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Thursday, May 28, 2015

A Budget to get women into the PAID workforce

Whether you’re a single woman, working mother or housewife, there’s something in the Budget that affects you. We examine the key measures below.

Key measures
-          Restrictions on the government’s parental leave pay scheme to stop new mothers ‘double dipping’
-          A ‘Jobs for Families’ childcare package, incorporating a new means tested child care subsidy. Designed to support working families and provide affordable access to childcare, it will replace the Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance (JETCCFA)
-          Stay-at-home parents may lose access to childcare subsidies under a tough new activity test
-          Families with income of around $65,000 will receive a subsidy of 85 per cent per child, up to an hourly fee cap
-          A two-year trial program for nannies
-          Additional funding for preschool programs.

Women shared the spotlight with small business in this year’s Federal Budget. The centrepieces of the Budget were small business tax cuts and a ‘Families package’, which included a mammoth investment in childcare.

Women are still the primary carer of children while men spend more time in the workforce, which explains why women generally have smaller superannuation balances.

According to the Association of Superannuation Funds of Australia, in 2011/12 the average female super balance was around $45,000 while men had about $83,000. Women were retiring with around $105,000 compared to men who had almost $197,000.

An analysis of 2014 ABS data shows that female workforce participation rates had been steadily increasing until the last decade, when in plateaued at around 60 per cent. The Government has seemingly indicated it is cognisant of the increasingly important role women can play in driving economic growth, which may have driven the Coalition’s decision to include a massive investment in childcare in their second Budget.

A big impediment to higher female workforce participation is affordable childcare.
At a time when the Australian economy is slowing as it transitions from the mining boom to broader-based growth, Mr Hockey wants to get women working :P (in paid employment – rather than a million things for free)

Affordable access to childcare
If passed through Parliament, the Families package contained in the Budget will primarily benefit low to middle-income families while leaving higher income families relatively unscathed.

A simplified means-tested childcare subsidy will be introduced from July 2017 which will see families earning between $65,000 and $170,000, around $30 a week better off - or $1,500 better off each year. Families earning over $170,000 may still receive a 50 per cent subsidy.
The new childcare subsidy, which will replace the Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance (JETCCFA), will be paid directly to approved care service providers to dramatically lower the upfront cost of childcare.

Families earning up to $65,000 a year will receive 85 per cent of childcare fees, up to an hourly fee cap. This is reduced to 50 per cent for families earning $170,000 or more.

Families earning less than $185,000 per year will no longer have a cap on the subsidy they receive. If the family’s income exceeds $185,000 a cap of $10,000 per child per year applies.

Stay-at-home mums
In a bid to boost workforce participation the Budget introduces tough new work requirements in order for people to qualify for childcare subsidies which may affect stay-at-home mums.

Families earning over $65,000 per annum with a stay-at-home parent who isn’t working, looking for work, training, studying or undertaking any other approved activity (such as volunteering) will lose access to subsidies and will have to meet the full cost of childcare under changes outlined in the Budget. Both parents must be undertaking these activities at least eight hours a fortnight to qualify for subsidies.

No ‘double dipping’
The Budget has also tightened eligibility for the government’s parental leave pay scheme.
New mothers who have access to an employer-funded paid maternity leave scheme stand to lose around $11,500 of taxpayer funded benefits, as part of moves to stop women ‘double dipping’ if these measures are approved.

New mothers currently can receive the government’s 18 weeks’ of pay at minimum wage plus participate in their employer’s parental leave scheme, if they have one.
However, new measures designed to stop parents from ‘double dipping’ will see mothers forfeit any government benefits if their employer offers a more generous scheme.

What’s next?
Budget measures must pass through Parliament to be legislated before they apply.
Labour and the Greens have already said they won’t support cuts to family tax benefits announced in the 2014 Budget in order to fund the new Families and childcare package.

If you think you might be affected by some changes, you should speak to your financial adviser.

RI Advice Group Pty Limited (ABN 23 001 774 125), AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and ALWAYS seek personal advice from a qualified financial adviser.

Tuesday, August 13, 2013

Taking control of your finances after a divorce

We are all acutely aware that people are usually prompted to focus on financial issues when they experience a significant life event such as a career or income change - which may spark a person’s interest in their finances.

A marriage may prompt a couple to consider longer term investment goals.

The birth of a child or taking out a mortgage may motivate others to do something about their life insurance.

Divorce is another such life event that prompts action and consideration about one's financial future.

While it is a far from pleasant life event, divorce presents a range of financial challenges that require thought and action in your personal financial planning.

The cost of divorce can be a huge financial drain, making it even more important to be focused on your finances and seek assistance to review them.

