Stay up to date with what’s happened in markets and the Australian economy over the past month.

While the anxiously awaited release of the latest inflation data at the end of July, showed an increase, it was in line with economists’ predictions.

Given the RBA wants inflation back within a 2-3% target range by the end of 2025, there were concerns about the inflation figures and the implications for the cash rate.

The ASX finished the month strongly with an increase of around 4%, riding out a mid-month plunge and surging to a record high for the ninth time this year.

Click here for our August update video.

Please get in touch on 03 9723 0522 if you’d like assistance with your personal financial situation.

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.

Gold fever is in the air and it’s not just the prospect of medals at the upcoming Paris Olympics.

Gold prices have been climbing strongly in 2024 as investors, jittery about the effects of wars in the Middle East and Ukraine, buy up the asset because of its reputation as a safe haven. The spot price has risen more than 18% since mid-February.

Demand for the precious metal is also being driven by central banks adding to their gold reserves to hedge against currency and other market risks.

Turkey, China and India were the biggest buyers of gold in the first half of 2024, aiming to reduce exposure to US dollar movements and to further diversify their reserve funds.The United States remains the largest gold depository in the world by far, holding two-and-a-half times more than Germany, the next on the list.

For investors, gold has been an alluring buy for centuries thanks to its association with wealth and power. As a precious metal and a physical asset, it often attracts a certain confidence, which is sometimes misplaced.

Controversial history

Gold has always played an important and, at times, controversial role in the global monetary system.

For example, during the Great Depression in the 1930s, the US government forced its citizens to sell their gold at well below market rates to help stabilise the economy. Then a new official rate was set at a higher price. It was the beginning of the end for the gold standard worldwide, the monetary system that pegs a currency’s value to gold.

After World War Two, a new international monetary order was negotiated that saw the US dollar pegged to gold with other currencies linked to the dollar’s value. The USD was convertible to gold bullion at a fixed rate of US$35 per troy ounce.

But increasing global financial instability and criticism from European nations eventually led to the system being abandoned by the 1970s when floating exchange rates were introduced.

Patchy performance

Day traders might be lucky enough at times to buy or sell gold for a decent profit by correctly guessing when to get in or out but, generally speaking, gold is not an easy investment to love.

Over the longer term, it hasn’t always beaten inflation, the price can plunge at a time when market conditions suggest it should be rising and its performance against stocks and bonds has been varied.

In fact, there have been long periods of persistently low prices. It languished for around six years from 1988 before recovering and then again for the decade or so leading up to the beginning of COVID-19 in 2020. The uncertainty of the pandemic-era helped spark a rally that has increased the price by almost 38 per cent.

Pros and cons

So, is gold worth considering as part of a portfolio? As with any investment, there are pros and cons.

Like many other asset classes, gold can help to diversify a portfolio and reduce certain risks. During stock market downturns, gold prices often (but not always) begin to rise. Some investors like the idea that it is a scarce, physical asset and, despite its ups and downs, gold has tended to hold its value over time.

At times gold has provided a good hedge against inflation. For example, in the US between 1974 and 2008, there were eight years when inflation was high and during those times, gold prices rose by an average of 14.9% annually. But different periods give different results. While US CPI growth was around 6.8% in 2021 and 2022, gold prices were achieving an annual increase of just over 1%.

How to invest

You don’t need to lug home gold bars and hide them under the bed to have a stake in a gold investment.

Of course, it is possible to own gold bullion by buying online or in person from one of a number of registered dealers in Australia. The actual gold can be delivered to you or held in storage for a fee. You could also own physical gold by buying jewellery although there are high mark ups and resale value isn’t assured.

The ASX provides the avenue to buy shares in one or more of the many gold mining companies. You’ll need to do your homework carefully to consider the credentials of the companies. Some are riskier than others depending on the countries in which they operate and their size.

You could also consider exchange traded funds (ETFs) that are linked to or track the gold price. One advantage is provided by the funds that hedge currency risk so that your returns won’t be affected by differences in the US dollar. Although with any fund, you’ll need to factor in an annual management fee, which will reduce your ultimate return. If you’re interested in achieving a balanced portfolio, we’d be happy to help 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.

Stay up to date with what’s happened in markets and the Australian economy over the past month.

Despite some signs of a weakening economy with stalling growth and a softening labour market, persistently high inflation is acting as a roadblock to the RBA’s possible rate cuts.

Markets have now priced in a risk that the RBA could hike rates as soon as the next meeting in August.

