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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Tips for getting on track with your financial goals

Tips for getting on track with your financial goals

The end of the financial year is the cue for most of us to look at our financial position heading into tax time. Hopefully you’ve made progress towards your goals. But if you find that your expenses are trending higher than you’d like or—shock, horror!—higher than your income, this could be the perfect time for a fiscal makeover.

The starting point is gathering up as much information as possible, beginning with the household budget.

Take a budget snapshot

You can’t set realistic financial goals and savings targets without knowing how much money you have at your disposal. If you don’t already track your income and spending, then take an annual snapshot as you go through your records to prepare your annual tax return.

Deduct your total spending from total income and what’s left is what you have to work with. Any surplus could be used to kick start a regular savings plan. If you discover a budget black hole, identify areas where you are overspending and could cut back.

Pay yourself first

Did you manage to save anything this year or are you are constantly counting on this month’s income to pay last month’s bills? Do you spend first and hope to save what’s left?

Instead of making saving an afterthought, pay yourself first and allocate a percentage of your income to a regular savings plan. Setting up a weekly or monthly direct debit will remove temptation and encourage you to live within your means.

Review your mortgage

If you have a mortgage this is likely to be your biggest monthly expense so it’s a good idea to check your progress at least once a year. Why not use some of the savings you’ve identified and increase your repayments to save interest? If your mortgage has a redraw facility you could use this to create a cash buffer for emergencies. These are the type of strategies that PrimeWealth can help you with.

While you’re at it, go online and compare interest rates. If your rate is no longer competitive consider switching loans and enlist our help to negotiate a better deal.

Negotiate better deals

Your home loan is not the only expense worth haggling over. These days if you want to get the best deal on your electricity, phone, internet or insurance you need to ask. Before you do, ensure you understand what your current plan/policy covers and research what’s on offer elsewhere.

Make a practice of doing this once a year, when your plan or policy is due for renewal. The savings can be substantial and can be put to much better use reducing debt or growing your wealth.

Check your super

Do you know how much you have in super and how it’s invested? When you retire superannuation is likely to be your biggest asset outside the family home, yet almost one in four Australians don’t know which risk profile their super is invested in.* This can cost you thousands of dollars in retirement savings and takes only minutes to correct.

Instead, why not call your PrimeWealth Advisor and ask for your current balance and where it’s invested. As an example, a 25-year-old woman on $80,000 in a conservative option until she’s 70 could improve her retirement balance by $294,000 if she switched to a risk profile more in keeping with her age and circumstances. *

Protect your wealth

Reaching your life and financial goals is not just about growing your wealth but protecting it.

It’s important to review your insurance policies annually—or as your circumstances change—to make sure you and your family have adequate cover. Insurance can be a significant cost for families, but the income it provides when accidents or illness strike is worth every cent.

So why not go beyond the usual search for last-minute tax deductions this June to do a thorough review of your current position. Contact us if you would like us to help you make the most of the year ahead, give us a call.

*source: MLC Wealth Sentiment Survey, 5 April 2018

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Key Considerations For Grandparents Funding Private School Fees

Key Considerations For Grandparents Funding Private School Fees

As we roll into a new school year, it’s not uncommon for grandparents to contribute to their grandchildren’s private school education.

If you are supporting your family by helping fund a grandchild’s private education, before the first term’s school fees are due it’s important to receive professional advice on the best way to contribute towards private school fees. At PrimeWealth your advisor can offer specific guidance based on your unique circumstances, however here’s a quick checklist of the key considerations:

Do the maths

Make sure that you have accounted for all your living expenses allowing you to live comfortably without the need to draw on any retirement savings in a way that is unsustainable.

Plan ahead

This will avoid selling investments at a time that may not be optimal, it’s important to ensure that ample funds are accessible when you need them, including a buffer.

Understand the impact on Asset testing

If you are maintaining control of the funds set aside for fees, these will be considered as an asset by Centrelink and could impact any Age pension entitlements.

Understand the gifting rule

If you are transferring funds to one of your children or grandchildren, be aware that the Department of Human Services gifting rule currently allows for a gift up to $10,000 in one financial year and a maximum of $30,000 over five financial years without your pension entitlements being affected.

Taxation

Get advice on the best structure for investing any funds set aside for school fees. “Education Savings” products can be internally taxed at a corporate tax rate which could be more than holding an investment directly.

Estate Planning

If you are no longer around to manage any funds for education purposes, ensure that you have considered this in your estate planning.

Control

Ensuring you maintain control of funds until they are required means you keep the funds in any circumstance that you may not have prepared for such as a child not attending private school or university.

 

Please contact PrimeWealth for further support and advice, taking into account your unique circumstances and financial goals.

 

 

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How to improve your life NOW for a brighter future: 15 tips

How to improve your life NOW for a brighter future: 15 tips

by Julie Tassone

Are you in your twenties and wondering how to improve your life now so that the future is brighter?

One of the characteristics of the Y-generation and people born this millennium is that they like to ponder the future. The trouble is, good, honest guidance about this future can be in short supply.

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Personal Tax Planning Guide FY18

Personal Tax Planning Guide FY18

Now’s the time to review what strategies you can use to minimise your tax before 30 June 2018.

Imagine what you could do with tax saved?

  • Reduce your home loan
  • Top up your super
  • Have a holiday
  • Deposit for an investment property
  • Upgrade your car

KEY SUPERANNUATION CHANGES

While you might not be flush with cash now and able to put large amounts into superannuation, it’s important that you are aware of what is possible to maximise your super balance and possibly reduce your tax at the same time.

NEW CONCESSIONAL CONTRIBUTION CAP (CC) OF $25,000 FOR EVERYONE

The tax deductible super contribution limit (or “cap”) is $25,000 for all individuals under age 75. Individuals need to pass a work test if over age 65.

