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With interest rates continuing to rise, reducing your mortgage interest rate can be a great way to save money so you’re not out of pocket and can keep or invest more of what you earn. Here’s a four step plan that may help you decrease your interest rate and reduce mortgage repayments. Step 1: Negotiate a lower interest rate If you have a mortgage with a variable interest rate, you can renegotiate your rate with your lender. You want to sound confident when you speak to your lender. That means being armed with all the information you need before you pick up the phone. Check your current interest rate and repayments, then compare it to similar loans elsewhere. If you find a better rate, ask your lender to match it or offer you a lower interest rate. Reviewing fees When reviewing your fees, look at the comparison rate. This shows the true cost of the loan once fees have been included. In addition to the comparison rate, check the one off fees such as application fees, monthly fees and annual fees. You may also want to ask which ones can be waived. Don’t forget to stay on top of what’s happening in the market so that if big changes are made to mortgage interest rates, you can jump on it. It’s the small changes you make now, that can have a huge impact over the lifetime of your mortgage. Switching loans If your lender is willing to lower your interest rate but that rate is still not competitive with other rates on the market, you may want to consider switching to another lender. If you decide to change, make sure you consider all the pros and cons of refinancing. You should make sure the benefits outweigh any fees you could end up paying. This may include costs for closing your current mortgage and applying for another one. Step 2: Commit to extra payments Consider whether you can afford to pay more than your minimum repayments. If you can, put in extra cash where possible, like a bonus or tax refund into your mortgage. This could save you thousands of dollars in interest and shorten the life of your loan. Step 3: Consider an offset account If you have a mortgage with a variable interest rate, an offset account maybe can be beneficial. Like a savings or transaction account, you can use it for regular payments. The difference is it’s linked to your mortgage. By having the money sitting in an offset account, it effectively reduces the amount you owe on your mortgage, so you end up paying less interest in the end. For example, if you have a mortgage of $350,000 and you have an offset account with $10,000, you’ll only pay interest on a loan of $340,000. Step 4: Pay off interest and principal Paying off both the principal and interest on your mortgage, is another strategy to save money by removing your debt faster. With an interest only loan, your repayments are covering the interest on the amount you borrowed but that’s it. If you’re paying off the principal as well, you’re not only reducing the interest, but you’re also shortening the term of your loan. Source: MLC    

Contrary to what some people may think, debt can help you build your wealth – especially if the debt is used responsibly with a clear plan and objective. In this article, we look at three ways that may help you to better utilise debt to increase your wealth over the long-term. ‘Efficient’ debt verses ‘inefficient’ debt It’s important to outline the difference between efficient and inefficient debt. Inefficient debt is generally associated with assets that depreciate in value and have no potential of producing income or offering tax benefits. This could include debt such as a car loan or using a credit card to pay for a holiday. Efficient debt on the other hand is acquired to purchase assets that have the potential to grow in value and/or generate income that can be used to pay back the debt. Examples of such assets include property, shares and other securities such as managed funds. It’s this type of debt that can help you build real wealth over the long term. There are a number of ways to manage debt as a means to build wealth over the long term. Remove inefficient debt Having inefficient debt is more than likely reducing your wealth due to the associated interest and fees. In some cases, it may be worthwhile focusing on paying down this debt first – starting with your highest interest/fee debt and progressively paying this off. For instance, if the interest on your credit card balance or personal loan is more than the interest on your home loan, depending on your circumstances, it may be better to pay off your credit card debt first given it has higher interest and fees than your home loan. By utilising this approach, you should be able to progressively reduce your overall interest payments. Borrowing to invest Borrowing to invest (e.g. in property or shares) or gearing, can be a powerful means to build wealth over time as it enables you to purchase more investments than would be otherwise possible. If your investments increase in value over time, gearing can generate a higher overall return, after the interest and other costs associated with the debt have been factored in. Capital growth and income generated from the assets can also be used to pay back the debt plus interest and fees. The interest charged on the debt may also be tax deductable. However, there is always a risk that your investments may decrease in value, resulting in owing more on the loan than the value of your investment. If you’re unable to pay back the loan due to unexpected circumstances such as, an interest rate increase or you’re out of work for an extended period, the lender may have the right to take ownership of your investments. In a worst case scenario, depending on the amount you’ve borrowed to invest, you could lose more than your initial capital. Debt Recycling Debt recycling can be an effective strategy to accumulate wealth over time by converting some of your debt, which is inefficient (doesn’t generate capital growth or income or isn’t tax-deductable) into debt that may be efficient (generates capital growth or income or is tax-deductable). One way to do this involves using a lump sum – possibly received from a bonus or an inheritance – to pay off your inefficient debt.  