Yearly Archives: 2011

The Federal Government’s Mini-Budget – Superannuation & Tax Changes Announced

On Tuesday 29th November 2011, the Government released a ‘mini-budget’ outlining measures on their plan to get the budget back to surplus by 30 June 2013.  Although the Federal government should be applauded for keeping its fiscal house in order and applying discipline in getting the budget back to surplus by June 2013, the rush to get back to surplus is more a political need than an economic one.

At a time where advanced economies across the globe focus on sovereign debt concerns, Australia remains in an enviable position.  Australia’s government debt to the Gross Domestic Product (GDP) ratio is likely to fall from 3.4% of GDP to 2.5% of GDP by June 2012, which is well below what is projected for Euro zone economies and even the US (e.g. Greece are currently sitting at 160%).

Obviously, Australia remains well and truly ahead of its global peers and the urgency to attain a surplus needs to be questioned, especially given the recent Organisation for Econimic Co-operation & Development (OECD) global growth downgrades, a low inflation environment, and the risk of further potential surprises (such as a slower than expected recovery) to the global economy.

The new saving measures which were announcemented include:

Reduced Minimum Pension Drawdown to Continue

The current 25% reduction in the standard minimum pension drawdown rate will be extended for another year as a consequence of the unsettled investment climate.

The 2011 Budget announcement originally had the minimum pension drawdown rates returning to the standard rates by from 1st July 2012.  Under this announcement the
drawdown rates will return to the standard rates by 1st July 2013.

Age

1/7/2011   to
30/6/13

Minimum
% Withdrawal

(25%
reduction)

From 1st July 2013

Under 65

3.00%

4%

65 – 74

3.75%

5%

75 -79

4.50%

6%

80 – 84

5.25%

7%

85 – 89

6.75%

9%

90 – 94

8.25%

11%

95+

10.50%

14%

 

$25,000 Contributions Cap to Super to Continue

The Government will delay indexation of the $25,000 concessional contribution cap until 1st July 2014 where it is expected to increase to $30,000.

The concessional contributions cap has been $25,000 since 1st July 2009 when the original cap of $50,000 was halved.  Consequently there has been no indexation of the concessional contributions cap since caps were introduced in 1st July 2007.

Whilst the Government advised in May 2011 that people with less than $500,000 in superannuation will be able to contribute $50,000 (instead of $25,000), there was no further announcement on this.

Government Co-Contribution Reduced by 50% for Low Income Earners

The Government will reduce the co-contribution for low income earners from $1,000 to $500 from 1st July 2012.  The maximum co-contribution reduces for incomes over $31,920 until it ceases when income reaches $46,920.

New Low Income Superannuation Contribution

The Government will make a contribution (up to a maximum of $500) to a low income earners’ superannuation to compensate for 15% contributions tax paid on concessional contributions from 1st July 2012.

The person must have adjusted taxable income of less than $37,000 and business / employment income of at least 10% of total income.  The Government announced this
initiative with the 2011 Budget, however it has been modified to include the 10% employment income requirement.

Super Guarantee (SG) Age Limit Removed

Originally the Government tabled amendments to lift the SG age limit from age 70 to 75, however in a late amendment the Government (sensibly) removed the age limit altogether.

This Bill has already passed through the House of Representatives and will be debated in the Senate next year with the increase to the SG to 12% and other parts of the Minerals Resources Tax package.

Other Changes

  •  The baby bonus will be reset to $5,000 from 1st September 2012 (it is currently $5,437) and indexation will be paused until 1stJuly 2015.
  • The increase to the standard tax deduction for work-related expenses (from $300 to $500) and the cost of managing tax affairs will be pushed out to 1st July 2013.  It was originally supposed to commence on 1st July 2012.
  • The 50% discount on interest income for tax purposes will be pushed out to 1st July 2013.  It was originally supposed to commence in 1st July 2012.
  • The phase out of the Dependant Spouse Tax Offset from 1st July 2012 will be extended to taxpayers with a dependant spouse born from 1st July 1952 (i.e. aged 59).  Originally the phase out applied where the spouse was born after 1st July 1971 (i.e. aged 40).
  • Directors will be personally responsible for their company’s failure to pay SG contributions. This was originally due to start from 1st July 2011 but it has been put off until the Bill passes (FY13).

