Personal loans vs credit cards

Upcoming travel, car upgrade, Christmas festivities or home renovations on the horizon? If you need access to money to cover costs like these, you might be considering a personal loan or credit card. Choosing between the two can be tricky. We’ll explain the differences and why one may be a more suitable borrowing option for you.

The biggest difference between a personal loan and a credit card is that with a personal loan you’re given a lump sum upfront, whereas a credit card you’re given a limit that you can spend up to. Both have their advantages and disadvantages. Read on to see which one best suits you.

What is a personal loan and how do they work?

A personal loan is a fixed amount of finance that you pay back in instalments over a period. Generally, they’re used for larger purchases. Most personal loans are unsecured loans, which mean they don’t require assets to take out the loan. usually you can apply for any amount between $5,000 and $55,000.

Set borrowing amount

When you take out a personal loan, you’ll be approved to borrow a set amount of money. You’ll receive this as a lump sum at the beginning of the loan term. Unlike a credit card, which is a revolving line of credit, you won’t be able to spend more than the amount you’ve been approved for. 

Example:

Let’s say you’ve been quoted a fixed price for a bathroom renovation that you need to pay as a lump sum. As you know exactly how much money you’ll need, and it’s more than your credit card limit or more than you can pay back in a month, a personal loan could work well.

Repayments and interest rates

While unsecured personal loans don’t usually carry an interest rate as low as a secured loan, such as a home loan, they typically have a lower interest rate than credit cards.

With a personal loan, you’ll have to pay back a certain amount each month over a set period of time (usually between a one and seven year period). This amount will consist of interest and principal. If you opt for a fixed rate loan, you’ll easily be able to budget for repayments as they’ll remain the same over the life of the loan. If you opt for a variable rate loan, your loan repayments may change as interest rates change, making it harder to budget for your repayments. The upside of a variable rate – you’ll be able to have access to a redraw facility on your loan, which comes in handy if you need money unexpectedly. With both our fixed and variable rate loans you’ll be able to make additional payments and repay the loan early without incurring fees. 

Fees and charges

A personal loan will generally have an application fee when you take out the loan and a small monthly fee.

What is a credit card and how do they work?

A credit card provides access to funds up to a certain limit. They’re useful for daily expenses, monthly bills or smaller purchases that you’ll be able to pay off each month. Like personal loans, they’re also a type of unsecured lending.

Flexible borrowing

Credit cards provide great flexibility as they act as a line of credit that you can use as you need. You’re offered a credit limit and can continually spend up to that limit (as long as you pay the required minimum monthly repayment). A minimum credit card limit starts from as low as $1,000. Unlike a personal loan where you’ve borrowed a fixed amount upfront and that’s all you can spend, you can continue to spend with credit cards up to your available balance. Credit card debt is revolving, and if you’re not careful with your spending, you can spend more than you planned or are able to manage. It’s important to keep your credit card balance to an amount that you can manage and afford to repay. 

Example: 

Let’s say you’re gradually renovating and spreading the cost across a number of months, you could look at paying for the renovations as you go with a credit card (provided you feel confident that you can pay off the money you spend).

Repayments and interest rates

As a general rule, credit cards carry a higher interest rate than personal loans. On your credit card’s due date, you’ll need to make a minimum monthly payment. If you want to avoid paying interest, you need to pay off the card balance in full each month.

Fees and charges

Aside from interest charged, a credit card typically has an annual card fee. There are additional costs for withdrawing cash – a cash advance fee and a variable cash advance rate (a higher interest rate for withdrawing cash). If you need to withdraw a lot of cash, a personal loan may be a better option as there are no fees to do this.

So what are the benefits of paying with a credit card? 

If you’re going to use a credit card for purchases and expenses, it’s best to only spend what you can afford to pay off each month to avoid costly interest charges. Aside from helping with short term cash flow issues throughout the month, or using your credit card to help manage your monthly household expenses, credit cards have other benefits. Many cards come with reward programs that reward you with earning points for each dollar spent on your card. You can accrue points and redeem for flights, accommodation, gift cards and more. Some cards also have travel insurance, extended warranty insurance and purchase protection insurance.¹ 

The verdict

If you have good control over your spending and regularly follow a budget, then a credit card may be suitable. But if it’s a big purchase or expense you need to finance, and you’re unable to pay the debt off quickly, a personal loan is worth looking at.

Whether you choose a credit card or personal loan, remember that they’re both debts. Before you decide to borrow money, think about whether you really need to make the purchase and if you need to make it now. If it’s an expense that can wait, a budget planner can help you make a considered decision. And always check the fees and charges of any loan or credit card you apply for.

1 Insurance
AWP Australia Pty Ltd ABN 52 097 227 177 AFSL 245631, trading as Allianz Global Assistance (AGA), under a binder from the insurer, Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL 234708 (Allianz), has issued an insurance group policy to National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686 (NAB) which allows eligible persons to claim under it as third party beneficiaries. Access to the benefit of cover under the NAB card insurances is available to eligible NAB cardholders and other eligible third party beneficiaries by operation of s48 of the Insurance Contracts Act 1984 (Cth). Any advice on insurance is general advice only and not based on any consideration of your objectives, financial situation or needs. You must check whether or not it is appropriate, in light of your own circumstances, to act on this advice. This insurance is underwritten by Allianz. NAB is not the product issuer or insurer and neither it nor any of its related bodies corporate guarantee any of the benefits under this cover.

