(Australian Associated Press)
A plan for cryptocurrency regulation and an overhaul of digital payments has left some sceptical and others welcoming Treasurer Josh Frydenberg’s ambition.
Bitcoin and other cryptocurrencies would emerge from the shadows under a financial licensing scheme for crypto exchanges, he announced on Wednesday.
With more than 220 million participants, global cryptocurrency assets are worth more than $US2 trillion ($A2.8 trillion).
“Australia has an opportunity to be among the leading countries in the world in leveraging this new technology,” Mr Frydenberg said, joining fellow Liberal Jane Hume who said crypto was “not a fad”.
“Recent surveys have found that up to 17 per cent of Australians currently own cryptocurrency, with that figure likely even higher among young Australians.”
Early next year, he will begin talks on a licensing framework for digital currency exchanges that will regulate the purchase and sale of cryptocurrency assets, and on a custody regulatory regime for businesses that hold crypto assets on behalf of consumers.
BTC Markets chief executive Caroline Bowler welcomed the timeline and “ambitious scope” of the changes.
“It would be a crushing shame to not have our regulation keep pace with international peers such as Singapore, Canada and Britain,” she said.
Consumer advocate Gerard Brody said it was less clear how these changes would protect against scam losses.
Mr Frydenberg is also looking at a central bank digital currency (CBDC), with advice on a pilot due before the end of 2022.
But advocates for the cash industry said an Australian CBDC should not replace physical banknotes and coins.
“Some Australians will never be able to use and access digital dollars and they will be largely excluded,” said Jason Bryce, a spokesman for CashWelcome.
The Reserve Bank’s Project Atom, a pilot for a wholesale “token” to be used by banks, reported success after being trialled by Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys.
Funding, settlement and repayment of tokenised syndicated loans was trialled on an Ethereum-based platform.
Project Atom demonstrated the potential for a wholesale CBDC to make financial market transactions safer and more efficient, assistant governor Michele Bullock said.
“De-banking” is another problem for individuals and businesses that the treasurer wants to tackle. It occurs when a bank declines to provide a banking service.
Almost half of Australians make payments using their mobile phone and COVID-19 has accelerated the use of digital wallets.
About 55 million non-cash payments worth about $650 billion are made in Australia every day, from shopping online to digital pay packets landing in a bank account or a tap and go payment for a coffee.
Regulators will be tasked with looking at taxation, fees, transparency and competition in the market.
Mr Brody, chief executive of Consumer Action, said the treasurer also had an opportunity to protect people from debt and financial stress from buy now, pay later services.
At odds with decentralised finance that tries to take back control from institutions, the treasurer says centralising oversight of the payment system will give the government a greater leadership role, including new powers for him to intervene.
Westpac chief executive Peter King said Australia needed a system fit for the digital age.
“Modernising our payments infrastructure and its regulation, including cryptocurrency regulation, will strengthen our financial system and improve protections for customers,” he said.
“Today’s announcement is good news.”
The Commonwealth Bank already has plans to roll out crypto services to customers next year.
Shadow treasurer Jim Chalmers said no action would be taken on payments or cryptocurrencies before the next federal election, which must be held by May.
“This is just a commitment to consult on the government’s last consultation.”
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Treasurer Josh Frydenberg says the government’s forecast for economic growth next year will be stronger then predicted in the May budget when he hands down his mid-year review later this month.
The treasurer confirmed last week the mid-year economic and fiscal outlook will be released on December 16.
Last week the national accounts showed the economy contracted by 1.9 per cent in the September quarter as a result of the COVID-19 Delta lockdowns in the nation’s two largest states, NSW and Victoria.
It was the third largest quarterly contraction on record.
But Mr Frydenberg said the economy is coming back strongly with 350,000 jobs added to the workforce since the start of September and retail sales rebounding with more than $5 billion spent at the recent Black Friday sales alone.
He also told the ABC’s Insiders program that a stronger growth forecast will come as a result of having one of the highest vaccination rates and lowest mortality rates in the world.
He also noted that the Organisation for Economic Cooperation and Development now expects Australia to grow by 4.1 per cent in 2022 and the Reserve Bank of Australia is predicting 5.5 per cent growth.
In May, Mr Frydenberg had forecast growth of 4.25 per cent for the 2021/22 financial year and 2.5 per cent for 2022/23.
“We’ll make those upgrades to our forecasts in MYEFO,” the treasurer said.
New predictions come at a time of uncertainty surrounding the new coronavirus Omicron variant.
“It’s too early to make any conclusive decisions or estimates about the economy as a result of Omicron,” Mr Frydenberg said.
He said what is known is that it is highly transmissible but there are also early signs it may be less severe than the Delta variant and no evidence as yet that the vaccines currently being used are not a defence against it.
“I don’t think we should be panicking,” he said.
“I think everyone should keep their heads and we should be calmly and safely reopening as we have been.”