New Personal Marginal Tax Rates & Thresholds Passed

The Clean Energy Bill (carbon tax) passed through Parliament and will soon receive Royal Assent.  The package includes changes to the personal marginal tax rates and thresholds from 1st July 2012.   Key changes include:

  • The tax-free threshold will increase from 1st July 2012 from $6,000 to $18,200.
  • The second tier marginal tax rate will increase from 15% to 19%, and the third tier from 30% to 32.5%.
  • The Low Income Tax Offset will reduce from $1,500 to $445 (as it will be largely incorporated into the new tax-free threshold).
  • The Pensioner Tax Offset will be rolled into the Senior Australians’ Tax Offset (SATO) from 1st July 2012.  The new offset will be called the Seniors and Pensioner Tax Offset (SAPTO).

Increase to the SG passes through the House of Representatives

The Minerals Resources Tax Bill passed through the House of Representatives after midnight on 22nd November 2011.

This package of legislation included a section to phase in an increase to the compulsory SG from 9% to 12% commencing 1st July 2013.  It also included changes to the age limit for SG contributions (see above).

How does this affect you?

Should you require further information on how these changes may affect you, or how you can benefit from the changes please contact our office on 03 8677 0688 or strategies@jbsfinancial.com.au.

www.jbsfinancial.com.au


How Can We Help Your Children?

Well it’s been a busy month here at JBS, with some exciting changes bringing even more products, services and value to our beloved clients!

A New Service for your family!
We  are very excited to announce our new service for our valued clients, or  more specifically, for your children.  We spend so much time speaking
with you, our clients, about securing your financial future, and we have realised that part of this includes ensuring your children are on the right path to financial independence and security.

It’s never too early to start maximising your earning potential, and we would like to offer, at our cost, financial planning advice to all of our client’s children who are under 30!

There is a lot of talk these days about which direction Gen Y are heading in with their finances, so we would like to help to ensure your children are on track and have some sound advice to consider.  We will meet with them and provide a strategy tailored to their individual situation, which will hopefully help gain their financial independence.

Please pass this link onto your kids and contact us for more details. We look forward to discussing this with you.

A night with an Olympian!
JBS will be hosting an evening with Olympic Gold Medalist, Duncan Free, who was badly injured when he was struck by a car while cycling in preparation for the 2012 London Olympics.

We would like to invite 25-40 year old clients and prospects to join us at Oriental Tea House in Chapel Street for a casual dinner with this
inspirational speaker to give an impartial overview on the importance of protecting what you are building in life.  Please contact Elly Parker if you would like any further information.

A New Adviser
We would like to introduce Gurbinder Gill who has joined JBS as a Senior Adviser.  Gurbinder comes to us from managing his own successful financial planning business, where he realised that to continue to sustain a high level of service, he needed to be better supported from a well structured and highly recommended practice.

He approached us based on our reputation in the industry, and after the necessary due diligence we concluded that he would be a great addition to the JBS team, especially providing mentoring and training to the junior staff members.

A New Tenant
We also welcome Monica van Riet to the JBS office, where she will operate her Mortgage Choice franchise and be able to assist all of our clients with extremely competitive full service loans.  Please contact us if you would like and more information, and make sure you drop in and say hi to both Gurbinder and Monica next time you stop by.

As always, we thank you for your ongoing commitment and support to JBS, and look forward to talking to you soon.


Women need Super and Insurance too!

Congratulations to Jenny Brown who has been nominated for the 2011 National Female’s excellence in  Advice Award, recognising professional excellence and outstanding work in addressing the particular issues faced by many women in achieving financial security now and in the future.

The Female Excellence in Advice Award is sponsored by the Association of Financial Advisers (AFA), TOWER Australia – the country’s largest life insurance specialist – and Sydney’s Macquarie Graduate School of Management.  These institutions have joined forces to encourage female advisers to take leadership roles in the currently male-dominated financial advice profession.  The Award recognises the achievements of female financial advisers in the workplace and their commitment to assisting women to gain financial stability and peace of mind.

“Jenny has been singled out by her industry peers as someone who is tackling this serious problem and is working towards being a part of the solution,” said CEO of TOWER Retail Life, Brett Clark.  “Far too many women are under-insured and under-resourced for retirement.  Research tells us that in Australia, half of women between the ages of 45 and 59 have less than $8,000 in superannuation.  At TOWER, less than one fifth of income protection policies are held by women and yet women make up half of the workforce in this
country.”

The CEO of the Association of Financial Advisers, Richard Klipin, also congratulated Jenny on her nomination.  “With this nomination, Jenny has been recognised for her professional achievements and her efforts to reach out to women of all ages in all situations to help them secure their financial future.”

