You don’t need an inner-city address, Caren will help you tackle money matters in the ‘burbs, through a better understanding of all the important issues – investing, superannuation, budgeting, tax, insurance, mortgages, gearing, shares, managed funds, small business, food, home, fashion, travel, and much more.

A fun and entertainingly educational forum, specifically designed for Australian “suburbanites".

Thursday, May 15, 2014

Your relevant Budget summary: The short, the long or the video version – your choice

Last year I branded the federal budget as boring, I won’t be doing the same this year! It’s a tough budget with all Australians told to bear the burden.

Tony Abbot has dubbed it “pain with a purpose” and according to Federal Treasurer Joe Hockey, “the economy is growing at less than normal speed and the time to fix the budget is now.”

For families, there is a focus on healthcare and education; for high income earners, a new tax just for them; for pensioners – new eligibility rules; and for the rest of us – a little bit of extra super.

For anyone who just wants an absolute bare bones budget breakdown, I’ve prepared a summary of the main points below. At the very least you can pretend to care if one of your friends or family members raises the matter.

And for anyone who would like a more comprehensive look at what this year’s Federal Budget involved, I’ve catered for your taste too by including some links to a much longer report and even a video.

First, the summary.

Personal Taxation
  • A levy of 2% will apply for three years to incomes over $180,000 pa, starting in 2014/15. It will increase the top marginal tax rate to 49%.
  • The levy will increase the Fringe Benefits Tax rate to 49% for three years, starting on 1 April 2015.
  • Tax offsets available for dependent spouses and mature age workers will be abolished on 1 July 2014.
  • Income thresholds determining the Private Health Insurance Rebate and Medicare Levy Surcharge will not increase for three years, starting in 2015/16.
  • Interest on HELP debts will increase, with a maximum rate of 6% pa from 1 June 2016.

  • People who make after-tax (non-concessional) super contributions from 1 July 2013 that exceed the cap will have the option to withdraw the excess amount plus earnings on the excess. Currently these excess contributions are taxed at 46.5%.
  • The timeframe for increasing the Superannuation Guarantee contribution rate to 12% will be amended. The next increase, to 9.5%, will occur on 1 July 2014 where it will remain for four years. From 1 July 2018, the rate will increase by 0.5% pa before reaching 12% on 1 July 2022.

Social Security
  • The age at which people will be eligible to receive the Age Pension will increase to 70 from 1 July 2035.
  • From 1 July 2015, Family Tax Benefit – Part B will only be available to families who earn up to $100,000 pa, down from $150,000 pa. This payment will also be limited to families whose youngest child is under 6.
  • The amount of income earned to be eligible for the Commonwealth Seniors Health Care Card will increase each year in line with inflation from 20 September 2014. However, tax-free payments from superannuation pensions will be included in the income assessment from 1 January 2015 for new applicants.
  • From 20 September 2014, the Seniors Supplement will no longer be payable to holders of the Commonwealth Seniors Health Care Card. However, cardholders will still receive the Clean Energy Supplement.
  • People receiving the Disability Support Pension under age 35 may need to undertake a compulsory workforce participation plan.

It’s important to note that at this stage, the measures announced are proposals only and may or may not be made law. So don’t go acting on them just yet…

If you’d like to hear more of what I have to say on the matter, click here for a recording of my most recent “You & Your Money” radio segment on 98.1FM Radio Eastern and click here for your more detailed Budget report.

And if you’d prefer to watch a 6 minute youtube budget update, click here.

Talk soon,

Monday, May 12, 2014

What if you can't sell your business?

As business owners we take significant risks on board, in anticipation that we'll be duly rewarded in the future.  One of the traps many business owners fall into is ploughing everything into one asset - their business.  But what if something unforeseen happens and your exit strategy doesn't pay off?

Let's consider the worst case scenario whereby you can't sell your business or can only sell it for a significantly reduced price.  Let's face it, that's going to be a fairly devastating situation.  Not just from a financial point of view, but personally as well.

