While we all hope for good health, the reality is that some of us may struggle at times with sickness or injury. And that may affect your family’s financial wellbeing.

Different types of life insurance or personal insurance can provide an income when you’re unable earn, or a lump sum to protect your loved ones if the worst happens.

Insurance products such as life insurance and total and permanent disability (TPD) cover are available through your superannuation fund or directly through an insurance company. There are also other products not usually offered by super funds such as accidental death and injury insurance, and critical illness or trauma cover.

Almost 10 million Australians have at least one type of insurance (life, TPD or income protection) provided through superannuation.ⁱ

Check what your fund offers

Super funds usually provide three types of personal insurance. These include:

• Life insurance or death cover provides a lump sum payment to your beneficiaries in the event of your death.

• Total and Permanent Disability (TPD) pays a lump sum if you become totally and permanently disabled because of illness or injury and it prevents you from working.

• Income Protection pays a regular income for an agreed period if you are unable to work because of illness or injury.

While these insurance products can provide valuable protection, it’s essential to be aware of circumstances where coverage might not apply. For example, super funds will cancel insurance on inactive super accounts that haven’t received contributions for at least 16 months.ⁱⁱ Some funds may also cancel insurance if your balance is too low, usually under $6000. Automatic insurance coverage will not be provided if you’re a new super fund member aged under 25.

Should you insure through super?

Using your super fund to buy personal insurance has advantages and disadvantages so it’s a good idea to review how they might affect you.

On the plus side

• Cost-effective: Insurance through super can be more cost-effective because the premiums are deducted from your super balance, reducing the impact on your day-to-day cash flow.

• Automatic inclusion: Many super funds automatically provide insurance cover without requiring medical checks or extensive paperwork.

• Tax benefits: Some contributions made to your super for insurance purposes may be tax-deductible, providing potential tax benefits.

Think about possible downsides

• Limited flexibility: Super funds can only offer a standard set of insurance options, which may not fully align with your needs.

• Reduced retirement savings: Paying insurance premiums from your super balance means less money invested for your retirement, potentially impacting your final payout.

• Coverage gaps: Depending solely on your super fund’s insurance might leave you with coverage gaps, as the default options may not cover all your unique circumstances.

• Possible tax issues: Be aware that some lump sum payments may be taxed at the highest marginal rate if the beneficiary isn’t your dependent.

Don’t forget the life admin

Whether you decide to buy insurance through your super fund or not, it is important to regularly review your insurance coverage to make sure they reflect your current life stage and to make sure you are not paying unnecessary premiums if you have more than one super fund.

Insurance within super can be a valuable safety net, providing crucial financial support to you and your loved ones. Understanding the types of coverage offered, the pros and cons of insuring inside super and the need for regular reviews are essential steps to make the most of this benefit. If you would like to discuss your insurance options, give us a call.

i The future of insurance through superannuation, Deloitte and ASFA, 2022 1051554 Insurance through superannuation.indd
ii Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019, No. 16, 2019 Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 (legislation.gov.au)

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.

What is redraw?

Let’s say you’ve made a habit of paying more than your minimum scheduled home loan repayments. This means you’ll have money available to take back out – if you want to.

This process is known as redraw. You can use this money to pay for sudden expenses, or planned things such as:

• holidays

• renovations

• school fees

• a new car.

Keep in mind there are times when redraw might not be available. For example:

• if you have a fixed rate loan, redraw is only available at the end of the fixed rate period (i.e. when the rate becomes variable)

• you can’t access redraw for construction loans.

Features of redraw

You can generally access all the funds you’re ahead by, minus one month’s scheduled repayment.

After you redraw money from your home loan, you must continue to make your regular repayments.

It’s important to remember that the interest part of your repayments will increase because you’re now paying interest on a higher loan amount.

What are the benefits of redraw?

Knowing you have a source of finance just sitting there, in case you need it, can give you simple peace of mind. Plus, this money accumulates over time and is easy to access.

Using your redraw facility can also be cheaper than using a credit card or personal loan. This is because the interest charged on your home loan is usually lower than with other types of credit.

How do I use a redraw facility?

You can use internet banking or contact your lender to see if redraw is available with your loan and how much you have available to use. If you’re all good to go, you can redraw straight away.

Speak to us or your lender to find out more.