Source: NAB 

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/manage-money/money-basics/credit-card-personal-loan

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

© 2024 National Australia Bank Limited (“NAB”). All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Financial markets can be like finely tuned racehorses, poised to gallop ahead under ideal conditions but often highly reactive to unexpected events.

It’s often said that the markets love certainty. Investors feel more confident when economic conditions are stable and predictable.

But certainty in financial conditions is never a sure thing. Uncertainty is always just around the corner with the possibility of changes in interest rates, new laws or regulations, upheavals in overseas markets, a breakdown in Australia’s relationship with a major trading partner, and wars and political instability.

As a result, stability and predictability are most often fleeting with peaks and troughs in prices inevitable.

Look at the past few years. Between 2020 and 2022, we were dealing with the side effects of COVID-19 on the economy and markets. Since 2022, interest rate rises, increases in the cost of living and conflicts in Ukraine and the Middle East have caused further market volatility.

This year, global political stability may be affecting markets with almost 50 per cent of the world’s population due to head to the polls to choose new governments including the United States, India, Russia, South Korea and the European Union.ⁱ Interest rate movements in Australia and overseas are another focus.

In this dynamic environment, investors find themselves grappling with crucial decisions about how to safeguard and optimise their portfolios.

It could be useful to know that making hasty decisions, reacting quickly to the latest event, may not be the best move.

Consider the performance of various assets classes over 24 years. If you had invested $10,000 in a basket of Australian shares on 1 February 2000, for example, your portfolio would have been worth $67,717 at 31 January 2024, delivering a return of 8.3 per cent each year.ⁱⁱ The same amount invested in international shares over the period would have provided a 5.4 per cent annual return with your portfolio then at $35,373.

US investment advisers Dimensional have calculated the risk to a portfolio of being out of the market for even a short period.

An investment of US$1,000 in 1998 of stocks that make up the Russell 3000 Index, a broad US stock benchmark in 1998, would have turned into U$6356 for the 25 years to 31 December 2022. But if you had decided to sell up during the best week, before later reinvesting, the value would have dropped to $5,304. Miss the three best months, which ended June 22, 2020, and the total return dwindles to $4,480.ⁱⁱⁱ

In other words, reacting to events by quickly selling up can have an unwelcome effect on your portfolio.

Trying to time the market by identifying the best and worst days to buy and sell is almost impossible. Investing for the long-term in a well-diversified portfolio can better suit some investors.

Historically, long-term investors who have weathered short-term storms have been rewarded. Markets have shown they tend to recover over time, and a diversified portfolio allows investors to capture the upside when conditions improve.

And there’s a bonus. The compounding effect of returns over an extended period can significantly enhance the overall performance of a portfolio if they are reinvested.

Why diversify?

Different asset classes – such as shares, bonds and cash – perform differently at different times.

By diversifying investments across different asset classes, regions and companies, can work towards reducing the effect of a poorly performing asset on the overall portfolio, providing a buffer against volatility and lowering risk.

Appreciating the lessons learned from the past while also understanding that past performance may not predict future performance, is a helpful way of navigating the uncertainties of the global markets.

We can help you stay committed to a robust investment strategy, design a portfolio that meets your objectives and help navigate the complexities of the markets. Reach out to us to help you invest confidently.

Market uncertainty caused by key historical events

Source: Vanguard Digital Index Chart^iv

Missed opportunity

Source: Dimension Funds Advisorsⁱⁱⁱ

i The Ultimate Election Year: All the Elections Around the World in 2024 – Elections Around the World in 2024 | TIME
ii https://insights.vanguard.com.au/VolatilityIndexChart/ui/retail.html
iii What Happens When You Fail at Market Timing | Dimensional
iv Vanguard Index Volatility Charts 

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page. 

Having a legally valid will can go a long way to avoiding disputes over the division of your assets. 

What did the artist Picasso, musicians Bob Marley and Aretha Franklin, and billionaire entrepreneur Howard Hughes have in common?

If you’re thinking they had amassed large fortunes before their deaths, you would be correct. But another key fact is that they all died without a valid will.

Picasso died in 1973 with an estate, including an extensive collection of artworks, later appraised at US$250 million. The eccentric Hughes passed away in 1976, leaving an estimated US$1.5 billion. His fortune was eventually split between hundreds of people after years of legal battles.

The estates of the musicians were lower, but still sizeable: Marley (US$30 million) and Franklin (US$18 million).

In each case, their estates needed to be settled in court after challenges by family members, former spouses, and other parties.

The importance of inheritance planning

Inheritance planning, unlike business succession planning, is an area that’s rarely discussed at the family level.

Most families regard subjects such as death and the future division of wealth as unpleasant, and potentially sensitive when multiple heirs are involved.

