Yearly Archives: 2012

Superannuation contributions – excess contributions tax alert

Superannuation contributions – excess contributions tax alert

 

Did you know that the tax deductible superannuation contributions cap of $50,000, including salary sacrifice amounts, if you are 50 or older stopped on 30th June 2012?

From 1st July 2012, the cap will be limited to $25,000 regardless of your age and any excess over $25,000 will be taxed at an additional rate of 31.5%.  With 15% tax already paid on the tax deductible contribution, the additional 31.5% tax on the excess brings the total tax liability to 46.5%.  Excess concessional contributions are also counted against your non-tax deductible superannuation contributions cap.

Tax deductible superannuation contributions (also known as concessional contributions) include any contributions made by your employer such as 9% superannuation guarantee contributions and salary sacrifice contributions and personal tax deductible superannuation contributions.

 

What should you do?

If you are 50 or older, and your concessional contributions in the 2012/13 financial year will be more than $25,000, you should:

  1. Contact your employer(s) to review the total amount being contributed to superannuation so that you won’t exceed the tax deductible contributions cap.
  2. Make sure amounts claimed as personal tax deductible superannuation contributions from 1 July 2012 do not exceed the cap when combined with all other tax deductible contributions to superannuation.

Don’t forget: it is the total of your tax deductible superannuation contributions (concessional contributions) made to all superannuation funds which is counted against your concessional contribution cap.  If you are a member of more than one superannuation fund, make sure the total of your tax deductible contributions made to all funds are counted.  This also includes payments made by your employer or claimed by you as a tax deduction for superannuation insurance premiums.

 

How can we help?

If you need to reduce your tax deductible superannuation contributions we can assist by calculating the impact on your taxable income and your projected retirement benefits.  We can also review your tax planning strategies, your retirement planning goals and assess other retirement funding options.

There are circumstances when contributing amounts in excess of the $25,000 cap, and incurring excess contributions tax, may not have a material impact on your overall financial situation.  Reducing your tax deductible superannuation contributions in these circumstances may not be necessary.  We can help you to assess the impact of excess contributions tax and to determine the appropriate course of action given your individual circumstance.


How To Retire Early And Lead The Good Life

If I told you to imagine your retirement, what would it look like? The time and money to travel the world, the ability to spend more time with family, restoring that old 1960 Shelby GT500 or maybe you just want to stop and smell the roses. Now imagine doing that 5 years or even 10 years earlier. Think it’s a pipe dream? Think again! With some professional assistance, savvy investing, smart spending and a practical attitude, you too could be on your way to retirement at 55!

There are four main steps to achieving a comfortable early retirement that should be mixed with hard word, determination and professional assistance.

What you have now.

Look at your assets, deduct your debts and there you have it; your net worth. This gives you your base to start with. Knowing where you are, helps to determine where you’re going. This step also involves a budget to know what you are spending.

What you want in retirement.

The AFSA Retirement Standard (a quarterly report on estimated expenses for retirees) indicates that an average couple living a comfortable life in retirement needs around $55,000 per annum. But is that you? Are you average? Are you OK with living comfortably?  Or is extravagant more your style? Maybe somewhere in between?

How much you’ll need to achieve your retirement income.

Working out how much of a lump sum you need to get the income you want in retirement can be tricky. You have to take into account a potential return (Do you use current market returns? Do you factor in a market downturn?), any lump sum withdrawals you’re expecting like a new car or holiday, CPI (inflation), tax, etc. We can assist you with this to give you a realistic idea of what you’ll need as a lump sum to retire early.

What you need to do to get there.

This is working out the difference between what you have and what you’ll need and doing what it takes to get there. There a number of options that can be employed including additional savings, reduced spending, changing your investment portfolio, tax savings, super contributions, etc. This is where we excel. We’ll assess your situation to determine exactly what you need to do to retire early and assist you every step of the way to make sure you remain on track until you get there.

As our motto says, we’ll help you to Create wealth for your future, Protect what you’ve built and Enjoy the fruits of your hard work when the time is right.

Click here to read the full article!


Transition to Retirement – Boost your super without reducing your income

As we approach retirement we are all looking for ways to make our money work harder for us to bring that retirement date back a little earlier or provide that bit more for our retirement spending.  One way to do this is to employ a Transition to Retirement strategy.