The eventual focus of a person is generally on getting finances moving forward after the divorce is settled.

If you or someone you know is going through divorce, a checklist of some of the issues to consider, may include some of the following.

Budgeting is critical:
Day to day financial circumstances will inevitably be different for both parties after the divorce. Child support payments, a previously stay-at-home parent taking on paid employment, changes in accommodation and the need to run a household on less income may all come into play.

These factors highlight the importance of looking at personal budgeting and managing expenses in-line with available income.

Updating your Will and Estate Planning arrangements:
It is exceptionally unlikely that the Will you had when you were married will reflect your post-divorce wishes.
It is recommended you review your Will and other estate planning arrangements, such as your Power of Attorney, as soon as possible. It is essential your wishes are expressed in a formal way. This is a key area for seeking professional advice as it can be a complicated and emotional process.

Re-investing liquidated assets:
In many cases major assets, such as a family home, will have been sold and proceeds divided. This may result in relatively large sums of money that need to be managed.

One of the big concerns facing many individuals after divorce is how to get back in to the property market and any related tax implications. These issues may have a major impact on your future financial health - this is an area you can benefit from some professional advice and the professionals who can assist in this specialist area.

Social security benefits:
Now that household income is split, you may be entitled to social security benefits that were not previously available to you. Benefits such as Parenting Payment and Child Support need to be considered in order to boost your income.

Insurance:
Another consideration is if any life insurance policies nominate your ex-partner as a beneficiary. Apart from resolving any such issues, you may need to review levels of cover to ensure you have sufficient insurance to cover your post-divorce requirements. Conversely, you may have too much cover in your new circumstances and therefore have the opportunity to scale down cover and divert funds to other spending or investment opportunities. Professional input is best sought.

Superannuation:
Superannuation generally forms part of the overall property settlement in a divorce, so both parties need to re-assess their superannuation and retirement funding. Depending on your age, you may need to take decisive action on your retirement funding and how much super you will need. You will also need to urgently review your nomination of beneficiary – particularly any BINDING nomination.

An SMSF, or Self-Managed Superannuation Fund, is an incredibly financially dangerous vehicle to be in at this time - your roles, responsibilities, and the risk to your assets held in the fund must be urgently reviewed.

Investments:
While divorce has an often large degree of emotional upheaval, it can be a beneficial time to re-focus on your future lifestyle goals, once the dust settles, and you have recovered a little. After some of the more fundamental issues are dealt with, you can then focus on a plan to re-build your well-being, health, wealth and financial independence. This is a useful time to consider engaging a financial adviser to discuss your options and opportunities.

A good time to lean on some sound advice:
At times of significant challenge, many people find the advice and support of a financial adviser to be invaluable.

For further information, or to set up an obligation free consultation, contact Hugh* from RIadvice-RetireInvest on 03 9471 0080.

*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited (ABN 23 001 774 125), Australian Financial Services Licence 238429. This editorial does not consider your personal circumstances and is general advice only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances.

Tuesday, September 11, 2012

Fatal mistakes that new relationships make!

Is this a second marriage or a new relationship after a breakdown?

Keep your financial situation separate:
Generally it is better to keep your finances separate.
Except for a joint bank account which is used to pay all the budgeted joint expenses.
A sum of money from each party can be deposited into the joint account each month.
This way the financial well being of both parties is maintained and the opportunity for fraud is reduced.
If a person has a problem with this, RUN.....

Only own things together as "Tenants in Common."
Always have a written agreement which states the proportion you each own - kept with your executor. This means that your share of the asset is always dealt with by you and your estate.
In "Joint Tenants," the ownership of the asset automatically passes to the survivor on death of the other. It does not go through your Will, nor can you say what happens to it.

On sale of a "tenants in common" asset, hold your own share in a separate bank account.
All too often, the money is put in a joint bank account, one of the parties dies, and the funds go to the other person immediately.
It wont matter that you had "both must sign" on the account.

Always have a Will which states your wishes.
Draft it with your beneficiaries involved, with legal help, making certain your partner is informed and aware.
Avoid relying on your partners good nature - "if you die first, I'll make certain your kids get a share."
It can work, but is imprudent to allow the potential for abuse.
Consider how long the person can live in the common home before it must be sold.
Probably better to consider 1, 3, 5 years, or whatever suits you both.
It can create enormous ill-will and heartache when people are forced to wait for an estate.

Suit yourself, however be business-like.
If you are older than 21, you may have had more than one relationship.
In business, written agreements are the norm and potential conflict is discussed and reduced.
Financial arrangements are business arrangements.
Protecting your financial well being is protecting your life - it should be done thoroughly.
If you play it like a game of chance, you stand to lose a huge amount.