But there’s a lot to be said for having open discussions within your family about the intended treatment of assets and future inheritances.

Beyond accumulating wealth over time, one of the most important aspects of estate planning is determining in a legally valid will how you intend to have your accumulated wealth distributed after your death.

Dying without a will can potentially be treacherous, and costly, if your intended beneficiaries need to contest how your assets are divided.

And consider that the next 20 to 30 years will see the biggest transfer of family assets in history as many members of the so-called “Baby Boomer” generation (people born just after the end of World War II through to 1964) die, in most cases with the intention of leaving their accumulated wealth to their children and other heirs.

Assets will include homes, investment properties, unspent superannuation money, direct shares, life insurance payouts, and a wide range of other financial and non-financial assets.

Why you need a will

Creating a valid will, and specifically documenting how you want your assets to be managed and divided between your nominated beneficiaries after your death, should be a key step in the inheritance planning process.

Dying without a will (intestate) will invariably create complications, because your estate will be passed over to the state or territory in which you live to administer.

This can result in your assets not being distributed to your surviving family members in the way you would have preferred.

Residential real estate and superannuation, which combined make up more than three quarters of total household assets, are the largest components of most financial legacies.

Federal Treasury estimates that assuming there’s no change in how most retirees draw down their superannuation balances, superannuation death benefit payouts will increase from around $17 billion to just under $130 billion by 2059.

Ensuring that any super you have left over at the time of your death is distributed according to your wishes requires you to complete a binding death benefit nomination form provided by your super fund.

It’s important to be aware of any potential tax implications. For example, while superannuation distributed to a surviving spouse or dependent children as a lump sum is generally tax free, non-dependents (including adult children) may be required to pay tax on amounts they receive.

That comes down to how much of your super is made up from pre-tax and after-tax contributions.

Capital gains tax does not apply if someone inherits direct shares or other financial securities, but tax may apply if they later dispose of them.

Any unapplied capital losses that could be used to offset capital gains tax cannot be transferred to beneficiaries.

Estate planning can be complex. Consulting a licensed financial adviser to help you and your intended beneficiaries map out an inheritance framework that also identifies issues such as potential tax liabilities is a prudent step. 

Contact us if you have any questions.

This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

GENERAL ADVICE WARNING
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) is the product issuer and operator of Vanguard Personal Investor. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee and product issuer of Vanguard Super (ABN 27 923 449 966).
The Trustee has contracted with VIA to provide some services for Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc (collectively, “Vanguard”).
We have not taken your or your clients’ objectives, financial situation or needs into account when preparing our website content so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for the product before making any investment decision. Before you make any financial decision regarding the product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard’s financial products can be obtained on our website free of charge, which includes a description of who the financial product is appropriate for. You should refer to the TMD of the product before making any investment decisions. You can access our Investor Directed Portfolio Service (IDPS) Guide, Product Disclosure Statements (PDS), Prospectus and TMD at vanguard.com.au and Vanguard Super SaveSmart and TMD at vanguard.com.au/super or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This website was prepared in good faith and we accept no liability for any errors or omissions.
Important Legal Notice – Offer not to persons outside Australia
The PDS, IDPS Guide or Prospectus does not constitute an offer or invitation in any jurisdiction other than in Australia. Applications from outside Australia will not be accepted. For the avoidance of doubt, these products are not intended to be sold to US Persons as defined under Regulation S of the US federal securities laws.
© 2024 Vanguard Investments Australia Ltd. All rights reserved. 

Overview

You can access your super early in very limited circumstances, including to pay certain expenses on compassionate grounds, as well as terminal illness, incapacity and severe financial hardship.

Access on compassionate grounds

You may be allowed to withdraw your super early on compassionate grounds to pay for:

• medical treatment for you or your dependant

• medical transport for you or your dependant

• modifications to your home or vehicle to accommodate your or your dependant’s special needs arising from a severe disability

• palliative care for you or your dependant

• death, funeral or burial expenses of your dependant

• preventing foreclosure or forced sale of your home

For release on compassionate grounds, you need to meet all eligibility conditions and provide the relevant documents to support your application. Applications that don’t include these documents may be delayed or not approved.

Applications can be made via ATO Online, or on their paper form where you don’t have access to the ATO’s online services.

The super you withdraw on compassionate grounds is paid and taxed as a normal super lump sum.

Access due to a terminal medical condition

You may be able to access your super if you have a terminal medical condition and all these conditions are met:

• Two registered medical practitioners have certified, jointly or separately, that you suffer from an illness or injury that is likely to result in death within 24 months of the date of signing the certificate.

• At least one of the registered medical practitioners is a specialist practising in an area related to your illness or injury.

• The 24-month certification period has not ended.

Contact your super fund to request access to your super due to a terminal medical condition. Your fund must pay your super as a lump sum. For the payment to be tax-free you must have a terminal medical condition either:

• at the time of the payment

• within 90 days of receiving the payment.

If you have a terminal medical condition and you have super held by the ATO you can claim it through your super fund or directly from the ATO.

For more information see Access due to a terminal medical condition.