Current legislation has made it possible for you to keep working while drawing down some of your super benefits.  The strategy, known as a Transition to Retirement, was implemented to allow you to supplement your salary and maintain a comfortable lifestyle while reducing your working hours.  Using the same tax and super legislation, you can make tax effective super contributions, receive a tax effective pension payment while still receiving some salary to achieve the same level of income.

A Transition to Retirement strategy works by allowing you to access your superannuation savings in a form of a non-commutable pension, while you continue to work.  This means that you cannot make lump sum withdrawals and are restricted to pension payments pension payments between 4% and 10% in any given year.  While you are receiving a concessionally taxed income from your pension (after age 60, it is tax-free), you can also salary sacrifice into superannuation and only be charged the super tax rate of 15% (30% if your taxable income exceeds $300,000) as opposed to your marginal tax rate – which could be up to 46.5%.  This effectively gives you more money in your super and saves you paying more personal tax.

What does this mean for me?

If you have a Transition to Retirement Strategy in place, you will benefit from the following:

  • Pension accounts are tax free – this saves the fund paying 15% tax on income and 10% tax on realised capital gains (for investments held over 12 months) on your superannuation balance.
  • Reduced tax rates on pension payments – only taxable components of pension payments made to people under age 60 are taxable and a 15% rebate may apply, reducing your tax on this income right down
  • Reduced personal tax – Lower tax rate on your personal income as salary sacrifice contributions reduce your taxable income.
  • Higher super contributions – with less tax taken out of your salary sacrifice contributions, there is more money held in your superannuation working for you for your retirement.

Case Study

Sally is age 56 and is currently receiving an income of $100,000 p.a. gross or $73,553 net.  She currently has a superannuation balance of $500,000 ($100,000 tax-free).  If Sally were to employ a Transition to Retirement strategy she could achieve the same take home salary ($73,533) while increasing her final retirement balance by approximately $73,490 by retirement at age 65.   (Assuming a 7.3% return and Indirect Cost Ratio of 2.0%)

How can we help?

If you are approaching or have reached preservation age (currently around 55) you should contact our office for a review of your financial position as a TTR strategy may be appropriate for you.  We can complete an assessment on the levels of salary sacrifice and pension payments that would provide the best outcome for your situation.

Don’t forget, you can refer a friend.  If you know someone in this position that you think this strategy may benefit, please do not hesitate to refer them to our office for a no-obligation free consultation.


Online Insurance Offers? Think Twice…

Nobody wants to think about insurance until they actually need it.  By then, of course, it’s too late.  Illness, injury and death are unpleasant topics and most of us feel pretty indestructible while we’re healthy, so why the need to talk about it?

With the recent emergence of online or over the phone insurance brokers, many think this to be a quick, easy and cheap way to get cover, however, you should ask yourself WHY it is so quick, easy and cheap prior to taking it!  The policy that you think will pay you a nice little lump sum to pay off your home loan if something happens to you, may not.

Why get insurance through an adviser rather than an online application?

  • We can complete a full analysis on your situation and provide recommendations on your insurance needs. They do not.
  • We can provide an ongoing service to ensure that the cover you do hold, continues to be right for what you need and the right price for the cover held. They do not.
  • We can generally provide the same policy at the same price (but price shouldn’t be the only deciding factor). They’re not necessarily cheaper.
  • We can provide recommendations on a full range of insurance options including life, trauma, total & permanent disability and income protection. They generally only offer life or income protection as standard.
  • We provide full advice on what you should hold, compare it to what you do hold, and make recommendations on what to do to be covered. They do not – YOU chose the cover for a quote to compare yourself.
  • We can provide quotes and/or recommendations on a range of insurance providers. They can provide quotes from a number of insurers but NO advice.
  • We make sure that your policy takes into account your medical issues so that you know that if you claim, you’ll get your payment. They do not.
  • Should you even need to claim, we’re there for you to help with all the paperwork and requirements. They are not.

So when you’re at home and one of those insurance ads comes on, don’t reach for the phone, think twice. They make it sound so simple because what they’re offering is simple.

If you’ve been thinking about getting insurances or reviewing your cover, call us and we can do an assessment, give a recommendation, get cover in place and make it easy for you.
Click here to read the full article!


Insurance Strategy

Who’s Looking After You?

