2016 Federal Budget – what it means to you

As you know the Government released the 2016/17 Federal Budget with a number of proposed changes below.  We will gain clarity on the proposed changes as new information and further detail becomes available to us.  Once we have further clarity, we will contact you directly should we identify any actions or changes which need to be made.

Superannuation  – better targeting of concessions

– Annual cap on concession contributions will reduce to 25,000 for all taxpayers

Age                                                   Annual cap amount 
In 2015/16 and 2016/17      From 2017/18
48 or under on 30 June 2015          $30,000                     $25,000
49 or over on 30 June 2015            $35,000                     $25,000

– ‘Catch-up’ concessional contributions
– Additional tax on concessional contributions

Income                              Tax on concessional contributions
In 2015/16 and 2016/17        From 2017/18
<$250,000                                     15%                               15%
$250,000 to $300,000                   15%                               30%
$300,000 +                                     30%                               30%

Superannuation – better targeting of concessions

– Changes to non-concessional contributions – from Budget night
– LIfetime cap of $500,000
– Replaces existing annual caps
– All non concessional contributions made on or after
1 July 2007

– Superannuation pension limits – from 1 July 2017
– a balance cap of $1.6m on the total amount of accumulation
super that can be transferred into tax-free retirement phase

Superannuation – enhancing flexibility and choice –
from 1 July 2017

– Harmonising contributions between aged 65 and 74
– removal of work test
– open up the ability for spouses over 70 to receive contributions

– Restrictions on personal superannuation contribution deductions eased
– all individual up to age 75 will be allowed to claim an income tax
deduction for personal superannuation contributions

Superannuation – improving integrity – from 1 July 2017

– Transition to retirement pensions
– tax exemption on earnings of assets supporting Transition to
retirement income streams will be removed
– same taxation as accumulation superannuation to apply
(ie 15%)

– Anti-detriment death benefit provision removed

Personal tax rate changes

– Targeted personal income tax relief

Current tax Thresholds  Tax rate   New tax Thresholds Tax rate 
           2015/16                                         2016/17
$0 – $18,200                   0%          $0-$18,200                     0%
$18,201 – $37,000         19%        $18,201 – $37,000         19%
$37,001 – $80,000         32.5%     $37,001 – $87,000         32.5%
$80,001 – $180,000       37%        $87,001 – $180,000       37%
$180,000+                     45%         $180,000+                     45%

Other personal tax rate changes

– Spouse superannuation tax offset
– Temporary Budget Repair Levy

Date of effect   Measures                             Details

1 July 2017       Spouse superannuation     – Spouse income threshold will
tax offset                              increase from  $10,000 to
$37,000
– Maximum tax offset will
remain at $540

1 July 2017       Temporary Budget               This levy, which is 2% of
taxable Repair Levy income in
excess of $180,000 will
expire on 30 June 2017
as legislated

Company tax rate

– Staggered cuts to the company tax rate

Maximum business turnover to be eligible for 27.5%
company rate

Tax Year        2016/17     2017/18    2018/19    2019/20  
Turn Over       $10m          $25m        $50m        $100m

Tax Year        2020/21     2021/22    2022/23
Turn Over       $250m       $500m       $1b

– Further company tax rate changes

Tax Year               2024/25          2025/26             2026/27
All Companies        27%               26%                    25%

Measures not announced or affected

– Negative gearing
– Child care rebate
– Age Pension
Please don’t hesitate to contact our office should you have any queries. However we will be in contact once the changes have been finalised and if you will be affected.

Yours sincerely

Stevens Roberts Financial Planning Team

This presentation has been prepared by Greg Stevens CAR . Launce Kent and Corey Roberts, Trading in Partnership as Stevens Roberts Financial Planning (ABN. 04169074) ABN. 63 277 397 276 are authorised representatives of Meritum Financial Group Pty Ltd, ABN 93 106 888 215 an Australian Financial Services Licensee 245569, Registered Office at 105 – 153 Miller Street, North Sydney NSW 2060 and a member of the National Australia group of companies.
This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax and/or legal advice prior to acting on this information.
Information in this presentation is accurate as at 3 May 2016. In some cases the information has been provided to us by third parties.  While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way.
Opinions constitute our judgement at the time of issue and are subject to change. We do not give give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.
Case studies in this presentation are for illustration purposes only. The investment returns shown in any case studies in this presentation are hypothetical examples only and do not reflect the historical or future returns of any specific financial products.  Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns. A
ny tax information provided in this presentation is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.

