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Thriving in the ‘Gig Economy’

1 March, 202323 March, 2023 Updated on23 March, 2023 Budgeting, Education, Tax

If you’re a freelancer or contractor or maybe even a consultant then you’re part of the “gig economy”. Gone is the job for life, or even a job in the normal, employed meaning of the word. For you, work consists of short-term contracts or a series of one-off jobs. “Gigs” as the band down at the pub might put it. For some, gig work is a liberating choice that allows them to work their own hours, holiday when they like and work wherever they wish. For others it’s a necessity in a weak job market where under-employment and age discrimination is rife, and more companies choose to outsource specific tasks. Key to the gig economy is technology, be it an Uber app, Skype, crowdsourcing sites or just email and the Web. A study found that 4.1 million Australians had freelanced in 2014/15, and it’s a trend more likely to grow than diminish. So if you’re a “gig worker” what can you do to make the most of your situation? It’s business If you’re happy picking up the odd jobs that fall into your lap for a little extra money, that’s fine. But if you are looking to earn a full-time income then you’re in business and need to operate accordingly. To begin with, you need to know: Who your potential clients are; How to reach out to them; How to gain referrals; The processes you have to put into place to track your work, issue invoices, and make sure you get paid on time; How to meet your tax obligations. Protect yourself Depending on the work you do and the requirements of your clients you may need a range of insurances: Professional indemnity insurance – if there’s any chance a client could sue you in relation to the work you are engaged to complete. Public liability insurance – in case your work activities cause injury to a member of the public. Income protection insurance – you may be eligible for workers’ compensation insurance, but the rules vary from state to state, depend on your business structure, and only cover work-related injuries. Income protection insurance will also cover you against illness and non-work-related injuries. Life insurance – if you have dependents but little in the way of net assets. Think long term Can you build your business into something you can sell? If not, how will you fund your retirement? As a gig worker you’re unlikely to receive compulsory superannuation contributions, but you can (and should) make your own contributions. Personal contributions are tax deductible up to the annual concessional cap of $27,500. Get advice All state and territory governments have departments of business that offer a wealth of information and support for small businesses. Check out the help available in your state. And talk to your financial adviser. Aside from being able to look at your insurance, savings and super needs, your adviser may be an experienced small business operator, a potential mentor, and a valuable member of your network. Contact us today! The information provided in this article is general in nature only and does not constitute personal financial advice.

The difference between a savings account and a term deposit

15 February, 20239 February, 2023 Updated on9 February, 2023 Education, Investing

Depositing cash in a savings account or a term deposit are the most common ways to invest your money. But, how do you know which is right for you? First, let us explain their main differences and impact on your money. What is a savings account? A savings account is a deposit account held at a bank or other financial institution that earns interest. Benefits Easy access to your money at any time, while the remaining balance earns interest. You can save more by depositing more at any time. Savings accounts are eligible for the Australian Government’s Financial Claims Scheme, which protects against the failure of an authorised deposit-taking institution (ADI) (such as banks or credit unions). The government guarantees deposits of up to $250,000 per account-holder per ADI. Downsides You may need to link your high-interest saving account with a transaction account to meet certain conditions, such as depositing a minimum amount every month or limiting your withdrawal frequency. As interest rates can vary, your earnings will also fluctuate. You may be tempted to spend more given the easy accessibility of funds. Fees Most banks do not charge a savings account fee; however, some may charge an account keeping fee. Possible Tax outcome Interest earned is treated as investment income and taxed at your marginal tax rate. What is a term deposit? A term deposit is also a type of deposit account held at a bank or financial institution, with money kept for a set period of time at a fixed interest rate. Benefits The interest rate is guaranteed and does not fluctuate. You can invest in multiple term deposits of different terms and interest rates. For example, you can invest $15,000 in a 6-month term deposit earning 1% p.a. and $5,000 in a 12-month term deposit earning 1.50% p.a. They too are eligible for the Australian Government’s Financial Claims Scheme. Downsides If you want to access your money before the term finishes, you may be required to notify your bank at least 31 days prior, except under special circumstances. If interest rates increase, you cannot benefit as your money is already locked away at a fixed rate. Banks usually have a minimum balance requirement for a term deposit of approximately $1,000 to $5,000. It may be a considerable risk if you do not want to lock away that much of your savings or have just commenced your savings journey. Fees Banks usually do not charge any fee on a term deposit. However, if you want early access to your money, there may be an early withdrawal fee and loss of interest for the remaining term. Possible Tax outcome Interest earned is treated as investment income and taxed at your marginal tax rate. Which is better for your needs? Interest rates, accessibility of funds, and fees are key factors to consider. If you want a guaranteed income, term deposits are the way to go. However, if you want easy access to your money, use a savings account. Alternatively, you may keep some funds in a savings account for daily expenses or an emergency and invest the rest in a term deposit. Ultimately, the right decision for you will depend on your budget and financial requirements. The information provided in this article is general in nature only and does not constitute personal financial advice.

Economic Update: October-December 2022

1 February, 202325 January, 2023 Updated on25 January, 2023 Economy, Investing

According to the Reserve Bank of Australia, domestic headline inflation is expected to reach 8% in the final month of 2022 as consumers continue to spend despite higher interest rates. Retail spending saw a significant increase of 6.4% during November, with Black Friday sales pushing the number even higher at 8% during the last week of the month. The surge in spending during this time is relatively new in Australia, with the event being similar to the Black Friday sales that occurred in 2021 but lower than the two previous years. This suggests that the trend may be a short-lived fad in the country. Low unemployment levels and expectations of continued labour shortages throughout the economy appear to be creating newfound confidence among consumers, despite continued increases in interest rates. The Reserve Bank appears determine to halt further price rises by pushing interest rates even higher through 2023, which will inevitably flow through to higher home loan rates and further falls in property prices. This is despite its own figures suggesting that if cash rates reach 3.6 per cent next year, some 15 per cent of Australian homebuyers will be experiencing negative cash flow, where their mortgage repayments exceed their net earnings. Few analysts though are expecting widespread defaults, pointing to the build-up of large financial buffers through the pandemic, continued strong labour markets and earlier house price gains, all acting to help homeowners get through the coming year. Nonetheless, the expectation is for further downward pressure on property prices through 2023, with most analysts predicting a 15 to 20 per cent fall in national house prices from peak to trough with impaired or unrenovated properties experiencing even greater price falls. Company profits are expected to remain strong through 2023, driven mostly by strong export prices, despite efforts to speed up the decarbonisation of the economy and move to more renewable sources of energy creation. Industries are expected to benefit from embracing public-private partnerships with the newly elected Federal Government in policy priority areas such as energy, defence, education, health, and security. The continued strength of the domestic labour market and the strong international demand for Australia’s mining exports should also protect the domestic economy from the cold winds that are currently blowing through the international economy. The United States economy, typically the powerhouse of the world economy, is almost certainly expected to fall into recession later in 2023, with domestic economic growth there expected to fall to a lacklustre 0.5 to 1 per cent for the calendar year of 2023. The Chinese economy is still held moribund by the continuing impact of the pandemic with reported cases of Covid 19 soaring as winter takes its grip on the country, causing factory shutdowns and with that, a fall in exports. In the United Kingdom, inflation peaked at 11.8 per cent in October 2022 and is expected to remain in double digits for some time as higher energy prices, interest rates and general cost of living increases cause widespread price hikes around that nation. While the Bank of England is doing its best to bring inflation under control, there is widespread resentment that it is the poorest and most vulnerable in the community that are paying the highest price for the nation’s economic woes. A situation made worse by the slowdown in economic activity in Europe generally, as the ongoing war in the Ukraine continues to take its toll, driving energy prices higher and causing massive economic dislocation. The information provided in this article is general in nature only and does not constitute personal financial advice.