Protecting yourself, your family & your investments are a critical part of financial planning which can often be overlooked.  The financial burden on families caused by death or disablement can be overwhelming, and having sufficient insurance protection against these events is important.

Unfortunately most people are underinsured, and therefore are at risk of severe financial hardship if they were unable to work due to sickness or injury.  Even if you think you are currently insured, quite often the level of cover is not appropriate for your situation.

What Types of Cover are Available?

·         Life Cover

Oftenknown as Death Insurance.  This type of cover provides the insured persons beneficiaries with a lump sum payment upon death.  This type of cover can also be used to pay down or clear debts and other ongoing expenses, such as the mortgage or your children’s education.  This can often be funded through your superannuation fund.

·         Total & Permanent Disability (TPD) Cover

The 2nd form of lump sum cover; TPD provides you and your family with the necessary funds to cover medical and rehabilitation costs that are often associated with long term injuries or illnesses.  This can also be funded through your superannuation fund.

·         Trauma Cover

The 3rd form of lump sum cover which pays out in the event you are diagnosed with a specified illness (up to 45 major illnesses) including cancer, heart attack / disease and stroke.  This payment helps fund medical / rehabilitation costs and allows you to take the necessary time off work to assist in the recovery process.

·         Income Protection Cover

Should you be off work due to injury or illness, this cover provides you with up to 100% of your income (pre-injury / illness) and can continue up to the age of 70.

We are committed to working with clients to attentively identify their specific needs and provide the most appropriate risk control and insurance management solution.  We are not aligned with any product provider and will ensure the most appropriate products for your specific needs are used.  We can source the best possible cover against loss of income, trauma, death or disablement for individuals and businesses.

Insurance Claim Statistics?

We thought it may be interesting to show the amount of claims that were paid by our insurance companies last year.

Industry statistics show a total of just under $4.0 billion in claims were paid out by Life Insurance companies over 2011 helping 62,352 individuals and families.

The following table provides a breakdown of the insurance claims paid in 2012

Product

Death

TPD

Trauma

Inc Protection

Total

           
Claim Paid ($)

$1,806,688,603

$629,004,646

$538,720,039

$1,000,457,827

$3,974,871,115

Number of Claims

18,197

6,930

3,169

34,056

62,352

 

This enormous amount of just under $4.0 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 $15.9 million was paid to 251 Australian every working day in 2011.

These statistics are the aggregate from the following insurance companies:

AIA, AMP, Asteron, AXA, BT, CommInsure, OnePath, Macquarie, MLC, TAL, Zurich

Think on this:

  • Not one of these claimants expected to claim on their insurance.
  • If these claimant hadn’t received $4.0 billion from insurance policies, where else would they have got that kind of money?
  • This is not a one-off statistic:  over the previous 6 calendar years the total claims paid out from the above insurance companies to policyholders totals just under $19 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 dependants were, to have been wise enough to take the good advice of their adviser and plan for the unexpected?


Create | Protect | Enjoy – the new JBS newsletter!

JBS Financial Strategists are thrilled to present you with our new fortnightly newsletter,
Create | Protect | Enjoy!

Every second Tuesday we will bring you our new newsletter, with the following sections:

  • a topical and interesting piece from the world of financial planning;
  • a showcase piece from one of our clients; and
  • Tuesday Trivia.

We will have rotating key strategies for you to consider, as well as a link to all of the JBS services.  You can also connect to any of our social media sites, which we strongly encourage.

The first edition is a little bit different as we thought it would be a great time to introduce the team to you so you can put a name to the face.

Click here to check out the new newsletter and the JBS team, and we look forward to any feedback you might have!


How Can Lower Interest Rates Benefit You?

With so much action and subsequent hype in the finance industry lately, surely it can’t all be bad news?

The Reserve Bank of Australia have repeatedly acted in consumer’s best interests by lowering interest rates, in an attempt to help even out the global economy’s woes.  Unfortunately however, these interest rates haven’t been passed on by the banks to consumers to the same degree.  Given that at least some relief has been passed on, albeit at a reduced level, there are still benefits to be had by the end consumer – you and me.

Depending on what stage you are at in your financial life cycle, there are options to captialise on these interest rate reductions.  Click here to read our full article.

