It seems western commentators can always find something to worry about regarding China. Last year it was shadow banking and the property market. Lately it’s been the sharp rise and pullback in its share market. The latter has indeed been severe – with a 32% fall over 3 and a half weeks. There have been many headlines regarding the share market volatility and efforts to stabilise the market. This note looks at the key issues.
The prospect of picking up a handy tax refund is a good reason to knuckle down and get your tax return sorted in the next few weeks…
And with an average refund for Australian tax payers of $3,630 up for grabs, it’s worth thinking about how you’ll use the money.
Tax Office figures show almost four out of five workers are likely to receive a tax refund, and surprisingly, a poll by the government’s MoneySmart website shows only 16% of people who received a tax refund last year actually spent the money.
The most popular way we used our 2014 tax refund (31%) was simply to save the cash. One in four (24%) put the tax man’s refund to work paying bills, and 18% paid down personal loans and credit card debts. Just over one in ten (11%) tipped a tax refund into their home loan.
It’s not often we receive a lump sum windfall, so it’s definitely worth thinking about how to get the most bang for your tax refund buck.
Using a tax refund to pay off debt certainly has its pluses. The average credit card debt is, coincidentally, about the same as the average tax refund, and using your refund money to clear a $3,000 card balance could mean saving around $600 in interest charges this financial year alone – especially if your card rate is around the 20% mark.
Tipping a tax refund into your home loan is a smart strategy that could even mean doubling your money. Making a $3,630 lump sum payment on a loan of $300,000 with the average variable rate of 4.7% can slash up to $7,440 off the total interest cost and cut around six months off your loan term.
If you’re among the one in three who prefer to save their tax refund, it pays to shop around for a decent interest rate. Or go a step further and ramp up the possible returns by using the cash to build a portfolio of investments. A balanced managed fund can provide instant access to a variety of asset classes.
Another way to turbo-charge the value of your tax refund is by adding the cash to your super fund. And note, if you’re a low to middle income earner, you could be entitled to a government
co-contribution worth up to $500.
If you’re interested in how to make the most of your superannuation and investments or strategies to pay off your debt faster call us on (03) 9851 0300 to arrange an obligation free meeting with one of our Financial Planners.
I am now getting very wary about going on holidays because invariably markets hit a rough patch whenever I do. That has certainly been the case over the past week with both a sharp pull back in Chinese shares and an intensification of uncertainty regarding Greece.
Two weeks ago it looked like Greece was heading for a deal with its creditors. Then at the last minute Greece’s Prime Minister, Alexis Tsipras, decided he didn’t like what was on offer from the Eurozone, the IMF and the ECB and called a referendum on it. This has seen Greece miss a June 30 €1.5bn payment to the IMF (which the IMF so far has called being in “arrears” albeit a declaration of “default” is likely by the end of July) and its banks shut with limits on ATM withdrawals (as Greeks have naturally been taking their money out for fear their deposits will be redenominated into a less valuable currency than the Euro) and on the verge of insolvency if something is not resolved soon.
The referendum has now been held and the No vote has won, with roughly a 60% of the vote. This note provides an update on what it means and the key things to focus on regarding Greece.
Consider these investment alternatives and you may just end up being better off.
Buying a home has been hailed for generations as an essential part of the Australian dream. But with house prices increasing faster than earnings, getting into the property market seems more like an impossible dream for first home buyers. You may even be better off renting in the meantime before attempting to get into the property market.
Australian capital city house prices soared by almost 8 per cent in 20141 while wages growth fell to 2.5%2 ―a record-low.
Consider these investment alternatives and you may just end up being better off.
…move into other areas
If property seems out of reach for you at the moment, consider investing in other assets instead of buying a home now or in the future―or to save a home loan deposit more quickly.
You can aim to build wealth with shares, managed funds or a fixed-term investment. And if you’re saving a deposit, some investments could give better returns than a basic savings account.
Some investment options
Consider these options and remember that all investments involve some risk. Explore our investor style calculator so you can understand your own attitude to risk.
1. Shares
When you buy shares―which you’d normally do through a stock broker or online stock broking service―you’re essentially buying part of a company. You can normally buy and sell shares anytime with no minimum time limit imposed on the investment term.
Building a portfolio of shares in different companies and industries can be financially rewarding. But because markets go up and down there are risks―your investment balance is likely to either increase or decrease, and so on throughout different market cycles.