Seventy-seven percent of Australian pre-retirees who haven’t enlisted the help of financial professionals1 don’t feel prepared for retirement.

This concerning statistic was revealed in MLC’s Australia today report. Of the remainder, only 9% feel ‘prepared’ for retirement and only 14% consider themselves ‘somewhat prepared’ for retirement.

Retirement is then, this is now

For many Australians retirement seems a long way off. We’re so busy worrying about paying off the mortgage and maintaining our standard of living that retirement planning isn’t on the radar. For some, it’s not even a consideration.

This lack of preparation for retirement is a symptom of a ‘living for today’ mindset that’s emerged in Australia today. More Australians are living pay-cheque to pay-cheque to support a more luxurious lifestyle than their parents. They’re foregoing financial planning for regular travel and entertainment and other lifestyle factors which Australians are now confusing with standards of living.

There’s little left over after our lifestyle expenses, so the majority isn’t feeling positive or confident about their retirement plans.

Ignore retirement and it will go away

Do we think if we ignore the concept of retirement planning, in favour of managing the demands of today’s lifestyle, the ‘problem’ will simply go away, or we’ll just sort it out later? Or is it that we feel retirement is too far away to plan for?

Ironically, if we pretend retirement isn’t there, it most certainly won’t be – at least not how we may imagine in the back of our minds.

Do you anticipate the day you log off from work and become your own recreational boss? Do you picture yourself hiking a mountain, surfing, writing that book, painting that landscape, seeing that play or developing that smartphone app – not because you have to, but just because it’s fun? Maybe you imagine learning the guitar, catching up with friends or taking long walks.

Well, if you’re ever going to stop working or cut back on your hours, you’re going to need a big nest egg to support you.

How big is your nest egg?

With couples needing $58,922 per annum for a comfortable retirement and $34,064 per annum for a modest retirement, and singles needing from $23,000-$43,000 per annum for a modest to comfortable retirement, those who aren’t prepared will face a significant shortfall.²Especially if you retire at 65 and live for 25 years.

Women and the young are least prepared

Australia Today reveals women are almost twice as likely to feel unprepared for retirement as men. Young people (aged 25-29) and those who live pay-cheque to pay-cheque are also more likely to feel unprepared for retirement.

For many women, career breaks to have children often means less super, and a lower annual income when they return to work. While for those under 30, retirement seems too far off to worry about.

Financial professionals offer a silver lining

The good news from MLC’s Australia today report is that help from financial professionals has an encouraging impact on our financial confidence and security.

Australians engaging the help of financial professionals are more than twice as likely to feel ‘very or fairly well prepared’ for retirement than those without a financial professional. They’re also 21% less likely to feel slightly or not at all prepared.

Those surveyed with financial planners or advisers are also 22% less likely to expect to rely on government support to ensure their financial security (52% with financial advisers compared with 27% without) and are 10% less likely to be relying on an inheritance to ensure financial security (77% with financial advisers compared with 67% without).

What can you do?

If you acknowledge that one day you’d like to stop working while still having control over your lifestyle, think about how much money you’d like each year and what that means as a lump sum. We can help you put a plan in place to enjoy the lifestyle you want in retirement.

Please contact us on 08 8223 3774 to discuss.

There are many great calculators online including ASIC’s MoneySmart retirement planner. You can also consider more actively managing your super, investigating and learning more about your investment options, risk/return considerations and timeframes, while topping up your super when you can (depending on your tax circumstances) to boost your retirement savings.

Source MLC August 16th 2016 newsletter.

Any advice in this post is of a general nature only and has not been tailored to your personal circumstances. Please see personal advice prior to acting on this information.

With so many desirable holiday spots across the country, prestigious travel magazine Conde Naste named Australia as the ‘Top Destination of 2016’. So if you’re planning a trip, it might be worth swapping your next overseas holiday for an adventure closer to home.

These Aussie destinations are great additions to your ‘must-see’ list.

1  Uluru

World-heritage listed and an icon of Australia, Uluru in Northern Territory is a must. You can visit this natural wonder by foot, camel, hot air balloon, on a Harley Davidson or in a helicopter. Sunrise and sunset are the best times, whichever method of transport you choose.