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/manage-debt/use-loan-redraw

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.

© 2023 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.

Navigating complex family relationships and blended families can be challenging at times and particularly when a family member dies.

A good estate plan can help to make sure your wishes are carried out when you die. An estate plan, of which a will is the first and most important part, can ensure your estate is distributed in the way you want. It can also help if you become incapacitated, particularly when it includes an enduring power of attorney and a medical power of attorney that indicate who should be in charge of your affairs and any relevant instructions.

Professional advice is vital in estate planning to make sure that you have considered all the issues, including tax matters, and that your loved ones are protected. It is also important to clearly communicate your wishes, particularly when there are complex issues involved, so that your wishes are clearly understood.

 Here are some of the issues to think about.

Superannuation

A binding death benefit nomination should be at the top of your list when you are considering the distribution of your superannuation funds.

This makes certain that your super death benefit is paid to those you choose because without one, the trustee of your super fund will make their own decision.

The nomination is usually valid for three years before it lapses and must be renewed.

Blended families

If you have been married more than once and/or have children with more than one partner, your will helps to effectively provide for those you choose.

You may wish, for example, to ensure that your children receive the proceeds of your estate rather than your spouse or ex-spouse. Alternatively, you may need to ensure your will protects your current spouse from the claims of previous spouses.

When it comes to the family home, the type of home ownership is important. If you have purchased as ‘joint tenants’, the entire asset will pass to the surviving spouse. On the other hand, if you have purchased as ‘tenants in common’, each spouse can distribute their share of the house to others.

You may also wish to include a ‘life interest’ in the home so that your current spouse can continue to live in the home until their death before it ultimately passes to your other beneficiaries.

Trusts

Any existing family trusts should be reviewed with a blended family in mind. Check that the trust deed provides clear instructions for succession, if you want to ensure your children from past relationships are catered for.

Your will can also establish new trusts, known as testamentary trusts, to provide for any dependents with disability, when you are worried that a child may waste or misuse your assets, or to allow for young children.

A testamentary trust can also help to protect your adult child’s interests if they were to divorce a partner or are facing bankruptcy. Any inheritance they receive from you would become part of their property and can be considered in a divorce settlement or called on by creditors.

Handing on a business

If you are in business with partners, or would like to hand on the family business to one child but not others, a life insurance policy may be a useful strategy – sometimes known as estate equalisation – to even the distributions from your estate.

In the case of a business partnership, you would name your partner or partners as beneficiaries of the life insurance policy, to effectively ‘buy you out’ of the business. Where it’s a family business due to be handed on to one child, your life insurance would go to your other children to match the value of the business.

Note that it is crucial to continually review the value of the business and the value of the life insurance to ensure they remain current.

Estate planning can be tricky and emotional, particularly when your circumstances are a little more complex. So, get in touch with us to ensure your estate plan meets your wishes and takes account of all the issues.

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.

In the space of 18 months – interest rates have risen regularly – which has seen plenty of positively or neutrally geared investment properties slip into negative territory. After a significant jump in the cash rates, savvy investors are now rethinking their medium to long-term strategies.

While some property investors actively choose a negative gearing path, others have only recently found themselves navigating the oft-talked about mortgage method due to the fast-paced interest rate climate. There are tax-related perks that come with negative gearing, but the strategy doesn’t necessarily make sense for everyone. To work out if negative gearing is right for you, it might be time to give your property investment plan a ‘health check’.

Advantages of negative gearing

Put simply, negatively gearing your property investment means spending more on your mortgage interest payments and expenses than you’re getting in rental payments. In this case you’re effectively not earning an income from the property, but it does mean you can write off these losses at tax time. Although the investment property is costing you (rather than providing income), the negative gearing pay day hopefully comes in the form of capital growth.

Disadvantages of negative gearing

While some investors swear by the strategy, negative gearing does come with downsides. You’ll be making an ongoing loss and won’t generate a passive income to help pay for the property’s holding costs. Another drawback is the potential for a capital loss. Investors get into real estate to make money, but there are no guarantees.

What is positive gearing?

On the flip side of negative gearing, positive gearing takes the opposite approach, whereby the income you earn from your investment property is higher than your expenses. This tactic is ideal for investors looking for consistent returns and a passive income. And if the property increases in value there will be capital gains on top of your rental income when you come to sell. You will pay tax on your rental income and with rising rates, it can be more challenging to find suitable properties which fit the strategy. 