But time and time again this is exactly what happens - business owners are surprised to find themselves being forced to sell their business for a lot less than expected, unable to find a buyer, winding down a business they hoped to sell, or without appropriate succession.  It's a reality we can't afford to ignore.

A serious threat to a lot of industries these days is technology.  Consider how technology has and is impacting the following industries:

Video/DVD rentals

I even read a Michael Pascoe article in The Age recently on how internet-enabled "ride sharing" is threatening the taxi industry.

And it's not just about technology - look at what global competition is doing.  We're watching almost entire industries pack up and head overseas!

Ok, the purpose of today's blog is not actually to scare you, but this is an area where no business owner can afford to be complacent.  We've invested too much to "hope for the best".

So what can you do?  Well you probably can't stop change.  And you absolutely don't want to put your head in the sand about it.  And you most definitely don't want to end up on some current affairs program saying technology changed and now I have to work until I'm 80...

You need to at least manage some of the risk by diversifying!  We all know the cliche - don't put all your eggs in one basket.  Well it's a cliche for a reason - it's true.  This is one of the fundamental risk management tools for any investment, including your business.  You need to have other assets in your portfolio aside from your business - if nothing else it's a plan B.

It's not going to stop the disappointment that I mentioned earlier and you won't necessarily be looking at the same financial position you'd planned for, but it will look a whole lot better than if you'd simply put everything into the business and didn't have assets elsewhere.

So where exactly should you diversify?

This is a question you need to ask us.  Our job is to look at your overall financial position, including your business, and identify any risks and how they might be mitigated.

Some typical diversified assets might include:
  • Property - residential, commercial, business, retail, holiday let etc
  • Shares
  • Managed Funds
  • Cash
  • Term Deposits
Personally, I believe you should have most if not all of these assets in your portfolio so that in the event that your business venture doesn't achieve what's needed to support your personal goals, you have other assets that you can rely upon, not just the business.

And a great way to achieve this diversification is through superannuation.  Super is an absolute monty when it comes to tax savings and I don't know a single business owner that doesn't like to save some tax.

By contributing some of your business income to super, you can mitigate some of that risk and take pressure off your business to provide everything for you in retirement.

Self Managed Superannuation can be particularly attractive to business owners and I have a theory that's because most of us are control freaks, or what I prefer to call management enthusiasts.  So it stands to reason we'd like to be in control of our retirement savings through super as much as we are through our business.

In fact there are 500,000 SMSFs set up in Australia and as far as the money is concerned, we're talking about more than $15 billion.  That's billion folks!

Anyway, if this is an area of interest to you, I'm running a Q&A session with Taxation specialist Michael Moschetti and Investment specialist Michael Crowe, about Self Managed Super.

It will be PACKED with education information, including:
  • Why Australians have invested more than $15 billion via Self Managed Super;
  • How Self Managed Super differs from standard super;
  • What's involved in running a fund;
  • How much it costs to manage a fund;
  • Keeping up with the rules and changes;
  • How to make decisions and where to go for advice.
Click here for more details and to register.  

By the way, I read an article in The Age over the weekend about how people should be wary of seminars because the people running them are looking to stitch you up before you leave.  That absolutely isn't the case at our education sessions and that's probably the reason they're so popular.  Of course we hope you like what we do and will choose us to help you make sensible financial choices, but there is no hard sell, it's an education session open to everyone in the community.

Ok, so the people I deal with in my work as a business adviser and financial adviser are busy and don't have time to waste, so I have to keep my advice simple and practical.  And at the end of the day, it doesn't really get more practical than being prepared - and I didn't even have to go to Scouts to learn that.  If you haven't diversified your assets away from just your business, then it's time to do something about that and frankly you should do it fairly urgently.

Of course, we're here to help!

If you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Business" radio segment on 98.1FM Radio Eastern.

Talk soon,

PS. Please don't keep me a secret. If you know someone who’d enjoy this or find it useful, pass it on!