Financial abuse can affect clients of all backgrounds. It occurs in over 90% of all domestic violence cases. It is time for economic abuse training for advisers so they can better meet the challenge. Many advisers admit they unsure of the red flags of financial abuse. And sadly, what to do if they encounter it.
Economic abuse is when one person has control over another’s access to financial resources. It was recognised as abuse in the domestic abuse bill after calls to make it a criminal offence.
The course is a training and certification programme to help advisers understand the signs of abuse. And importantly, know how to assist clients. Therefore, the online training consists of video interviews with abuse survivors, advisers and lawyers. It includes reading materials, quiz questions, references and case studies. At the end, you will have devised your own internal Procedure to deal with cases you encounter.
Advisers need to “know their clients”
Wealth Planning Partners director Amanda Cassar says: “As advisers we must know our clients in order to give appropriate advice. And, economic abuse can occur regardless of socio-economic standing, education, race or ethnicity.”
Cassar, a global ambassador for financial abuse prevention and remediation, added: “There is no cookie-cutter approach to assisting clients. But, you can help reduce the risk of exposure to financial abuse through education. Also, through advising clients about protection options such as trusts or binding financial agreements.”
Certification
To achieve the Financial Abuse Specialist certification, course participants are invited to submit testing materials. The certification aims to help consumers identify advisers with the expertise and resources to support them.
Read more about economic abuse and how to get involved with this training programme in the magazine this week.
Have you heard about the reduction in Account Based Pensions and minimum draw downs?
Capital losses from falling share prices are realised only if the company goes into liquidation or the shares are sold. Reducing the amounts drawn down from account based pensions can help investments last longer.
Market Ups and Downs
Leaving investments intact may well offer the best chance to rebuild balances when markets pick up again, as they eventually do. But, this holding pattern can be hard for older people with account-based pensions. This is due to the requirement to draw a minimum income each year. For many people in residential care, this could be 7-15% of the balance at July 1.
Reductions in Account-Based Pension draw downs
Halving the draw-down amount is similar to a measure the government took as a result of the 2008 global financial crisis. The minimum income levels will again be halved for this financial year and next year. If the cash flow is not needed, people might wish to reduce their pension withdrawals. This could be especially so where higher Centrelink pensions may be likely.
Graham is 85 and living in an aged care facility. His account-based pension had a balance of $220,000 on July 1, 2019. He needed to draw 9% of that balance ($19,800) as income in 2019-20.
Graham regularly draws amounts of $1,650 a month, so he has already taken out $14,850 this year. Combined with share market drops and low interest rates, his pension balance has now dropped to $168,000.
Graham wants to minimise how much he draws. The halving of the minimums means he can stop drawing any more income this year and take out less next year as well as he’s also eligible for the two cash bonuses that will be paid of $750 each by Centrelink, as he’s on the Age Pension also.
If you’d like to discuss if halving your account based pension is a good idea, contact your Gold Coast advisers at Wealth Planning Partners on 07 5593 0855.
Interest rates have been falling faster and longer than deeming rates for Centrelink and Veterans’ Affairs recipients. This makes it practically impossible to earn current deeming rates from bank accounts. So, what to deeming rate cuts mean for pensioners?
High risk vs High Return
Higher-risk investments (in better markets) may potentially produce higher returns. But, these are often not appropriate for people in aged care and can cause anxiety in times of volatility.
Calls to cut deeming rates have been made as part of stimulus measures and rates will be cut by 0.75% from May 1,2020.
This means higher pension entitlements and lower aged care means-tested fees for some. But, pensions will not change if the maximum pension is already received or entitlements are calculated under the assets test.
The impact of Deeming rate cuts
Case Study
When Edna moved into residential care, she sold her home to pay her $400,000 accommodation cost. She was left with $350,000 in the bank. She receives an age pension of $849.31 a fortnight and pays $1,133.96 a fortnight in residential care fees.
When deeming rates change on May 1, her pension will increase to $899.77 and fees will decrease to $1108.65 a fortnight. This improves her income by $75.77 a fortnight, which helps with extra income to meet her expenses.
Cash bonus
Aged Care residents who receive a means-tested pension (Centrelink/Veterans’ Affairs) or hold either a Commonwealth Seniors Health Card or Veterans Gold Card will receive two $750 cash payments as a boost to income. Awesome!