Three-Minute Financial Check-up

11 January, 202321 December, 2022 Updated on21 December, 2022 Budgeting

While the standard of living is constantly improving in Australia, economic disruptions, stagnant wage growth and continually increasing house prices are putting more and more people under financial stress. A recent report by the social research group, the Melbourne Institute, ‘Taking the Pulse of the Nation’, found one in three Australians reported being under financial stress. It found that those on fixed-term contracts and anyone self-employed were particularly vulnerable to feeling financial stress, as were people employed in the hospitality and IT sectors. There is nothing worse than that niggling feeling that you’re not in control of your financial situation or worse, the dread that you may not be able to meet your next home loan repayments or that you’ve maxed out your credit cards. For many people, it is simply that their lives are so busy they never have the time to focus on their financial position and so the constant pressure of earning money and paying bills can easily spin out of control. Just as all financial situations can be improved, so all financial problems can be resolved and the earlier you act, the better. Just the simple step of reaching out for help will make you feel better about your financial situation. So, it may be as simple as being unsure whether you will have sufficient savings in super to retire in the way you were hoping to, or it might be that you have created a debt mountain that you feel helpless to reduce. If you find yourself spending a large part of the day worrying about your finances, if you have trouble sleeping at night or if your financial position is causing repeated arguments between you and the people you care most about, it is important that you reach out for help. A good place to start is completing this Three-Minute Financial Check-Up. If you answer no to any of the questions on this list, you should make time to discuss your financial situation with a qualified financial adviser. They will be able to tell you just how serious your situation is and more, how you can take steps immediately to improve your financial position and help you get you back on track, so you do feel in control. Your Three Minute Financial Check-Up Action YES NO Do you pay all your credit cards off in full by their due date? Do you sleep easy knowing all your bills will be paid when they fall due? Do you have a budget, and do you stick to it? Are you making all your loan repayments on time? Do you know exactly how much your home loan is today? Do you know what you would do if you lost your job tomorrow? Are you confident about your children’s financial future? Do you have life and total and permanent disability insurance in place? Do you have income protection in place? Do you know how much you have in super? Are you and your partner in agreement about your finances? Do you feel confident about your overall financial position? The information provided in this article is general in nature only and does not constitute personal financial advice.

6 steps to a sustainable Christmas

21 December, 202221 December, 2022 Budgeting

Just as the Grinch stole Christmas, excess spending can rob us all of yuletide happiness. Seasonal credit card splurges can create ballooning long term debt, while unnecessary consumption inevitably leads to a blow-out in rubbish bin waste. The Commonwealth Bank of Australia estimates $11 billion is spent on presents each year, including some 20 million unwanted gifts. At the same time, seasonal celebrations boost landfill rubbish by a massive 30 per cent. So, if you want to max out the ho, ho, ho in Christmas this year, think of applying more whoa, whoa, whoa to your spending and consumption ideas. Here are six simple tips Ebenezer Scrooge would be proud of: Ninety per cent of Australians claim to recycle something, sometimes. What better way to do this than to shop for presents in one of Australia’s 2,500 opportunity shops? Forget the old days of chipped crockery and stained used clothing. Op shops are full of trendy, mint condition items and are the perfect place to find something slightly offbeat or unusual for your loved one. Save on postage and reduce needless paper usage by sending clever and original e-Christmas cards. Head online to create your seasonal messages to email to friends and family. Many websites provide free cards, while others offer designer animated versions. Instead of giving a physical gift, give an experience such as tickets to a concert or a voucher to use at a favourite restaurant. Better still, why not gift something special of yourself by offering to cook a meal or provide free babysitting for a family member. Giving an experience rather than a physical gift also means you don’t need to waste precious paper by wrapping the present or spend money on postage getting it to that special someone. If you do give a physical present, think of some clever ways to wrap it, so you’re not adding to the 150,000 km of wrapping paper Australians needlessly use each year – that’s enough paper to circle the equator 4 times. Wrap your gift in a re-usable patterned tea towel or scarf, or better still, invest in some brightly patterned boxes to hold your present that can be recycled from one Christmas to the next. Stop for a moment and look around your home to see what you can re-use and turn into a gift. A great place to start is the garden. Many plants can be easily divided and, in doing so, will create new plants you can pot up in a re-usable pot to give away. Take time to plan your meals this season and, wherever possible, cut down on buying heavily packaged or processed foods. Instead, buy fresh foods that can be eaten without much cooking, re-used as leftovers, or frozen for later consumption. It’s estimated that ninety per cent of Australians discard some 25 per cent of all the food they buy during December – that’s food that has been needlessly produced only to end up in Australia’s landfills. What really matters is remembering how blessed we are to be enjoying the festive season in whatever way we can and being with the people we care about most. The information provided in this article is general in nature only and does not constitute personal financial advice.

Being sensible with Buy Now Pay Later this silly season

7 December, 20221 December, 2022 Updated on1 December, 2022 Budgeting

Move over debit and credit cards; consumers are flocking to Buy Now Pay Later (BNPL) services. Afterpay, Zip Pay and several similar payment solutions allow shoppers to take home their goodies now while paying them off via a few weekly, fortnightly or monthly payments. There’s no interest payable as such, although fees are charged for late payments. A survey by Mozo reveals that 30% of Australian adults have one or more BNPL accounts and we’re not afraid to use them. Afterpay, our most popular BNPL service, achieved sales of $4.3 billion across Australia and New Zealand in the 2019 financial year, nearly double its sales of the previous year. With the nation set to splurge around $27 billion on Christmas, it’s a safe bet that plenty of that spend will be by BNPL. But with 60% of those surveyed by Mozo admitting that BNPL lead them to buy things that they wouldn’t have otherwise, it begs the question: how to use this payment option sensibly during the silly season? 1. Set your limits Make sure you have a budget for your Christmas spend, and use it to help resist the temptation of impulse purchases. 2. Track your spending Don’t just track your BNPL spending. Make sure you review credit and debit card purchases, too. Are you staying within budget across all your spending methods? 3. Avoid fees Around one third of BNPL users have missed at least one payment. While late fees may seem modest, they can add up. 4. Don’t repay BNPL loans with a credit card If you don’t pay off your entire credit card bill within the interest-free period, adding your BNPL repayments to the card may see you paying a high rate of interest on your purchases. Better to use a debit card or direct debit from your bank account, and making sure there’s enough money in the account to meet payments. 5. Avoid BNPL if you’re saving for a home loan Lenders may look at your use of BNPL as a sign that you don’t have significant savings and are living from payday to payday. The lower your debt, of all types, the easier it will be to get a mortgage. 6. Have a happy festive season Used wisely, BNPL can help you jingle your bells and put the merry in your Christmas. Just make sure you know what you’re signing up for and that you can meet all of the regular payments. Take care, and you’ll be able to enjoy the start of the New Year without a financial hangover. For further budgeting tips and financial advice, talk to us. We’re here to help. The information provided in this article is general in nature only and does not constitute personal financial advice.

