It is important to understand where this income will come from, how long it will last, and whether your retirement investments are on track, or whether some adjustments need to be made to get you there.

Work out how long your super or account-based pension will last

There are many variables that come into play when calculating how long your super or account-based pension will last in retirement, and it can be challenging to figure it out alone.

If you’ve transferred your super to a pension account already, then you can use the MoneySmart calculator to help estimate how long your pension will last. And if you haven’t, we can discuss different considerations with you that will impact how long your account-based pension will last.

Here are some of the fundamental things you need to know about a couple of other retirement income options.

Account based pensions

Account-based pensions are a popular retirement income product. They fluctuate in value and are linked to the market so your investment, and therefore your long-term income, isn’t guaranteed.

How long an account-based pension lasts will depend on:

• the amount of initial capital invested

• the return from the underlying investments

• the amount of fees charged

• how much you withdraw as income each year.

The tax benefits of account-based pension are:

• you don’t pay tax on pension payments from age 60

• if you’re aged between preservation age and 59, the taxable portion of your pension payments will be taxed at your marginal tax rate less a 15% offset

• you don’t pay tax on investment earnings.

In some cases, the underlying investments for most pension accounts are chosen to minimise fluctuations but still provide a bit of growth.

Defensive assets

These include cash and fixed income. In general, they’re lower risk and provide lower returns over the long term.

Growth assets

These include equities and property. They’re usually open to market fluctuation but tend to provide higher returns over the long term.

Generally, defensive assets provide you with a relatively steady return and, therefore, income. However, some growth assets are usually needed to keep your funds growing during your retirement, so they last longer. With an account-based pension, you can mix defensive and growth assets to a ratio that you’re comfortable with.

Annuities

Some annuities could provide you with regular and guaranteed income for either a fixed period or for life. They are more secure than account-based pensions as your income is guaranteed regardless of what the share market and interest rates do.

The downside is that you’re locked into the agreed income for the whole term or the rest of your life. If your circumstances change, you generally can’t withdraw a lump sum. A lifetime annuity also has no residual capital value, which means you can’t leave it to someone in your will.

The best of both systems

Continuing to build your investments, including your super funds, is still crucial in retirement. They need to keep growing to ensure your retirement income lasts as long as possible.

This means it becomes increasingly important to protect your super growth funds from market falls while still allowing them to grow if the market goes up.

Other things to consider

Age pension eligibility

When it comes to the Age Pension, there are several rules to determine your eligibility. You can learn more by visiting Services Australia, but some of the basic rules are:

• You must have reached your Age Pension age, which is currently 66 (after 1 July 2019, age pension age will go up 6 months every 2 years until 1 July 2023).

• You must be a resident of Australia.

• You must pass income and asset tests.

If you don’t meet the income and assets tests to be eligible for the Age Pension, you may be able to access the Commonwealth Seniors Health Card (if you pass an income test). This card provides affordable medicine, bulk billed doctor visits and depending on what state you live in, there may be some other concessions that you’re entitled to. You can find out more from Services Australia.

Speaking to a financial planner

With so many options, it’s a good idea to seek help to ensure you’re investing in a way that suits you. Particularly as there are some more complex considerations, such as tax implications. 

Source: NAB

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/work/plan-retirement/income

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.

© 2022 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.

Moving into aged care can be a challenging time, both for those making the move and families supporting their loved ones. It’s understandable that everyone wants to find the most suitable accommodation and the appropriate standard of care, however, it can be confusing to make that choice.

A new star rating system for aged care is giving existing and potential residents and their families helpful insight into the quality and staffing levels of an aged care facility.

Four key performance areas covering residents’ experience, staffing levels, compliance and quality measures are each given an individual star rating. These ratings are then combined to provide an overall rating which is made public on the My Aged Care website.

For many people this will be the most consistent measure of whether aged care accommodation meets independent requirements for a good, average or poor facility.

