Financial Newsletter Sunshine Coast

Welcome to Unique Financial Partnerships, keeping you up to date with all financial planning, self managed superannuation funds, tax minimisation, life insurance, on the Sunshine Coast and around Australia.

The information in this newsletter is current at the time of printing. Contact us for updates.

BUDGET CHANGES TO PENSIONS AND SUPERANNUATION

The federal government’s recent budget
included some significant changes to pensions
and superannuation that may affect you.

If you are receiving a government pension, from 20
September 2009 you stand to gain up to an additional
$32.49 each week if single, or up to $10.14 a week
for a couple. A number of the benefits you currently
receive as separate payments, such as the utilities,
pharmaceutical and telephone allowances, will be rolled
into one fortnightly Pension Supplement payment.

If you are a carer, you also stand to gain from the budget
with an additional $600 a year for Carer Payment
recipients and $600 for each eligible child of those
receiving Carer Allowance. The first such payment is
scheduled to be made on or before 30 June 2009.
In addition, the budget contained some initiatives
designed to reduce government expenditure, which
you may also need to take into account.

By 2047, 25 per cent of the population will be aged
over 65, and every person aged 65 and over will be
supported by only around 2.4 people of working age.
The life expectancy of the average person has also
significantly increased. In order to reduce the impact
this will have on future pension costs, the government
has decided to raise the pension age from 65 to 67 by
the year 2017.

The rate at which other income reduces the pension has
been increased from 40 cents to 50 cents for each dollar
earned above the income free area of $138 per fortnight
for singles and $240 per fortnight for couples. However,
a new Work Bonus system will include only half of the
first $500 of fortnightly employment income in the
income test.

If you are currently working and using a salary sacrifice
arrangement, be warned that from 1 July 2009 you
will only be able to make $25,000 of concessional
superannuation contributions each year. Similarly, for
each $1.00 of non-concessional contribution you make
into super up to $1,000 the government has reduced
the superannuation co-contribution rate from $1.50 to
$1.00 until the 2011-12 financial year, and then to $1.25
until the 2013-14 financial year.

If you are receiving an account-based pension, the
minimum amount you are required to draw annually as
a pension has been reduced by 50 per cent for 2009-10.
This will reduce the need to sell investment assets at a
loss during the current global financial crisis.

With these pension and superannuation changes the
government appears to have given with one hand
and taken with another. Be aware that not all the
proposed elements of the budget have been passed
by parliament, so there could still be some changes to
come.

END OF YEAR TAX TIPS

It’s that time of year again. Out comes the
shoebox full of receipts and off you go to
your local tax agent or accountant to get it
all sorted out.
With the end of the tax year fast approaching, here are
a few strategies to consider for reducing your tax and
maximising your savings.

Margin loans
Do you have a margin loan? Why not prepay some
of the interest? This will help to reduce your overall
interest cost, as well as providing a larger immediate tax
deduction for the interest paid.

Super contributions
If you earn less than $30,342 p.a. and make an aftertax
superannuation contribution of up to $1,000, the
government will contribute $1.50 for each $1.00 that
you put in. This could add an immediate boost to your
superannuation of up to $2,500 and is equivalent to a
150 per cent return on your investment. Even if you earn
up to $60,342 p.a. the government will still contribute,
but at a lesser rate.
If your spouse earns less than $13,800 p.a. and you
make an after-tax superannuation contribution of up
to $3,000 into your spouse’s superannuation, you could
claim an 18 per cent tax offset worth up to $540.

Salary sacrificing
Still on the subject of superannuation, perhaps you
could arrange for part of your pre-tax income to be paid
into superannuation on your behalf by your employer.
A salary sacrifice arrangement such as this reduces your
taxable income. But remember that you must arrange
to sacrifice the income before it is earned and take into
account the annual upper limit of $50,000.

Capital gains & losses
Are you one of the many investors who has seen the
value of your investments fall during the recent global
financial crisis? By selling some of those investments
you could crystallise the capital loss to offset against
capital gains made on other assets.

Medical expenses
Something that is often overlooked is the net medical
expenses tax offset. If your family has spent over $1,500
out-of-pocket on eligible medical expenses, you could
receive a rebate of 20 per cent of the amount spent.

