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Will these super changes affect you?

July 3, 2023

As our superannuation balances grow larger, it makes more sense than ever to keep track of the many rules changes that have recently happened or are coming up soon.

Australians are investing more in super – almost $151 billion dollars in the year ending March 2023, an increase of 11.3%

Those extra contributions, plus the rebound in the financial markets, have resulted in super assets of around $3.5 trillion.

And it is being put to good use. We took out lump sum payments totalling $53.5 billion dollars during the 12 months and pension payments of $42.3 billion.

Quarterly rate of return

To keep your super on track for a comfortable retirement, check out these latest changes in case they affect you.

Super bonus for workers

For employees, the new financial year kicks off with an increase in the Superannuation Guarantee paid by employers. It is now 11% of eligible wages.

This rate will increase by 0.5% each year until it reaches 12% in 2025.

The Australian Tax Office will also be cracking down on employers who don’t pay on time or at all. From 1 July 2026, super must be paid at the same time as wages rather than at the end of each quarter.

The recent Federal Budget also provided funds to help the ATO enforce super payments and recover unpaid amounts.

Minimum pension drawdown increase

A COVID-19 measure to reduce the minimum drawdown required on super pensions will end on 1 July 2023.

Investors receiving super pensions and annuities must withdraw a minimum amount each year. The federal government reduced this amount by 50% over the last four financial years to help those wanting to protect their capital as the markets recovered from the chaos of the pandemic.

You can find out more by visiting the ATO’s minimum pension standards.

Transfer balance cap to be lifted

The maximum amount of capital that can be transferred to your super pension will increase to $1.9 million from 1 July 2023.

The transfer balance cap limits the total amount of super that can be transferred into a tax-free pension account. This is a lifetime limit.

The cap is indexed and began at $1.6 million when it was introduced in 2017. Increases in the cap are tied to CPI movements.

You can see your transfer balance account and cap information in your online ATO account.

Extra tax for large balances

Investors with super balances of $3 million or more will lose the benefit of super tax breaks on earnings. From 1 July 2025, taxes on future earnings will be 30% instead of 15% although they will continue to benefit from more generous tax breaks on earnings from the funds below the $3 million threshold.

This change is expected to apply to around 80,000 people.

Other recent changes

A number of changes announced in both Federal Budgets last year have also been slowly introduced over the past 12 months.

In one major change, the minimum age was lowered for those able to invest some of the proceeds of the sale of their homes into super, known as a ‘downsizer contribution’.

From 1 January 2023, if you are aged 55 or older, you can now contribute to your super up to $300,000 (or $600,000 for a couple) from the sale of their home.

The home must be in Australia and owned by you for at least 10 years.

In another residential property initiative, a scheme that allows investors to use their super fund to save for their first home has been expanded.

The First Home Super Saver Scheme last year increased from $30,000 to $50,000.

The Scheme allows you to make contributions into your super then apply to release them when you want to purchase your first home, provided you meet the eligibility requirements.

Another significant reform for many has been the removal of the work test for those under 75, who can now make or receive personal super contributions and salary sacrificed contributions. (Although the ATO notes that you may still need to meet the work test to claim a personal super contribution deduction.)

Previously if you were under 75, you could only make or receive voluntary contributions to super if you worked at least 40 hours over a 30-day period.

A further change introduced last year was the removal of the $450 per month threshold for super contributions.

Employers must now pay the super guarantee to all employees regardless of their earnings however, employees who are under 18 still need to work more than 30 hours in a week to be eligible.

While caps have been lifted and programs expanded, at least one scheme has not changed. The Low Income Super Tax Offset (LISTO) threshold remains at $37,000. LISTO is a government payment to super funds of up to $500 to help low-income earners save for retirement.

If you earn $37,000 or less a year you may be eligible a LISTO payment. You don’t need to do anything other than to ensure your super fund has your tax file number.

Finally, a project that may pay off down the track, the Federal Budget included continued funding for a superannuation consumer advocate to help improve investors’ outcomes.

Expert advice is important to help navigate these changes over the coming year. Call us for more information.


Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Filed Under: Blogs, News

Who needs a testamentary trust?

July 3, 2023

The rising cost of living is grabbing all the attention right now as people struggle to pay the increasing prices. But in the meantime, our collective wealth has been growing steadily and is being transferred to the next generation at increasing rates.

In fact, the value of inheritances as well as gifts to family and friends has doubled over the past two decades.

A 2021 Productivity Commission report found that $120 billion was passed on in 2018 and that amount is expected to grow fourfold between now and 2050. In 2018, the value of the average inheritance was $125,000 while gifts averaged $8000 each.

So, there is a lot at stake and it means that estate planning – a strategy for dealing with your assets after you die – is vital to help fulfil your wishes and protect the interests of the people you care about.

