Small business asset tax break extended

Posted on 31 January 2019
Small business asset tax break extended

(Australian Associated Press)

Small businesses will get an extra tax break with the Morrison government again extending the instant asset write-off to mid-2020.

The tax break will also be lifted immediately to cover assets worth up to $25,000, up from $20,000, Prime Minister Scott Morrison announced on Tuesday.

"Businesses who go out and invest today, whether it's a vehicle, whether it's a piece of plant or equipment, all of it, up to $25,000 immediate write down," he told an audience in Brisbane.

"We are so serious about small and family businesses and we have put our money where our mouth is."

This is the third year-long extension to the measure, which was set to finish at the end of the current financial year.

It allows firms with a turnover of up to $10 million a year to instantly claim tax deductions on all equipment purchases worth less than $25,000.

Mr Morrison said it would mean more than three million eligible small and family businesses could keep $750 million of their own money and reinvest it in their business and support the jobs and wages of their 5.7 million employees.

The change needs legislation, which the government intends to pass once parliament returns in February.

The small business ombudsman has previously urged politicians to boost the tax break to $100,000, saying the $20,000 level was too low for capital-intensive businesses like farms.

Last March, Labor announced it would make the tax break permanent if elected.

"The extension of the instant asset write-off announced today is welcome but goes nowhere near Labor's Investment Guarantee, which is available for all investments over $20,000," shadow treasurer Chris Bowen said.

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Four ways to declutter your finances

Posted on 29 January 2019
Four ways to declutter your finances

Your home may be looking minimal and serene in 2019 thanks to author and TV host Marie Kondo. But could your finances do with some decluttering too? Find out how to go about it with our guide to simplifying your budget, bank accounts, super and debts.

Ready to discover the life changing magic of simplifying your money management? Taking the lead from minimalism guru Marie Kondo, we bring you a step-by-step guide to applying decluttering principles to your finances.

Less really is more

Of course, we're not talking about giving all your money away to make life simpler. But simplifying your finances will almost certainly make it easier to stay on top of money matters. When you're dealing with too many bank accounts, bill payments, super balances and debts, you're far more likely to lose track of what's going on with your money. And that means things can fall through the cracks, which leads to missed opportunities as well as long-term problems.

So paring back your finances is the first step to feeling capable and in control. And once you've simplified things, it's that much easier to keep money matters organised, through automation and regular monitoring.

1. Budgeting based on your values

Just as Marie Kondo lays down the challenge to only keep things that bring you joy, it's just as important to prioritise things we value when spending money in the first place. Understanding what you value most, and then taking a good look at where your money is actually going can be a powerful way to shift your spending habits.

This is something John Purl, Senior Financial Adviser for Affinitas Capital has found to be true for his clients. "You'll struggle to get anyone to stick to a cash flow, budget or savings plan, if it does not align with their true values," he says. "The values conversation has the greatest impact on motivation to make changes."

Hear more from John on how to worry less about money

2. How many bank accounts?

Although it can help to have different bank accounts for savings goals, and another to make sure all your regular expenses are covered, keep multiple accounts to a minimum to save time and effort. Monitoring balances, interest and outgoings for so many accounts just makes things complicated.

Having four separate accounts should be enough for you to manage income and expenses with ease and keep everything simple and smooth with your cash flow and savings. The majority of your money will go into the household account for everyday expenses, with two savings accounts, one for short term goals, like saving for a holiday, and another for your financial future. Funds from this third account might go towards a rainy day fund, your super or some other type of investment. And having a fourth account where you can channel about 10% of your monthly income to spend on yourself, guilt-free will allow you to save for the future without missing out on enjoying yourself, here and now.

Read more about budgeting and saving on Money & Life

3. Simplify your super

Over a lifetime your super balance has the potential to become one of your biggest financial assets. So making sure you're receiving all the super contributions you're entitled to and knowing where they are is an important part of financial housekeeping. It's not unusual to lose track of super if you've changed jobs or moved house a few times. The MyGov portal and ATO offer a free service to help you find lost super.

