Third of Aussies treading water with money

Posted on 20 April 2018
Third of Aussies treading water with money

(Australian Associated Press)

More than a third of Australians are treading water financially, with many struggling and often running out of money for food or bills, new research shows.

The ANZ's latest financial wellbeing snapshot, released on Thursday, reveals only about a quarter of all Australians have "no worries" when it comes to money.

The majority of the 3,578 people surveyed by the ANZ say they are "struggling", just "getting by" or describe their finances as "bad", with little confidence in the immediate future.

Of those, 13 per cent are "struggling" and often run out of money for food or bills.

While 23 per cent say they are "getting by", the majority describe their finances as "bad" or are not confident about the next 12 months.

Restaurateur and artist Miranda Scherger considers herself one of the "lucky" ones.

When the 32-year-old started to feel the pinch a few years ago, she was able to move back in with her parents in regional Victoria.

"I was living in Melbourne for a few years and got myself into a lot of debt," Ms Scherger told AAP.

"There was one point where I had no savings and it felt like I was going backwards."

Ms Scherger now thinks she's doing "okay" financially.

About 24 per cent of Australians have "no worries" when it comes to money, the majority of whom are aged at least 50, and have substantial savings and investments.

After paying off the bulk of her debt, Ms Scherger falls in with the 40 per cent of Australians who say they are "doing okay".

According to the report, financial wellbeing for people such as Ms Scherger depends not just on socio-economic status and income, but on their state of mind.

That means how people feel about their money situation right now and going forward.

Despite having what she calls an "average" wage, Ms Scherger is now comfortable enough to start looking at buying a house in the country.

"I don't have a huge amount of debt," she said.

"I'm able to save a good amount of my wage. I have a financial plan and I'm good at sticking to it."
Posted in: News  

World enjoying best growth since 2010: IMF

Posted on 20 April 2018
World enjoying best growth since 2010: IMF
Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)

The International Monetary Fund says the global economy is enjoying its strongest performance since the start of the decade.

In its latest World Economic Outlook released on Tuesday, the IMF says the global upswing that began in mid-2016 has become broader and stronger, led by faster growth in the Euro area, Japan, China and the US.

"The partial recovery in commodity prices should allow conditions in commodity exporters to gradually improve," the Washington-based institution said, as it made a modest upgrade to Australia's outlook.

The IMF stuck to its most recent world growth forecast of 3.9 per cent for both this year and next.

This is the strongest pace since the growth spike in 2010 which initially followed the 2008-2009 global financial crisis.

It now sees Australia growing at three per cent in 2018 compared to its previous 2.9 per cent prediction made in February, while keeping 2019 at 3.1 per cent.

Such growth should help the Australian jobless rate ease to 5.2 per cent in 2019 and close to what the Reserve Bank believes to be "full employment" at five per cent.

The unemployment rate was 5.6 per cent in February.

However, the IMF warns future growth prospects look challenging for advanced economies faced with ageing populations and low productivity growth, making it hard for household income growth to return to their pre-GFC pace.

It also says interest rates may need to rise more quickly than expected if excess demand emerges, which would stress highly indebted countries, firms, and households.

Escalating trade restrictions and retaliation is another risk to the outlook, it said, noting the first shots in a potential trade war involving the US have now been fired.
Posted in: News  

Super changes on for young and old

Posted on 12 April 2018
Super changes on for young and old

Melinda Bendeich, Manager, Technical Advice at ClearView

In the 2017 Federal Budget last May, the Government proposed a number of superannuation changes to improve housing affordability.

It announced the First Home Super Saver Scheme (FHSSS), aimed at helping young people enter the property market by enabling them to partially access their superannuation for a home deposit.

It also announced a 'downsizer contribution' to encourage Australians 65 years old and over to sell their home and invest for retirement, with the aim of 'freeing up' more properties for the younger generations.

These two initiatives are now law.  This article examines each benefit in detail and illustrates how they may be beneficial for your clients.

First Home Super Saver Scheme (FHSSS)

The FHSSS allows individuals to effectively save for their first home inside superannuation. From 1 July 2017, FHSSS voluntary contributions of up to $15,000 per year and $30,000 in total can be made into superannuation and these contributions, plus deemed associated earnings, can be withdrawn by first home buyers or builders.

The Government estimates that this could boost house deposit savings by up to 30 per cent given the tax benefits of using pre-tax dollars for contributions and the low 15% tax on super earnings (not to mention the potential for higher returns in super compared to standard deposits in bank accounts).

To be eligible for the FHSSS, your clients must be over age 18 and must never have owned any property in Australia. However, if they are jointly purchasing a property with someone who has previously owned property, the FHSSS is still available as it is individually tested.

The Australian Taxation Office (ATO) is administering the scheme and advising super funds on how much can be released after taking into account contributions tax. Once your client has obtained a contract to buy or build their first home, they have 12 months to request the release of FHSSS contributions.
Withdrawals will generally be taxed at your client's marginal tax rate, however, a 30 per cent tax offset will apply.  Importantly, withdrawals will not be assessable by Centrelink or the Department of Veterans' Affairs and there will be no impact on payments such as Family Tax Benefits.

Case study

Reagan rents a studio apartment and is on an annual salary of $100,000. She is keen to buy her first home.

