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Are you ready for June 30?

All / 09.06.20170 comments

When it comes to getting the most (money) from your annual tax return, there is always a lot to think about, so we’ve provided a short checklist of options that could open the door to some opportunities. The key here is to plan ahead.

Tax deductions—lower your liability

  • Pay now for some of next year’s expenses

If you have some spare cash available, paying for certain expenses early could mean you also get your tax break back from the ATO earlier. Expenses that are met in July could leave you waiting more than 12 months for the return. A popular expense in this category is interest on an investment loan, but be careful because not all expenses qualify you for a tax deduction in advance.

  • Cash back for some of your insurance premiums

Except for income protection, most life insurance premiums are not tax deductible at a personal level. But holding your death or permanent disability cover through a superannuation fund can achieve a similar outcome. This is an important consideration when setting up a new policy. Or in some cases you may be able to replace an existing policy with one inside superannuation, which is particularly helpful when cash flow is tight.

 

 

Super contributions—don’t waste the limits

June 30 is not just about deductions for expenses. It’s also a good time to consider the superannuation contribution limits that may be wasted if you don’t act soon, particularly as both concessional and non-concessional limits reduce significantly from 1 July 2017.

  • Salary sacrifice or concessional contributions

The annual limit for these types of tax-deductible contributions in 2016/17 is $30,000 for those aged under 49; and $35,000 per year for people 49 and over. From 1 July a cap of $25,000 per annum applies, regardless of age.

If you’re an employee, this limit covers both employer super guarantee and salary sacrifice contributions. Do you need to review and adjust your current arrangements?

  • After-tax contributions

Anyone under 65 (whether working or retired) can contribute $180,000 each year to super as non-concessional contributions. You can also contribute $540,000 in a single year by bringing forward the limit for the following two years. From 1 July the annual cap reduces to $100,000 or $300,000 over three years.

These are just a few ways to manage how your money is taxed. Depending on your circumstances, other options may be available. Your licensed financial adviser can work with you to help you achieve what is best for you this financial year. But please don’t leave it too late.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Super in Your 40’s. It’s time to get focused.

All / 30.05.20170 comments

This third article in the 4-part series on superannuation through the generations calculates how much will be needed for retirement in 20 years, how to increase the balance, salary sacrifice vs paying off mortgage, government contributions, and insurance through super.

Typically your forties is a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget, but by this age there’s a good chance there’s some spare cash that can be put to good use. As you pass the halfway mark of your working life, it’s time to give retirement planning a bit more attention.

How much?

A 45-year-old today will reach ‘retirement age’ in 22 years. Taking inflation into account a couple will, by then, need an income of around $113,000 per year if they want to enjoy a ‘comfortable’ retirement(i). With the government expecting us to be self-sufficient in our old age, the nest egg required to fund that lifestyle could be close to $2 million(ii). So, what can you do to have $2 million waiting for you in two short decades’ time?

A beneficial sacrifice

At this age, a popular strategy for boosting retirement savings is ‘salary sacrifice’ in which you take a cut in take-home pay in exchange for additional pre-tax contributions to your super. If you are self-employed, you can increase your tax-deductible contributions, within the concessional limit, to gain the same benefit.

Salary sacrificing provides a double benefit. Not only are you adding more money to your retirement balance, these contributions and their earnings are taxed at only 15%. If you earn between $87,000 and $180,000 per year that money would otherwise be taxed at 39%. Sacrifice $1,000 per month over the course of a year and you’ll be $2,880 better off just from the tax benefits alone.

It’s important to remember that if combined salary sacrifice and superannuation guarantee contributions exceed $30,000 in a given year the amount above this limit will be added to your assessable income and taxed at your marginal tax rate. And be aware that this cap will be reduced to $25,000 per annum from 1 July 2017 so be prepared to review your potential contributions for 2017/18.

What about the mortgage?

Paying the mortgage down quickly has long been a sound wealth-building strategy for many. Current low interest rates and the tax benefits of salary sacrifice, combined with a good long-term investment return, means that putting your money into super produces the better outcome in most cases.

One caveat – if you think you might need to access that money before retiring don’t put it into super. Pay down the mortgage and redraw should you need to.