2  Tasmania

Fast becoming a cultural and foodies’ mecca, as well as a place to explore rustic landscape, Tasmania has earned its place on ‘must-see’ lists for travellers. From the Museum of Old and New Art in the south to Cradle Mountain in the north, Tasmania offers cultural charm and is a haven for those wanting to explore stunning natural beauty.

3  Great Barrier Reef

The world’s largest coral reef stretches for more than 2,000 kilometres off Queensland’s coastline, and can be experienced on a budget, or in high-end luxury. After taking in the Reef’s vivid colours by snorkelling, diving or sailing, you can visit the Daintree Rainforest or explore the Whitsunday islands.

4  Kakadu National Park

Covering more than 20,000 square kilometres of extraordinary, ancient landscape, Kakadu is a spiritual place. Generations of Indigenous Australians, the Bininj Mungguy, have been connected to this area for tens of thousands of years. Aboriginal art and cultural experiences are a key drawcard for visitors.

5  Kangaroo Island

Famous for its art, wine and food festivals, Kangaroo Island – off the cost of South Australia – has a lot more to offer than pristine beaches. Home to artisan food and wine producers, this island is a ‘happy place’ for foodies.

6  Margaret River

After taking a wine tour of Australia’s more revered wine regions, there’s plenty more to see and do around Margaret River. Enjoy some downtime at the beach, check out the remarkable beach caves, or go whale watching along some of Australia’s most stunning coastline.

7  RACV Royal Pines golf course

If golf is more your scene, you may like to visit the RACV Royal Pines golf course on Queensland’s Gold Coast. It’s the home of the Australian PGA Championship. And if you need a break from the fairway, long and sandy beaches are not far away.

8  Great Ocean Road

Widely touted as Australia’s most scenic stretch of road, you’ll see stunning cliff tops, rivers, rainforests and beaches. As you wind through the centre of the Great Otway National Park, you’ll see spectacular views of the rock formations known as the Twelve Apostles.

9  Byron Bay

A great place to wind down and chill out, Byron Bay is where lush green hinterland meets the beach. Check out the famous Wategos Beach, take a whale watching tour and wander your way through the region’s many markets.

10  The Kimberley

One of the world’s most sparsely populated areas, the Kimberley region has fewer people per square kilometre than almost any other place on Earth. This ancient landscape includes rugged gorges and spectacular waterfalls, and from here you can make your way to Cable Beach.

Any advice in this post is of a general nature only and has not been tailored to your personal circumstances. Please see personal advice prior to acting on this information.

You may be in the enviable of one day entering retirement with your mortgage paid off, adequate superannuation savings and no debts left to pay off.

However, the combination of high house prices, low interest rates and low inflation are making it more challenging to retire debt free with none or little of your super savings earmarked to pay anything apart from a retirement income.

In a Senate economics committee hearing in October, treasury secretary John Fraser described the high cost of housing as a “worry”, emphasising that homebuyers were becoming more comfortable about taking on more debt.

“As an old person, I talk with people my age,” he added. “And the bank of mum and dad is becoming more and more prevalent. It has impacts on superannuation, and why people are saving in their older years to fund their children’s housing needs.”

By the way, Fraser turned 65 not so long ago – so the question of whether he is “old” is debatable.

And in a recent speech to an investment conference, the new Reserve Bank governor Philip Lowe highlighted Australia’s extremely-low inflation. (The annual headline inflation rate was 1.3 per cent to September.) It seems hard to believe that inflation reached 18 per cent in the mid-1970s.

“Indeed, I am the first Governor of the RBA to have taken office where the concern of the day is more that inflation might turn out to be a bit too low rather than a bit too high,” Lowe commented.

Such low inflation together with low wages growth means, among other things, that homebuyers cannot rely on inflation to effectively help repay their mortgages. (When wage growth is strong, the proportion of income needed to meet repayments can significantly fall with successive wage rises.)

In short, more homebuyers are likely to find their mortgages remain unpaid for much longer periods – perhaps into their retirement.

Furthermore, low interest rates can make homebuyers more comfortable about taking on higher debt to compete against other would-be buyers.

Another temptation triggered largely by low interest rates and high housing prices is to take a home-equity loan to subsidise pre-retirement lifestyles. Again, a risk is that a borrower may not repay the debt by retirement.