As a bonus, this money is tax-free and not assessable. The first payment will be paid into bank accounts over the next two weeks. The second payment will be paid in late July so keep your eyes peeled for these.
If you’d like to learn more about what the deeming rates cuts mean for you, please reach out to the Gold Coast financial advisers at Wealth Planning Partners to review your personal situation.
Is it time to break free from being Asset rich and cash poor?
Here are four ways to boost your income…
Are you asset rich but cash poor? Turns out, you’re not alone. Data from the ABS (Australian Bureau of Statistics) shows that almost one-third of older Australians in low-income households were asset rich but cash poor.[1] Most wealth is tied up in illiquid assets, in particular the family home.
But you need not scrape by on so little. There are ways to try and boost your income.
1. TAKE ADVANTAGE OF YOUR PROPERTY
Selling up and moving to a cheaper and/or smaller house may free up money to help fund your retirement. But keep in mind that it might affect your benefits if you’re receiving an age pension. Some of the proceeds from the sale might be counted as assessable under the age pension assets test, and this might lead to a drastic cut in your pension. On the flip side, it can also help supplement any loss of pension.
2. SUPPLEMENT YOUR INCOME
Getting a part-time job or monetising a hobby, could boost your cash flow if you are retired. But remember that working when you have become eligible for an age pension may reduce your pension amount. Discuss with your adviser how you might optimise your retirement benefits while working part time. You are able to earn up to a certain amount before your Age Pension is impacted. Do you enjoy knitting, teaching or tutoring, baby-sitting, crafts, cleaning, handyman work or mowing? All can add a few dollars a week extra to your income.
3. RENT OUT YOUR PROPERTY
If you have extra space in your home, you may consider renting it out. Even just one room to a student or occasionally to holiday makers can made a difference. Or if you have another property, like a holiday home, you may look into listing it as a short-term rental? This could impact the tax you pay when you sell your home so you should seek advice on these strategies.
4. REVISIT YOUR INVESTMENTS
Have you invested in securities like shares and ETF’s? This may be a good time to meet with our financial adviser to review your portfolio. Your financial adviser may recommend strategies and ways to reduce your exposure to risk and volatility and possibly increase your income via dividends.
UNDERSTAND THE RISKS
You don’t have to be trapped in a situation where you are asset rich but cash poor. There are ways to boost your income, but keep in mind that some involve taking big risks. So, always seek financial advice to help you weigh your options and make decisions based on your own personal situation.
If you’d like to discuss your options, contact the Advisers at Wealth Planning Partners Robina to see if we can assist with your situation.
Did you know there are over 12[1] million Australians with a single superannuation account? There is also $13.8[2] billion in ‘lost super’. Is some of that yours?
Find it
Moved house over the years? Changed jobs during your career? Don’t know where your teenage self stashed your super? Pretty sure you’ve lost track of some accounts along the way? It’s easy enough to track it down. If you have a MyGov account, log in and link to the ATO. Then, you’ll be able to find superannuation linked to your name and tax file number easily enough here.
Consider Combining it
So, you want to save on fees, reduce your paperwork, keep track of your hard earned money, and grow your retirement fund? But, ensure you seek professional financial advice first to make sure combining is beneficial for you. However, there may be some drawbacks to combining if your health has changed and you have insurances in your existing fund. Your Advisers at Wealth Planning Partners can assist with advice on combining superannuation funds.
Ask your financial adviser
Many websites offer to help find and combine your super, including MyGov. It is quick, easy and free. You can ask your financial adviser for help; check with your existing superannuation provider or the Australian Tax Office. If you want to do a bit of research yourself, check out the ASIC MoneySmart website too.
Grow it
A professional financial adviser can help you find an appropriate superannuation fund that will grow your hard-earned funds. We can work out whether you are invested in line with your preferred risk profile. This can help manage the ‘sleep at night’ test in times of market movements. Also, Advisers can review the fees you are paying and check historical returns. And, we can help to ensure you have enough income for retirement. The sooner you nail it, the better!
Want to break free from being asset rich and cash poor? Turns out, you’re not alone! Data from the ABS (Australian Bureau of Statistics) shows almost one-third of older Australians in low-income households were asset rich but cash poor.[1] Most of their wealth was tied up in illiquid assets. In particular the family home.
But, there’s no need to scrape by on so little. There are ways to try boost your income.
