Category Archives: Investment

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

More Free Money from the Government

Believe it or not there is still the possibility to get some free money from the government. The superannuation co-contribution is hanging on in there for a little longer so make use of it if you can and grab up to $500 of free cash.

To access the co contribution you need to fulfil the eligibility criteria, the main three being as follows

  1. The work test… At least 10% of your income must be from employment or running a business. It is not available for stay at home mums unfortunately.
  2. The income test …. Your total income must be less than $50,454 to access some co-contribution and below $35,454 to get the full co-contribution.
  3. The age test …. You must be under age 71, and if over age 65 you must also satisfy the work test of 40 work hours in 30 days.

The maximum co-contribution is 50c for every dollar you contribute as an after tax personal contribution to a maximum of $500.

ACTION

It’s easy, transfer up to $1000 of money from your personal bank account to your superfund as a personal contribution before 30 June. The tax office calculates the co-contribution and puts it in your superfund when you lodge your 2016 tax return. There are no forms to fill in.

Budget Update 2016 – 7 Main Points

Morning, below is a summary of the changes to the budget relating to super. This being the area of most change. Remember these changes are not yet legislated and mostly will not come into force until 1 July 2017.

None of the changes suggest you should remove any money from super. It will continue to be more tax effective to have super as your savings structure rather than assets in your own name; just not as tax effective as it was.

1. Div 293 tax – the threshold for this tax, which is an extra 15% tax on contributions made, has been reduced from the current $300k to $250k. It reduces (but does not eliminate) the tax savings of making contributions for higher earners. The tax savings being the difference between the top tax rate and 30%.

2. Concessional contributions – the caps will be reduced to $25k pa (currently $30k and $35k depending on age) from 1/7/2017. From this date those with balances under $500k will have the opportunity to carry forward some unused caps for five years.

3. Work test – this is to be abolished from 1/7/2017, great news as it means we can utilise non-working spouses caps more easily.

4. Transition to Retirement Pensions – the lovely TRP strategy for those over 55 but not yet retired won’t work after 1 July 2017 as the earnings within the fund will be taxed at accumulation rates. So enjoy for the next year while it lasts and then we will look at rolling the balances back into accumulation phase. It will generally still be better tax wise than having investments in your own name, subject to your other income.

5. The Non concessional cap – (currently $180k p.a.) will be reduced to a lifetime limit of $500k. This limit starts today. Don’t panic if you have already contributed over $500k, you are not going to have to take it out or be taxed on it, it just means you can’t put in any further non-concessional amounts.

6. Pension Limits – the amount transferred into pension phase will be capped at $1.6m from 1 July 2017. So if you have a pension bigger than this already, we will need to roll some of it back into super by 1 July 2017 (the later the better).

7. Small Business Concessions – no changes to this, so it looks as though if you sell a business and retire we will still be able to contribute those funds to super in addition to the concessional and non-concessional caps above. (Subject to the CGT lifetime limits already in place)

That is pretty much all the important areas covered, so lets see what actually gets legislated and then we can adjust those long term plans.

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