Let the government contribute

Low-income earners can pick up an easy, government-sponsored, 50% return on their investment just by making an after-tax contribution to their super fund. Not surprisingly, there are limits(iii), but if you can contribute $1,000 of your own money to super you could receive up to $500 as a co-contribution.

Another strategy that may help some couples is contribution splitting. This is where a portion of one partner’s superannuation contributions are rolled over to the partner on a lower income. Your financial adviser will be able to help you decide if this strategy would benefit you.

Protect what you can’t afford to lose

With debts and dependents, adequate life insurance cover is crucial. Holding cover through superannuation may provide benefits such as lower premiums, a tax deduction to the super fund and reduced strain on cash flow. Make sure the sum insured is sufficient for your needs as default cover amounts are usually well short of what’s required.

Also look at insurance options outside super. They may provide you with greater flexibility, such as level premiums, which might be better value in the long run.

Finally, review your superannuation death benefit nominations to ensure they remain relevant. You can make binding nominations that may see your dependents receive their benefit more quickly than waiting for probate to take its course.

Seek professional advice

The forties is an important decade for wealth creation with many things to consider, so ask your licensed financial adviser to help you make sure the next 20 years are the best for your super.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

(i) Value of $59,000 today – the income calculated to provide a couple with a “comfortable” level of income as calculated by The Association of Superannuation Funds of Australia (ASFA) (June 2016) – in 22 years at 3% inflation.
(ii) Sum required to fund an annual income of $113,000 for 30 years at a return of 4% pa after inflation, fees and tax, disregarding any age pension.
(iii) The super co-contribution high income threshold for 2016-17 is $51,021.

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How’s your budget – surplus or deficit?

All / 26.05.20170 comments

Each year in early May, the Treasurer delivers the Federal Budget and many people across Australia listen intently. The Budget tells us how the government plans to spend its revenue in the coming year, whether it can afford to give us tax cuts, and whether it expects to spend more (creating a deficit) or less (creating a surplus) than it receives.

Budgets are also important on a personal level, especially when living costs are rising and uncertainty abounds. So it’s worth having a look at how you can manage your finances in the current economy.

Save more or spend less?

Is it easier to save more, or to spend less?

They might sound like the same thing. After all, saving is what we do with whatever’s left over after spending, isn’t it?

Well, not quite. You see, it’s easy for spending to get out of control, and many people actually find it easier to focus on reducing their spending than saving towards a goal.

Take control

To begin with, work out where your money goes. Start by keeping track of everything you spend and what you spend it on. There is a vast number of apps that can help you do this, but it can be just as effective using pen and paper or a simple spreadsheet.

Record your spending under categories based on necessity. Things like mortgage repayments, utilities and essential food obviously go in the ‘must spend’ group. Some things will be ‘optional but important’, and others will fit into the ‘frivolous’ category.

Do I really need this?

After a few weeks you’ll have an idea of where your money is going then it’s time to start asking yourself a couple of questions:

  1. Do I need to spend this much on this category?
  2. When I over-spend, what can I do to prevent it happening again?

It’s worth remembering that every year in Australia we spend billions of dollars on food we don’t eat, clothes we never wear and services we don’t use. So for many people, gaining control over spending doesn’t mean ‘doing without’, it just means being sensible about spending. There are numerous activities you can enjoy for free, and you can even turn a ‘thrift campaign’ into a hobby.

Watch debt

Pay off credit cards every month to avoid high interest costs. If that’s not possible, investigate consolidating credit card debt into home loans or other lower cost loans. When borrowing, always make sure you leave a ‘comfort zone’ to ensure you can meet your commitments and any emergencies that arise.

If you need assistance in preparing a personal budget that doesn’t force you to do without or give up everything you love, talk to us.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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An often forgotten aspect of Insurance

All / 19.05.20170 comments

When most people think about financial planning they tend to focus on the wealth creation side of things, but often forget about the wealth protection. Building a financial plan without adequate insurance is like building a house on flimsy foundations.

Comprehensive insurance cover can be a significant expense; however these costs can be made more affordable by taking advantage of the tax deductions that apply to specific types of insurance, and to some methods of implementing insurance.