1. DOWNSIZE YOUR PROPERTY
Selling up and moving to a cheaper house may free up wealth to help fund retirement. But, do keep in mind that it might affect benefits if you’re receiving a Centrelink Age Pension. Some of the proceeds from the sale might be counted as assessable under the Assets Test. This could lead to a drastic cut in your pension if you suddenly acquire additional cash.
2. SUPPLEMENT YOUR INCOME
Getting a part-time job or cashing in on a hobby could boost your cash flow if you are retired . But remember that working when you have become eligible for an age pension may reduce your pension amount under the income test. It’s best to discuss with your adviser how you might optimise your retirement benefits while working part time.
3. RENT OUT YOUR PROPERTY
If you have extra space in your home, such as a spare room or two, you may consider renting it out, either full time or on a part-time basis. Or if you have another property, like a holiday home, you may look into listing it as a short-term student or holiday rental. This too could impact the tax you pay when you sell your home so you should seek advice on these strategies.
4. REVISIT YOUR INVESTMENTS
Have you invested in securities? With cash rates at an historical low, this may be a good time to meet with a financial adviser to review your portfolio. Your financial adviser may recommend strategies and ways to increase income and/or reduce your exposure to risk and volatility in the event of market movements.
UNDERSTAND THE RISKS and BREAK FREE
You don’t have to be trapped in a situation where you are always asset rich but cash poor. There are ways to boost your income, but keep in mind that some involve taking big risks. So seek financial advice to help you weigh your options and make decisions based on your on personal financial situation.
The Advisers at Wealth Planning Partners in Robina are ready to help you with financial advice tailored to your financial situation.
The $10k cash call: Why large payments are on the scrapheap
Opposition is mounting against a federal government bill to ban cash payments over $10,000, the $10K Cash Call. This raises concerns it will push customers into the clutches of banks or other financial institutions. The Currency (Restrictions on the Use of Cash) Bill 2019, passed through the House of Representatives on Thursday. This Bill is designed to crack down on criminal money laundering. “We know large amounts of cash are essential to the business model of criminal gangs,” says Assistant Treasurer Michael Sukkar.”Gangs launder the cash from the proceeds of manufacturing and selling drugs and other serious crimes through the legitimate economy. The cash limit will make it harder for them to do so.”
Amendments to The Bill
On Thursday, Labor’s shadow assistant treasurer Stephen Jones pushed for an amendment to the bill. This “recognises the importance of cash for conducting transactions around Australia” following “a lot of concern within the community about the impact of this bill”.
Independent MP Andrew Wilkie flagged concerns the measure will push customers into the banking system. Especially given the impending threat of negative interest rates.
“An interesting line of argument, which I think has some merit, is: if Australia does eventually reach negative interest rates, cash will assume new importance. But this bill will diminish the ability of people to use cash,” Wilkie said.
“For the most part, people now take advantage of online and phone banking services.” But, she acknowledged “the fine and possible jail sentence for innocent people who still have a preference to use cash.”
In the same vein, Finn Dorney of Shadforth Financial Group says “a move to reduce the amount of cash transactions over time will only benefit Australians. However, there is no argument that some cash transactions can be linked with criminal behaviour. This does not account for all transactions of this type. Therefore, careful consideration needs to be given to the implementation of such an extreme change in legislation.”
The Federal Budget explains to all Australians how the Government intends to manage the country’s finances. It outlines their tax and spending plans. Not only during the next financial year but into the future as well. Just like a household budget, the Federal Budget forecasts revenue and expenses to determine whether there is a surplus or deficit.
It’s also a political statement setting out the Government’s intentions, priorities and new policy initiatives. So, how does the Federal Budget affect you?
This year’s Budget proposal
This year’s Federal Budget is an ‘election budget’ with future tax cuts for all Australians, especially low and middle income earners. Overall, there were minimal changes to super proposed in the Budget, with minor changes to super contributions for older Australians.
Superannuation
Superannuation contributions for older Australians
From 1 July 2020, there will be no work test for people aged 65 and 66 when making concessional and non-concessional contributions. Currently, you need to work at least 40 hours over a 30-day period to contribute.
Also, the three-year bring-forward for non-concessional contributions is proposed to be extended to people aged 65 and 66 which means they could contribute up to $300,000 in non-concessional and $25,000 concessional contributions in one year.
