Yearly Archives: 2012

Free Money for Christmas

Well that got your attention! What are we talking about? We definitely don’t have spare cash to throw out to you all but the Government might. I know this sounds very fishy – especially when I say that the Government wants to give you money but it is true for some of us.

How long have you been working? 5 years? 10 years? 30 years? And how many superannuation funds have you had along the way? What about that job years ago that you had for 6 months? Working at McDonalds didn’t agree with you but they may have paid you superannuation and where is it now? Superannuation legislation for employers to make compulsory superannuation contributions came in in 1992 and since then, people have had fund after fund and are losing funds at a staggering rate.

In 2011 a Westpac survey found that there was a massive $19 billion in unclaimed superannuation in Australia, with $4.7 billion here in Victoria alone. The report also showed that the areas with the largest amount of lost super included Brandon Park, Glen Waverley and Wheelers Hill with a total of around $57 million from these suburbs alone. Workers and retirees in the western suburbs of Werribee and Point Cook have about $53 million waiting to be claimed, while Fountain Gate and Narre Warren residents are missing just over $50 million.

These staggering figures show the need to keep track of your funds. So if you’re thinking that you could have some lost super from the days as the mail clerk or even before you left work to have your kids, then you need to click onto the ATO’s SuperSeeker website. It is a secure, convenient service designed to track and find your super accounts.

So that’s one way to get free money from the Government and I hear you asking what’s the other? The answer: by checking for lost cash, insurance policies with balances and shares. The ATO have records of more than $670 million in lost funds (outside of superannuation listed above). So if you’ve moved house and you think you once held some shares in Billabong that your grandmother gave you, you might be lucky enough to find them again (OK, so if you had Billabong shares, they’re probably better lost – but if you had Commonwealth Bank shares, now that’s one that you’d hope to find).

All you have to do for this one is log on to the moneysmart.gov.au website and type in your name. Within seconds you could be $10 or $1,000 richer, or no richer but feel comfortable knowing that you’ve not lost any of your hard earned cash.

And that’s the other way to get free money from the Government. Well, technically it’s your money anyway, you might have just lost track of it. In any case, it takes a couple of minutes to check and you might find some money you didn’t realise you had.


Young, Free & Unprotected

When we’re young and free with the world at our feet, we think that we’re pretty indestructible (I remember that time). Life’s all about fun! Travel, drinking, friends… who wants to think about grown up things like insurance? While we might not want to think about it, it doesn’t stop that fact that we all need it.

Let me throw some figures at you… According to the place with all the info (The Australian Bureau of Statistics), they say that:
– In 2009, 15% of people in ‘prime working age’ are disabled.
– There are 275 new cases of diabetes in Australia every day, while two million of us are at risk.
– One in five Australians will experience a mental health problem in their lives.

And the Australian Institute of Health and Welfare put out a report that said:
– Males were 2.2 times more likely than females to be seriously injured as a result of a land transport accident, while just over 50% of those seriously injured were aged less than 30 years.
– For those seriously injured due to traffic (on-road) accidents, 28.2% were judged to be suffering from injuries which were considered to be high threat to life.

Of AMP’s 2010 claim, youngest to claim on Total & Permanent Disablement was just 18 years old, Terminal Illness was 24 years old, and Income Protection was 19 years old.

But what does that mean for you as a young nipper? Well, those figures don’t discriminate against age. We like to think that these figures are for the 15% of the older population or the two million people other than me.

But the reality is that it has to happen to someone, so it might be you. While we can take measures to reduce the risk, we can’t eliminate them and so we should look at ways of ensuring that other aspects of our lives are not negatively affected by it. Personal insurance gives you that freedom to know that if something did happen, you wouldn’t have to worry about the money needed to pay for rehab or maybe the cost of the experimental treatment, renovations to your home or even just having your partner or your parents stop work to be by your side in your recovery.

If we look at the statistics, you’re more likely to have a major medical injury or illness than win tattslotto but I bet you’ve bought a ticket or two in your life. If you think you’re in with a chance to win the big bucks, then you’re in with more of a chance to have something go really wrong with your health. So, why wouldn’t you take out insurance?