If Reagan made voluntary salary sacrifice contributions of $10,000 p.a. for the next three years, she would have $24,777 to withdraw from her super, according to the First-home buyers' super saver scheme estimator tool which allows for 15% contributions tax (

This is estimated to be $6,191 above what would have been available saving via a standard deposit account using after-tax salary.

Downsizer contributions

Australians aged 65 and over who sell the family home to free up equity to fund their retirement will be able to make additional super contributions of up to $300,000, from 1 July 2018.

This benefit can be utilised by both members of a couple for the same home, resulting in a total possible contribution of $600,000 per couple.It will apply where the contract for the sale of the home is entered into (exchanged) on, or after, 1 July 2018.

Contributions made under this legislation will not count towards other super caps.Additionally, no work test or age restrictions apply, however, you clients must have owned their home for at least 10 years and it must be their principal residence.

It's important to be aware that your clients may risk losing some or all of their Age Pension. While the family home is exempt from the Asset Test, the additional $300,000 super contribution will be an assessable asset.

Finally, to be eligible to make a downsizer contribution, there is no requirement to purchase a new home.This may provide retirement planning opportunities that were not previously available to those over 65 years of age and retired.

Case study

Frank and June, both 65, are about to retire.  For over 20 years, they have owned and lived in their home which is valued at $800,000.  They own a holiday home on the coast and plan to relocate to this property at retirement.

Upon the sale of their principal residence for $800,000, Frank and June are able to contribute an additional $300,000 each (total $600,000 from the sale proceeds) into super to help provide for their retirement.
They are not limited by the standard $100,000 p.a. cap that normally applies to those 65 and over.


Posted in: News  

Major parties wrangling over superannuation

Posted on 5 April 2018
Major parties wrangling over superannuation

(Australian Associated Press)

The federal government insists it has been vindicated over its past decision to delay increasing the superannuation guarantee as Labor toys with fast-tracking the trajectory.

In 2012 the Gillard Labor government moved to increase the superannuation guarantee from nine per cent incrementally to 12 per cent by 2019.

The Abbott government froze the guarantee at 9.5 per cent in the 2014 budget and aimed to get to 12 per cent by 2025.

Assistant Treasurer Michael Sukkar doesn't think increasing the superannuation guarantee early would necessarily be a popular move because of tight household budgets and flat wages growth.

"We've been vindicated that it was absolutely the right decision for every dollar you increase in superannuation guarantee that's a dollar less you've got today," he told Sky News.

Asked if the government was seeking to delay the increase to 12 per cent again, Mr Sukkar responded: "with a very strong economy we're moving into an environment that maybe we can manage it."

The May federal budget is expected to reaffirm the government's intention to lift the super guarantee from 9.5 per cent to 10 per cent in 2021.

Meanwhile, Labor is considering applying the superannuation guarantee to the government-funded parental leave scheme to help address an imbalance in women's retirement savings.

Mr Sukkar questioned how the opposition would fund it.
Posted in: News  

Tax cuts won't pass this week: Cormann

Posted on 29 March 2018
Tax cuts won't pass this week: Cormann

Colin Brinsden and Katina Curtis
(Australian Associated Press)

The Turnbull government has given up on passing corporate tax cuts this week, but will make a fresh attempt in the May Budget week.

Finance Minister Mathias Cormann told the Senate on Tuesday afternoon the government had been unable to convince nine crossbenchers to get behind the bill to reduce the corporate tax rate from 30 per cent to 25 per cent across all-sized businesses.

Independents Derryn Hinch and Tim Storer have yet to lend their support to the bill, leaving the coalition with only seven of the nine crossbench votes it needs.

"We believe there is opportunity for the government to persuade the majority of senators of the merits of our argument that is why the government is committed to keep working, to keep engaging," Senator Cormann said.

The minister, who has previously been successful in negotiating other key pieces of legislation, said the cuts were in the interests of working families because they would pay for jobs and higher wages.

Labor frontbencher Don Farrell told parliament it was an opportunity for crossbenchers to reflect on their decision to support the bill.

"That's not the way we create equality in this country. It won't trickle down to those people who really need a wage rise in the current environment," he said.

Earlier on Tuesday, Mr Shorten confirmed a Labor government would scrap the tax cuts for businesses with a turnover of more than $50 million.

However, Labor has yet to make a decision on what it will do about the already legislated cuts for small firms.

"Labor will consider its final position on that in the context of the information we receive in the budget," Mr Shorten told reporters.

"What we are not going to do is promise business corporate tax cuts which this government cannot pay for."

Prime Minister Malcolm Turnbull said the opposition wants to go to the election on a platform of "fewer jobs and less well-paid jobs".

"Their latest policy on company tax is no more well calibrated than their shocking cash grab on pensioners," he told parliament, referring to Labor's plan to end cash handouts for non-taxpaying shareholders on their dividend credits, which was subsequently amended on Tuesday to protect pensioners from the change.

One Nation senator Pauline Hanson reiterated her party's support for the tax cuts while predicting Labor wouldn't deliver on its promise to ditch them in government.

"It will be political suicide for them if they do," she told reporters in Canberra.

But shadow treasurer Chris Bowen said the reductions for firms above $50 million were neither "justifiable or affordable".

"These changes don't come in until 2019 and so it is appropriate that we are up-front about our plans and we're doing that today," Mr Bowen told ABC radio.

The latest Essential Research poll suggests voters have become ho-hum over the whole issue with 40 per cent backing the cuts, 30 per cent opposing and the remainder ticking 'don't know'.

Posted in: News  
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