A helping hand for the holidays

23 November, 202216 November, 2022 Updated on16 November, 2022 Education

Summer and the festive season are times we all look forward to, balmy evenings, relaxing holidays and social get-togethers. Like a beacon on the horizon, it provides something to aim for as we work, play and navigate our way through twelve, long months. Our modern world is busier and more stressful than ever, and for many, the holidays also represent a time when feelings of isolation, worries over work, finances and family conflicts, seem intensified. A time when more families than ever seek the assistance of charities. Tin-rattling events and fundraising campaigns don’t happen as often over the Christmas period. Charity chocolate boxes – always popular in the office – are ineffective if most people are on leave. So how can you help? People are traditionally very generous around Christmas-time, but for some organisations, it’s not always about cash; there are ways to contribute that don’t involve donating money. For example, the needs of disadvantaged children are foremost for organisations such as The Smith Family. This organisation focuses on enabling children to build better futures for themselves; aiming to break the poverty-cycle through education. Regardless of your education, skill set or background, if you want to make a difference to the lives of children, see www.thesmithfamily.com.au for further information. During times of crisis, not everyone has a shoulder to lean on, yet a caring ear is close by thanks to organisations like Lifeline. Lifeline provides emotional support 24/7, existing, “…so that no person in Australia has to face their darkest moments alone.” Lifeline has a volunteer program where you can be trained to support people in need via phone or web chat. Alternatively, Lifeline can assist you to set up your own personalised fundraising page so instead of receiving gifts for your wedding, anniversary, birthday (whatever occasion you choose), friends and family can donate to Lifeline instead. For further details, go to www.lifeline.org.au. During the holiday season, with all the associated excitement and frenetic activity, it’s easy to forget the voiceless, those unable to speak for, and support, themselves. This time of year, wildlife charities struggle through lack of funding, and an inundation of animals injured or left homeless after bushfires, habitat loss or road accidents. While cash donations are needed to buy food and medicine, if you’re unable to help financially, donations of bedding, old towels, blankets and food are equally important. You can also organise your own fundraising event. Alternatively, if you’re a knitter you can make possum-pouches, or those handy on the tools, can assist wildlife carers in building pens, fences and enclosures for animals. Each state has administrative wildlife centres that distribute aid and workers where they’re most needed, in Victoria contact Wildlife Victoria www.wildlifevictoria.org.au. As we face the end of the year our focus is naturally on summer holidays and festive celebrations but remember that if you or your family are experiencing difficulty, these charities exist for you too. So now we turn to a new year. We draw a line beneath the last one and look forward to twelve months of renewal and possibility. The information provided in this article is general in nature only and does not constitute personal financial advice.

Director Identification Numbers – time is ticking!

16 November, 202216 November, 2022 Regulatory

Do you have an SMSF with a corporate trustee or are you a director of a company? Do you know you have to register for a director identification number (director ID) by 30 November 2022? Legislation was previously introduced resulting in new obligations for company directors requiring them to obtain a personal director identification number (‘Director ID’) before 30 November 2022. As a company director, you are required to personally apply for a Director ID. Note this also includes where you are a director of a company acting as a trustee (such as the corporate trustee of your SMSF or family trust). While our office can help you in understanding your new Director ID obligations, unfortunately we cannot make the application on your behalf (although we are happy to assist if and when required). Please see below for the registration process to follow. Once you have successfully applied for, or if you have previously obtained, your Director ID, please supply a copy to our office. How do I apply for a Director Identification Number? You can apply by calling 13 62 50 or online. To apply by calling 13 62 50: Call 13 62 50 (may be a wait time of around 5 mins) The overall process should not take more than 5 minutes, once your call is answered. You will need to have your personal TFN and ID ready. ID will need to be 1 Primary & 1 Secondary document (You will be asked for details on documents ie. Document numbers, expiry dates etc) Primary documents can be: • Australian full birth certificate (extracts and commemorative certificates are not acceptable) • Australian passport (including passports that have expired in the past two years) • Australian citizenship certificate or extract from a Register of Citizenship by Descent • ImmiCard • Visa (if you are using a foreign passport but you are still in Australia) Secondary documents can be: • Medicare card • Australian driver’s licence or learner’s permit. This must show your photo and signature, and the address on the card must match your details on the form. You will then be asked answer a couple of questions, such as; • The name of the bank where you hold an account that earned interest in the last 2 years • Your mobile phone number • The name of your Accountant This should then complete the process and you will be given your Director ID number. To apply online: There are 3 key steps to apply for your director ID online. Step 1: Set up myGovID If you do not already have a myGovID you will need to set this up before you can apply for your director ID online. You can find information on how to setup your myGovID by downloading the app at: https://www.mygovid.gov.au/set-up Step 2: Gather your documents You will need to gather some information that the ATO already knows about you to verify your identity. You will need your tax file number, your residential address held by the ATO, and information from two of the following documents: • Bank account details • ATO notice of assessment • Super account details • Dividend statement • Centrelink payment summary • PAYG payment summary Most of this information can be downloaded from your myGov account so it may be worthwhile linking to this service ahead of applying for your director ID. Note, myGovID is different to your myGov account. Your myGov account allows you to link to and access online services provided by the ATO, Centrelink, Medicare and more, while myGovID is an app that enables you to prove who you are and to log in to a range of government online services, including myGov. Step 3: Complete your application Once you have a myGovID and information to verify your identity, you are ready to apply for your director ID. You can click on the following link to start the application process. The application process is quick and should take you less than 5 minutes. https://abrs.gov.au/persons/ui/secure/start/applyForDirectorID?action=applyfordirectorid Further information about the application process, and step-by-step instructions, can be found via this link: https://www.abrs.gov.au/director-identification-number/apply-director-identification-number The information provided in this article is general in nature only and does not constitute personal financial advice.

Federal Government’s October 2022 Budget

9 November, 20229 November, 2022 Economy

A sudden uptick in the unemployment rate and slower economic growth combined with continued strong inflationary pressures are set to test the Australian economy during the next two years, according to the Federal Government’s 2022 October Budget. While record commodity prices and higher Government revenues have provided some relief reducing the annual budget deficit from $78 billion to $36.9 billion, the economic outlook remains uncertain. Government spending will continue to outpace revenue with Canberra doing little to address the long-term structural difficulties contained within the budget, despite trying to restrain spending in order to limit inflationary pressures within the economy. Perhaps more importantly is the very real possibility that the Australian economy could tip into recession next year with unemployment set to spike at 5.5 per cent while economic growth is expected to slow to just 1.5 per cent. Global political and economic uncertainty cast a long shadow over this budget, with the Government allocating some $1.4 billion in aid to Pacific nations during coming years – one of the few areas of higher Government spending. Despite keeping a tight hold on outlays, the budget centrepiece is a pledge to build 1 million new houses across the nation during the next five years, in an attempt to alleviate the country’s chronic housing and rental shortages. Nonetheless, households will continue to face their own tough budgetary realities with energy prices tipped to explode by more than 56 per cent in the two years ahead and real wages expected to continue to fall. Fearful of pushing domestic inflation even higher, the Budget contains no cash relief or direct subsidies for households facing increasing cost of living pressures from higher energy costs, higher fuel prices and higher interest rates. Medicines will become cheaper with the maximum general co-payment for medicines on the Pharmaceutical Benefits Scheme cut from $42.50 to $30 while an additional 17 million scripts will now receive Government subsidies to reduce their cost to patients. In the meantime, the Government has left the door open to review the much-debated 2024 income tax cuts, which are focused on providing tax relief for high income earners, particularly wage earners who have been adversely impacted by ‘bracket-creep”. The former Government’s much talked about commuter car park programs have been axed along with $1.7 billion slashed from various Government regional dams’ projects over the next four years and $4.6 billion over the next twelve years. While the Government has promised to spend $1 billion to create 180,000 additional fee-free TAFE and vocational training places, little has been done to support small business, emerging from two years of pandemic created restrictions and tough trading conditions. Nonetheless, the whole country will benefit from the Government’s commitment to move to a low carbon economy and its “Rewiring the Nation” program is set to improve energy transmission and connect new renewable energy projects to the nation’s electricity grid. $800 million has been set aside for Powering Australia, which plans to cut taxes on electric vehicles, invest in a national EV charging network and provide solar battery storage for up to 100,000 Australian homes. The information provided in this article is general in nature only and does not constitute personal financial advice.

