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5 tips to survive a decline in income

All / 02.07.2020

5 tips to survive a decline in income

Since precautionary measures were heightened to slow the spread of COVID-19, almost 1 million Australians have lost their jobs. According to the Australian Bureau of Statistics, Australia lost 7.5 per cent of its jobs between 14 March and 18 April. If you’re one of the many Australians who has lost their job, it’s understandable that you may be feeling stressed about managing your finances.

Put together a new budget

The first thing you need to do if your income has fallen is put together a new budget. With a reduction in your income, you’ll likely be looking to reduce your fixed and discretionary expenses. Put together a budget that includes your essential expenses such as your mortgage or rent payments, bills, and groceries. This is also a good time to assess which expenses you can do without until your income rises again.

Set up payment plans

Losing your source of income can be stressful, especially when you have ongoing payments to meet. If you’ve put together your new budget and you’re not sure you’ll be able to meet your regular payments, speak to your mortgage lender and other providers about setting up a payment plan. The important thing is that you do this proactively and keep communication open as having these conversations now will put you in a much better place to negotiate.

See what support you may be entitled to

The government has announced a range of support packages available to people who have lost their source of income or have had their income significantly reduced. Check which support you may be eligible to receive and organise all of the details you need to apply. Full details about the Federal Government’s measures to support individuals and businesses are available on the Treasury website.

If you’ve lost your income due to illness or injury and you have income protection insurance, check what claims you are eligible to make and what payments may be available to you.

Identify potential savings

When you put together your new budget, you probably identified expenses you could do without such as gym memberships and other discretionary expenses. To identify further savings, check if you can switch to cheaper providers for your utilities such as electricity, gas and internet and consider winding back your mortgage payments if you have been paying extra.

Seek advice from financial professionals

In stressful times, it can be hard to look beyond the current period of financial stress. However, this is also an opportune time to reset your financial plan for the future. Take this opportunity to speak with your financial professionals, including your mortgage lender or broker, accountant, and a financial adviser to manage your finances now and into the future effectively.

Moving forward

At a stressful time for people, it’s important that you don’t feel like you need to weather financial challenges alone. Taking the time to see what support may be available through the government’s support packages is a good place to start. And to set up a financial plan for the future that also addresses your current financial challenges, make sure you speak to a qualified financial professional for tailored 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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What to consider when withdrawing your super early

All / 25.06.2020

What to consider when withdrawing your super early

As the COVID-19 virus took a sledgehammer to the economy, the federal government rapidly introduced a range of initiatives to help individuals who lost income as a result of the measures taken to control the virus.

One of those initiatives was to allow qualifying individuals access to a portion of their superannuation to help them meet their living costs. Withdrawals are tax free and don’t need to be included in tax returns. Most people can withdraw up to $10,000 in the 2019/2020 financial year and up to a further $10,000 in the 2020/2021 financial year.

For many people this early access to super will prove to be a financial lifesaver, but for others the short-term gain may lead to a significant dip in wealth at retirement. And the younger you are, the greater that impact on retirement is likely to be.

Alexander provides an example that many people will be able to relate to. He’s a 30-year-old hospitality worker, and due to the casual nature of his recent employment he is not eligible for the JobKeeper allowance. He is eligible to apply for early release of his super under the COVID-19 provisions, however before going down this route he wants an idea of what the withdrawal will mean to his long term situation.

Taking the max

Much depends, of course, on the future performance of his superannuation fund. However, if Alexander withdraws $20,000 over the two financial years, and if his super fund delivers a modest 3% per annum net return (after fees, tax and inflation), then by age pension age (currently 67), Alexander will have $39,700 less in retirement savings than if he doesn’t make the withdrawal.

At a 4% net return, he will be $65,360 worse off if he makes the super withdrawal.

But that’s not the only disadvantage for Alexander. A smaller lump sum at retirement means a lower annual income. If Alexander draws down his super over a 20 year period, at a 3% net return, he will be around $2,670 worse off each year as a result of making the withdrawal. Over 20 years that adds up to a total loss of $53,375. At a 4% return, his youthful withdrawal will cost him over $96,000 by the time he reaches 87.

Reducing the risk

On the plus side, if Alexander is eligible for a part age pension when he retires, his smaller superannuation balance may see him receive a bigger age pension.