Access due to severe financial hardship

You may be able to withdraw some of your super if you are experiencing severe financial hardship. Access on grounds of severe financial hardship is not administered by the ATO. You need to contact your super provider to request access due to severe financial hardship.

There are no special tax rates for a super withdrawal because of severe financial hardship. Withdrawals are paid and taxed as a normal super lump sum. If you’re under 60 years old, this is generally taxed at between 17% and 22%. If you’re over 60 years old, you won’t be taxed unless the lump sum includes an untaxed element.

Eligibility

Eligibility for access due to severe financial hardship depends on your age in relation to your preservation age. For example, if your preservation age is 55 and you’re under 55 years and 39 weeks old, you need to satisfy the conditions under 1 below.

1. Under preservation age plus 39 weeks

If you’re under your preservation age plus 39 weeks, you need to meet both these conditions:

• You have received eligible government income support payments for a continuous period of 26 weeks.

• You are not able to meet reasonable and immediate family living expenses.

The minimum amount that can be withdrawn is $1,000 and the maximum is $10,000. If your super balance is less than $1,000 you can withdraw up to your remaining balance after tax.

You can only make one withdrawal in any 12-month period.

2. Reached preservation age plus 39 weeks

If you’ve reached your preservation age plus 39 weeks, you need to meet both these conditions:

• You have received eligible government income support payments for a cumulative period of 39 weeks after you reached your preservation age.

• You were not gainfully employed at the time of applying.

There are no restrictions on how much you can withdraw if you meet the age and the other 2 conditions.

How to apply for access due to financial hardship

You need to apply to your super fund directly for release of super on financial hardship grounds. The ATO does not process severe financial hardship requests.

If your super provider requests evidence, you can ask Services Australia to provide a letter confirming you have received eligible government income support payments for the relevant period.

For more information on how to apply for early access to your super because of financial hardship, see If you need to apply because of financial hardship at Services Australia.

Access due to temporary incapacity

You may be able to access your super if you are temporarily unable to work, or need to work fewer hours, because of a physical or mental medical condition.

This condition of release is generally used to access insurance benefits linked to your super account.

You’ll receive the super in regular payments (an income stream) over the time you are unable to work. There are no special tax rates for a super withdrawal due to temporary incapacity. Withdrawals are paid and taxed as a super income stream.

Contact your super provider to request access to your super due to temporary incapacity and to ask about insurance attached to your super.

Access due to permanent incapacity

You may be able to access your super if you are permanently incapacitated. This type of super withdrawal is sometimes called a ‘disability super benefit’.

Your fund must be satisfied that you have a permanent physical or mental medical condition that is likely to stop you from ever working again in a job you were qualified to do by education, training or experience.

You may still be eligible to withdraw your super where you meet the above criteria, but are undertaking other work, such as light duties in a different position or casual work in a different field.

You can receive the super as either a lump sum or as regular payments (income stream).

To receive concessional tax treatment, a super withdrawal due to permanent incapacity must be certified by at least 2 medical practitioners.

Contact your super fund to request access to your super because of permanent incapacity.

To work out how your super payment will be taxed you need to know how much of the money in your super account is a:

• tax-free component

• taxable component the super provider has paid tax on (taxed element)

• taxable component the super provider has not paid tax on (untaxed element).

If you’re under your preservation age and receive a disability benefit as an income stream, you’ll get the super income stream tax offset that reduces the tax rate on the taxed element of your taxable component by 15%.

If you’ve reached your preservation age or if you get a lump sum, your disability benefit will be taxed at the rates described in Tax on super benefits.

Super balance less than $200

You may be able to access your super if:

• your employment is terminated and the balance of your super account is less than $200

• you have found a ‘lost super’ account with a balance less than $200.

Contact your provider to request access. Check the eligibility criteria for withdrawing super from ATO-held accounts.

No tax is payable when accessing super accounts with a balance less than $200.

Illegal early release and scams

Illegal early release

Some promoters claim to offer early access to your super by transferring it into a self-managed super fund. These schemes are illegal, and heavy penalties apply if you get involved. For more information, see Illegal early release of super.

Be aware of scams and schemes

Be alert to scams or schemes where people:

• impersonate the ATO, or a trusted organisation like your super fund, to steal your money or personal identifying information

• contact you and charge for services that are free, like gaining early access to your superannuation.

If you receive a phone call, text message or email offering to help you release your super early, do not:

• provide your personal information

• click on any links.

Stolen or misused identity

If you’re concerned that someone has accessed your super without your permission, you should check your:

• myGov and ATO Online account and make sure your contact details are still correct

• superannuation account to make sure that your account details are also correct, and that there have been no unauthorised transactions.

If you receive a text message or email stating that your myGov details have been changed, or that you have applied for early release of super when you have not, do not click on any links, and consider whether your identity has been compromised.

If you think that someone has stolen or misused your identity, contact both:

• your super fund immediately if you identify unauthorised transactions or updates to your account

• our Client Identity Support Centre on 1800 467 033 (between 8.00 am and 6.00 pm, Monday–Friday) to help you establish your tax identity.