Spouse contributions
And, from 1 July 2020, you can continue to receive spouse contributions up to age 74, up from age 69, if the work test is met. This will help couples even up their super balances as they near retirement. Learn more about Spouse Contributions thanks to MoneySmart.
if you have a super balance of below $6,000, administration and investment fees will be capped at 3%
from 1 July 2019, you will no longer be charged an exit fee
if your account has been inactive for 16 consecutive months your insurance cover will cease.
The proposal to ensure insurance is only offered on an opt-in basis for accounts with balances of less than $6,000 and new accounts belonging to members under the age of 25, did not pass into legislation. The Government will delay the start date for this measure until 1 October 2019.
Tax
Personal income tax cuts
The Government proposes the following personal income tax rates.
From 1 July 2022, the top threshold of the 19% tax bracket will increase from $41,000 to $45,000. And, the low income tax offset (LITO) will increase from $645 to $700.
And, from 1 July 2024, the 32.5% tax rate will reduce to 30%.
Proposed personal tax rates and thresholds
Tax rate
Current threshold
Threshold from 1 July 2022
Threshold from 1 July 2024
Nil
0 – $18,200
0 – $18,200
0 – $18,200
19%
$18,201 – $37,000
$18,201 – $45,000
$18,201 – $45,000
32.5% until 30 June 2024
30% from 1 July 2024
$37,001 – $90,000
$45,001 – $120,000
$45,001 – $200,000
37%
$90,001 – $180,000
$120,001 – $180,000
–
45%
$180,000+
$180,000+
$200,000+
Low and middle income tax offset (max)
$1,080
–
–
Low income tax offset (max)
$445
$700
$700
Low and middle income tax offset
The low and middle income tax offset (LMITO) will increase for the 2018/19 to 2021/22 financial years. After this, LMITO is not available. The maximum LMITO will increase from $530 to $1,080.
Enhancements to the instant asset write-off
If you have a small or medium business, you can immediately deduct eligible assets costing less than $30,000. The assets must be first used or installed, ready for use, between 7:30pm (AEDT) on 2 April 2019 and 30 June 2020.
Assets acquired between 29 January 2019 and before 7:30pm (AEDT) on 2 April 2019 are subject to a $25,000 threshold. Also, this is limited to small businesses.
Therefore, the instant asset write-off is expanded to medium businesses by increasing the annual turnover threshold from $10 million to $50 million. Certain assets are not eligible, for example, horticultural plants and in-house software.
Medicare levy low income thresholds
The Medicare levy low income thresholds will be increased to reflect movements in the consumer price index (CPI) from 1 July 2018.
Social Security
Energy Assistance Payment
A one-off Energy Assistance Payment of $75 for singles and $62.50 for each eligible member of a couple. To be eligible, you must be receiving a qualifying Government payment on 2 April 2019 and be resident in Australia.
Qualifying payments are the Age Pension, Carer Payment, Disability Support Pension, Parenting Payment Single. Also, the Veterans’ Service Pension and the Veterans’ Income Support supplement, Veterans’ disability payments, War Widow(er)’s Pension. And, permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 (including dependent partners) and the Safety, Rehabilitation and Compensation Act 1988.
Partner service pension
Both former spouses and former de-facto partners of veterans will be able to continue to receive the partner service pension after their relationship with their veteran partner has ended. This includes situations where the relationship has ended because of family or domestic violence.
Aged Care
Additional Home Care packages
As previously announced on 10 February 2019, the Government will provide funding for an additional 10,000 Home Care places over five years from 2018/19.
Seek advice
However, if you have any questions about the proposed changes in the Budget, please contact me on 07 5593 0855. The team of Gold Coast Financial Planners at Wealth Planning Partners are here to help.
2018 has been a mixed year for investors, with some gains, and some losses. But are we at the end of the growth cycle… for now?
Market Cycles and the end of the Growth Cycle
We’ve seen a complex economic environment with geopolitical and trade uncertainty, a change of PM (again,) a Royal Commission or two and the possible burst of the crypto-bubble. Pretty easy to say, there’s been plenty going on that can affect markets, your investments and long-term retirement savings.
Markets traditionally work in cycles of around 9 years and we’re now at the very pointy end of the longest bull run in history. Bear markets traditionally last for less than 1.5 years. So, somethings gotta give… right? Does this mean the end of the growth cycle?
Looking forward, 2019 is likely to be characterised by further volatility and a difficult environment for shares.
So what’s next? And what should you do?