Australian shares finished the month close to where they started, with investor sentiment influenced by news of higher inflation and fears of another interest rate hike.

Click here for our July update video.

Please get in touch on 03 9723 0522 if you’d like assistance with your personal financial situation.

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.

Managing your financial situation always involves tension between how you live your life now and preparing for your future – whatever that looks like.

The worry about not getting the balance right and making unnecessary sacrifices now – or not having enough money for the things you want to do in the future is a common and valid concern we hear when we talk to clients. You want to be living your best life now which means not living too frugally or worrying about your future. At the same time, you don’t want the choices you are making now in how you live your life to impact or make impossible the wonderful life you envision for yourself down the track.

Balance whatever your stage of life

We all have financial goals – whether you are saving for your children’s education, working towards that once in a lifetime round the world trip, freeing up finances for a gap year, or setting yourself up for a wonderful retirement. It’s important to balance your ‘now’ with your ‘future’ when it comes to spending, saving, and investing to make sure you can achieve those goals. You don’t want to regret your spending – or on the other hand live a frugal life and look back on opportunities you missed while you were squirrelling it away.

The tension between the ‘now’ and your ‘future’ with respect to your finances can be even more heightened when you have retired. It can be a strange adjustment suddenly not having a wage coming in and living off your savings, super and investments. It’s common, and quite understandable, to worry about not having enough to last the distance, particularly given that a 65-year-old today may live well into their 90’s and could spend up to three decades in retirement. No one wants to outlive their savings.

However, many retirees live unnecessarily frugal lives as evidenced by a 2020 Retirement Income Review which found that most people die with the bulk of their retirement wealth intact.Those that live frugally do so often not from necessity but because they don’t have an understanding of their financial needs, including how these will change over time, and how much they can afford to spend.

How the balance changes over time

That balance is hard to hit. It is different for different people, and your approach to saving and spending will change at various stages of your life.

If you are paying off a difficult to maintain level of debt or in the final stages of scraping together a deposit for a home, making sacrifices now in the way you live life your life might feel OK. Equally, if you have spent much of your life building wealth, letting loose the reins a little and going on that cruise might be something you are extremely comfortable with.

Certainty now and confidence in the future

Whatever your stage of life, achieving the right balance comes from having an in-depth understanding of your financial situation now, and establishing and maintaining a personalised plan that takes into account all aspects of your financials – your earning capacity, level of debt, assets and very importantly, the life you want to live today and your goals for the future.

The importance of receiving support with financial planning is reinforced in a recent report which indicated advised Australians are significantly more likely to say they feel confident in achieving their financial goals (71%) compared with those who are not receiving support (55%).

The same proportion said that they were living well now, stating their finances allow them to “do the things I want and enjoy in life.” And those receiving advice are also balancing the “now” with their future needs. Those accessing financial advice also indicated they were more likely to be financially prepared for retirement and have a higher savings balance.

This confidence that comes from receiving personalised advice also means being more prepared when people leave the workforce (and a wage) behind. Advised Australians are significantly more likely to feel very or reasonably prepared for retirement (76%), than those without advice (45).^iv

The key to achieving a balance between living your best life now and being financially secure in the future is knowledge. If we know that tomorrow is shaping up well for us, we may worry a little less today, feel a little less guilty when we spend today and be less likely to have regrets about spending – or about missing out – further down the track.

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.

If you’re nearing retirement age, it’s likely you’re wondering if you will have enough saved to give up work and take it easy, particularly as cost-of-living increases hit some of the basic expenses such as energy, insurance, food and health costs.

Fortunately, someone has already worked out what you might need.

The Association of Superannuation Funds in Australia (ASFA) updates its Retirement Standard every year, which provides a breakdown of expenses for two types of lifestyles: modest and comfortable.

Based on our average life expectancy – for women it is just over 85 years and men 81 – if you are about to retire at say age 67, you will have between 14 and 18 years in retirement, on average and depending on your gender.

ASFA finds that a couple needs $46,944 a year to live a modest lifestyle and $72,148 to live a comfortable lifestyle. That’s equal to $902 a week and $1387 respectively. The figure is of course lower for a single person – $32,666 for a modest lifestyle ($628 a week) or $51,278 ($986) for a comfortable lifestyle.

What does that add up to? ASFA estimates that, for a modest lifestyle, a single person or a couple would need savings of $100,000 at retirement age, while for a modest lifestyle, a couple would need at least $690,000.