The fund you're with now can also help you track down super balances held in your name and consolidate them into a single fund. Not only will consolidating super give you fewer funds and statements to keep track of, it can also save you a fair amount in fees. Before you decide to close any of your existing accounts, it's important to check whether you'll still have the right level of insurance cover as you'll often have personal insurance policies such as life or income protection insurance arranged and paid for through each super fund.

Find out more about making the most of your super with the right type of fund and investments

4. Do away with debt

Clearing multiple personal debts once and for all can seem like an impossible task. As you struggle to get back to zero, temptation can creep in to just borrow more and become resigned to debt as a permanent part of your financial situation. One option is to consolidate your personal borrowing into a single repayment to make it easier to chip away at the outstanding balance. Your mortgage provider may be able to refinance your home loan so you can bundle debt repayments with your mortgage and benefit from a lower rate of interest as a result.

But if you don't have a mortgage or you're looking for a simple way to pay down personal debts faster, Peter Foley CFP® and Director of Thirdview suggests trying one of two tried-and-tested approaches. "The avalanche method is probably better known and involves paying as much as you can towards the debt with the highest interest first," he says. "The thinking here is that you're saving yourself more in interest. Then you have the snowball method which prioritises debts in order of size, putting more of your repayment budget towards the smallest balance first. When this debt is settled, you can redirect more of your cash flow to the next smallest so you build up momentum and that's where the snowball effect comes in. The satisfaction and sense of achievement you'll get from having one less debt to deal can also give you the motivation you need to keep going on your mission to get completely debt-free."

Hear more about the pros and cons of different ways to manage debt

Looking for more advice on keeping your finances spick and span? Read our 5 tips for getting on top of financial housekeeping.


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Seven mind hacks to help you spend less

Posted on 24 January 2019
Seven mind hacks to help you spend less

When it comes to spending money, your brain has a whole A to Z of biases steering you towards splashing out instead of sticking to your budget. Find out how these mind habits work and learn hacks to help you get the better of them.

Anchoring bias

Your brain has an extraordinary knack for grabbing on to information and making assumptions on this limited knowledge. It's a great time-saver, but doesn't serve you well when it comes to deciding how much to spend, whether it's a kettle or a wedding dress. Anchoring bias is the all-too-human habit of pouncing on the first price you see and using it as a yardstick for what you should be paying. And this can lead you to get comfortable with the idea of paying more than you need to or can afford.

Doing research is by far the best way to overcome anchoring bias. Having a range of prices in front of you can help you get the best value for money. If you're buying a second-hand car for example, don't snap up the first one you see without comparing lots of others available with the same year, make and model.

Bandwagon effect

Humans are social animals and that means we want to fit in. When making buying choices, it's not unusual to look to those around us for cues on what to buy and how much to spend. So when you're in the market for that second hand car and discover others are getting a loan to buy brand new wheels, you might be tempted to do the same.

Again, it's doing your homework that's going to help you talk yourself out of jumping on the bandwagon with spending more on your car, mobile phone plan, holiday or any other purchases your peers are enthusiastic about. Getting to know all your options and weighing them up to determine what works best for you is an important part of make buying choices you won't regret later.

Choice-supportive bias

Buyer regret is something everyone gets a taste of now and then. Like the designer couch that's actually really uncomfortable or the state-of the-art kitchen appliance that's so hard to clean it never gets used. Thanks to choice-supportive bias (also known as post-purchase rationalisation, or 'buyer's Stockholm syndrome') you let yourself off the hook for your mistake and miss out on a learning opportunity.

Humans hate being in the wrong so much we'd rather convince ourselves we made a good decision and seek evidence to support this view. And this can lead to similar mistakes in the future where you fall for special features or a slick design instead of seeking out something that's good value and better suits your needs and budget. By treating every purchase you make as a new opportunity to choose wisely, you can consciously avoid any rose-tinted view of your previous retail blunders.

Framing bias

A close cousin to anchoring bias, framing bias helps sales staff the world over upsell their customers to a more expensive product. By presenting you with three or more products ranging in price from low to high, they're carefully guiding you towards choosing a mid-priced option that could, in fact, be relatively expensive.

