessible to the elder spouse earlier under the low-rate tax threshold.
• Where spouses have an age difference, there may be Age Pension planning benefits to split contributions to the younger spouse. This is because superannuation only becomes an assessable asset once you become eligible for the Age Pension.

Leanne is 57 and is planning on retiring in the near future. Her husband John is 47 and earns $100,000 p.a. as a contractor. During the year, John contributes $25,000 into his super, reducing his taxable income to $75,000. Then in August, John opts to split $18,750 into Leanne’s super. These contributions will boost Leanne’s balance and become available for her to withdraw from super tax free under the low-rate tax threshold when she retires – effectively allowing John to reduce his income tax whilst not locking away the funds until John retires.

Spouse Contributions and tax offset: In certain circumstances, if an individual has an assessable income (plus reportable employer super contributions and reportable fringe benefits) of $37,000 or less, their spouse can make a contribution of $3,000 into the low-income spouse’s super account and receive a tax offset of up to $540. This will boost the super balance of the spouse whilst saving tax for the high-income earner.
Tony currently earns $90,000 p.a. and is married to Sophie, who works part time earning $30,000 p.a. Tony receives a bonus and opts to contribute $3,000 into Sophie’s super fund. By doing this, Tony receives a rebate in his tax return which reduces the tax he will pay by $540.
So, if you would like to hear more about these strategies and how they can help you, please contact Income Solutions for a catch up.

[2] Ross Clare, ‘Are retirement savings on track?’ (The Association of Superannuation Funds of Australia Limited 2007).
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.
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How to Avoid a Centrelink Overpayment

Many of you may have heard in the news recently about Centrelink sending debt recovery letters to many government benefit recipients, including Family Tax Benefit recipients. This can be a distressing time for the families when they realise they may have to repay the overpayments.

What many people aren’t aware is that Centrelink relies on the income information we provide to make their benefit calculations, and if the information they have is out of date, over or under payments may arise.

Household income affects family payments such as Child Care Benefit and Family Tax Benefit A & B. Centrelink state – ‘The payments you receive will be checked against your actual income after the end of the financial year.If you have received more than you are entitled to, this amount will need to be repaid.’

On the flip side, if you have received less than you were entitled to, this will be rectified at the end of the year when Centrelink balance payments.

How to stop a discrepancy occurring:

  • Log on to your My Gov account and access Centrelink
  • Click on the My Profile box and make sure all your information is up to date including relationship status, contact details and that all children are listed correctly
  • The Family Assistance and Estimates box shows what income Centrelink are calculating their benefits from.IS THIS CORRECT?
  • If not, in the top left hand corner, select the Menu drop down and click on Family Assistance / Update Family Income Estimate
  • Click the ‘Update Income’ box and update what you expect your income to be for that financial year

Come July, it will be a good idea to revisit your income estimate for the coming financial year considering any probable salary increases. This is especially important if you have opted to receive your Family Tax Benefit fortnightly to ensure you are not being overpaid.
Lastly, if you are unsure of anything, give your Adviser a call to clarify your situation.

 

Lee Nickelson, Certified Financial Planner®

 

Please note: The advice in this article is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

 

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Myth #5: Now I have a plan, I am set

Blog - Linked In Size (1)For the final instalment of the Financial Planning Myth Series, I wanted to touch on a Myth that even some people who already engage a Financial Planner believe; that is “Now that I have a Plan in place, I am all set and can execute the plan myself.

A Financial Plan is not unlike a Personal Training or eating plan; you get much better results when you have a coach who holds you accountable to enact the plan and to stick to it! Like weight loss or muscle gain goals, achieving financial goals requires hard work and dedication. Getting successful outcomes is always easier when you have someone challenging you along the way.

