Personal insurance policies may have a large effect on our cash flow. One factor which dictates how much you pay is whether your insurance premiums are structured on a stepped or level premium. If you’ve ever held any form of personal insurance then you may have come across these terms, however have you ever wondered what the differences is between the two? When your personal insurance policy is initially set up, you have the option to choose whether to have the premiums set on a stepped or level structure.

 
Having your premiums on a stepped structure would generally mean you pay lower premiums initially compared to a level structure.  Stepped premiums increase annually with the added risk of a potential claim.  The downside however is that over time your stepped premiums will increase each year as you get older. This method may not be desirable to some as the premiums may become too expensive to sustain over time.  In certain circumstance, stepped premiums are more favourable.

 
For example a 25 year old male may not be able to afford insurance premiums on a level structure, however in several years’ time he may be earning a larger income and thus be able to afford level premiums. So in the meantime he can put in place his personal insurance policy on stepped premiums to ensure he’s covered and once can he can afford to pay level premiums, he can change the premium structure.

 
Or you may have to take out an additional loan for a short period of time (say 5 years) and you can then ensure you have sufficient insurance to cover this debt for just the 5 years and cancel the policy once the debt is repaid.

 
A level premium is the second option you have and it calculates the risk over the life of the policy (assuming it is held to the expiry of the policy – age 65 and above depending on your policy) and spreads the cost of this risk.  Although initially more expensive to set up, insurance policies on a level structure will not increase over time (excluding any CPI increase).  A disadvantage to having level premiums is it may have a larger impact on your cash flow initially, however over time the savings will catch up.

 
The following table is an example of a 35 year old male with $500,000 of death insurance.

*Please note premiums are shown in months. The above table is only an example, for personalised quotes please contact your adviser.

 
As shown above, stepped premiums are initially cheaper, however over time becomes much more expensive.  In the above example the insured person from age 35 to 60, will have paid $14,002 more under stepped premiums compare to a level structure.

 
Stepped and Level premiums are only one factor to consider when reviewing your insurance needs tailored to your needs. So if you’re interested to know more, please contact JBS for further details and advice.

A couple of week’s back I had the privilege of dining at Heston Blumenthal’s “The Fat Duck” in Melbourne. What an experience! I am lucky enough to have dined at the restaurant before in its original UK location, while travelling through Europe with my brother a few years back. It was hands down the best dining experience of my life. So to say my expectations for round 2 were lofty, would be the understatement of the century.

While being seated at our table the restaurant manager George asked my friend Michael how his flight from Sydney was. We all looked at each other confused as we had not discussed this at any point with the restaurant and had absolutely no idea how they would know he flew down for the meal. We enquired about the question and George clarified that they often do some random research on their diners and had seen that Michael runs a marketing company in Sydney. Our jaws had already hit the floor before we had seen a dish.

What followed was an epic meal, in size, length, quality and enjoyment. He has re-engineered his classics and come up with some spectacular new dishes to suit its home for the next 6 months. In my opinion, even better than the original in the UK. I have included a couple of snaps from a few of the 16 courses.

Savory Lollies – Waldorf Rocket, Salmon Twister and Chicken Feast

Snail porridge with joselito ham and shaved fennel

Salmon Poached in Liquorice Gel – Endive, Vanilla Mayonnaise and Golden Trout Roe

The “Not” so full English breakfast – nitro scrambled eggs, candied bacon & French brioche

We sat down at 8:30 and were the last to leave at quarter to 2 in the morning. Some may gawk at the price tag of $525 per head, but you are really paying for the memory and experience. It is a true performance rather than a meal. He is the Rolling Stones of the kitchen, experimenting with the most odd and mind boggling flavours and ingredients.

These things come down to value. I feel like the team at The Fat Duck ticked every service box possible and I walked out of the restaurant with a huge smile on my face. I would do it 1000 times over. Have fun and pay for things that make you happy.

Adam Mckenzie

During times of share market volatility it’s easy to get caught up in headlines aimed to scare us from investing.

An article in the Age on 9th March 2015 had the headline ‘$24 Billion wiped off the ASX’,  can be a little daunting when expressed this way.  It went on to discuss how the share market fell 1.3% that day.  What it failed to mention was the share market was up over 10% in the previous 2 months, which equated to many more ‘Billions’ added to people’s wealth.