Source: ato.gov.au August 2023
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/when-you-can-access-your-super-early

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Land banking is a real estate investment scheme that involves buying large blocks of undeveloped land. These schemes are often unregulated and there’s little protection if something goes wrong.

In a land banking scheme, property developers usually buy land, divide it into smaller blocks and offer it to investors. As an investor, you either buy a plot of land or buy an option to purchase a plot of land. These are known as ‘option agreements’. The option agreement is usually triggered when the land has been approved for development by the local council.

The land is expected to be sold at a profit when it’s rezoned or approved for development.

Land banking schemes sold at property seminars

You might hear about land banking at property spruiking or investment seminars. They are described as a ‘get rich slow’ option.

Glossy brochures and presentations promote land banking as a cheaper way to get into the property market.

Property spruiking events and investment seminars are often high-pressure environments. You can be rushed into making a decision. You may not be given enough time to consider the investment carefully or to seek independent advice before you sign up.

How land banking schemes go wrong

The land is undeveloped

Developers can mislead investors about the prospects of rezoning or developing the land.

Some developers offer land for investment without knowing whether they can get council approval to develop it. Some have failed to tell investors that there are development restrictions on the land.

If the land doesn’t get development approval, your investment could be unsaleable and worth less than you paid.

Schemes can collapse

A number of land banking schemes have collapsed in Australia and overseas without the promoted development ever proceeding.

Planning approval can take many years and lots of money. Ongoing legal and planning costs can eat into the funds to support the development. This can cause the company to become insolvent. If you’re an option holder, you can lose all the money you’ve invested.

Option agreements can expire

Some land banking option agreements have a ‘sunset clause’. The sunset clause ends the scheme 20 to 25 years from the date of the agreement, if the land fails to be rezoned or developed.

The sunset clause can mean investors lose the fee they paid if there’s not enough money to repay all option holders. You may not get a refund on any legal fees, commissions and other payments you paid.

Land banking scams

Investors may be scammed by developers who are selling options in land they do not own.

Legal or financial advice kickbacks

Land banking scheme promoters may refer you to lawyers, accountants or financial advisers. Be aware that they may have a pre-existing business relationship with the promoter or developer, who may receive a kickback for referring you. And, they could have a personal interest in the property development. Always seek professional advice.

Important: ASIC has taken action against land banking schemes run by Askk Investment Group, VKK Investments Unit Trust, Realestate Equity Investment Trust (REIT), 21st Century land banking companies and Midland Hwy.

What to check before investing in land banking

Contact the local council

Ask the local council if the land will ever be released for development. A land banking promoter may try to persuade you that the council is not aware of all potential developments. You should question the promoter’s motivation for telling you this.

Check if it’s a managed investment scheme

Managed investment scheme operators need an Australian financial services (AFS) licence. The scheme may be a managed investment scheme if:

• Investors do not have day-to-day control over managing their investment.

• The scheme involves pooling investor funds.

• The funds are used to further the development.

You can check ASIC Connect’s Professional Registers to see if the developer and the promoter hold an AFS licence.

Read the product disclosure statement (PDS)

If it is a managed investment scheme, you must be given a product disclosure statement (PDS). The PDS must include information about the scheme’s key features, fees, commissions, benefits, risks and complaints handling procedure.

Make sure you read the PDS. If you don’t understand the investment, get independent financial or legal advice.

Do not confuse the PDS with marketing material used to sell the investment, such as brochures or information sheets.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/investment-warnings/land-banking

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Key points:

• Scientists have found that working memory can be disrupted as early as people enter middle age

• In 2024, it is estimated there are more than 421,000 Australians living with all forms of dementia

• More than two-thirds of aged care residents have moderate to severe cognitive impairment

Scientists have reported a global breakthrough in brain research through a new study that identifies how the brain changes over time and what these changes mean for Australia’s ageing population.

Findings from the study, which were published in the journal Nature Communications, provide new insights into the ageing process of the human mind and provide a foundation for therapies to stay mentally resilient.

A team of researchers from Nanyang Technological University, Singapore, demonstrated that communication among memory-coding neurons — nerve cells in the brain responsible for maintaining working memory — is disrupted with ageing and that this can begin in middle age.

Scientists were able to use new forms of optical imaging to test live mice of three different ages, young, middle-aged and old, to observe how each animal responded to tasks that required memory.

Previous research has relied on the nerve cells from dead subjects to estimate the impact of brain alteration over time, however, recent technological development has allowed the Lee Kong Chian School of Medicine to track mice in real-time.

The team discovered that compared to young mice, middle-aged and old mice required more training sessions to learn new tasks, indicating some decline in memory and learning abilities from middle age.

The findings suggest that strengthening the weakened connections between the nerve cells, such as through memory training activities, could help delay the deterioration of people’s working memories as they age.

Lead investigator and Assistant Professor Tsukasa Kamigaki said the study showed that communication between neurons was significantly reduced over time and with age.

“This discovery provides more evidence that proactive intervention can improve neuron communication,” he explained.