Income protection

Due to the high frequency of claims, premiums for income protection insurance can be quite high. However, they are tax-deductible, so the cost is discounted at the same rate as the policy holder’s marginal tax rate. For example, someone on a marginal tax rate of 39% (including 2% Medicare levy), paying a premium of $1,000 would have an out of pocket cost of just $610, after the tax deduction is claimed.

It needs to be remembered, however, that any benefits paid under an income protection policy are treated as assessable income, and therefore subject to tax.

Life insurance

While the premiums for life insurance are not normally tax-deductible to individuals, there is a simple way to gain a tax benefit. Superannuation funds can claim a tax deduction for the life insurance premiums they pay. So by taking out life insurance via a superannuation fund, a similar result can be gained as if the premium was deductible to the person taking the insurance.

Using superannuation to provide life insurance has another potential benefit. As premiums are paid by the fund, it reduces the pressure on household cash flow. This may reduce the ultimate superannuation payout, but if the savings made outside of super are used wisely, the overall financial position should be improved.

The proceeds of life insurance are generally not taxable. However, a death benefit paid from a super fund to a non-dependant may be subject to some tax.

Total and permanent disability insurance (TPD)

TPD insurance is usually attached to life insurance. From a tax perspective it’s treated in a similar way, so implementing it via superannuation is usually the most tax-effective way to do it.

Trauma insurance

Trauma insurance pays a lump sum if the policy holder suffers a defined medical condition or injury. It cannot be implemented through superannuation. Premiums are not tax-deductible, but benefit payments are not subject to tax.

As with investing, the main focus on insurance shouldn’t just be on saving tax. It is a protection tool. Always talk to a qualified adviser to ensure you get the appropriate level of cover, and the most tax effective way to implement it.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.


Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Good Cashflow Makes Life Easier

All / 11.05.20170 comments

If you rely on your investments for income, an important aspect of managing your portfolio is cash flow. Correctly structured cash flow is critical, so let’s have a look at what you might need to think about.

What is cash flow?

Cash flow simply looks at the payment frequency of income from an investment. This income is paid regularly (ie. monthly, biannually, annually), but can sometimes be erratic, particularly for longer term investments, such as private equity.

It differs from the total income return in that it examines how often and when income is paid rather than the actual level of income received from the investment over a set period.

Why is cash flow important?

It’s important to understand the cash flow components from your portfolio for two main reasons:

  1. It’s a fundamental step in having an effective personal financial budget. While you may be receiving income from an investment, if the income doesn’t arrive regularly enough to meet living expenses, you will need to access cash from other sources to bridge the gap. This might involve getting a cash advance from a credit card at high interest rates, or reducing (or possibly eliminating) your monthly savings.
  2. Uneven cash flow makes accelerated debt reduction difficult to achieve.
    Due to the high initial costs involved, many of us go into debt to purchase items such as cars. However, this debt comes at a price: while you are carrying it – you cannot use these funds to invest elsewhere. It makes financial sense to reduce lifestyle debt as quickly as possible so that these funds can be used to invest in financial assets that will appreciate in value to create enduring wealth.

Consider cash flow diversification

Diversification doesn’t stop at your choice of investment assets. You need to consider it from a cash flow perspective too. It is essential to have a sufficient mix of underlying assets within your portfolio so that a relatively even income is received throughout the year. While some investments may look similar at first glance, a prime differentiator between them may be the frequency of dividend, distribution or yield payments and the terms on which they are paid.

Understanding cash flow is crucial to being able to maintain a budget, and following a workable budget is the key to efficiently managing your wealth and achieving your financial goals.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Super in Your 30’s. It’s important to squeeze it in

All / 03.05.20170 comments

If you are in your thirties, chances are life revolves around children and a mortgage. As much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which repayments are generally at their highest, relative to income. And on top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade.

Are you really expected to think about super at a time like this?

Well, yes, there are a few things you need to pay attention to.

Short-term plans

As careers start to hit their strides, the thirties can be a time for earning a good income. If children are not yet in the picture, but are part of the future plan, then it’s an excellent idea to squirrel away and invest any spare cash to prepare for a drop in family income when Junior arrives. Just remember that any savings you want to access before retirement should not be invested in superannuation.

