What are the criteria?

You must meet a range of different conditions to apply for the Co-Contribution, but as a general rule:

• You earn less than $61,920
• 10% or more of your total income comes from employment activities
• You are less than 71 years old
• You are not the holder of a temporary visa
• For full eligibility

How it is calculated:

For every dollar you earn over $31,920 the amount the government contributes is reduced by $0.0333 cutting out completely at $61,920. The ATO have a calculator for you to find out exactly how much you will receive back.

Don’t hold off…

From July 2012 the government are cutting the super co contribution from $1.00 for every dollar you contribute to $0.50 taking the maximum  you can receive to $500 so there is no better time than now to contribute. For more information

To find out more about this strategy and how it affects your personal circumstances please contact our office.

By Amy Flett

The truth is, it’s the same concept when you seek financial advice. Except perhaps the beautiful travel destination during the process. We’ll get to seeking advice shortly but first we’ll look at the motivation behind doing a DIY renovation on your finances.

One night, you can’t sleep, you’re motivated and you’re thinking of ways to get out of a financial rut, how to pay down that slowly-reducing mortgage faster, wanting to find out if investment properties in Queensland are over-valued, wondering if European markets are affecting your superannuation (Am I in the Balanced option? Does that have many international shares?), trying to get some more zeros on your bank balance and avoiding a credit card bill like you received at the end of last January. You buy the Financial Review, the latest money magazine and check out the website for the money guy you saw on TV last week.

This is where it gets interesting.

With a swag of ideas from each of these sources, you decide to renovate your financial garden, setting forth with the gusto of Jamie Durie and a pitchfork. The only problem is that there are a few financial “storm water pipes” and “underground electricity cables” to avoid as well as areas where you will want to get “council approval” before proceeding. Let’s have a look at 6 common financial DIY mistakes to avoid.

1. Superannuation contributions

A little known statistic released by the ATO is that 70,072 people are expected to exceed one of the superannuation contribution caps as at the last financial year. With a penalty interest rate on contributions of 46.5%, the implications of overlooking the current caps are significant. Proposed changes to the cap, the introduction of the bring-it-forward rule, employer super guarantee contributions, Government Co-contributions, recontribution of funds and other considerations all make this an area where mistakes are easy to make.

Used wisely, a solid superannuation contribution strategy can boost your super balance, minimise your income tax and help out the beneficiaries of your estate. A worthy area to explore with the help of a trained professional.

2. Saving for your child’s schooling

Here is a mistake made by parents, one of many they can potentially make. If you’re single, you may like to either take mental notes or skip to the next section. Saving for your child’s education costs is often thought of as simply opening a bank account in your child’s name (or in trust for your child) and depositing funds from their grandparents or as you have extra funds available. Some mistakes in this area include the following:

• Not considering the tax implications of your investment choices i.e. who’s name the investment will be held in, capital gains tax considerations, ownership issues etc.
• Strings attached. An area that is often overlooked is whether your child will still receive funds saved for their university costs if they do not go to university. Should your child still receive a lump sum?
• Planning to fund school fees only. Another area overlooked is the additional costs for study. School books, uniforms, extra-curricular activities & excursions all add to the total amount needed.
• Not considering your options. Forgetting to consider whether paying more off your mortgage, buying an education or investment bond, starting a savings plan or many other strategies may be appropriate to your unique situation can cost you thousands.
• Over-estimating your long-term discipline to save. Without a coach, teams don’t perform. Without support, habits are harder to break and harder to form. It is no different with saving. Unless you often wake up with an extra $20,000 in your bank account and wonder how you must have saved it (rather than having a low balance and wondering where you spent it), you probably need a plan, an adviser and a solid set of habits to fund your longer-term goals.
• Not knowing  all the options – the government has set up assistance in the form of the Education Tax Rebate. It was found $200 million went unclaimed last year

With the reinforcement of a skilled adviser, motivated to see you achieve your dreams, you have a greater potential to help fund your child’s education costs as they grow, achieve and excel.

3. Having a short-term mind vs saving for retirement

You may have heard the Woody Allen quote that life is what happens when you are busy making plans. On the flip-side, not planning and living totally spontaneously brings about a short-term mindset that will not benefit you in when you stop working. This brings us to retirement, the golden years when you will be more motivated by a $150,000 Winnebago than a $8,000 Vespa. A common mistake in this area is thinking that 9% or 12% superannuation contributions will be enough. With the help of your adviser, you may find out that you need $2,000,000 in order to fund your campervan, visit Norway and continue to engage in your social circle. This is not the area where you want to rely on a guess or happenstance.

