In this edition of Insights and Investment Solutions magazine, learn about the latest market update on local and international markets.

We take a look at sustainable investing and how investors are increasingly interested in how a company makes money, not simply how much it makes.

Finally, we share seven super strategies for end of financial year.

Download (PDF): Investment Solutions Magazine - Winter 2019

Retirement tends to roll around a lot sooner than we expect. Laying plans from an early stage will ensure you enjoy the best retirement possible.

What are my retirement options?

Most of us look forward to retirement. It’s a chance to explore new horizons, do all the things we never had time for when we were raising a family or pursuing a career, or just a time to relax and enjoy life at a more leisurely pace.

In fact, retirement can be pretty much what you choose it to be. That may mean hanging up your work boots for good. Or you may prefer to gradually ease yourself in to retirement by dialing back your working week. It could even be a time to choose your own hours by shifting into a consulting role.

It certainly makes retirement a golden stage of your life and that makes it worth planning for.

When would you like to retire?

You may have plans to retire at a certain age, by a set date or following a particular event. However for some of us, retirement could come around sooner than expected because of ill health, an inability to continue in a physical role or the need to care for a loved one.

The key point is that it pays to make plans for your retirement long before you’re ready to leave; you never know what lies around the corner.

Enjoying your retirement

Making retirement a truly ‘golden’ period of your life can hinge on making the most of your time. That doesn’t have to mean travelling the world on regular vacations. It can be as simple as joining local community groups, undertaking new studies to broaden your knowledge or spending more time with family and friends.

Talk to friends and family members for ideas on how they are spending time in retirement. Remember, these can be some of the most productive years you may ever have enjoyed.

Planning for a change in retirement

You may be thinking about a change of location or even moving overseas for your retirement. While this may be the dream of a lifetime, be sure to think through any major moves – and not just from a financial perspective. Friends and family are very important as we age and it may not be easy to make new connections outside of a familiar community.

If you’re set on the idea of relocating, it can be worth renting for a year or so to be sure the reality lives up to your expectations.

Working out the cost

No matter what your plans for retirement, the reality is that it can involve something many people don’t have enough of – money.

Making some plans in advance for how much income you’re likely to have in retirement and how much your preferred lifestyle will cost is a key step in relishing your senior years.

A good starting point in planning retirement is determining your financial position. It’s a lot easier than it sounds. You may wish to start thinking about the value of your assets and liabilities.

Will the age pension be enough? Will you be comfortable with ‘comfortable’?

Many Australians aspire to have at least a ‘comfortable’ retirement. But what kind of annual income will you need to enjoy ‘comfortable’ by your standards? And how much does that mean you'll need at retirement?

According to the ASFA Retirement Standard for the June quarter 2017 published by the Association of Superannuation Funds of Australia (ASFA), in order to enjoy a ‘comfortable’ retirement, singles at retirement (aged 65) will need an annual income of $43,696. Couples at retirement will need an annual income of $60,063. These figures assume the retiree(s) own their own home and do not pay rent or make mortgage payments.

By ASFA’s standards, a ‘comfortable’ retirement means you can go on one annual holiday in Australia, you can eat out regularly and afford bottled wine. See what else a comfortable retirement means. Looking at the list, you can see whether your definition of ‘comfortable’ matches with the ASFA’s standards.

Planning to rely on the age pension could see your retirement dreams cut short. The pension is designed to support a very basic standard of living.

Plan your retirement out

If you’re considering retirement, it makes perfect sense to discuss it with us before stepping down permanently from the workforce. We can suggest strategies to give your super savings a last minute boost as well as advising you on investments to help maximise your retirement income.

Disclaimer Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

When running a self-managed superannuation fund (SMSF), it’s important for investors to be aware of some of the key global and economic environmental factors that may impact their investment portfolio.

We look at five global themes that are currently playing out in world markets, and how they may potentially impact their investment portfolios. It’s important to remember that past performance is not a reliable indicator of future performance.

1. Trade Wars

Trade tensions between the United States and China have shown their ability several times to cause turmoil in the investment markets.

The showdown kicked off in July 2018, when the US implemented its first China-specific tariffs. In turn, China has retaliated with its own tariffs, and threatened a range of other measures that may affect US businesses operating in China.

Things escalated in May 2019, as the US extended tariffs on a range of imported goods from China, drawing further tit-for-tat measures from Beijing.

With the solution of the trade tensions having a long way to go; nobody wants to see a full-blown trade war. The prospect makes markets nervous, and that may mean volatility for portfolios.

2. Slowing global economic growth

Global economic growth is an important driver of investment performance, but to a certain extent is hostage at present to the trade war concerns.

In March 2019, the Organisation of Economic Co-operation and Development (OECD), Australia’s peer group of developed countries, said in its Interim Economic Outlook that global trade growth had slowed from 5.25 per cent in 2017 to about 4 per cent in 2018.

In April 2019, the International Monetary Fund (IMF) cut its global economic growth forecasts for 2019 and said growth could slow further due to trade tensions. The IMF lowered its growth forecast for the global economy in 2019 from 3.5 per cent, which it expected back in January, to 3.3 per cent with the ongoing trade tensions remaining a risk for the global economy.

Any further deterioration in the outlook for world economic growth could mean volatility for equities.

3. Growth in China and how it affects Australian Resources

As China’s economy has grown, the world has become used to spectacular numbers: its gross domestic product (GDP, the amount of goods and services produced in the economy) grew at an average annual rate of 9.5 per cent between 1989 and 2019, with a peak of 15.4 per cent in the first quarter of 1993.

Falling Chinese economic growth rates is not good for investors, as it raises concern for global economic growth. Investors are now conditioned to expect Beijing will stimulate the economy when growth rates slip, but there are also concerns about its ability to sustain this given China’s huge levels of debt.

One of the closest exposures to China that many Australian SMSFs have is through holding shares in the big miners that supply the country’s voracious heavy industries including: BHP (iron ore and steelmaking coal), Rio Tinto (iron ore) and Fortescue Metals Group (iron ore). While China is a concern at the portfolio level, in terms of the sensitivity of the broader share market to perceptions of Chinese economic health, at the company level, these stocks continue to benefit from selling to China.

For example, in May, Fortescue paid a record dividend, and cited, among other factors, continued strength in Chinese steel production, which grew by 9.9 per cent in the first quarter of 2019 compared to the previous year.

The big miners are also benefiting from the fact that iron ore supply from Brazil has suffered in the wake of January’s tailing dam disaster. Brazilian miner Vale has stated that it could be up to three years before it resumes exporting at full capacity, and the supply disruption means that iron ore prices are likely to stay stronger than had been expected over that time.

4. The low-interest rate environment

The low-interest-rate environment that has been the investment setting for several years appears unlikely to change anytime soon. This is mainly due to central banks being reluctant to lift interest rates from long-term lows and bond yields pushed lower as investors become pessimistic about economies.

The dilemma for yield-oriented investors is that income is difficult to find in the traditional areas, meaning that higher risk has to be borne to generate higher levels of income. In Australia, listed shares have been popular for this purpose, using Australia’s dividend imputation system: infrastructure investments, real-estate investment trusts (REITs) and corporate bonds have been other alternatives used.

The challenge of a global low-interest-rate environment for investors looks like it will remain for some time.

5. New and disruptive technologies

An area that has opened up for investors recently is new and disruptive technologies. These include advances in areas such as cloud computing, artificial intelligence, virtual reality as well as social and new media.

Companies that have “disrupted” established industries by doing business differently such as the likes of Amazon, Uber, Netflix and Airbnb, have created new levels of value in very short periods of time, but now find themselves vulnerable to disruption.

The digital and IT-powered revolution will continue to pose both risks and opportunities for investors: the only certainty for an investor is that technological advances cannot be ignored.

This article was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. This information is current as at 3 June 2019. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. It does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Past performance is not a reliable indicator of future performance. No representation or warranty is given as to the accuracy, likelihood of achievement or reasonableness of any forecasts contained in the information set out in this document. Any projections are predictive in character. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be affected by inaccurate assumptions or may not take into account known or unknown risks and uncertainties. The results actually achieved may differ materially from these projections.

The end of the financial year is a good time to think about how you could grow your super and get started with saving for retirement. Here are some options you could consider to help your super work harder for you.

First home buyers

You may be able to make voluntary superannuation contributions to use towards a deposit for your first home under the First Home Super Saver Scheme (FHSSS) starting from 1 July 2017. Voluntary contributions you make, plus associated earnings, can be accessed from 1 July 2018 subject to meeting eligibility criteria. Whether using concessional or non-concessional contributions, the total amount of contributions you can withdraw is capped at $15,000 a year (or a maximum of $30,000 in total).

Superannuation Guarantee contributions, as well as contributions that don’t count towards or are in excess of the contribution caps, cannot be accessed under the FHSSS as part of your deposit. See more here.

Downsizer contributions

From 1 July 2018, if you are planning on downsizing your family home of ten years or more and are aged 65 or over, you may be able to contribute up to $300,000 from the sale proceeds to superannuation as a downsizer contribution. If you have a spouse, they could also contribute up to $300,000 to their superannuation from these proceeds.

Downsizer contributions do not count towards your before or after-tax contribution caps or caps on contributions for total superannuation balance. You can find out more about whether you might be eligible at ato.gov.au.

Tax-deductible super contributions

You may be eligible to claim a tax deduction for your personal super contributions. By doing this, you may be able to pay less tax while saving more for your future. Your eligibility can be affected by your age, sources of income and the level of salary sacrifice and certain other employer contributions made for you. To claim a deduction, you must give a notice to the Trustee of your super fund and have it acknowledged.

Keep in mind that personal deductible contributions count towards your annual before-tax contributions cap. The current before-tax contributions cap is $25,000 per financial year. Any contributions made above these limits will attract additional tax.

Consider a one-off contribution

After-tax super contributions are made from money you have already paid income tax on and won't be claiming a tax deduction on. For example if you work for an employer, making a contribution to super directly from your bank account is considered an after-tax contribution.

Investment earnings within your super accumulation account are taxed at up to 15%, compared to your marginal tax rate which applies to investments you may hold outside of super. Please note that depending on your income level, your marginal tax rate may be less than 15%.

The annual limit for after-tax contributions is currently $100,000 if your total superannuation balance is below $1.6 million at the start of the financial year. In certain circumstances, you may be able to bring forward three years of after-tax contributions into one year, contributing up to $300,000, if you haven't triggered the rule in the previous two years and your total superannuation balance is below $1.4 million at the start of the financial year. You may still be able to contribute part of the bring-forward if your total superannuation balance is between $1.4 million and $1.5 million at the start of the financial year.

Salary sacrifice to top up your super

Salary sacrifice is an arrangement where part of your before-tax wage or salary is paid into your super account instead of being received as take-home pay. It could be an effective way to boost your super and help you with saving for retirement. There may be tax advantages for you, depending on how much you earn.

To get started, do a budget to work out how much you can afford to invest from each pay packet. You may also consider talking to your employer to find out if they can set up salary sacrifice arrangements for you.

Keep in mind that salary sacrifice contributions count towards your annual before-tax contributions cap of $25,000 per financial year. Personal deductible contributions and contributions made by your employer also count towards your annual before-tax contributions cap.

Government co-contribution

In the 2017/18 financial year, if you are a middle to low income earner, adding to your super from after-tax money could see you entitled to a government co-contribution worth up to $500.

To be eligible you need to earn less than $51,813 in the 2017/18 financial year and be aged below 71 at 30 June 2018. You must also have a total superannuation balance of less than $1.6 million at the start of the financial year to be eligible.

The maximum co-contribution of $500 is available if you earn less than $36,813 in the 2017/18 financial year and if you have made a contribution yourself of at least $1,000. The co-contribution steadily reduces as your income rises and until it reaches zero at an annual income of $51,813.

Spouse super contribution tax offset

If your spouse or partner’s assessable income is less than $40,000 in a financial year, and you decide to make super contributions on behalf of your spouse, you may be able to claim a tax offset for yourself.

The maximum tax offset available is up to $540 if your spouse receives $37,000 or less in assessable income in the 2017/18 financial year. The tax offset is progressively reduced until it reaches zero for spouses who earn $40,000 or more in assessable income in a year.