A one-star rating indicates significant improvement needed; two stars indicates improvement needed; three stars indicates an acceptable quality of care; four stars indicates a good quality of care and a five star rating indicates an excellent quality of care.

There has been one round of ratings revealed since the system was launched in December 2022, with about one-third of the 2,700 aged care facilities in Australia receiving four or five stars, two thirds receiving three stars and one-in-10 receiving one or two stars.

How care is measured

Staffing levels in aged care are always of interest. With no staff ratios in aged care, the focus is on ‘care minutes’ provided by registered nurses, enrolled nurses and personal care workers.

A new funding model – in place from 1 October 2022- requires aged care facilities to meet a minimum average care minute target of 200 minutes a day, including 40 minutes registered nurse time. This target will become mandatory from 1 October 2023, and increase to 215 minutes, including 44 registered nurse minutes, from 1 October 2024.

Quality measures

The five crucial areas of care that go into determining the quality star rating include pressure injuries, physical restraint, unplanned weight loss, falls and major injury, and medication management.

The data is collected quarterly, with zero-star ratings given to providers who fail to report on each area.

The compliance rating, which is the responsibility of the existing Aged Care Quality and Safety Commission, provides information on the extent to which a residential aged care service is meeting its responsibilities.

A service that receives a one star compliance rating (which would occur if it was sanctioned or found to be punishing anyone who complained to the Commission) will receive an overall one star rating, regardless of how they perform in other sub-categories. Services that receive a two star compliance rating (if they were issued a compliance notice under the current system) cannot receive an overall star rating higher than two stars, regardless of how they perform in other sub-categories.

Resident experiences

A resident’s experience of a facility carries the highest weighting towards the overall star rating.

To understand the experience of residents, 12 questions are asked, for example – ‘do staff treat you with respect’, do you feel safe here’, ‘do you get the care you need’, and ‘are the staff kind and caring’. Responses can vary from never to always.

At least 10 per cent of older Australians living in residential aged care will be interviewed face-to-face about their overall experience at their residential aged care home by a third-party vendor each year.

Anyone currently living in or considering a facility with a low rating should feel empowered to ask what management is going to do about improving things.

Be informed

The star ratings are a recommendation of the Aged Care Royal Commission to better inform people living in or considering moving into residential aged care and to provide greater transparency in an effort to lift the overall standards.

They will become an increasingly important tool in the planning and decision-making process.

Give us a call to help you or a loved one plan for current and future needs.

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.

As the end of financial year fast approaches, here are three main factors to keep in mind. By being prepared, particularly with your admin, having an awareness of what you can claim and considering any capital losses or gains, you will be well positioned to make the most of EOFY.

Compile your records and receipts

This time of year either has us patting ourselves on the back for our good record keeping throughout the last 12 months, or vowing to have better systems in place next financial year. If it’s the latter, there are many great apps you can utilise to make it easier to keep track.

In the ATO app, there is a myDeductions section to help keep your records in one place, and Expensify and Shoeboxed are also popular choices. These apps are free, though the latter two have paid plans that allow for more features (including the ability to integrate with accounting software such as QuickBooks).

Whichever system you have used, get prepared by compiling your records and receipts or looking at your app. Having this information at the ready will reduce the time it will take to prepare your tax return and ensure you don’t miss any expenses from the past year.

Know what to claim

Whether you’re new to property investment or have owned an investment property for a while, it’s always a good idea to be aware of what you can claim come tax time. This can be a bit of a process, given the introduction of different tax deduction rules, but here are some key things to focus on.

Immediate expenses

As a property investor, you can claim expenses such as council rates, body corporate fees and charges, loan expenses such as interest paid and bank fees, as well as costs related to advertising, accounting, and alterations. Costs relates to the investment property’s repairs and maintenance, such as cleaning, gardening, or pest control, can also be claimed.

You can also claim expenses that relate to the running of the property, such as phone calls to the tenants or real estate agents and internet charges. However, these must be portioned according to how often they were used for this purpose, rather than personal use – again, this is why good record keeping throughout the year is helpful in saving time at EOFY.

