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Understand the Key Asset classes

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

It is important to understand the main asset classes and how they can affect the returns and risk of your portfolio. The types of asset classes include:

  • Shares
  • Property
  • Bonds (or fixed interest as they are often called)
  • Cash

There may be asset types within each asset class. For example, within shares, there is a choice of Australian and international shares and within international shares, there is choice of specific regions or countries like China or emerging market shares.

Generally ‘growth’ assets like shares and property provide the prospect of higher returns over the long term compared to ‘safer’ assets like bonds and cash. However growth assets have a higher level of risk including the risk of capital loss and more ups and downs in returns particularly over the short term. ‘Growth’ assets are only appropriate if you have an investment time horizon of at least five years due to their higher level of inherent risk.

Shares: Shares represent part ownership in a company and usually provide income payments through dividends and can produce growth if the share price increases.

For Australian companies, these dividends can be franked, which means that you receive a tax credit for the tax already paid by the company so that you are not taxed twice (once at the company tax rate and again at your marginal tax rate). If your tax rate is less than the company tax rate (currently 30%) you will receive a refund for the extra tax paid by the company. If your tax rate is higher you may need to pay some extra tax.

Property: An investment in property provides you with ownership in a property or a number of properties through a managed structure. Property investments allow you to benefit from the rent received by the properties as well as the change in the valuation of the property over time. The returns of these properties will depend on the quality of the tenant and the rent paid as well as the location and type of property such as residential, industrial or commercial.

Bonds (fixed interest): A bond is a tradeable debt security, usually issued by a government, semi-government or corporate body to raise money. Investors in the bond have effectively lent money, for which they receive a fixed rate of interest over a set period of time. The bond is repaid with interest on the predetermined maturity date.

For example, if you invest in a 5 year bond paying 3% coupon you will pay $1,000 to invest in the bond. In return, you will receive $30 (3% of $1,000) each year. At year 5, you receive the coupon of $30 plus the original $1,000 outlay.

It is possible to experience capital losses from a bond investment if it is cashed before maturity and interest rates have risen or capital gains if the reverse occurs. They are not as safe as cash.

Cash: Cash is one of the safest investments. Cash compared to other assets tends to provide lower variability in returns, high level of security on the capital invested and acts as a more defensive investment. This reduces investment risk so the money is available when you need it, with a minimal potential for capital loss.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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Retirement: https://www.macarthurwealth.com.au/account-based-pension/

What are Investment Bonds

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Investment bonds, or insurance bonds as they are also known, are issued by life insurance companies. They have features similar to a managed fund combined with a life insurance policy. They can be a tax effective way to invest if certain rules about contributions and withdrawals are followed.

Investment bonds are used for a range of purposes including:

  • A medium to long term lump-sum or regular savings plan
  • A tax effective investment for investors on high income earners
  • Investment bonds can be taken out by parents, grandparents and the like on the life of a child. The bond can be structured to automatically be transferred into the child’s name at a pre-determined age. This is referred to as ‘child advancement’.
  • Estate planning. Because an investment bond is in essence a life insurance policy, it is subject to life insurance rules. This includes the ability of the owner of the investment bond to nominate one or more beneficiaries to receive the proceeds of the bond in the event of the death of the bond owner. By nominating beneficiaries under an investment bond, the bond does not form part of the estate of the bond owner and may be administered separately to their estate.
  • Deceased estates that are required to invest bequests that will vest with beneficiaries at a later date.

Parties to an investment bond

There three parties to an investment bond; the owner – who subscribes the investment funds, the life insured – who may be the bond owner, or someone else, and the issuer of the bond – the life insurance company.

Some bonds may include fourth party, being a nominated beneficiary. The bond owner may nominate a beneficiary to receive the bond proceeds in the event of the death of the life insured.

Child Advancement Conditions

Where a bond is issued on the life of a child, and its ownership is to vest in the name of the child at a future date, the bond is subject to Child Advancement Conditions. The owner of the bond may nominate an age, up to 25, at which the ownership of the bond will transfer to the child.