Whilst our industry is full of people who recommend change for change sake (mostly when it is not actually required), occasionally there are changes to your circumstances that you might not realise cause ripple effects right throughout your Financial Plan. For example, consider the impact of a large home renovation, whilst this might not seem like a huge deal, have you considered things like:

  • Does your Will need changing to reflect your wishes and to equalise your estate?
  • Do you require higher sums of Life and Total & Permanent Disability Insurance?
  • Does your Home Loan need reviewing and could you get a better rate now you have more debt (hence more bargaining power with the Bank)? Perhaps you should contact your Mortgage broker or lending specialist.
  • Are there strategies you could use like Debt Recycling to reduce your Mortgage more quickly?

A good Financial Planner can give you the tools and create a Plan to get you on the right path, but even the best laid plans will require tweaking and adjustments over time. The value added through a long-term partnership with your Planner can be invaluable.

To quote Will Rogers: ‘Even if you’re on the right track, you’ll get run over if you just sit there.

Steven Nickelson, Financial Planner

 

Please note: The advice in this article is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

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Adversity and perseverance in every day life

In December, we Bec blog Jan 2016at Income Solutions held our End of Year Event in Geelong and Melbourne to say “thank you” to our wonderful clients. Every year we have a theme and this time it was “Adversity and Perseverance”. What does that have to do with Financial Planning? Well, in terms of “hanging in there”, quite a lot really.

In a complex world with billions of inhabitants, we often find ourselves needing to be tough in order to get by – and some have it much harder than others. One of our guest speakers at the event was Moira Kelly; an amazing humanitarian who thinks nothing of entering a war torn country to help sick and injured children receive adequate medical care and a warm bed. Her list of achievements and awards from 1986 onwards would make most of us feel incredibly guilty for complaining about a bad hair day or not having a nice enough car.

Moira is one of those special people with a very interesting psyche that not all of us are born with. As a little girl, she wanted to work with Mother Theresa to help those in need. At the age of 18, her wish came true. However, Moira made it happen. She willed it to happen, but also planned and took the necessary steps to make her dream a reality.

A timely example of this level of perseverance is Mr David Bowie and his rise to fame. This week I watched a documentary on his journey to creating the Ziggy Stardust character. I like to think I’m quite knowledgeable about music artists, as my preferred literary genre is the music biography. However, I wasn’t entirely aware of just how long it took Bowie to score a hit single and sell a decent amount of records. As David Jones, he formed his first band at 15, at 20 he released a strange novelty single that flopped, followed by a string of unsuccessful singles. It took Bowie ten years to become the huge star and incredible artist we know and love (and mourn) today. The level of belief in himself and his talent is what eventually made him one of the most influential music artists of all time. Most musicians would have given up during that ten year period.

So how does adversity and perseverance apply to you and I, in our everyday lives? We don’t need to be a Moira Kelly or a David Bowie to reach our goals. However, if we want to live a fulfilling life and do the things we love, we have to “hang in there” sometimes. Are you in the right job? Do you even like it, let alone love it? Would you consider going back to study to get a job you really want? Are you currently earning what you deserve? In terms of finances, is your money working for you? How (if at all) is your money and super invested?

So many questions to ask ourselves! Sometimes we have to change a few things in our lives to get on the path we should be on. Some of us will face adversity, most of us will need to persevere – but we only get one shot at life. At Income Solutions, we’re more than just financial planners – we believe that investing in yourself and doing what you love is the key to a happy and fulfilling life; and we talk to our clients about this every day.

Are you just starting out and want to find out about putting a plan in place to secure your financial future? Perhaps you just want to learn more about how your hard earned cash can be better invested? We have a range of free information sessions held in our Geelong and Melbourne offices which cater for everyone. It doesn’t matter how much you earn, or where you are in life, you can make some informed decisions and sensible choices to help design yourself a life that you can be passionate and excited about. So, get in touch!

Rebecca Lee, Marketing Manager

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Myth #4: My Adviser should get me the best returns

SN blog 2016With recent market sentiment being all negative, oil price concerns, China devaluing the Yuan and Australian Share markets at a 2 ½ year low earlier this week, it’s timely that I post the 4th Financial Planning myth of the series; My Adviser should get me the best returns.