Neutral gearing explained

If your investment property costs you nothing, but also earns you nothing, then it is neutrally geared. It’s a rare approach because it’s difficult to perfectly align both the expenses and earnings but can work well for anyone investing through a self-managed super as it won’t eat into the fund’s wealth.

What to consider when negative gearing

It’s important to cover all your bases when working out whether negative gearing is the right strategy for your personal circumstances and the property in question. Prepare yourself by asking;

• Can I realistically pay for the property while also losing money on it?

• If interest rates continue to rise, can I still afford this strategy?

• Is there scope to increase the rent to meet the mortgage demands?

• Is the property going to appeal to a high number of potential renters so it never sits empty?

• What happens if I can’t find a quality tenant, or even one at all?

• Has the home got good capital growth potential?

• When, if ever, will the property be positively geared?

• Will the potential tax benefit, coupled with the profit I hope to make upon its sale, outweigh the negative gearing loses?

Is negative gearing still worth it?

As the cost of living – and the price of holding a mortgage – continues to increase, negative gearing will eat more and more into your monthly expenses. While it can be a highly effective strategy to reduce your tax bill and unlock capital gains, there are a lot of other things to consider. If your household budget is already tight in the current climate, then perhaps this isn’t a path for you. However, if you have crunched the numbers and are confident you can absorb the extra costs then negative gearing might just be the right fit.

Ultimately, you’ll need to consider your own financial circumstances and speak to us to find a loan that suits your ideal strategy.

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.

Transition to retirement rules

Under the transition to retirement rules, when you reach your preservation age, you may be able to reduce your working hours without reducing your income. You can do this by choosing to start a transition to retirement income stream (TRIS).

The TRIS payment tops up your part-time income with a regular ‘income stream’ from your super savings. Previously, you could only access your super once you were 65 years old or retired.

For more information on the changes to transition to retirement income streams from 1 July 2017, see GN 2019/1 – Changes to transition-to-retirement income streams.

Under these rules, you can only access your super benefits as a ‘non-commutable’ income stream. A non-commutable income stream is one that you can’t convert into a lump sum. This generally means you can’t take your benefits as a lump sum cash payment while you are still working. You must take your super benefits as regular payments.

Super guarantee contributions and TRIS

Employers still need to make compulsory super guarantee contributions for all their eligible employees. This includes people on a TRIS.

We recommend you talk to us if you’re considering:

• super withdrawal options

• how tax applies to your retirement, transition to retirement or superannuation income streams.

If a TRIS is not in the retirement phase:

• the earnings from the assets supporting the TRIS will not be eligible for exempt current pension income (ECPI), and are taxed at the relevant tax rate

• it will not count towards your transfer balance cap (until it goes into the retirement phase).

A TRIS isn’t in the retirement phase until you meet one of the following conditions of release:

• you’re 65 years old or older

• retirement

• permanent incapacity

• terminal illness.

For more information, give us a call.

Source: ato.gov.au
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Individuals/Jobs-and-employment-types/Working-as-an-employee/Leaving-the-workforce/Transition-to-retirement/.

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.

Why it’s so important to talk about your finances

According to this research¹, one in two Australians don’t sit down regularly to look at their finances and one in three say that money is a source of conflict in their relationship.  

To put conversations about money back on the table, Australians should sit down for at least 45 minutes one Monday each month, either individually, with their partner or other family members, to get familiar with their financial situation.

Having regular discussions about money can help you manage your finances, reduce financial stress and improve your financial wellbeing.

To help, leading Australian psychotherapist Lissy Abrahams created a conversation guide to get people started. 

Tips for starting a conversation about money

Follow these simple steps to help you start a conversation about money.

Make a date to discuss financial matters

Talking about finances doesn’t have to be boring. Find one Monday a month and pop it in your diary. When the day arrives cook a nice meal then turn off your devices for 45 minutes. Make sure you jot things down so you can go back to them later.

Set some boundaries around the conversation about money

At the start of the conversation set some boundaries. These include being:

• open and honest

• curious about each other’s views on money

• respectful – by being non-judgemental, not interrupting, and remembering no-one is right or wrong – just different.

