Retiring early was an option in the boom years of double-digit returns on superannuation. That all halted in 2008, when the financial crisis hit. That meant people in their 50s and 60s were rewriting their life plans to include a lot more work and a lot less retirement.
Super bounced back a lot in 2009, but people are still not retiring in the same numbers as in the past, says Rob Brooks, chief executive of big industry super fund Vision Super.
"The global financial crisis has had a real impact on confidence, two consecutive years of losses, but members are now starting to see their accounts come back. One thing that has happened is benefit payments to members are right down. You can talk to any super fund and I think they will say the same thing - benefit payments are right down because people just aren't retiring."
Not only are members of super funds not retiring and withdrawing money from super, they are not putting money in either. "Over 2009, we did also see a lot of people cutting back on voluntary contributions, but that is starting to come back now," Mr Brooks says.
Monday, January 11, 2010
Thursday, January 7, 2010
3 tips to get your debts under control
Finding a solution to controlling your debts means looking at your lifestyle and being prepared to make some changes. Below are 3 tips to help you take control of your money and debt.
1. Get rid of your credit cards
With all the unsolicited offers of easy credit, loans, store cards and credit cards that come through your letter box every day, getting into debt has become so easy.
1. Get rid of your credit cards
With all the unsolicited offers of easy credit, loans, store cards and credit cards that come through your letter box every day, getting into debt has become so easy.
- If you have store cards or credit cards, get rid of them! Store cards in particular have high interest rates
- Get into the habit of using cash instead of reaching for your credit card to pay for items
- Do you really need that item? Think before you purchase
- Stop overspending. Before you buy that new outfit, wait a day to find out if it is something you really need. Putting time and space into the equation can often make you realise that you don’t need that new outfit after all – even if you want it.
- Never impulse buy. Separate life’s necessities from your wants and desires so you can keep impulse buying in check.
- Write down what you spend. Use a budget planner so you can see where your money goes. Seeing it on paper can make you realise where you are going wrong, and help discipline your spending habits.
- The key to any debt management solution is budgeting and repayment plans. Commit as much money as you can to paying off debts with high interest rates.
- Firstly pay off debts with high interest rates or that put your home or assets at risk.
- Find an independent financial adviser to help you formulate a debt management strategy.
Wednesday, January 6, 2010
New year resolutions add to wealth
Turning your financial goals into new year resolutions increases the chances of success by up to ten times according to new research from the United States.
The US researchers found that almost half of the people who turned their plans and goals into a new year’s resolution had reached their goal or were still on track with it six months later. Less than five per cent of people who had goals for the year but did not make them into a specific resolution were still on track with their plan.
However, experts warn that the resolutions must be very specific to bring any worthwhile benefit. It won’t work to simply resolve to “cut back on debt” for example.
Popular new year resolutions include saving money – experts suggest setting up an automatic savings plan with direct debits – and paying off debts – experst recommend paying the high interest credit cards off first.
For more information or help on savings plans, budgeting, debt management or consolidating debts, speak to one of the financial advisors at Intellichoice today.
The US researchers found that almost half of the people who turned their plans and goals into a new year’s resolution had reached their goal or were still on track with it six months later. Less than five per cent of people who had goals for the year but did not make them into a specific resolution were still on track with their plan.
However, experts warn that the resolutions must be very specific to bring any worthwhile benefit. It won’t work to simply resolve to “cut back on debt” for example.
Popular new year resolutions include saving money – experts suggest setting up an automatic savings plan with direct debits – and paying off debts – experst recommend paying the high interest credit cards off first.
For more information or help on savings plans, budgeting, debt management or consolidating debts, speak to one of the financial advisors at Intellichoice today.
Tuesday, January 5, 2010
A guide to salary sacrificing
Salary sacrificing some of your pay to superannuation can be a very tax-effective way to increase your reitrement savings and also reduce your income tax liability. The amount you sacrifice into your super is essentially deducted from your assessable income, which may reduce your income tax liability.
Instead of paying tax at your marginal rate on the money, when you salary sacrifice your pay to super, it becomes a taxable contribution received by the fund. The contribution (plus any future income earned from the investment) is generally taxed at a minimum rate of 15%.
Because of the generous tax concessions, the government restricts concessional contributions (which include superannuation guarantee, salary sacrifice and personal concessional contributions).
An employer can contribute to super on your behalf and claim a tax deduction for an unlimited amount, but if your concessional contributions exceed $50,000 in a year, you'll pay tax at 31.5% (in addition to the 15% tax paid by the super fund) on the excess. You'll receive the tax bill but you'll be allowed to withdraw money from you super fund to pay it.