Long-term comfort

Don’t be alarmed, but by the time a 35-year-old couple today reaches retirement age in 32 years’ time, the effects of inflation could mean that they will need an income of about $152,000 per year to enjoy a ‘comfortable’ retirement[i]. To support that level of income for up to 30 years in retirement they will want to have built a combined nest egg of about $2.7 million![ii]

If you are on a 30% or higher marginal tax rate, willing to stash some cash for the long term, and would like to reduce your tax bill, then consider making salary sacrifice (pre-tax) contributions to super. For most people super contributions and earnings are taxed at 15%, so savings will grow faster in super than outside it. For example, if you’re earning $100,000 per annum, making a contribution of $10,000 from salary to super will save you paying $3,900 in income tax for that year – and increase your super balance by $8,500.

Growing the nest egg

Even if you can’t make additional contributions right now there is one thing you can do to help achieve a comfortable retirement: ensure your super is invested in an appropriate portfolio. With decades to go until retirement, a portfolio with a higher proportion of shares, property and other growth assets is likely to out-perform one that is dominated by cash and fixed interest investments. But be mindful: the higher the return, the higher the associated risk.

Another option for lower income earners to explore is the co-contribution. If you are eligible, and if you can afford to contribute up to $1,000 to your super, you could receive up to $500 from the government. Or to keep your partner’s super humming along while she or he is earning a low income, you can make a spouse contribution on their behalf and gain a tax offset of up to $540.

Let your super pay for insurance

For any young family, financial protection is crucial. The loss of or disablement of either parent would be disastrous. In most cases both parents should be covered by life and disability insurance.

If this insurance is taken out through your superannuation fund the premiums are paid out of your accumulated super balance. While this means that your ultimate retirement benefit will be a bit less than if you took out insurance directly, it doesn’t impact on the current family budget. However, don’t just accept the amount of cover that many funds automatically provide. It may not be adequate for your needs.

Whether it’s super, insurance, establishing investments or building your career, there’s a lot to think about when you’re thirty-something. It’s an ideal age to start some serious financial planning, so talk to a licensed financial adviser about putting a plan into place so you can have everything now – and in 30 years’ time.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

 

[i] Value of $59,000 today – the income required to provide a couple with a “comfortable” level of income as calculated by The Association of Superannuation Funds of Australia (ASFA) (June 2016) – in 32 years at 3% inflation.

[ii] Sum required to fund an annual income of $152,000 for 30 years at a return of 4% pa after inflation, fees and tax, disregarding any age pension.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

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6 Smart Ways To Build Savings

All / 28.04.20170 comments

The word “thrifty” is rarely thought of in a positive sense but that’s not fair because if we continually spend more than we earn, our debts will eventually catch up and other words such as “default” or “bankrupt” might become more familiar.

Being thrifty doesn’t mean doing without – quite the opposite. Here are six simple tips to build up your savings.

  1. Create a budget and stick to it

Before you can get your spending under control you need to know exactly what your income is compared to how much you spend. There are many free online budgeting tools available, such as the MoneySmart Budget Planner found at www.moneysmart.gov.au.

Recording every purchase as you get started is an interesting exercise. At the end of every month, add up all of your purchases and compare them to your budget. It could be surprising to see where your cash is actually going.

  1. Be debt smart

Make a list of your debts and organise them in order of annual interest rate. Those with the highest rates (most likely your credit cards) should be paid off first, especially as the debt is not tax-deductible. It rarely makes financial sense to invest money to receive 8% pa while you are paying credit card interest of 20% pa.

  1. Time for a mortgage check-up?

Like all things, mortgage products change – particularly with interest rates at record lows. If you are more than five years into your mortgage, it could be time for a review. Check with your lender to ensure you’re getting their best rate. You might be astonished at the deals lenders are prepared to do to keep your business.

  1. Get creative in the kitchen

Have you looked deep into your kitchen pantry lately? At least once a week gather up the household and get creative. Brainstorm how to use some of the existing ingredients from your pantry and fridge (those that are still edible!) in new and different ways. This creative exercise will not only be fun, but will save on your grocery bills.

  1. Switch and save

When was the last time you compared costs on your home/health/car insurance, phone plans, gas and electricity? By shopping around and negotiating a better deal you could save significant dollars on your monthly spend. There are helpful websites to make comparison shopping much easier but be aware that they only list providers who have paid to be promoted on their sites.