10 year rule

Insurance bonds are tax paid investments. This means earnings on the investment are taxed in the hands of the life insurance company at the corporate tax rate. Insurance companies are generally taxed at a rate of 30% however the actual rate of tax payable may be less than 30% when tax deductions, tax offsets, and tax credits available to the life insurer are taken into account.

Investment bonds can be tax effective for long term investors with a marginal tax rate higher than 30%. An investment bond is designed to be held for at least 10 years. If you hold the bond for at least 10 years, the returns on the investment, including additional contributions that meet the 125% rule, will be tax free. In some circumstances, investing in an investment bond for a shorter period may be an appropriate strategy.

Withdrawals

If you withdraw money before 10 years is up, some or all of the income will be taxable and included in the investor’s assessable income. This amount is taxed at the investor’s marginal tax rate – however a 30% tax offset is allowed to compensate for the tax already paid by the life insurance company. Where an investor’s personal tax rate is less than 30%, any unused portion of the tax offset can be used to reduce tax payable on other income in the same financial year.

If you make a withdrawal within the first 10 years, the rate at which earnings in the investment bond are taxed will depend on when you make the withdraw

125% Rule

While investment bonds are often described as a ‘single premium’ or lump sum investment, many investment bonds accept both regular and irregular additional investments. Provided the amount invested in any one year – based on the anniversary of the bond commencing – does not exceed the previous year’s investment by more than 125%, it will be considered part of the initial investment.

If you exceeds 125% of the previous years’ investment, the 10 year period will reset. If you do not make a contribution in any one year, a contribution in following years will reset the 10 year rule.

Investment Options

The life office issuing the investment bond may offer a range of investment options such as single asset funds i.e. cash, fixed interest, shares, property or a range of diversified options. Each option has different investment goals, timeframes, risk profiles and underlying assets.

Disadvantages and Risks of Investment Bonds

The key risks are largely determined by the nature of the investment chosen. Risks to be aware of include:

  • Market risk: The performance of the investment bond will be affected by the assets and securities that it invests into.
  • Fees: These may vary depending on the investment bond and investment options chosen and include management and administration fees and buy-sell spreads.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

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Retirement: https://www.macarthurwealth.com.au/account-based-pension/

How are Granny Flat Rights Assessed by Centrelink and DVA?

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Sometimes living alone may not be the best option and you may wish to move in with your children or another close relative/friend, or you may wish to reassign ownership of your home. The arrangements can be either formal or informal and you receive the right to accommodation for life.

This might involve you moving into someone else’s home or into a granny flat built on their property. Alternatively you can transfer ownership of your home to that person and continue to live in the home.

This arrangement may involve a gift of money, payment of expenses or transfer of the title of your home.

Normally the transfer of money or assets would come under Centrelink/Veterans’ Affairs (DVA) gifting rules. But the granny flat rules determine how this transfer is assessed and the interaction with gifting rules.

How are Granny Flat Rights Assessed by Centrelink/DVA?

You should discuss your individual circumstances with your local Centrelink/DVA office before taking any action to determine how you will be assessed.

If you pay money that equals the purchase or construction costs or you transfer full ownership of your home, this is deemed to be a ‘reasonable amount’. Gifting rules do not apply.

If transfer additional amounts Centrelink/DVA will determine the ‘reasonable amount’ for the granny flat right using a formula with a conversion factor (shown below) based on your age and the maximum rate of age pension (couple rate). Any amount paid or transferred over this reasonable amount is a gift and is assessed under deprivation rules.

Deprivation applies if the amount deemed to be a gift (single or couple combined) is more than:

  • $10,000 per financial year, or
  • $30,000 over a five year rolling period (includes current financial year and the four previous financial years)

Deprived assets are assessed against the income and assets tests for the next five years and may have a negative impact on your Centrelink/DVA entitlements.

If you move out of the granny flat within five years and the reason that you moved could have been anticipated at the time the right was established, gifting rules may be applied retrospectively.