Depreciation

According to research from BMT, up to 80% of property investors fail to take full advantage of claiming tax depreciation.ⁱ Property depreciation is the second-highest deduction available for property investors, second to mortgage interest repayments, so not claiming as much as you can is a lost opportunity.

Depreciation is annual decline in the value of the property’s structure and permanent fixtures such as the oven/stove, dishwasher, carpet, heater, and air-conditioning unit. You can claim interest for all qualifying depreciating items on investment properties purchased from 9 May 2017 onwards.

You can also claim a depreciation deduction on the construction costs of 2.5% a year for a period of 40 years – this is if your investment property was built after 16 September 1987. The same applies to renovations done after 27 February 1992. The depreciation deductions of the property structure and permanent fixtures can be complex, so it can be best to seek advice.

It’s important to note that if the property was used for personal use (such as your holiday home), interest payments cannot be claimed as an expense for this period.

Consider negative gearing losses and capital gains

Negative gearing, in which the income from the investment is less than the expenses are, is also something to keep in mind at EOFY. If you have had losses, this will reduce your total tax payable.

On the other hand, if you’ve sold your investment property and made a capital gain on the sale this financial year, this will be taxed. Provided you have owned your investment property for over 12 months, you can apply for the 50% capital gains tax (CGT) discount.

Should you have any questions about your current property or finance as we approach June 30, don’t hesitate to get in touch.

i https://www.bmtqs.com.au/bmt-insider/tax-depreciation-facts/

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.

There are limits on how much you can pay into your super fund each financial year without having to pay extra tax. These limits are called ‘contribution caps’.

How much you can contribute to your super fund and whether your fund is allowed to accept your contribution may also depend on your age and total superannuation balance.

Contribution caps apply to all super funds. If you have more than one super fund, all your contributions are added up and count towards your caps.

If you exceed these caps, you may need to pay extra tax. You can avoid this by knowing about your own contribution caps.

For more information, see Super contribution caps.

Understanding the types of contributions

There are 2 types of contributions you (or others) can make into your super fund:

• Concessional – These contributions come from income that has not yet been taxed. They are also called ‘before tax’ contributions. Once the concessional contributions are in your super fund, they are taxed at a rate of 15%. You may need to pay extra tax if you exceed the concessional contribution cap.

• Non-concessional – These contributions come from income that has already been taxed. They are also called ‘after tax’ contributions. These contributions are not taxed once received by your super fund. However, you may pay tax on them if you exceed your non-concessional contribution cap.

Source: ato.gov.au May 2023

Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Super-contributions—too-much-can-mean-extra-tax/?page=2#Understanding_contribution_caps.

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.

The concept of retirement is changing, with fewer people working towards a final retirement date and then clocking off for good.

Instead, those who have the flexibility to choose are often transitioning out of the workforce over several years, or even returning after a break.

Whether you simply want to wind back your working hours to explore other interests, or don’t want to cut your ties with work completely, to make it work you need to plan.

Choosing your retirement date

There is no set retirement age in Australia, but most people will not be eligible to receive an Age Pension until they reach age 67.ⁱ This means you need enough savings to provide another income source if you retire earlier.

Although most of us have super, you are not permitted to access it until you reach your preservation age, which can vary.

Withdrawing your super also requires you to meet a condition of release. There are various conditions, but the most common one is reaching age 60 and permanently retiring from the workforce. Once you turn 65, you can access your super whether you are working or not.ⁱⁱ

Keep in mind, tax also affects your super, with different rates applying depending on your age. Most people can access their super tax-free once they reach 60.

Paying for your retirement

Unfortunately, there is no simple answer to how much income you will need in retirement. It depends on your current lifestyle and planned retirement activities, but a good place to start is the ASFA Retirement Standard.

