(Feedsy Exclusive)

In today’s economic climate, it’s increasingly common to help your child with their first home.

In this article, we’re going to look at three options to help you do this.

Why not take a look at the pros and cons of each and choose the one that’s the best fit for you?

1. With a cash gift

A lump sum of cash is a great way to raise the deposit for a first home, but there are a few things to consider.

Lenders may require the gift to be in your child’s bank account for a period of time. Typically this could be between three and six months, so you’ll need to plan ahead.

The lender will also need to know that your child can keep up with the repayments, which usually means that they are employed (or self-employed) with a certain level of income.

And you should accept that your cash gift is exactly that — you may need to sign a declaration to say you don’t expect it back.

You should also consider what happens if your child buys with a partner and they split up — the partner could end up with a share of a house that you’ve helped to fund.

2. Buying in partnership

Buying a property in partnership with your child and owning it together is another popular option.

There are various ways of doing this — you can own the property in different proportions, and your share could pass to your child or another party in your will, or you could own it 50/50 with a clause that means your share automatically passes to your child, regardless of your will.

Be sure to get legal advice for this option and agree on ground rules before you go ahead.

3. Using your home as a guarantor

Instead of cash, you can use the equity in your own property as security. This is known as a guarantor loan and means your child won’t have to raise a deposit.

You can limit the scope of the loan by setting it as a certain proportion of the property’s value, for example, 20%. This means you can be released once the property rises in value or your child pays off that proportion of the loan.

Know that you may not be accepted if you are retired or are still paying off your own mortgage. And your child will need to prove that they can afford their mortgage repayments.

Helping your child with their first home is a valuable gift. Choose how you do this wisely, and you will be helping to get your child off to a secure start in their adult life.

If this article has inspired you to think about your own unique situation and, importantly, what you and your family are going through right now, please contact your advice professional.

The significance of choosing the appropriate structure to make the protection and maintenance of your assets possible cannot be overstated. This is necessary regardless of whether you have acquired your fortune on your own or through inheritance.

In this instance, you may want to consider estate and succession planning to protect your assets and ensure some tax benefits for the beneficiaries of your estate.

One of the most effective estate planning strategies today is the use of a testamentary trust in a will.

When your estate is distributed to your beneficiaries, a testamentary trust can help with minimising capital gains tax, stamp duty, and other taxes that may be due. It can also help protect your assets from creditors, unscrupulous individuals, and the like.

Testamentary trusts—the basics

A testamentary trust (aka will trust) is, in simple terms, a trust that’s created according to the terms set in a will. It typically takes take the form of a discretionary trust.

However, unlike inter vivos (facilitated or done between living persons) discretionary trusts, which allow for the transfer of assets and gifts while the grantor is still alive, testamentary trusts are only activated after the grantor’s demise.

Each beneficiary under your will may have a testamentary trust that is most appropriate to their circumstances. There are different sorts of testamentary trusts that can be established, such as:

• Beneficiary-controlled testamentary trust
• Capital-reserved testamentary trust
• Protective testamentary trust

Benefits of testamentary trusts

Compared to typical wills, a testamentary trust offers the grantor more discretion over estate planning and distribution to beneficiaries.

Among the key benefits of testamentary trusts are:

• Flexibility: A testamentary trust functions in a similar way to a discretionary family trust. A trustee may choose which beneficiaries get trust income as long as they are nominated in the trust. With this freedom, the trustee can choose to distribute income, capital and dividends in the most tax-efficient way. Also, in the event that superannuation funds are paid to the estate, trustees will have plenty of discretion in how to handle them.
• Asset protection from third parties: Testamentary trusts can shield assets from possible court cases, bankruptcies, and legal actions because the trustee has the title to the trust assets (not the beneficiaries directly). A testamentary trust can offer you extra asset protection if your surviving spouse or your adult child runs a business that carries a large financial risk. For adult children, it might offer family law protection as well.
• Tax advantages: Testamentary trusts give trustees the option to divide and distribute the trust’s income for tax planning purposes. Also, distributions from a testamentary trust will be tax-free up to the standard full exemption amount. Beneficiaries who have children aged below 18 can significantly profit from this tax planning benefit because they can use pre-tax income to pay for their children’s expenses. Moreover, any capital gain made by the executor (the person chosen to carry out the will) is disregarded by law when a capital gains tax asset is transferred from the executor to a beneficiary.

So, is a testamentary trust for you?

When it comes to estate and succession planning, it’s always better to get the input of your financial advisor and a solicitor specialising in wills and trusts.

If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.

Dominic Giannini
(Australian Associated Press)

Age pensioners will be able to pick up extra shifts and earn some extra cash before Christmas without losing their benefits.

New laws increase the amount they can earn by $4000 to $11,800 from December 1 until the end of 2023 before their pension starts to taper.

It will benefit more than 50,000 pensioners in the workforce.

The new laws also scrap the need to reapply for their payment for up to two years if they exceed the income limit.

The pension is currently cut off after the income limit is exceeded for three months.

Social Services Minister Amanda Rishworth said the changes would help address crippling workforce shortages.

“Older workers are an untapped market, having years of knowledge and skills to offer employers,” she said.

“Giving older Australians the choice to engage in the workforce will not only benefit them, it is also an important step towards addressing Australia’s labour shortages.”

Age pensioners will be able to pick up extra shifts and earn some extra cash before Christmas without losing their benefits.

New laws increase the amount they can earn by $4000 to $11,800 from December 1 until the end of 2023 before their pension starts to taper.

It will benefit more than 50,000 pensioners in the workforce.