Be aware of annual limits

As annual limits apply to the amount you can add to your super each year, it is important to consider how much you have already added to your account (or accounts) during the financial year to know which strategies can work for you. Visit ato.gov.au for the latest information on super contributions.

Disclaimer This information is current as at 19 April 2018. This information has been prepared without taking account of your personal objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investment held in superannuation. The Government has set caps on the amount of money that you can add to superannuation each year on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps. For more detail, speak with a financial adviser or visit the ATO website. [Insert business name] cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of superannuation can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser.

Your super returns may be doing ok, but could they be better? Being actively involved in how and where your super is invested, could make a real difference to your retirement savings over the long-term.

If you are considering going down this route, there are some factors to think about such as your retirement goals, how long you have until you retire and the amount of risk you’re comfortable taking on.

For instance, if you’re close to retiring, you may want to avoid putting your super somewhere that's too risky. Riskier investments tend to experience more ups and downs so time may help to ride them out.

This article considers four examples of investment strategies for your super.

The importance of diversification

Before we discuss the various investment strategies, it’s important to highlight the significance of diversification. Like any type of investment, spreading your super across different types of investment options, can help to build a strong portfolio and manage risk.

Why?

Because if you were to invest all of your super into one asset class such as property, your investment may suffer a loss if the property market was to fall in value. However, if you spread your money across multiple assets, you may have a different result.

Investment strategy type 1: Growth

If you don’t think you’ll be accessing your super for at least 10 years or more, a growth strategy may work for you as a longer timeframe may help an investment portfolio withstand volatility while aiming for returns.

A growth strategy that follows a higher risk, higher return approach tends to have a larger focus on assets that are exposed to capital appreciation. That is, investing in assets which are expected to grow at a higher rate than the industry or overall market.

For instance, this may involve an investment of around 70-85 per cent in shares or property with the rest in fixed interest and cash-based investments.

Historically, over any 20-year period, a growth strategy has delivered better returns than more conservative portfolios which would mainly be invested in fixed interest and cash. However, over a short-term period, you may experience significant losses as a result of market volatility.

Another key benefit of a growth strategy is that by making greater returns on your investment, your savings are more likely to keep up with the rising cost of living. This is arguably important because over time inflation may reduce the value of your retirement savings, which could make it difficult to maintain your standard of living when you’re retired.

Investment strategy type 2: Balanced

Similar to a growth strategy, if you aren’t planning to access your super anytime soon, opting for a balanced investment portfolio may be another option.

This strategy is aimed at balancing risk and return so your portfolio has enough risk to provide reasonable returns, but not enough to cause significant losses.

A balanced strategy typically involves investing around 60-70 per cent in shares or property, with the rest in fixed interest and cash-based investments.

Investment strategy type 3: Conservative

You may be considering how you could protect your capital if you want to access your super within 3-5 years.

A safe or conservative strategy follows a lower risk, lower return approach so it’s really about preserving the value of your investment portfolio. While there may be less risk of losing money, a downside could be that your returns may not keep up with inflation.

For example, this could involve investing around 20-30 per cent of your super in shares and property, with the rest in fixed interest and cash-based investments.

Investment strategy type 4: Ethical and sustainable

You may choose not to invest in certain companies based on ethical grounds. For example, taking a stance against investing in fire arms. This approach is called ethical or socially responsible investing.

There is also sustainable investing which goes beyond incorporating just ethical and social factors. That is, it approaches investing from an environmental and governance lens too. Some super funds now offer this, so if these factors are important to you, speak to your super fund for more details.

If you’re a self managed super fund (SMSF) trustee, there are a range of sustainable managed funds which you can tap into.

Review your investment approach

You may want to review your current investment approach with your super fund or SMSF to consider how it aligns with your goals and risk comfort.

For example, if you are looking to take an active role by directly investing your super in shares, exchange traded funds and managed funds, there are super products and platforms which enable you to do this.

Alternatively, a SMSF is an option that enables you to have more control over how your super is invested with the added bonus of being able to access more investment options such as direct property and commodities. You also have the ability to borrow within your super fund for investment. There are a number of administration requirements however, as well as legislative requirements to adhere to.

You may want to consider speaking to a financial expert when determining which super product may be best for you.

This article was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. This information is current as at 22 May 2019. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. It does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. BT cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of investing in property, shares or superannuation can impact individual situations differently and you should seek specific advice from a registered tax agent or registered tax (financial adviser). Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investment held in superannuation. The Government has set caps on the amount of money that you can add to superannuation each year on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps. For more detail, speak with a financial adviser or visit the ATO website.

In 2010, Wendy was diagnosed with rheumatoid arthritis, an incurable and debilitating condition that changed her life overnight.

At the time of her diagnosis, Wendy, then 47, was loving life, enjoying peak career success working for a pharmaceutical company, and a newfound romance with David, a lovely man she had met six months earlier.

At first, Wendy was unable to comprehend the reality of what lay ahead. Just six weeks after her diagnosis, crippling pain meant Wendy could no longer perform her normal duties at work. When it became clear she would have to leave the job she prided herself on being good at and which she loved, the mum of three was devastated.

Just six months before her diagnosis, Wendy had met with a financial adviser who suggested she take out income protection. Fortunately, Wendy listened and now, looking back, says it was one of the best decisions she had ever made. She often thinks about what her life would have been like had she not had the financial support income protection provided.

Rather than worrying about how she was going to pay her share of a new mortgage and meet her medical expenses, Wendy could focus on her treatment, and adjusting to a new life that was never part of the plan.

It took three years to get her condition to a manageable level and David stood by Wendy’s side and they married, even though they hadn’t been together long, creating in the process a blended family that makes them the proud grandparents of 10.

These days, Wendy works part-time as a first aid teacher and keeps her RA symptoms under control through a strict vegan diet and plenty of exercise, especially swimming and cycling.

Wendy’s story is an inspiring tale of indefatigable resilience in the face of adversity. As David says, “She gets up, she dresses up, she turns up – and she never gives up.”

Adds Wendy, “Life these days is definitely challenging managing an incurable disease. I have my good days and bad days, and still a few sad days too. My health has its ups and downs but my focus now is on staying well as best I can.”

Hope for the best but plan for the worst

It may be important to know which options could be available to try and help protect you and your family’s future, in the event of any unforeseen sickness or injury. Speaking to us about your insurance cover could provide peace of mind for you and your loved ones.

Disclaimer Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

There is no doubt that interest in responsible investments is growing. Not only in Australia but globally, investors are increasingly interested in how a company makes its money, not simply how much it makes.

While some investors may focus on the longer-term viability of a company and its behaviour, others may hold particular values they want their investments to mirror. How these two strategies play out in the investments context can be different.

We explore the rise of sustainable investing in more detail.

Sustainable investing: changing investors’ perception

Even at the highest level, investors are shifting from only looking at short-term returns to a broader focus on long-term value creation, including the impact a company is having on those around them.

In his 2017 letter to the CEOs of the companies his firm invests in – Blackrock CEO, Larry Fink, highlighted this exact issue noting that “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate”.

More and more investors are asking CEOs to focus not only on creating shareholder value, but also on long-term vision for the company, and, by extension, the impact it will have on society via investing sustainably.

Sustainable investing: it’s not a new idea

Today, many investment managers, including BT, use environmental, social and corporate governance (known collectively as ESG) knowledge and data. It can help to inform the analysis of important areas including risk and innovation to engagement and voting practices.

Examples may include a company’s interaction with the environment, such as water and air pollution, social factors like employee diversity or safety standards, along with the company’s governance structure, such as how the board is composed and compensation structures. This approach seeks to add value or manage risks through broader, more comprehensive investment analysis, decision-making and engagement with companies.

Sustainable investing opportunities

For investors, navigating the world of responsible investment can be complex. Terms like ethical, sustainable and impact investing are often used interchangeably by investors seeking to ensure that their money is invested in companies or funds that mirror their values and beliefs. In reality, these terms each relate to a specific type of responsible investing – depending on what the investment is trying to achieve.

Ethical investing verses sustainable investing

Arguably, the most well-known responsible investment strategy among investors is ethical investing. This strategy’s primary purpose is to exclude certain industry sectors, companies, practices or even countries that meet specific criteria from a fund or portfolio, based largely on the client’s preference not to be invested in these activities. Traditional ethical investment strategies seek to avoid issues like tobacco, weapons, gambling, and pornography, however, investors are increasingly interested in strategies that avoid sectors linked to climate change or abuse of human rights.

Sustainable investing, in contrast, is a type of responsible investing that considers ESG issues in an investment, alongside standard financial measures when assessing a company’s performance. This might include how a company approaches employee relations, executive remuneration and anti-money laundering legislation.

Sustainable investing also lends itself to longer-term investment horizons and strategies. If more investors use a sustainable strategy in their investment decision-making, more and more companies will be encouraged to behave sustainably and address ESG concerns and opportunities in their business.

Impact investing is a rapidly developing field

You may also have heard about the rapidly developing field of impact investing. Impact investments preference the social or environmental purpose of an investment over or alongside its financial results. Whilst there are currently few opportunities to access impact investments for most retail investors, many people are attracted to the idea of investments that aim to deliver a positive outcome as an alternative, or complement to traditional philanthropic funding.

How retail investors get involved with sustainable investing

If you are interested in sustainable investing, visit our sustainability section or alternatively, speak to your Merit Wealth financial adviser.

Written by Jessie Pettigrew, Senior Manager Sustainability - BT and Madelaine Broad, Portfolio Analyst, Investment Specialist – BT. This article was prepared by BT. BT is a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. This information is current as at 12 April 2019. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.

This is a Budget not only designed to showcase the return to surplus (and by default the Government’s economic credentials) but engage voters with initiatives to make them feel like they are more prosperous. A massive infrastructure spend adds to this sentiment.

The Government has also stated that it will keep taxes as a share of GDP within the 23.9% cap.

All measures, of course, are reliant on the relevant legislation passing Parliament which is by no means a given with an election looming.

Budget 2019-20 Highlights:

Personal tax cuts - $19.5bn package of personal income tax cuts

Small business - Instant asset write-off increased to $30k and expanded to businesses under $50m Infrastructure - $100bn in infrastructure projects across all States and Territories Regulators - $1bn ATO task force funding targeting multi-nationals and high net worth individuals

What is missing from the Budget is any word or statement on the previously announced measures that would deny non-residents access to the CGT main residence exemption. Shadow Treasurer Chris Bowen recently released a media release calling on the Government to drop the “unfair ex-pat CGT changes.” So, unless the Government returns from the election with a majority, these changes will not come to fruition.

If we can assist with any additional information, please contact your Merit Wealth Adviser.

Budget 2019-20 Highlights include...

Financial discussions during divorce tend to focus on dividing assets and cash, but managing your insurance is an area which can make a big difference for you and your family.

Over 40% of Australian marriages fail, with nearly half of these involving families with young children.

While insurance protection may have been something that both parties had considered while married, it’s no less important after the relationship has ended.

Insurance is about preparing for those unexpected situations which may make it difficult to care for yourself or manage your responsibilities, whether as the main caregiver or financial provider. These situations include temporary or permanent disablement, critical illness or death. Protection can be key when you are on your own, but can also make a difference to the ongoing welfare and care of children. If you already have insurance, it can be important to reassess the level of cover you have to see if it is still adequate for your new circumstances.

Here’s four types of insurance cover you might consider taking out or reviewing, after a marriage or relationship breakdown.

1. Living insurance Living insurance (also known as trauma insurance) can provide a lump sum payment for people suffering from one of a range of specified medical events. This can be crucial to assisting with medical and accommodation expenses if you suffer from a serious illness or injury and could also help you with more flexibility with work arrangements and continued family expenses.

2. Income protection Whether you are the main caregiver or financial provider to your children, income protection can help you continue to provide stability and financial support in the event of temporary or permanent disability.

In determining your level of cover, consider the financial contribution you make for your children, and/or the cost of someone to perform childcare and household duties.