Investing into share markets or other growth assets (such as property) is not a short-term prospect.  You need to take a long-term view of at least 5 – 7 years.  Focusing on just the year ahead, or the daily movements of share markets, you can easily get caught up in the hype and make irrational decisions.  However, when we look at share markets over a longer term, we can start to see the benefits.

Constructed correctly, a share portfolio can bring rewards when a longer time frame is assessed.  The following graph outlines the annual returns from the Australian share market (including dividends) over the last 20 years.

As outlined in the graph, there have been 3 negative years and 17 positive years since 1995.  Over the last 20 years, 85% of years were positive, yet it is those negative years that get the most attention.

The average return has been +9.64% per year or 192% (since 1995).  That includes a period where markets were heavily negative during the Global Financial Crisis.

It is important that you receive adequate advice when constructing share portfolios, as your time frame, investment risk profile, your goals, and the underlying investments need to be analysed.  Investing is an area JBS are passionate about as we see the benefits it can provide our clients.

This passion leads us to produce a weekly newsletter on how share markets are performing.  If you are interested in shares and want to increase your knowledge we ask you to subscribe to our weekly Monday Markets newsletter here.

For those who know me well, they know I’m a big kid at heart. I own a lot of movies and quite a few of them are kids movies (I still enjoy watching the old Disney classics). Well what some may or may not know is I’m a huge fan of Lego, and I know I’m not the only one!

Back in January of this year, I was lucky enough that my girlfriend did her research and found out about the Brickvention expo. I believe it was the first time that they ran this expo in Australia and it was must attend for any big Lego fans like myself, and judging by the size of the crowd, I’m definitely not unique in my love for Lego. I was seriously like a big kid in a candy shop.

They had many different and awesomely built displays, there was even a huge Lego replica of the Golden Gate bridge, which I had only just seen the real thing for the first time a few months before hand. It was out of this world, if only I had a big enough room in my house to dedicate it to building Lego. My girlfriend can also be a big kid, so she jumped at the chance of having a photo with the Lego Tigger!

They had random Lego displays to show off what people could make themselves, to displays of various landmarks around the world, like the Sydney Opera House and Big Ben in London. And of course they had displays for Lord of the Rings and Star Wars. The best displays for me were the ones that involved the big boats, the trains and planes, especially when they were zooming around their Lego world.

Now of course when you go to one of these events you need to buy yourself a little souvenir. Unfortunately the R2D2 Lego pack was a bit pricey, so I settled for the train. As a kid I loved playing with my train set, so this one was a no brainer. I’m still in the process of building it, but I’ll get there one day and will hopefully get the tracks and room to play with it too.

I may be a big kid, but I’m happy to admit it!

In the late 80s interest rates peaked at 17% which made home ownership out of reach for most people and hard to cover for those that had them. We move forward to today and the Reserve Bank Cash Rate is at a very low 2.25% with the last rate rise occurring in November 2010.

While this isn’t great news if you’re thinking of investing into bank deposits or fixed interest investments as returns are low, it does open up opportunity for people to review their mortgage, other debts and financial planning affairs in general.

Some of the main considerations could be:

–   Obtaining a low rate mortgage that still provides the benefits that you need or utilise. If you refinance to the lowest rate loan you could end up paying a higher interest rate on your credit card and may not be an appropriate strategy or beneficial for you

 
–   There are lenders outside the major 4 banks. While many of us complain about the big 4 making massive profits, we also like their security. You can consider options outside the banks and look at credit unions, lending societies, and other lending institutions.

 
–   Reducing your mortgage interest rate and continuing to make the same level of repayments could see you reducing the length of your loan which means interest savings. But, are there restrictions on how much you can make in additional payments? Do you have a redraw facility in case you need to access the funds?

 
–   Credit card interest rates are high and can be up to 20% so consolidating debt may be a way to go, especially if you can reduce that down to say a mortgage rate of around 5%. But beware because if you don’t make additional payments to cover the consolidated funds, you are extending the term of this debt and could end up paying higher interest over the life of the debt.

 
–   Margin lending becomes more appealing with lower interest rates however any strategy that includes debt, should also have contingency plans. Can you still afford it if interest rates increased by as much as 3%? Do you have relevant insurances in place to ensure that can cover your obligations if you can’t work?

 
–   Returns on cash and fixed interest investments become lower and shares become more appealing however you need to consider the risks involved. Chasing returns rather than investing into a diversified portfolio could see a decline in your balance outside what you are comfortable with.