There are other things Alexander can do to reduce the financial consequences of accessing his super early. One is to only make the withdrawal if he absolutely has to. Or if he does make the withdrawal, to use the bare minimum and, when his employment situation improves, to contribute the remaining amount back to his super fund as a non-concessional contribution.

COVID-19 is adding further complexity to our financial lives, so before making decisions that may have a long-term impact, talk to your financial 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.
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Make tax deductible super contributions

All / 18.06.2020

Make tax deductible super contributions

By making a personal super contribution and claiming the amount as a tax deduction, you may be able to pay less tax and invest more in super.

How does the strategy work?

If you make a personal super contribution, you may be able to claim the contribution as a tax deduction and reduce your assessable income.

The contribution will generally be taxed in the fund at the concessional rate of up to 15% ¹, instead of your marginal tax rate which could be up to 47% ².

Depending on your circumstances, this strategy could result in a tax saving of up to 32% and enable you to increase your super.

How do you claim the deduction?

To be eligible to claim the super contribution as a tax deduction, you need to submit a valid ‘Notice of Intent’ form. You will also need to receive an acknowledgement from the super fund before you complete your tax return, start a pension or withdraw or rollover money from the fund to which you made your personal contribution.

Make sure you can utilise the deduction

It is generally not tax-effective to claim a tax deduction for an amount that reduces your assessable income below the threshold at which the 19% marginal tax rate is payable. This is because you would end up paying more tax on the super contribution than you would save from claiming the deduction.

Other key considerations

  • Personal deductible contributions count towards the ‘concessional contribution’ cap. This cap is $25,000 in 2019/20, or higher if you didn’t contribute the full $25,000 in 2018/19 and are eligible to make ‘catch-up’ contributions. Penalties apply if you exceed the cap.
  • You can’t access super until you meet certain conditions.
  • If you are an employee, another way you may be able to grow your super tax-effectively is to make salary sacrifice contributions (see opposite page).

Seek advice

To find out whether you could benefit from this strategy, you should speak to a financial adviser and a registered tax agent.

Case study

Bob, aged 55, is self-employed, earns $80,000 pa and pays tax at a marginal rate of 34.5% (including the Medicare levy).

He’s paid off most of his mortgage, plans to retire in 10 years and wants to boost his retirement savings.

After speaking to a financial adviser, he decides to make a personal super contribution of $10,000 and claim the amount as a tax deduction.

By using this strategy, he’ll increase his super balance. Also, by claiming the contribution as a tax deduction, the net tax saving will be $1,950.

DetailsMake personal contributionMake personal contribution and claim deduction
Personal super contribution$10,000$10,000
Assessable income$80,000$80,000
Less super deductionNil($10,000)
Taxable income$80,000$70,000
Income tax and
Medicare payable 4
$19,147$15,697
Income tax and
Medicare Levy saving
$3,450
Less 15% fund tax on deductible contribution($1,500)
Net tax saving$1,950
4 Based on 2019/20 tax rates

Salary sacrifice contributions

If you are an employee, you may want to arrange with your employer to contribute some of your pre-tax salary into super. This is known as ‘salary sacrifice’.

Like making personal deductible contributions, salary sacrifice may enable you to boost your super tax-effectively. There are, however, a range of issues you should consider before deciding to use this strategy.

Your financial adviser can help you determine whether you should consider salary sacrifice instead of (or in addition to) making personal deductible contributions.

You may also want to ask your financial adviser for a copy of our super concept card, called ‘Sacrifice pre-tax salary into super’.

¹ Individuals with income above $250,000 in 2019/20 will pay an additional 15% tax on personal deductible and other concessional super contributions.
² Includes Medicare Levy.
Important information and disclaimer
This document has been prepared by GWM Adviser Services Limited (ABN 96 002 071 749, AFSL 230692) (GWMAS), part of the National Australia Bank group of companies. Any advice provided is of a general nature only. It does not take into account your objectives, financial situation or needs. Please seek personal advice before making a decision about a financial product. Information in this document is current as at 1 March 2020. While care has been taken in its preparation, no liability is accepted by GWMAS or its related entities, agents or employees for any loss arising from reliance on this document. Any opinions expressed constitute our views as at 1 March 2020. Case studies are for illustration purposes only. Any tax information provided is a guide only. It is not a substitute for specialised tax advice.
GWM Adviser Services Limited (ABN 96 002 071 749, AFSL 230692) (‘GWMAS’). A member of the National Australia Bank Limited (‘NAB’) group of companies.
NAB does not guarantee or otherwise accept any liability in respect of GWMAS or these services.