The new laws also scrap the need to reapply for their payment for up to two years if they exceed the income limit.

The pension is currently cut off after the income limit is exceeded for three months.

Social Services Minister Amanda Rishworth said the changes would help address crippling workforce shortages.

“Older workers are an untapped market, having years of knowledge and skills to offer employers,” she said.

“Giving older Australians the choice to engage in the workforce will not only benefit them, it is also an important step towards addressing Australia’s labour shortages.”

Poppy Johnston
(Australian Associated Press)

The International Monetary Fund expects Australia to dodge a recession but has downgraded its expectations for growth next year.

The United Nations agency anticipates growth slowing to 1.7 per cent in 2023 – less than the 1.9 per cent forecast in its world economic outlook released last month.

In its annual health check on the Australian economy, the IMF pointed to Australia’s resilient domestic buffers to economic headwinds, including decent household savings.

“Between the slowing global growth and some still-resilient domestic buffers, Australia is on a narrow path for a soft landing,” the report said.

But Australia is not out of the woods – a larger-than-expected slowdown in China’s growth would put the nation’s exports at risk and higher inflation and wage growth domestically could prompt further interest rate rises from the central bank.

“The decline in housing prices has the potential to accelerate, which can reduce household consumption, with some impact on banks’ balance sheets,” the IMF warned.

The agency urged the Reserve Bank to keep lifting interest rates to cool demand and called on the government to keep spending constrained and targeted.

Treasurer Jim Chalmers said the IMF confirmed the Albanese government had delivered a budget “right for the times” in October.

“The government is returning 99 per cent of the upward tax revisions for the next two years to the budget when the inflation challenge is most severe, and 92 per cent over the forward estimates,” Dr Chalmers said.

“This compares to the former government’s average of around 40 per cent.”

The international agency also weighed in on Australia’s tax reform debate – noting the stage three tax cuts would reduce the personal income tax burden and Australia would be best to double down on “under-utilised” indirect taxes, such property taxes and the goods and services tax.

“Longstanding recommendations include broadening the GST base to limit exemptions for healthcare spending and restricting the capital gains tax exemption for the sale of main residences,” the report said.

The IMF recommended ditching stamp duty in favour of land taxes to promote housing affordability, labour mobility and a more sustainable tax base.

The agency welcomed Australia’s renewed commitment to climate mitigation and said more renewables in the grid would improve the resilience of the electricity sector and insulate the country from price spikes and energy market volatility.

While recognising the political challenges, the IMF said an economy-wide carbon price was the most effective way to cut emissions.

Despite Australia’s resilience to economic turmoil, a new report shows small businesses are starting to suffer.

CreditorWatch’s business risk index found small businesses were three times more likely to be falling behind on payments than big businesses.

Business to business payment defaults also continue to rise at an average rate of 20 per cent each month.

CreditorWatch chief economist Anneke Thompson said the rise in trade defaults, depressed consumer confidence and rising job vacancies all pointed to a slowing economy.

“Instinctively, this seems unwanted, but unfortunately a significant slowdown of the economy is one of the only cures for inflation,” she said.

“The challenge is not allowing small business to suffer the brunt of the impact of a slowing economy, which unfortunately is usually the case.”

(Feedsy Exclusive)

Saving a few dollars today can add up to a lot of money later on – cash that you can use to start investing, pay off your debt repayment, or save for retirement.

But to ensure you have a clear direction and achieve what you want, you need to start setting financial goals – that is, if you haven’t done so yet.

While a lot of people associate financial goal setting with business, it’s something anyone can and everyone should do. In this post, we’ll discuss why making financial goals is essential and provide tips on how to do so.

Setting financial goals – the basics

The specific objectives you set when it comes to your own finances are called financial goals. The goals you choose are tailored to your financial situation, and they provide you with definite benchmarks to strive for.

Your financial goals spell out the desired results of your short-, medium-, and long-term financial decisions. To illustrate, below are examples of short-, medium-, and long-term financial goals.

Short-term goals

Your short-term objectives help you build the foundation and confidence you need to accomplish longer-term, more ambitious goals.

• Create a weekly or monthly budget and stick to it.
• Build an emergency fund.
• Pay off credit card debt.

Medium-term goals

Once you achieve (or nearly accomplish all) your short-term financial goals, you have the foundation needed to follow through on midterm objectives.

Medium-term objectives serve to bridge your short- with your long-term goals.

• Get life and disability insurance.
• Reduce or pay off your student loan or any major debt.
• Save for your dream home or children’s education.

Long-term goals

Your long-term financial objectives are meant to prepare you for future needs and challenges. This is why these goals typically involve preparing for retirement.

To make sure you’re saving enough, you need to determine how much you’ll actually need to retire comfortably.

While your superannuation is considered a retirement investment, it may not be enough to cover your financial requirements later in life.

You need to take your future health and mobility needs into consideration, even if you’re physically fit currently. You also need to factor in inflation, as the cost of goods and services today wouldn’t be the same years or decades from now.

So, aside from saving for retirement, you might want to consider investing in long-term, low-risk investments like mutual funds and savings bonds. Or you could also go for high-risk, high-yield investments with the help of a stockbroker or your financial advisor.

Benefits of financial goal setting

Creating financial objectives is a crucial first step toward financial success, security, and stability.

In particular, financial goal setting provides the following benefits:

• Establishing clear goals enables you to create achievable plans.
• It provides a benchmark for monitoring your progress.
• It keeps you accountable for the results.
• Making a list of goals helps in setting priorities.
• Tracking your progress can inspire you to achieve more.

So, if you have yet to set financial goals, do so today.

If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.