Writer and broadcaster Claudia Hammond describes the solution perfectly in her book Mind Over Money: The Psychology of Money and How To Use it Better. "If you are buying a product and the shop gives you a choice of three, don't let the expensive one sway you towards the middle one." In other words, there's no harm in choosing the cheapest, as long as you still end up getting what you need from your purchase.

Ownership bias

This is a budget busting habit that's even harder to avoid since online browsing became possible. It's the tendency we have to see an object and then imagine it as a part of our lives. Whether it's a rug or a handbag, in your mind's eye, you already own it and that can make it much easier to click buy, even when that means parting with more money than you can afford.

If you have the willpower to steer clear of this sort of temptation, so much the better. But avoiding window shopping altogether whether in bricks and mortar shops or online is a lot to ask. It might be more realistic to save some money into a spontaneous spending fund instead. By having a little of your budget dedicated to impulse buys, you can indulge in some wish fulfillment now and again, as long as you've built up enough to cover the cost upfront rather than borrowing to make it happen.

Present bias

This is a totally natural tendency we generally have to value our present experience too highly when we're weighing up spending now vs. saving for the future. The 'When in Rome' shopping story we tell ourselves for overspending on while on holiday is one example of this bias. You may never visit this place again so you may as well buy that amazing artwork or outfit, even though you'd normally consider it way beyond your price range.

Of course, you don't have to be on holidays to talk yourself into spending instead of saving. One way to short-circuit our present bias is to automate savings and be very clear about the relative value of what you're saving for. If you've decided on a holiday with the family overseas as your most important priority for the year, figure out how much to put away each month and arrange a direct debit to make sure that amount is taken from your salary every week or month.

Status quo bias

We humans are creatures of habit and making changes can be something we find hard as a result, especially when it takes a little time and effort. This is why we make such loyal customers, even when the product or service we've been paying for, year after year, may not be the best value.

There are a couple of approaches you can try to nudge yourself out of your comfort zone and push against status quo. The first is to make small changes, a little at a time, so you're more comfortable in making the switch and less overwhelmed by the research and decision-making involved in choosing the best provider for your insurance, mobile, utilities, etc. On the other hand, it can be very motivating to take care of these tasks in all one go and have the satisfaction of making significant savings across the board. If you're someone that gets a kick from bagging a bargain, this second technique might be ideal for you.


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Where does all my money go? Save money on your three biggest expenses

Posted on 15 January 2019
Where does all my money go? Save money on your three biggest expenses

Money and Life
(Financial Planning Association of Australia)

The three biggest drains on our money are paying for housing, food and transport. And there's no getting away from the fact that it is unlikely we can live without any of the "big three". Here we look at some ways of how to save on these items.

Saving on rent in the Big Smoke

It can be hard to save money on rent, especially when you live in the more expensive cities in Australia, like Sydney or Perth.

If your company allows remote work, consider living a bit further outside the CBD. If you only need to attend the office occasionally you'll save on rent while cutting your commute time down significantly.

Another idea is to consider flatmates. More people are sharing the rising cost of living by having flatmates beyond the usual university share-house age. Do your research to find compatible house mates, and enjoy company as well as lower living expenses.

Hugely popular house-sharing site has recently recorded the 60 to 64-year-old age bracket as having a 43 per cent growth in usage, followed by the 50-54 and 65+ brackets.

Buying a home

Buying your first home is definitely one of life's "biggies". Real has developed a an integrated calculator that helps take some of the worry and confusion of just how much it is going to cost you and all the steps involved.

The calculator will show you how much you can actually borrow, calculate hidden costs such as stamp duty and whether you will incur lenders mortgage insurance. With home loans, there is the choice between an online solution powered by NAB, and a more traditional structure where you can access more than 30 lenders.

"It means that you can understand your options and have the ability to choose the right loan for you," says Andrew Russell, executive director of financial services at REA Group.

"Now you can get pre-approval online in your own time and when you're comfortable. Even the night before a last-minute auction," he says.