Also, taking out insurance while you’re young can save you thousands in the long run. While you’re young, you’re relatively healthy and therefore taking out insurance is cheaper. You are more likely to get standard rates, which means that you are no more of a risk of claiming than anyone else your age, unlike when you’re older, rounder and doing less exercise. If you can get standard rates at a young age, you can take out level premiums. This means that you can spread the risk of claiming over the life of the policy rather than just year by year and save a heap in the long run!

So take time out from all the stuff young people do these days and do a grown up thing for just a minute or two! Once it’s in place, you don’t have to think about it again (we’ll review it for you to make sure that it stays relevant) and you can go back to your Contiki tours, absinthe and ipads. Oh and it covers for anywhere in the world.

To read more, click here.


Does My Super Retire With Me?

For some, knowing that one day we get to retire and never work again keeps us going. Knowing that we’ll one day have all the time in the world to do what we want, when we want. But what will actually happen to our money in retirement? How does it all work?

What happens to your super when you retire?
A vital element of retirement involves choosing how to use your super savings. To set yourself up for retirement and providing your future income, you will need to make decisions regarding how you are going to invest your funds, when it will begin, how much you wish to receive and how often you will need to receive payments.

When can you access your super?
While Preservation rules may allow you to access a portion of funds early, to access your superannuation benefits for retirement you need to meet a condition of release which includes:

• Reach Preservation Age which is anywhere from 55 to 60 depending on your date of birth.
• If aged 60 to 65, you must have ceased employment and if you are under age 60 there is a further requirement that you never intend to be gainfully employed for 10 or more hours a week.
• If you hit age 65, there are no restriction and you have full access to your funds.

What retirement options are available to you?
Retirement shouldn’t mean – Now I can access my funds so give me my lump sum. There are many options available that need consideration to ensure that your entire retirement life is taken care of.

• An Account–based pension (previously known as an Allocated Pension) allows you to invest your funds the same as you would under a super plan, however pays a regular pension payment from your balance. Any funds remaining after your passing forms part of your estate.
• An Annuity is an investment that is commenced with a lump sum and provides the investor with a guaranteed income for specific term but you have no say in the investment of funds and you may forfeit any balance upon your death after a qualifying period.
• Lump Sum Withdrawal to live off the balance of funds.
• Leave it in Super. You can now leave your benefits in superannuation (accumulation phase) indefinitely and there is no requirement for withdrawals to be made.

What about tax?
Tax should be a big consideration in retirement. It seems to be a common belief that once you retire, you don’t pay tax but that’s not necessarily the truth.

Tax laws still apply to everyone regardless of your age. If your 100 and have taxable income, then you should be lodging a tax return. But the way you structure your funds in retirement could dramatically reduce your tax bill.

For each of your retirement options there are tax consequences which are explained in further detail in the full article.

So with all these options and considerations, what should you do with your super at retirement? You should seek the advice of a good financial planner as you could be considerably worse off by not knowing what you can do and what it will mean for you and the future generation. Retirement should be about enjoyment and family not worry about whether your funds will last and pension payments.

Let JBS do the worrying for you.
Click here to read more!


Long Term Investing…

Share markets, like life, have their ups and downs. When it comes to the Australian share market, the only thing that is predictable is its unpredictability. So how do you navigate the world of investing without taking a big hit? The simple answer is – take a long-term view.

Over the last 100 years, the Australian share market has posted positive returns in 80 per cent of calendar years as illustrated in the graph. This highlights the importance of having a long term focus rather than reacting to short term volatility.

Whenever there is short-term market uncertainty, investors often get caught up in the momentum and noise, which can lead to emotional decision-making. By taking a long term approach to investing, you give your investments time to recover from the downswings that are a natural part of any investment cycle, and reap the rewards of the inevitable upswings. History also shows us that the Australian share market has previously gone on to achieve new highs following each low.

That’s why a well formulated investment strategy is necessary to keep you on track. Investment decisions should be based on principles and fundamentals as opposed snippets of information, emotions or even mass hysteria. But more than anything, keep that long term view!

Click here to read more.