Start by gaining an understanding of share market cycles and your own attitude to the risks they present.
2. Managed funds
When you invest in a managed fund, your money is pooled with other investors’ and managed by an investment manager. The manager buys and sells shares or other assets on your behalf that ideally increase in value. The fund then distributes income―often called distributions―at predetermined intervals.
Managed funds can be offered by managers specialising in a particular investment technique or industry (sector). They can provide access to assets and markets normally unavailable to individual investors. And you can often invest with a relatively small amount of money and make regular contributions to build your investment over time. See how investing bit-by-bit can make a big difference using our dollar cost averaging calculator.
Some managed funds specify a minimum investment term, although investment returns and risk levels cannot be guaranteed.
3. Fixed-term investments
Rather than investing for an undefined period, you may want more certainty.
Fixed-term investments offer opportunities for predetermined periods at declared rates of interest so you know exactly how much you’ll end up with at the end of the term. The downside is you’ll generally earn less than you would with other types of investments and if you withdraw your money before the end of the agreed term, a penalty will apply.
Fixed-term investments can include unlisted debentures, secured or unsecured notes, bonds and term deposits. Each type will offer specific terms, conditions and investment characteristics, normally outlined in a prospectus.
4. High-risk investments
High-risk investments can be complex, even for the most experienced investor. It’s important to consider the potentially high levels of risk before investing in assets like exchange traded products, futures, options, warrants, hedge funds and others.
Some high-risk investments are offered with the potential for higher returns, which can be tempting for investors aiming to make money in a short period of time. The reality is that you can lose money very quickly.
What’s right for you?
Investing to build wealth or buy a home can be rewarding. Whatever you choose to invest in, make sure you seek professional help beforehand. At Tailored Lifetime Solutions, our Financial Planners specialise in helping people match their investments to their personal risk preferences. Call us on (03) 9851 0300 to arrange an appointment.
1 ABC News, 2 Jan 2015, http://www.abc.net.au/news/2015-01-02/home-prices-rise-nearly-8pc-in-2014-boosted-by-strong-december/5996972
2 Business Insider Australia, http://www.businessinsider.com.au/wages-growth-in-australia-is-at-2-5-the-lowest-since-records-began-2015-2
With an up to date will you can make sure your money goes where you choose…
A recent news story reminded me of the importance of having an up to date will.
Like me, you may have read that the Sydney Swans club is arranging a memorial plaque for one of its long term supporters—a man named Royce Skinner who died in 2014.
What makes the story so interesting is that Mr Skinner had no direct family and he chose to bequeath what is believed to be a six-figure sum to the Sydney Swans Foundation.
The thing is, without a formal will in place—and no immediate next of kin, there’s every chance Mr Skinner’s wealth could have ended up in the hands of the state government. But by choosing to make his wishes known in a formal will Mr Skinner has not only provided a valuable legacy to the club he loved, he will be acknowledged for many years to come through the memorial plaque.
It could be a very different story for some 45% of Australians who don’t have a formal will.
When we die intestate (without a will) we can leave behind a mess for families, friends and even business associates to sort out. And if things turn nasty, as they can do, the people who matter most to you could face years of legal wrangling as its left to the courts to sort out who inherits your estate.
All this can be avoided by having a will drafted by your solicitor. It will set out what you want done with your property and possessions after your death as well as making provisions for all your dependents including elderly relatives. It gives you peace of mind and provides certainty for family members.
Yes, you can write a will yourself and there’s no shortage of online will kits that cost next to nothing. However it’s not something I usually recommend. For the cost of around a few hundred dollars I think it’s preferable to employ your solicitor to prepare a will. This should ensure it’s written up properly and more likely to withstand legal challenge.
If you already have a will in place, take a few minutes to think about any significant changes to your life over the last year—like the purchase of additional assets, the sale of old ones, or even a shift in your relationships, and consider if your will should be updated in light of these.
If you would like to know more about wills or discuss your estate planning needs contact us on (03) 9851 0300 to arrange a meeting with one of our financial planners.
Originally published by AMP Ltd.