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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Add to your super and get a tax deduction

All / 11.06.2020

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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HomeBuilder program

All / 10.06.2020

HomeBuilder program

The HomeBuilder program has been announced to help drive economic activity across the residential construction sector by providing grants of $25,000 to eligible owner-occupiers for new home construction and substantial renovations.

Support to build or renovate your home

If you’re looking to build a new home, complete a knock-down rebuild or to substantially renovate your existing home, you may be eligible to apply for a Government grant of up to $25,000 to put towards construction costs.

The HomeBuilder program will complement existing support measures, such as state-based first home-owner grants and stamp duty concessions. It is also accessible in conjunction with the First Home Owner Super Saver Scheme and First Home Loan Deposit Scheme. The good news is, you don’t need to be a first home owner to apply for the grant, so if you’re not eligible to participate in any existing schemes, this program might provide
you with support.

Eligibility criteria

To be eligible for a grant, the following eligibility criteria must be met:

Eligibility criteria

Age and citizenship• You must be an Australian citizen
• You need to be aged 18 years or older
Individual income capsYour income must be below one of the two caps below:
• $125,000 per annum for an individual applicant based on your latest tax return (either 2018/19 or 2019/20), or
• $200,000 per annum for a couple based on both individual’s latest tax returns (either 2018/19 or 2019/20)
Date of
contract and construction
• The building contract must be entered into between 4 June 2020 and 31 December 2020
• Construction must commence within three months of the contract date
Grant to build
a new home – requirements
• The new home must be occupied as a principal place of residence
• The completed value of the new build (land and property) cannot exceed $750,000
• This criteria applies where vacant land is purchased either before or after 4 June 2020, with a contract to build entered into after this date
Grant for substantial renovations – requirements• Substantial renovations to an existing principal place of residence must have a commercial contract price between $150,000 and $750,000
• Renovations include where a property (house and land) is already owned and a knock down rebuild is completed (where the new build cost is capped at $750,000)
• Pre-renovation value of the property must not exceed $1.5 million
• Renovations must improve accessibility, safety or liveability and cannot include additions such as swimming pools, spas, sheds or stand-alone garages

HomeBuilder program

Eligibility criteria

Use of property• The home must be used as your primary place of residence
• The new or renovated dwelling cannot be intended for use as an investment property
Companies, trusts and owner-builders• Not available to companies or trusts, including SMSFs
• Not available to owner-builders
Evidence requiredYou’ll be asked to provide:
• proof of identity
• a copy of a signed and dated contract
• a copy of your builder’s registration or licence
• a copy of your latest tax return (either 2018/19 or 2019/20), and
• other documents such as Council approval, contracts, occupation certificates
and valuations
Other• All contracts and agreements must be entered into at arm’s length, which means conditions such as the price and scope of works must be commercial, rather than favourable because of your relationship with another party involved
• All building and renovation work must be carried out by a registered or licenced contractor and named as a builder on the building licence or permit
• Unlike some other Commonwealth and State-based schemes, there is no
requirement that you need to be a first home buyer

Next steps

To find out more about this program and whether you might be eligible, you should speak to your financial planner, or access further information from the below sources:

LocationWebsite
NSWrevenue.nsw.gov.au
VICsro.vic.gov.au
TASsro.tas.gov.au
WAfinance.wa.gov.au
SArevenue.sa.gov.au
NTtreasury.nt.gov.au
Important information
This document has been prepared by GWM Adviser Services Limited (ABN 96 002 071 749, AFSL 230692) (GWMAS), part
of the National Australia Bank group of companies. Any advice provided is of a general nature only. It does not take into account your objectives, financial situation or needs. Please seek personal advice before making a decision about a financial product. Information in this document is current as at 4 June 2020. While care has been taken in its preparation, no liability is accepted by GWMAS or its related entities, agents or employees for any loss arising from reliance on this document. Any opinions expressed constitute our views as at 4 June 2020. Case studies are for illustration purposes only. Any tax information provided is a guide only. It is not a substitute for specialised tax advice.
GWM Adviser Services Limited (ABN 96 002 071 749, AFSL 230692) (‘GWMAS’). A member of the National Australia Bank Limited (‘NAB’) group of companies. NAB does not guarantee or otherwise accept any liability in respect of GWMAS or these services.
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A helping hand to step into your first home

All / 04.06.2020

A helping hand to step into your first home

Struggling to save for a 20% deposit on your first home? A recent Australian Government initiative may allow you to buy your first home with a much smaller deposit, helping you take that first step to home ownership years sooner.