Commonwealth Seniors Health Card Explained

Once in retirement, we want to ensure that our funds will at least last us out.  The help of a good financial planner is imperative for this but also reducing costs wherever possible will also assist.  The Commonwealth Seniors Health Care (CSHC) entitles the holders to concessions and discounts on everyday items to reduce the living expenses of retirees and therefore reducing the need to draw on their retirement funds.  The only real down side is that you have an official card in your wallet that declares you’re a Senior Citizen.

Benefits
The Commonwealth Seniors Health Card gives you access to cheaper prescriptions via the Pharmaceutical Benefits Scheme, bulk-billing rates for doctor’s appointments, and an increase in benefits for medical expenses above a certain threshold via the Medicare Safety Net.

Every state and territory have their own list of concessions available and often private businesses offer discounts or concessions to Commonwealth Seniors Health Card holders.  The Card also entitles travel on the interstate rail services (Ghan, Indian Pacific and the Overland) at concessional rates.

As a Commonwealth Seniors Health Card holder, you may also receive a Seniors Supplement of between $200 and $310 each quarter.

Eligibility
To be able to receive the CSHC you must have reached qualifying age, be an Australian citizen, a holder of a permanent visa, or a Special Category Visa holder with 2 years living residency, have an annual taxable income of less than $50,000 for singles, $80,000 couples and $100,000 for separated couples and are not currently receiving any Centrelink or Department of Veterans Affairs service pension or support.

Find out more & Applying
You can read more here Or you can download a brochure on the Commonwealth Seniors Health Card and other Government issued cards here.
To apply, you can download the application form from the Centrelink Website.


Self Managed Super Funds and the ATO

As part of the Government’s Stronger Super reforms for a stronger and more efficient superannuation system to maximise retirement income for members, the ATO is actively contacting trustees of the various Self Managed Superannuation Funds and providing information on the rules and responsibilities for running a SMSF.

The Stronger Super reform also saw changes to legislation that came into effect on 7 August 2012 which put further requirements on trustees as detailed here.

The ATO has become more active in its efforts to ensure all Trustees of SMSF’s (new or existing) are aware of their obligations and superannuation rules.

As part of the services offered by JBS Financial Strategists, we offer advice and guidance of the obligations of Trustees however it is important that all Trustees understand their roles.  We believe all Trustees/clients should be educated and aware of their responsibilities.

Two of the documents being distributed include:

> Running a SMSF – Provides information to SMSF trustees on the rules and responsibilities for running the SMSF, managing the retirement savings and complying with super and tax laws.

> How Your Super Fund is Regulated – Explains how the ATO works with you as Trustees and others to regulate your fund.

If you would like a copy of these documents, please email us at strategies@jbsfinancial.com.au.


Men, Car’s and Insurance

Ok, we hear you!  Where is the love for you fellas?  Well, this blog is for the men out there and we want to talk about cars…. in a round-about way.  Have you ever thought about how much you earn?  Not in a year or next year but over your lifetime?  If you started work at, let’s say age 22 after university, and your first year’s pay packet was around $40,000.  Assuming an annual pay increase of only 3% (CPI), do you realise that you would have received over $3.4 million in salary by retirement at age 65 (43 years) with your final salary around $138,000 per annum.

If you work it out, that’s about 97 Ford Falcon Utes, or 141 Mazda 3s, or 68 VE Holden Commodore SS’, or 5 Ferrari 458 Spiders, or even 1 Bugatti Veyron.  Whether you have multiple cars or just one, I bet you have insurance on that little baby.  So if you have insurance on your one Holden, then why wouldn’t you insure all 68 of them if you had them?

If you think about it, at the moment you’re probably paying around $800 per annum to insure your car worth about $40,000.  That’s 2% of the value of the car and the maximum you would only get paid out is the same as one year’s income (using the example above).  So why haven’t you got income protection in place?  If something happened to you, you could lose your ability to earn an income (in this example $3.4 million), not just the value of your car.

Income Protection insurance is designed to pay a monthly benefit of up to 75% of your income if you were unable to work due to sickness or accident. It provides protection for you 24 hours a day, 365 days a year anywhere in the world.  This allows you to concentrate on getting your health back on track and allows your financial obligations to be taken care of.  No one wants to have to sell their house after a major medical injury or illness because they can’t afford the mortgage repayments.