If you're 50 or older at any time to 30 June 2012, your concessional contribution limit is $100,000 (instead of $50,000) beore excess tax is charged. The $100,000 limit applies for each year you're over 50 until 30 June 2012,w hen it reverts back to $50,000.
Things you should consider
Don't salary sacrifice funds you think you may need before you retire. If you're younger, it may be more beneficial to pay off non-deductible debt (such as your home loan) instead.
If you're older, the reverse could be true. Generally, salary sacrificed funds will have been taxed at 15% and once you retire you can access the funds tax-free and pay off oustanding debts. Make sure you have a written agreement with your employer before making contributions.
If you would like more information about salary sacrifice or whether this is the best option for you to have a financially secure future, speak to one of the financial advisors at Intellichoice first. They will be able to recommend an option that suits your needs based on your current financial circumstances. Speak to one of the financial planners at Intellichoice by calling 1300 55 10 45 email info@intellichoice.com.au or visit www.intellichoice.com.au for more details on the various services and products on offer.
Instead of paying tax at your marginal rate on the money, when you salary sacrifice your pay to super, it becomes a taxable contribution received by the fund. The contribution (plus any future income earned from the investment) is generally taxed at a minimum rate of 15%.
Because of the generous tax concessions, the government restricts concessional contributions (which include superannuation guarantee, salary sacrifice and personal concessional contributions).
An employer can contribute to super on your behalf and claim a tax deduction for an unlimited amount, but if your concessional contributions exceed $50,000 in a year, you'll pay tax at 31.5% (in addition to the 15% tax paid by the super fund) on the excess. You'll receive the tax bill but you'll be allowed to withdraw money from you super fund to pay it.
If you're 50 or older at any time to 30 June 2012, your concessional contribution limit is $100,000 (instead of $50,000) beore excess tax is charged. The $100,000 limit applies for each year you're over 50 until 30 June 2012,w hen it reverts back to $50,000.
Things you should consider
Don't salary sacrifice funds you think you may need before you retire. If you're younger, it may be more beneficial to pay off non-deductible debt (such as your home loan) instead.
If you're older, the reverse could be true. Generally, salary sacrificed funds will have been taxed at 15% and once you retire you can access the funds tax-free and pay off oustanding debts. Make sure you have a written agreement with your employer before making contributions.
If you would like more information about salary sacrifice or whether this is the best option for you to have a financially secure future, speak to one of the financial advisors at Intellichoice first. They will be able to recommend an option that suits your needs based on your current financial circumstances. Speak to one of the financial planners at Intellichoice by calling 1300 55 10 45 email info@intellichoice.com.au or visit www.intellichoice.com.au for more details on the various services and products on offer.
Monday, January 4, 2010
Kick start your finances for the new year
The Christmas break and the quiet January period is the perfect time to get your financial affairs in order.
It can be hard to set time aside during the year and have a good hard look at your finances. That's why the New Year period is ideal as there are usually less distractions and work pressures. While the prospect of getting lost in all the paperwork might seem daunting, it is well worth the effort to review your personal finances and think about what goals you want to achieve and what you want your financial future to look like. Remember, small changes in the way you manage your money now can have big results in the long term.
It can be overwhelming knowing where to start, but below are three key areas where you can start straight away.
Set up a budget
There's nothing complex about doing a simple budget. You can use the free budgeting calculator on the Intellichoice financial planning website to get an idea on your income and expenses and where your money goes.
Check that your debts are under control
While using a credit card can be more convenient then using cash, expenses can quickly add up. You should pay off your credit card in full each month, but if you can't do that, at least try to pay off the minimum amount due so you don't get charged a late payment fee.
If you have too many credit card debts or personal loans, speak to one of the financial planners at Intellichoice about a debt consolidation loan. A debt consolidation loan is a single loan that combines all your debts into one, leaving you with just one repayment.
Review your super
While retirement might seem a long way off, your superannuation is likely to grow into the biggest asset you own after your house. That's why it is important to make sure that you are still on track to achieve your retirement goals. One of the simplest things you can do is to make sure that all your super funds are consolidated into one - so you don't have to double up on super fees etc. You can also speak to one of the financial consultants at Intellichoice about finding lost super.
For more information on how Intellichoice can help you achieve your financial goals for the new year, call 1300 55 10 45 or email us directly on info@intellichoice.com.au.
It can be hard to set time aside during the year and have a good hard look at your finances. That's why the New Year period is ideal as there are usually less distractions and work pressures. While the prospect of getting lost in all the paperwork might seem daunting, it is well worth the effort to review your personal finances and think about what goals you want to achieve and what you want your financial future to look like. Remember, small changes in the way you manage your money now can have big results in the long term.