A modest lifestyle means being able to afford everyday expenses such as basic health insurance, communication, clothing and household goods but not going overboard. The difference between a modest and a comfortable lifestyle can be significant. For example, there is no room in a modest budget to update a kitchen or a bathroom; similarly overseas holidays are not an option.

The rule of thumb for a comfortable retirement is an estimated 70 per cent of your current annual income. (The reason you need less is that you no longer need to commute to work and you don’t need to buy work clothes.)

Building your nest egg

So how can you build up a sufficient nest egg to provide for a good life in retirement? There are three main sources: superannuation, pension and investments/savings. Superannuation has the key advantage that the money in your pension is tax free in retirement.

Your superannuation pension can be augmented with the government’s Aged Pension either from the moment you retire or later when your original nest egg diminishes.

Your income and assets will be taken into account if you apply for the Age Pension but even if you receive a pension from your super fund, you may still be eligible for a part Age Pension. You may also be eligible for rent assistance and a Health Care Card, which provides concessions on medicines.

Money keeps growing

It’s also important to remember that the amount you accumulate up to retirement will still be generating an income, whether its rentals from investment properties or merely the growth in the value of your share investments and the accumulation of money from any dividends paid.

You can also continue to add to your superannuation by, for instance, selling your family home and downsizing, as long as you have lived in the home for more than 10 years.

If you are single, $300,000 can go into your super when you downsize and $600,000 if you are a couple. This figure is independent of any other superannuation caps.

Planning for a good life in retirement often require just that – planning. If you would like to discuss how retirement will work for you, then give us a call.

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.

With property remaining a high-priced asset, it’s more important than ever for investors to ensure their property investments are a financial success.

The latest data demonstrates property’s popularity. One-in-five households (21%) owns a home in addition to their usual residence.

Maximising taxation benefits is one key element but the ATO recently found 9 out of 10 returns were incorrect, so it’s essential to check your paperwork as we approach the end of the financial year.

Get your structure right

As with any investment asset, ensuring the right ownership structure for a property asset is vital because it can make a big difference to your tax position each financial year.

It’s also sensible to check if you are using the right structure to help protect your investment from creditors, provide income in retirement, or cope with the unexpected death of a part-owner.

Managing the loan

Once you establish your investment loan, tax still remains a consideration. Any deductions you claim for your loan expenses must directly relate to earning assessable rental income.

In cases where money from the loan is used for both private and income-producing purposes (such as a property partly used for rental and partly as your home), you must split your claims into deductible and non-deductible amounts.

If you use the redraw facility on your home’s mortgage to fund an investment property, you won’t be able to claim the interest as a deduction if you subsequently use your family home as a rental. There are also capital gains tax (CGT) implications with this strategy.

Costs related to loan establishment fees cannot be claimed as a deduction upfront and must be spread over the term of the loan or a five-year period, whichever is shorter.

Rental deduction dangers

Although many investors focus on the tax deductions they can claim from a property asset, both rental income and deductions are key areas of ATO interest.

Detailed records are required to substantiate all claims and any rental income from ‑short-term arrangements and insurance payouts must be included in your return.

You also need to be careful not to overclaim. Many new investors make the mistake of claiming an immediate deduction for initial repairs after purchasing a property. Existing damage must be claimed over several years as a capital works deduction and is used when working out your capital gain or loss when selling.

Deductions such as advertising for tenants, professional property management, council rates, land tax and strata fees, building and landlord insurance, and pest control can only be claimed for time periods directly connected to earning income.

Depreciation or capital works?

Property investors are able to claim a wide range of deductions for expenses associated with maintaining and financing property assets, but care is needed.

Claims for depreciation of assets with a limited effective life (such as freestanding furniture, washing machines and TVs), can be made each year, but deductions for capital works must be spread over 40 years following construction. Capital works include improvements or alterations such as adding a driveway or altering the building.

Improvements such as renovating a bathroom, are a building cost and must be claimed at 2.5 per cent annually over 40 years from completion.

Check your CGT

When it comes time to sell your investment, an important consideration is capital gains tax (CGT). The key to making your investment tax-effective is to ensure you have identified all legitimate expenses contributing to the property’s cost base so you can correctly calculate the capital gain or loss.

The property’s cost base includes the price paid plus your buying and selling costs (such as stamp duty, legal fees and the agent’s commission). You are not permitted to include amounts already claimed as a deduction, including depreciation and capital works.

Any capital gain must be included in your tax return for the income year the property is sold, while capital losses can be carried forward and used in future years.

To ensure you are making the most of your investment assets, call our office today.

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.