Take a trip down memory lane to your childhood

Often our financial beliefs and behaviours are shaped from a very young age. From witnessing how our parents talked and/or fought about money and their spending habits, we’ve absorbed many messages about money.

Typically, we either adopt their behaviours or go the opposite way. Understanding this about yourself, your partner, or other family members, helps you understand your similarities and differences around money matters so you can create healthy financial plans together.

To understand how your attitudes are shaped by your childhood, ask questions like:

• How did your parents talk about money?

• What, if anything, did you see them fight or stress about with money?

• What did you save or spend your money on growing up?

• Were you more of a saver or a spender? Why do you think you were?

• Are you similar or different to anyone in your family when it comes to money?

• What’s the one thing you wish your parents told you or didn’t tell you about money when you were a kid?

Talk about your current attitudes towards money

Financial knowledge and skills are learned and continually need to evolve depending on your life stage. It’s important to find ways to navigate this.

To understand more about how you feel about money matters, ask questions like:

• What money concerns do you have? Saving? Spending? Debt? The future?

• How do you feel when you make a big purchase?

• What’s your initial reaction when thinking about having a loan or going into debt?

• What are three non-essential things you’d buy if money was no issue?

• How important are financial goals and do you have any you’re working towards?

Assess your current situation

Even though it may feel awkward or initially confronting, it’s important to know your numbers. Remember, there’s no right or wrong. If you are doing this with a partner or family member, expect to have different financial ideas and spending habits. Be curious about these differences as it’s about finding your way forward.

To understand more about your current situation, ask questions like:

• How much do you earn?

• What are your incoming and outgoing expenses?

• What debts or loans do you have, if any?

• How do you feel about joint finances? Should some bills or expenses be shared, and others separate?

• What’s your approach to managing money? Do you have a budget? Set savings goals? Bucket money? Are you secretive about any bank accounts?

• What opportunities are there to reduce spending?

Plan for the future

Whether it’s a holiday, saving for a home deposit, buying a new car, or paying off debt, create exciting goals to work towards. This’ll keep you motivated and in alignment with your goals.

Get started

If you need help getting this conversation started, give us a call. 

1 Our research was conducted by NAB Economics and based on responses from 2,050 Australians weighted to the population, conducted from August to September 2022.

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/start-a-conversation-about-money

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.

© 2023 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.

Diversification is an investment strategy that lowers your portfolio’s risk and helps you get more stable returns.

You diversify by investing your money across different asset classes — such as shares, property, bonds and private equity. Then you diversify across the different options within each asset class. For example, if you buy shares, you buy across a range of different sectors such as financials, resources, healthcare and energy. You can also diversify by investing your money across different fund managers and product issuers. 

Diversification lowers your portfolio’s risk because different asset classes do well at different times. If one business or sector fails or performs badly, you won’t lose all your money. Having a variety of investments with different risks will balance out the overall risk of a portfolio. 

It’s worth taking the time to review your investments and look for opportunities to diversify.

How diversification benefits you

Diversification is your best defence against a single investment failing or one asset class performing poorly (for example, the share market falling or one fund manager failing).

If you diversify your investments, when some fall in value, others may rise and balance out the fall. Diversification lowers your portfolio risk because, no matter what the economy does, some investments are likely to benefit. For example, when interest rates fall, bond prices rise, while shares generally do poorly at this time.

How to diversify

To diversify well you need to invest across different asset classes and within different options in an asset class. You can also diversify by investing in different fund managers or product issuers. 

Review your investments

List all of your investments and what they’re worth. This could include:

• cash in a savings account

• shares

• managed funds

• an investment property

• your home

• your super

This will show you which asset classes you’re investing in and where you could diversify.

Identify gaps and research other asset classes

If most of your money is in one or two asset classes, research other asset classes. For example, if you own a house, an investment property won’t help you diversify. If property prices fall, you won’t have any other investments to balance out the fall. To diversify, you could invest in different asset classes such as shares or bonds.

Then within each asset class, make sure your money is invested across the different options available. For example, if you’re mainly invested in one sector such as financials, you should research other sectors such as mining, materials, health care, capital goods and commercial and professional services.

The way your super fund invests is a good example of diversification. Check your fund’s website or annual statement to see how they invest. 