For around 62% of the population aged 65 and over, the main source of retirement income is the Age Pension and government payments.ⁱⁱⁱ

Eligibility for an Age Pension is assessed using your age, residency status and personal income and assets. These determine whether you receive the full fortnightly payment rate, which is currently $1,604.00 a fortnight for a couple.^iv

As part of your planning, check for other potential sources of income from investment assets, contract work, or rent from investment or Airbnb properties.

Using your super savings

While you may dream of retiring early, many of today’s retirees can expect to live well into their 80s, so your super may need to provide income for more than 20 years. If you are unsure whether your super is on track, we can help you check your progress and put strategies in place to achieve your retirement goals.

Most super funds provide online calculators to give a rough estimate of your likely retirement balance and how much income it will provide.

ASIC’s MoneySmart Retirement Planner is another resource for working out your retirement income and potential Age Pension payments.

Transition-to-retirement (TTR) pensions

If you would like to ease into retirement, it can be worth investigating a TTR pension. These allow you to cut back working hours while using your super to supplement your income without compromising your lifestyle.

If you are aged under 60 you will pay some tax on pension payments, but they are tax-free once you reach age 60.^v

TTR pensions also allow you to continue topping up your super through a salary sacrifice arrangement with your employer. You only pay 15% tax on these contributions, which may be lower than your marginal tax rate.^v

Giving super a late boost

If you have income to spare as you move towards retirement, perhaps from an inheritance or downsizing your home, there are now additional opportunities to continue adding to your super.

You can make personal after-tax contributions of up to $110,000 a year until you reach age 75, even if you are not working. You may even be eligible to use a bring-forward arrangement and add up to $330,000 in a single year.  

Once you hit 60, if are planning to sell your current home you can also make a downsizer contribution of up to $300,000 ($600,000 for a couple) into your super account.

Retiree concessions

When you are doing your retirement sums, don’t forget some of the concessions on offer to older Australians. If you are aged 60 and over and working less than 20 hours per week, your state’s Seniors Card can provide discounts on public transport and some goods and services.

You may also be eligible for the Commonwealth Seniors Health Card for cheaper prescriptions and medical appointments, or a Pensioners Concession Card for discounted public transport.  

If you would like to discuss your retirement options and how to fund them, give us a call.

i https://www.servicesaustralia.gov.au/who-can-get-age-pension?context=22526
ii https://www.ato.gov.au/Individuals/Super/
iii https://www.aihw.gov.au/reports/australias-welfare/age-pension
iv https://www.servicesaustralia.gov.au/how-much-age-pension-you-can-get?context=22526
v https://moneysmart.gov.au/retirement-income/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.

Australians are living longer and experiencing higher house-to-wage ratios. It makes good sense to consider how you can achieve a comfortable long term future.

What makes a smart investor?

A webinar on borrowing to invest brought together financial advice commentator Noel Whittaker, REA Group’s Chief Economist Nerida Conisbee and NAB Equity Head of Sales Craig Saunders to explore what makes a smart investor.

Financial investment commentator Noel Whittaker summed up the panel’s attitude to moving forward financially: “I believe becoming wealthy is like a game of Monopoly. The aim is to get the most assets under your control as you can.”

The panel agreed on the importance of diversification and the basic steps to get a mix of performing assets. They also discussed the ins and outs of borrowing to invest in shares or property.

1. Define your goal

Most of us want extra money to create a better life for ourselves and our loved ones. Setting specific goals and a time frame for achieving them will help you build a realistic plan. The strategies you’d use to achieve each goal will probably look quite different, too.

Say your goal is that, in 10 years time, you’ll be receiving $100,000 p.a. in income from your investments so you can pay for your kids’ education and then give them a home deposit later on.

Needless to say, if you don’t have the expertise to work this out for yourself and then put the investments in place, speak to us today.

2. Compounding is everything

Compound growth means the more you invest early on, the greater your probable long-term return. Whittaker believes seven to 10 years is the minimum investment time frame because “property is going to have long flat times and shares will be volatile”.