“Examples of intervention include lifestyle changes, such as cognitive training and regular exercise. These activities can potentially mitigate the impact of cognitive ageing and enhance people’s overall cognitive health as they age.”

The study, which spanned four years, found that ongoing brain activity was critical in middle age to prevent memory loss in later life, according to co-first author and research assistant Huee Ru Chong.

“The fact that the brain circuits showed signs of degradation from middle age highlights the need for clinical strategies to safeguard our mental well-being as early as possible,” he said.

An independent expert in the field of neuroscience and behavioural disorders, Dr Jun Nishiyama, commented on the significance of the research.

“It is well-known that brain performance declines with ageing, yet the underlying causes remained elusive,” Dr Nishiyama said.

“This groundbreaking study from NTU Singapore offers key neurological insights into age-related working memory decline, highlighting reduced neuronal communication in the mouse prefrontal cortex beginning from middle age.”

In Australia, the number of people with dementia is expected to increase to more than 812,500 by 2054 without a medical breakthrough.

Lifestyle factors, such as a healthy diet, maintaining frequent brain activity through tasks and organisation, along with socialisation and abstaining from alcohol, can prevent the likelihood of developing cognitive impairment. 

For support, please contact the National Dementia Helpline on 1800 100 500. An interpreter service is available. The National Dementia Helpline is funded by the Australian Government. People looking for information can also visit dementia.org.au.

Source:
This article was originally published on https://www.agedcareguide.com.au/talking-aged-care/how-does-ageing-affect-the-ability-to-remember. Reproduced with permission of DPS Publishing.

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business. Our business does not take any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Having a budget helps you see where your money is going. You can put aside money for bills and expenses and set up a plan to reach your financial goals.

Follow these steps to get started. Use how often you get paid as the timeframe for your budget. For example, if you get paid weekly, set up a weekly budget.

1. Record your income

Record how much money is coming in and when. If you don’t have a regular income, work out an average amount.

Make a list of all the money coming in, including:

• how much

• where from

• how often (weekly, fortnightly, monthly or yearly)

This money could be from your wages, pension, government benefit or payment, or income from investments.

2. Add up your expenses

Regular expenses are your ‘needs’ – the essential items you need to pay for to live. These include:

Fixed expenses, for example:

• rent or mortgage payments

• electricity, gas and phone bills

• council rates

• household expenses, like food and groceries

• medical costs and insurance

• transport costs, like car registration or public transport

• family costs, like baby products, child care, school fees and sporting activities

Debt expenses, for example:

• personal loan repayments

• credit card payments

• mortgage repayments

Unexpected expenses, for example:

• car repairs and services

• medical bills

• extra school costs

• pet costs

To make sure you’ve recorded all your expenses, look at your bills or bank statements. Include what the expense is for, how much and when you pay it.

3. Set your spending limit

The money you have left after expenses is your spending and saving money.

Your spending money is for ‘wants’, such as entertainment, eating out and hobbies.

Make a plan for what you want to do with your spending money. This will help you to see where it goes and keep within your spending limit.

4. Set your savings goal

If you have a savings goal you can use your budget to work towards it.

Once you know how much money you have for ‘wants’, you can work out how much of it you’d like to save. 

Having some savings can create a safety net for unexpected expenses. Even a small amount set aside regularly will make a difference.

5. Adjust your budget

Your budget needs to work for you and your lifestyle so it’s important to adjust your budget as things change. 

For example, if your expenses start to increase you may need to reduce your spending, or change your savings goal. Or you might be able to save more if you get a pay rise or you pay off some debt.

6. Make budgeting easier

To help make budgeting easier, consider having separate bank accounts. You could have:

• a transaction account for bills and expenses

• a transaction account for spending

• a higher interest savings account

You can then automate your budget by setting up a regular transfer to your savings account on pay day. You can also set up direct debits when your bills are due.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/budgeting/how-to-do-a-budget

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

When getting ready to buy property, there are many things to keep track of as settlement approaches. An important consideration is what you will need in terms of insurance – admittedly not the most exciting part of buying a new home, but one which can save you money and stress in the future.

Why lenders often require insurance

While not a legal requirement, insurance is often required by lenders, and they may want to see your policy before either the exchange of contracts or ahead of the settlement.

As the lender has a stake in the property during the life of the loan, they will want to know should the property be damaged or destroyed, if any large insurance claims are made, and if your insurance lapses.

Types of insurance

There are various forms of insurance relating to your property, these include:

• Home or building insurance – to protect you against damage to the property (such as due to an extreme weather event like fire or floods).

• Contents insurance – to safeguard you against theft or accidental damage to your belongings.

• Lenders Mortgage Insurance (LMI) – to cover the lender should you default on your repayments (note: LMI is a one-off payment by the buyer, not the lender).

• Landlord insurance – to protect your property if you are renting it out.

• Mortgage protection insurance – to cover your mortgage payments in case you or your partner become unemployed, seriously ill or die.

Home and contents insurance

Home and contents insurance, is often what buyers think of when it comes to getting insurance.

