kristopher

Important Money Stuff This Quarter – October 2024

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This is all you need to be smarter than 90% of your friends when it comes to all things finance.

 

Here’s our quarterly economic update with all of the important money stuff you need to know this quarter:

 

1. Australia and Global Economic Update (looking back)

  • Australia: The Australian economy is slowing down. People are spending less money because the cost of borrowing is high due to increased interest rates. The country’s economy grew by only 0.2% from April to June 2024. Inflation, which makes everyday things more expensive, is still higher than desired but is expected to go down slowly over the next couple of years​(KPMG)​(RSM Global).
  • Global: Around the world, the economy is mixed. In the U.S., companies are still making good profits, but some areas, like manufacturing, are struggling. Europe is starting to improve, especially in countries like Spain and France, though Germany is facing challenges because of its strong ties to China’s weak economy. China’s economy is struggling due to problems in the housing market, while Japan is doing better with steady growth ​(Russell Investments)​(IMF).

2. Investment Market Update:

  • Global Stock Markets:
    • U.S.: U.S. companies are doing well and making strong profits, which has helped boost the stock market. But because people expect the economy to slow down, there is a risk that the market could drop if things get worse. It’s important to pay attention to job losses and company earnings​ (Russell Investments).
    • Europe: In Europe, stocks are cheaper than in other parts of the world, which makes them a good option for investors looking for long-term growth. Spain, Italy, and France are seeing some economic recovery, but Germany is still struggling ​(Russell Investments).
    • Asia (China & Japan): China’s economy is weak, but its stocks are cheap, so some investors see this as a chance to buy. Japan, on the other hand, is doing better, and its currency is undervalued, meaning it might be a good place to invest​ (Russell Investments).
  • Australian Market: Australia’s stock market has had a rough time because people are spending less, and the mining sector is facing global challenges. However, there are still opportunities for investors, especially in companies that pay good dividends (a portion of company profits paid to investors). Fixed-income investments, like government bonds, are also doing better as interest rates have come down​ (Russell Investments).

3. Looking Ahead (Opportunities and Risks):

  • Australia: Australia’s economy is expected to slow down more, with unemployment likely to rise to 4.5% by 2025. If inflation (the rate at which prices increase) keeps falling, it could create opportunities in sectors that rely on people spending money​ (RSM Global).
  • Global:
    • Opportunities:
      • U.S. stocks could keep doing well if companies continue to make profits. In Europe, stocks are relatively cheap and could be a good investment as the economy recovers. Japan’s currency is undervalued, making it an attractive option for foreign investors​ (Russell Investments).
    • Risks:
      • If the U.S. or China’s economies slow down more than expected, it could cause global markets to fall. China’s slow recovery is especially concerning for countries that depend on it for trade, like Australia​ (IMF). European markets are also at risk if the U.S. economy weakens, and Australia’s high debt levels could hurt consumer spending in the long term.

Have a read through, and as always let us know if you want to discuss any of the above further. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. If you’ve missed any of our recent articles, you can find them here.

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336.

What even is a TTR pension?

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What’s a TTR pension? Transition to Retirement is a phrase that pops up a LOT in our day to day, but what does everyone mean when they say they’ve got a TTR pension?

What’s a Transition to Retirement Pension?

A Transition to Retirement pension is a type of superannuation/pension account designed for when you’re slowing down work but still able to build up your super before full retirement. It allows you to draw a tax-free pension whilst you are still working, reduce your tax, build your super and get some great benefits in that delicate and tumultuous time between full work and retirement.

How can I draw a pension whilst I’m still working?

TTR pensions allow you to start drawing down on your retirement savings which can be really useful in the phase where you cut down on your working hours but need to supplement your income.

As outlined in the ASIC Money Smart website, if you’ve reached your preservation age (between 55 and 60) and are still working, you can use a TTR strategy to:

  • supplement your income if you reduce your work hours, or
  • boost your super and save on tax while you keep working full time.

My payments seem really small compared to my wages I’d like to replace – how does that work?

Here’s a great example of how a TTR pension can utilise the tax benefits to your advantage. Say you are in the 39% tax bracket (including the Medicare levy). You could replace $16,390 of your salary by drawing out $10,000 from your TTR pension tax-free, and have no impact on your cash flow. By avoiding paying tax at your normal tax bracket, you are getting more bang for your buck when it comes to your take-home funds.

Are there other benefits?

Absolutely there are! We’d always suggest consulting an adviser to see if it’s right for your particular circumstances, as everyone is completely different. In general, TTR pensions can help provide additional cash flow whilst you are salary sacrificing, when you might be tight on cash flow otherwise. We’ll give you an example from our mates over at MLC who’ve crunched the numbers for us:

  • Dominic (age 60) earns $160,000 a year and starts a TTR pension with $100,000. He draws a $7,076 pension each year. The additional tax-free cashflow allows Dominic to salary sacrifice $11,600 and remain in the same net cashflow position. In this scenario, Dominic’s personal tax saving would be $4,524 and net (after super contributions tax) benefit would be $2,784.

