Category Archives: Financial Advice

30 Days to Financial Wellness

As we well know, without a plan, the financial goals we aspire to probably won’t materialise.

With no structure in place, 10 years down the track, you may feel no better off than you are now, and wonder where your money went. However, sometimes knowing where to start is a stumbling block.

So to start you on your journey, here is a 30 day plan . Full of hints, tips and links to great articles to get you started.

When you get to day 27 give me a call !

Lindsay

Quick – get those Non Concessional Contributions in now

Finally, the proposed  super reforms have gone through with many changes to take place from July 2017.

One of these well publicised reforms is a change to the Non-Concessional Contribution (NCC) cap, which is to be reduced to $100k p.a. (previously $180k).

However, there are further changes to the NCC affecting those of you lucky enough to have $1.6m in super, or those who hope to attain those lofty heights in the medium to near term, which have had less press.

As an aside, to maintain reading interest & due to popular request, this is our fairly recent new family member (the horse not the child) which seems to be somewhat reducing our capacity for NCC’s, at least in the short term. He is lots of fun though, especially when I get to ride him while short-thing is at school, and then send her a selfie to really rub it in!

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Anyway back to the point….

After 1 July 2017, if you have a total of more than $1.6m in super (whether in pension, transition to retirement pension, or super) you will not be allowed to put any NCC’s into super at all. That’s none whatsoever. Nil. Only the $25k concessional contributions will be allowed (eg SGC, salary sacrifice and personal deductible).

You may ask, why would I want to put more in super as earnings on balances over $1.6m will be taxed? This is quite correct, but the earnings will be taxed at a mere  15% on income and 10% on most capital gains, so it is not that bad really. Additionally if your superfund is invested in Australian shares, it will still receive the 30% franking credits which reduce (or possibly eliminate) any tax due.

ACTION POINT

The good news is that the old rules still apply until 30 June 2017, therefore assuming you have not triggered the bring forward caps in the last two years (in which case there are transitional rules), this is a last opportunity for those near or over the $1.6m cap and under age 65 (or over age 65 and passing the work test), to pop an additional $540k into super as a tax free NCC.

If you think this might be relevant please call to discuss your situation in more detail.

Lindsay 02 8090 4112

Super Reforms Passed

The budget super reforms have now passed the senate and only require royal assent to become law, which is thought to be a mere formality.

The major changes are as follows

  • Introducing a $1.6 million transfer balance cap which limits the amount that can be transferred to the retirement phase, where earnings are tax-free. This measure will also apply to death benefit income streams.
  • Reducing the non-concessional contribution cap to $100,000 pa (or $300,000 under the bring forward provisions), limiting the ability to make NCCs to people who have a total superannuation balance of less than $1.6 million and introducing transitional rules for those who triggered the bring forward rule prior to 1 July 2017.
  • Removing tax exempt earnings for transition to retirement income streams.
  • Lowering the income threshold for Division 293 tax to $250,000.
  • Reducing the concessional contributions cap to $25,000 for all taxpayers.
  • Introducing a concessional contributions catch-up regime for those with total super balances of less than $500,000 from 1 July 2018.
  • Allowing a deduction for personal contributions without testing the proportion of employment income received (the 10% test).
  • Introducing a low income superannuation tax offset to replace the low income superannuation contribution (which will be abolished from 1 July 2017).
  • Increasing the annual income threshold from $10,800 to $37,000 for eligibility for the spouse contribution tax offset.
  • Abolishing the anti-detriment payment.

Next Steps

We will be in touch with our clients that will be affected by the pension cap and changes to existing transition to retirement pensions soon to discuss available options.

I will post a series of blog updates running through the changes in more detail. However if you have any questions please don’t hesitate to call.

One thing to consider now is if you have the means to contribute $540k as a non-concessional contribution, the 2016/17 year is your last opportunity to this before the caps are lowered (note conditions apply).

Lindsay 0413 952 180

Lets Negatively Gear Something Else

There has been much in the press recently about negatively geared investment properties and whether the tax concessions will be reined in.

However we are forgetting that you can negatively gear any investment, it doesn’t have to be property, and no one is talking about changing those rules. You can access the benefits of gearing by borrowing to invest in shares and managed funds.

Geared investment portfolios are a great way to get the banks money working for you, giving you a greater exposure to the market and earnings potential. Interest on loans used to purchase share or managed fund investments is deductible for tax. As are ongoing management and adviser fees.

Various borrowing options are available nowadays including simply using a line of credit on your home loan, or non-recourse loans where at the end of the term you keep shares that have gone up and walk away from those that may have fallen. The loan on any loss making shares is cancelled with no more to pay.

The days of old fashioned share loans with scary margin calls have long gone. Although if you like that kind of thrill we can arrange one for you!

Ten further reasons why you might like to consider gearing into shares rather than property include

  1. No stamp duty
  2. No legal fees
  3. No property agent Fees
  4. No worrying about tenants
  5. No rates, insurance or maintenance costs
  6. No land tax
  7. No agents commission on sale
  8. A higher income return
  9. A higher capital gain over the long term
  10. Ability to spread the eventual sale over several tax years minimising capital gains tax

For a more detailed discussion as to the multitude of options available  and whether this strategy might suit you please give us a call.

Lindsay 0413 952180