Donations
Finally don’t forget tax-deductible donations to charity.
In tough times like these, every bit helps.
With all of the above, make sure you have kept all
receipts and maintained any necessary records. No
receipt means no deduction.
You should consult with your accountant or financial
planner before implementing any of these strategies.
Even if it is too late for you to take advantage of these
strategies this year, it is a good time to get organised for
next year.

STOCK MARKET ROLLERCOASTER

As a result of the global financial crisis, the S&P
ASX 200 index had a dramatic 55 per cent fall
in value between November 2007 and March
2009. But is the market finally showing signs of
a sustainable recovery?
The share market started a slow upward climb from its
low of 3,124 in March, to reach 3,800 on 27 May 2009.

Debate is still raging about the timeframe for recovery from the
recession. A number of economists have predicted that the
recession in the US will end in August. It is this sort of positive
sentiment that is contributing to the upward trend in the market.

Despite this, there are also a number of factors that are
combining to slow the pace of recovery on the market.
Many companies are increasingly desperate for fresh
capital. With signs of pending economic recovery on
the horizon and the current low price of shares, the cost
of debt financing has become relatively more
expensive than equity financing. This has spurred a rash
of capital raising efforts, which have mopped up a lot
of cash that could otherwise have stimulated a rise in
share prices.

The latest impact on the Australian share market was
the surprise decision by the Australian Securities and
Investments Commission to lift the ban on covered
short-selling of financial securities. Bank shares fell
sharply following the decision, which was made a week
before the ban was due to expire. With the lifting of the
ban many investors expected a rush on short-selling of
bank shares, which was a principal factor contributing
to the instability and collapse of major financial
institutions such as Lehman Brothers.

Continuing global credit worries are still haunting
banks, resulting in a situation in which shares in
financial institutions are struggling to gain ground on
the market.

While there is an obvious upward trend, the continuing
legacy of the global financial crisis and uncertainties
relating to recovery from the recession are dampening
any upward momentum that the market may develop.
Only time will tell if the market will begin recovering at
a more rapid rate.

Why not discuss with your financial adviser how you
can benefit from the current market.

TURNING CENTS INTO DOLLARS

How could you go wrong saving your loose
change? It’s hard to imagine, but not all saving
is equally productive.
Take for example the story of Ron England, a
projectionist at Paramount Studios. In 1974, Ron bet his
brother a meal in Paris that he could collect a million
cents. He got into the saving habit and after several
years his garage was filled with over two tonnes of
cents. He never actually counted them but estimated he
had at least a million. There they sat until he decided to
move house and had to work out how to get rid of them
all.
At this point things started to go wrong. Ron discovered
he couldn’t just take the coins to the bank and have
them changed into dollars without paying a significant
fee. He’d also need to hire lifting equipment and a pretty
large truck to carry that many coins.

The US Mint didn’t want them and coin collectors
weren’t interested. It looked like it was going to cost him
a lot to get rid of his pile of coins.
Thankfully, after some media attention a large
supermarket chain stepped in and offered him $10,000
for his stash and to donate $5,000 to charity. It took a
mover four hours and many trips to clear his garage.
His brother paid for the trip to Paris and everyone was
happy.
But the truth is that Ron could have earned much more
money from his savings. If Ron had put all those cents
in the bank and earned 3% interest, he would have had
over $20,000 instead. Better still, if he’d invested in the
share market and earned 10% interest he would have
had over $100,000. Well, we hope he enjoyed his meal
in Paris!

Disclaimer
All representations and information contained in Futuro in Focus are made in good faith and are believed to be correct at the time of preparation. Articles are of a general nature and they do not purport to be specific investment advice. Individual needs or other considerations have not been taken into account, thus information contained herein should not be relied upon as a substitute for detailed advice. Futuro Financial Services will receive fees or brokerage from the provision of advice or placement of investments. You may, by contacting our Privacy Officer on 07 3018 0400 or by writing to Futuro Financial Services Privacy Officer GPO Box 942 Brisbane QLD 4001, request not to receive further editions of Futuro in Focus.