Blog

Jul17

A Boost to Small Business - how to benefit from tax cuts!

Friday, July 17, 2015

 

 

One of the most talked about changes in this year’s budget was Treasurer Joe Hockey’s announcement of an immediate deduction for small businesses for acquired assets up to the value of $20,000, a generous increase from the current $1,000 threshold. From July 1, small businesses tax will also be cut to 28.5%.

So why is the government so keen to give small business a boost? And if you’re one of the two million small business owners in Australia, what can you do to make the most of the changes in the lead up to the end of financial year?

Urging small businesses to 'have a go'

 
The $5.5billion small business package designed to stimulate the economy by encouraging small business owners to spend now – anything from “cars and vans to kitchens and machinery,” according to Mr Hockey in his budget speech.

Given 96 per cent of Australia’s businesses are small, they employ over 4.5million people and they are typically able to make purchase and hiring decisions quickly, boosting small business confidence and investment can have a significant and almost immediate impact.

 
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Jul10

Trauma Insurance and the Big 4

Friday, July 10, 2015

 

 

 The very first successful human to human heart transplant was performed in 1967 by a team of specialists including Heart Surgeon Dr Marius Barnard. Not only was Dr Barnard part of the team that changed medical history, but he’s also responsible for the introduction of Trauma insurance in Australia.

Dr Barnard noticed that improvements in medical care meant that many more patients were now surviving and recovering fully from their medical conditions but in doing so were suffering from financial stress and the financial burden associated with the cost of treatment and recovery, not to mention time out of work.

So in 1983 Dr Barnard launched an insurance product called “dread disease insurance” which covered four major medical conditions being heart attack, stroke, cancer and coronary artery bypass surgery, also known in the industry as the “Big Four” medical events. 

Whilst the trauma insurance product has evolved significantly since 1983, the Big Four :

  • heart attack
  • stroke
  • cancer
  • coronary bypass surgery

Statistics show that more than $621 million was paid out in Trauma claims in Australia in 2013 *. This is likely to increase with the Cancer Council of Australia forecasting 149,990 new cases of cancer to be diagnosed in 2020, up from just 47,388 cases diagnosed in 1982. 
 

Calculating the exact level of cover needed will be different for everyone. A trauma policy can provide funds to help prepare the unexpected. It can assist by providing funding to pursue top-level medical treatment, travel to seek medical assistance or allow a partner or spouse to take some time off work to provide care. It could also cover medical and treatment costs and out of pocket medical expenses, replace income in the event that you can’t work and go towards reducing or repaying debt.

To work out an appropriate sum insured for Trauma cover, typically a needs analysis will be required to take into consideration your own personal and financial requirements.

 



Jul06

How much money do I need to retire comfortably?

Monday, July 06, 2015

How much is enough to retire on- “How long is a piece of string?”

The English language is a filled with wonderful idioms one of my favourites being the sub-title to this discussion. When it comes to the question of how much money one needs to be able to retire comfortably today there has probably never been a better answer except perhaps the old stalwart of the legal profession “it depends”.

The question is of course on what does it depend

The answer to this is simple; it begins with the kind of lifestyle you wish to have or maintain in retirement. 

  • Where you want to live, 
  • what you want to do, 
  • Right down to what you want to eat or drink. 

Of course you also need to build in a big enough buffers for uncertainties such as illness and the replacement of major lifestyle assets like cars and homes. 

It’s an intensely personal question and can only be answered through a structured process with a professional of thinking through what you really want and how this relates to what you are able to afford based on your assets and savings patterns.

That said one of the most important outcomes we look for when working with our clients is to ensure that they understand how the eventual move into retirement works in practical terms including how the various elements of our retirement system work together. This includes not only the personal wealth that they have accumulated in superannuation and other investments but how these relate to Government benefits and how you move from growing your wealth to living on your wealth. The all important question being how long what will you have accumulated in retirement last?

Often we find that working through the process with clients yields many surprises for them in terms of what they are able to afford to retire on when what they have accumulated with is pared with the available Government benefits.

With the full aged pension now set at $33,035 pa for a couple and $21,912.80 pa for a single home owner even with superannuation benefits of only $250,000, it is possible to enjoy a fully indexed income in retirement of around $48,200 per annum for 20- 27 years depending on investment performance etc, from a combination of your own resources and the aged pension. In the following table we have shown the potential income available to three retiree couples based on various levels of retirement wealth and assuming that they have a 20 year life span in retirement from aged pension age:-

Retirement wealth Annual income (Combined)

 

  Retirement Wealth Annual income (combined)
Couple 1  $250,000  $48,200
Couple 2 $500,000 $59,500
Couple 3 $1 Million $79,000

When it is considered that the above incomes will essentially be tax free and that many other valuable concessions are available to assist in retirement it is clear that a comfortable retirement is within reach of most Australians. The key element though is to plan early to accumulate as much as possible in the most efficient way over your life times and to understand how the financial aspects of retirement all fit together. When it comes to planning for the future you really need to guidance of experts.



Jun19

Do you feel like spending?