Jenny and the team at JBS are thrilled with our nomination which further supports our commitment to helping our clients, especially our women clients, to maximise their earning potential and ensure security in their finances, both now and for the future.

If the above statistics scare you, or worse, include you or someone close to you, then please contact JBS to discuss how we can help to get and keep you on track.

For more information please contact JBS’s Practice Manager, Elly Parker 03 8677
0688 or eparker@jbsfinancial.com.au


Insurance Claim Statistics; You won’t believe it!

You wouldn’t believe the amount of claims that were paid by our life insurance companies last year, so we thought we had better show you!  Industry statistics show a total of $3.5 billion in claims were paid out by Life Insurance companies over 2010 helping out a staggering 61,274 individuals and families.  The following table provides a breakdown of the insurance claims paid in 2010.

2010 CLAIMS PAID BY PRODUCT TYPE

Product

Life

TPD

Trauma

Income Prot

Total

Claim Paid ($) $1,629,150,468 $460,930,853 $443,736,522 $1,033,831,983 $3,567,649,826
Number 16,173 5,477 2,531 37,093 61,274

This  enormous amount of $3.5 billion would not have been paid if it weren’t for the work that is done with clients, by advisers, to protect family lifestyles and assets and businesses from the devastating effects of illness and injuries.

An average of $14.3 million was paid to 245 Australians, each working day in 2010.

All of these statistics include data from the following insurance companies:
AIA, AMP, Asteron / Suncorp, AXA, BT, CommInsure, OnePath, Macquarie, MLC, Tower, Zurich

Key Points

•    Not one of these claimants expected to claim on their insurance.
•    If these claimants hadn’t received the $3.5 billion from their insurance policies, where else would they have got that kind of money?
•    This is not a one-off statistic:  over the previous 5 calendar years the total claims paid out from the above insurance companies to
policyholders totals just under $15 billion.

That’s a lot of people who didn’t ever want to claim – but had to.  How glad do you think they and their dependents were, to have been wise enough to take the good advice of their adviser and plan for the unexpected?

Are you adequately protected?  Is your cover right for you, your family, and your personal situation right now?  If you would like to discuss your personal situation or be added to the JBS Newsletter list, please contact us via our website or strategies@jbsfinancial.com.au.

Source: the risk store


What’s Happnening in the Market 5 August 2011

Market Action August 2011

A gloomy global economic outlook sent investors on a mass exodus out of risky markets last Thursday and into the refuge of US government debt, sending yields to yet another round of new 2011 lows.  The intense flight into safe-haven Treasury’s forced benchmark 10-year yields down more than 50 basis points since last Friday; there hasn’t been such a large one-week drop in yields since November and December of 2008, when Lehman Brothers collapsed, sparking a financial-market frenzy.  Last Friday morning, the 10-year US Treasury note yields 2.40%

Investors across the globe have been buffeted by economic and political turmoil in recent days.  In the US, fears have turned from worries about a possible default by the US government to a weakening economic outlook.  A string of recent weaker than expected economic data have pointed to a possible slowing of the recovery.

In Europe, leaders are still working through a longer term solution to the sovereign debt crisis impacting peripheral countries such as Greece, Portugal and Spain.  Investors are increasingly nervous that troubles are spreading to Italy and Spain, driving down stocks across the region and sending borrowing costs of peripheral nations soaring.

European stock markets plunged 3.4%,  the largest one-day drop in more than a year, while US major indices continued the falls, ending down around 4.5%.
The breaking of short-term technical levels, automated trading systems and the imposition of automated sell trade curbs in the US, fed the worries of traders.

Keeping market moves in perspective

Despite last week’s extreme movements, there was nothing in terms of a fundamental change in the world economy that happened in the past 24 hours.  The fact is we remain in a volatile market environment, set against the backdrop of a grinding global recovery.

It is helpful to put last nights’ moves against the backdrop of the following key fundamentals:

The recent softer US data is consistent with our long held view that economic data overseas will oscillate between good and bad for a while yet, but that the net effect is the continuation of a grinding recovery over the next year or more.

Despite Eurozone debt concerns, core countries such as Germany continue to deliver strong growth, and one of the best performing sharemarkets in the world over the past year – despite everything going on with Greece.

Equity valuations remain ok (on the cheap side of longer term averages).  US earnings in particular remain robust with 75-80% of reporting companies in the current earnings season beating expectations – 43% of these by more than 5% (though we do expect US earnings growth to slow to a more sustainable pace going forward).