Share a life together with joint decision making.
People who understand that a person needs to be prudent, are perhaps the ones to get and hold onto.
Bullying, pouting, pleading do not indicate the relationship will go far.
Make decisions jointly, with all the factors considered. Participate.
Certainly, you can now jointly afford that $1,000,000 mansion, but do you want to clean it?
Perhaps a more modest home with travel would give you much greater pleasure.

A new relationship can be a cause for optimism and pleasure.

Be aware of your needs, and it will most likely remain a source of these things.

Monday, September 10, 2012

Protecting your bread and butter - Buy/Sell

If you own your own business, chances are it’s your livelihood. But what if something happened to you or your partner and you were unable to go on running your business?

 

Having a buy-sell agreement in place can be one of the best ways for small and medium business owners to protect their livelihood against death, disability or trauma.

 

A buy-sell agreement is a legally binding contract between business partners, which facilitates the sale of business ownership when certain ‘trigger events’ like death and disability occur.

 

While the purchase can be funded personally, it is also commonly done through insurance, which can provide ready capital and is often more cost-effective.

 

But what are the chances?

 

It can take years of hard work to build up a successful business, however all this can be quickly undone if you or your business partner die or suffer a serious illness or disability.

 

While it’s understandably not something you want to think about, unfortunately these events are more common than you might think.

 

For two business partners currently aged 45, there is a 55% chance of death, total and permanent disability or trauma occurring before age 65. While for three business partners that number rises to 70% - for four business partners that number is a whopping 80%1.

 

Sadly, the more partners you have, the more likelihood there is of a misfortune occurring to one of you. However, having a buy-sell agreement in place can protect the equity in your business.

 

Using insurance to fund the agreement

 

There are many advantages to using insurance to fund a buy-sell agreement.

 

First, it can help to protect your equity in the business if you suffer from accident, illness or death, as you (or your estate) aren’t forced to try and sell your share of the business in a difficult and stressful time.

 

“Stressed sale” could lead you to sell your share of the business for less than it’s worth, or worse still, not be able to sell it at all.

 

Equally, it also protects the other business partners from having to work with your estate or an unwanted replacement business partner, your executor, or from having to suddenly come up with funds to pay you out.

 

But how exactly does a buy-sell agreement through insurance work?

 

Basically, partners sign a legally binding agreement enabling the sale and purchase of business equity in the event of death, disability or trauma.

 

Each partner also takes out an insurance policy, with the agreement stipulating that if a trigger event occurs, the funds received from the insurance policy will be used to payout their share in the business.

 

This means you, or your estate, would receive the payment, while the remaining partners would receive your shares.

 

Are there any other options?

 

If you do not have a buy-sell agreement in place and something happens to you or your partner, the business may be forced to take one of the below options - consider the questions raised and how ideal these would be for YOUR business:

 

Buy-out the share holding: Do you have enough equity in your business to do this at short notice? How will you determine the value?

 

Partner’s estate maintains share holding: Are you comfortable with your partner’s estate as a business partner?

 

Sell the share holding: Would the partner’s estate receive a good price for their equity? Would the remaining partners get the right business partner?

 

Borrow funds to buy the share holding: Would lenders still lend money despite the loss of a key person? Would private equity be looking for a premium, making it more expensive?

 

In many cases, having a buy-sell agreement via insurance should be considered as a sensible way to protect the interests of all partners. However all businesses are unique so it’s important to seek help from qualified professionals in order to find the right solution for your business.

 

For more information call Hugh Kilpatrick* from RIadvice-RetireInvest on 03 9471 0080.

 

*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited (ABN 23 001 774 125), Australian Financial Services Licence 238429. This editorial does not consider your personal circumstances and is general advice only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances.

 

1 Australian Bureau of Statistics, 2005 Australian Life Table.

Friday, August 17, 2012

A SUPER start to the year.....

With the start of a new financial year just past, now is perhaps the perfect time to talk to a financial adviser about strategies to boost your superannuation.



There have been some changes to super rules recently, but with so many tax concessions in place super can still be one of the most effective ways to save for retirement.



The Government wants to encourage us to save gradually rather than making a huge lump sum investment as we approach retirement, however there are limits to how much we can tax-effectively contribute to super each year.



These limits are called contribution caps. Different contribution caps apply depending on the type of super contribution you make and how much you have contributed to your super in the past.



Knowing what the contribution caps are will help you make the most of your super savings and stop you from paying unnecessary tax. If you exceed the limit you could potentially be taxed at penalty rates of up to 78% on top of 15% you have already paid.



