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MAKING THE MOST OF YOUR TAX REFUND

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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.

Article originally published by AMP Ltd.

THE VIRTUE OF (SALARY) SACRIFICE

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When you make a sacrifice, you’re usually giving something up with the expectation of future gain.

Salary sacrificing into your super is no different—you’re giving up ready access to your money in your take-home pay. But in return you’re boosting your retirement savings and saving on tax.

You can pay extra cash into your super from your pre-tax salary at the concessional 15% rate of tax1 —up to a limit (or cap) of $30,000 for 2014/15 (or $35,000 if you’re 49 or over). That’s a considerable tax saving for most people on their usual marginal tax rate.

Get your regular payment in place

With a new financial year fast approaching it’s a great time to get your salary sacrifice arrangement in place – on top of the regular super guarantee payments made by your employer. This way you’ll be able to maximise your concessional contributions and minimise your tax burden over the course of the next financial year.

Boost super, save on tax

Let’s look at how salary sacrifice could work in practice.

Judith, aged 50, is a teacher earning $80,000 a year. She currently puts $385 per fortnight into her online savings account (approximately $10,010 a year) and wants to start building up her retirement savings. She is considering whether to make:

  • an after-tax contribution into superannuation of $10,010 a year, or
  • an equivalent pre-tax (salary sacrifice) contribution.

After-tax contributions v salary sacrifice for Judith (2015/16)

In both scenarios, Judith’s take-home pay is the same. But by salary sacrificing into super, Judith can increase her super contributions for the year by $2,980, even after taking the 15% contributions tax into account.

Salary sacrifice checklist

Salary sacrifice isn’t without pitfalls. You’ll need to make sure you don’t unintentionally go over your contributions cap or reduce your other entitlements.

Here’s a handy checklist to make sure that you’ve ticked all the boxes.

1. Make sure that you can salary sacrifice

  • Does your employer allow salary sacrifice?
  • Are you under age 75?

2. Complete your employer’s standard salary sacrifice paperwork

  • You can’t salary sacrifice income already earned.
  • Plan ahead to sacrifice bonus and leave payments.

3. Make sure your other entitlements aren’t affected

Check with your employer:

  • how your super guarantee is calculated
  • the definition of ‘salary’ used to work out your payments.

4. Monitor your concessional contributions cap

Check all concessional contributions for the financial year. These include:

  • compulsory contributions paid by your employer – such as the super guarantee
  • contributions from a previous role within that financial year
  • pre-tax contributions on top of your super guarantee
  • administration fees and insurance premiums paid by your employer
  • contributions allowed as an income tax deduction – such as contributions you make if you are self-employed
  • notional taxed contributions if you are a member of a defined benefit fund

5. Get the agreement in writing

  • Every employer is different. Make sure you know when your contributions are paid within the financial year so you don’t go over your concessional contributions cap.

6. Set up a notification

  • Download the AMP app and set up an alert to notify you when your payments reach your account.

So don’t delay. Make sure you get your salary sacrifice arrangement in place by 1 July to take full advantage of the government’s tax concessions for the next financial year. You’ll soon see the difference when you next look at your super balance.

At Tailored Lifetime Solutions, we can help you plan your salary sacrifice strategy and keep track of your contributions cap. Call us on (03) 9851 0300 to arrange a meeting with one of our Financial Planners.

1 Or 30% if you earn more than $300,000 a year.

Article originally published by AMP Ltd.

2015-16 FEDERAL BUDGET – WHAT DOES IT MEAN FOR YOU?

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The Federal Budget is in and while it may not be as contentious as last year’s there are still some proposed changes that could affect you. Whether you’re a retiree, a family with young children, expecting a new baby or running a small business the budget may have an impact on you.

The technical specialists at AMP have put together a brief discussion on the proposed changes and how they affect families on a practical day-to-day level.

At Tailored Lifetime Solutions we specialise in helping people achieve their financial goals in an ever changing environment. If you have any questions about how the proposed Federal Budget changes may impact your financial goals call us on 03 9851 0300 to arrange a meeting with one of our Financial Planners.

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HOW TO NEGOTIATE THE BEST PROPERTY PRICE

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Negotiating the best property price isn’t a matter of swindling a seller. It’s about doing your homework, knowing what you want, knowing the market and making sensible offers.

When you are buying property, getting the best price can mean the difference between being able to afford it and having to settle for second best. And, of course, a purchaser is often negotiating with a seasoned professional, so any time spent brushing up on negotiating skills is well spent.

But we’re getting ahead of ourselves. For a first-class property price negotiation, the homework starts well before you even let the agent know you are interested.

The first thing to do, says buyers’ agent Shelley Horton, is get a good understanding of your requirements and circumstances. Aside from the location and type of house you are looking for, this understanding involves finance, of course.

“One of the first things I would be wanting to find out is whether a purchaser will be borrowing to finance the property, and how much they are looking to borrow,” Horton explains. “If someone is relying on finance as part of the property purchase process, I would always recommend they go and get preapproval, because if you don’t have preapproval, it doesn’t really put you in a strong position against the rest of your competition.”

Aside from meaning that when you do eventually make an offer it will be taken seriously by the seller or their agent, having finance sorted out means that you can be sure of what your stamp duty and associated costs are, and exactly what price range you can consider.

“We can start to work out what an offer range might be, and then it’s just a matter of ascertaining the market,” Horton says.