3. Term life insurance

Term life insurance pays a lump sum benefit if you pass away or are diagnosed with a terminal illness. If you pass away, the benefit is paid to your nominated beneficiaries. It may be helpful to seek further advice on your beneficiary nomination. Where there are minor children involved, and you wish to ensure that there are ongoing financial provisions to cover their education, medical needs and care; you may need to allow for a testamentary trust in your will.

You could also use a Term Life payment to pay out a mortgage, so children are able to inherit and live in a property debt-free.

4. Different Total and Permanent Disability (TPD) definitions for your changing circumstances

While people tend to be more aware of occupation based TPD insurance which covers a situation where you would no longer be able to work, there are also options for homemakers. A payment from this type of policy can be used to hire a professional to perform normal household duties if the homemaker is unable to as a result of permanent disability.

TPD insurance can be important in helping you manage your own needs, as well as supporting your children.

While the end of a relationship can be a stressful and difficult time for you and your family, reviewing and revising insurance cover so that it meets your new requirements can eliminate one area of concern for you – the ongoing needs of your children.

It can also be helpful to discuss financial protection with your former partner. This can provide comfort to both of you that your children will have continued security and financial support.

If you would like to determine your current insurance needs and establish what policies may be suitable for you and your family, please contact your Merit Wealth adviser.

Disclaimer This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. This article may contain material provided by third parties derived from sources believed to be accurate at its issue date. Insurance is subject to terms and conditions, and limitations and exclusions apply. Please read the Insurance’s Product Disclosure Statement to see if this insurance is right for you.

In an age of digital distraction, mindfulness has never been more important.

A form of meditation, and a powerful tool that keeps you in the present moment, mindfulness may ease psychological stresses, anxiety, depression and even pain.[1] Practice of presence has also been shown to promote a better work ethic, sleep, and even money management skills.[2]

There is no better time to practice mindfulness from a money management perspective, with slow wage growth and big hikes in the costs of some essential services, putting Australian families under even more financial strain.[3] The effects of such financial stress are evident in studies conducted by the Australian Psychological Society in 2015.

Results suggested that personal finances was one of the main sources of stress for Australians, with debts and negative numbers against a person’s name, having a very strong impact on wellbeing. In some cases, anxiety and depression can be linked to financial insecurity.[4]

The state of deep relaxation that comes with mindfulness, on the other hand, can lead to enhanced mood, lower blood pressure, and a reduction of lifestyle stress.[5] Here are five simple ways to use this technique when saving, spending and planning.

1. Improve mindfulness: stop living paycheck to paycheck

Reactive money management can be mentally and physically exhausting. When you’re not scrambling to make ends meet, you might be running out of money before the end of the month, which can lead to less resource to better remedy how you budget.

According to Tim Howard, Technical Consultant at BT Financial Group[6], tracking your expenses is key to getting out of money ruts caused by debt and improve mindfulness.

“You’ve got enough stress in your life without thinking about how the next bill, unexpected or not, will be paid,” Tim says. “In the simplest sense, you need to know where every dollar is coming from, and where every dollar is going. Start with a list, spreadsheet or mind-map on an A3 piece of paper - you’ll be amazed at the financial clarity an exercise like that gives you.”

2. Improve mindfulness: set up an emergency fund

Tim suggests any emergency fund set up by you should have at least three to six months of living expenses in case of an unexpected financial hurdle, such as job loss or sudden illness. Because of this, an emergency fund is a proactive way to deal with any future financial setbacks you may encounter. “An emergency fund is more than just for a rainy day” Tim adds. “A far more fun and positive way to think of it is your ‘future choices’. Such a fund can allow you to take a career break, some time off to work, study, start a business, take a holiday or explore.”

“Even though the reasons which lead you to the choice may be unforeseen, such as a change in health or losing your job, a fund like this gives you more power to choose your response to these events.”

3. Improve mindfulness: pay attention to money habits

Do you like to splurge after a big week at work? Book weekends away on your credit card? Or, are you more likely to limit your spending (which sees you socialising less and staying in more)? Whatever the case, Tim believes it is important to identify bad money habits, when it comes to mindfulness, before seeking ways to change them.

“Finance might not be your favourite topic in the world, however, that doesn’t mean you shouldn’t have a basic understanding of where you’re at with yours,” Tim says. “It’s important to remember healthy money management will stretch into many other aspects of your life from a feeling of greater security, to greater choice and knowing when you should and shouldn’t choose to spend (and what on).”

“It’s also important to think about where all your money comes from, plus where it goes. What are the reasons behind what you are buying? Is it giving only short term or long term benefits too?”

4. Improve mindfulness: swap card for cash

“Credit cards are great servants but terrible masters,” Tim adds. “If you aren’t able to pay off your credit card in full every month, you are spending beyond your means and someone else is making money from your consumption.”

“A great way to track what you spend is by budgeting cash ahead of time. This doesn’t necessarily mean walking around with a hand full of notes – use savings or debit cards, and then follow your online banking to understand if you are only spending on what you intended to.”

5. Improve mindfulness: stay focused on your financial goals

Tim believes that mindfulness money management can be helped by having your goals where you can see them, and that by doing so you have a more focused attention on what you’re spending or saving, ensuring all financial decisions support your short and long-term targets.

“Have them written out on the fridge, stick them on your wall or door, and even write them out on the bathroom mirror” Tim says. “Any goal that is in front of you, stay front of mind, so you have the goal in mind when making decisions throughout the day.”

[1] Corliss, Julie. “Mindfulness Meditation May Ease Anxiety, Mental Stress.” Harvard Health Blog, Harvard Health Publishing, 3 Oct. 2017

[2] Goyal, Madhav. “Meditation for Psychological Stress and Well-Being.” JAMA, American Medical Association, 1 Mar. 2014

[3] Bagshaw, Eryk. “Electricity Prices Jump 12 per Cent, Six Times the Average Pay Rise.” The Sydney Morning Herald, The Sydney Morning Herald, 31 Jan. 2018,

[4] “Feeling Safe, Stable and Secure - Finances.” Head to Health

[5] “Meditation May Reduce Stress and Improves Health by MedicineNet.com.” MedicineNet,

[6] Interview conducted with Tim Howard, Technical Consultant at BT Financial Group on 23 January 2019

[7] Peterson, Bailey. “Credit Card Spending Studies (2018 Report): Why You Spend More When You Pay With a Credit Card.” ValuePenguin, ValuePenguin, 22 Aug. 2018,

The article was prepared by BT Financial Advice (BTFA). BTFA is a division of Westpac Banking Corporation ABN 33 007 457 141, AFSL and ACL 233714. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This article may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts no responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it.

We all live in hope that when we pass, we’re not forgotten. We’d also like to believe that the money we’ve worked so hard for will help to give our kids and grandkids a better life.

But for those who don’t have a plan in place, and would rather leave this to chance, there is a risk that your wishes may not come true.

These four estate planning strategies will help you ensure your beneficiaries are looked after long after you’ve gone.

1. Make a will as part of your estate plan

If you pass away without a will, your wealth will be distributed in line with the state government formula that applies in your state/territory, known as intestacy. This means your assets may be distributed against your wishes and could incur higher tax liabilities.

Having a will is therefore important in estate planning as it defines who you nominate to receive your wealth. It can also include who you choose to look after your children if they’re under the age of 18, and instructions about your funeral.

DIY wills

Estate laws are complex so taking a do-it-yourself approach to your will may cause you more stress than you need. Consider having it professionally drafted by a solicitor, a private trustee or the Public Trustee for your state or territory.

Keep it updated

Key events that happen to you may trigger a review of your will. For instance, if you dispose of or buy new assets, you may want to consider whether it’s worth amending your will to reflect this.

2. Nominate an executor for your estate plan

An important part of estate planning is the nomination of an executor. This person is responsible for distributing your wealth among your beneficiaries and paying off any debts when you pass.

You may choose to name a family member as your executor, although appointing a third party such as your solicitor, accountant or a public trustee may ease the burden on your family members. However, there is a cost associated with this.

3. Get the right level of insurance

In many cases life insurance forms an important part of estate planning as it provides a financial safety net which your family can use to, pay for funeral expenses, enable the payout of large debt such as a mortgage or buy out a business partnership for instance.

Many super funds offer life insurance which can be adjusted according to your needs. If you hold life insurance outside of your super, a lump sum will be paid to any nominated beneficiaries upon your passing.

4. Consider trusts for effective tax management

Finding ways to manage your tax helps to ensure your wealth is protected, as well as being, a key part of estate planning.

Create a trust

Trusts can help manage your tax especially when it comes to capital gains and income tax. A good example of this is a testamentary trust, which in essence, passes on control of your assets rather than the assets themselves.

Instead of passing assets directly to a beneficiary, they are passed into a trust which a chosen beneficiary/s is in control of. This does not take place until your death.

Your spouse, for instance, could be the principal beneficiary initially, with your children and grandchildren as future beneficiaries when they reach 18 years of age.

But like everything, there are some disadvantages with testamentary trusts to keep in mind. For instance, there are specific requirements you need to meet and if you decide to appoint a professional as a trustee, you’ll have to cover fees for this service.

The article was prepared by BT Financial Advice (BTFA). BTFA is a division of Westpac Banking Corporation ABN 33 007 457 141 & Australian Credit Licence 233714 (Westpac). This information is current as at 26 February 2019. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any tax considerations outlined in this publication are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of super investments can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser.

Many of us don’t hesitate to insure physical assets such as our home, contents and vehicles, but what about our greatest asset of all – our ability to earn an income?

While we’d all like to picture a smooth road ahead, sometimes that’s just not the case. Protecting your income along the way isn’t a luxury: anyone with financial obligations could consider their back-up plan should job loss, business closure, sickness or injury, strike.

Because of this, planning ahead for the unexpected may be something to think about for your and your family’s financial security. Read on for some tips on protecting your income.

1. Save for a rainy day

Saving is a potential way to insure yourself against setbacks, such as losing your income or unforeseen emergencies. This may be a good back up for short-term or relatively minor setbacks and, the best part is, it’s flexible. Get into the habit of saving on a monthly basis; you could keep these funds in an easily accessible savings or cash account with the best interest rate you can find, so you can access your money if needs be.

2. Consider Income Protection insurance

Income Protection insurance is designed to replace a percentage of your monthly income if you’re unable to work for a period of time due to sickness or injury. This may cover your day-to-day living expenses, giving you the financial peace of mind to focus on what’s more important: your recovery.

One thing to consider is the level of income protection cover you may already have through your employer or your super. If your employer or your super fund offers some form of income protection cover, you may still need to apply for additional income protection insurance or another type of insurance cover, so that in the unfortunate event of sickness or injury, you can protect your financial position.

3. Invest in yourself

Building up your skills could be a form of insurance. Developing more expertise and updating your skills in your chosen field makes you arguably a more valuable candidate, in case you need to find a new job due to redundancy. Even if you don’t lose your job or get sick or injured, broadening your skills can give you more career options down the track, whether or not you choose to remain with your current employer.

4. Find ways to boost your earnings

Finding ways to increase your regular earnings may improve your current financial situation and make it easier to save. By doing so, you could be providing financial protection against loss of income or unforeseen emergencies. Sometimes it even lets you follow your passion as a secondary source of income. Some people make extra money by taking up part-time employment such as a part-time tutor or coach, while others create and sell arts or crafts at local markets or online. With all the opportunities out there, there’s bound to be something to suit you.

This article has been prepared by BT Financial Group, a division of Westpac Banking Corporation ABN 33 007 457 14, AFSL and Australian Credit Licence 233714, and the information is current as at 20 February 2019. This article provides an overview only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information has been prepared without taking account of your objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.

What is gifting? But before you gift a significant amount, it’s important to understand how this could impact your Age pension or other social security benefits you receive now or in the future.

What is gifting? Gifting can be a viable strategy as gifts given within certain limits can not only provide you with the satisfaction of being able to help others, but also slightly increase your Age Pension benefit entitlement. However, exceeding these limits could result in the gift continuing to be treated as your asset for a period of time, even though you no longer hold this asset.

But gifting isn’t just about giving away an amount of your savings. There are a number of other scenarios where gifting rules may apply, for example:

Transferring shares to someone without receiving the full market value in returnGiving up control of a company or trust which holds underlying assetsTransferring an investment property worth $300,000 to another person for less than its true value (so for $200,000 for example)Forgiving a loan someone owes youProviding money to a company or trust you don’t control, without a loan agreement showing the amount is to be repaid.