Why the share market is not the same as the economy

26 October, 202219 October, 2022 Updated on19 October, 2022 Economy, Finance

At the beginning of 2022 the Australian economy appeared to be sliding into recession, dragged down by higher interest rates and even higher inflation levels. As a result, it was tempting to believe the share market was also set to tumble. And while that’s not impossible, the local market traded higher during each of Australia’s last nine recessions, with some of the strongest trading on the Australian share market occurring when the economy was contracting. For example, 1983 was the best year ever on the Australian share market, climbing 60 per cent higher, while the economy was stuck hard in the 1981-1983 recession. So, while it is tempting to think poor economic times mean a dismal outlook for the market, there are four key reasons why that is usually not the case. Firstly, the market is driven by expectations. There is an old saying; investors buy on the rumour and sell on the facts. Big share market falls occur suddenly, well before the economy officially moves into recession, as investors promptly react to bad news. Once the economy is in recession, investors look to the future and how companies can take advantage of emerging opportunities in an improving economy. Improvements that can take time to show up in economic data. Secondly, the share market reflects investor sentiment, while consumer concerns and beliefs dominate the economy. Consumers might cut back on buying clothes or going out in preference to boosting savings when they fear bad times. In contrast, professional investors are constantly looking for opportunities, and economic downturns where small businesses go bust and consumer sentiment changes, usually create them. Thirdly, the share market comprises large successful companies. In contrast, economic statistics are dominated by what is happening to individuals and small businesses. Two groups that can respond very differently to world events. For example, the war in Ukraine prompted a rise in energy prices, particularly for oil. Most individuals and small businesses responded by cutting back on their petrol consumption, while large oil companies are cranking up production to take advantage of these higher prices. Finally, the share market has a much smaller universe than the economy. The market is made up of large companies entirely focused on getting larger and more profitable and, in doing so, attracting more investors to support their efforts. The economy is made up of Governments, individuals, and small businesses, all making a wide range of decisions about how they will live and operate in an ever-changing world and are basing those decisions on a raft of factors. So, while the share market and economy are connected, they are influenced by widely different variants that often see them heading in different directions. The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: July-September 2022

12 October, 202212 October, 2022 Economy, Finance

As geo-political tensions tighten in Ukraine, economies around the world are reeling from mounting energy prices, soaring costs of living and in a desperate attempt to bring down inflation, higher interest rates. The US economy appears certain to fall into recession. Markets have suddenly become volatile as shares are sold in preference to holding funds in defensive assets such as cash. This in turn is reaping havoc on world currency markets. Funds are flooding into US dollar denominated investments and in doing so, are sending the value of the greenback sky high against other currencies. Speculation is mounting that the British pound may fall to historic lows in coming months and may even reach parity with the US dollar, driven by the newly elected Prime Minister Liz Truss, implementing a big borrowing, low taxing budget. This controversial attempt to boost the British economy comes at a time when central banks around the world, including the Bank of England, are lifting interest rates in order to reduce economic activity and so, dramatically slow the rate of inflation. The Organisation of Economic Co-operation and Development is now forecasting economic growth will slow from 2.8 to 2.2 per cent during the next twelve months as the United States, China and Europe all cut back on economic activity. While Australia is not spared from this global slowdown, with the OECD forecasting domestic growth will tumble from 2.5 to 2 per cent during the coming year, it should survive this turbulent period better than most. Much will depend on this month’s Federal Budget. The first by the newly elected Albanese Government, it will tread a line between its reform agenda including much talk about tax cuts and trying to slow the economy and so reduce inflation. Although the employment rate across the nation remains high, spiralling prices for basic foodstuffs and other essentials is putting enormous pressure on the Government to provide relief to those struggling to get by. In the meantime, petrol prices are set to bounce higher as the Federal Government restores the fuel excise tax, adding 23 cents a litre to both petrol and diesel sold in Australia. In addition, the Reserve Bank has made it clear it will continue to lift the domestic cash rate and with it most other local interest rates, until it has clawed back the rate of inflation from an expected high of 7 per cent, to less than 3 per cent. Higher interest rates are already impacting homebuyers. Five rate rises since May, mean a couple earning $92,000 each, can now borrow $264,000 less than they could in April according to analysis by the research house, Canstar. So even with a 20 per cent deposit, a couple’s maximum budget has dropped from more than $1.63 million to $1.37 million and this in turn is being reflected by prices in the property market. As buyer’s budgets have fallen, so too have property prices. CoreLogic Home Value Index shows house prices in Sydney have dropped by 7.6 per cent this year while Melbourne prices have fallen by 4.6 per cent. With the Reserve Bank determined to force even higher interest rates on the economy in order to defeat inflation, there is no end in sight to higher interest rates and further property price falls. The information provided in this article is general in nature only and does not constitute personal financial advice.

Personal risk management plan – do you have one?

28 September, 202228 September, 2022 Finance

Risk Management Plans don’t only apply to businesses – every person and family should also have a plan to help them cope in the event of an unexpected crisis. No doubt you have insured your car as the risks of damage are obvious to you on a daily basis. You will almost certainly have insured your home and contents against fire, burglary or storms. But what about your greatest asset: your income? Statistics show that as a working adult, earning an average income is worth more than $3.7 million over a 40-year full-time career, assuming no increase in earnings. How would you cope if your family’s primary income earner met with serious illness or accident? Your Risk Management Plan Professional guidance is crucial in establishing your risk management plan. You need to consider the extent of your financial commitments and review what assistance may already be in place. This may include insurance cover within your superannuation, employer protection, existing insurance policies or other sources. Fortunately, a range of insurance policies are available to cover the risks you confront. These include: Loss of Life or Total & Permanent Disablement. By including this in your superannuation it is effectively a tax deduction as your superannuation comes from pre-tax income. Income protection. A critically important cover for income earners. It will provide you with income in the event of sickness or accident for a predefined period. If you are a small business operator you can include the costs of operating your business while you are incapacitated. The premiums are a tax deduction. Trauma insurance. This is sometimes referred to as critical illness insurance and provides for a lump sum in the event of suffering a specific injury or illness. It is ideal for a non-income earning partner who may not qualify for income protection. Child Trauma insurance. Many families are devastated when a child is struck with a critical illness. This may mean one or both parents having to give up work while the child undergoes lengthy treatment. Some companies are now providing specific policies to assist the family in such a catastrophe. A licensed financial adviser will be able to help you prepare a Risk Management Plan… just in case. The information provided in this article is general in nature only and does not constitute personal financial advice.