Some details to be aware of include:

  • For Centrelink/DVA purposes, granny flat rights do not need to be written agreements however Centrelink/DVA may request a statement that the arrangement has begun
  • The amount paid or transferred for the granny flat right is an exempt asset (except deprived asset amounts) and you are assessed as a homeowner if the amount paid is above the extra allowable amount of $224,500 (2022/2023) If you pay $224,500 or less you are treated as a non-homeowner and the amount paid is an assessable asset
  • If you are transferring ownership of your home Centrelink/DVA may use the value accepted for stamp duty or may choose to receive a valuation from the Australian Valuation Office

If you have paid money for construction of the granny flat you need to provide a copy of the building contract to Centrelink/DVA to verify the construction cost

Other Things You Should Know

Granny flat arrangements may not work out. You may wish to formalise the arrangement to protect yourself by having a solicitor draw up an agreement and identify any other details. This agreement may include:

  • The quality and type of the accommodation to be provided
  • Whether the accommodation is in a particular property or in any property
  • How the granny flat right can be dissolved if the arrangement is no longer suitable

You should also ask your solicitor to review and formalise your estate planning arrangements such as your Will and Powers of Attorney.

The value of the granny flat can be a significant proportion of your estate so it is important to prevent potential rifts between family members. You may find it difficult to get your money back if you no longer want to live in the granny flat.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

Facebook  https://www.facebook.com/macarthurwealthmanagement

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Retirement: https://www.macarthurwealth.com.au/account-based-pension/

Gifting and Centrelink

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

A person who is eligible for Centrelink or Veterans’ Affairs (DVA) payments is expected to use their own financial resources to support themself so the ability to gift to others without an impact on entitlements may be limited.

Centrelink/DVA entitlements are based on two tests – an income test and an assets test. Gifts can reduce assets (and also the assessed income) and may help to increase the amount of Centrelink/DVA payment.

A single person or couple combined is allowed to gift $10,000 per financial year, with a limit up to $30,000 over a five year rolling period. If more than this amount is gifted the excess amount is called a ‘deprived asset’.

A deprived asset is counted as an assessable asset under the assets test and is subject to deeming under the income test for five years from the date of the gift. This may affect your Centrelink/DVA payment.

When looking at the $30,000 limit, Centrelink will also take into consideration amounts gifted in the previous five years.

Before making the gift it is important for the person to ensure they can afford to do this and that they have enough money to meet their own needs. The amount given away may be more than the additional payment received from Centrelink/DVA. The motivation needs to be to help someone financially, not just increase Centrelink/DVA benefits.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

Facebook  https://www.facebook.com/macarthurwealthmanagement

Youtube   https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter  https://twitter.com/MacarthurWealth

Pinterest   https://www.pinterest.com.au/MacarthurWealth/

Linkedin   https://www.linkedin.com/company/macarthur-wealth-management

Instagram  https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

Uncategorized

Understanding Debt

When used properly, debt can be an effective tool that may help you to achieve your financial goals. Debt can be used to purchase a range of items before you have saved the full purchase price.

It is important to understand the difference between ‘good’ debt and ‘bad’ debt. Debt can help you buy the family home, purchase a car or consumer goods and also enable you to purchase investment assets such as shares, managed funds or a rental property.

Where debt is used to acquire investments such as shares or property, this is known as gearing. This is often referred to as ‘good’ debt because it gives you the potential to claim a tax deduction for borrowing expenses and assets that will hopefully appreciate in value over time.

Borrowing to invest (gearing) simply allows you to use a combination of your own money and borrowed funds to accelerate wealth over the long-term. However it is a higher risk strategy that magnifies both the gains and losses from your portfolio. The higher the proportion of borrowed funds compared to your equity, the greater the associated risks. Options to gear into investments include margin lending, home equity loans or geared managed funds that borrow internally.