What’s not included as gifting?

You wouldn’t be viewed as gifting an asset when you sell or reduce any of your existing assets to meet normal living costs – for example, to pay for a holiday or fund renovations to your home.[1] You’re also able to transfer assets between yourself and your spouse without the gifting rules applying. Additionally, there may be opportunities to contribute assets to your spouse’s superannuation and increase your Age Pension where your spouse has not yet reached their Age Pension age.[2]

How much can you give when gifting?

While you are not limited in the amount, there are limits within which a gift wouldn’t affect your Age Pension benefit. Centrelink use two tests to determine if you are within or outside the allowable gifting limits.

Firstly, individuals and couples combined can gift up to $10,000 per financial year or up to $30,000 over a five financial year period and remain within the gifting free period.

Any amounts gifted outside this limit will result in the excess amount being treated as a ‘deprived asset’ which will be counted as an asset under the assets test and deemed under the income test.[3]

How can gifting affect your Age Pension?

The deprivation provisions are designed to limit the potential for social security recipients to reduce their assets and as a result reducing the impact of the income and asset means tests on their benefit entitlement.[4]

Where a person has given away, destroyed or diminished the value of an asset or given away an amount in excess of the gifting free area, Centrelink will treat the individual as continuing to hold the asset under the asset and income means test for five years from the date of the gift.

Concerned about the impact of gifting?

Given the complexities involved in planning for and calculating the impact a gift may have on your Age Pension or other Centrelink benefit, it’s worth seeking help from a qualified financial adviser or Centrelink directly before you gift.

Example – Gifting and deprivation

Joan is aged 68, receives the Age Pension and wants to help her daughter buy a property. On 20 September 2018, Joan gives her daughter $50,000 from an inheritance Joan recently received from her late father.

As Joan has not gifted any amounts previously, the first $10,000 falls under the gifting free area and the remaining $40,000 will continue to be treated as Joan’s asset under the Centrelink income and asset means tests until 20 September 2023.

After this time, the remaining $40,000 will no longer be treated as Joan’s asset.

[1] https://www.humanservices.gov.au/individuals/enablers/gifting [2] https://www.humanservices.gov.au/individuals/enablers/superannuation/27271 [3] http://guides.dss.gov.au/guide-social-security-law/4/1/1 [4] http://guides.dss.gov.au/guide-social-security-law/4/1/1

The article was prepared by Tim Howard, Strategy Specialist at BT Financial Group and is current as at 31 January 2019. BT Financial Advice Advisers are representatives of Westpac Banking Corporation ABN 33 007 457 141 AFSL & Australian Credit Licence 233714 (Westpac). BT Financial Advice is a Division of Westpac. The information in this publication is current as at 7 January 2019. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any tax considerations outlined in this publication are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of super investments can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser.

This article was originally written by Pendal Group Limited and is shared with permission.

Diversification is likely to be one of the key foundations of a strong investment portfolio. Pendal, one of BT’s key strategic partners, explains this strategy in simple terms.

What is diversification

Diversification is the act of spreading the money you have to invest across a number of different types of investments. For example, rather than putting all your money into shares in one company, you split it across multiple shares in companies which operate in different industries or different countries. You might also spread to other types of investments like bonds or property.

Why do this? Because different investments behave in different ways. When one peaks, another may plummet, while another stays flat. Some provide investment returns in the form of income (for example, dividends or rent), others through increasing in value. Diversification ensures that an investment portfolio is not at risk of suffering too much if one or more of its parts fall in value.

Diversify, yes – but also think of your objectives

Diversified investment portfolios vary substantially, but can be grouped according to what the owner (the investor) wants from their portfolio and how much risk they are prepared to take on. Broadly speaking, we can bucket portfolios under one of three labels: conservative, balanced and growth.

Conservative portfolio: This may have the bulk of its money (70% or more) invested in cash and fixed interest (bond) investments, with the rest in growth assets such as shares and property which are, generally speaking, more volatile. This type of portfolio is designed to achieve lower variability in returns, albeit with lower returns than balanced and growth portfolios.

Balanced portfolio: As the name suggest, more of a balance, with around 30% - 40% invested in cash and fixed interest and the remainder in growth assets, with slightly more varied returns through time.

Growth portfolio: The alter-ego of the conservative portfolio, this kind of portfolio will typically have at least 70% - 85% in growth-oriented investments, aiming to provide higher returns over the long term, but with a greater likelihood of shorter term volatility. This means in some years you could see losses – even significant losses – but also higher returns in the good years.

The traps of diversification

When you manage an investment portfolio on your own, there are many risks to contend with.

First is a basic lack of knowledge. ASIC research shows that 10% of people have at some point invested in something they didn’t understand, and 69% of people either had not heard of or did not understand the concept of risk and return trade-off. Furthermore, some 41% of people view real estate as a low or very low risk type of investment. A lack of knowledge and experience means many investors could be open to:

• Buying into an investment before prices drop significantly, or selling before they increase (known as timing risk) • Failing to understand which investments are low risk and which are considered high risk • Investing too much in one investment simply because it has already performed well.

OK, I get it. What next?

The concept of not putting all your eggs in one basket seems logical, but working out how you do this with your own money and actually doing it – yourself – takes a lot more effort. Help is available. A financial planner can sit down and help you work out what you want from your money over time and define your financial goals. Furthermore, Australia has a well-developed market for investment products, including managed funds, to provide one-stop diversified investment options for individuals.

About managed funds

Investing in a managed fund allows you to access investment professionals to manage your money. In a managed fund your money is pooled with that of many others. The investment manager controls where this pool of money is invested, using their investment process and experience to the mutual benefit of the investors. The investment manager cannot just invest where they please; each managed fund has its own governance structure, rules to abide by and specific investment objectives – like providing long term growth, or regular income.

There is a wide range of managed funds available including well diversified options such as conservative, balanced and growth funds. You will pay a fee for ongoing management, but beyond the investment manager’s expertise, what you buy is freedom to ‘get on with life’, as managed funds are one of the easiest ways for time-poor or knowledge-poor people to establish and manage a diversified portfolio.

Make the most of diversification experts

We recommend seeking professional financial advice. Qualified advisers can assess your needs and recommend investments designed to meet your goals.

About Pendal: Pendal Group Limited (Pendal), known as BT Investment Management until May 2018, is ASX-listed (ASX:PDL) with $92.8 billion in funds under management as at 31 December 2018. Pendal is a diversified global investment manager with offices in Sydney, London, New York, Boston and Singapore. Pendal offers over 50 investment strategies including equities, diversified, property, cash and fixed income products. At 31 December 2018 Pendal employees were the largest single shareholder group, holding 14% of total PDL shares on issue, providing strong alignment between employees and the company’s growth and success.

Disclaimer: This article has been prepared by Pendal Fund Services Limited ABN 13 161 249 332, AFSL No 431426 (Pendal), It is not to be published, or otherwise made available to any person other than the party to whom it is provided. This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not intended as professional advice or to be regarded as a securities recommendation. The article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.This article contains material provided by third parties derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. The views and opinions expressed in this article are those of the individual contributor(s) and do not necessarily reflect the official policy or position of BT Financial Group or any company in the Westpac Group, its entities, or any other entity, on the matter discussed. Past performance is not a reliable indicator of future performance. Any projections mentioned in this article are predictive in character. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be affected by inaccurate assumptions or may not take into account known or unknown risks and uncertainties. The actual results achieved may differ materially from these projections. Information current as at February 2019. © BT Financial Group – a Division of Westpac Banking Corporation ABN 33 007 457 AFSL and Australian credit licence 233714

Remember when mobile telephones were brick-like devices that cost thousands of dollars and only had a battery life of 30 minutes? It was only 33 years ago*, yet in that time those clunky phones have transformed into pocket-sized PCs that carry much of our personal and financial information.

If you are in doubt as to what could be learned about you by cracking your smartphone’s security code, consider the apps that you may have downloaded to your phone. For starters, mobile banking apps provide access to your accounts, ride-hailing apps often record your home address, travel apps detail your flight bookings and holiday plans, e-commerce apps contain your recent purchases, and location services reveal where you are or have been.

Then there’s the more detailed information about yourself, family, and friends that you may have innocently provided in emails and social media posts…

That’s why it’s important to take the security of your phone as seriously as you do that of your bank cards.

Luckily, there are six simple tech tricks that add an additional layer of protection for the valuable information it contains.

1. Only download apps from official app stores

Ignore emails or texts that encourage you to download apps as well as links in an email or a text that could lead you to a fake app store. These fake apps may be hiding a virus or malware such as a Trojan that’s designed to surreptitiously steal your information.

2. Use a complex, unique password for each app and site

Avoid using your mother’s maiden name or your pet’s name and instead opt to set up hard-to-guess passwords for each of your online accounts and apps. It’s important that you change them regularly so an online password manager helps you to remember your existing passwords and create new ones. This is usually done by integrating your web browser and recording the passwords as you type them.

There are also many free password managers available online to help with this.

3. Always lock your smart phone

Whether you use fingerprint recognition, a PIN, or something even more secure- locking your smartphone is important because it makes it less attractive to opportunistic thieves who wish to re-sell it. If someone’s able to access your phone, they’re also likely to have access to your apps and email, and the ability to reset your password, locking you out of your own email account. This potentially uncovers sufficient information to impersonate you.

It’s also wise to turn off your discoverable Bluetooth and location services when you’re not using them, to prevent your movements being tracked.

Many apps and sites now offer second-factor authentication (2FA), which means a user must input a second layer of information after their username and password to obtain access. It’s worth setting up 2FA on your most important accounts, such as your email, social media, and banking apps, if it’s available.

Some phones are also available with extra security features, such as iris scanners, facial and voice recognition, ‘shake pattern’ recognition (yes, it recognises how you shake your phone!), and fingerprint sensors. But while these may be convenient and give you additional peace of mind, they’re not currently considered replacements for vigilant use of more basic security functions.

4. Keep your software and apps up to date

Regularly check your phone’s app store for the icon that indicates your apps are due for an update, and make sure you update when prompted. It’s also worth following your phone-maker’s prompts to undertake operating system updates. This is important because updates usually include fixes for any new security holes that may’ve been identified by phone and app makers.

5. Add a keyword to your phone account

Mobile providers are usually happy help keep your data safe by adding a keyword to your account you quote when you call them, so consider setting one up.

6. Use your PC’s virus protector on your phone

Did you know that many of the software programs used to protect home computers from viruses and malware have an option that allows you to also use them on your phone? Check the terms of your existing anti-virus program to see if it covers mobile devices, or consider purchasing separate protection for your phone.

Disclaimer *https://www.thevintagenews.com/2016/10/01/priority-brief-history-mobile-phones-evolution-years/ Article prepared by Starts at 60, October 2017 and reused with permission. Information current as at 16 July 2018 and may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, accepts no responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. The information shown in this article is general information only, it does not constitute any recommendation or advice; it has been prepared without taking into account your personal objectives, financial situation or needs and you should consider its appropriateness with regard to these factors before acting on it. Any taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. You should also consider obtaining personalised advice from a professional financial adviser before making any financial decisions in relation to the matters discussed hereto.

In this edition of Investment Solutions magazine we take a look at how you can enjoy the festive season without the financial stress.

BT Financial Group Investment Specialist, Riccardo Briganti, provides us with a market update on local and international markets.

Finally, we share insights on what makes a good investment strategy.

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In this edition of Investment Solutions Magazine we take a look at how you can use your SMSF to educate your children about finance. BT Financial Group Investment Specialist, Riccardo Briganti, provides us with a market update on local and international markets. We also look at if you can really afford for your adult kids to continue to live at home. Finally, we share some tips on how to spot scammer

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In the winter edition of Investment Solutions magazine, we analyse what the proposed Budget changes mean for you. BT Financial Group Investment Specialist, Riccardo Briganti, provides us with an investment update on local and international markets. We take a look at how to make your retirement funds last the distance. Finally, Dr Bryan Humphrey talks to us about his experiences ‘voluntouring’ internationally during retirement

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The 2017-18 Federal Budget attempts to please as many people as possible.