There are also scenarios that can allow you to complete a recontribution strategy if you’d like to maximise your tax-free component of your super benefit, which can be really helpful to your beneficiaries.

Let me know if I can help.

If you aren’t sure where to start then reach out by booking a time HERE. We can discuss your situation and see if a TTR pension may be appropriate for you.

If you haven’t already, you can also read our article on the value financial adviser add HERE or download our helpful guide.

 

Get 2024/25 off to a great start

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Get 2024/25 off to a great start

MLC | 1st July 2014

The beginning of the financial year is a great opportunity to review your financial situation, make sure you’re on track and on top of changes happening across tax and superannuation. Here are five areas that you may wish to review early this financial year.

#1: Make your tax savings work for you

The personal tax cuts commenced on 1 July 2024 which may mean you pay less tax and have extra cashflow, and it’s important to think about the best way to make the extra dollars work for you. If you are an employee, you may have already noticed an increase in your take-home pay as less tax is withheld each pay period by your employer. You may need the savings to meet regular household expenses and manage cost of living increases. But if you have capacity, there are ways you may be able to use the tax savings to improve your financial position, such as reducing debt, increasing your cash reserve, investing for the future or boosting your super balance.

Even small amounts can make a difference over time. If you’re able to reduce your debt, you’ll have indirect savings by reducing the amount of interest you are paying. If instead you choose to build up your savings, the right option to do this depends on a number of things including:

  • whether your investment goal is short term or long term
  • based on how long you have to invest, what you would like to invest in (eg term deposits, shares and/or
    property), and
  • whether you need access to these funds at a particular time (for example, super savings can generally
    only be accessed once you retire after age 60).

The key is to make a conscious decision to put your tax savings to work in a way that suits you best. To estimate your tax savings for this financial year, check out the Government’s calculator at taxcuts.gov.au.

#2: Review your concessional super contributions strategy

Concessional contributions include:

  • contributions that your employer must make for you (Super Guarantee of SG contributions)
  • salary sacrifice contributions (which are contributions from you pre-tax salary) and;
  • personal contributions that you claim as a tax deduction.

A limit applies to the concessional contributions that you can make without having to pay extra tax. This is known as the concessional contributions (CC) cap. From 1 July 2024, the annual CC cap increased from $27,500 to $30,000. In addition, the rate of SG contributions that employers must make increased from 11% to 11.5%.

Therefore, the beginning of the financial year is a good time to review your super contributions strategy to ensure it continues to be right for you. This includes taking into account the increased CC cap and SG rate to ensure you do not exceed your CC cap. It could also mean starting or reviewing a salary sacrifice arrangement with
your employer if you’re able to direct some of the additional income from the 1 July tax cuts towards saving for retirement.

Your CC cap may be limited to the annual cap or may be higher if you have unused concessional contributions from the last five financial years and meet other eligibility rules. These are called unused carried forward contributions. See ato.gov.au and search ‘concessional contributions cap’ for more information.

#3: Could you benefit from the increase in the non-concessional contribution cap?

Non-concessional contributions are contributions you make from after tax income or existing savings. The non-concessional contribution (NCC) cap increased from $110,000 to $120,000 on 1 July 2024. If you’re eligible, you may be able to ‘bring-forward’ some of your NCCs from the next one or two financial years, meaning
you could make even larger contributions today. The increase to the annual cap also means that the maximum amount under the bring-forward rule increased from up to $330,000 to $360,000.

Like CCs, eligibility rules apply to NCCs. This includes limits on your total super balance, NCCs you may have made in previous financial years and your age.

Remember that investing in super has the benefit of earnings being taxed at 15% compared to your marginal tax rate which could be up to 47% (including Medicare levy). However, access to these savings is restricted generally until you are retired after age 60.

#4: Submit your notice of intent to claim tax deduction for personal super contributions

If you made personal contributions in 2023/24 and intend to claim a tax deduction, don’t forget to give your super fund your notice of intent and receive an acknowledgement before you lodge your tax return for 2023/24. You must lodge your notice of intent no later than 30 June 2024 if you haven’t lodged your tax return by that point.

You also need to lodge your notice of intent before you commence a retirement phase income stream, rollover or make a withdrawal from your super account. This includes personal contributions you have made since 1 July 2024 that you wish to claim as a tax deduction.

The timeframes are very specific and there is no discretion if these are missed, which means it could impact the tax deduction you are able to claim from these contributions.