 
–   Be careful with your spending, with additional funds in our pocket due to lower interest rates, it is tempting to spend more. Maybe consider making additional repayments of debt, additional savings or additional super contributions to ensure that the additional money available in your cashflow isn’t blown.

While you may think that you’re personal situation hasn’t changed, the world around you is. Interest rate rise and fall, economic markets changes and legislation is amended, which is why you should be regularly reviewing your financial position. If you haven’t had a review of your financial plan lately, make sure you give the team at JBS a call to make an appointment.

For 33 years my Mum (Dianne) and Dad (Howard) have been at the farm in Cosgrove South, 17 km east of Shepparton. Although only a hobby farm by neighbour’s standards, the farm is over 100 acres and we have had many adventures and life experiences on the land.

Dad and Mum gave us a great start in life. They were always keen for my sister Megan and I to experience new things and try new ideas. Dad and Mum were really into conservation and the environment. I remember one time when Dad, a lecturer at Dookie Agriculture College, encouraged students to participate in a field trip to plant over 400 native trees in the 30 acres west of our house. Almost 20 years later and the paddocks has now become a landmark along the Midland Highway. The natural vegetation and the wildlife is now prevalent.

I remember another time Mum organised a Melbourne high school to come and camp in our paddocks to gain a country experience. They were studying astronomy and for my sister and I who were primary school kids at the time, it was a great experience to have older kids at our place using telescopes to study the solar system.

I also have great memories of shooting hares, marking lambs, raising potty calves and camping in the paddocks with mates, but without a doubt, the highlight of growing up on the farm was our mini Moke. I honestly don’t remember learning how to drive. My sister and I would spend many hours driving around the farm. My mates also loved coming out to the farm to have a drive of the Moke. There is no doubt that it was always a lot of fun, however Dad, from any early age, drilled into us the fact that driving can be dangerous. I remember being out in the middle of the paddock when it was raining and I was driving. Without warning Dad reached over and spun the steering wheel. We spun around a number of times in the mud and it really reinforced just how quickly and easily you can lose control. I still remember the feeling of being out of control in the Moke and this lesson has no doubt held me in good stead throughout my adult life, to the point where I’m yet to have a car accident (touch wood).

Dad was known throughout our extended family for his great ideas. Being out of town, we collected rain water for drinking, and bore water for the gardens and toilets. I remember complaining one summer’s day about the fact that I was hot and I wanted to go for a swim. Dad came up with the idea that we could swim in the bore water tank. The closed in tank was about 12 foot high, 6 feet wide, with about 8 feet deep water. The man hole to climb in is about 3 feet by 3 feet, meaning that it takes some time for your eyes to adjust to the dark. It is also black and attracted the sun, so the top foot or so of water was really quite warm yet the rest of it was freezing cold as it was pumped straight out of the ground. A 10 min swim chills you to the bone and is enough to survive an afternoon of 40 degree heat. Over a number of summers, my sister and I developed many games in the tank to pass our time. We would sit under the freezing cold water as it was pumped into the tank, dive for golf balls and have frog races. I even remember one Christmas we had over 16 of us in the tank at one time including both of my 80 plus year old grandparents, diving for golf balls on the bottom in the pitch black. The swimming tradition continued last Christmas, with my son Riley having his first swim in the tank. It wasn’t a very warm day and I got in, he only lasted a matter of seconds, but for a 3 year old it was pretty scary, and I’m very proud of him for giving it a go, and I’m definitely claiming it as a swim. To be honest however, I think he was actually more impressed with the 16 frogs that currently call the tank their home.

Other ideas that Dad has had over the years include Teflon tape on the dogs bowl to stop the ants being able to climb into the food. Raising yellow belly fish in the tank to stop them getting eaten by birds. Raising many animals including emus, a kangaroo, a magpie and many lambs who had been separated from their mothers.

There is no doubt however that Dad’s most successfully idea has definitely been our olive trees. In 2000 Mum and Dad planted over 50 trees in our front paddock. For the past 7 or so years the crop has been increasing to the point that a big SOS goes out each year around mother’s days for pickers to come back to Cosgrove South for a “farm experience”. This is become a great tradition, one that my children Riley & Lucy look forward to each year. Last year was our biggest crop, over 440kg’s of olives, which equated to 110 litres of oil. Dad takes it to an Italian man on the other side of Shepparton who uses a traditional olive press to make traditional olive oil. Although the quality is well and truly good enough, Mum and Dad don’t produce the oil for commercial purpose. They get more pleasure out of gifting it to their family and friends, and those who have been fortunate enough to taste it (including the JBS team) continue to ask when the next crop is due.