Friday, June 19, 2015

How consumer confidence influences the economy

When the Reserve Bank of Australia lowered interest rates, Treasurer Joe Hockey immediately urged Australian households and businesses to make the most of this opportunity, and to borrow, invest and spend.  But why does how we ‘feel’ as consumers matter? And why do policy makers and the RBA care how confident we are in the economy and in the financial decisions we make?

It’s partly because consumer confidence is an important economic indicator, and when the ANZ-Roy Morgan confidence gauge fell 0.9 per cent to an eight-month low in April 20151, it created cause for concern. ‘Confidence’ may seem like a vague term for economic data, but the economy is driven by people – and people don’t always act or spend logically. Our decisions are influenced by our emotions and beliefs, and these decisions affect overall economic performance.

What this means is that measuring consumer confidence is a bit like measuring a ‘vibe’. It’s commonly accepted that economic news influences consumer confidence. Negative headlines about the budget or economy can drive confidence down, while good news might drive it up. And sometimes waves of optimism and pessimism are more unpredictable.

In some ways, it’s a self-fulfilling prophecy. If you as a consumer feel optimistic about the state of the economy, you’ll probably feel more secure in your job. You might believe a pay rise is a possibility or that your investments will go up. Confident consumers are more likely to spend rather than save, driving economic activity. Soon it will start to look like you were right to feel optimistic.

But if you feel pessimistic you’re much more likely to hold tight to your money. When confidence is down, consumers tend to spend less and economic activity suffers.

And that’s when policy makers start to move the levers they can to help stimulate confidence. About half of Australians have a mortgage2, so lowering interest rates puts money back into the pockets of a significant proportion of the population. Rate cuts can also stimulate business investment and, by potentially lowering the exchange rate, help local exporters be more competitive. Whether all this happens as a result of the May interest rate cut remains to be seen.

With all this in mind, it’s not surprising the Federal Budget also aimed to reassure consumers3. So, while consumer confidence looked vulnerable ahead of the Federal Budget, it’s entirely possible the new measures announced on 12 May will do the job of raising confidence in ourselves – even if we’re still not sure about the economy.

____________________________________________________________

1 http://www.theaustralian.com.au/business/latest/consumer-confidence-hits-8-month-low/story-e6frg90f-1227313145711
2 http://www.smh.com.au/business/the-economy/six-ways-a-rate-cut-could-affect-your-household-and-business-budget-20150203-134hck.html

3 http://www.businessinsider.com.au/australian-consumers-confident-about-themselves-but-not-the-economy-2015-5

 

 

 



Jun10

Living longer means changes in Super

Wednesday, June 10, 2015

Nothing can be taken for granted when it comes to superannuation and aged pension policy.

Do you know how much money you need to maintain the standard of living you’re used to when you retire?

According to the latest Association of Superannuation Funds of Australia (ASFA figures), a couple currently aged 65 wishing to live a comfortable lifestyle need an annual income of $58,444 – and under the current age pension assets test framework that means they’ll need a joint superannuation balance of at least $510,000.

However, nothing can be taken for granted when it comes to superannuation and aged pension policy. Recent industry discussion about changes to aged pension entitlements and the potential to reform superannuation tax concessions means it’s more important than ever to ensure you are financially self-sufficient for your future.

Why are changes required?


As the Government’s 2015 Intergenerational Report highlighted, Australians are living longer – and this will place increasing unsustainable pressure on our aged pension system. By 2055, the average woman in Australia will live to 96.6 years and men to 95.5, and the gap between life expectancy and the age of pension eligibility is widening. Meanwhile, the proportion of people aged over 65 will continue to grow.

There are several ways to address this. First, it is likely Australians will continue working for longer. Government policy is also likely to continue to encourage more people to be self-funded retirees – while making changes to the system to ensure it is fair for all.

Minor moves for the greater good

While the 2015 Federal Budget avoided ‘tinkering’ with the superannuation system, it did announce stricter asset testing to determine eligibility for the age pension. Now, retired couples with more than $823,000 of assets (excluding the family home) will no longer be eligible for the government pension, and others will have their part pension cut. This means those affected may need to make sure they top up their super – or delay their retirement.

It’s a clear sign that people are expected to take control of their own financial future, rather than depend on public support.

Your superannuation is still the best way to save for retirement, and it will continue to benefit from attractive tax concessions. It may be worth considering putting extra money into your fund to benefit from the effects of compound growth, and new measures to make it simpler to find lost super should help consolidate accounts to reduce costs.

The budget changes will not kick in until January 2017, so there’s still time to re-think your retirement strategy. And if you’re thinking about changing your goals, it’s a good idea to talk with your adviser first.

 



Jun05

Preparing for End Of Financial Year - EOFY

Friday, June 05, 2015

 

With the end of the financial year on our doorsteps, its a good time to reflect on your financial situation.

Here is a list of common changes to consider...

Has your income changed?

The income you received during the year may not be the same as when your advice was put in place. Maybe you received a pay increase, earned some overtime or received other payments such as extra commission or a bonus. How might this affect you?