Ladies, income protection is not only for the men – if you had 188 Holden Barina’s you would insure them too.

So call us today to get your income protection in place.  We can tailor an insurance package to your needs, and that includes a tax-deductible premium that you’re comfortable with.

Click here to read the full article!


Women, Money & Divorce

Today’s article is one for the ladies.  We want to discuss the unfortunate topic of divorce and how it impacts on you financially.  But it’s not just for the unfortunate ones whose marriage has or might breakdown.  This article is about empowering women to understand their financial position and ensure that we remain on track to reach our own financial goals regardless of what life throws at us.

Even if you were married to Tom Cruise, Tiger Woods or Arnold Schwarzenegger, when you divorce, it’s highly likely that your financial position will be negatively affected. Sure, their divorce settlements might have had a couple more zeros on the end of the figure but assets still have to be divided.

A recent study by the Australian Institute of Family Studies has shown that women are worse off than men after a divorce, particularly if you have kids.  Women with dependent children found it particularly difficult to recover financially, due to problems balancing childcare and work, while women without dependent children financially recover on average after around six years.

So what does that mean for you if you’re going through a divorce or contemplating your options in the husband area?  You need to take time out from having thoughts of unfortunate accidents happening to your man and concentrate on organising your finances.  You should:

•    Understand your financial position by visiting a trusted financial planner
•    Reassess your financial goals as it’s all on you now.  What do YOU want to achieve?
•    Get a Post Office Box for a single mail location regardless of your residential address
•    Revise your Will or your ex could be entitled to some money on your passing
•    Update your Superannuation Nominations as binding nominations remain valid even after a divorce

Still like your partner?  Then you should look at your own financial position and take steps to ensure your own financial goals are not jeopardised or reduced because of taking time off to have kids or because you’re not the financial controller of the family.  Some tips to ensure equality in your financial position includes:

•    While you’re working, contribute extra funds to super to compensate for the time when contributions stop during the child raring year.
•    If you’re taking time off to raise your children, keep your skills and education current so that getting back into the workforce later isn’t a challenge
•    Have some assets in your name solely.  This ensures access to funds at all times.
•    Ask about your financial position.  You don’t have to take over the family finances but both parties to a relationship should at least understand where all their money is and going.

Click here to read the full article!


SMSF Compliance & Legislation

New legislation was recently passed for the 2012/2013 tax year that will put further requirements on SMSF trustees. There are 4 key changes that the new regulations introduce:

•    Insurance consideration as part of the Investment strategy – An insurance review for members is now required as part of the SMSF Investment strategy review.
•    Regular reviews of the Investment strategy – This is now required by law however there is no guidance on what time length ‘regular’ means as yet.
•    Keep money and assets of the fund separate to personal assets – This has always been a requirement however now its regulation, enforceable by the ATO.  Ownership of assets should be structured and documented appropriately.
•    Market valuation of assets – The ATO have been campaigning for Trustees to value assets of the fund at their ‘net market value’ as part of best practice.  However this has since been overturned and now legislated to value assets at market value.

The ATO have also release the hit list of things they will be focusing on for SMSFs for the 2012/2013 financial year.  This list includes:

•    New SMSF trustees – will be randomly checked to ensure they understand the requirements of running a SMSF so that the fund has not just been established to illegally access funds.
•    Contribution reporting – with all super funds, exceeding the contributions caps can bring with it additional tax. The ATO expects to send out 30,000 refund of excess concessional contributions offers.
•    SMSF compliance with income tax obligations – this relates to ‘Exempt Current Pension Income (ECPI)’ and taking the required steps such as valuing assets at market value before starting payment of the pension.
•    Commercial arm’s-length assets – The purchase & sale price of assets within the SMSF as well as income returns must always reflect the true market value.
•    SMSF annual returns – while lodging a return is a requirement of operating a SMSF, there are a number of trustees that lodge the returns late or don’t even lodge one at all.  The ATO intends on auditing over 1500 SMSFs who have never lodged a return to enforce them to either lodge the outstanding returns, or to wind up the SMSF.