JBS are thrilled to be presenting our new newsletter in two week’s time, Create | Protect | Enjoy. In it, we will feature:

  • A topical article, similar to those included in Two Minutes on Tuesday each week;
  • A client showcase, giving you an overview of one of our client’s businesses;
  • Tuesday Trivia, a useless piece of information similar to the Did you know section below; and
  • Hot Topics, a link to a rotating couple of key strategies which we offer.

If you are not an existing JBS client and would like to be added to the mailing list, please contact Elly Parker.

Lastly, don’t forget the JBS Seminar – Protect What You Are Building on July 19th. Click here for more details.


How to help your children save money, and help you in the process!

You generally work hard your whole life, dreaming of the day when you can retire, your kids are off your hands and no longer your (financial) responsibility, and it’s finally time for you to let your hair down and enjoy the fruits of your rewards!

More and more these days, we are seeing Gen X and Gen Y refusing to fly the coop until much later in life.  This is great for them, as it gives them a chance to save (hopefully) enough money to put a deposit on a property, but what about the burden it puts on you, their parents?

Your children can (and will!) potentially eat their way through more of your retirement savings than you have bargained for, and below is a list of tips to help encourage your kids to save.  This is a must-read if you have children of any age as it’s never too late to start!

Click here to read the full article, and please contact JBS if you are interested of any of the strategies mentioned:

1. All initial meetings are at our cost, no matter what your age!
It doesn’t matter how old your child is (or anyone you would like to refer), because the first strategy meeting where we get to know our new prospect, is obligation free, and entirely at our cost. We do this because it gives us a good insight into our prospects, and a chance to get to know them and their goals (both financial and otherwise), prior to providing a strategy. From here, each situation is different and we address them on a case by case basis, but it gives prospects a good idea on what they need to do. There is nothing to lose by trying it!

2. If you are an existing JBS client and your child is under 30, we offer them a financial plan at no cost to them! 
Yes, that’s right, they can come and see us at our cost, and we will tailor a plan for their needs to ensure they are on the right track from an early age.  This can be done in conjunction with you, or independently if they prefer (and we won’t tell you anything!).

3. JBS Risk Seminar – Protect what you are building
Following our successful seminar last year, we are delighted to invite you and your children | friends | colleagues to an exciting event on 19 July, detailing the importance of risk insurance (i.e. Life, Total Permanent Disability, Trauma and Income Protection).  We have inspirational speaker Josh Wood lined up, who was a promising young athlete before a tragic accident left him a quadriplegic.  After being told he will never walk again, you will be amazed at Josh’s journey.  Following Josh, we have an insurance expert to give an overview on the different types of risk insurance, and a run through of some different scenarios facing 25-45 year olds.  We encourage you to come to this event and bring guests who you think will benefit from these topics, or alternatively, please give us a call to discuss your options.  For more information please contact the JBS Practice Manager, Elly.


EOFY Planning – Part 2

In the last edition of Two Minutes on Tuesday, we looked at getting your superanuuation ready for June 30.  If you missed it, please click here.
In Part 2 of our End Of Financial Year planning special, we explore what else you need to consider includng insurance, finance & health insurance advice.  We explore the following strategies:

  • Prepaying your private health insurance;
  • Purchasing death & TPD insurance tax effectively;
  • Prepaying income protection insurance;
  • Prepaying loan interest; and
  • Offseting a capital gain.

Please click here to read the full article and if you would like to discuss any of these strategies and how they can be applied to your personal situation, please contact JBS on 8677 0688 or strategies@jbsfinancial.com.au.


EOFY Planning – Part 1

With the end of the financial year fast approaching, we are bringing you a two-part planning special to help ensure you are financially ready.
In Part 1, we look at making sure your super is ready for June 30, and include information on the following nine things for you to consider:

  1. Maximise concessional contributions
  2. Super is a partnership deal
  3. Sunset for in specie transfers
  4. Beat the cuts to co-contributions
  5. Make a spouse contribution
  6. Prepare for LISC
  7. Review (and study) salary sacrifice arrangements
  8. Review your pension
  9. Review your investment strategy

Click here to read the full article, and look out for Part 2 next week where we explore what else you need to consider for EOFY, including Insurance, Finance & Health Insurance advice.
If you would like to discuss any of these areas, please contact JBS on 8677 0688 or strategies@jbsfinancial.com.au.


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