If you are making salary sacrifice contributions to super

There is a limit, known as the concessional contributions cap, on the amount you can contribute to superannuation each year from your pre-tax income. Contributions your employer makes on your behalf, such as Superannuation Guarantee and salary sacrifice contributions, count towards this limit.
If you have arranged with your employer to contribute part of your salary to superannuation via a salary sacrifice arrangement, it is important to review your contributions to ensure they are still within the concessional contribution cap.

If, for example, you’ve earned more than expected then the amount you have salary sacrificed, together with the compulsory contributions made by your employer, may be in excess of the contributions cap. This could result in additional tax penalties and administration issues. Detecting this before the end of the year can allow time to minimise any impacts.

Making tax deductible personal super contributions

You must meet certain criteria to be eligible to claim a tax deduction for a personal superannuation contribution you make. If you haven’t earned as much as you thought:

You may not to be able to claim a deduction for the full amount of the contribution. You can only claim a tax deduction for your contribution if you have assessable income to offset.

Will your spouse earn less than $13,800 this year?

If your spouse has a low income, you may be eligible to claim a tax offset of up to $500 after making a contribution to their superannuation fund. Tax offsets have a greater impact on your underlying tax liability than deductions because they directly reduce your tax bill dollar by dollar – rather than deductions which simply reduce the income you include in your tax return.

Is your insurance still appropriate for you?

Have any of these happened to you through the year?

  • A change in your salary
  • The purchase of a new home
  • Changes to your home loan repayments – such as an increase in your rate of repayment or lump sum repayments
  • Purchase of an asset funded by borrowings
  • Marriage or divorce
  • New children.

If so, you may need to review your insurance cover.

Do you have a self managed super fund (SMSF)?


You’ll be aware that having an SMSF means you have extra responsibilities as trustee of the fund. As 30 June approaches, two important considerations include:

  • If you are in pension phase, have the minimum pension payments requirements been met?
  • If your SMSF is receiving contributions from an unrelated employer, it must be able to receive contribution information through the new SuperStream data standards. If you have recently changed employers or intend to change employers, it’s important to make sure your fund can receive contributions using the data standards so you are not in breach of your duties.  


Jun03

Early access to super for people with terminal illness

Wednesday, June 03, 2015

Early access to super for people with terminal illness

 
The Assistant Treasurer has announced that, from 1 July 2015, the government will amend the provision for accessing superannuation for people suffering a terminal illness.

Under the current provision for early access to super, a person with a terminal illness is required to obtain a certification from medical specialists that they have less than 12 months to live.

The relevant regulations will be amended to change the life expectancy period from 12 months to 24 months.



Jun02

Women aged over 45 are nearly twice as likely to be disabled from sickness as men, new research has shown

Tuesday, June 02, 2015

 
 

Produced by the Financial Services Council (FSC) and KPMG Australia, the research looked at the likelihood of disability insurance claims across a range of client demographics. In particular, the report found that 45 year old females are 94% more likely to make a claim due to sickness than their male counterparts, but 22% less likely to make a claim due to accident than males in white collar occupations.

Other key findings from the research include:

A person who has held a policy for 10 years or more is 50% more likely to make a claim than a person who has held a policy for less than 1 year
Male white collar smokers are 50% more likely to claim due to sickness than male white collar non-smokers
Smokers are 12% less likely to return to work than non-smokers

The data forms part of a new Disability Income Table (ADI 2007-2011), an actuarial tool used by life companies to determine policy pricing. The Disability Income Table was last updated 20 years ago, and comprises extensive data and analysis based on more than 30,000 claims made between 2007 and 2011.

For the first time, the impact of policy duration, benefit period and cause of claim (such as mental illness, nervous disorder and musculoskeletal) are quantified within the table.



May07

What if it happens to you? Planning for the worst case scenario

Wednesday, May 07, 2014

Your partner has had a lump on their arm for some time. After having this inspected by a doctor and then referred to a specialist, a biopsy later reveals that it is cancer in an early stage. The specialist recommends a combination of removal, radio therapy and chemotherapy. Although you are looking for positives in that it has been detected early, deep down in your heart you think the worse.

A properly constructed trauma insurance plan will fix the financial problems. Typically this would cover your mortgage, children’s school fees and two years of income. From our 32 years experience we know that by easing the financial pressure, it will give you the best chance to recover physically and mentally.

Statics are showing us that 52% of all trauma claims in Australia are cancer related. The four major conditions that are covered by a tax free lump sum are; Heart Attack, Stroke, Coronary artery bypass surgery , and of course cancer.

We have been able to take the pressure of client’s physical issues by removing the financial issues.

Call one of our experienced risk planners to cover your personal and/or business situation adequately.

How can you tell if a financial planner is right for you?

When our advisers go through the exhaustive process to finally be employed by Dunsford Financial planning the one major question that we ask of them is; would you feel comfortable sitting down discussing your personal details with the adviser?

The major driver for us as an employer is will our clients be able to trust, and discuss opening with you, your dreams, fears, things that must be avoided, and areas that make you comfortable.