One powerful tool in planning your estate is a testamentary trust, which only comes into effect after your death. It operates in a similar way to a discretionary family trust and your Will acts as the trust deed, providing instructions for the trust.

It allows you to control the distribution of your assets and provides a way of managing any tax implications for your beneficiaries. Testamentary trusts are often used to protect assets from unforeseen circumstances such as lawsuits, creditors and divorces and they can help to preserve a family’s wealth.

A testamentary trust can be useful for those with blended family relationships and children with complex needs. For example, a child with a disability who is unable to manage their own investments can be supported by the use of a trust. Testamentary trusts may also help to provide some certainty for parents that their young children will be provided for. They are also often used by philanthropists as a way of providing a legacy for a cause they support.

Choosing a trustee

If you are setting up a testamentary trust, you will need to appoint one or more trustees who will manage administration and distributions.

The trustee could be a family member (who may also be a beneficiary) or the role could be handed to an independent person or organisation.

Trustees should understand the tax situation of each of the beneficiaries to ensure that the timing and amount of distributions don’t inadvertently cause difficulties for them. Trustees must also lodge a tax return every year and maintain trust accounts and records.

As the ATO points out, for the trust to operate effectively, a high level of co-operation between family members may be important so that tax, financial and other information is shared.

The pros and cons

Whether or not you should set up a testamentary trust in your will depends on your own circumstances.

The positives include:

  • The ability to control the distribution of income
  • The possibility of some tax advantages for your beneficiaries
  • A level of protection for your assets from lawsuits, family breakdowns and business difficulties
  • A way of keep a family’s wealth intact into the future
  • Support for vulnerable beneficiaries such as those with special needs or lacking financial experience and minors
  • Can be used by anyone with assets to distribute, whatever the size of their estate

On the other hand, there are a number of considerations to be aware of such as:

  • The complex paperwork and reporting required
  • The cost to establish the trust and keep it running
  • The possibility of disputes among beneficiaries or with the trustee over the future of the trust, distributions, and its administration

Testamentary trusts are a valuable strategy to help ensure your wishes are followed. They can shape your legacy, provide fairly for your loved ones and protect assets.

Call us if you would like to know more about establishing a testamentary trust and to see whether it is suitable for you.


Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Filed Under: Blogs, News

Anticipating your future before gifting

July 3, 2023

Photo by Tyler Nix on Unsplash

Many retirees may want to help younger family members by gifting part of their savings. But if things go wrong in the future, the joy may turn to grief.

Gifting may help the children and grandchildren, but it may have significant impacts on an older person’s own future – especially if an aged care need arises.
Means-testing impacts your eligibility for government concessions, such as the age pension, and impacts how much you will be asked to pay in aged care fees.

Gifting assets may not have the impact you think, as gifts are still assessable for five years if you gift more than the allowable thresholds. If you gift more than $10,000 in a financial year (or $30,000 over five years) the excess counts as a deprived asset for the next five years.

If you want to reduce assessable assets, you need to plan more than five years in advance. But it is hard to predict what may happen in the future. Leaving yourself short, may increase your risks and reduce your range of care choices.

Example

Betty has $700,000 in financial investments, in addition to her home. She decides to gift $300,000 to family. This leaves her with $400,000 in savings, but Centrelink will continue to assess her assets at $690,000 (only reduced by the allowable threshold of $10,000).

As a result, Betty has less assets to support herself. Her age pension only increases by $780 per year.

If Betty needs to move into aged care within the next five years, the gift will also affect her means-test assessment. She will need to fund around $27,000 per year for ongoing care fees (basic fee plus means-tested care fee) plus other personal expenses and accommodation costs.

The key message is to take care before gifting, as protecting your financial future is just as important as helping family members to secure their futures. Gifting assets may leave you with insufficient resources to fund future needs or to adapt to any changes. Financial advice to consider implications may help you to make an informed decision.

Call us today on 03 9723 0522 to discuss your options.


Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

Integrity One Facebook

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Filed Under: Blogs, News

Airbnb vs long term rentals – do the numbers stack up?

July 3, 2023

In just 15 short years, Airbnb has transformed from a platform helping homeowners earn cash from their spare rooms to a business and property investment strategy.

There are between 100,000 and 350,000 short-term rental properties across Australia, with homes making up approximately 85% of those listings according to various portals.

While it might seem like a no-brainer investment decision — making thousands of dollars a week versus simply hundreds, the reality isn’t quite that simple.

Although taking the short-term route can be lucrative, savvy investors need to crunch the numbers to determine whether the figures add up. Just like any investment, there are tax implications with short-term rentals, as well as other possible hurdles including strata by-laws, council restrictions, heavy competition and seasonal impacts.