  1. Be organised!

Most people are amazed at how many gifts they buy each year, often at the last minute. By establishing a gift list and allocating a set budget for each recipient well ahead of time, you can progressively buy gifts on sale during the year. This will certainly help your cash flow and circumvent overspending by avoiding that last minute rush.

As you watch your bank balance increase, enjoy the feeling of being in control and knowing you can have whatever you want with just a little discipline.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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What do the financial headlines really mean?

All / 21.04.20170 comments

Headlines are designed to grab the readers’ attention and sell news but often don’t accurately reflect the content of the article. Financial headlines can result in misinformation and investor panic. This article explains why it’s important to seek professional financial advice before hitting the panic button.

I’m the first to admit I’m no expert when it comes to horse racing, so hopefully you’ll forgive my ignorance. During my daily read of the major newspapers, I came across this headline in a major Australian paper:

“Trailblazer equals Phar Lap’s winning streak with triumph at Flemington.”

Wow! I thought. After 80 years, the mighty Phar Lap has been equalled!

Phar Lap’s legend has been passed through every Australian generation. According to Melbourne Museum, his exhibit continues to be its most popular. Intrigued, I read the article.

Only then did I discover that Phar Lap’s record of 14 consecutive wins has been beaten many times – Trailblazer being the most recent in a string of successful horses, including the famous Black Caviar with 25 wins.

That newspaper headline cunningly grabbed my attention, yet having read it, I felt betrayed somehow… even foolish.

It reminded me of an urgent call I’d received recently from a client. Brett is one of those guys you speak to a couple of times each year to review his portfolio – until one day a couple of months back.

Brett had seen this headline on a national news site:

“Australian shares slump amidst global economic fears, $30 billion wiped out.”

He was in a bit of a panic so I immediately checked out the article.

Sure, global markets were in turmoil over political uncertainty, but the article explained Australian shares had, “…slumped to five-and-a-half week lows.”

Excuse me?

If the markets had slumped to say, five-and-a-half year lows, Brett’s concerns might be justified.

In fairness, the article elaborated, identifying sector fluctuations and quoting figures. Too late for Brett who was already spooked and suggested selling his shares to buy fixed interest assets before his losses became greater.

Brett is not alone. Time-poor, many people scan headlines and subsequently make financial – or other – decisions in haste.

Recently, I read this headline in the financial press:

“Capital gains tax increase set to push up property prices.”

My immediate concern was that I hadn’t realised Capital Gains Tax (CGT) was rising. Reading further, I discovered the article was speculative; talks were taking place to determine whether current tax breaks should be cut.

The headline had captured my attention, but the reality of the situation was not as worrying as I’d first thought.

It pays to get the facts, right?

Fortunately, Brett contacted me before taking action. I was able to calm him down by giving an overall picture of the global situation and relate it specifically to his investment portfolio and personal strategy.

Anyone with horse racing expertise would have laughed at my naïve conclusion about Phar Lap, and but for a temporary red face, I’d have recovered.

Conversely, had Brett not consulted me, and acted on his impulse of selling his shares, his outcome may have been quite different.

They say the devil’s in the detail, and it certainly holds true for most things in life which is why we see a doctor if we’re sick, or a mechanic if the car’s playing up.

Accordingly, we should never underestimate the value of professional financial advice.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Is It Time for a Super Review

All / 13.04.20170 comments

Picture this… when you were 21 years old your well-meaning but financially inept uncle put $1,000 into an ordinary bank account for you with instructions to leave it there and let the bank’s interest turn it into a fortune. You followed his directions only to discover 34 years later when you reached 55 the balance of your “fortune” was just $13,690! What went wrong? Well, to put it frankly, you didn’t give it any attention.

This is a classic mistake that many Australians make when it comes to their superannuation.

How long has it been since you reviewed your superannuation to see if it’s on track to meet your retirement needs, regardless of whether your retirement date is two years away or twenty?

Here are some questions to ask yourself:

Do you know how your super is invested?

Have you ever made any changes to suit your own circumstances? If you’ve never made a change, you may still be invested in your employer’s default option, which may not be appropriate to your needs.