Invest overseas

Australia has a small share of the world’s investment opportunities. Investing some of your money overseas will lower the risk of investing in a single market. For example, investments in Asian and European markets may perform well when the Australian markets falls.

If you invest overseas you’ll be exposed to exchange rate risk. 

Invest through a managed fund, managed account, ETF or LIC

A simple way to diversify is to invest through a managed fund, managed account, exhcange-traded fund (ETF) or listed investment company (LIC).

Managed funds and managed accounts

Managed funds and managed accounts can help you invest across a range of asset classes. Some managed funds and managed accounts offer pre-made diversified portfolios. These usually have the labels of conservative, growth or high growth depending on their asset allocation.

ETFs and LICs

ETFs and LICs provide a low cost way to invest in an asset class or diversify within an asset class.

Most ETFs in Australia are passive funds. These track an asset price or market index, such as the ASX200 or S&P500. 

Most LICs are actively managed funds and invest in one asset class, such as Australian shares or private equity. 

Keep your investments diversified

Over time, some of your investments will rise in value and others will fall. This means you could have more money in one asset class than when you started investing. You could also be less diversified. For example, if your shares go up and your bonds fall in price, you’ll have a greater portion of money invested in shares. As shares are higher risk, your portfolio will also be higher risk. If you’re not comfortable with this risk, it’s time to re balance.

How to rebalance

You can rebalance your portfolio by:

• Investing some extra money, such as a tax refund, in an investment you want more exposure to.

• Selling some investments and putting your money in other types of investments.

Selling investments will lead to a capital gain or a capital loss. 

Get help with diversification

Finding the right investments can be challenging. If you need some help to build a diversified portfolio, talk to us.

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

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.

About downsizer contributions

If you are 55 or older, you may be able to contribute up to $300,000 from the proceeds of the sale (or part sale) of your home into your superannuation fund.

A downsizer contribution is a non-concessional contribution, but it doesn’t count towards the contribution cap. It will not affect your total superannuation balance until it is re-calculated at the end of the financial year.

However, downsizer contributions count towards your transfer balance cap. This cap applies when you move your super savings into retirement phase, and is taken into account in determining eligibility for the age pension.

You should consider seeking independent financial advice in relation to the age pension asset tests.

Eligibility requirements

You must meet these eligibility conditions:

• You have reached the eligible age (and there is no maximum age limit) at the time you make a downsizer contribution

• Your home was owned by you or your spouse for 10 years or more before the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.

  • from 1 January 2023, 55 years or older

  • from 1 July 2022, 60 years or older

  • from 1 July 2018, 65 years or older.

• Your home is in Australia and is not a caravan, houseboat, or other mobile home.

• The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or the home would be entitled to the exemption if it was a CGT rather than a pre-CGT asset (acquired before 20 September 1985).

• You make your downsizer contribution within 90 days of receiving the proceeds of sale (usually at the date of settlement).

• You have not previously made a downsizer contribution to your super from the sale of another home or from the part sale of your home.

• You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making your downsizer contribution.

Note: If your home was only owned by one spouse and was sold, the spouse that did not have an ownership interest may also make a downsizer contribution, or have one made on their behalf, provided they meet all of the other requirements.

How much you can contribute

You can make a downsizer contribution up to a maximum of $300,000 (each spouse), but the contribution amount can’t be greater than the total proceeds from the sale of your home.

How to make a contribution

• Contact your super fund(s) to check that they accept downsizer contributions.

• You’ll need to submit a Downsizer contribution into super form (NAT 75073) to your fund(s) with or before your contribution is made. If you don’t, your fund may not be able to accept your contribution as a downsizer contribution.

• If you make multiple contributions to one or more super funds, you must provide a Downsizer contribution into super form for each contribution. The total of your contributions cannot exceed $300,000.

• Contributions must be made to your super fund within 90 days of receiving the proceeds of sale. However in some circumstances you may be able to request an extension of time.

How to request an extension of time

You may be able to request a longer period to make your contribution. For example, where a delay has been caused by factors outside your control, such as ill-health or a death in the family. However, an extension of time won’t be granted to allow you or your spouse to meet the age requirement.

Where possible, an extension of time should be requested within 90 days of receiving the proceeds of sale.