Make money from your home

A great way to make money from your existing home is to rent out a spare room via Airbnb or sites like Flatmates. Especially if you live in a major city in Australia, there are young people arriving from countries across Europe and South America as visa restrictions loosen up, and many come to Australia on a working holiday or student visa. Generally they will stay three to six months and the rent gained from them can be considerable.

Save money on decorating and furnishing

When you find your dream purchase or rental, the next financial hurdle may be how to turn it into a home by what you put inside it.

Home and lifestyle designer Jane Brown, of Jane Brown Interiors, suggests you buy at the end of the two biggest seasons in the year, Summer and Winter, when stores are likely to have sales and you can look for bargains.

"Also, the end of the Financial Year can be a phenomenal time for sales, as stores need to shift their inventory," says Brown. To save even more money, she recommends auction house sales, such as Grays Online, or eBay and Gumtree.

"Buy, sell and swap sites are springing up all over Facebook. These are great options, are usually community-based and can be the source of amazing bargains".

Food for your soul

The Australian government estimates food waste costs the country's economy $20 billion each year. Four million tonnes of food end up as landfill and one in five shopping bags end up in the bin, equivalent to $3,800 worth of groceries per household per year.

Brisbane-based Rachel Smith helps people quit impulse shopping and is the author of Underspent, a book about how she broke her own shopping addiction and saved 38% of her salary in one year.

Her top tips for saving money on food shopping costs include:

  • Plan meals so you will only buy ingredients you need
  • Make a shopping list
  • Stop buying "ready meals" and microwave meals
  • Avoid buying pre-packaged and pre-cut fruit, vegetables and salads
  • Read the price label to see costs per gram or litre
  • Know how much things cost, eg. average price for a kilo of tomatoes or potatoes or a punnet of strawberries
  • Use cash to pay for food and groceries, not credit cards.

Also, keep an eye out for expensive ingredients that go on sale and can be frozen for later on. Meat products will last roughly three months in the freezer if packaged properly, so when those expensive steaks are creeping towards their use-by date, snap them up and store them for later.

Your method of transportation

Smith is also a transport planner and the author of Decongestion, an ebook to help city leaders and mayors to cut traffic congestion.

Quoting the recent Australian Automobile Association's Transport Affordability Index, Smith said that Brisbane families spend on average $19,629 a year on transport, with Sydney families coming out even higher at $22,237.

Smith's tips for saving money on transport include:

  • Car pooling
  • Off peak travel on public transport
  • Working from home, even one day a week or a month
  • Walking or cycling instead of using the car

You can also shop around for car insurance; for example a lot of companies now let you pay monthly, with no penalty or price increase.

Do you even need a car? There are now great car-sharing services such as Go Get and Drive My Car. If you can manage without a car you can rent out your parking space if you have one. Parking spaces in Sydney's Ultimo near the CBD go for approx $60 per week.

And try to avoid using taxis or Uber when there's a cheaper alternative. In Sydney and Melbourne there are now hire bikes from Obike and Reddy Go which are great for your wallet and your health; access is gained by downloading an app and paying a small fee, which unlocks the bike.

For more tips and tricks on how to manage your money, avoid mistakes that can derail your financial future, and secure your financial freedom, download our free eBook.

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What tap-and-go means for our teens

Posted on 14 January 2019
What tap-and-go means for our teens

Money and Life
(Financial Planning Association of Australia)

A survey of 1100 high school students suggests many are confused about how credit cards work. Are new technologies making it harder for young people to understand what money management is all about? And what can we do about it?

Understanding what happens when you spend money on your credit card seems to be something of a blind spot for young people living in the 21stcentury. When asked how long it would take to pay off a $2,000 credit card debt, making minimum repayments only, more than half of 1100 high school students surveyed believed the debt would be settled within 3 years. Assuming an interest rate of 18%, it would actually take more than 15 years to clear the balance[1].

In today's world where tap-and-go technology and online shopping are the norm, the choice of ways to spend our money keep growing. So just how serious an issue is financial literacy for our kids and teens? We spoke to Kendall Flutey, co-founder of Banqer financial education software to get her take on the importance of financial education and what we can all be doing to help kids understand their responsibilities around money.

