Market Makers

Government co-contributions

6 February 2015

Australian-money_istock_000002051596xsmall

 

Like a super bonus of up to $500? If you're eligible and you top up your super after tax, you could still receive a government super co-contribution

SUPER CO-CONTRIBUTION 

The super co-contribution is intended to help eligible people boost their retirement savings.

If you are a low or middle-income earner and make personal (after-tax) super contributions to your super fund, the government also makes a contribution (called a co-contribution) up to a maximum amount ($500 in 2014-15).

The amount of government co-contribution you can receive depends on how much you contribute and what your income is.

You don't need to apply for the co-contribution. If you're eligible and the fund has your tax file number the ATO will pay it to your fund account automatically.

The way your co-contribution is calculated depends on the financial year in which you made your personal super contributions.

ELIGIBILITY FOR THE SUPER CO-CONTRIBUTION

You will be eligible for the super co-contribution if you can answer YES to ALL of the following:

  • you made one or more eligible personal super contributions to your super account during the financial year
  • you pass the two income tests:
  1. your total income for the financial year is less than the higher income threshold ($49,488 for 2014-15)
  2. 10% or more of your total income comes from eligible employment-related activities or carrying on a business, or a combination of both
  • you were less than 71 years old at the end of the financial year
  • you did not hold a temporary visa at any time during the financial year (unless you are a New Zealand citizen or it was a prescribed visa)
  • you lodged your tax return for the relevant financial year.

You are not entitled to a super co-contribution for personal contributions you choose to claim and have been allowed as a tax deduction. 

HOW DOES THE CO-CONTRIBUTION SCHEME WORK?

If you earn more than $34,488, your co-contribution entitlement reduces by 3.33 cents for every dollar you earn over $34,488, until it cuts out at $49,488 (for the 2014/2015 year). For example, if you earn $40,000 and you make an after-tax contribution of $1,000, the Government's maximum contribution of $500 is reduced by $182, which potentially gives you a co-contribution of $318.

CO-CONTRIBUTION INCOME THRESHOLDS

Income year

Lower income threshold

Upper income threshold

2014/2015

$34,488

$49,488

 

Total income1

After-tax contribution required for
maximum super co-contribution

Maximum super co‑contribution 2014/2015

$34,488

$1,000

$500

$39,488

$666

$333

$44,488

$334

$167

$49,488

$0

$0

 

If you would like to know more about the government co-contribution or other ways to boost your super balance, please give us a call! Your adviser will be happy to help.

 

Sources: www.ato.gov.au and www.superguide.com.au

 

 

Do your children have a back up plan other than you?

23 January 2015

Family

The financial decisions you make today can have long-lasting consequences

That's why it's so important you make the right decisions -including making sure you and your family have the right plans in place to achieve your long term goals. You may never have thought about how your retirement plans may be derailed if a sickness or injury happened to achild of yours. Fortunately there are strategies that may help protect your retirement lifestyle as well as your children's financial futures.

According to a 2010 report on underinsurance: One in five families will be impacted by the death of a parent, a serious accident or illness that renders a parent unable to work- 95% of families do not have adequate levels ofinsurance (The Lifewise/NATSEM Underinsurance Report, February 2010)

Do you have children?

  • If they suffered a serious illness or accident and couldn't work for an extended period, how would they cope financially? 
  • Do they have a mortgage or any other business or personal debts in their name? 
  • If they had to pay substantial out-of-pocket medical expenses, where would this money come from? 
  • Are you the 'guarantor' for any of your children's loans or debts? 
  • If you had to help your child out financially, what would it mean for your own financial situation -both now and in retirement?

Does your child have a spouse/partner?

  • If their spouse/partner couldn't work for an extended period due to a serious illness or injury, what would that mean for them financially? 
  • If your child had to stop work temporarily to look after their partner, where would that leave them financially? 
  • If their spouse/partner passed away unexpectedly, how would they cope financially? 
  • Who would they turn to for help? Does your child's partner have any additional personal or business debts - on top of the debts they share with your child? 
  • Does your child or their partner have a significant level of savings they could access in an emergency? 
  • If you had to help your child and his/her partner out financially, what would it mean for your own financial situation - both now and in retirement? 
  • If your child was to die unexpectedly, who would take care of their debts or provide for their family?

Do you have any children?

  • If your child had to spend an extended period of time in hospital, who would look after your grandchildren? 
  • If your child or their partner could never work again, how would they afford to provide for their children's ongoing expenses? 
  • Do you know who your son/daughter has listed as the guardian of their children if they were to die unexpectedly? 
  • How would that guardian be able to support your grandchild financially? 
  • Would you be able to stop work earlier than expected to take care of your grandchildren if they needed you? 
  • If so, how will this impact on your finances - both now and in retirement? 
  • If you had to take on the ongoing care of your grandchildren what would having the additional time and financial commitment of a dependent(s) meanfor your long term plans?

How do you talk to your children about protecting themselves (and your retirement)?

If you've never had the conversation, talk to your children about a tailored protection plan. Find out what cover (if any) they have in super, and encourage them to investigate the types and amounts of cover they need. You may find they are grossly underinsured - especially if they have debts and/or dependants.
Encourage your children to assess their financial commitments. For example:

- Lifestyle expenses, internet and mobile phone bills

- HECS debt, personal loans and credit card debts

- Mortgage (average is $365,7991)

- Children of their own

(Australian Finance Group (AFG), January 2010)

Types of cover to protect your child and your retirement

Life cover for death and terminal illness

  • Helps families eliminate debts and stay in the family home 
  • Provides an ongoing income for the family 
  • Pays medical bills and funeral costs

Income replacement cover for sickness or injury

  • Helps families keep up with mortgage repayments and day-to-day living expenses

Total and Permanent Disablement (TPD) Cover for permanent incapacity

  • Helps eliminate debts and cover long-term care costs 
  • Pays for modifications to the family home

Trauma cover for serious illness

  • Pays out-of-pocket medical costs 
  • Helps spouse take time off work to provide care 
  • Allows people to make lifestyle changes - like reducing work hours, or taking an extended holiday


Advice of protection needs

It's important people seek their own advice that takes into account their income, debt levels, family status etc.