I could go on and on about my memories of the farm and I really feel fortunate to have had such great experiences growing up. Megan and I really learnt some important lessons and a lot about life. My goal now as a father is to continue passing on my parents attitude to life which is have a go, try new things as you never know what might happen.

The Commonwealth Seniors Health Card (CSHC) provides concessional benefits to self-funded retirees who aren’t entitled to the Government Age Pension.

Some of the benefits provided include:
•    Concession rates for medication (Pharmaceutical Benefits Scheme)
•    An additional Seniors Energy Supplement payment
•    Other concessions provided by State, territory and local governments as well as private businesses, in the areas of health, transport, education and recreation

To be eligible for CSHC a person must meet the following criteria:
•    Have reached the age of Pension entitlement
•    Not qualify for pension payments from the Department of Human Services or Department of Veterans Affairs
•    Meet residency requirements
•    Meet the income test which is based on your Adjustable Taxable Income

The income test is as follows:

Changes from January 1st 2015

Any person, who commenced a superannuation income stream from the 1st January 2015, will have their Account Based Pension deemed as income. This means your account based pension income is now subject to a rate of income (deeming rate) for calculation purposes rather than the previous calculation of reducing the gross annual pension payments by the relevant deductible amount which is actually a return of the original capital. This could make it more difficult to meet the income test.

The deeming rates are as follows:

Anyone who has commenced a super income stream prior to the 1st January 2015 will be exempt from the new rules as long as they became holders of the CSHC before 1st January 2015 and continue to be eligible in the future.

Example 1
John is 66 years old, married, and a holder of the CSHC before the 1st January 2015.  John and his wife have a combined annual income of $70,000 per year.  John also has $600,000 in a tax free account based pension, which he commenced before the 1st January 2015 and draws $45,000 per annum.  Because of the grandfathering rules, John’s Account Based Pension will not be subject to deeming rules as it was commenced before the 1st January 2015.  The pension is subject to the old rules, giving him a deductible amount of $33,784 on the $45,000 he’s withdrawing from his Account Based Pension.  This means that only $11,216 will be assessed as income.  This amount together with John and his partner’s income of $70,000 brings their total annual income to $81,216, meaning he will be eligible for the CSHC.

Example 2
Cath is 66 years old, married and a holder of the CSHC before the 1st January 2015.  Cath and her partner have a combined income of $70,000 per annum.  On the 2nd February 2015, Cath decides to move her account based pension, which is worth $600,000 to a new product.  As a result, Cath loses the grandfathering provisions and her new account based pension will be deemed to earn $19,806 worth of income.  Together with Cath and her partner’s taxable income of $70,000, brings their combined total income to $89,806.  In this scenario, Cath would fail the income test, as their combined income is over $82,400 meaning Cath will not be eligible for the CSHC.

This is why it is very important to seek advice before considering re-booting an existing pension. The benefits that you currently receive from holding the Commonwealth Seniors Health Card must be considered as part of the assessment in the strategy to re-commence any income stream to ensure that the strategy is right for you.

If you wish to discuss how these changes may affect you, please contact the JBS team.

Over the Christmas and New Year’s break, I had an amazing plan to get a few major things done in the 1 month I had off. First thing was to get my home loan ready in the anticipation of potentially purchasing my first home. Next, was to complete all outstanding errands and spend some quality time with my family (as I had my lovely nieces from interstate visit). In between all of this, there was Xmas parties, birthday parties and New Year’s celebrations. If I managed to get some spare time in between, I had plans for myself, to do absolutely nothing at all (the stuff dreams are made of).

How did I go? Let me tell you.

As a rule of thumb I always want to get the least enjoyable tasks out of the way first, so in the first week the goal was to get my finances ready which would leave me 3 weeks to search and find the perfect home for me and my family. Bearing in mind that the majority of the paperwork required for my home loan was submitted prior to my break, it still took until the last week of my holidays for the application to be completed. This was due to my slackness but we eventually got there. Anyway, 3 days to go and find for our perfect home. To make matters worse, I came down with a fever in the last week of my holiday. The end result was, even though I got the home loan sorted I am still currently looking for a home, not to worry because I got to spend some quality time with my family.

