Retirement on your mind?

Retirement on your mind?

As you saw in our previous month’s client video with Steve Fairall, he’s been retired for 2 years and it looks pretty good! Steve says, “there was a stage when we had 4 young kids, we wanted to provide them with a good life in Sydney, help them grow and get well educated whilst also setting ourselves up for the future.”

But there’s a lot of work and strategy that goes into a financially effective retirement.

Let me explain,

As you would know if you meet certain requirements you can add up to $25,000 per year into your superannuation fund as a concessional contribution and up to $100,000 can be added as a non-concessional contribution each year. 1

During the accumulation phase of your superannuation, contributing to your fund can ensure that you will have ample funds held tax effectively during your pension phase. Most people think after you are 65 years old and no longer working that you are unable to make voluntary contributions. However, this is where the strategy comes into play.

It is called the “downsizer contribution”, put simply if you are aged 65 or older and you have owned your principal place of residence for at least 10 years you may be eligible. This means you can make a tax-free contribution into your super of $300,000 and as a couple you can contribute $600,000 irrespective of having a total superannuation balance in excess $1.6 million.

Prime Wealth’s Senior Advisor Angus Rodgers says, “Where it applies, this is an awesome strategy to ensure retirement funds are maximised and invested tax-effectively.”

Still confused or want to know more about this strategy, the tax and social security implications talk to our advisors today on (02) 9415 1511 or email us.

1 This contribution will be considered at 30 June of the financial year in which the contribution is made, when the total superannuation balance is recalculated.

This strategy is not for everyone and has been provided as general information only and prepared without taking into account your financial position, objectives, and needs. You should consider its appropriateness and seek financial advice before making any financial decisions.

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How the ‘gig economy’ has changed work and the economy.

How the ‘gig economy’ has changed work and the economy.

Firstly, you’re probably wondering what this whole “gig economy” means.  It’s actually a buzz phrase, first coined at the height of the financial crisis when a number of workers started ‘gigging’ and working many casual jobs to stay afloat financially. Today, it is more recognised with people freelancing who are seeking more flexible and diversified work and working hours especially within the rapidly growing digital platforms.   These platforms allow freelancers to directly connect with potential employers to find employment.  Hence the term ‘gig workers”.  Great examples of these digital platforms are companies such as Uber, Airtasker and Deliveroo who are changing  traditional markets.

With this growing trend legislation also needs to be updated to reflect these abovementioned changes and it has, but it has been slow. Internationally, we have seen disagreement over gig workers classifications as either ‘employees’ or ‘independent contractors’. The most recent ruling by Australia’s Fair Work Ombudsman in June 2019 found Uber drivers to be independent contractors because there is not “an obligation for an employee to perform work when it is demanded by the employer”, as reported by Stuart Ridley.

A survey commissioned by the Victorian government published in June 2019, found 7.1% of Australians reportedly used a digital platform such as Airtasker (34.8%), Uber (22.7%), Freelancer (11.8%), Uber Eats (10.8%), Deliveroo (8.2%) for work. This report further found 64.8% of gig economy workers to access work via one platform opposed to 35.2% who accessed work through more than one platform and 11.4% who are registered on four or more platforms.

This however has forced changed to be made in the definition of work reviewing the definition of ‘casual’ work to ensure legislation applies to capture gig workers under workplace health and safety, improve superannuation rights and ensure protection under Australia’s industrial relations system. Simona Scattagalia Cartago says, “Getting a real measure of this global phenomenon is not easy, especially when some may underestimate its true size by considering only gig work as a primary source of income. In the US, more than 35% of the workforce seems to be participating in the gig economy, and that number is expected to jump to 43% by 2020.”

This however is also causing issues regarding superannuation. The Association of Superannuation Funds of Australia (ASFA) noted almost a quarter of self-employed people to have no super and less likely to meet the $450 per month earning threshold with any one employer as recorded in February 2018. It has been suggested a new ‘dependant contractor’ category to be made, ditching the earning threshold.

Further taxation issues have arisen from this new gig economy with the Australian Tax Office (ATO) updating guidelines for people earning income via digital platforms to also include ride sharing, short-term property or room rentals or skills on demand, as changed in June 2019. The ATO warn they will be matching data earnings from such above-mentioned platforms.

If you want to know more about how to navigate through these gig economy changes, please get in touch with the team via email or phone us 02 9415 1511. Speak soon!

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What’s the price of advice?

What’s the price of advice?

Financial advice is less about increasing a client’s wealth now and more about helping the individual; or family achieve the things that really matter to them.

The coming 25 years will be a transition as the Baby Boomers move to retirement. CoreData estimates $3.9 trillion of wealth to be transferred into the hands of younger generations. This wealth transfer is unprecedented in history. With the progress of technology and current landscape of the financial services market, “advice is less about increasing a clients wealth now and more about helping the individual or family achieve the things that really matter to them”, as said by Simon Hoyle in Septembers Professional Planner.

In a number of recent studies undertaken by CoreData it has been revealed that individuals who seek competent and professional financial advice and who act on it are healthier and happier with benefits of advice beyond financial issues. These include;

  1. A Comfortable Lifestyle

In case studies, a core goal was to maintain a desired level of spending and allowing for inflation, to ensure living standards do not drop. This was exceeded as clients enjoyed additional expenditure including holidays.