A financial adviser can help with strategies to make life insurance more cost-effective, including insurance inside super.

Together, we can work out the best way to protect you and your family from the financial implications of sickness or injury.

If you would like to talk to us, or would like your children to talk to us, we can arrange an obligation-free protection review. This includes an assessment of their protection needs, an analysis of any existing cover, and an evaluation of at least 8 different major insurance companies to determine the most cost-effective and appropriate policy.

The best news is there's no charge for our service - the insurance company pays us!

Just a quick call and we can make a time for a free review.

 

 

(Article published with the permission of The Hendrie Group)

 

The Seven Deadly Sins of Estate Planning

24 April 2015

Estate-planning-and-probate

 

A comprehensive, well-thought-out Estate Plan is the only way of ensuring someone’s wishes are carried out after their death but many still get it wrong, says Anna Hacker, Wills and estates-accredited specialist at Equity Trustees.

“At first, it may seem a complicated process but developing an Estate Plan is the only way to make sure assets are distributed appropriately among beneficiaries,” commented Ms Hacker.

She said that there are seven main ‘deadly sins’ of estate planning which can derail the efforts taken to ensure that wishes are fulfilled in the event of death or incapacity.

Wrath

It may be true that ‘hell hath no fury like a woman scorned’ but when it comes to estate planning, men who are scorned in a Will can cause problems too.

“Divorce and separation, not to mention blended families, make for a complicated estate. Although marriage revokes all previous Wills, divorce does not always. Marriage breakdown and remarriage should be triggers to review arrangements.

“It is increasingly common for Wills to be challenged in court whether by an ex-partner or another family member. In a number of cases, these challenges are upheld. While it is impossible to prevent a challenge, the best way to make it unlikely to succeed is to obtain expert assistance in developing the Estate Plan,” Ms Hacker said.

Greed

While do-it-yourself Will kits and cheap estate planning services can seem quick and easy, the reality is they are extremely basic and often do not always cover every eventuality.

“Those who look for the cheapest way to write a Will do so at the risk of compromising on quality. What may save money now, could end up costing later.”

Ms Hacker confirmed that just because a document is in the format of a Will, it doesn’t mean it covers everything required – especially if the person completing the DIY Will form doesn’t understand how to structure financial affairs or sort out ownership of assets. Estate planning is about advice – the Will is just the end product of that.

“Very simple mistakes can make a Will meaningless.  For instance, a recent case dealt with a young man who had drafted a new Will but not yet signed it. As a result, his estranged partner was still the beneficiary of his entire estate while his parents and current partner at the time he died, received nothing”.

Sloth

For many, developing an Estate Plan is something to do another time.  They may think they are too young or that they don’t have enough assets to justify making a Will.

“The fact is that anyone who has children, is a member of a superannuation fund or who owns their own home should have an Estate Plan. Choosing to do nothing is something that their families may end up regretting in the future,” Ms Hacker says.

Pride

One of the most valuable aspects of an Estate Plan is the capacity to establish a Power of Attorney but it is easily overlooked or ignored.

“It can be hard for people to accept that they may not have the mental capacity in the future to manage their affairs. With an ageing population, the number of people with issues such as dementia will only increase – statistics suggest that there will be around 400,000 people in Australia with dementia by 2020 and 900,000 by 2050.

“Empowering someone with the ability to make appropriate decisions on your behalf, if required, is an important part of a comprehensive Estate Plan,” reminded Ms Hacker.

Lust

There have been a number of cases in recent years where children from extra-marital relationships have successfully made a claim on an estate. While it may not be an issue that most need to consider for themselves, there are still lessons to be learnt.

“Court battles such as those over the estate of Richard Pratt or, more recently, Michael Wright highlight the increasing role that courts are taking in awarding significant portions of estates to people who were originally not beneficiaries,” Ms Hacker says.

“In the case of Mr Wright, a third daughter asked for $12 million from his estate of $800 million but the court decided to award her more than double that amount.

“Keep in mind that it doesn’t need to be family members who can make – and win – a claim on an estate.  There are examples of neighbours doing what most people would consider to be ‘neighbourly’ acts such as assisting with grocery shopping or simply visiting elderly neighbours being awarded a share in an estate,” Ms Hacker said.

Envy

It may seem like a cliché from an Agatha Christie novel but it is a sad fact that reading out a Will can bring out the worst in people.

“Previously close-knit families end up in bitter dispute over the contents of a Will. People should never assume that it couldn’t happen in their family,” Ms Hacker said.

“It may be that the Will-maker felt there were valid reasons for leaving more money to one child than to another – for example, they may have helped the other child set up a business.  Unless this is explained clearly – preferably not just in the Estate Plan but before they die – it can cause significant resentment.”

Gluttony

More a sin of omission, perhaps, than a deadly sin but people shouldn’t forget philanthropy when establishing an Estate Plan.

“Many like the idea of leaving something to charity in their Will as a bequest or even setting up a foundation to continue their philanthropic activities after their death. It’s something that is easy to forget. This is another area where getting expert advice can help ensure all their wishes are carried out after their death,” Ms Hacker said.

 

Source: http://www.eqt.com.au

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