It can be overwhelming knowing where to start, but below are three key areas where you can start straight away.
Set up a budget
There's nothing complex about doing a simple budget. You can use the free budgeting calculator on the Intellichoice financial planning website to get an idea on your income and expenses and where your money goes.
Check that your debts are under control
While using a credit card can be more convenient then using cash, expenses can quickly add up. You should pay off your credit card in full each month, but if you can't do that, at least try to pay off the minimum amount due so you don't get charged a late payment fee.
If you have too many credit card debts or personal loans, speak to one of the financial planners at Intellichoice about a debt consolidation loan. A debt consolidation loan is a single loan that combines all your debts into one, leaving you with just one repayment.
Review your super
While retirement might seem a long way off, your superannuation is likely to grow into the biggest asset you own after your house. That's why it is important to make sure that you are still on track to achieve your retirement goals. One of the simplest things you can do is to make sure that all your super funds are consolidated into one - so you don't have to double up on super fees etc. You can also speak to one of the financial consultants at Intellichoice about finding lost super.
For more information on how Intellichoice can help you achieve your financial goals for the new year, call 1300 55 10 45 or email us directly on info@intellichoice.com.au.
Friday, December 18, 2009
ATO targets trust distributions to private companies
The Australian Taxation Office yesterday released a controversial draft Taxation Ruling, TR 2009/D8, in relation to the application of Division 7A to unpaid present entitlements. That is, distributions declared, but not paid, between a trust and a private company. Such unpaid entitlements will exist in almost every situation where a corporate beneficiary is utilised.
To date, most advisors have acted on the understanding that unpaid present entitlements were not considered to be a “loan” for the purposes of Division 7A. This was on the basis that there was no debtor/creditor relationship and instead the value of the distribution represented a new trust relationship.
However, in TR 2009/D8 the Commissioner has taken the view that, where there is a private company with an unpaid present entitlement to a trust, there will only be rare situations where this will be excluded from the operation of Division 7A. This is on the basis that most of these unpaid present entitlements will be considered loans.
We note that this draft ruling suggests it is providing an interpretation of the law as it has applied since 1997, and as such, the Australian Taxation Office considers the ruling would apply retrospectively.
Given this view is significantly different to the common view, what should your clients do now?
The ruling has only been issued in draft form at this stage. The final ruling may vary significantly from this draft. Further, it may be a long period from its release in draft format to its finalisation given the controversial nature of the ruling and the industry opinion (common in both the accounting and the legal professions) that it is overly stringent.
Our current advice is to be aware that this may be an issue to contend with in the future and be careful in structuring current transactions and with how trust distributions are dealt with in each future year. At this stage, we do not suggest that you amend prior returns to declare any historical unpaid present entitlements which you believe may be caught by the newly published opinion of the Australian Taxation Office. These issues may be a concern to be dealt with once the finalised opinion of the Australia Taxation Office has been released, together with any guidance on how to address currently existing issues.
Should you have any questions in relation to the above or other taxation matters, please speak to your financial advisor or solicitor.
To date, most advisors have acted on the understanding that unpaid present entitlements were not considered to be a “loan” for the purposes of Division 7A. This was on the basis that there was no debtor/creditor relationship and instead the value of the distribution represented a new trust relationship.
However, in TR 2009/D8 the Commissioner has taken the view that, where there is a private company with an unpaid present entitlement to a trust, there will only be rare situations where this will be excluded from the operation of Division 7A. This is on the basis that most of these unpaid present entitlements will be considered loans.
We note that this draft ruling suggests it is providing an interpretation of the law as it has applied since 1997, and as such, the Australian Taxation Office considers the ruling would apply retrospectively.
Given this view is significantly different to the common view, what should your clients do now?
The ruling has only been issued in draft form at this stage. The final ruling may vary significantly from this draft. Further, it may be a long period from its release in draft format to its finalisation given the controversial nature of the ruling and the industry opinion (common in both the accounting and the legal professions) that it is overly stringent.
Our current advice is to be aware that this may be an issue to contend with in the future and be careful in structuring current transactions and with how trust distributions are dealt with in each future year. At this stage, we do not suggest that you amend prior returns to declare any historical unpaid present entitlements which you believe may be caught by the newly published opinion of the Australian Taxation Office. These issues may be a concern to be dealt with once the finalised opinion of the Australia Taxation Office has been released, together with any guidance on how to address currently existing issues.
Should you have any questions in relation to the above or other taxation matters, please speak to your financial advisor or solicitor.
Wednesday, December 16, 2009
Benefits of budgeting
A budget is the most fundamental and most effective financial management tool available to you. Regardless whether you are earning thousands of dollars a year, or hundreds of thousands of dollars a year, it is an extremely important tool used to give you an understanding on how much money you have to spend, and where you are spending it.