Many indicators are pointing to a potential downturn in 2019 in developed markets, so is now the ideal time to position for a lower growth environment and focus on alternatives and the more stable, cash flow producing investments? Or… the end of the growth cycle! Possibly, so what are my options?
There’s four main choices you have…
Do nothing, hold the course. You understand that markets fluctuate, that’s just a part of how they work. Your goals and risk profile remain the same and you’re committed for the long term. No worries! Review your statement, throw it in the file and have yourself a cuppa.
Panic! Sell out and pop everything into cash… tho chances are, you aren’t great at picking the bottom of the market and won’t be brilliant at deciding when to ‘get back in.’ You’ll possibly miss some growth options too… As someone wiser than me once said, “it’s time IN the market that counts, not timing the market.” Have a chat with your adviser before doing anything too rash. Remember, you only crystalise gains and losses when you make the sell!
Sell down part of your portfolio into cash to make way for some future buying opportunities, in case things go pear shaped and you can take advantage of the potential volatility. Again, schedule time with your adviser to work out if this option is for you, and which funds you’re happy to sell.
Things have changed… Contact your adviser! See if you are still happy with your existing Risk Profile Questionnaire and update your current circumstances. You may need to rejig what you currently have, arrange a switch or two of growth vs defensive stocks and be reassured to hold steady or change to a different profile. Do you now have a moral bent towards more socially responsible investing? Do you have a greater or lower income requirement? Has your family structure or debt level changed? All good triggers to visit an adviser and review.
Australian retail, housing and banks to suffer*
Australia’s retail sector is already weak and there are indicators showing it’s unlikely to improve any time soon, with lower motor vehicle sales growth, falling house prices and money supply growth at a 26-year low.
With State and Federal elections slated over the next six months, keep a close eye on consumer confidence, which tends to be timid ahead of major elections. Falling consumer confidence, tighter lending standards and the Reserve Bank of Australia’s reluctance to cut interest rates further, mean we’re likely to see house prices continue to fall nationally in 2019.
Defensive stocks likely to see gains*
The 2018 drought across Australia has seen many agricultural stocks fall. While a rebound in crop volumes is not likely to hit until 2020, 2019 may be the year to pick up some agricultural stocks at the bottom of the cycle. In times of volatility, other defensive sectors to consider are telecoms, utilities, healthcare and staples.
Investors may be in for a bumpier ride in 2019. However, those with well-positioned portfolios should still be able to capitalise on some attractive income and growth opportunities.
If you have any questions, please don’t hesitate to get in touch. Our office in Robina is always stocked with tea, coffee, hot chocolate… or even a wine and we’d love to see you and update at any time.
If you’re a recent retiree and looking to increase superannuation savings, we’ve got some good news!
The Australian Government is proposing to make it easier to boost super with the work test exemption. For recent retirees, you can save more super by contributing for a year without having to show you’ve been ‘gainfully employed’.
Current rules
Currently, anyone under age 65 can contribute to their super regardless of whether they work or not. But, those aged between 65 and 74 need to meet the ‘work test‘ before they can make super contributions. To pass, they have to show they’ve been gainfully employed for at least 40 hours over 30 consecutive days in the financial year they plan to contribute.
The government has already given members with a total super balance of less than $500,000 some flexibility to grow super. These individuals can carry forward any unused amount below the concessional contribution cap of $25,000. This can occur on a rolling basis for 5 years from 1 July 2018. They can use unused cap amounts from 1 July 2019. People between 65 and 74 must still meet the work test before they can make ‘catch‑up’ contributions.
Proposed measure
So, to encourage this age group to save even more for retirement, the government is proposing changes. This is to give individuals who don’t meet the work test an extra year to beef up super savings.
From 1 July 2019, those between 65 and 74 with a super balance under $300,000 will be able to make voluntary contributions. This is in the first financial year that they don’t satisfy the work test. Once eligible, they don’t have to remain under the $300,000 balance cap during the 12‑month period.
The annual concessional and non-concessional contributions caps will continue to apply, but members can access unused concessional contributions cap amounts they have carried forward.
The government will assess total super balances at 30 June of the financial year in which members last met the work test. So those who retire in the 2018–19 financial year may be eligible to make additional contributions.
Seek professional advice
If you’re considering contributing to your super under the proposed work test exemption, it may be wise to speak to your adviser to see how making additional super contributions may work to your advantage. We’re your local Gold Coast financial advisers. So give us a call to see if this applies to you! 07 5593 0855.