This all brings us back to the reason that you would look to meet with a financial adviser or attend an information evening. The benefits of having someone to come alongside you, look at where you stand financially, help you plan using the latest strategies and work with your current accountant is almost priceless.

By Rich Peterson

Income Solutions would like to advise that we will be closed Wednesday the 25th of April. We will reopen Thursday 26th of April at 9am.

For a full listing of ANZAC day services around Geelong area please visit the City of Greater Geelong – ANZAC Day Marches and Commemorative Services

If you have owned your own home for several years, chances are your property has increased in value and at the same time your mortgage has reduced.  This equity in your home could be a potential gold mine because you can borrow against it to invest, allowing you to harness your homes financial potential.  Many people get nervous about ‘betting the house’, and this strategy isn’t right for everyone, but in the right circumstances it can significantly increase your wealth over the long term.

Understanding equity

The equity in your home can be thought of as the profit—the difference between how much your property is now worth, and how much you owe on your mortgage.  If you have owned your home for many years, your amount of equity has the potential to be in the hundreds of thousands.

An Example about Home Equity Loan

John owns his home.  He purchased it 15 years ago for $300,000.  Over that time he has worked hard to pay down his mortgage to $75,000.  In addition, the values of homes in his area have increased substantially over that same timeframe.  His home has been appraised at $700,000.  The equity in his home would be $625,000 (the current value $700,000 minus the current balance of his loan $75,000).  John will be able to obtain a loan for $500,000 (80% of his equity on the home) which he could use for investment purposes.

Benefits of Home Equity Loans

> Lower interest rates:  Generally, home equity loans offer lower interest rates than other types of investment loans.  Because the loan is secured by your home, these types of loans are considered less risky to lenders.

> Tax deductable interest: Often the interest associated with home equity loans has the added benefit of being tax deductible, which can help you maximise the financial benefit of investing.

> Put your home equity to work: Many homeowners with equity do not harness this investment potential. Home equity loans can help you to unlock the added value to your home without having to sell.

Education, understanding and knowledge are the key elements in aiding you to achieve your goals, along with the right advice and planning.  Talk to your Income Solutions adviser today if you wish to know more.

By Shylesh Sriranjan

An article caught my eye, ” Having a lend – lighter rules throw borrowers to the sharks”. It talks about being asset rich and income poor, and explains the case of Sally, a retired lawyer having problems associated with being asset rich and income poor.  Sally has $3 million dollars worth of property, however was last year knocked back when wanting to borrow $300,000 to renovate one her properties due to new regulations.  The focus has now changed and the ability of being able to repay loans through income versus using assets as backing is no longer an option.    Changes are now opening up avenues for finance brokers to offer, other less desirable options of borrowing funds.

This problem is not a new problem for many Australian’s.  An article attached from November 2004  “Senior Role for Jeff” quoting Jeff Kennett about the issue with the introduction of reverse mortgages for older Australians’ . Jeff is also chairperson of Beyond Blue, a depression initiative,  states  ”One of the trends that I have picked up is that people, as they get older, find themselves stressed and suffering anxiety because they are asset-rich and income-poor”  This is due to the fact that having that having these assets does not give them the flexibility of being able to do what they want to do, when they want to do it…

Please continue to concentrate on building a wonderful income stream from your career and the ownership of productive enterprises (shares)

By David Ramsay

Consolidating debt has many advantages,  to name a few:

• Interest rates  are reduced.  If you are paying the 21% on your GE money card then 17% on your credit card,  consolidating onto your home loan can save big dollars. This simple step of consolidating will reduce debts from 21% and 17% respectively to a much more manageable 7% that most banks offer on a standard variable loan rate.
• Multiple credit cards and personal loans bring with them multiple annual fees and charges.  Consolidating these will result in just one loan and therefore only one set of fees.
• Reducing uncertainty – by consolidating, you have one payment to pay per month instead of having many due on various days which can sometimes be difficult to keep track of.

Please see below for case study showing  Warren’s example of consolidating his loans:

Before Debt consolidation Warren is paying off 5 different loans each month

After debt consolidation Warren’s monthly repayments are reduced from $2,676 per month to $1,730 per month. He is saving $946 each month

By simply consolidating Warren’s loans, he has an extra $946 per month in his pocket. With his extra money ,  he can increase his loan repayments, start investing or saving for something special.  The world is Warren’s oyster!

By Jacqui Wilcox – Mortgage Specialist

People are always asking me questions about the sharemarket; is it going to go up or down? Is it a bad time to invest? Things are looking shaky in Europe, should we move to cash?

I haven’t the slightest idea where the market will be in 6 months from now. What I do know is that for those of us working to accumulate wealth, we should hope that it is down. Down you say? YES, down!