You will be able to seek a review of any decision we make in allowing a longer period. If you are dissatisfied with the length of the extension, or a decision not to allow a longer period, you can lodge an objection on the Objection form – for taxpayers (NAT 13471).

You can phone the ATO on 13 10 20 to apply for an extension of time.

If you make an invalid contribution

If the ATO becomes aware that your contribution doesn’t meet the eligibility requirements, your fund will need to assess whether it could have been made as a personal contribution under their acceptance rules.

If your contribution is accepted as a personal contribution, the amount will count towards your non-concessional contributions cap.

If your contribution can’t be accepted, the contribution amount will be returned to you by your super fund.

Penalties may apply for making a false and misleading statement if you incorrectly declare you’re eligible to make a downsizer contribution.

Talk to us to find out more.

Source: ato.gov.au
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/individuals/super/growing-and-keeping-track-of-your-super/how-to-save-more-in-your-super/downsizer-super-contributions/.

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.

What is creditworthiness?

It might be a bit of a mouthful, but the concept of creditworthiness is simple enough to understand.

The term refers to a person or company considered suitable to receive credit – mainly due to being reliable in paying money back in the past, as well as having enough funds to stay afloat if things go south.

There are ways to enhance your creditworthiness. But for now, it’s best to wrap your head around the basics.

What do they look at?

When you apply for credit, banks look at lots of different factors to determine your creditworthiness such as your income, assets, spending, and debts. And, they’ll usually look at the following things.

Your credit file

This is your history of credit applications and interactions. You can ask for a copy of this file to see where you stand – and to ensure your information’s accurate.

Your income

Unless you plan to buy a super yacht or 60-roomed Sydney Harbour citadel, they’re not expecting you to be super-rich. Instead, they looking for proof of steady, regular income—each week, each month.

Your savings

Do you put aside a bit from your pay packet each month? Even a modest bank account with a short savings history suggests you’re a reliable character.

Your assets

Retirees, for example, may not have high incomes, but will have significant assets in reserve. So long as these are reasonably liquid, they’ll boost your creditworthiness.

Your debts

It may seem odd that debt can make you more (and not less) creditworthy. However, banks like to see evidence of your ability to manage debt and pay things down.

That said, it’s a question of balance – and it’s important your debts are well within your capacity to handle.

Why does creditworthiness matter?

It matters to you

Used responsibly, credit can get you to where you want to be, quicker than you might think.

Don’t take on debts you can’t afford, to become a slave to your own mortgage, or slide into financial distress.

Talk to us today if you need more information.

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/creditworthiness.

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.

© 2023 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.

If you own a rental property or holiday home, work out if your rental arrangements are for an investment or a business.

Common rental arrangements

Common rental arrangements include where you:

• rent part of the property (rent out a room)

• rent the property for part of the year

• have a domestic arrangement with family members (meaning, you receive payment for board and lodging)

• rent the property to your family or friends

• rent your property consistent with normal commercial practices (arms-length arrangements).

Rental investors

Most owners are investors who are not in the business of letting rental properties, even where there is more than one investment property. This is because they:

• have minimal involvement in rental activities (such as, interviewing potential tenants or inspecting the property)

• still rely on income from their job.

Carrying on a business of letting rental properties

As the owner of rental properties, some of the factors that show you are carrying on a business of letting rental properties are the:

• significant size and scale of the rental property activities

• significant number of hours spent on the activities

• extensive personal involvement in the activities

• business-like manner in which the activities are planned, organised and carried on.

There are eight indicators to determine whether a business is being carried on. These are listed in paragraph 13 of TR 97/11. Although the ruling refers to primary production, these are equally relevant to non-primary production activities.

Domestic arrangements

Where you receive payment from family members in the form of ‘board and lodging’, your arrangement is of a domestic nature. This means you don’t declare the rent as income and you can’t claim expenses.

However, where you rent out your property to relatives or friends, the essential question to work out is whether the arrangements are:

• consistent with normal commercial practices in this area

• less than commercial rent.

If the arrangement is consistent with normal commercial practices, we treat you the same as any other owner in a comparable arms-length situation. If the property is rented out at less than commercial rent, other considerations arise and your claim for expenses may only be allowed up to the amount of rent you received.

Source: ato.gov.au

Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Individuals/Investments-and-assets/Residential-rental-properties/Rental-property-as-investment-or-business/.

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.