“This means doing lots and lots of research – seeing the prices other similar properties are listed on the market, checking recent sell prices for other properties that fit the criteria, comparing as much as we can like for like, so then you know that you’re not paying too much.”

Horton initially looks at online resources such as realestate.com.au or Domain. She also uses RP Data reports, but notes that the general public doesn’t usually have access to these (agents, valuers and credit advisers usually do).

“The reports give us a little more insight into properties that have sold, and background on the circumstances and situations leading up to a property coming on the market, how long they’ve been on the market and whether they have switched agents,” she says.

Above all, the best thing a buyer can do is get out and look at properties, and speak to the agents to build contacts.

“I inspect properties and go to auctio555ns just to keep in touch with the area, to see what the market is doing,” Horton says. “If you go to an auction and there was a lot of hype around the property, but then you find that there was really only one person interested in bidding, it tells a different story.”

Once you have your finance sorted and you’ve found that special property, get the building and pest inspections done as soon as you can so that if you do make an offer, you are prepared to move quickly. This can give you the edge on your competitors.

“If you have your homework done – your due diligence reports, your finance – you know exactly the position you’re in and you’re ready to go, and letting the agent and vendor know that is actually a good thing,” says Horton. “An agent wants to look for all those signs to see who is the most serous buyer. So being able to make an offer, possibly with no cooling off, will put you ahead of anyone else, because the agent knows that you’re going to start talking about dollars and, once you agree, it’s a done deal.”

Finally, it’s time to talk dollars, and you are well armed by the time you reach this point. Most agents will make buying guides available at inspections, so you will have a good idea of the vendor’s expectations; you will have a certain budget in mind because your finance is locked in; and you will have a good idea of the value of the property from all the preparation you have done (if you are still unsure here, you can have a professional run a valuation or engage a buyers’ agent).

So what should you offer? “I tend to not start too low because the agent won’t take you seriously,” Horton says. “You have to get that balance right. You might want to start five per cent below a realistic opinion of the value of the property, and go from there. It also depends on your budget. Certainly start below your maximum, and work up to that. Every dollar you get the property under your budget is a bonus for you.”

One exception to this is when a property has been on the market for a long time and there is not much interest in it. “That might be the case where you can get something at a heavily discounted price because the property is stale,” Horton says. The key to knowing whether this is the case, of course, is all that thorough research you’ve done.

At Tailored Lifetime Solutions our dedicated MFAA Approved Credit Advisor, Paul Bridges, can help get your finance sorted out so you are ready to make a deal. Call us on (03) 9851 0300 to arrange an appointment.

Article originally published by MFAA.

INVESTING – THE BASICS

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Investing can sometimes seem complicated. At Tailored Lifetime Solutions, our Financial Planners talk to clients about investing every single day. Their goal is to demystify the subject and help people make some pretty big decisions about their personal goals and how they’re going to achieve them. AMP has put together an introduction video that will help you understand some basics about investing and explain who really is an investor. If you want to know more about investing or if you want help building a plan to achieve your goals, call us today on (03) 9851 0300 to arrange a meeting with one of our Financial Planners.

 

 

 

SOCIALLY RESPONSIBLE INVESTING

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You can invest your super in an ethical way without affecting your bottom line.

Socially responsible investing has come a long way over the past 15 years or so. It used to be a marginal activity, confined to government agencies and activists, and focused more on ‘negative screening’ by excluding companies that take part in activities like arms, tobacco, pornography, alcohol and gambling. There was also the perception that it could negatively affect your bottom line.

Now socially responsible investing is increasingly common as ordinary investors realise the power they hold to influence companies for the better. As such, it’s moving towards ‘positive screening’ with investment in companies whose products and services have a positive and sustainable effect on society and the environment. What’s more, investors are realising that socially responsible investments can perform just as well as other types of investment. As Peter Shergold, AMP Limited Director, asserts “[i]f you look at most socially responsible funds through the Global Financial Crisis and beyond, they’ve actually done pretty well compared to other funds.”

So you may be able to more closely align your investment strategy with your ethical beliefs without affecting the performance of your super. In addition, there are links between an organisation’s environmental and social impact, the quality of its corporate governance, and its long-term business success.

What is socially responsible investing today?

Socially responsible investing takes environmental, social, ethical or governance considerations into account. It can involve investing in businesses and funds engaged in solving challenges such as:

  • helping the working poor buy a home through microlending
  • developing sustainable agriculture in developing countries
  • building energy-efficient infrastructure like wind farms.

AMP Capital—making a difference

At AMP we like to talk about Environmental, Social and Corporate Governance (ESG) investing. And the issues are as important to us as they are to you.

As Australia’s largest responsible investment manager, our AMP Capital investment experts have over a decade of experience integrating ESG factors into investment decisions. A deeper understanding of ESG factors provides greater insight into areas of potential risk and opportunity that can impact the value, performance and reputation of the investments we make on your behalf.

Back in 2007 we were among the first companies to sign on to the Principles for Responsible Investment. We are committed to extending ESG integration across our mainstream investment activities.

So you can rest assured we are working to hold the companies in which your money is invested to account.

Take control of your super

If you want to make sure your money is invested in a way you are comfortable with, you should ask the hard questions. Remember, it’s your money. So you get to decide how it’s invested. And at Tailored Lifetime Solutions we can help you take control of your super and own your tomorrow.

If you’d like to know more, call us on (03) 9851 0300 to talk to one of our financial planners.

Article originally published by AMP Ltd