What are some of the new challenges young people are facing when it comes to taking control of their finances?

The way we're managing our finances in the 21st century is evolving, and fast. At the heart of these changes is the increasing intangibility of money as we move towards a cashless society. Although this is a really exciting innovation that can make it easier to keep track of money, it causes some issues for our youth. Spending digital currency just doesn't have the same psychological trigger that handing over a ten dollar note does it's a softer loss. It's that much harder to put the value of what you're buying in context a bottle of Moet seems equivalent to a bottle of milk when it's just the tap of a card away. So when young people are out in the world spending their money, we often see a big disconnect between actions and their financial consequences.

What signs are we seeing that young Aussies lack awareness of key financial concepts?

The issues we're seeing with financial literacy aren't new, but they're more widespread. From the early interactions we're having with 5,000 Aussie kids using our platform we're certainly seeing kids who don't comprehend the responsibilities that come with servicing debt. And we're seeing many children in our learning environment struggling to maintain positive cash flow. This kind of activity in kids (and adults too!) often comes with other negative financial behaviours, such as a lack of regular savings and/or a disregard for the future.

Thankfully, at a young age these behaviours can be changed more easily! By making kids aware of the consequences of their assumptions and actions, we can help them become more financial literate and responsible.

What do you think are some of things causing this lack of awareness? What can be done to change it?

It's important to remember that no real ownership is granted over the life skills that support good money management. Australia hasn't mandated these lessons in schools, so the burden mostly falls on parents. I think it's true to say that the majority of us earn our financial stripes by seeing what our parents do, and through our own trial and error.

For a busy parent, making time to talk about money may be something that's less important than other types of guidance and education. And for others, their own lack of financial capability can be detrimental as it gets passed along to the next generation. Financial illiteracy is shown to be a cyclical problem, entrenching inequality and often leading kids to adopt negative financial behaviours from a young age. Parents in this situation may not intend to model poor money management but when you're having a hard time keeping financially afloat yourself, teaching your kids to do the opposite is an unlikely outcome!

In order to change this and ensure equal access to a standard level of financial literacy for every child in Australia, we need to find a new way to deliver a robust financial education, at least from an academic perspective. I believe the place for financial lessons to be learnt is in our schools. Parents still play a valuable role but just as with other educational subjects, school makes the most sense as the place to be taught this important life skill.

What are the real world risks for young people with limited exposure to the basics of personal finance?

Personal finances are often a balancing act. Education plays a crucial role in getting the balance right between income and expenses in order to achieve a surplus. In the last decade or so we're seeing a powerful force tipping the scales: hyper-consumerism. This has a profound impact on our kids and teens who are being targeted by increasingly sophisticated marketing tools and techniques, to the point where it's hard to tell the difference between online advertising and an authentic content post.

At the same time, we've seen financial education standards falling amongst our youth, which only makes things worse. This corresponds to a higher risk of our next generation living with debt, permanently. If you're determined to keep buying and don't have the financial savvy to understand the consequences of these decisions it can shape your entire financial future.

What can parents and schools do to support kids towards a more responsible approach to managing their money?

I believe parents and schools both have a role to play here. Parents are better positioned to speak candidly about past and present monetary experiences, oversee engagement with real financial products and services, and foster a safe environment for kids to experience their 'financial firsts'. Schools, on the other hand, can really reinforce the fact that financially focused conversations are an acceptable and normal part of life and education.

School should also act as the sandbox environment, a place where kids can make monetary mistakes, understand the consequences and learn from their experience. Regardless of the tool, resource, or online platform they choose for these activities, I feel all schools should incorporate practice of these vital life skills into their curriculum.

The FPA and Banqer are working in partnership to boost financial literacy in our schools. Looking for ways to help kids learn some positive financial habits? Find out more about money lessons new and old for your children.

[1] ABC News, Cashless kids: Is tap-and-go technology promoting financial illiteracy? Kathy McLeish, 17 August 2017.

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