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
The banking watchdog believes Australians should be getting better advice in managing their retirement nest eggs so people do not end up having unnecessarily frugal lives post-work.
Australian Prudential Regulation Authority deputy chair Helen Rowell says the superannuation and wealth management industry is far too focused on accumulating savings.
“Evidence shows that the majority of Australians do not adequately plan for their retirement or make the most of their assets in retirement,” Ms Rowell told a Australian Financial Review super and wealth summit on Monday.
“One of the problems with the ‘nest egg’ motif is that it puts a focus in the consumer’s mind on accumulating the largest possible pot of money and then sitting on it.”
She said the federal government’s recent retirement income review found many people die with the bulk of their life savings intact.
“Rather than a sign of generosity to the next generation, this is widely accepted as evidence that retirees often lack the necessary guidance or options to help them effectively manage their nest egg,” she says.
“And so often (they) are more frugal than needed in their retirement spending for fear of running out.”
Ms Rowell says this under-development of retirement income products is a missed opportunity for the wealth management industry.
“The sector could be doing more to demonstrate its valuable contribution to solving the retirement puzzle by offering high quality financial products now and into the future,” she said.
But equally important, providers should also think carefully about creating products that will achieve the right objectives for consumers.
“What APRA wants to avoid is a repeat of some of the legacy issues we have spent years trying to fix or eradicate, especially in life insurance,” she says.
Income protection 101
There’s not much you can do without an income. In monetary terms, your ability to earn an income is your biggest asset by far – which is why income protection is so important. When you’re protecting your biggest asset, there are 3 things you need to understand so you know what you’re covered for, and what that means at claim time:
When you apply for income protection, you can generally choose a sum insured that’s up to 70% of your before-tax income (excluding super contributions).
The higher your amount insured, the higher your premium will be. So you need to think about how much money you’ll really need to keep up with your everyday expenses (like your rent/mortgage, bills, school fees etc.). Just because you can cover 70% of your income doesn’t mean you have to.
For example, you might earn $10,000 per month but decide you only need $5,000 per month to keep up with your living costs. That may significantly reduce the cost of your cover (i.e. your premium).
This means the amount you receive will be determined by your actual income in the two years before the claim (which could mean you receive less than the amount insured) – as opposed to a ‘Guaranteed’ or ‘Agreed’ payment type where, at claim time your amount insured won’t be adjusted if your income has decreased.
Note: ‘Agreed value’ income protection policies guarantee the amount you’ll be paid if you have to make a claim – regardless of any changes to your earnings. However, from the 1 April 2020, this type of policy is no longer available with OnePath.
Use the income replacement calculator to forecast your current income into the future, to help you decide on a amount insured.
The waiting period is the number of days before you become eligible to claim,starting from the date the doctor confirms you are disabled. The most common chosen waiting period options are 30 days, 60 days and 90 days.
Income protection payments are usually made monthly in arrears.So if you had a 30-day waiting period, your first payment would be made 60 days after you first became disabled.
The waiting period affects the premium. Naturally, a policy with a 30-day waiting period is more expensive than the same policy with a 90-day waiting period, because you’re eligible to claim sooner.
For example, if you’re off work for 80 days and have a 30-day waiting period, you could potentially be paid your amount insured for 50 days. But if you have a 90-day waiting period, you may not be eligible to receive anything.
When choosing your waiting period, you should think about how soon you’re likely to need financial support if your income stops:
The benefit period is the maximum amount of time you can receive income protection payments for any claim while you are disabled. It can be based on time (e.g. 2 years) or age (e.g. to age 65) and your choice can make a difference to the total amount you receive.
Say you’re aged 40 and you become permanently disabled, meaning you’ll never be able to return to work. If you had a 2-year benefit period, your benefit payments would stop when you’re aged 42. But if your benefit period period was to age 65, you would continue to receive benefit payments for an additional 23 years as you continue to meet the disability definition.
Choosing a longer benefit period increases your premium because the potential payout is higher. However, be aware the benefit period is the maximum amount of time you can receive payments. If you’re able to return to work sooner than that, or you reach age 65, your payments will stop.
Also, if your policy offers ‘partial disability benefits’, you may be able to return to work part-time and receive reduced payments until you’re able to work to full capacity. This can be a great benefit to have as it means you’re supported if you’re restricted in your capabilities, or you want to try a new occupation.
One great feature of income protection (outside superannuation) is that premiums are generally tax-deductible, which can make it significantly more cost-effective to get the cover you need.
You may also be able to hold an income protection policy inside super, meaning you can use tax-effective super contributions to pay your premiums, however, within a superannuation policy, features are generally more restricted.
If receiving payment for an income protection claim (outside super) OnePath does not withhold tax (under the PAYG withholding system) from claim payments, so it is advisable that you retain your payment statement for your tax records and include the claim payments received in your tax return (however you should seek tax advice to understand your personal tax liability).