What is the First Home Loan Deposit Scheme?

The First Home Loan Deposit Scheme (FHLDS) provides lenders with a Government-backed guarantee that allows some eligible first home buyers to purchase a home with a deposit of as little as 5%.

Who is eligible?

  • Australian citizens over the age of 18 who have saved at least 5% but less than 20% of the value of an eligible property. If applying as a couple, both must be Australian citizens.
  • Genuine first home buyers only.
  • Singles with a taxable income of no more than $120,000, or couples with a combined taxable income of no more than $200,000.
  • Owner-occupiers only. If you move out of the property it will cease to be covered by the scheme.
  • The price of the property must be less than the price cap. Price caps range from $250,000 in rural South Australia to $700,000 in Sydney and some other parts of NSW.

All of these criteria must be met.

What are the benefits?

Normally, lenders require home buyers with a deposit of less than 20% of the purchase price to take out mortgage insurance. This helps to protect the lender if the borrower cannot repay the loan. Under the FHLDS the Australian Government provides a guarantee to the lender, which means you won’t need mortgage insurance. That saves you money, but more significantly, because you don’t need to save as big a deposit, you’ll be able to buy your first home a lot sooner.

What are the disadvantages?

Purchasing a home with a smaller deposit means you will need to take out a bigger home loan, leading to greater total interest payments over the life of the loan.

Will all eligible home buyers benefit from the scheme?

No. Only 10,000 applicants are expected to receive support each financial year. Currently, around 108,000 homes a year are sold to first time buyers, so chances are that, even if you meet all the qualifications, you may not receive approval under the FHLDS. It is, however, still worth applying. If you receive conditional approval for a loan, you have 90 days to find and settle on a property.

Can the FHLDS be used in conjunction with other first home buyer incentives?

All states and territories offer support to first home buyers, mainly in the form of the First Home Owners Grant, which is basically a cash handout, and in reduced stamp duty. These can be used in conjunction with the FHLDS. Be aware, however, that different eligibility criteria apply to each scheme and that limits and thresholds vary from state to state. Some incentives only apply to newly built homes, and property value cut-offs may differ. Depending on personal circumstances you may be eligible for some schemes, but not others.

How do you apply?

The National Housing Finance and Investment Corporation has appointed a number of major bank and non-major lenders to provide loans under the scheme. Search for “FHLDS participating lenders” to find them.

Applications are made through participating lenders and their authorised representatives, including mortgage brokers. These lenders and brokers will be able to assess your eligibility for both the FHLDS and other first home buyer incentives, and guide you through the application process.

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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Waiting in cash until share markets fall

All / 29.05.2020

Waiting in cash until share markets fall

As any long-term share market investor knows, markets can go up and they can go down. While most people view a falling market as a bad thing, some investors see it as a buying opportunity. After all, it’s better to pay, say, $60 for a share after a market dip than $100 for the same share at the market peak.

Of course, to be able to exploit these buying opportunities, the cash needs to be available. That means hoarding some extra cash while markets are happy in anticipation of a rainy day. It also means having a strategy around when to invest, how much to invest, how long to hold and what to invest in. There isn’t a single, off the shelf solution to this, but 58-year-old Barry provides an example of what the rainy day investor needs to think about.

How much?

Barry is a seasoned investor with a sizable self-managed super fund. He has weathered several market slumps over the years, and when markets are trading normally, with low volatility, he is happy to build up a cash reserve of up to 20% of his fund’s value to be used when the share market goes ‘on sale’. The cash comes from dividends and distributions, contributions and realised capital gains.

When to invest?

With no hard and fast rules, Barry decides that if the market falls by 10% he will invest 25% of his reserved cash. For each further fall of 10% he will invest a further 25%, so after a market fall of 40%, all his cash stash will be invested. This could occur in a short time period or evolve over many months of ups and downs. In some market corrections he may not use all of this cash.

What to invest in?

Barry has some favourite shares and if they fall significantly in value he will top up his holdings. However, he knows this involves more risk than buying the market, so most of his purchases will be of index funds.