It tackles the issues currently in focus across the Australian community – gaps in healthcare, first home ownership, foreign workers, investment and bank accountability to name a few of the pressure points.

It also delivers an economic ‘sugar hit’ in the form of $75 billion in infrastructure projects.

But as author John Lydgate says:

“You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time.”

As always, it is the detail that tells the real story.

Here are some of the key measures:

For Business

Small business CGT concessions tightenedIndexation returned to Medical Benefits SchemeLarge multinationals laws tightened further

Superannuation

Tax relief extended for merging super funds

Investors

The Government is very keen for private investors – including large scale investors and superannuation funds – to be a part of the solution to Australia’s housing affordability crisis. A series of new measures target investment opportunities to expand the availability of affordable rental properties.

Individuals & Families

Medicare low-income threshold increasedIndexation paused on Family Tax Benefit paymentsPenalties introduced for Work for the Dole and jobseekersWorking Age Payments consolidatedRegional and rural scholarshipsPreviously announced measures include higher education fees increased and funding mix for schools

Infrastructure & Investment

Regional Growth Fund establishedImproved competition in banking Disaster relief extended

Regulation & Administration

Sales suppression technology banned

Other Measures

Farm Business Concessional Loans Scheme extendedVisa charges increaseAgricultural levy changes

For assistance with any of the Budget measures and what they might mean to you, your business or your investments, talk to your Merit Wealth team today.

As we move through life, find a partner, raise a family, and maybe start a business, the importance of insurance in a long term plan increases. That’s because insurance is all about providing a financial safety net that helps you to take care of yourself and those you love when you need it most.

Here are 5 reasons why insurance matters.

1. Protection for you and your family

Your family depend on your financial support to enjoy a decent standard of living, which is why insurance is especially important once you start a family. It means the people who matter most in your life may be protected from financial hardship if the unexpected happens.

2. Reduce stress during difficult times

None of us know what lies around the corner. Unforeseen tragedies such as illness, injury or permanent disability, even death – can leave you and your family facing tremendous emotional stress, and even grief. With insurance in place, you or your family’s financial stress will be reduced, and you can focus on recovery and rebuilding your lives.

3. To enjoy financial security

No matter what your financial position is today, an unexpected event can see it all unravel very quickly. Insurance offers a payout so that if there is an unforeseen event you and your family can hopefully continue to move forward.

4. Peace of mind

No amount of money can replace your health and wellbeing – or the role you play in your family. But you can at least have peace of mind knowing that if anything happened to you, your family’s financial security is assisted by insurance.

5. A legacy to leave behind

A lump sum death benefit can secure the financial future for your children and protect their standard of living.

To ensure you’ve got the right cover for you and your family, please contact us today.

By the time you retire, you have probably collected a considerable amount of home equity and downsizing can be a way to tap into that valuable cash.

Downsize your lifestyle – not your life

When your kids left home you probably had big plans for those unoccupied bedrooms – like the art studio you’ve always wanted, a sewing room or a play room for the grandkids.

But it’s a fair bet those rooms have barely changed and now you may be wondering if you really need all the extra space.

Downsizing can be a way to harness the home equity you have built up. But it’s a big decision and you need to be sure it is the right choice that helps you scale back your life without scaling back your lifestyle.

Let’s look at some factors to consider.

1. Where would you like to move to?

When you’re not in the workforce, your choice of location is no longer dictated by proximity to work. You’re free to explore a change of scenery or even relocate overseas. This opens exciting possibilities, although you may want to remain close to family or friends. This certainly makes a long distance relocation something to think through carefully. If you’re heading off to a new location, investigate whether the area has clubs and organisations to help you make new friends and become part of the community.

2. What sort of property are you looking for?

Along with the location, plans to downsize should cover the type of property that is right for your needs – both now and in the future.

Some of the factors you may want to look at are the ease of maintenance of the property, how many stairs it features and whether doorways are wide enough to accommodate aids such as a walking frame. Single level living is often a plus for seniors.

3. Does it stack up financially?

On paper at least, downsizing can seem like a great way to free up extra cash. But you will need to pay for a new home and this brings a range of buying and selling costs which can eat into the sale proceeds of your current home.

There are ongoing costs to consider too. Moving from a house into an apartment can mean a lower maintenance style of living. Be sure to look into strata levies though. The more facilities an apartment complex offers, the higher the levies you are likely to face.

4. Have you considered your emotional needs?

There’s a lot of family history tied up in our homes and you shouldn’t discount the emotional attachment to your place. Think through the decision to move very carefully and discuss it with your family. The last thing you need is to make a decision you’ll regret.

Investing the proceeds from the sale of your property

Give some thought to how you will use the funds remaining from the sale of your old place once you have purchased a new home.

One possible strategy is to use the money to make a non-concessional (after tax) contribution to your super fund.

The non-concessional contributions cap for the 2016/2017 year is $180,000, however this will reduce to $100,000 per annum from 1 July 2017. The ability to make non-concessional contributions up to 3 times the cap by bringing forward the cap for the following 2 years in certain circumstances will be retained but will be based on the lower cap.

If you’re aged 65 or over, you must satisfy a work test to be able to make a non-concessional super contribution and you cannot take advantage of the bring-forward rules.

In addition, from 1 July 2017 non-concessional contributions can only be made by those who have total superannuation balances of less than $1.6 million.

While investing the proceeds from the sale of your property into super is one potential strategy for you to consider, we can further discuss other strategies that are tailored towards your situation and goals.

Aged care can be a tough subject for many families to broach, but as we enjoy longer lives, there’s a growing likelihood that at least part of our final years will be spent in formal care.

The decision to move into aged care doesn’t just come with a raft of emotional issues. There are also financial considerations. That’s because nursing home accommodation can involve substantial costs, especially for self-funded retirees.

The costs involved

New residents entering aged care are often asked to pay an upfront accommodation bond. There is no set level for this bond – the only proviso is that residents must be left with at least $46,500 in assets (excluding the family home) after the bond has been paid.

An accommodation bond works like an interest-free loan to an aged care home. Any income earned from the bond is used by the aged care home to improve accommodation and services for residents.

As aged care facilities are generally free to set their own bond, it’s usually open to negotiation between families and the home’s staff. This can be a source of discomfort as it means revealing your financial worth to complete strangers. Simply being aware of how the system works can help you plan for it.

How do I pay my accommodation costs?

You can choose to pay an upfront bond by:

a lump-sum style ‘refundable accommodation deposit’rental-type payments called a ‘daily accommodation payment’, ora combination of both.

The accommodation bond is generally returned to residents or their estate, if they move out or pass away when it is paid as a lump sum.

Bonds vary widely and in some of our capital cities, the cost is running into hundreds of thousands of dollars. So it’s extremely important to consider all the facilities available and consider if a particular aged care home is the right place for you or your loved one.

Unfortunately, high demand for aged care, particularly high level care, often means families who haven’t done their research have to accept the first place that becomes available and that can see a mad scramble to find the bond money.

Basic daily fee

In addition to the accommodation bond, a basic daily fee is used to contribute towards your day-to-day living costs such as meals, cleaning, laundry, heating and cooling. Everyone entering an aged care home can be asked to pay this fee.

The maximum basic daily fee for new residents is $48.44 per day. This equals 85% of the basic age pension rate and it increases on 20 March and 20 September each year in line with changes to the age pension.

Means-tested care fee

This is an additional contribution towards the cost of care that some people - self-funded retirees in particular, may be required to pay. The Department of Human Services will work out if you are required to pay this fee based on your income and assets.

There are annual and lifetime caps that apply to the means-tested care fee. Once these caps are reached, you cannot be asked to pay any more means-tested care fees.

The government’s Aged Care website features a Residential Care Fee Estimator to help gauge the sorts of fees you could be looking at.

Funding it all

Meeting the future cost of aged care is just one aspect retirees need to factor into their investment portfolio.

The way your portfolio is structured can impact on your age pension entitlements as well as the costs you’ll pay for aged care.

Some sensible strategies can help you make the most of your assets to enjoy a fulfilling retirement. Don’t leave it all to chance. Discover how to get started today to enjoy a rewarding tomorrow.

How am I tracking to live the life I want in retirement?

There is no magic figure that shows how much all of us need in retirement. The important thing is to understand the sort of retirement lifestyle you hope to enjoy and determine how much annual income you might need to fund this goal.

One strategy that can give you a good idea of your desired retirement income is to write up a retirement budget. It can show how much income you will need but also let you fine-tune your ideal lifestyle if it looks like you may need to scale back your plans.

Strategies that may help you save for retirement

It’s often only when we are approaching retirement that the reality of the financial side of things becomes completely clear. Unless you plan to rely solely on the age pension (which only provides for a very basic lifestyle), it may be worth looking at ways to boost your retirement savings in your final working years.

There are a number of ways to do this:

1. Explore your super contributions

For starters, you may be able to increase your pre-tax super contributions. You may like to talk to your employer about making contributions via salary sacrifice. This is where part of your pre-tax wage or salary is directed to super instead of being paid directly to you.

Or you may be able to make a contribution out of your own pocket. Super savings are only taxed at 15%, but be aware of the contribution caps.

2. Consider your spouse’s super

If you have a spouse or partner, it may be worth making a contribution to his or her fund. Be aware, annual limits on super contributions do apply. Contact us to further discuss these limits.

3. Explore your super investment strategy

Now is also the time to review your super fund to check that your nominated investment strategy is in line with your tolerance for risk.

Many pre-retirees are tempted to shift their super into low risk, conservative options, but bear in mind you could have 20 or even 30 years of living ahead. It could pay to have at least part of your retirement savings, including super, invested in growth assets that could generate long term capital gains.

Pay off the mortgage or grow super?

If you still have money owing on your home loan, you may be wondering whether it is better to use any spare cash to pay down this debt or add the money to your super. Everyone’s situation is different and we would need to look at your personal circumstances to provide advice.

Lending a hand to the kids

You may have plans to give your adult children or grandchildren a financial helping hand when you are retired. Just be sure you have sufficient funds in place to secure your own lifestyle first before offering financial assistance.

What about a self-managed super fund?

A self-managed super fund (SMSF) can have real pluses, allowing you to have complete control over how your super is invested (within Tax Office guidelines).

We’ll be happy to explain if a SMSF is right for your circumstances. Managing your own retirement savings is a significant responsibility – and one that comes with costs of its own.

In addition to determining if you have sufficient capital for a SMSF to be worthwhile, consider whether you really want the added responsibility.

Investments outside of super

Along with your superannuation, it is a good idea to grow your investments outside of super. This may give you a diversified pool of funds to draw on as well as providing some protection against any unexpected legislative changes to super.

Downsizing the family home

Downsizing to a smaller property could offer the benefit of a lower maintenance home, an opportunity to be closer to family and a way to access any potential home equity.

It is worth crunching the numbers to be sure downsizing puts you in front financially. The upfront purchase costs, notably stamp duty, on your new home can take a bite out of your available cash.

There may be other options worth looking at, such as a reverse mortgage, which allows you to harness any home equity you may have without the need to sell a much loved family home.

Estate planning might seem like an activity you can afford to put off but in reality it’s something everyone should consider

Appropriately documenting how assets should be distributed in the event of your death protects your interests and those of your loved ones.

Someone who dies without an estate plan risks leaving their family with a complicated administrative burden, warns Hall and Willcox Partner Emma Woolley.

Since no one knows when they will pass away, estate planning should be on the agenda for everyone, she says.

"Quite often people say they don’t need to have an estate plan or a will because they don’t consider they have sufficient assets to worry about or they believe the estate will automatically pass to the people they intend, such as their spouse and children. That’s not the case," Woolley says.

If you pass away without a valid will, state laws determine how your estate will be administered. This may result in assets being distributed against your wishes and unnecessary tax liabilities for beneficiaries.

Blended families

Early estate planning is even more important for people who have a blended family, have been divorced or have children from more than one relationship.

In these situations, there are a range of competing interests. Woolley says in her experience, the main cause of conflict after a death in a blended family is that people had different expectations about how the estate would be distributed.