So, here are some tips to help work out the best property path.

Why are you investing in property?

By understanding your investment strategy, you can plan for the future of your asset. If cash flow is important, you’ll want a property that turns a profit each week (also known as positive gearing). This gain is made after you’ve paid all the holding expenses, but keep in mind a short-term rental attracts additional costs.

Alternatively, if your plan is purely to realise capital gain in the long run, and you’re able to absorb potential losses (also known as negative gearing), ensure you are aware of your out-of-pocket expenses each financial year to know where you stand. While you’ll get a tax break for these outgoings, will the short-term gain be worth the long-term pain?

Taking the short-term path

A quality property in a popular holiday destination can earn a homeowner hundreds if not thousands — of dollars a night. This can be an incredible income if managed well and might also mean you have a vacation home, or retirement pad, that pays for itself.

Real estate in some sought-after holiday locations has also made great capital gains over the last decade, so the strategy could prove to be fruitful for investors willing to play the long game.

Choosing the long-term option

Quality long-term rentals provide financial stability for landlords who don’t want to ride the wave of seasonal markets. A great home in an established neighbourhood with a low rental vacancy rate can be a “set and forget” investment that gives investors peace of mind and a passive income for years.

The truth about short-term letting

Putting your property on Airbnb, Vrbo or Stayz can be advantageous for property investors. According to Airbtics, a short-term rental analytics site, the average annual revenue for Australian hosts on Airbnb is $48,760, which is a healthy passive income, but it can be a volatile market space with hidden costs.ii

Here are some facts potential short-term landlords need to understand before taking the plunge;

Consider booking frequency – The average Australian occupancy on Airbnb is just 53%, which means your investment could be sitting empty for almost half the year, with some markets already saturated with short-term rentals.

Councils are changing heart – Some local governments are realising just how many homes are vacant during a national housing crisis and are starting to restrict short-term rentals, with some limiting letting to just 90 or 180 days in a calendar year.

Stratas aren’t always supportive – Owner’s corporations can refuse short-term rentals altogether so it pays to determine whether it will be allowed in your building.

Holiday hotspots can cool down – Depending on where your short-term rental is located, demand for it could ebb and flow considerably. You’ll need to be sure the months it’s earning will cover those down days.

Beware of hidden costs and taxes – Holiday lets incur additional costs which aren’t usually associated with long-term rentals, including; increased maintenance through greater wear and tear, cleaning, furnishings, higher management costs and insurances. There are also tax implications such as annual income tax and capital gains upon sale to consider.

The best investment strategy will depend on your financial situation, your goals and your property location. If you’d like to discuss funding, don’t hesitate to give on 03 9723 0522 to discuss your options.


Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

Integrity One Facebook

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Filed Under: Blogs, News

Getting your RAD refunded

July 3, 2023

Photo by Josh Appel on Unsplash

Understanding the refund rules for RADs may remove some of the stress and worry with a move into residential care.

Room prices in aged care are usually quoted as a lump sum. Often this is a big number, which can cause a lot of worry. But this is also one of the most misunderstood areas of residential aged care. Demystifying the rules may reduce some of the worry.

The lump sum charged for a room in residential care is called a Refundable Accommodation Deposit – RAD for short. While this may look like a lot of money to hand over, it is important to realise that a RAD is not “lost” money. The amount you pay as a RAD refundable when you leave care or pass away.

If you pay a RAD, you will need to give up access to this money while you live in care, but it remains part of your wealth and is part of the inheritance that you can leave to your family.

How much is refundable?

Your full RAD paid will be refundable when you leave care. The amount refunded is only reduced if you have asked (or allowed) the provider to deduct some of your ongoing care fees from your RAD, instead of paying these amounts from your bank account or other income sources.

The rules were different before 1 July 2014, so you may have had experience with a family member who did not get all their money back in previous years. The rules are also different for retirement villages where you may lose a portion of your entry cost as a deferred management fee or refurbishment fee.

Under the current rules for residential aged care, as long as you pay your other fees in full each month, there will be nothing to deduct from the RAD and all of the money paid is eventually refunded.

Example:

Danny moves into residential aged care with a room price of $700,000. He chooses to pay this as a lump sum. All of Danny’s other ongoing care fees are paid along the way from his bank account. When Danny passes away, the full $700,000 is refunded to his estate.

When is the RAD refunded?

The aged care provider needs to refund your RAD when you leave care or pass away.

When you pass away, your executor may need to obtain probate and show a copy to the provider. The provider then has 14 days to pay the refund. If the provider does not require probate, they might have a cheque ready to pay the refund when your family come to collect your personal items.