There are two main types of home insurance: sum-insured cover (which means the insurer will pay for repairs or a rebuild up to an estimated amount you specify in your policy) and total replacement cover (which means you will be covered for your home to be repaired or rebuilt as it was without you having to set a specific sum-insured limit).

Total replacement cover is more expensive and not all lenders offer it, so keep that in mind. As for contents insurance, you tend to be covered for the replacement value of your belongings.

According to statistics from Finder in January 2023, 60% of survey respondents have some form of home insurance policy. An interesting finding was that only 43% of respondents with home insurance said that they fully understood their home insurance policy. While 48% said they partially understood it, 8% didn’t understand the benefits and inclusion of their policy.

It’s important to know what you are covered for, such as which type of event. Home and contents insurance don’t cover everything, so check the exclusions – these might be a house left unoccupied that is then damaged, doing renovations, any existing damage and damage caused by pets.

You can usually request additional insurance, for example, covering high value items such as expensive jewellery or fixing that hole in the wall, so it’s worth checking what is included in your policy and whether it’s worth paying extra.

Do you need insurance before settlement?

As mentioned above, some lenders will ask to see proof of insurance before any contracts are exchanged. In some instances, the lender will ask that your insurance is effective from the date you sign the contract or before the loan becomes conditional.

Depending on which state or territory you live in, you may be responsible for damage to the property as soon as contracts are exchanged. Here is a list on each area’s requirements:

• ACT, TAS & SA – the buyer is responsible for damage to the property as soon as contracts are exchanged.

• NSW & VIC – the buyer is responsible for damage to the property on settlement.

• QLD – the buyer is responsible for damage to the property from 5.00pm the next business day after the contract date (before settlement).

• WA & NT – the buyer is responsible for damage to the property on whichever comes first: either the date the whole purchase price is paid, or the date the buyer is entitled to or is given possession of the property.

i https://www.finder.com.au/home-insurance-statistics

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

When and how you can access your super to start an account-based pension.

If our working years can be regarded as the time when we aim to build up our superannuation savings, our retirement years can equally be regarded as the time when we aim to spend them.

At least that’s the objective for most Australians. Which generally leads to the question: how do I start accessing my super funds when I do stop working, or maybe even before I stop working?

This article focuses on the basics, including the general eligibility rules around accessing your super and how to switch your super accumulation account to an account-based pension.

What age can I access my super?

To legally access your super for retirement purposes, you generally need to have met a condition of release by reaching what’s known as your preservation age.

That’s slightly complicated. In the majority of cases it means you have already turned 60 and have either stopped working completely or are starting a transition to retirement income stream (see below).

However there’s a small opening, that’s about to close, allowing slightly earlier access. The preservation age also extends to people who are now aged 59 (born on or after 1 July 1963) and who will turn 59 on or before 30 June 2024. Those born after 30 June 1964 will need to wait until they turn 60.

How do I access my super?

Having reached your preservation age, you have the options of turning on a pension income stream, making a lump sum withdrawal, or doing a combination of both.

Importantly, to start accessing your super, and if you don’t want to take out a lump sum, you will need to open a pension account and transfer some or all of your super across. You may need to contact your super fund to find out their process, but it’s usually as simple as lodging a request with your fund by filling out a form and providing information such as where you want your pension payments to be made and some proof of identification.

You then decide how much you want to transfer, nominate the size and frequency of your pension account payments (there are minimum annual withdrawal amounts), and how you want the funds in your pension account invested.

There is a limit on the maximum amount that can be transferred as a tax-free retirement income stream from super to a pension account, known as the transfer balance cap. This is currently set at $1.9 million. The Tax Office keeps track of how much you transfer, and if you go over the cap it will levy an excess transfer balance tax.

If you have more than $1.9 million in super you have the option of keeping the excess in your super account and paying up to 15% tax on your earnings, or you can withdraw the excess as a lump sum. From 1 July 2025 a 30% tax rate will apply on earnings from super accounts with balances above $3 million.

How can I transition to retirement?

If you’re still working you have the option of drawing down on your super by starting a transition to an account-based retirement income stream (TRIS). This can enable you to reduce your current working hours and use your TRIS pension payments to top up your part-time income.

At the same time, as you’re still working, you will continue to receive compulsory super guarantee payments from your employer (which are taxed at the normal rate of 15%) into your super accumulation account.

What are the tax considerations in pension mode?

If you’re aged 60 or over and retired, any income earned on your pension assets is tax free and so are pension payments you withdraw.

It’s slightly different for those on a TRIS. If you’re 60 and over you pay no tax on your TRIS pension payments. If you’re under 60 and have a TRIS you are taxed at your marginal tax rate but receive a 15% tax offset on the taxable portion of your income stream. No tax is payable on the tax-free portion. Investment earnings in a TRIS are taxed at up to 15%.

What are the minimum pension withdrawal amounts?

There are restrictions on how much can be withdrawn tax free through a TRIS in a financial year if you’re under 65, until you’ve met a condition of release. The minimum withdrawal amounts is 4% of your super balance and the maximum is 10%.