Retirement wrongs that could send you broke!

14 September, 202229 September, 2022 Updated on29 September, 2022 Finance

While retirement should be the best years of your life, many Australians make simple, avoidable mistakes with their finances that can leave them without the funds to really enjoy life. However, with some simple good advice at the start of retirement, these mistakes can usually be avoided, leaving retirees to focus on what is really important and that is, simply enjoying life. Making emotional investment decisions Many people reach retirement age and panic that they don’t have enough money. This then prompts them to make high risk investments in the vague hope of catching up on lost time. Too often their dreams of big profits blind them to risks and many end up losing a chunk, if not all, of their money. All retirement savings are irreplaceable and should be invested with this in mind. Ignoring your portfolio At the other end of the spectrum are retirees who think they have so little saved for retirement that it doesn’t matter what they do with it, in terms of their investments, it won’t make any difference to their lives. This is almost as big a mistake as taking excessive risks. No matter how much money you have saved for retirement, you should be pro-active in making sure these funds are safely invested and providing for you. Miscalculating your retirement funds Many misjudge either the total amount they have to retire on, and/or, the level of income it will generate. This is particularly the case when the decision is made to keep an investment property in retirement. The high value can often give a false sense of financial security, while the actual income generated after all the costs are deducted, can be extremely low. Determine just how much money you have saved for retirement, conservatively judge how much income will be generated from those savings and ensure you don’t spend more than your investments generate. Changing asset allocations to conservative assets, such as cash For many, retirement is the first time they have had to manage or decide how to invest a large amount of money. This can be unnerving at the best of times. Throw in a small market downturn and it is not unusual for people to panic and sell perfectly good investments. This is, of course, the worst option. By panicking and selling investments when the market has taken a step down, losses are locked in and any chance of recovering those funds as the market improves, is lost. Keeping up with the “Joneses” Too often, we’re swept along by what others do. Focus on how you want to live. Think about what will make you happy in retirement and then invest your savings safely so you can focus on enjoying life. For most, the things that make them happiest are free. Time spent with grandchildren, walking barefoot on a beach, or spending time in the garden, all cost very little money and are a fabulous boost to the body, health and mind. If you have any doubts at all about how you should structure your finances, make the decision to get quality advice before you make any of these mistakes. It will be the best investment you make in retirement. The information provided in this article is general in nature only and does not constitute personal financial advice.

An often forgotten aspect of insurance

17 August, 202211 August, 2022 Updated on11 August, 2022 Economy, Insurance

When most people think about financial planning, they tend to focus on the wealth creation side of things, but often forget about the wealth protection. Building a financial plan without adequate insurance is like building a house on flimsy foundations. Comprehensive insurance cover can be a significant expense; however, these costs can be made more affordable by taking advantage of the tax deductions that apply to specific types of insurance, and to some methods of implementing insurance. Income protection Due to the high frequency of claims, premiums for income protection insurance can be quite high. However, they are tax-deductible, so the cost is discounted at the same rate as the policy holder’s marginal tax rate. For example, someone on a marginal tax rate of 39% (including 2% Medicare levy), paying a premium of $1,000 would have an out of pocket cost of just $590, after the tax deduction is claimed. It needs to be remembered, however, that any benefits paid under an income protection policy are treated as assessable income, and therefore subject to tax. Life insurance While the premiums for life insurance are not normally tax-deductible to individuals, there is a simple way to gain a tax benefit. Superannuation funds can claim a tax deduction for the life insurance premiums they pay. So, by taking out life insurance via a superannuation fund, a similar result can be gained as if the premium was deductible to the person taking the insurance. Using superannuation to provide life insurance has another potential benefit. As premiums are paid by the fund, it reduces the pressure on household cash flow. This may reduce the ultimate superannuation payout, but if the savings made outside of super are used wisely, the overall financial position should be improved. The proceeds of life insurance are generally not taxable. However, a death benefit paid from a super fund to a non-dependant may be subject to some tax. Total and permanent disability insurance (TPD) TPD insurance is usually attached to life insurance. From a tax perspective it’s treated in a similar way, so implementing it via superannuation is usually the most tax-effective way to do it. However, TPD policies held in super must have a stricter definition of what constitutes ‘total and permanent disability’ than similar policies held outside of super. Trauma insurance Trauma insurance pays a lump sum if the policy holder suffers a defined medical condition or injury. It cannot be implemented through superannuation. Premiums are not tax-deductible, but benefit payments are not subject to tax. As with investing, the main focus on insurance shouldn’t just be on saving tax. It is a protection tool. Always talk to a qualified adviser to ensure you get the appropriate level of cover, and the most tax effective way to implement it. The information provided in this article is general in nature only and does not constitute personal financial advice.

The effect of rising inflation

3 August, 202227 July, 2022 Updated on27 July, 2022 Budgeting, Economy

The word ‘inflation’ doesn’t only dominate business news headlines but finds its way into general news reports too. So, what is inflation and how does it affect you? In simple terms, inflation signifies a rise in the price of goods and services, meaning you pay more for every purchase you make. Does the US influence Australia’s inflation rate? It is not a surprise that countries in today’s world are more connected than ever before. Therefore, a rise in US inflation rates will impact the Australian economy too. However, the degree and timing of its impact will vary. For example, a rise in labour costs in the US may have a limited impact on Australians; however, an increase in the price of iPhones or Nike shoes in the US will reflect in their price in Australia too. What will be the impact of rising US inflation on Australia’s economy? Interest rate movements made by the US Federal Reserve Bank (the Fed) are closely monitored by central banks worldwide, including the Reserve Bank of Australia (RBA). Over the past decade, many developed economies, including the US and Australia, have reduced interest rates to boost their economies. With rates rebounding from all-time lows there is an expectation that rates will continue increasing due to the strong performance of those economies. Quite often when the Fed increases its interest rate, Australia is quick to follow suit. The cost of borrowing funds will increase, leading to a rise in the inflation rate, making goods and services more expensive. Rising inflation rates can also negatively impact the Australian dollar, where one AUD buys less USD than it may have done previously. What will be the effect on investors? A rise in inflation affects investment markets negatively due to higher interest rates, volatility in the economy and uncertain share prices. For some investors, rising interest rates mean paying more interest on their home loan, which reduces their disposal income and, in turn reduces their capacity to invest. For retirees, an increase in the price of goods and services at a time of share market volatility can lead to having to sell more of their investment assets (potentially at a loss or reduced profit). Also, there could be uncertainty in dividend income, which many retirees often rely upon. Retiree investors will have fewer years to recover from a drop in their portfolios compared to younger investors. How should you prepare for a rise in inflation? It is important to first analyse your personal cashflow situation to understand where your money goes. Consider fixing at least part your home loan to limit your exposure to rising interest rates. Reconsider new personal loans, such as car loans. Do you need to take on new debt when interest rates are likely to increase? For the risk-taking investor, it can be tempting to invest more money into shares when prices are falling, but always consider averaging your position to avoid market timing risk. For investment purposes, consider having exposure in well established companies “blue chip stocks” vs riskier stock. Investors often find comfort knowing their funds are exposed to good quality companies with strong balance sheets. If the thought of rising inflation leaves you feeling unsettled, be sure to talk to a professional adviser. Your adviser will review your financial position, your ability to meet your financial obligations, as well as identify strategies to outpace inflation. The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: April-June 2022