Budgeting is about planning. And planning is crucial to produce a desired result. A builder would never start work on a new house without a blueprint. You would not get in a car for a cross-country road trip without a map. The same should also be applied when it comes to your money, yet many of us find ourselves in the situation where we make, spend and invest money without a plan to guide us.
A budget is one way for you to plan, organize and control your financial resources. It can help you set and realize goals, and decide in advance how your money will work for you.
The basic idea behind budgeting is to save money up front for both known and unknown expenses.
Seven Benefits of Budgeting
1. It lets you know what is going on
Personal budgeting allows you to know exactly how much money you have, how your funds are being allocated, how they are working for you, what your plans are for them, and how far along you are toward reaching your goals. Knowing about your money is the first step toward controlling it.
2. Control
A budget is the key to enabling you to take charge of your finances. With a budget, you have the tools to decide exactly what is going to happen to your hard-earned money - and when. You can be in control of your money, instead of having your money limit what you do.
3. Organization
A budget divides funds into categories of expenditures and savings. It can also provide further organization by automatically providing records of all your monetary transactions. They can provide the foundation for a simple filing system to organize bills, receipts, and financial statements.
4. Communication
If you are married, have a family, or share money with anyone, having a budget that you both (or all) create together is a key to resolving personal differences about money handling. A budget is a communication tool to discuss the priorities for where your money should be spent, as well as enabling all involved parties to "run" the system.
5. Take advantage of opportunities
Knowing the exact state of your personal monetary affairs, and being in control of them allows you to take advantage of opportunities that you might otherwise miss. Have you ever wondered if you could afford something? With a budget, you will never have to wonder again - you will know.
6. Extra time
All your financial transactions are automatically organized when it comes round to the end of the financial year. Being armed with such information saves you time digging through old records.
7. Extra money
This might well be everyone's favourite benefit. A budget will almost certainly produce extra money for you to do with as you wish. Hidden fees and lost interest paid to outsiders can be eliminated. Unnecessary expenditures, once identified, can be stripped out. Savings, even small ones, can be accumulated and made to work for you.
To learn more about managing a budget, speak to a financial advisor from Intellichoice about a savings and debt management strategy to help you achieve your financial goals. Please feel free to use the free budgeting calculator to get started on managing your money.
Budgeting is about planning. And planning is crucial to produce a desired result. A builder would never start work on a new house without a blueprint. You would not get in a car for a cross-country road trip without a map. The same should also be applied when it comes to your money, yet many of us find ourselves in the situation where we make, spend and invest money without a plan to guide us.
A budget is one way for you to plan, organize and control your financial resources. It can help you set and realize goals, and decide in advance how your money will work for you.
The basic idea behind budgeting is to save money up front for both known and unknown expenses.
Seven Benefits of Budgeting
1. It lets you know what is going on
Personal budgeting allows you to know exactly how much money you have, how your funds are being allocated, how they are working for you, what your plans are for them, and how far along you are toward reaching your goals. Knowing about your money is the first step toward controlling it.
2. Control
A budget is the key to enabling you to take charge of your finances. With a budget, you have the tools to decide exactly what is going to happen to your hard-earned money - and when. You can be in control of your money, instead of having your money limit what you do.
3. Organization
A budget divides funds into categories of expenditures and savings. It can also provide further organization by automatically providing records of all your monetary transactions. They can provide the foundation for a simple filing system to organize bills, receipts, and financial statements.
4. Communication
If you are married, have a family, or share money with anyone, having a budget that you both (or all) create together is a key to resolving personal differences about money handling. A budget is a communication tool to discuss the priorities for where your money should be spent, as well as enabling all involved parties to "run" the system.
5. Take advantage of opportunities
Knowing the exact state of your personal monetary affairs, and being in control of them allows you to take advantage of opportunities that you might otherwise miss. Have you ever wondered if you could afford something? With a budget, you will never have to wonder again - you will know.
6. Extra time
All your financial transactions are automatically organized when it comes round to the end of the financial year. Being armed with such information saves you time digging through old records.
7. Extra money
This might well be everyone's favourite benefit. A budget will almost certainly produce extra money for you to do with as you wish. Hidden fees and lost interest paid to outsiders can be eliminated. Unnecessary expenditures, once identified, can be stripped out. Savings, even small ones, can be accumulated and made to work for you.
To learn more about managing a budget, speak to a financial advisor from Intellichoice about a savings and debt management strategy to help you achieve your financial goals. Please feel free to use the free budgeting calculator to get started on managing your money.
Subscribe to:
Posts (Atom)