Once you’ve rolled over some or all of your super to an account-based pension you are required by law to withdraw a minimum pension amount each financial year, which is a percentage of your account balance based on your age. For new pensions, the minimum withdrawal amount is calculated on a pro-rata basis from when a pension commences to the end of the financial year.

The table below shows the required minimum withdrawal rates.

Source: Australian Tax Office

Any amounts leftover in your pension account when you die will go to your nominated beneficiaries. Depending on the type of beneficiary (reversionary, spouse, dependant or non-dependant) the amounts can be paid as an ongoing pension stream until the account runs out or as a lump sum.

Consider getting professional advice

If you’re wanting total financial flexibility in retirement, you could consider leaving part of your money in super, rolling over some of it into an account-based pension, and also withdrawing lump sums whenever you need to.

There are a range of benefits from adopting a combination of your options, although there may also be potential tax consequences for both you and your beneficiaries.

Managing the combination of a super accumulation account, an account-based pension, an Age Pension entitlement (if eligible), potential investment earnings outside of super, and irregular lump sum payments, can be highly complex.

Using the services of a licensed financial adviser, like us, is a worthwhile consideration as you weigh up all of your retirement options.

Source: Vanguard February 2024

This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

GENERAL ADVICE WARNING
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) is the product issuer and operator of Vanguard Personal Investor. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee and product issuer of Vanguard Super (ABN 27 923 449 966).
The Trustee has contracted with VIA to provide some services for Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc (collectively, “Vanguard”).
We have not taken your or your clients’ objectives, financial situation or needs into account when preparing our website content so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for the product before making any investment decision. Before you make any financial decision regarding the product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard’s financial products can be obtained on our website free of charge, which includes a description of who the financial product is appropriate for. You should refer to the TMD of the product before making any investment decisions. You can access our Investor Directed Portfolio Service (IDPS) Guide, Product Disclosure Statements (PDS), Prospectus and TMD at vanguard.com.au and Vanguard Super SaveSmart and TMD at vanguard.com.au/super or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This website was prepared in good faith and we accept no liability for any errors or omissions.
Important Legal Notice – Offer not to persons outside Australia
The PDS, IDPS Guide or Prospectus does not constitute an offer or invitation in any jurisdiction other than in Australia. Applications from outside Australia will not be accepted. For the avoidance of doubt, these products are not intended to be sold to US Persons as defined under Regulation S of the US federal securities laws.
© 2024 Vanguard Investments Australia Ltd. All rights reserved.

Consolidating your super means moving all your super into one account. It makes your super easier to manage, and saves on fees.

Before you consolidate, pick the best super fund for you.

You can transfer your super for free in a few simple steps.

If you’re ready to consolidate your super now, go straight to the Australian Taxation Office (ATO) online at myGov.

Why consolidate your super

Consolidating your super can save you time and money.

Having all of your super in one account means you:

• save money by only paying one set of fees

• have less paperwork

• can keep track of your super balance more easily

Things to do before consolidating your super

Before you change out of a super fund, there are few things you need to do to make sure you don’t lose important things like insurance.

Check employer contributions

Check your current accounts to see if changing funds will affect how much your employer contributes. Some employers contribute more to certain funds.

Check your insurance cover

Before you leave a fund, check to see if you have any insurance through the fund. This might be life, total and permanent disability (TPD), and/or income protection insurance.

If you change funds, you might not be able to get the same cover. Be particularly careful if you have a pre-existing medical condition or are aged 60 or over.

If you’re not sure, get independent advice from a licensed financial adviser – you can speak to us.

When you change super funds, you usually keep the existing insurance until the replacement policy is issued and your new cover is confirmed.

Tell your employer

Whether you choose a new super fund or one of your existing ones, give your employer the details they need to pay your super into your chosen account.

Check your type of super fund

Super funds can either be accumulation or defined benefits funds. If you are in a defined benefits super fund get professional advice before you leave. Some funds are very generous, so make sure you’ll be better off. If you leave, you can’t rejoin. 

When you consolidate your super, don’t just transfer your super into the account with the highest balance. The best account for you may be one of your small accounts, or an account with a completely new fund. How to consolidate your super

Once you’ve chosen your account, transfer the balance of your other super accounts into it.

You can do this easily online through the ATO:

• go to my.gov.au

• log in or create an account

• link your myGov account to the ATO

• select ‘Super’ and then ‘Manage’

• select ‘Transfer super’ (this option will only appear if you have more than one super account)

This will show you all of your super accounts and let you transfer your balance from one to another.

You can also transfer your balance to a new fund by:

• contacting the new fund directly

• using an ATO rollover form

Changing super funds

If you only have one super fund but you’re thinking about changing, follow the same process as you would follow for consolidating your super.

You might be thinking about changing funds to:

• invest in a fund with better services and features

• leave a fund that has been performing poorly

• leave a corporate fund after leaving your job

Don’t rush to change super funds if:

• your fund performed poorly in a single year — judge its performance over five years or more

• you’re chasing last year’s top-performing fund — it may not perform as well in coming years

Remember to check your insurance cover before you change.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/how-super-works/consolidating-super-funds

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.