‘Bad’ debt is non-deductible debt like borrowings for consumer goods such as cars and holidays. Even though a loan for the family home is non-deductible, it should not necessarily be viewed as ‘bad’ debt because the value of the home has the ability to grow over time. But looking at strategies to pay off this debt as quickly as possible will increase your wealth.

In any case, paying off non-deductible debt before deductible debt will usually be the most appropriate course of action for many people.

The cost of borrowing can be high so you need to be disciplined and consider strategies to reduce the total interest cost, reduce the term of the loan and improve your cash flows.

Some of these strategies may include:

  • Making loan repayments more often
  • Making additional payments
  • Repaying non-deductible debt first
  • Combining loans into one account with a lower interest rate

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

Facebook  https://www.facebook.com/macarthurwealthmanagement

Youtube   https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter  https://twitter.com/MacarthurWealth

Pinterest   https://www.pinterest.com.au/MacarthurWealth/

Linkedin   https://www.linkedin.com/company/macarthur-wealth-management

Instagram  https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

What is a transition to retirement (TTR) pension

TTR strategies make use of a transition to retirement (TTR) income stream, which can be started as soon as a person reaches preservation age, without having to satisfy a full condition of release like retirement. A TTR income stream is subject to the same regulations as an account-based pension however the following limitations apply:

  • In general, lump sum withdrawals are not allowed.
  • Each fiscal year, there is a 10% restriction on income stream payments.

The most popular TTR strategy is the usage of concessional contributions along with it.

The advantages of employing a TTR approach can include:

  • Maximizing a superannuation balance tax-effectively in the years leading up to retirement (TTR and concessional contributions strategy).
  • Improved superannuation benefits by balancing the superannuation accounts of a couple’s members.
  • Reducing debt, including mortgages.
  • Cutting back on work hours before retiring and making up the difference in income with tax-efficient or tax-free income stream payments.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any* decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

Facebook  https://www.facebook.com/macarthurwealthmanagement

Youtube   https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter  https://twitter.com/MacarthurWealth

Pinterest   https://www.pinterest.com.au/MacarthurWealth/

Linkedin   https://www.linkedin.com/company/macarthur-wealth-management

Instagram  https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

How to set goals

The starting point for any plan is to set your personal goals. Financial goals are likely to be different for each person and need to reflect your specific preferences, aspirations and needs. Your goals may vary from short-term goals (less than one year) like buying a car, paying off your debt or going on a holiday, medium term goals (1-3 years) such as saving for your children’s’ education or long-term goals (5 years or more) like saving for a comfortable retirement and leaving behind a legacy.

Your goals will be more real and achievable if you can apply the following attributes:

  • Specific: Make them specific to you and your family.
  • Measurable: Ensure there is a measurement in place to determine whether the goals have been met.
  • Achievable: The goals need to be achievable so while you may set a stretched target which requires you to be diligent don’t set the target too high.
  • Realistic: Your goals can be an aspiration but must still be grounded.
  • Time-targeted: You need to set time targets to achieve your goals.

Once you have determined where you are heading, you can work with your financial planner to develop the pathway to achieving your goals.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

Facebook  https://www.facebook.com/macarthurwealthmanagement

Youtube   https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter  https://twitter.com/MacarthurWealth

Pinterest   https://www.pinterest.com.au/MacarthurWealth/

Linkedin   https://www.linkedin.com/company/macarthur-wealth-management

Instagram  https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

Claiming a tax deduction for carry forward concessional contributions

From 1 July 2018, individuals who don’t fully use their basic concessional contributions cap in a financial year, accrue an unused concessional contributions cap amount.

Unused concessional cap amounts are available to carry forward and (if eligible) apply (use) in any of the following five financial years.

If an unused concessional cap amount accrues during a financial year and is not then applied in any of the five following financial years, it expires.

USING CARRY-FORWARD CONCESSIONAL CONTRIBUTIONS

A individual can carry forward and apply available unused concessional cap amounts from any of the previous five financial years to increase their concessional cap in the current financial year if:

  • their concessional contributions for the current financial year exceed the basic concessional cap (currently $27,500), and
  • their total superannuation balance (TSB) just prior to the start of the current financial year is less than $500,000.