You see, share prices are driven by the fear and greed of people who own shares. These emotions are largely guided by media scare mongering through the dramatisation of any mildly negative piece of information by plastering this garbage on the front page of our daily newspapers, on the nightly news and online.  As John Bogle says in the very first line of his book, ‘Successful investing is all about common sense; it is simple, but not easy.’

Dividends, on the other hand, are an accurate reflection of a company’s profit. In 2008, Woolworth’s share price dropped 21.50% (driven by investors fears about the GFC), yet their dividend increased 24.30% (as a result of an increase in profits). Mum and dad investors were  scared. However – Mum, dad and the children, still eating? Fact!

Let’s say, for example, that you are 30 years old and have established that you would like to have the financial freedom that work becomes a choice by the age of 55, and have predicted that $50,000 per year in today’s dollars is what it would take to enable you to do all the things you want to do in your life. Now let’s assume you have decided on Commonwealth Bank (CBA) shares as your chosen source of income, and have set out to accumulate enough CBA shares to give you sufficient income to meet your goals (this is for the purpose of this example only, and not a recommendation to run out and buy CBA shares, although there are worse strategies out there!). Based on the income per share paid in 2011 of $3.20 (excluding Franking Credits which would be on top of this if you’re not working), you would require 15,625 CBA shares to reach you goal. Let me now ask you; how much per share would you like to pay for those CBA shares? Would that be $62.16 per share (the highest share price reached in December 2007) costing you $971,406 to obtain 15,625, or $24.03 per share (the low reached in December 2009) costing you just $375,468 to obtain your target of 15,625 shares?

Knowledge, understanding and education are the key ingredients in enabling you to achieve your goals. With the right advice and disciplined planning, the opportunity to purchase a piece of our nations wonderful productive enterprise at low prices can bring your retirement goals forward.

Our great companies are now arguably in the greatest shape they have been in; the GFC caused companies to tighten their belts, cut costs and reduce their debts, and we are now seeing companies with large amounts of cash on their balance sheets ready to invest in their future.

Once you truly understand the consistency, reliability and tax-effectiveness of the dividends available from human endeavour in action, seeing a path to achieving you goals becomes clearer. To quote a long-term client of ours, ‘for years I watched the All Ordinaries hoping it would go up. Now I hope it will go down. I know the dividends will keep coming in.’

So what will you do? Sit back, procrastinate and ‘wait for things to improve’? Or, take action, implement a plan to make your goals a reality now, and share in the spoils of what are currently some great opportunities to grow your income stream

By Steven Nickelson, Certified Financial Planner

The education tax refund has been instigated by the Australian Government to assist with the growing costs of educating primary and secondary school children. It allows parents, carers and independent students to claim money back on a multitude of items such as:

• Laptops
• Educational software
• Textbooks and stationery
• Some uniform items

In some instances you may get 50% of your money back if you have kept all your reciepts.

How much can I claim?

The refund is capped at $409 for primary school students and $818 for high school students based on a 50% refund for expenses up to $1636.

Am I eligible?

Conditions apply for the Education Tax Refund. The main criteria is you received Family Tax Benefit Part A. The government have put up a dedicated website to help people determine their eligibility

Shocking rebate facts…

Recent research by the Herald Sun details that more than $300 million in refunds is going unclaimed yearly. Treasury analysis shows 600,000 eligible students failed to claim – that figure represents one in four children eligible are not receiving the refund. Are you one of these people?!?

Further Reading:

“ A simple example of how the ETR Works” – Education Tax Refund Website.

“Family Tax Benefit Part A” – Centrelink.gov.au

By Amy Flett – Client Services Officer

Raelene is recognised as one of Australia’s greatest track and field athletes, winning Seven Commonwealth Gold and three Olympic Silver medals. Raelene was unlucky to miss out on the ultimate accolade – Olympic Gold.

Raelene was just beaten for Gold at the Munich Olympics in 1972 by East German Renate Stecher, a woman later caught up in the drug controversy surrounding all East German athletes. At the 1976 Montreal Olympics, Raelene was disqualified for 2 false starts.  Later film footage show that she had not jumped the gun on the first start.  Despite injury and disappointment, Raelene kept running. In 1982 she finished her athletic career in a high with a gold medal at the Brisbane Commonwealth Games before a packed home crowd.

Since completing her illustrious  track and field career Raelene has overcome many other challenges. In 1996 she was diagnosed with breast cancer and then a few years later with ovarian cancer. Raelene will be joining us to talk about her sporting career as well as fights with breast and ovarian cancer.

The Income Solutions team would like to wish you a Merry Christmas and happy New Year.

Our offices will be closed from Friday the 23rd of December until Monday the 9th of January 2012.

All the best,