How long to hold?

In volatile markets price movements can be sudden, dramatic, and in either direction. Barry’s strategy is to sell any shares that produce a gain of 20% or more during the recovery phase. He also uses stop-loss orders to provide some protection from further sharp falls. Barry also limits himself to buying quality assets, and is prepared to hold them long term if the recovery is a slow one.
Barry knows his strategy isn’t perfect. If share prices don’t fall, he is left holding larger amounts of low-yielding cash than would normally be the case. If they fall a long way, he’ll miss out on buying at the bottom of the market. But Barry gains some peace of mind that if (or when) market corrections do occur, his strategy should provide some protection to his super portfolio and improve his long-term position.

Seek advice

This is just one example of a rainy day cash strategy. Everyone’s circumstances differ, and it is important to seek appropriate advice specific to your situation. Talk to your qualified financial planner about a solution that’s right for you.

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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Hands up – who wants to save tax?

All / 21.05.2020

Hands up – who wants to save tax?

Most investors and business owners are aware that the interest paid on an investment loan is generally tax deductible. These deductions can be maximised by prepaying the interest on the loan.

To do this contact your financial institution and arrange to have all of the interest costs for the following financial year brought forward and paid during the current year. You may then be able to claim these costs as a tax deduction in the current financial year.

The advantages could be considerable as the following example shows:

Phillip earns an annual salary of $110,000 and owns a rental property that generates an additional income of $23,400 each year. Phillip currently owes $320,000 on the property, with an interest rate of 4.5% per year on the loan. Assuming no other tax deductions, the impact of prepaying interest on Phillip’s assessable income is as follows:

Income  
Salary income$110,000
Rental income$ 23,400
Gross income$133,400
Less Deductions
Prepaid interest ($320,000 at 4.5%pa) $ 14,400
Assessable incomePrepaid interest ($320,000 at 4.5%pa)
Tax on gross income$ 39,523
Tax on assessable income$ 33,697
Tax saving due to prepaying interest$ 5,826

Prepaying the interest on your investment can bring forward related tax deductions this financial year. It may also enable you to fix the rate on your loan for 12 months and in so doing, could attract a lower interest rate.

Other conditions apply to claiming a deduction on prepaid interest, so first seek professional advice to determine if your circumstances satisfy all requirements. Don’t leave it until next June – start planning now.  

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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Your health and wealth during the COVID-19 Pandemic

All / 15.05.2020

Your health and wealth during the COVID-19 Pandemic

There isn’t a single person in the world who hasn’t been impacted by COVID-19. As new case numbers start to slow in Australia, so too is our economy. This time presents new challenges as everyone gets used to a “new normal” and figures out the best way to weather the coming months. This article provides an overview of different measures the Federal Government has announced to support individuals and businesses, current market performance and what you should be thinking about when it comes to your finances and continuing to build long-term wealth.

Government support for individuals and businesses

The Federal Government has announced two economic stimulus packages and the JobKeeper Payment to support individuals and businesses. An overview of the Federal Government’s measures announced to date is detailed below.

Support for individuals

The Federal Government has announced a range of measures to help individuals. Eligibility to access these measures is determined on criteria such as your employment status or loss of income due to COVID-19. Some of the key measures include:

  • two $750 payments to social security, veteran and other income support recipients (first payment from 31 March 2020 and the second payment from 13 July 2020);
  • access to the JobKeeper Payment from your employer (if eligible) equal to $1,500 per fortnight;
  • a time-limited supplementary payment for new and existing concession recipients of the JobSeeker Payment, Youth Allowance, Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit equal to $550 per fortnight;
  • early release of superannuation funds (see overview below); and
  • a temporarily reducing superannuation minimum drawdown rates (see overview below).

Full details about the Federal Government’s measures to support individuals are available on the Treasury website.

Early release of superannuation

Eligible people will be able to access up to $10,000 of their superannuation in the 2019-20 financial year and a further $10,000 in the 2020-21 financial year. To access your super early, you need to meet one of the following five criteria:

  • You are unemployed.
  • You are eligible for the JobSeeker payment, Youth Allowance for jobseekers, Parenting Payment special benefit or the Farm Household Allowance.
  • You were made redundant on or after 1 January 2020.
  • Your working hours reduced by at least 20 per cent after 1 January 2020.
  • You are a sole trader, and your business activity was suspended, or your turnover has reduced by at least 20 per cent after 1 January 2020.