The ATO have indicated that they will work with trustees to rectify small breaches however a serious breach can mean penalties such as fines, disqualification of the trustees and/or making a SMSF non-complying may apply.

When you join JBS as a SMSF client, you can be assured that we will keep you abreast of any new regulations that affect the way you are to run your SMSF to ensure that your fund remains compliant at all times.

Click here to read the full article!


Five Lessons That Stand The Test Of Time

Like anything in life, investment markets go through phases. What’s fashionable one year can easily become passé the next. In fact, it often does.
For investments to truly stand the test of time, it pays to ignore the fads and focus on the things that are really important. That’s what makes some investment lessons simply timeless.

1. Do not try to time the market
Assessing the markets for the best time to invest is easier said than done. Intuition tells us that the best time to buy is when prices are down, and the best time to sell is when prices are up. However, trying to pick the top and the bottom of the market is extremely difficult and it increases the risk of being out of the market when it rallies.
Successful long-term investing isn’t about chasing the hottest performance. It’s about taking a long-term view and staying the course. While this doesn’t provide protection from market downturns, it does ensure investors benefit during times of market growth.

2. Diversification – the best protection against risk
History has shown that no single asset class outperforms year after year. Spreading a portfolio across a range of investments helps create a smoother and more consistent return and is one of the best ways to reduce risk.
While portfolio diversification often starts with investing across different asset classes, it also includes holding a spread of investments within an asset class across a range of companies, industries and even countries; and also investing with a combination of fund managers, for example, blending active with index managers.

3. Use dollar cost averaging
The discipline of investing money at regular intervals allows investors to capture the best and worst of market movements, plus everything in between.
While this strategy can be effective across many different market conditions, possibly the real value of dollar cost averaging is that the structure of such a disciplined investment program helps overcome the behavioural bias that often turns investors into market timers.

4. Rebalance annually
When establishing the initial asset class weightings for a portfolio, alignment with an investor’s risk and return profile is front of mind. And while better returns from faster growing assets are always welcome, this can often mean asset weightings have deviated from the original target mix.
Rebalancing a portfolio, or adjusting investments to match the target mix, ensures the level of risk in a portfolio is suited to an investor’s goals and objectives leaving them better positioned to ride out more volatile periods.

5. Costs matter
One part of successful investing is to keep the costs of investing low. All else being equal, investments with consistently low management fees and transaction costs can mean a head start in achieving competitive returns. Management fees create a drag on returns that can make it more difficult for a fund manager to add value. High fund turnover can lower a fund’s tax efficiency and also drive up transaction costs.
The chart below illustrates the significant impact costs can have on portfolio returns. It compares the Vanguard Australian Shares Index Fund to other wholesale Australian equities funds. Over the past 15 years, for every $100,000 invested in the Vanguard fund, investors could have saved $25,340 in fees simply by choosing the low-cost option.
Ultimately, lower fees mean more investment returns are passed on to investors, which positions them for greater long-term financial success.

* Vanguard research based on Morningstar and S&P data as at 30 June 2012. Vanguard pays a subscription fee for this data. Calculation assumes both Vanguard fund and fund with the industry average fee earn the annual historical return of the S&P/ASX 300 Index over 15 years commencing 30 April 1997. Returns are calculated net of management fee and assume all distributions are reinvested with no capital withdrawals and take no account of entry and exit fees and taxes. The industry average fee is calculated by Vanguard using Morningstar Direct data and definition of “wholesale fund” and is the average fee for wholesale Australian equities funds minus Vanguard’s fund for the period 30 April 1997 to 30 April 2012. The fee used for Vanguard’s fund is 0.34% p.a. The calculation assumes all other things are equal. The results would be different if an alternative index was chosen or if the survey of managers considered different or more funds. Past performance is not an indication of future performance.
Vanguard ® 2012 Index Chart – Market Returns – 1 July 1982 to 30 June 2012

Both the above article and chart has been reprinted with the permission of Vanguard Investments Australia Limited.
GENERAL ADVICE WARNING
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 our website content so it may not be applicable to the particular situation you are considering. You should consider yours and your clients’ 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 website was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
© 2012 Vanguard Investments Australia Ltd. All rights reserved