20 July, 202213 July, 2022 Updated on13 July, 2022 Economy

The price of a lowly head of lettuce has never been a recognised barometer of the strength of the Australian economy, that is until the media started reporting iceberg lettuces were selling for $10 a head. Suddenly, this has become a touchstone for everything that is wrong with the domestic economy. Prices are on the rise, spurred by higher transport costs and climate-based disruptions to the food chain, and the cost of living is surging. While some relief came with an unexpected 5.2 per cent increase in the basic wage, a move endorsed by the newly elected Federal Government, the prospect of similar inflation linked wage increases were dismissed as a ‘baby boomer fantasy’ by the trade union movement. Nonetheless, fears of further wage increases remain. So, all eyes are now focused on price rises with the most recent figures from the Australian Bureau of Statistics, pegging Australia’s rate of inflation at 5.1 per cent per annum. As bad as this might seem, it is still one of the lowest inflation rates among OECD nations, beaten only by Japan and Switzerland, at the bottom of the inflation table with 2.5 per cent, followed by Israel on 4.0 per cent, and Korea and France with 4.8 per cent. However, with inflation in the United States at 8.3 per cent and 7.8 per cent in the United Kingdom and both countries expecting this rate to go higher, the fear is Australia’s rate will start moving towards 7 per cent – a rate not seen in Australia for more than 20 years. Inflationary fears were made worse by the Governor of the Reserve Bank, Phil Lowe, calling for “front-loaded” interest rate hikes to avoid stagflation and warning against any super-sized wage claims. Just the mere mention of stagflation, something not seen since the seventies, has sent a shiver through the economy. This drove fears that home loan interest rates will also be pushed higher, causing more financial stress for those who have borrowed heavily and bought property at the recent record-high prices. While all four of the big banks are reporting current home loan arrears at record low levels and the majority of customers are tracking well ahead on their home loan repayments, fears still remain about the impact of higher interest rates. Property prices have already started to slide with industry analysts expecting the average prices in Melbourne and Sydney to fall by 10 per cent this calendar year and by potentially as much again next financial year. Meanwhile, the value of cryptocurrencies, which seems to magnify prevailing market sentiments, has collapsed across the board with values falling by as much as 70 per cent. The largest single cryptocurrency, Bitcoin, which was trading at just $US67.81 in July 06, 2013, soared as high as $US68,000 last November, is currently trading at $US20,200, with little market enthusiasm. While cryptocurrency was once touted as being something of a safe haven and a means of diversifying investment portfolios, it is fast becoming a magnifier of market excess and pessimistic economic sentiment. The information provided in this article is general in nature only and does not constitute personal financial advice.

The female investor

6 July, 202229 June, 2022 Updated on29 June, 2022 Investing

Investment and portfolio building has traditionally been a male-dominated world, but these days more women are trading on the market – and they’re good at it! According to an ASX Australian Investor Study completed in 2020, female investors make up 42% of Australian investors, yet 45% of those only began investing in the year prior to 2020. It’s intriguing that younger women – known as Next Generation Investors aged 18 – 25 – are taking up stock portfolios. Their goals include saving for a holiday (50%) or paying down existing debt (34%). The ASX study highlighted a few other interesting points: Women prefer products more commonly understood, such as direct Australian shares (53%), residential investment property (37%) and term deposits (31%). Women are less concerned than men about low interest rates and market fluctuations, but consider issues like whom to trust, hidden fees and liquidity. While men are more accepting of market volatility, women prefer stable or guaranteed investment returns. While we’re about breaking down stereotypes, the study found that women are generally more successful in their investments than men. This could be because women are cautious by nature, taking longer to research investment choices and, once settled, preferring to ride out market ups and downs. Conversely, men tend to regularly review their portfolios and trade aggressively, buying and selling assets, potentially incurring additional fees and losses due to market swings. In recent times there has been a surge in Australian women backing other Australian women in start-up business ventures. According to SmartCompany.com.au, female venture capitalists are recognising that entrepreneurial women face a specific set of challenges, such as a lack of networking and mentoring opportunities, and lingering perceptions around gender-based work/family roles. Further, support for Indigenous businesswomen is increasing as women’s investment networks strive to encourage women from diverse backgrounds. Fact is, almost 40% of Australian women who are single for reasons of divorce, widowhood or otherwise, will retire in poverty. Issues around the gender pay gap are recognised contributors to women generally having less money in savings and/or superannuation: women save an average of $598 per month compared with men $839. In an effort to improve these figures, many women strive to secure their financial futures through self-education: magazines, blogs, podcasts etc. Others seek professional advice through referral from a trusted friend or relative. The financial planning industry recognises that more women are actively investing. Financial advisers are developing strategies specific to women’s needs and goals – in fact, the industry is well-served by a large number of financial professionals who are women. The Financial Planning Association of Australia (FPA) can put you in touch with a qualified professional adviser, just like us, so you can ensure all your decisions are well-informed and that your personal needs and goals are considered. The information provided in this article is general in nature only and does not constitute personal financial advice.

4 simple techniques to reduce your tax

22 June, 202216 June, 2022 Updated on16 June, 2022 Tax

Here is a list of tips to help you minimise the amount of tax you pay this end of financial year: 1. Keep records Even if you use an accountant to prepare your tax return, you are responsible for the information you provide and for keeping your tax records for a minimum of five years. So, to ensure that you don’t have to pay any more tax than you are obliged to: Keep receipts of all your tax-deductible expenditure. If you are audited by the tax office, you will need to be able to prove the expenses were incurred. Keep track of all your medical expenses. If net medical expenses relating to disability aids, attendant care or aged care exceed the threshold for the year, you may be eligible for a tax offset that takes the form of a credit against tax payable. Keep detailed records of income and capital gains. Required details include date the investment was purchased, how much was paid, when it was sold and how much was received. 2. Claim all available tax deductions You may be able to claim a tax deduction for many of your expenses. These include: donations to registered charities or non-profit organisations; self-education expenses; premiums on income protection insurance; work-related expenses. You should bear in mind that the range of permissible work-related expenses varies widely from occupation to occupation. Refer to the Australian Tax Office (ATO) website www.ato.gov.au for full details. 3. Contribute to superannuation Contributions to superannuation can reduce the level of tax you would otherwise have to pay on your investments because super is taxed at a maximum of 15%. In addition, some people are eligible to claim a tax deduction for contributions made to super. The rules surrounding superannuation tax deductibility provisions and contribution limits are complex, so it pays to seek advice from your financial planner. 4. Manage capital gains When you sell an investment for a profit, you are considered to have made a capital gain. For non-professional investors, capital gains will be included on your annual income tax return. Assets acquired before 20 September 1985 are exempt from Capital Gains Tax (CGT) considerations. When you sell an asset for less than you initially paid for it, you make a capital loss. When your total capital losses for the year outweigh your total capital gains, you will finish up with a net capital loss for the year. If you have a potential CGT liability, there are some strategies that you could consider to reduce the amount you need to pay: a. Keep an investment for at least 12 months Investors are entitled to claim a 50% discount on capital gains made on assets held for longer than a year. So, by holding on to the investment for more than 12 months you will halve the CGT payable. b. Use carry-forward tax losses to reduce CGT Capital losses incurred in previous tax years that have not already been offset against capital gains may be carried forward in future tax years and can mitigate the effect of any CGT liability. Check your past income tax returns or ask your accountant to determine whether this is an option for you. Remember that this information is not personal tax advice. Always consult a professional adviser to help you determine the best strategies for your personal circumstances. The information provided in this article is general in nature only and does not constitute personal financial advice.