All of this can be something of a vicious circle for those saving for a debt-free retirement. And the impact on young people wanting to get their foot into the costly housing market is another story.

Of course, there can be a powerful and understandable case for parents to assist adult children to buy their first home – if the parents can afford it without damaging their own prospects for a satisfactory standard of living in retirement. Much depends on personal circumstances include advice received.

It’s hardly surprising that mortgage debt is lowest among older households. Quite simply, they have had much longer to pay it off than younger households.

However, a research paper, Buy now, spend later – Household debt in Australia – published last December by the National Centre for Social and Economic Modelling (NATSEM) at the University of Canberra – reports that home mortgages made up almost 30 per cent of debt for households headed by a person aged 65 or older – up from 19.6 per cent in 2004.

And home mortgage debt accounted for 46 per cent of debt for households headed by a person aged 50 to 64.

There’s plenty to think about before taking a bigger mortgage later in the countdown to retirement and/or agreeing to open the “bank of mum and dad” to adult children wanting a leg-up into the costly housing market.

Source:

Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2016 Vanguard Investments Australia Ltd. All rights reserved.

Important:

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.

What the super reforms could mean for you

On 1 July 2017, a range of super reforms take effect which are either positive or neutral for most Australians. The enclosed booklet will help you understand what the reforms could mean for you.

The following booklet also outlines some opportunities that may be available before and after 30 June this year to possibly help you grow your super and retire with more.

As legislation and rules continue to change, it’s important to regularly review your plans to ensure you stay on track to achieving the retirement lifestyle you want. We will be in contact with clients directly, however should you wish to make an appointment, simply call us on 82233774. At our meeting we’ll review your strategies and look at how the changes could potentially work for you.

Download the booklet here.

However, the combination of high house prices, low interest rates and low inflation are making it more challenging to retire debt free with none or little of your super savings earmarked to pay anything apart from a retirement income.

In a Senate economics committee hearing in October, treasury secretary John Fraser described the high cost of housing as a “worry”, emphasising that homebuyers were becoming more comfortable about taking on more debt.

“As an old person, I talk with people my age,” he added. “And the bank of mum and dad is becoming more and more prevalent. It has impacts on superannuation, and why people are saving in their older years to fund their children’s housing needs.”

By the way, Fraser turned 65 not so long ago – so the question of whether he is “old” is debatable.

And in a recent speech to an investment conference, the new Reserve Bank governor Philip Lowe highlighted Australia’s extremely-low inflation. (The annual headline inflation rate was 1.3 per cent to September.) It seems hard to believe that inflation reached 18 per cent in the mid-1970s.

“Indeed, I am the first Governor of the RBA to have taken office where the concern of the day is more that inflation might turn out to be a bit too low rather than a bit too high,” Lowe commented.

Such low inflation together with low wages growth means, among other things, that homebuyers cannot rely on inflation to effectively help repay their mortgages. (When wage growth is strong, the proportion of income needed to meet repayments can significantly fall with successive wage rises.)

In short, more homebuyers are likely to find their mortgages remain unpaid for much longer periods – perhaps into their retirement.

Furthermore, low interest rates can make homebuyers more comfortable about taking on higher debt to compete against other would-be buyers.

Another temptation triggered largely by low interest rates and high housing prices is to take a home-equity loan to subsidise pre-retirement lifestyles. Again, a risk is that a borrower may not repay the debt by retirement.

All of this can be something of a vicious circle for those saving for a debt-free retirement. And the impact on young people wanting to get their foot into the costly housing market is another story.

Of course, there can be a powerful and understandable case for parents to assist adult children to buy their first home – if the parents can afford it without damaging their own prospects for a satisfactory standard of living in retirement. Much depends on personal circumstances include advice received.

It’s hardly surprising that mortgage debt is lowest among older households. Quite simply, they have had much longer to pay it off than younger households.

However, a research paper, Buy now, spend later – Household debt in Australia – published last December by the National Centre for Social and Economic Modelling (NATSEM) at the University of Canberra – reports that home mortgages made up almost 30 per cent of debt for households headed by a person aged 65 or older – up from 19.6 per cent in 2004.

And home mortgage debt accounted for 46 per cent of debt for households headed by a person aged 50 to 64.

There’s plenty to think about before taking a bigger mortgage later in the countdown to retirement and/or agreeing to open the “bank of mum and dad” to adult children wanting a leg-up into the costly housing market.