US government bond valuations are now considered to be at extremely expensive levels.  The debt ceiling/deficit cutting issues will be worked through and US default is an extremely low probability going forward.

The central scenario for Europe is that sovereign debt worries will continue to muddle through for now, but with any agreement on a long term solution still a way off yet.

Emerging economies remain the key drivers of global growth.  Central scenario is for a soft rather than hard landing in China (slowing to 8% pa or so – still impressive).

Key Message

Whenever there are large market-driven movements like last night, it is likely there will be continued volatility until things settle down again.

The key for investors is not to panic.  We remain confident that while market conditions will continue to be volatile over the rest of the year, now is not the time to make knee-jerk reactions and run to cash (as many did in the depths of the GFC – with terrible results in the ensuing recovery).

Keep your head, stick to your long term strategic plan, and look through the current noise to keep headlines in perspective (especially against the backdrop of market valuations and economic fundamentals).  There is nothing in the past week or so that should change your medium to long term investment strategy.


Don’t miss the govt co-contributions for FY11!

We all like the thought of making easy instant money, and thanks to the Government with the Superannuation Co-Contribution it’s possible.

Provided you meet the eligibility requirements (see below), for each $1 non concessional (personal after tax) contribution you make into super before 30 June 2011, the Government will match it by $1, up to a maximum co-contribution of $1,000.

This can represent an instant return of 100% on your money!

If your income for the 2011 financial year is less than $61,920 (subject to the requirements stated below), we strongly suggest you consider making a non concessional personal contribution into super before 30 June.

To calculate the estimated maximum co-contribution for you, please contact JBS to discuss your personal circumstances.

Below is further information on the Government Super Co-Contribution.

Should you have any questions don’t hesitate to contact the JBS team.

www.jbsfinancial.com.au  

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 Eligibility Requirements

You will be eligible for the co-contribution if all of the following apply:

  • you make a personal super contribution by 30 June each year into a complying super fund and don’t claim a deduction for all of it
  • your total income (less any business deductions) is lower than the higher income threshold of $61,920
  • 10% or more of your total income is from eligible employment, carrying on a business or a combination of both
  • you are less than 71 years old at the end of the year of income
  • you do not hold an eligible temporary resident visa at any time during the year, unless you are a New Zealand resident or holder of a prescribed visa
  • you lodge your income tax return for the relevant financial year.

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 Income Thresholds

Lower income threshold Higher income threshold What will you receive for every $1 of personal super contributions? What is your maximum entitlement?  
$31,920 $61,920 $1 for every $1, up to a maximum super co-contribution of $1,000 a year. Your maximum entitlement is $1,000. However, you must reduce this by 3.333 cents for every dollar your total income, less business deductions is over $31,920, up to $61,920

 

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Personal (non concessional) Super Contributions

Personal super contributions are the amounts you contribute to your super fund from your after-tax income.

These are in addition to any compulsory contributions your employer makes on your behalf and do not include contributions made through a salary sacrifice arrangement.

The following super contributions do not attract the co-contribution:

  • super guarantee contributions paid by your employer
  • salary sacrifice contributions – these are before-tax contributions made by your employer and are reportable employer super contributions
  • personal contributions for which you have claimed an income tax deduction
  • contributions made by your spouse or any other party on your behalf.

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 Payment of the Co-Contribution

If you are entitled to a super co-contribution, it will be paid to your fund after all of the following have occurred for a financial year:

  • you have made eligible personal super contributions to your super fund or RSA before 30 June
  • you have lodged your income tax return
  • you did not claim an income tax deduction for all of your personal super contributions in your income tax return
  • your super fund has reported your personal contributions to us
  • we have received any additional information required.

 The super co-contribution is tax-free. However, the earnings on the super co-contribution will be taxed like any other earnings within the super fund

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Welcome!

 Welcome to the JBS Blog!

Our JBS Blog has been created to allow us to send our Newsletter to our clients in a format where your interaction and feedback is encouraged.  The Newsletter aims to provide fresh commentary, information and insight on all things financial planning.

JBS is a licensed boutique financial planning business focused on creating and managing wealth strategies for high net worth individuals, small business owners, and Gen Ys.  JBS concentrate on wealth creation by providing advice on various financial planning strategies, entirely dependent on your personal situation.  These strategies all have the same aim: to create long-term wealth, protect yourself, your family and your investments, and to position you to be able to enjoy your success.

We hope you enjoy our blog, and look forward to your interaction and feedback.

To your success,
Jenny and the JBS Team