3. Embrace good debt

When borrowing money, Whittaker urges us to remember the difference between good and bad debt. “Winners borrow money for things that will increase in value. This means buying or improving an asset that can grow in capital value. You also need to be aware of which investments are tax deductable and which aren’t.

“Losers pay high rates of interest to borrow for things that have no long-term value and no tax deductions – like clothes, a car or holiday” states Whittaker.

4. Shares or property?

REA Group’s Chief Economist Nerida Conisbee points out that every investment decision has good and bad points. “If you borrow to buy property, it’s tangible, you get rental income, you’ve got the potential of capital gain and it doesn’t have the volatility of shares.”

Whittaker points out that if you borrow for shares, you can start with $1,000 and very low entry and exit costs. “Shares are liquid, the income can have franking credits to make it highly effective for tax purposes and you can diversify easily.”

Both agree that when weighing up what will suit you best, you have to factor in set-up costs, regular fees and any costs associated with an investment class, as well as loan interest rates and the capital gains tax you’ll pay down the road.

Include all these factors into your calculations and Whittaker believes “long term, shares have greater potential capital gain than property”.

5. Tips for borrowing to invest in shares

Saunders reminds us that most people already have a substantial investment in property – their home. Drawing down on their mortgage to invest in diversified asset classes may be a practical solution.

“It can be an effective way to build your equity so you have more money working for you sooner,” he says.

Saunders explains that most lenders, strongly recommend that you invest your loan in diversified funds. “To protect your investment, the approved vehicles are diversified assets like managed funds, EFTs and separately managed accounts.”

6. Tips for borrowing to invest in property

Conisbee says the vast majority of people buy property for capital gain rather than yield.

“Capital growth has been most prominent in capital cities, while the best yield tends to be in regional areas, so you have to know your goal before deciding where to invest,” she says.

Conisbee points out that another issue to consider is that capital growth has been highest for houses rather than units. “Houses have performed better simply because there are more units than houses being built.” She adds that REA’s search data reveals people still want to live in a big family home on a big block.

“People are willing to trade lifestyle to get it. And that’s behind the price rises in regional cities like Hobart and the Gold Coast.”

7. Maintain a safety net

The panel emphasised the need to maintain a safety net – or not to over-leverage. As Whittaker points out: “Borrowing magnifies whatever is going to happen.”

It’s also important to remember that, whichever asset class you choose, over time it will include dips as well as growth.

Source: NAB

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/home-property/pay-off-home-loan/smart-borrowing

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.

© 2022 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.

Don’t confuse debt consolidation with debt elimination.

If you’re swamped with credit card debt and personal loans, it can sometimes help to talk to a professional about debt consolidation. However, you need to be wary so you don’t end up paying more in the long term and/or reduce the equity in your home.

What is debt consolidation?

Debt consolidation is where you transfer your credit card debt and any personal loans to your mortgage. 

The advantage of doing this is that the interest rate on your home loan is likely to be lower than you’re paying on your smaller debts. You might also benefit from a regular manageable repayment. However, there are some things you need to be aware of.

Debt consolidation is not debt elimination

Since debt consolidation clears the debt from your credit cards, the temptation is to think that you’ve paid off the debt. 

But you haven’t. You’ve merely transferred the debt to your mortgage. So, once you’ve consolidated your debts, consider cancelling your credit cards, otherwise you could get trapped in a debt spiral.

Remember the 80% LVR threshold

When you took out your mortgage, you might have been under the 80% loan to value ratio, which meant that you didn’t have to pay lenders mortgage insurance. Be careful when you consolidate your debts that you don’t reduce the equity in your home and have to pay lenders mortgage insurance.

Personal loans aren’t tax deductible

Interest charges on an investment loan are tax-deductible but interest on a home loan isn’t. When you consolidate your debts, you need to be mindful of how much interest you can claim as a tax deduction. Seek advice from a tax agent before making a decision in this area. 