Want to know more about RADs or aged care? Call us on 03 9723 0522. to make an appointment today.


Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

Integrity One Facebook

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Filed Under: Blogs, News

Homebuyer support to ring in the new financial year

July 3, 2023

The new financial year marks the opportunity to access a raft of grants and incentives aimed at helping more people buy a home. That means now is the perfect time to sort through all the national and state schemes, and finding the ones that are right for you.

To get you started, here’s a quick rundown of what’s on offer. Don’t forget that they could combine to get you on the property ladder this year.

Three National Home Guarantee Schemes

The National Home Guarantee Scheme (HGS) has expanded to offer help to more groups that find it difficult to buy their own home.

All three offer a government guarantee of your below 20% deposit loan. This saves you adding the cost of Lenders Mortgage Insurance (LMI) to your repayments.

No money changes hands, but as that ever-harder-to-save 20% deposit slips out of reach for more people, having a loan with a deposit of 5% or even 2% guaranteed by the government could help you get into the market sooner. Let’s take a brief look at what’s on offer.

The First Home Buyer Guarantee (FHBG) supports up to 35,000 eligible first home buyers each financial year. Your minimum deposit is 5%, while the maximum price and other conditions vary from state to state. The new news is that the scheme now accepts joint applications from friends, siblings, and other family members. Buyers who have previously owned a home may also be allowed to apply as long as their last ownership was at least 10 years ago.

Eligibility criteria for the First Home Buyer Guarantee

To apply home buyers must be:

  • applying as an individual or couple (married / de facto)
  • an Australian citizen(s) at the time they enter the loan
  • at least 18 years of age
  • earning up to $125,000 for individuals or $200,000 for couples, as shown on the Notice of Assessment (issued by the Australian Taxation Office)
  • intending to be owner-occupiers of the purchased property
  • first home buyers who have not previously owned, or had an interest in, a property in Australia.

The Regional First Home Buyer Guarantee (RFHBG) is for eligible first home buyers in regional areas. There are 10,000 places available each financial year to 30 June 2025. Again, the maximum cost of the home and the applicant’s annual income varies state to state but a minimum 5% deposit is needed wherever you are.

The Family Home Guarantee (FHG) supports eligible single parents and single legal guardians with at least one dependent child. That now includes single aunts, uncles and grandparents caring for a child. The minimum deposit needed is just 2%, with 5,000 places available each financial year to 30 June 2025. Again, there are limits on annual income and the cost of the home.

One thing to keep in mind when looking at the National Home Guarantee Schemes is that most, but not all, lenders will include the schemes when assessing your home loan application. Different lenders also have different minimum deposits they will accept, and of course different interest rates. It may save you valuable time and keep your banking record clean if you check with us before applying for any scheme or loan.

State specific grants, stamp duty and shared equity schemes

Regardless of where you are buying, you’ll find that each state and territory has some form of support for first home buyers. Usually, these offer payments or discounts to first home buyers purchasing new properties or house and land packages. These grants are not taxed and don’t have to be repaid, making them worth considering.

Stamp duty is a huge up-front cost for buyers, adding thousands to the price of a property. All the states have a minimum price threshold before stamp duty is charged. They also offer one-off stamp duty concessions for first homebuyers paying below certain amounts. In some states, first homebuyers can also opt to pay a much smaller annual land tax instead of stamp duty.

Shared equity schemes are also broadening the people who qualify. Shared equity is when the state government buys a portion of your home. This reduces your deposit, loan amount and repayments. In return, if and when you sell, they will take that percentage of the sale price. Shared equity is traditionally only offered to key workers. However, in some states, single parents and singles aged over 50 can also apply.

First Home Super Savers Scheme

Another scheme is the national First Home Super Savers Scheme. In this, you make contributions into your super fund to save for your first home. Depending on how many years you’re registered with the scheme, you can withdraw a maximum of $50,000, plus the calculated earnings from those investments. You find out how much you can access by asking for a FHSS determination, and then request a withdrawal when you sign the contract for your home. This takes a minimum of 20 days, so planning is crucial. Because it affects your super, it’s wise to get some financial advice before you do it.

While having more schemes to choose from provides options, sorting through your options can be complicated and time consuming. The capped number on some offers means it’s best to get in touch with us sooner rather than later.

We can work out which schemes you qualify for and put together a buying roadmap, to help you get into your own home sooner.

Nicholas Berry Credit Representative Number 472439 is a Credit Representative of Integrity Finance (Aust) Pty Ltd – Australian Credit Licence 392184.
This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Filed Under: Blogs, News

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Integrity One Planning Services Pty Ltd (ABN 59 125 846 933) is a Corporate Representative (315000) of Integrity Financial Planners Pty Ltd (AFSL No. 225051).