  1. More Superannuation

Through the implementation of curated advisor strategies, additional contributions were made to enable a tax-efficient superannuation resulting in healthier balances and more funds when needed.

  1. Optimised Allocation

Financial advisors provide value in optimising the allocation of assets by placing assets into more productive investments. Case studies proved clients to have more funds to spend on themselves and their families.

  1. Peace of Mind

With the assistance of advisors households are assured of a more protected financial situation even with unexpected events occurring allowing for a greater sense of security and less to worry about in life.

  1. Confidence

Individuals equipped with expert financial advice generally have more confidence to spend on their lifestyle and are more confident in their decisions.

  1. Reduced Stress

Research by CoreData found a lack of financial wellness creates huge emotional and social costs from lack of sleep to damaging relationships.

Want to know how we can support you or your family in doing and achieving what matters to you? Give us a call on (02) 9415 1511 or email us for your no obligation conversation.

 

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Why people who set goals do better financially?

Why people who set goals do better financially?

As we move into the new financial year it is the perfect time to evaluate how you are tracking against the goals you set at the beginning of the year.

What were you saving for?

  • A holiday like 53% of Australians
  • Building your rainy day fund with 46% of Australians
  • Or with 40% of Australians saving to buy or renovate a home

How have you tracked with this goal? Are you any closer to having the financial structures and plans in place to achieve what you want in life? Or are you struggling?

You are not alone…

  • 41% of people incur unexpected expenses or change in financial circumstances
  • 27% experience a lack of willpower
  • 17% set an unachievable goal

So, what’s the trick?

It’s as simple as understanding the importance of goal setting. Without a goal, there’s nothing to work towards. Like a game of darts without a dartboard, where do you aim? The real question is where do you want to go, what’s your ‘why’?

By having a goal, research tells us you reap further benefits such as; increased performance, happiness, focus, energy, strength and success.

Long term goals allow you to understand your big picture, helps you to set small goals in order to reach that big goal. Short term goals set you up for success achieving regular wins and keeping you motivated giving you the ability to quickly know if you are on track or not.

So, set a goal, make your dartboard and let’s hit the bull’s eye!

If you don’t have any goals or are struggling to achieve the ones you previously set, let’s talk. At PrimeAdvisory our ‘why’ is to keep you on track!

References: ASIC MoneySmart

Source: https://www.moneysmart.gov.au/managing-your-money/saving/how-australians-save-money

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What you should be doing now to take advantage of record-low interest rates

What you should be doing now to take advantage of record-low interest rates

Home loan interest rates in Australia are currently at all-time lows and they may go even lower.

Rates are dropping because the Reserve Bank has cut the cash rate not once but twice, lowering costs for banks. In response, many lenders have announced cuts to their variable rate home loans.

These record low rates are great news for people who currently have mortgages or those intending to get a mortgage.  Unfortunately for those relying on bank interest from savings the news is not that good.

Here’s 4 ways you can make the most of the low mortgage rates.

  1. Don’t change anything

Doing nothing only makes sense if you have a variable rate mortgage and your lender is passing on the cash rate cut. You’re fortunate if this is the case because you’ll already be enjoying lower repayments without you having to do anything.

However, you still might want to consider the following options.

  1. Compare your rate and if you should refinance to a lower one

Even if your lender has passed on the rate cut it makes sense to compare your rate with what else is in the marketplace. With literally hundreds of lenders and thousands of mortgage products available you should at least be checking and keeping your bank honest.

Switching to a lower rate mortgage on the right terms could save you a considerable amount of money.  If you have a look at the marketplace now, some lenders are offering rates in the low 3.0% range.

To get a sense of just how low rates are right now you can check out our monthly lowest mortgage rates page.

  1. Make extra repayments with your lower rate savings

When your rate is reduced you benefit from lower minimum required monthly mortgage repayments. To maximise the benefit simply keep making the same monthly repayments as you were prior to your rate being reduced. The difference between what you need to pay vs what you pay if you maintain repayments will result in you paying back your loan faster and reducing your overall interest expense.

Let’s use an example to demonstrate how the extra repayments work. Say you borrowed $450,000 over 30 years @ 3.89% p.a.

  • Monthly repayments = $2,119

If your lender passed on the last two cash rate cut’s your rate would fall to 3.39% p.a.

  • Monthly repayments at 3.39% = $1,993

The interest you will save is $29,440 and you will be mortgage free two years and 11 months sooner.  How good is that.

  1. Accumulate savings to account for possible rate rises in the future

What goes down will inevitably go up.  Mortgages are usually repaid over a long time which would include different economic cycles. Despite current low rates, you should expect them to rise at some stage in the future. This means your repayments will rise too.

While rates are low you can use your savings from your lower repayments to build up a cash buffer to use if you need to cover higher repayments in the future. There are at two ways you can do this:

  1. Redraw

If your loan allows for extra repayments and has a redraw facility then you could follow the extra repayment strategy from tip 3 and then redraw the money if you need it later. Note that some lenders have restrictions on how much or how often you can redraw.

  1. Offset account

If your loan has an offset account you can simply add the savings to the offset and they’ll act like extra repayments, effectively helping you pay less interest. But if you need to cover higher repayments in the future you have access to the funds.

Contact your PrimeAdvisory Accountant or Financial Advisor to discuss how you can take advantage of the currently low interest rates to stay on-track.

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