"Quite often a person in a new relationship wants to make sure [their partner] is looked after for the rest of their life with other children getting [the remaining assets] once that spouse is no longer with us," she says.

Woolley recommends people with complicated family relationships discuss their plans with their family so they have an opportunity to explain what they have done and why, although she acknowledges that not everyone wants to talk about their finances with the family.

"The key is not to put your head in the sand," she says. "There are a lot of cases where the legacy is a dispute because family members had different expectations."

Not just a will

An effective estate plan includes more than a will.

Jointly-owned properties go to the last surviving owner, so it’s important to understand how such assets are held. Assets held in trusts and superannuation funds are not included in the estate that is covered by a will and need to be dealt with separately.

There are about 600,000 family trusts in Australia. People who have a family trust need to understand who takes control of the structure after their death.

Woolley says "people often overlook superannuation but this can be an extremely valuable asset".

Life insurance policies that pay a benefit into the superannuation fund can boost even a fairly low balance, making it a large asset.

"It can be hundreds of thousands of dollars and if they don’t decide, the law will choose who gets it. For young people, it might go to their parents or siblings and they might not want that," she says.

People need to approach their superannuation fund and complete the right paperwork to identify who should receive the fund’s assets when they die. For self-managed superannuation funds, a death benefit nomination form must be completed to direct how assets will be distributed.

Life cover

Insurance can be used as an estate planning tool. Woolley recommends taking advice about what type of life insurance cover would be appropriate for your personal circumstances.

People with a policy outside of superannuation should check with their financial adviser to make sure the payout will be directed to the intended beneficiaries. Life insurance payouts from policies held outside of a superannuation fund may go directly to the person named in the policy, bypassing the estate.

An estate plan can also include an enduring power of attorney or living will, which appoints someone to make financial decisions for you if an illness or accident renders you incapable of making those decisions.

Some people might want to consider leaving a charitable legacy in their will, while business owners should address succession planning issues in an estate plan.

Each person’s situation is different and estate planning is a complicated area. It pays to seek specialist advice on what would work best in your personal circumstances.

The Government’s broad ranging superannuation reforms to superannuation passed Parliament on 23 November 2016. It’s important to understand what these changes might mean to you so you don’t miss out on the short-term opportunities available now.

The reforms represent the single biggest change to superannuation since its inception. While there has been a softening of the original Budget announcements, there are still some very big changes coming your way.

We explore what the reforms are likely to mean to:

Accumulators: Under 65sPeople with large super balances & high income earnersRetirees and those transitioning to retirementStill going: Over 65 and still workingPeople with low super balances and broken employment

Accumulators: Under 65

The reforms likely to impact on you are:

Reduction in non-concessional contribution caps

If you are close to retirement age and looking to build your super balance, this change is incredibly important. From 1 July 2017, the annual non-concessional contributions cap will be reduced to $100,000 (from the current $180,000).

This means that if you are approaching retirement age, you have until 30 June 2017 to use the current caps and contribute up to $540,000 this financial year. You can do this using the ‘bring forward’ rule. This rule allows you to bring forward up to three years worth of non-concessional contributions in one year (and then make no or limited contributions for the next two years until you reach your three year cap).

The advantage of using the bring forward rule now is that your three years worth of contributions utilise the current caps. If you contribute more than $180,000 this financial year but not the full $540,000, you still trigger the bring forward rule but any further contributions from 1 July 2017 are subject to the new $100,000 cap. That is, instead of your cap being $540,000 across three years, it might be $460,000 or $380,000. And, if you wait until after 1 July 2017 to trigger the bring forward rule, you will only be able to contribute up to $300,000.

If you want to make in-specie contributions – that is, contributions to super that are not cash such as listed shares, etc., then you should look at whether the cap reduction affects your ability to do this.

People with Large Super Balances & High Income Earners

The Government thinks that you are not using superannuation for its intended purpose – to fund retirement. As a result, the reforms introduce a whole series of measures that pare back the tax advantages for people with large super balances:

Non-concessional contributions capped at $1.6 million

Once your super balance has reached $1.6m, from 1 July 2017 you will no longer be able to make non-concessional contributions to super. So, you have until then to maximise your contributions (see Reduction in non-concessional contribution caps). Going forward, your super balance will be assessed at 30 June each year.

Concessional contributions cap reduced

From 1 July 2017, the annual concessional contribution cap will be reduced to $25,000 for everyone (currently $30,000 for those aged under 50 and $35,000 for those aged 50 and over).

30% tax on super extended to more taxpayers

High income earners with incomes of $300,000 or more pay 30% tax on contributions they make. From 1 July 2017, this threshold will reduce to $250,000.

Retirees and those Transitioning to Retirement

The reforms likely to impact on you are:

Tax concessions limited to pension balances up to $1.6 million

The reforms introduce a $1.6m ‘transfer cap’ on the amount you can hold in a superannuation pension. This means that if you are in pension phase, the balance of your pension needs to be no more than $1.6m. If not, from 1 July 2017 the Tax Commissioner will direct your fund to reduce your retirement phase interests back to $1.6m and you will be subject to an excess transfer balance tax.

Your overall super balance can be more than $1.6m but only $1.6m can be transferred into a tax-free pension. Keeping the excess balance in super may still be worthwhile because of the low 15% tax rate.

If your spouse has a low superannuation balance, it might be worth thinking about how you can maximise your returns as a couple.

Earnings on fund income no longer tax-free

From 1 July 2017, the income from assets supporting transition to retirement income streams will no longer be exempt from tax but included in the fund’s assessable income. For example, if your super fund earns interest from a term deposit, that interest is currently tax-free in a transition to retirement pension. From 1 July, that interest will be included in the fund’s assessable income.

Lump sum withdrawals no longer meet minimum pension requirements

The Government has closed a quirk in the superannuation system that allowed people under 60 to withdraw from their pension and in certain circumstances have that withdrawal treated as a tax-free lump sum. From 1 July 2017, taking a lump sum alone will no longer meet the minimum pension requirements. This means that retirees under age 60 may pay more tax on their pensions.

Still Going: Over 65 and Still Working

Currently, if you are 65 or over, your superannuation fund can only accept contributions from you if you work at least 40 hours in a 30 consecutive day period in the financial year. The original Budget announcements abolished this work test. Unfortunately, this reform did not progress and the work test will remain.

Contractors & Self-Employed

There is good news if you are partially self-employed and partially a wage earner.

Currently, to claim a tax deduction for your super contributions you need to earn less than 10% of your income from salary or wages. From 1 July 2017, the 10% rule will be abolished.

This change will be useful for contractors who hold their insurance through super as they will be able to claim a personal tax deduction for these insurance premium contributions. The caveat here is that these contributions must remain within the reduced $25,000 concessional cap.

People with Low Super Balances and Broken Employment

There is a lot in the reforms for people who have not had the opportunity to build their super balances. The reforms likely to impact on you are:

‘Catch up’ super contributions

Normally, annual caps limit what you can contribute to superannuation. The reforms allow people with broken work patterns to ‘catch up’ their concessional super contributions. From 1 July 2018, people with super balances below $500,000 will be able to rollover their unused concessional caps for up to 5 years. Unused cap amounts can be carried forward from the 2018-19 financial year; which means the first opportunity to use these new rules will be 2019-20.

Tax offset for low income earners

A new tax offset will be available for people earning less than $37,000. The offset refunds any tax paid on super contributions.

Tax offset for topping up your spouse's super

Currently, if your spouse earns less than $10,800, you can claim a tax offset of up to $540 if you make super contributions on their behalf. This offset is being extended to spouses who earn up to $40,000.

Our advisers can work through the superannuation reforms with you to help you be in the best possible position for your individual circumstances. Speak to your Merit adviser today. We can help.

If you need to live in residential aged care it’s likely you will need to pay aged care fees to cover the costs of your care and accommodation, which will be based on your assets and income. Your social security pension entitlements are generally included when calculating your income.

There will be changes to the way the aged pension is calculated from 1 January 2017 and these changes may affect your ongoing aged care fees. It’s important to understand how these changes may affect you.

Changes to the aged pension

Under the assets test, you may hold assets to a certain value before your pension reduces. If the value of your assets is more than your relevant threshold, your pension entitlement will be reduced by $1.50 for every $1,000 of excessive assets.

The asset limits will increase when the changes are introduced, which will allow more pensioners to receive the full pension. But if the value of your assets exceeds your relevant limit, your pension entitlement will reduce by $3.00 for every $1,000 of excessive assets, instead of reducing by $1.50 for every $1,000 of excessive assets. Pensioners whose assets are higher than their relevant limit may lose or receive a lower pension.

Residents already in aged care

If you live in an aged care facility and your pension entitlements reduce, your aged care fees may also reduce. In some cases, the aged care fees won’t reduce despite the fact you will be receiving a reduced pension. In these situations, you will need to consider how you will meet your costs with less cash flow. If your aged pension entitlements increase you will have additional cash flow but your aged care fees may also increase. You may need to budget for this.

The examples below illustrate how the changes may impact you depending on your level of assets.

Example 1

Harry is 78, owns his own home and has $537,000 in a bank account and allocated pension. These are deemed to earn a certain rate by Centrelink. He currently receives $376.65* in age pension per fortnight.

Harry entered aged care on 1 June 2016 and paid a refundable accommodation payment of $350,000. Based on his level of assets and income, his ongoing aged care fees are $90.78* per day ($1,271 per fortnight).

From 1 January 2017, if he still has $537,000 in assets, his estimated age pension will reduce to $49.00^ per fortnight – a drop of $327.65 per fortnight. His ongoing aged care fees will remain at $90.78*per day. As his aged care fees will stay the same he will need to consider how he will fund this with a reduced age pension.

Example 2

Jenny is 82 and owns her own home. She has $240,000 in an account-based pension which is deemed and $40,000 in a bank account. She currently receives $762.15*in aged pension per fortnight.

Jenny entered aged care on 1 June 2016 and paid a refundable accommodation payment of $350,000. Based on her level of assets and income, her ongoing aged care fees are $78.38* per day ($1,097.32 per fortnight).

From 1 January 2017, if she still has $280,000 in assets, her estimated age pension will be $783.90^ per fortnight. This will be an increases of $21.75^ per fortnight. Her aged care fees are only estimated to increase by $10.78* per fortnight.

*Based on rates and thresholds until 30 June 2016. These rates assume Harry keeps his home and leaves it vacant.

^Based on rates until 30 June 2016 and expected thresholds from 1 January 2017.

Future funding considerations

There are ways to increase pension entitlements and reduce aged care fees. These include spending money on holidays and home renovations, giving away assets up to allowed limits, or investing in assets that are exempt from the social security means tests. Some people might also consider drawing more money from investments, taking more income from superannuation pensions, commencing a long-term annuity or renting their home.

But it’s important to remember that everyone’s situation is different. Strategies that work for some may not work for others. Understanding how Centrelink assesses your income and assets and considering what strategy is best for you can be confusing. Which is why discussing your situation with a financial adviser can help you make the right choices.

If you’re concerned about how these changes might affect you, contact us today.

High prices. Fast bidding auctions. A mass of new constructions. The housing market has risen fast in the past few years but is it becoming too risky? Tim Rocks, Head of Market Research & Strategy, believes there is little to fear from housing at the moment but investors might find more attractive opportunities in shares.

Burning down the house

The view of rapid increases in house prices since 2011 has lead to fears around:

a housing bubble the potential of a crash and mortgage stresstiming for a potential crash

But are high house prices really a sign of bad things to come?

The truth is, the increases have been concentrated in areas with rising employment, incomes and population flows like Sydney and Melbourne, while others have just risen with inflation – or even fallen like Adelaide and Perth (Source: Corelogic). Falling interest rates have offset increasing house prices so households are actually spending roughly the same percentage of their income on mortgage repayments as they did before the rapid rise in prices. Mortgage defaults are also lower than historic averages (Source: Reserve Bank of Australia (RBA)). This might change if interest rates or unemployment suddenly rise, but at this stage, interest rates are more likely to stay the same or even decrease.