One of the best super saving strategies for many people is salary sacrifice. Salary sacrifice can be a tax-effective way to boost retirement savings with contributions to your super made from your pre-tax income. This means the contributions are taxed at just 15%, rather than your marginal tax rate.



If you aren’t able to set up a salary sacrifice arrangement, have no employment income or are self-employed (earning less than 10% of your income from an employer), you may consider making a personal contribution to super this year.



Not only will this boost your retirement savings, but you may also be able count it as a tax deduction, meaning savings at tax time.



Another advantage of super can be the ability to pay insurance premiums from your super, by purchasing insurance through your super fund - under insurance is a major issue in Australia and up to 95 per cent of Australian families do not have adequate levels of insurance cover.**



While most people would never consider driving a car without motor insurance, many of us do not insure our most important asset – our ability to earn an income. There are a range of different types of insurance available that could help provide for you, or your family, in the event of accident, illness or injury.



For example, you may be able to buy adequate life and Total and Permanent Disability insurance cover through your super. The tax savings may be an advantage of this strategy, plus your insurance premium may be cheaper because the super fund may be buying the insurance in bulk at a discounted rate.



The rules around superannuation can be complex and these strategies may not be appropriate for everyone, so it is critically important to consult a financial adviser to get advice that is specific to your circumstances.



Make it a super start to the year - by seeing a financial adviser and putting a strategy in place now, giving you the peace of mind of knowing that you are getting the most out of your super and insurance this financial year.



Call Hugh* from RIadvice-retireInvest on 03 9471 0080 today.





*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited (ABN 23 001 774 125), Australian Financial Services Licence 238429. This editorial does not consider your personal circumstances and is general advice only. You must not act on the information provided without first obtaining professional financial advice specific to your circumstances from a suitably trained and authorised professional.
** 2010 Lifewise/NATSEM Underinsurance Report conducted for the Financial Services Council.

Tuesday, July 24, 2012

Keep your Superannuation safe!

Take your year of birth off your Facebook profile.

Never divulge your details over the phone or the net.

Only invest through licenced financial advisers in major organisations.

KEEP SUPER SAFE LINK

Tuesday, June 19, 2012

Time to re-think your cash savings?

In light of all the economic uncertainty we’ve experienced since the start of the global financial crisis, it’s not surprising that many investors, particularly those close to or in retirement, are settling for low-risk options for their retirement savings. It’s one of the main reasons we’ve seen such a large transfer of money from shares to term deposits and savings accounts in recent years.


This strategy may less attractive following the Reserve Bank of Australia’s (RBA) recent cut to the official cash rate.



The RBA’s rate cut of 0.50%, investors are likely to see reduced returns from their term deposits and cash savings over the coming months, and potentially longer. This is likely to concern many investors, particularly those who are relying on their money to fund a retirement that could last up to thirty years or more.



The main issue for cash investors, as interest rates reduce, is that their money becomes less effective at protecting against inflation.



Term deposits and cash savings generally don’t keep up with inflation over time, so the purchasing power of your money could reduce. This might mean that you don’t end up with the money you need to achieve your financial goals.



For that, you generally need some exposure to growth assets such as property and shares. While they are more volatile than cash, they offer the potential for higher returns over the long term.



Often investors have this perception that investing in growth assets is inherently risky, but these days there are investment options that allow cautious investors to earn competitive returns, yet still be well-placed to take advantage of opportunities that arise as markets recover.



For example, many superannuation funds offer a viable alternative to term deposits in the form of conservative investment options. Importantly, your money remains within the superannuation environment, which is a tax effective way of saving for retirement.



By investing conservatively through superannuation or your pension you get the safety you’re looking for as well as a tax-effective return. Superannuation earnings are taxed at a maximum of 15% and earnings on pension assets are tax free.



Of course, super is only suitable for retirement savings as your money cannot be accessed until you meet a condition of release such as permanent retirement, but there are also non-super options.



Other conservative investment options can include defensive share funds that target high regular income with lower volatility than the overall sharemarket. This approach helps to provide better capital protection should the sharemarket fall.



These options may be welcome news for investors who are concerned about volatility but keen to get more out of their investments. Everyone’s situation is different so it’s important to get financial advice that’s relevant to your specific needs and objectives.



Ultimately, the right strategy will come down to how much money you need to enjoy your retirement, how long you have to invest it and how much risk you are willing to take. A financial adviser can help you understand the various strategies available to reduce the impact of volatility whilst still focusing on growth opportunities and quality returns.



For further information contact Hugh Kilpatrick from RIadvice-RetireInvest on 03 94671 0080.



*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429. This editorial does not consider your personal circumstances and is of a general nature only. You must not act on the information provided without first obtaining professional financial advice specific to your circumstances.