It’s now coming up to six years since Greece first revealed that it had understated its true level of public debt. And this is the fourth year in which it has seemingly held global financial markets to ransom as a result of its excessive public debt level. To be honest it’s becoming a bit of a drag. Greece should never have made it into the Euro, but of course getting it out again is easier said than done. Greece is now rapidly approaching another moment of truth, and this has been causing increasing angst in investment markets with the risk of more to come. This note looks at the key issues.
Tax reform is a hot topic in Australia with lots of strongly-held views. There are three main reasons. First, despite the tax reforms of the 1980s, 1990s and 2000s the Australian tax system is still far from ideal. This is highlighted by the Government’s Tax Discussion Paper. Second, some see tax reform as a way to plug the budget deficit; in other words tax reform is actually a euphemism for boosting the tax take. Third, some see various aspects of the tax system as being significant causes of problems in the economy.
Ever since the mining boom ended around 2011/2012 there have been constant predictions of doom for Australia. Foreign commentators and investors seem to have been particularly bearish on this front. I seem to constantly come across an ad on the internet titled “Australian Recession 2015 – Why it’s coming, what to do and how you can profit. FIND OUT MORE”. Never mind that last year the same ad referred to 2014! The mining collapse is still unfolding and growth has not been great, but the bust for the Australian economy many have been foreshadowing has not occurred. This note looks at the latest growth figures and seven reasons not to be too gloomy.
The past few weeks have seen banks tighten up lending conditions for property investors – either charging higher interest rates or imposing lower loan to valuation ratios or both. There is even talk of lenders managing their exposure by focussing on postcodes. This is all in response to increasing pressure from the banking regulator APRA (the Australian Prudential Regulation Authority) demanding that the 10% cap on property investor lending growth that it announced last December be adhered to.
When it comes to arranging insurance it’s important to decide what types of insurance are available to you and what you’ll need for your particular life circumstances. From here you’ll need to consider whether you should keep it inside your super fund or set it up separately.
What are the benefits of insurance through super?
1. Get more for less
It can be cost effective to buy insurance through super. That doesn’t mean you won’t find cheaper cover outside your super fund. But it’s likely you’ll be better off because tax benefits mean you could end up paying less overall and group buying power—which normally comes with insurance through super—often gives you more for less.
2. Boost cashflow
In super you can pay for your insurance using before-tax money rather than dipping into your take-home pay, which can also be a tax-effective way to pay your premiums. Or, you can simply have the premiums deducted from your existing account balance. Be sure to keep an eye on your super balance though—less super may affect your lifestyle in retirement.
3. Access government help
You could make after-tax contributions to your super and use these to pay for your insurance. If you do, you may be eligible for a government co-contribution.
4. Be covered more easily
You’ll usually be granted insurance cover automatically when you buy through super. Outside of super you may have to submit an application, undergo medical examinations and wait for approval.
What are some of the downsides?
1. Tax on claims
Depending on your circumstances, you may pay tax on disability claim payments when your insurance is held through super. And certain beneficiaries may be subject to tax on death benefit claims they receive.
2. Limited beneficiaries
Payments (following death) can only be paid to superannuation dependents. If you have insurance outside of super there are generally no restrictions (unless your insurer specifies otherwise).
3. Longer timing on payments
When it comes to payments for some policies, including life insurance, total and permanent disablement and temporary salary continuance, the money will normally be paid by the insurer to the super fund first. The trustees can then pass it to you or your beneficiaries in accordance with the fund’s rules and the Superannuation Industry Supervision Act—this means payments can take longer.
4. Restricted types of cover
Cover provided through super can be more limited than a policy held outside super. For example, trauma cover is generally not available through super, but funds like those offered by AMP make it easy to link the cover you have inside and outside super.
What now?
After you’ve considered the pros and cons of holding insurance inside super, you need to determine the level of cover you need. At Tailored Lifetime Solutions we specialise in helping people work out the right amount of cover and type of insurance that best meets their individual needs. Call us on (03) 9851 0300 to arrange a meeting with one of your financial planners.
We look at how much money you might need each year and ways you can still budget for your social life. Australian retirees generally need a certain budget each year to live a modest or comfortable lifestyle, and industry figures recently revealed the highest annual increase in those budgets since 20101. The Association of Superannuation […]
A number of changes to the super system could create opportunities for Australians of all ages. Here’s a rundown of what you need to know. Last month, the Federal Government legislated a number of proposals that it previously put forward in its May 2021 Federal Budget. The changes announced will come into effect on 1 July […]
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