A good Financial Adviser, in fact, should be brave enough to admit that they’re unable to control markets and manipulate your portfolio to time markets and ‘buy low and sell high.’ Likewise, adding value by ‘picking’ individual stocks or Fund Managers is elusive.

As John Bogle, Founder and former CEO of Vanguard puts it, ‘Successful Investing is all about common sense.’ ‘Simple arithmetic suggests, and history confirms, that the winning strategy is to own all of the nation’s publicly held businesses at very low cost.’

“So what does a Financial Adviser do, then?”

A truly great Adviser should assist you to build a capital base that produces enough income to enjoy the lifestyle you want to live in the future; all whilst juggling your short term goals such as building a family, educating said loved ones, paying for travel to give your family great experiences along the way, covering contingencies (in case life doesn’t go as planned) and allowing you work-life balance – so you can enjoy the spoils of your hard work.

Indeed, there are many roles an Adviser should play in your life; including educating you to make sound decisions with money, reassuring you during tough times, giving you recognition for your efforts and achievements, providing you with peace of mind, and offering a sounding board to bounce ideas off.

My favourite description is ‘an unreasonable friend’. As a coach and a friend, your Adviser will be someone in your life who gets behind you and can give you a nudge beyond the normal limits you have set for yourself in order to help you reach for something greater. Someone who will not simply tell you what you want to hear, but rather what you need to hear, and always put your interests in front of theirs. It sounds simple, but that is often very difficult to find.

To book an appointment with an Income Solutions Adviser, visit our website now!

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DAVID RAMSAY’S END OF YEAR COMMENT

As the year comDavid EoYes to an end, you will see in the media the so-called financial experts trying to predict what the share market will return in 2016.

Personally, I never make short term predictions about the share market; but if I did it would similar to Nick Murray’s prediction for the US market for 2016. Many people say if the US sneezes we get a cold, however I hope we get what Murray predicts the US will receive in 2016:

“We’re simply observing that five hundred large profit-seeking companies, managed by experienced professionals, are currently planning to commit very large cash sums to strategies which might, if successful, result in both direct and indirect benefits to the patient, diversified, long-term investor”. Nick Murray, Client’s Corner, Dec 2015.

To find out more, I urge you to visit Nick Murray’s website and subscribe to his Newsletter Client’s Corner. The article is entitled How Companies Are Planning To Reward Shareholders In 2016. I also recommend, if you have not already done so – that you attend our free information evening Common Sense Investing. We have dates scheduled for January, however if you are still enjoying your holidays, our 2016 dates and can be viewed here.

Merry Christmas and Happy New Year to all.

David Ramsay, CEO and Founder

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RETHINKING YOUR DECISIONS

Copy of Copy of Copy of Copy of JulyAs part of my current study I was required to research and analyse the Charter Hall Group. I am inclined to share some of my findings with you.

Charter Hall Group (CHG), is a property funds manager which, was founded in 1991. The group employs specialist intellectual property and advanced intellectual knowledge to manage property assets across retail, office, residential and industrial properties. These assets can be held in either unlisted, or listed property trust.

The Charter Hall Group’s intellectual property includes investment management, asset management, property management, transaction services, development services, and treasury, finance, and legal and custodian services as outlined in the Charter Hall Group Annual Report 2015. Consequently, Charter Hall consider themselves to be the upmost experts in property.

On the 16th of June 2006, the Charter Hall Group floated on the ASX, closing at $4.97.

On the 14th of December 2015, the Charter Hall Group closing price was $4.33. This demonstrates a loss of over 12%, in 9.5 years.

I ask you, taking into consideration the information I have just shared with you.

If the experts at Charter Hall are unable to make a profit in the property market, why do so many Australians invest their time, and expend their energy trying to turn property into profit?

David Ramsay, Founder and CEO

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