Check your cover now
If you have OneCare Income Secure Cover, you can see exactly what you’re covered for by logging into the Self Service Portal. There you can update your details and change your communication preferences.
In particular, check your cover against our income replacement calculator. If your income has changed significantly since you last updated your policy, there’s a chance you may be over or under-insured – in which case you should talk to your financial adviser.
Did you know?
There’s a common exclusion on income protection policies that means you generally won’t be covered if you suffer an injury or illness because of an intentional act. Also,if your cover is held inside super, you’re generally not covered if you suffer an injury or illness while you’re unemployed.
OneCare is issued by OnePath Life Limited (OnePath Life) ABN 33 009 657 176, AFSL 238341. OneCare Super is issued by OnePath Custodians Pty Limited ABN 12 048 508 496, AFSL 238246. OnePath Life is not a related body corporate of OnePath Custodians.
We recommend that you read the relevant Product Disclosure Statement available at www.onepath.com.au or by calling 133 667 before deciding whether to acquire, or to continue to hold the product.
OnePath Life Limited (OnePath Life) ABN 33 009 657 176, AFSL 238341. It is current as at September 2019 but may be subject to change. Updated information will be available by contacting Customer Service on 133 667.
Whilst care has been taken in preparing this material, OnePath Life and it’s related entities do not warrant or represent that the information is accurate or complete. To the extent permitted by law, OnePath Life and it’s related entities do not accept responsibility or liability from the use of the information.
Where tax or technical information is needed, the information is our interpretation of the law and does not represent tax advice.
Money and Life
(Financial Planning Association of Australia)
If there’s one thing the COVID-19 pandemic has shown us, it’s that the unexpected can happen at any time. And, while there are many things in life you can’t control, you can make sure you have enough funds put aside to help you get buy. Here’s how to build your emergency savings, even on a budget.
As anyone who lost their job overnight due to COVID-19 will tell you, it pays to have cash stashed away for a rainy day.
An emergency can happen at any time, for any number of reasons. If it does, your emergency fund will provide a safety net to cover your living expenses until you can get back on your feet.
It’s best not to turn to a credit card to get you through an emergency, as credit doesn’t replace your income. It just creates a debt that you’ll need to start repaying almost straight away, whether or not your income is back to normal.
Anyone can start an emergency savings fund, even if you’re not a regular saver. Here’s how to build up your emergency savings, the smart way.
You’ll need to keep enough cash in your emergency fund to cover your living expenses for at least three to six months. For example, if your living expenses come to $3000 a month, you’ll need to keep at least $12,000 in your emergency fund.
If you’re not sure how much you actually need each month, go through your most recent bills and invoices and put everything into a budget.
Next, think about a realistic timeline for achieving your goal. How long it will take depends on how much extra cash you’re able to put aside each week or month.
For example, say you wanted to build your emergency fund within one year. If you needed $12,000 in your fund, that means you’d need to contribute $1000 a month, or roughly $230 a week.
Does the figure seem realistic? If not, you can spread the contributions out over a longer time, or find ways to increase your savings.
If money is tight, you’ll need to go over your budget with a fine tooth comb. Find every possible place where you could tighten up your spending and divert the cash to your emergency fund. Think about cancelling subscriptions you don’t use, or try negotiating a better deal on your services. Cut back on eating out for a while, or don’t buy any new clothes for a few months. Be ruthless to slash your unnecessary spending, so you can put the money towards your emergency fund.
Another option is to divert a set percentage of your income into your emergency savings, once your non-discretionary expenses have come out. Whatever you have leftover is your spending money for the month. For example, if you have $150 a week left over after expenses, you could contribute 30 per cent ($50) to your emergency savings fund.
Once you reach your savings goal, and you’re comfortable you can keep yourself afloat for three to six months, you can hit pause on your contributions. At this stage, you might want to divert the money you’ve been putting into your emergency savings into another type of savings, or even start an investment portfolio.
You want to keep your emergency fund in a separate online savings account that isn’t accessible via a bank card or credit card. Out of sight is out of mind, so keeping it at a different bank to your regular transaction account is even better.
Don’t be tempted to invest your emergency savings. Investments by their nature increase and decrease in value over time. The last thing you want is to find yourself in a situation where you’re forced to sell down your investment at a loss, just so you can get access to your emergency funds.
Similarly, cash is king when it comes to emergency savings. If you need quick access to the money, it’s easiest to withdraw cash from your bank account.
If a situation arises where you need to access your emergency savings, go for it, that’s what they’re there for. Once the emergency has passed, and you have an income to rely upon, you can simply top up the fund again and continue along your way.
For more advice on saving for a rainy day, take a look at our other articles on budgeting and saving. Or if you’d like more information about investing once your emergency fund is in place, check out our content on financial planning.