#5: Review your estate planning goals

Just like many aspects in your life, your estate planning needs to be reviewed on an ongoing basis. Your Will and Enduring Power of Attorney should be updated to reflect any changes to your finances, investments, family and goals. Reviewing your estate plan ensures that it:

  • aligns to your goals, and
  • directs your assets to the right beneficiaries at the right time.

Some key life changes that may impact your estate planning include:

  • getting married
  • having children
  • a change in relationship, such as separation or divorce
  • acquiring or selling assets, or
  • building your savings (including super).

Superannuation doesn’t automatically form part of your estate, which means unless you take certain action, you can’t rely on your Will to determine who’ll receive your superannuation balance when you pass away. Your super fund may allow you to make a death benefit nomination to people who are eligible beneficiaries under superannuation law.

Eligible beneficiaries include your spouse, children and certain other dependants. You can also nominate your estate if you want to make provision in your Will to distribute your super balance. Each super fund has rules about the types of nominations that you can make and other requirements for the nomination to be valid. If you make a binding nomination, the trustee of your super fund must follow your instruction if the nomination is valid and hasn’t lapsed at the time you pass away.

However, if your nomination isn’t binding or isn’t valid (for example, because the person you’ve nominated isn’t an eligible beneficiary, or you haven’t followed the requirements of your fund when making your nomination), your super fund will decide what to do with your superannuation if you pass away.

Final Thoughts:

As always let us know if you want to discuss any of the above further. Please bear in mind that not all the strategies will be applicable to you, and always speak with your professionals before putting anything in place. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. 

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336. If you want a hand or to know what your current nominations are, just give us a shout!

Tax Return Checklist

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Tax Return Checklist

We’re over the hump of the worst of winter and slowly creeping our way closer to spring. In central Vic, this means a lot of wet weather but glimpses of the warmth that might come our way soon!

Now that June 30 is over and done with and we’re well into July, a lot of you are starting to think about your tax returns and what you need to get together to give to your accountants.

There’s a whole heap of speculation over what you need to provide and where you get stuff from – so we’ve broken down some of the key points that we get asked a lot to help out.

Please note that sometimes, if you have complex investments and depending on your super fund and investment platform, you may not receive all of your information that you need for your tax return before your lodgment date. If this is the case, let your adviser or your accountant know what you’re waiting on so you can discuss options.

Here’s a checklist with some of the most frequent items we get asked about:

Tax Return Checklist

  • Income Protection Premiums. If you pay for income protection insurance that is held outside of super and paid for out of pocket, you may be eligible for a tax deduction. Your insurance company will send you your EOFY statements for this with the amount you can claim anytime from now, for you to pass onto your accountant. If you have an adviser, we may also send them to you as well directly.
  • Super Statements. Your 23/24 end of financial year super statements will start to become available between now and December, depending on your fund. They will be sent directly from your super fund or adviser. If you have online access you may also be able to login and download them directly depending on your fund, and don’t forget that a lot of the info flows through to your MyGov account.
  • Investments. If you hold shares, managed funds, ETFs or any other similar investment within a trading platform or investment account, you will also receive an EOFY statement. As these rely on each fund manager or share company to provide reporting, they can take a bit longer to come through to you. For example, the SelfWealth platform releases these around the end of July, but some platforms will be as late as September or October.
  • Notice of Intent to Claim. If you have made contributions and lodged a Notice of Intent to Claim form, you may want to provide your acknowledgement letter from your super to your accountant. These are usually completed and sent to you within a few weeks of your super contribution being reclassified.
  • Advice Fees. There is so much speculation over whether adviser fees are tax deductible, and unfortunately the answer is that at the moment, they aren’t. You may be able to claim deductions for your accountant’s fees and other tax costs, but at the moment, the ATO doesn’t recognise financial advice fees as a deduction.

As always, if you want to chat just give me a ring. You can book directly in with me HERE. There are also a couple of our recent articles HERE which you may not have seen.

Take care and speak soon!

Kris

What You Actually Need To Know Before June 30

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What You Actually Need To Know Before June 30

In our industry everyone bangs on about the end of the financial year (which is nowhere near as exciting or celebratory as the end of the calendar year), but people are still confused about what they should actually be doing.

This year, to make it as easy as possible for you (and us), we’ve found an amazing downloadable guide with easy, actionable information all about tax tips and super strategies to help you prepare for the end of financial year.

You may already have some of these in place, but it has a great breakdown of a lot of the different tax strategies out there to think about while we still have time. As someone very wise always still says to me regularly, proper prior preparation prevents poor performance. If you can think about your tax before June 30, you’ll be ahead of the game!

Have a read through, and as always let us know if you want to discuss any of the above further. Please bear in mind that not all the strategies will be applicable to you, and always speak with your professionals before putting anything in place. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. 

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336. If you want a hand or to know what your current nominations are, just give us a shout!