The following example explains when a default option should be reviewed…

Brian (59) and Ingrid (29) work for Some Such Corporation. Their employer pays their superannuation contributions into the company’s preferred fund, which has a default investment option with a high allocation to cash and fixed interest assets. This suits Brian as he doesn’t like risk and plans to retire in a few years. However, it does not suit Ingrid, who is unlikely to retire for a further 35 years and accepts short-term volatility to achieve higher returns in the long term.

Are you making personal contributions to super?

Making ‘salary sacrifice’ or non-concessional contributions to superannuation is one of the most effective ways to boost your retirement savings. You may also earn additional tax benefits or government co-contributions. On the other hand, if you are making regular contributions, are you sure that you’re staying within the set limits and won’t be penalised for contributing too much?

Who will receive your super when you die?

Have you nominated a beneficiary on your account, or want to make a change to your existing beneficiaries? Some binding nominations are valid for only three years. Is yours still current?

Does your super fund provide any insurance cover?

If it does, remember to check the level for which you are covered. You may find that your existing cover is now inadequate and it’s time for a top-up.

Aside from your own personal circumstances shifting, major changes are coming into effect this July, so it pays to review your super well before then. You don’t want to reach that long-awaited retirement date to find you don’t have as much as you had “hoped”. Give us a call.

Assumptions for calculation:

$1000 invested over 34 years averaging 8% interest with no additional contributions. Not including bank fees and charges.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.


Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Plan For The Unexpected Now

All / 13.04.20170 comments

 

We all hope that bad things won’t happen to us, but what if they did? These people held the same belief until…

Jordan started his own business servicing computers after working for a major IT company for many years. At age 38, he was enjoying the freedom and control it gave him. Unfortunately his car collided with a truck on the way to see a client and Jordan suffered a severe whiplash injury. He couldn’t work for two months and the loss of income made life hard for his young family.

He didn’t think to arrange income protection insurance to replace the workers’ compensation cover he’d had with his former employer.

By their late 40s, James and Jenny had worked hard to reduce their mortgage and used some of the equity in their home for a loan to buy an investment unit. It was tenanted and had the potential for long-term capital growth. Sadly, James died suddenly after a massive stroke. On a reduced income Jenny couldn’t afford to keep paying the interest on the investment loan. The unit had to be sold quickly at a loss.

They didn’t think to increase James’s life insurance when they borrowed for the unit.

At 42, Sara is a successful business owner and prides herself in managing her personal finances well. She has a diversified portfolio of property and shares. Last year she contracted breast cancer and her work was disrupted with tests and hospital treatment for five months. She has now recovered but the medical bills made a severe dent in her finances so she was forced to sell a big chunk of her share portfolio at short notice.

Sara didn’t know that trauma insurance may have paid her a lump sum if she was diagnosed with a critical illness.

Three important lessons can be learned from these cases.

Firstly, the unexpected can happen to anyone.

Secondly, take the time to review your insurance arrangements at least once every year. If there are changes in your circumstances – new job, new loans, family changes, etc. – you may need to make adjustments to your cover.

Thirdly, talk to an expert. There are many different choices of insurance and it pays to have a specialist analyse your needs and find the most cost-effective solution for your circumstances.

Review your insurance policies

The last few years have seen reduced profits for insurance companies due to lower investment returns and rising claims. This has caused premiums on most types of policies to dramatically increase.

Each time you review your insurance, check your coverage and make sure you have told the insurer all of the information they need to know. The last thing you need when making a claim is to discover that you’re not covered or you didn’t fully disclose the facts.

Checklist

  • Does your income protection policy still reflect the income you are currently earning?
  • Will your life insurance pay off all your current debts and be able to support your dependants if you can’t work?
  • Have you taken up a “high risk activity” such as skydiving which could affect your life cover?
  • Will your house insurance pay out enough to rebuild your house if it is destroyed?
  • Have you recently installed security devices on your home that could reduce your premium?
  • Have you bought an expensive work of art and forgotten to add it to your contents policy?
  • Has your vehicle been modified in any way that could affect your motor vehicle policy?

This list is by no means complete but it’s enough to start you thinking. If it’s time to arrange a review for a complete analysis of your insurance needs contact your licensed adviser.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

Read More >>
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