Source: MFAA

Reproduced with the permission of the Mortgage and Finance Association of Australia (MFAA)

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.  Past performance is not a reliable guide to future returns.

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 operate some or all of your business from home, you may be able to claim the business-use portion of expenses you incur. For example:

• occupancy expenses (such as mortgage interest or rent, council rates, land taxes and home insurance premiums)

• running expenses (such as electricity, gas, phone, internet, stationery, cleaning and the decline in value of assets).

The temporary shortcut method ended on 30 June 2022, and the fixed-rate method has been revised.

For the 2022–23 income year, the revised fixed rate is 67 cents per hour. You no longer need to:

• have a dedicated home office space

• work out the business-use portion of phone, internet, gas and electricity separately.

You can also claim the decline in value of depreciating assets and equipment separately, including any repairs and maintenance costs.

If you want to use the revised fixed rate method, you need to keep a record of all hours worked from home for the entire income year (for example, on a timesheet, roster or in a diary).

If you haven’t kept a record of all hours worked from home, you can use a representative record of your hours from 1 July 2022 to 28 February 2023. You will need a record of the total number of your actual hours from 1 March to 30 June 2023.

Your business structure can also affect the method you can use and the expenses you can claim.

Remember, your tax professional or BAS agent can help you with your tax. Contact us on Phone: 07 5641 4134 if you have any questions. 

Source: ato.gov.au March 2023
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Business/Small-business-newsroom/General/New-changes-to-home-based-business-expenses/.

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.

Paying off your mortgage early will save you money and take a financial load off your shoulders. Here are some ways to get rid of your mortgage debt faster.

Switch to fortnightly payments

If you’re currently paying monthly, consider switching to fortnightly repayments. By paying half the monthly amount every two weeks you’ll make the equivalent of an extra month’s repayment each year (as each year has 26 fortnights).

Make extra payments

Extra repayments on your mortgage can cut your loan by years. Putting your tax refund or bonus into your mortgage could save you thousands in interest.

On a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years go towards paying off interest. So anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan.

Ask your lender if there’s a fee for making extra repayments.

Find a lower interest rate

Work out what features of your current loan you want to keep, and compare the interest rates on similar loans. If you find a better rate elsewhere, ask your current lender to match it or offer you a cheaper alternative.

Switching loans

If you decide to switch to another lender, make sure the benefits outweigh any fees you’ll pay for closing your current loan and applying for another.

We can help you find a loan that may be more suitable than your current loan.

Make higher repayments

Another way to get ahead on your mortgage is to make repayments as if you had a loan with a higher rate of interest. 

This may not be possible while interest rates are rising. But when rates go down, repaying at a higher rate will help to pay off your mortgage sooner.

If you can switch to a loan with a lower interest rate, keep making the same repayments you had at the higher rate.

An offset account is a savings or transaction account linked to your mortgage. Your offset account balance reduces the amount you owe on your mortgage. This reduces the amount of interest you pay and helps you pay off your mortgage faster.

For example, for a $500,000 mortgage, $20,000 in an offset account means you’re only charged interest on $480,000.

If your offset balance is always low (for example under $10,000), it may not be worth paying for this feature.

Avoid an interest-only loan

Paying both the principal and the interest is the best way to get your mortgage paid off faster.

Most home loans are principal and interest loans. This means repayments reduce the principal (amount borrowed) and cover the interest for the period.

With an interest-only loan, you only pay the interest on the amount you’ve borrowed. These loans are usually for a set period (for example, five years).

Your principal does not reduce during the interest-only period. This means your debt isn’t going down and you’ll pay more interest.

If you’re interested in changing lenders and need help finding the right loan, contact us on Phone: 07 5641 4134.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/home-loans/pay-off-your-mortgage-faster

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.

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Preparing for loss of capacity or death is vital for SMSF members. It’s important to ensure your trust deed is watertight.

There are more than 600,000 self-managed superannuation funds (SMSFs) in Australia, managing close to $900 billion of assets on behalf of over a million Australians.