Nothing lasts forever

The sharp increase in housing prices, even in areas like Sydney and Melbourne, is unlikely to last forever but doesn’t necessarily mean a crash. While prices have increased, construction of new apartments has also been rapid. For example, developers added 30% to city apartment supplies in Melbourne, 36% in Brisbane and 18% in Sydney by the end of 2015 (source: RBA). This additional supply has seen rent increases slow down and vacancies rise, which should gradually translate to a slowdown in prices and construction.

So from an investment perspective, housing is likely to be less attractive over time because a greater supply not only means less opportunity to command high rent, but also less certainty of a constant rental income. But for owner-occupiers, this change may translate to some stabilisation in house prices – and greater opportunities if interest rates stay low.

A share in time

Investors specifically targeting returns may need to extend their search beyond bricks and mortar. Currently, shares and listed REITs (listed property trusts) offer higher yields compared to the rental income and deposits from residential property (Source: Datastream). This is likely to continue over the next couple of years, particularly as supply in residential property increases, but also as the need for office space, warehouses and shopping centres continue to make listed REITs necessary.

An investment property may still be an important part of a portfolio, but it depends on what your goals and needs are, along with your expectations for returns. Shares and listed REITs can be a riskier type of investment, but do offer the potential both for higher gains – or bigger losses – depending on a range of factors.

In today’s hectic world we often spend so much time worrying about the future or lingering in the past we forget to enjoy the present. But tuning into the wonderful things happening around us as they happen can be life changing. It’s also a great way to combat stress, especially when it comes to our finances.

The Australian Psychological Society’s 2015 stress and wellbeing in Australia surveyfound financial concerns are the top cause of stress among Australians*. Whilst we stress about our finances sometimes things fall outside of our control. Being more mindful is one way to address this.

Mindfulness expert Elizabeth Granger explains mindfulness is moment-to-moment awareness. “This can be cultivated by doing formal mindfulness practice where you set aside meditation time to deliberately pay attention to the present moment in a non-judgmental way. It involves bringing curiosity and a sense of allowing what is here to be here, as opposed to judging what’s happening in our lives.”

Mindfulness practices originated from Buddhist traditions more than 2500 years ago. So they are not new phenomena. More recently these techniques have been embraced by western culture.

Nevertheless, mindfulness takes a certain amount of effort, says Granger. “We spend so much time wanting experiences or ourselves to be different it can feel difficult to allow things to be the way they are, as opposed to how we wish them to be. While there is nothing technically difficult about mindfulness practice, it does require discipline to pay attention this way.”

Path to the practice

Granger came to mindfulness while working as a litigation lawyer and studying psychotherapy on the side, all while raising two young children.

“As soon as I started practising I noticed how it helped me manage stress and how I could think more clearly under pressure. It helped me open up to many more possibilities,” she enthuses.

According to Granger she is now more able to manage her emotions thanks to her mindfulness practice. “My focus has improved, including my ability to resist distractions. But the biggest change is the way I am open to the world around me. I have more capacity than before and I’m happier as I savour more moments of my life.”

Mindfulness can be practised anywhere, says Granger. “I remember once meditating while walking around the airport when my plane was cancelled, so it is a very portable practice which can be done anywhere.”

If you’re feeling the stresses of life, mindfulness can be a great way to control or reduce those feelings. Another way to ease worries such as finances is to ensure you have a financial plan in place and that you’re tracking to it. If your financial future is keeping you up at night and mindfulness just isn’t doing the trick, please don’t hesitate to contact us.

* Stress & wellbeing: How Australians are coping with life, Australian Psychological Society Stress and wellbeing in Australia survey 2015

One of the features of a self-managed super fund (SMSF) that is often touted is its flexibility. This exists both in accumulation and retirement phase, and arises in a number of contexts, such as investment choice and pooling of balances. It’s also important to remember that this flexibility also exists when it comes to estate planning, or more importantly, death benefit planning.

Death benefit planning in a superannuation context relates to the discussion of who you want your remaining super benefits paid to in the event of your death. In a standard superannuation environment, death benefits are normally dealt with in one of three ways depending on the type of nomination that exists. These same three options exist in the SMSF environment.

3 standard beneficiary options of super still apply

First, a binding death benefit nomination is in place. If a binding nomination is in place, it will set out who the death benefit is to be paid to, and how much of the balance they are to receive. If the binding nomination is valid (for example, the beneficiaries named are eligible under super law to be paid a benefit), it must be followed.

Second, a discretionary death benefit nomination is in place. Like a binding nomination, it will indicate who the death benefit is to be paid to, and how much. The difference is that the trustee of the fund, which in the case of an SMSF are any remaining trustees plus your legal personal representative (often the executor of your estate), are not bound to follow the nomination. Whilst in most situations the wishes left in a discretionary nomination are followed, trustees often need to take more care as inappropriate allocations can be challenged.

Third, there is no nomination in place. In these circumstances the remaining trustees have full discretion as to who is paid and how much, provided the distributions are made in accordance with super law. As the deceased’s will is often seen as a guide to where payments should be made, a number of trustees may be inclined to take the “easy” way out and pay the death benefit to the estate, and therefore allow the executor to handle the allocation. Of course, this means your super suddenly becomes an estate asset and may be subject to potential challenge from beneficiaries.

Of these three options, a binding nomination appears to be the safest, and is in most cases. But there are issues to be aware of.

Beware of the 3 year expiry…

In most superannuation funds, a binding nomination is only valid for a maximum of three years. Unless it is renewed at least every three years, it ceases to be binding for the trustees. Whilst it may then give an indication of where you wanted the benefits to go, the trustees aren’t bound to follow it and even if they did, they could be challenged by other possible superannuation beneficiaries.

SMSF has an alternative solution

This is where a SMSF can offer some advantages. With a properly drafted Trust Deed, it is possible to establish a non-lapsing binding nomination within your SMSF. This means that you can forgo the three year renewal for it to be binding upon your death. While there is no requirement for its renewal, this should be regularly revisited, just as you would, your Will.

As an example, if your original intent was for your benefits to be paid to your spouse and you outlived your spouse, your otherwise binding (and non-lapsing nomination) will be invalid as your benefit can no longer be paid as intended.

Beyond this, it is also possible to deal with your death benefits in another way. This particularly arises when you move to retirement and commence drawing a pension from your SMSF. Whilst your death benefit nominations can still deal to your wishes, you could gain additional certainty by commencing pensions with binding reversionary nominations.

In its strictest sense, a true binding reversionary nomination will mean that if you were to pass away before your pension account was exhausted, the pension will continue to be paid to your nominated beneficiary after your death. This means the beneficiary doesn’t have a choice about how to receive the benefit – it will continue to be paid in the form of a pension. A discretionary reversionary nomination on the other hand may indicate and confirm who the benefit will be paid to, but not be binding on the “how” – that is, the beneficiary could choose between a lump sum or a pension.

This ability to put in place a valid binding reversionary nomination may increase in importance in the future as a result of the Government’s 2016 Budget announcements placing a cap on the amount that can be placed into a pension. If a valid binding reversionary nomination is in place, your beneficiary should be able to continue to receive your pension without it impacting on how much of their own super benefits can be transferred to a pension in the future. If the beneficiary had a choice however, and chose to continue to receive a pension, then it may be assessed against their cap.

Do the ground work now for a well planned retirement

Whilst the main aim of super is to save for your own retirement and then, hopefully, be able to spend those savings in retirement, it’s vitally important to plan and be aware of what could happen if you were to pass away earlier than expected. A well-crafted SMSF Trust Deed can give you added flexibility and greater certainty. Given the complex nature of super and estate planning though, you would be best served by making sure you get the assistance of experienced advisers to provide yourself and your family peace of mind.

Work-life balance for four out of every ten working Australians is actually getting worse, according to a report by The Australian Institute Think Tank in November of last year. The study also found Australians are donating $110 billion in free labour each year by giving extra time to work without being paid. This means the average full-time worker is doing six hours of unpaid overtime each week – worth an estimated $9471 a year.

Why?

The reason for the increasing work/life balance imbalance, is work insecurity and pressure from bosses, says Director of Research David Baker. Fear about job security is described as widespread.

“For many Australian workers rocking the boat appears to be a genuine concern,” Mr Baker says. “If seeking better balance is perceived to be a threat to career prospects people are unlikely to freely raise the issue with their boss.”

On top of that, technology means we are constantly available, so it can be difficult to switch off. So is the elusive work-life balance possible?

Work life balance – what is it actually?

Firstly, it helps to actually define what work-life balance is. It’s an often talked-about concept but in reality how that looks is very personal.

Jim Bird who works at WorkLifeBalance.com, a company that offers high performance, enterprise-wide work-life balance solutions and time management programs, says that what it’s not, is trying to schedule equal hours between your work and personal life.

There’s no perfect, one-size fits all solution but rather, that the best individual life work balance will vary over time and often on a daily basis, Mr Bird says.

Why it’s important

It is common knowledge that overwork over time equals burn out, ill health, lack of productivity and motivation. Balance brings out the best of us in both our work and personal lives. It’s essentially about having a balance of achievement and enjoyment.

“Achievement and enjoyment are the front and back of the coin of value in life. You can’t have one without the other. Trying to live a one sided life is why so many ‘successful’ people are not happy, or not nearly as happy as they should be,” Mr Bird says.

“You cannot get the full value from life without both achievement and enjoyment. Focusing on achievement and enjoyment every day in life helps you avoid the ‘As Soon As Trap’, the life dulling habit of planning on getting around to the joys of life and accomplishment ‘as soon as….’”

5 tips to achieving greater balance

• Make time every day for things that make you feel good, like exercise. • Limit time wasting activities and people. • Unplug from technology for set periods of the day. • Be prepared to change and let some things go to create space. • Take small steps – balance takes time to get right.

Are you looking towards a comfortable retirement in the not too distant future? If you are, you need to ensure your income is protected, so that in the event you fall seriously ill or experience an accident in the lead up to finishing work for the last time, you don’t have to dip into your retirement savings to cover your income shortfall while you recuperate.

It’s easy to assume that the older you get, the less important income protection is. You might have paid off the house in full; you might even be working part-time and looking towards a time in the not too distant future when you’ll be stepping out of the workforce altogether.

But the runway to retirement is actually one of the most important times to ensure your income is adequately and fully covered. Because if you had to stop work for any extended period as a result of an accident of serious injury during this time, without income protection insurance you would probably need to rely on your retirement nest egg to keep the ship afloat. This could have serious and negative consequences for how you spend your retirement.

Worryingly, research conducted by the Australian Institute of Superannuation Trustees and Industry Funds Forum has found a significant underinsurance problem when it comes to income protection. The research found 45 per cent of Australians are underinsured by $1,000 a month . For people in this group, making ends meet becomes a real issue – something that is difficult to contemplate when you are also trying to recover from an accident or illness.

The message is that without adequate income protection cover, an accident or serious illness could have terrible consequences for the lifestyle you wish to lead when you do transition out of the workforce.

Cover that’s right for you

So what is income protection insurance? It’s a type of cover that offers a benefit in the event you suffer a serious illness like cancer, heart attack and stroke, or experience a serious accident that prevents you from performing your usual job.

Policies generally cover up to 75 per cent of your total salary, for a period of up to five years. A waiting period of up to six weeks generally applies between the time of the diagnosis or accident and the time you receive a pay-out but can be reduced according to your needs.

One of the benefits of income protection insurance compared to life insurance is that it’s usually tax deductible, which helps to reduce your taxable income and the tax you pay.

There are two main types of income protection premium options, stepped and level. Stepped premiums are generally cheaper than level premiums, but their cost increases over time. Whereas level premiums are more expensive than stepped premiums at the time the policy is taken out, but reduce in price compared to stepped premiums over time.

Safeguarding your retirement

Let’s look at a hypothetical case study to show why income protection insurance is important at every age. Bob, 57, and his wife Sue, 55, had only just paid their last mortgage repayment and were contributing the funds equivalent to their old monthly mortgage repayment to their self-managed super fund.

Cleaning the gutters one afternoon, Bob slipped off the ladder, breaking his hip. He spent two weeks in hospital and six weeks in a rehabilitation facility, and needed to take six months off work to recuperate fully.