Consider making the maximum tax deductible super contribution this year before 30 June 2018.

The advantage of this strategy is that superannuation contributions are taxed at between 15% to 30% compared to typical personal income tax rates of between 34.5% and 47%.

Ordinarily, self-employed individuals and those who earn their income primarily from passive sources make super contributions close to the end of the financial year and claim a tax deduction. However, this is the first financial year that individuals who are employees may also use this strategy.

Individuals who may want to take advantage of this opportunity include those who:

  • work for an employer who doesn’t permit salary sacrifice
  • work for an employer who allows salary sacrifice, but it’s disadvantageous due to a reduction in entitlements, and
  • are salary sacrificing but want to make a top-up contribution to utilise their full CC cap.

SPOUSE SUPER CONTRIBUTIONS

From 1 July 2017, higher income thresholds apply when determining eligibility for the spouse contributions tax offset.

From this date, you may be eligible for a tax offset of up to $540 on super contributions of up to $3,000 that you make on behalf of your spouse if your spouse’s income is $37,000 p.a. or less (previously $10,800 p.a.).

The offset gradually reduces for income above $37,000 p.a. and completely phases out at $40,000 p.a. and above (previously $13,800 p.a.).

ADDITIONAL TAX ON SUPER CONTRIBUTIONS BY HIGH INCOME EARNERS

The income threshold at which the additional 15% (‘Division 293’) tax is payable on super contributions has reduced from $300,000 to $250,000 p.a., effective 1 July 2017. Where you are required to pay this additional tax, making super contributions within the cap is still a tax effective strategy.

With super contributions taxed at a maximum of 30% and investment earnings in super taxed at a maximum of 15%, both these tax points are more favourable when compared to the highest marginal tax rate of 47% (including the Medicare levy).

GOVERNMENT CO-CONTRIBUTION TO YOUR SUPER 

If you are on a lower income and earn at least 10% of your income from employment or carrying on a business and make a “non-concessional contribution” to super, you may be eligible for a Government co-contribution of up to $500.

In 2017/18, the maximum co-contribution is available if you contribute $1,000 and earn $36,813 or less. A lower amount may be received if you contribute less than $1,000 and/or earn between $36,814 and $51,812.

MAXIMISE DEDUCTIBLE SUPER CONTRIBUTIONS

The concessional superannuation cap for 2018 is $25,000 for all individuals. Do not go over this limit or you will pay more tax!

Note that employer super guarantee contributions are included in these caps. Where a concessional contribution is made that exceeds these limits, the excess is included in your assessable income and taxed at your marginal rate, plus an excess concessional contributions charge.

10 ways to reduce your tax

OWNERSHIP OF INVESTMENTS 

A longer-term tax planning strategy can be reviewing the ownership of your investments. Any change of ownership needs to be carefully planned due to capital gains tax and stamp duty implications. Please seek advice from your Accountant prior to making any changes.

Investments may be owned by a Family Trust, which has the key advantage of providing flexibility in distributing income on an annual basis and an ability for up to $416 per year to be distributed to children or grandchildren tax-free.

PROPERTY DEPRECIATION REPORT

If you have an investment property, a Property Depreciation Report (prepared by a Quantity Surveyor) will allow you to claim depreciation and capital works deductions on capital items within the property and on the property itself.

The cost of this report is generally recouped several times over by the tax savings in the first year of property ownership.

MOTOR VEHICLE LOG BOOK

Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2018. You should make a record of your odometer reading as at 30 June 2018 and keep all receipts/invoices for your motor vehicle expenses. Once prepared, a log book can generally be used for a 5-year period.

An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.

SACRIFICE YOUR SALARY TO SUPER

If your marginal tax rate is 19% or more, salary sacrifice can be a great way to boost your superannuation and pay less tax. By putting pre-tax salary into super rather than having it taxed as normal income at your marginal rate you may save tax. This can be especially beneficial for employees nearing their retirement age.

PREPAY EXPENSES AND INTEREST

Expenses relating to investment activities can be prepaid before 30 June 2018. You can prepay up to 12 months of interest before 30 June on a loan for a property or share investment and claim a tax deduction this financial year. Also, other expenses in relation to your investments can be prepaid before 30 June, including rental property repairs, memberships, subscriptions, and journals.

INSURANCE PREMIUMS

Possibly your greatest financial asset is your ability to earn an income. Income Protection Insurance generally replaces up to 75% of your salary if you are unable to work due to sickness or an accident. The insurance premium is normally tax deductible, plus you get the benefit of protecting your family’s lifestyle if you cannot work due to sickness or an accident. It’s a small price to pay for peace of mind. Like rental property interest, income protection premiums can also be pre-paid for 12 months to increase your deductions.

WORK RELATED EXPENSES

Don’t forget to keep any receipts for work-related expenses such as uniforms, training courses and learning materials, as these may be tax-deductible.

REALISE CAPITAL LOSSES

Tax is normally payable on any capital gains. You should consider selling any non-performing investments you hold before 30 June to crystallise a capital loss and reduce or even eliminate any potential capital gains tax liability. Unused capital losses can be carried forward to offset future capital gains.

DEFER INVESTMENT INCOME & CAPITAL GAINS

If practical, arrange for the receipt of Investment Income (e.g. interest on term deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2018.

The Contract Date (not the Settlement Date) is generally the key date for working out when a sale or purchase occurred.

IS AN SMSF SUITABLE FOR YOU?

Now is a good time to seek specific advice in relation to this question, as it may be appropriate to establish an SMSF in conjunction with other tax planning opportunities, to maximise the benefit of the SMSF in your circumstances.

Talk to your Client Advisor TODAY before the 30 June 2018 deadline for assistance to reduce your tax!

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