Each SMSF’s trust deed is legally required to set out the rules for establishing and operating the SMSF including its objectives, who can be a member of the SMSF, and whether benefits can be paid as a lump sum or as an income stream.

But what happens when a member becomes incapacitated, or dies?

Has the SMSF’s trust deed been worded in a way that will make it possible to give effect to the wishes of an incapacitated or deceased member, to the extent those wishes are consistent with superannuation laws?

If you’re a member of an SMSF, it’s important to ensure that you have ticked all the right boxes when it comes to succession planning.

And, to do this, it’s worthwhile considering obtaining tailored professional advice from an SMSF specialist.

Preparing binding death benefit nominations

SMSF members generally have a degree of ability to choose who will get their residual super benefits when they die, by making and giving the SMSF’s trustee a binding death benefit nomination.

This directs the fund’s trustee to pay the benefit to either a legal personal representative or one or more eligible dependants of the member.

However, depending on the wording of your SMSF trust deed and the nomination itself, it is possible that a binding death benefit nomination given by a member will expire after just three years (or any shorter period specified in the trust deed) under Regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (Cth). In that scenario, assuming the member is still alive, their death benefit nomination would then need to be renewed and there would be no death benefit nomination in place unless and until they do so.

But the High Court ruled last year that it is possible for a validly made binding death benefit nomination to last indefinitely if a trust deed’s wording is structured in such a way that effectively avoids the three-year automatic expiry.

This is a prime example of why it may be worthwhile getting professional advice around the wording in your trust deed covering death benefit nominations as well as your nomination form, including whether they are aligned with your preference as to how often (if at all) death benefit nominations need to be updated in order to be legally effective.

Preparing for loss of capacity or death

Another key aspect for SMSF trustees to consider and plan for is who would take control upon a member’s loss of capacity or death.

For example, problems can arise where someone wanted their super money to go to a child from a previous relationship, but where a second spouse controlling the fund was able to frustrate the wishes of the deceased.

It’s certainly worth asking how your wishes will be honoured if you lose capacity or die. Who will or could be running the fund in this situation? As there are a range of legal factors and restrictions that shape who would be eligible to operate the SMSF or make decisions on your behalf, good quality expert legal and financial advice on these matters can go a long way to avoiding inconvenience, confusion and conflict in future.

Reversionary pension nominations

SMSF trust deeds can generally specify that a superannuation income stream that a member of the SMSF is receiving will automatically transfer to an eligible dependant beneficiary previously nominated by the member upon the member’s death. This nomination is typically referred to as a reversionary pension nomination.

For some SMSF members they can be very important, particularly for people who have a high tax-free component or who are expecting a life insurance payout upon their death.

Some SMSF trust deeds are worded in a way that gives priority to a reversionary pension nomination over a binding death benefit nomination, which can lead to unexpected or unintended outcomes after a member’s death.

Reversionary beneficiary nominations are not necessarily needed or suitable for everyone with an SMSF, but for those wanting to implement them it’s important to ensure they’re permitted under the terms of the trust deed and enforceable in the future.

Getting succession planning advice

SMSF trust deeds can be complex documents, and it’s vital to ensure that yours is structured to ensure it is best placed to conform to your wishes in the event you’re incapacitated or die.

Consider giving us a call or consulting a licensed financial adviser or other relevant qualified professional who specialises in SMSF.

Source: Vanguard

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer and the Operator of Vanguard Personal Investor. We have not taken your objectives, financial situation or needs into account when preparing this article 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 any financial product we make available before making any investment decision. Before you make any financial decision regarding Vanguard products, 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 at vanguard.com.au free of charge and include a description of who the financial product is appropriate for. You should refer to the TMD before making any investment decisions. You can access our IDPS Guide, PDSs, Prospectus and TMDs at vanguard.com.au 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 article was prepared in good faith and we accept no liability for any errors or omissions.