Because he had taken out income protection insurance he was able to take the time off work and still maintain his and his wife’s lifestyle. Had he not had this insurance, he would have been required to use money set aside for his retirement.

If you don’t have income protection insurance, or want to ensure you have the right level of cover for your personal circumstances, why not talk to you adviser today? It’s a great way to give you peace of mind that you have everything in place for a comfortable, enjoyable retirement.

Self-managed super funds (SMSFs) remain a popular vehicle for investors to build their retirement savings. According to the Australian Taxation Office (ATO), 99.5 per cent of all super funds are SMSFs. A total of 29 per cent of the $2 trillion in super fund assets are in SMSFs and the average SMSF balance now exceeds $1 million.

While SMSFs are a great option for people who have the time and inclination to mange their super themselves, it pays to be aware of the basics before deciding to open your own fund.

1. Meeting the sole purpose test

Every SMSF must meet the sole purpose test. This means the fund must only be run to provide income in retirement for members. Funds that don’t meet this test won’t be able to receive concessional taxation benefits that apply to super fund assets.

If the ATO does form the view the assets in the SMSF do not meet the sole purpose test it could impose civil or criminal penalties on the fund members.

2. Ensuring the fund meets compliance requirements

There are strict rules every SMSF fund member must meet to ensure the fund complies with regulatory requirements. These include ensuring either a corporate or individual trustee is appointed to the fund, creating a trust and a trust deed to determine how the fund is administered and recording members’ tax file numbers.

The ATO can take various steps to ensure funds found not to be compliant are brought into line with its requirements. For instance, the ATO might require members to undertake education and training.

Serious breaches might lead to the ATO freezing the assets in the fund.

3. Preparing an investment goal and strategy

Every fund should have a clearly articulated, written investment strategy and goal. This will set out the performance expectations of the fund and the objectives the fund is designed to meet. For instance a goal might be for the fund to have $1 million in assets before the members retire. The investment strategy will set out the types of investments and asset classes in which the fund can invest. These two documents act as a blueprint for how the fund should be run.

4. Ongoing monitoring

All SMSF members are required to monitor how the fund is tracking against its investment goals and objectives on an ongoing basis. This is especially important when the fund members’ circumstances change. If a member retires, receives a redundancy or contracts a serious illness, for instance, the goal and investment strategy must be amended to take this into consideration.

5. Seeking advice

Even if you want to take responsibility for your own superannuation, it’s still important to seek advice. This will help to ensure the fund meets regulatory requirements and to ensure assets are positioned to maximise members’ wealth in retirement.

To find out how we can help to ensure you are making the most of the assets in your SMSF, and at the same time stay within the law, please contact us today.

New research by super fund REST has found younger people are concerned about their financial future and worried they will have to support their parents in retirement.

REST surveyed 1000 people between the ages of 18 and 34 – the group known as the ‘Millennials’ – in early 2016 and found 30 per cent said they were concerned they would have to give up work to look after their Baby Boomer parents.

While this finding is troubling, there are plenty of steps Baby Boomers can take to help ensure they can fund their own retirement.

Building a retirement nest egg

Superannuation remains one of the best ways to build retirement savings. If you’re still in work, think about making voluntary contributions to your super fund over and above the super guarantee. Doing this will help to build your nest egg, and at the same time help reduce your taxable income.

Ensure you have the right cover

Another way to help secure your financial future is to put in place insurances so that in the event you do suffer an accident or illness, you can still pay your bills.

There are a range of different types of insurances that can help you to do this. Income protection insurance will pay out if you suffer an accident or illness and cannot work for a period of time. You might also consider taking out trauma or total and permanent disability cover, which will pay out if you suffer a serious illness such as cancer or a heart attack.

If you do have this cover in place, it’s likely you will be able to cover basic expenses while you get back on your feet again.

Finding an aged care solution

All too often, people leave it too late to plan for a time when they are not able to live in their own home anymore. Often, people put this off and when the time comes, it falls to their children to find a solution.

To avoid this, talk to a financial adviser about what your options are, including remaining at home and receiving at-home care, so that when the time comes, you won’t have to rely on your children to make decisions about your aged care accommodation needs.

The earlier you start to focus on building and protecting your wealth, the better your outcomes will be in retirement and the less chance you will be a financial burden on your children.

To find out how we can help you build a stronger financial future for you and your family, contact us today.

The 2016-17 Federal Budget is a budget of targets – broad targets to boost business and innovation, and the narrow revenue targets of the wealthy and multi-nationals. It’s a big, long-term crafted budget designed to give enough pre-election glow but with structural measures to reign in spending and reduce concessions.

At one end, the Budget contains broad measure to bolster business, investment and innovation including tax cuts and a number of tax measures enabling and freeing up alternate funding and investment sources for business.

At the other end are significant reforms restricting access to superannuation concessions as well as a stronger crackdown on multinationals diverting profits outside Australia.

To police the new revenue measures, the ATO gets an extra $678.9 million to establish a new Tax Avoidance Taskforce.

Plus, the Budget allows for a $1.6 billion “decisions taken but not yet announced” election war chest.

Business

Company tax rate reduced to 25% over 10 yearsIncrease in tax discount for unincorporated small business to 16% over 10 yearsSmall business entity threshold increase to $10m from 1 July 2016$1k GST exemption on imported goods abolished from 1 July 2017UK style diverted profits tax to reign in multinationals

Superannuation

$500,000 lifetime non-concessional contributions cap from Budget nightReduction in concessional contribution cap from 1 July 2017Tax exemption on earnings supporting transition to retirement income streams (TRIS) removed from 1 July 201730% tax on super contributions of high income earners extendedTax free super balances capped at $1.6m from 1 July 2017

Individuals

32.5% personal income tax threshold increase to $87,000 from 1 July 2016Subsidies to create employment path for unemployment youth

Other

$678.9m ATO anti-avoidance taskforceTobacco excise adds $4.7bn

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Dissolving a marriage is undeniably tough, regardless of the circumstances. Your focus is on getting through one day at a time, rather than planning for what could happen in the future.

It’s easy to overlook the importance of reviewing your estate planning when you’re overwhelmed by the endless paperwork created by splitting assets, resolving debts, restructuring property, negotiating custody, and finalising financial support.

Many people assume that a separation or divorce automatically voids legal documents prepared during a marriage. That’s not the case. So if your ex-spouse is the last person you want to give your assets to when you die – let alone be responsible for a life and death decision on your behalf – you need to get onto it…fast!

Here are a few things you should consider:

Update your will

While you are separated (not yet legally divorced), your existing will is still valid and will be enforced. So if you pass away, your ex-spouse will still receive everything you had intended when you were happily married. That often equates to almost everything you own.

Divorce affects your will differently depending on where you live in Australia. In some places, divorce automatically makes your will invalid. In others, any provisions or gifts for your ex-spouse in your will become void. Even though your ex-spouse is excluded (which may be one of your key objectives) it changes the distribution of your estate in a way that you may not be happy with.

It’s often best to make a new will clearly stating your wishes for your estate.

Appoint a new Executor

If you had nominated your ex-spouse as the Executor of your will, this nomination also becomes void on divorce. Without an Executor, the Court will appoint someone to administer your estate, which could mean your estate is not handled in the way you wished. Wouldn’t you feel better knowing that someone you trust will be responsible for winding up your personal affairs?

Rethink your beneficiaries

When you set up many of your assets, you would have been asked to name a beneficiary – the person you would like your asset to be paid out to in the event of your death. It’s likely that you nominated your ex-spouse, so it’s time to change it. Start with your superannuation and life insurance, then check with your financial adviser if there are others that need attention.

Delegate a new power of attorney

It’s also important to change your power of attorney nomination if it was previously allocated to your ex- spouse. Your power of attorney may make decisions on your financial, legal and health matters if you can’t make them yourself. Delegate this power to someone you trust – a parent, friend, sibling, or an adult child.

Divorce is never easy

When it feels like the world as you knew it has collapsed around you, you might find comfort in restoring order to the foundations of your future. There’s nothing more important than protecting yourself, your children, and any others who depend on you.

Your financial adviser can help you with your estate planning. However, you should also consult a legal adviser.

With escalating property prices continuing to make headline news, it's no surprise that many people consider the family home as their most valuable asset. It's certainly one they fully insure.

But, in most cases, your home is not your most valuable asset. It's your ability to earn an income.

Over your lifetime, your earning capacity could amount to millions of dollars, putting the value of your family home well and truly in the shade.

The math on annual income

For instance, let's imagine you're currently aged 40 and are married with two kids, earning $150,000 a year as a logistics manager. Now, let's say that you plan to work until you're at least 65 years of age, and you can expect annual increases of a modesttwo percent each year.

Over the next 25 years, you accumulated earnings will amount to more than $4.8 million to cover you and your family's lifestyle and living expenses - everything from the mortgage, to family holidays, your car, school fees and more.

Yet only one in three Australians has income protection insurance, putting many families at risk.

Peace of mind

While injury or illness may stop your income, it certainly won't stop the bills. Indeed, Australian cities are among the most expensive in the world. This high cost of living, coupled with the fact that Australians have a one in three chance of being disabled for three months or more before the age of 65, provide compelling reasons to insure your income.

Affordability

These days, you can tailor income protection insurance to suit your circumstances and budget. If cash flow is a struggle and finances are tight, you might prefer to get income protection insurance through your super fund.

Being insured through super is generally an easy and more cost-effective option, although the amount of cover available is limited, compared to holding income protection separately. So if you're an established professional with a high income, or if you want to maximise your retirement savings rather than dip into them for insurance premiums, holding income protection insurance outside your super will probably be more beneficial.

It's also good to know that, unlike other types of personal insurance, income protection premiums are tax deductible.

Two other factors influence the cost of income protection:

1. Waiting period

Policies typically come with a waiting period - and the shorter this is, the more expensive the premiums will be. So if you have enough savings to manage expenses for three or six months, it's worth extending this waiting period.

2. Length of benefit period

You can cover your lost salary for a specific length. The greater your benefit period the more expensive your premiums will be.

To find the most appropriate way to protect your most valuable asset, it's a good idea to talk to your financial adviser.

Estate planning is something everyone should consider.

Since no one knows when they will pass away, estate planning should be on everyone’s agenda.

If you pass away without a valid will, state laws determine how your estate will be administered. And it may not necessarily be as you would expect.

Blended families

Early estate planning is even more important for people who have a blended family, have been divorced or have children from more than one relationship. In these situations, there are a range of competing interests. You may want to make different provisions for family members and those family members may have quite different expectations

Whilst not always easy, it may help to discuss your plans with members of your family. Later disputes may be overcome by setting expectations in advance.

Not just a will

An effective estate plan includes more than a will. A substantial part of your estate may not be subject to your will. If you do not allow for this then distribution of your estate may be very different from what you expected.

Jointly owned properties go to the last surviving owner, so it’s important to understand how such assets are held. Assets held in trusts and superannuation funds are not included in the estate that is covered by a will and need to be dealt with separately.

There are about 600,000 family trusts in Australia. People who have a family trust need to understand who takes control of the structure after their death. Often the key here is who is the appointor of your Trust?

And now with more than 530,000 SMSFs, there is a huge build up of wealth in these funds. So a smart estate plan will include your will and a plan to manage and deal with your interests in Family Trusts and superannuation.

Many superannuation funds carry life insurance policies, causing even funds with relatively low member balances to have significant value in the event of death. People need to approach their superannuation fund and complete the right paperwork to identify who should receive the fund’s assets when they die. For self-managed superannuation funds, a death benefit nomination form must be completed to direct how assets will be distributed.

Life cover

Insurance can be used as an estate planning tool.

People with a policy outside of superannuation should check with their financial adviser to make sure the payout will be directed to the intended beneficiaries. Life insurance payouts from policies held outside of a superannuation fund may go directly to the person named in the policy, bypassing the estate.

An estate plan can also include an enduring power of attorney or living will, which appoints someone to make financial decisions for you if an illness or accident renders you incapable of making those decisions.

Some people might want to consider leaving a charitable legacy in their will, while business owners should address succession planning issues in an estate plan.

Each person’s situation is different and estate planning is a complicated area. It pays to seek specialist advice on what will work best in your personal circumstances.