4 fool-proof ways to keep on top of your credit cards

8 June, 20221 June, 2022 Updated on1 June, 2022 Budgeting, Education

Credit cards certainly make life easier – they are simple to use, accepted almost everywhere, and help you to buy what you want, when you want, particularly online. So much so that living close to the credit limit has become the norm for many people and spending can quickly get out of hand. To make sure your credit card works in your best interests, use these tips to stay on top of your debt. Routine is key We all know how easy it is to let things get away from us. Just like that power bill sitting at the bottom of the stack of mail on the bench or “accidentally” bingeing an entire Netflix season while the laundry piles up, we tend to postpone boring, albeit important, tasks. Create a routine, though, and you’ll complete these jobs simply out of habit. It can be as easy as setting a monthly reminder in your calendar to check that your credit card payments are up to date. Paying your credit card balance off in full each month, will help you avoid pesky interest fees. This handy tip will also help you avoid any late fees! Make use of technology If organisation skills are not your forte, why not take advantage of the many apps and services designed to help? ‘Mint’ is one of the many useful apps available that will organise your spending into categories, helping you ensure there is always cash to go towards your credit card repayments. Making use of automatic payments in your banking app can also be helpful. Payments will be made on time and best of all, once set up, you don’t have to lift a finger! Cash advances cost more When money is tight, people are forced to use their cards for cash advances (withdrawing cash) instead of just purchasing goods and services… and in doing so, are paying a high price for the privilege. Interest is charged immediately on a cash advance and at a higher rate than purchases. Even if you have an interest-free card, you will immediately start paying interest as soon as you withdraw cash using your card. If you must take cash off your card, repay it as quickly as possible. Emergency funds will save the day! You’ve probably heard about the importance of emergency funds, and with good reason! If we’ve learnt anything over the course of the COVID-19 pandemic it’s just how quickly things can change, particularly within our economy. So, whether it’s an increase in the cost of living or a rise in interest rates, it is vital to have a bit of spare cash handy. A good place to start is with an emergency fund calculator. It will consider your income, savings, and living expenses, and provide an estimate of how much spare cash you should be saving for a rainy day. Realistically, many of us couldn’t get by without our credit cards, but it is vital that we use them in a way that only provides a benefit to our lifestyle. The secret to credit card success — keep your spending responsible and pay the full balance off every month; otherwise, the only winners are the banks. The information provided in this article is general in nature only and does not constitute personal financial advice.

A different “End of Financial Year Sale”

25 May, 202225 May, 2022 Superannuation, Tax

As the end of financial year fast approaches, there is still time to consider the strategies available to you this June 30 to build your wealth, some of which are discussed below. Making a non-concessional contribution to super (Government Co-contribution Scheme) There is a federal government scheme in which people who earn less than $42,016 pa and make a non-concessional contribution to superannuation (a contribution for which no tax deduction will be claimed), may be eligible to receive a government contribution to their superannuation. Under the scheme, the government will contribute up to $0.50 for each $1.00 you contribute to your super fund up to $500. This entitlement reduces for every dollar earned up to the cut-off annual income of $57,016. For those eligible, this strategy can provide a return on every dollar contributed to super. Making a concessional contribution to super Concessional contributions to superannuation are those contributions made to super for which a tax deduction is being claimed. Using this strategy, most people can claim a tax deduction for contributions they make, up to the maximum limit, which is currently $27,500 p.a. However, this figure includes any Superannuation Guarantee Contributions an employer may make. If you have a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you may be entitled to make additional concessional contributions for any unused amounts. The federal government allows a 15% Low Income Superannuation Tax Offset of up to $500 on concessional contributions made by individuals with a taxable income of less than $37,000 per year. This strategy can assist you to bolster your retirement savings whilst managing your tax liability prior to retirement. Paying income protection premiums in advance Income protection insurance can pay a monthly benefit of up to 75% of your salary if you are unable to work due to illness or injury, with the premiums being tax deductible. Paying premiums in advance enables you to bring forward the following financial year’s premiums to claim a tax deduction this financial year. This strategy enables you to protect your existing and potential wealth by taking out insurance to cover you against those events which can disrupt even the best laid plans. There are many end of financial year strategies that have tangible benefits to assist your wealth accumulation and protection objectives, so speak to your financial adviser now to discuss and implement. The information provided in this article is general in nature only and does not constitute personal financial advice.

Don’t leave your family’s future in the hands of a crowdfund

11 May, 20224 May, 2022 Updated on4 May, 2022 Insurance

If there is anything we have learnt in the last two years, it is just how quickly things can change. Between devastating bushfires, floods, and a life-altering pandemic (just to name a few), being prepared for the unexpected has never been made more apparent. As confronting as it may be, it is essential to be aware of the grim possibility of unexpected death and the financial impact it would have on our family. Are they prepared and able to cover funeral costs? Will there be sufficient funds for living expenses? For mortgage repayments? It is a harsh reality but one we all cannot afford to ignore. Unfortunately, approximately 58% of Australians have done just that and do not have enough life insurance cover to allow their loved ones to continue living at the same standard they were before the passing of a family member. This issue of under-insurance leaves many desperately scrambling for ways to make up the shortfall and turning to options like ‘crowdfunding.’ Whether via social media or news articles, we often encounter a devastating story that tugs at our heartstrings and our human desire to help others. Mainly in the form of ‘GoFundMe‘ pages, we see devastated families turning to the generosity of others to raise funds. And while there is nothing better than seeing people coming together and supporting those in need, we cannot rely on the goodness of others to help us financially in the tragic event of illness or death. Heartbreakingly, less than a third of crowdfunding campaigns reach their fundraising goals. Additionally, most crowdfunding programs charge additional fees just to start your campaign. Appropriate personal insurance is the only sure way to guarantee a financially secure future for you and your family, no matter what obstacles life may throw your way. Life insurance calculators are a great starting point; they are an easy-to-use tool that considers age, number of dependents, assets, debts, and more, to give you the most accurate estimate of insurance cover for your circumstances. For tailored, expert advice, speaking with an experienced financial adviser will help you secure the most cost-effective and suitable cover for your individual needs. You’ll also feel protected knowing your policy will be reviewed regularly to ensure it covers your current circumstances. The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: January-March 2022