Each year, my God Daughters come down from Darwin and spend their summer holidays with us. I’ve always loved having them visit for several reasons. Firstly, I enjoy several activities only kids can enjoy, these being going to water parks, riding the rides all day, and eating ice cream when all the rides have been closed. Some may say I’m babysitting three 3 little girls, I’m secretly enjoying the water parks just as much as they are. The second reason is my son Leon, who is 1 and has endless amounts of energy and still wants to play even when we put him down to sleep. However after a full day of running around with his cousins, he sleeps like a dream. This leaves me a couple of hours to relax and watch a movie, hit the gym, or even head out with the boys (subject to permission from the wife).

In between sorting out my home loan, enjoying theme parks with the kids and getting sick, I managed to get all my errands completed including servicing both cars and painting my parent’s house.

So did I learn anything from my 1 month break? I learnt that my son sleeps a lot better after he spends all day playing with his cousins, I also learnt that maybe he needs a brother or sister so I can spend some more time with my wife (or the boys). Overall I managed to spend a lot of quality time with my friends and family, I completed all my errands and miraculously found time for myself. The question now is when’s my next holiday? Can’t wait!

As we go about our day to day lives we never think about what could happen to us, whether it’s becoming permanently or temporarily disabled, becoming quite ill or even getting into an accident.  For members of a self-managed super fund (SMSF) this could become an issue.  What as members and trustees of your fund can you do to prepare and handle these situations?

The first thing to do regardless of whether you have individual or corporate trustees is for each member to appoint a legal personal representative (LPR) under an enduring power of attorney.  By doing this, if you or another member become disabled and unable to conduct your normal duties as a member / trustee of your SMSF, then your legal representative steps in and takes over for you.  What you should make sure is that you choose the right person to appoint as your legal representative.  As you need to be certain that they understand what it takes to run an SMSF and the duties required of a member / trustee.

What you then need to ensure is that your Trust Deed allows for the legal representative to become a member / trustee of your SMSF.  Not all trust deeds allow for this and you need to make sure yours is flexible enough to allow the appointment of a replacement director or trustee depending on your structure.  If your trust deed doesn’t allow for this then in the event a member becomes disabled then the their super benefits may no longer be able to remain in the SMSF and must be paid out to another fund.

The final thing to do is to assess your trustee structure to ensure it allows for the seamless transition for the legal personal representative (LPR) to replace the disabled member.

The table below outlines the differences between an individual and corporate trustee structure.

Every situation differs and a member becoming disabled doesn’t always occur, thankfully! But by following the tips above you’ll be prepared for the worst case scenario. Our office will be able to assess whether or not you’re ready for this event, so feel free to pick up the phone and give us a call!

Table Source: SMSF Adviser

Christmas I always go home to see my family & friends back home in Queensland. When I arrived in the “sunny state” on Christmas day the weather was not so sunny and the outlook was not looking great for the next couple of weeks. Trying to keep active/outdoor kids amused inside for five days was becoming difficult, my niece & nephew aren’t really fans watching cricket on TV (this was also depressing as the weather in Victoria was amazing) so the decision was made to head back to Victoria early to actually have a summer break.

Arriving back in Melbourne I sent out a few text messages to friends living along the coast and began planning a road trip. Starting in Werribee South Beach, I spent a couple of nights at friend’s house relaxing by the water with a few cold beverages and soaking up the sun. It was nice to be able to spend NYE in a dark and secluded part of the world but still be close enough to watch the fireworks that were set off in Melbourne and Geelong.

New Year’s day we packed up the surf boards and headed to Torquay where we again enjoyed the sun, surf and great company. The evening involved strolling round the amazing market in Torquay, this particular market is open every Thursday night during January (the market then move to Geelong after that). All sorts of yummy cheap eat food stalls, cold beverages, local markets selling all sorts of handmade jewellery, clothes and bits and pieces along with live music & entertainment all evening. I couldn’t believe how many people were at this market, it was huge.

After another overnight stay with some friends we again packed up the surfboards in search of some waves further south along the coast. We thought leaving early we might miss the traffic, however once we hit Lorne it was all over. It was a stinking hot sunny day and I didn’t fancy wasting it sitting in traffic watching people enjoy the sun from the car window. Although very small waves, we parked the car and I ventured into the cold water for a paddle.

Sun kissed, tired and hungry it was time to head back to Melbourne to begin the preparation for back to work – pity we can’t live the beach life fulltime.

PJ   🙂