Where an eligible member makes concessional contributions that exceed the basic concessional cap, the amount necessary to accommodate the contribution is taken from the earliest unused concessional cap amounts within the five-year period first.

Last updated in September 2022

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

Facebook  https://www.facebook.com/macarthurwealthmanagement

Youtube   https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter  https://twitter.com/MacarthurWealth

Pinterest   https://www.pinterest.com.au/MacarthurWealth/

Linkedin   https://www.linkedin.com/company/macarthur-wealth-management

Instagram  https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

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Ten tips for setting a good budget

To put you on the path to building your wealth you need to start saving money. This may mean working out how to find more money. The best way to do this is to set yourself a budget.

Setting a budget is important for everyone no matter your age or how much money you have. It is especially important for people who are struggling to meet their goals or who keep building up debt.

A budget is not about just cutting expenses. It is about finding a good balance between your income and your expenses and deciding what is important to you so that you have money left over to save.

A budget is not a fixed forever plan. You can continue to make adjustments over time until you reach a comfortable outcome and have a good strategy in place that will meet your goals.

There are two sides to a budget:

  • Your income – includes income from all sources such as salary, interest, rental income and dividends, but only include your regular income and make sure you use after-tax income or allow for tax payable in your expenses.
  • Your expenses – includes mortgage repayments, bills and general living expenses.

Tip

Go through the following documents to check you have captured all of your income and expenses:

  • Bank account statements
  • Credit card statements
  • Pay slips (for both income and deductions)
  • Cheque book details
  • Expense receipts
  • Bills and insurance certificates

You could also consider keeping a diary to record all your expenses – and don’t forget all the little ones as this is where you can often make some significant savings.

Setting a budget is a simple step but sticking to the budget can be harder.

Below are ten tips for setting a good budget:

  1. Make it realistic or you will never stick to it
  2. Budget an amount for fun, leisure and personal expenses so you can avoid impulse buying
  3. Save your pay rises, bonuses, special payments or tax refund
  4. Look for small savings – for example, take your lunch to work, or use internet banking to reduce bank fees.
  5. Pay by cash or EFTPOS to avoid credit card fees (and also avoid accumulating debt)
  6. Reduce fees and charges – combine bank accounts to reduce fees
  7. Put your change into a savings jar at the end of every day
  8. Shop around and compare prices on insurance policies. Look for companies that offer discounts for multiple policies
  9. Use lay-by options instead of debt and credit cards
  10. Update your budget each year

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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What is an Account Based Pension

Superannuation can be used to start an account-based pension once a person retires (or meets another condition of release).

This allows income to be received as a series of regular payments (usually monthly, quarterly, half yearly, or yearly).

A minimum amount of income needs to be paid each year and additional lump sum withdrawals can generally be made at any time. The pension can also be stopped (fully commuted) and be rolled back to the accumulation phase of superannuation, or rolled over to start another income stream, or be taken as a lump sum. Restrictions apply to taking lump sum withdrawals where the pension is being paid under transition to retirement rules.

Account based pensions stop once the account balance is exhausted, the pension is commuted, or upon the death of the person unless there is an automatic continuation of the pension to a nominated reversionary beneficiary.

The maximum amount that may be used to commence a ‘retirement phase pensions’ is limited to an individual’s transfer balance cap. The general transfer balance cap is currently $1.7m however where a person commenced a retirement income stream prior to1 July 2021, their personal transfer balance cap may be less than $1.7m. Pensions paid under transition to retirement rules are not a retirement phase pension and are therefore not affected by the transfer balance cap.

Last updated in September 2022

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

Facebook  https://www.facebook.com/macarthurwealthmanagement

Youtube   https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter  https://twitter.com/MacarthurWealth

Pinterest   https://www.pinterest.com.au/MacarthurWealth/

Linkedin   https://www.linkedin.com/company/macarthur-wealth-management

Instagram  https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

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