If you are considering early release of your superannuation, you need to consider what the potential long-term impacts may be to the growth of your superannuation fund and retirement income. While $20,000 split across two $10,000 withdrawals may not seem like a lot of money now, it could have significant compounding value if it’s left in your fund. Understandably, people may not have any other choice to support themselves financially. Make sure you speak to a financial professional to understand your risks and if this is a suitable option for you. If you’re eligible, you can apply for early release of your superannuation directly with the ATO through the myGov website.

Temporarily reducing superannuation minimum drawdown rates

The temporary reduction in the minimum drawdown requirements for account-based pensions has been designed to reduce the need for retirees who have account-based pensions to sell their assets to fund their minimum drawdown requirements. The new minimum drawdown rates are outlined in the table below.

AgeCurrent minimum drawdown rates (%)Reduced rates by 50 per cent for the 2019-20- and 2020-21-income years (%)
Under 6542
65-7452.5
75-7963
80-8473.5
85-8994.5
90-94115.5
95 or more147

Support for businesses

The Federal Government has announced a range of measures to help businesses facing financial difficulty. Eligibility to access these measures depends on factors such as your turnover and how much your business’s revenue has decreased due to the COVID-19 pandemic. Some of these measures include:

  • increasing the instant asset write-off threshold for depreciating assets from $30,000 to $150,000;
  • allowing businesses with turnover below $500 million to deduct 50 per cent of eligible assets until 30 June 2021;
  • PAYG withholding support, providing up to $100,000 in cash payments which allows businesses to receive payments equal to 100 per cent of salary and wages withheld from 1 January 2020 to 30 June 2020; and
  • temporary measures to reduce the potential actions that could cause business insolvency.

Full details about the Federal Government’s measures to support businesses and eligibility criteria are available on the Treasury website.

How the banks are approaching home loans

Banks have announced that homeowners experiencing financial difficulty can pause their mortgage repayments for between three and six months. It’s important to remember that, in most cases, interest will still be capitalised and added to your outstanding loan balance. When payments restart, your lender may require increased repayments, or the term of your loan may be increased. These are important factors you need to discuss with your lender. Here’s what the big four banks are offering customers:

  • ANZ: deferral of repayments for up to six months, with a review after three months.
  • CBA: deferral of repayments for up to six months.
  • NAB: deferral of repayments for up to six months, with a review after three months.
  • Westpac: deferral of repayments for three months, with the potential for a further three months after review.

What do past market crashes and corrections tell us about the current environment?

While the circumstances of the current crash are unique, it’s normal to have a market crash greater than 20% every decade. Based on the last eight market crashes, the average market decline is 40% from high to low. From the initial decline to recovery, the average crash duration is 41 months, and the market bottom usually occurs around seven months after the initial 20% decline. This means it can take roughly seven months for the market to hit bottom and the following 34 months to recover.

On February 20 this year, the S&P/ASX200 hit an all-time high of 7162 points. By 31 March, the ASX200 was down 36.5%.

What should you focus on when it comes to personal finance?

While it can be tempting to sell all your investments now as the market declines, this locks in your losses and puts your wealth in a weak position. If you haven’t already defensively positioned your investments, speak with a financial adviser about how to best adjust your investing over the coming months. You should also consider how to maximise your returns as the market recovers. As the author of the best-selling investment book The Intelligent Investor Ben Graham says, “Be the realist who buys from pessimists and sells to optimists”.

Investing and building wealth is a long-term game. As such, you should be investing with a long-term time horizon in mind.

How do you best look after your health during COVID-19?

Maintain good health by eating healthy foods and exercising regularly to make sure your immune system is as strong as possible. You also need to observe the Government’s social distancing rules and only leave home for essential activities such as going to the supermarket, pharmacy, work, or exercising.

What should I do next?

During this time, you may face some challenges in your finances. Your ability, however, to understand the options available to you and what the current period means on a long-term basis is key to getting through this challenging time productively. Further, making well thought out decisions now will give you the strong foundations you need in your health and wealth as the world recovers and embarks on a new period of growth.

Before you make any big changes to your financial situation, speak to your financial adviser and accountant to get personalised advice for your unique situation.

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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End of year tax tips

All / 07.05.2020

End of year tax tips

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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