27 April, 202220 April, 2022 Updated on20 April, 2022 COVID-19, Economy, Investing

Robust domestic economic growth Australia is rebounding from the pandemic, with domestic economic growth forecast to reach 3.5 per cent this financial year. Some analysts predict it might be even stronger, possibly reaching as high as 4 per cent. Driven by Government spending Much of this is due to the lingering impact of the Federal Government’s massive $343 billion health and economic pandemic support packages, as well as further spending in response to recent floods in New South Wales and Queensland. The Government is also spending some $18 billion on infrastructure, mostly rail and road improvements, in an attempt to boost productivity and efficiencies throughout the economy, particularly in the regions. Tightening geo-political tensions in Asia and around the world has prompted the Government to earmark as much spending again on strategic defence measures, including a new naval submarine base on the east coast. Spurred by higher commodity prices The sudden, and largely unexpected, war in Ukraine has prompted a spike in oil prices as a shadow falls over the continued supply of Russian oil and gas to Western Europe. While prices will ease with the arrival of the Northern summer, they are expected to remain stubbornly high. The war, along with continued supply interruptions due to the pandemic’s lingering impact on world trade, means prices for key commodities such as iron ore, coal, and wheat will remain high for the foreseeable future. For Australia, this is, on balance, good news, meaning the price we are paid for key exports will remain strong, driving both domestic profits and Government tax revenue higher. Employment is exploding In line with this strong level of economic growth, domestic unemployment is set to fall to 3.75 per cent in the coming months, its lowest level in some 50 years. Meanwhile, whole sectors, such as the aged care and child-minding sectors and a number of agricultural sectors, are reporting desperate staff shortages, prompting calls to lift migration levels and allow more temporary workers into the country. Nonetheless, low wage growth continues to dog the economy. While the Government is forecasting quarterly wage growth of 3.25 per cent by the middle of next year, this is still below the expected inflation rate, meaning most Australians will face little relief from higher living costs. However, the continued strength of Government spending, combined with prevailing strong terms of trade, should boost profits across the board, leading to higher returns for investors. Despite some clouds on the horizon As always, there are clouds on the horizon. The United States was already facing inflationary pressures, and the impact of the Ukraine war on oil prices is likely to push the US inflation rate higher still, possibly touching 7.9 per cent this year. The US Federal Reserve has started to pull monetary policy back in with a series of interest rate hikes, fanning fears that the US economy may fall into recession later this year. The US is not alone. The Australian Federal Treasury expects global trade bottlenecks (the war in Ukraine and higher oil and food prices) to prompt an uptick in the local inflation rate above the Reserve Bank’s preferred inflation band of 2.5 to 3 per cent. Rising inflation is, in turn, spurring fears of a domestic interest rate hike, with many analysts expecting the cash rate to increase by one full percentage point, which could cause home loan rates to rise across the country. The information provided in this article is general in nature only and does not constitute personal financial advice.

Federal Budget Highlights 2022-23

13 April, 20226 April, 2022 Updated on6 April, 2022 Economy

The Federal Government has delivered a big-spending 2022 budget, taking immediate steps to reduce cost of living pressures for working Australians while implementing a range of massive infrastructure and defence spending measures. The Government will slash the fuel excise by half, effective immediately, as well as provide a one-off cash hand out of $250 to a range of social security recipients, and a $450 additional tax offset for low- and middle-income earners. Productivity will be boosted across the nation by enhanced training incentives, dramatic tax measures to drive greater digital adoption and improve computer-based efficiencies as well as steps to boost the nation’s overall level of self-sufficiency. Concerns about the growing budget deficit, which has now reached $78 billion, have been largely put on the back burner with confidence placed in the fact that as the economy grows, this will naturally reduce. A bounding economy The Australian economy has posted astonishing growth. It has come roaring out of two years of pandemic induced lockdowns, to post strong growth across the nation, spurred on by higher prices for coal, iron ore and wheat. Gross domestic product is expected to expand by a massive 4.2% this year while wages are expected to grow by 2.75% and surge by 3.25 % in the following year. Unemployment is currently 4%, but this is expected to drop to 3.75 % over the next six months – its lowest level since 1974. An extra 100,000 Australians have found work compared to employment numbers recorded when the pandemic first hit in March 2020. This is expected to help slash welfare payments by $11 billion across the next four years. A focus on increased productivity Training and improved productivity remains a key focus, with the Government implementing a $365 million extension to the existing apprentice wage subsidy scheme, in an attempt to further boost apprenticeship training. The Federal Government is continuing its focus on boosting business productivity allowing a $120 tax deduction for every $100 spent on digital adoption technology, such as portable payment systems, cyber security measures and subscriptions to cloud based services. A similar tax measure will be introduced for businesses providing external training courses to staff whether online or in-person, to increase productivity throughout the economy. This will be supported by a raft of Government driven efficiencies such as digitalising trust income reporting, improved PAYG systems and automatic reporting of taxable payments. And a more efficient economy The 2022-23 budget also includes a raft of infrastructure projects that will drive greater efficiencies and economic growth across Australia in the decade ahead. In addition, the Government has announced steps to develop a circular waste economy, support low emission technologies including hydrogen, extended gas pipeline infrastructure and more efficient environment approval strategies. Source: budget.gov.au The information provided in this article is general in nature only and does not constitute personal financial advice.

Why financial advice may be your best investment

30 March, 202223 March, 2022 Updated on23 March, 2022 Education, Investing

It is commonly assumed that seeking financial advice is for the wealthy, and it only helps the rich become richer, yet financial advice can prove useful to anyone who wishes to better their financial future. Financial advice is like getting a health check-up for your financial situation. Your financial adviser is like your personal trainer, assisting you in achieving your best possible financial health. Seeking professional financial advice provides you with a clear path to achieve your financial goals, and that is an investment worth making. Why invest in financial advice? Financial advice isn’t only about investing your money in the share market. Want to save to buy your first home? Want to protect your children in case of your death? Want to enjoy a comfortable retirement? Don’t understand what to do with your super or how to invest in the share market? Think of a financial adviser as a one-stop shop for the majority of your financial issues in life. Come to think of it, be it your parents telling you to save money from your first job or an Instagram ‘finfluencer’ explaining the benefits of compound interest while dancing to a trendy song, these are all informal pieces of financial advice you receive throughout your lifetime. However, a professional adviser can legally provide holistic advice by reviewing your entire financial situation and your risk-taking capacity to recommend an appropriate investment portfolio. Also, an adviser’s investment recommendations are based on research which can give you comfort over your decisions rather than constantly worrying about the investment you made based on your work colleague’s stock ‘tip’. Is financial advice cost effective? The financial advice industry has undergone a monumental transformation following the Financial Services Royal Commission of 2017-2019. As a result, new education and compliance requirements have been legislated to further protect the client’s best interests. This has led to a drop in the number of financial advisers Australia-wide – from approximately 28,000 in 2018 to just 19,000 in 2021. The silver lining here is that while there are fewer advisers to choose from, the quality of advice is deemed to improve exponentially. As per Russell Investments “Value of an Adviser” report, advisers added a value of approximately 5.2 per cent to their client’s portfolios in the 2020 COVID-19 pandemic. Still, the true value of financial advice is much more than comparing the fees you pay against the performance of your investments, or the tax saved on your income. A financial adviser can be a sounding board for your financial ideas, a resource to answer the simplest or most complex of queries, provide research-backed recommendations, and guide you over the long term based on their experience. Ready to make the investment? Your day to day job may not allow you to focus on the financial aspect of your life. In contrast, your financial adviser’s primary daily responsibility is to help you handle your finances efficiently. So, are you ready for your financial check-up? Take the first step and book an appointment with us today. The information provided in this article is general in nature only and does not constitute personal financial advice.

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