If you then borrow the same amount and invest it, you’re essentially replacing the inefficient debt with a debt that is tax-deductable and could potentially generate wealth. There are other options for implementing a debt recycling strategy, with varying levels of risk. A financial adviser may be able to help you determine a strategy that is most suitable for your needs. The risks associated with taking on debt Using debt as part of your investment strategy can introduce substantial risk including: Borrowing could increase potential losses. Your losses could exceed the amount initially invested. The value of your investments purchased using debt may not increase, or if the value does increase, it may not be sufficient to cover the costs of the loan such as interest and fees. You may need to sell your investments sooner than intended to cover your interest, fees and charges. If you are unable to repay your loan, the lender may have the right to sell your assets to cover outstanding repayments, interest or fees. You may be liable to pay more tax. In summary Given the level of risk associated with an investment strategy that incorporates debt, it’s important to consider whether this approach is right for you. Speaking to a professional, such as a financial adviser, is highly recommended. It’s also important not to incur more debt than you can comfortably afford to pay back, regardless of whether it is efficient or inefficient. Bottom line: when it comes to taking on debt, there is always risk, but if managed well, efficient debt can help you to build your wealth over time. Source: BT

Retirement is a major milestone in life, representing the end of years of hard work and dedication. It’s a time to enjoy the freedom to pursue your passions and interests without being tied to a work schedule. However, to make the most of your retirement years, careful planning and consideration is key, particularly when it comes to managing your finances and investments. Here, we address some of the commonly asked questions relating to retirement planning including outlining some steps for growing your money in retirement and how to adjust your investment risk as you near retirement. Steps for growing your money in retirement Retirement planning doesn’t end when you stop working; in fact, it becomes even more pressing as you move into this new phase of life. Here are a few steps for retirees to grow their money in retirement: Assess your financial situation – Before making any investment decisions, review your financial situation. Work out your income, expenses, assets and liabilities to get a clear idea of your overall financial health and retirement readiness. Create a budget – Develop a realistic budget that will cover your retirement goals and lifestyle. Factor in expenses such as housing, healthcare, travel and leisure activities, and identify areas where you can reduce costs or make adjustments if needed. Diversify your investments – Diversification is key to managing risk in retirement. Spread your investments across various investment options, such as shares, bonds and real estate, so that you’re not overexposed to any single market or economic downturn. Consider income generating investments – Look for investments that provide a steady stream of income, such as dividend paying shares, bonds, rental properties or annuities (a form of investment entitling the investor to a series of regular payments). Monitor and rebalance your portfolio – Regularly review your investment portfolio to ensure it still meets your financial goals and risk level. Rebalance your portfolio as needed and adjust for changes in market conditions or your personal circumstances. Stay informed and seek professional advice – Keep yourself informed about market trends, economic developments and changes in tax laws that may impact your retirement investments. Consider meeting with a financial adviser or retirement planner to help you develop a retirement strategy that meets your needs and objectives. Manage withdrawal rates – Be aware of how much you’re withdrawing from your pension each year to avoid going through your savings too quickly. For an account-based pension, the minimal drawdown rate for under 65s is 4%, gradually increasing to 14% when the member turns 95. Plan for healthcare costs – Healthcare expenses can be a major burden in retirement, so it’s very important to factor them into your financial plan. By following these steps, you can proactively grow your money and help improve your financial security throughout your retirement years. Adjusting investment risk when nearing retirement As you approach retirement, you may need to rethink your investment strategy to reflect your changing financial needs and risk tolerance. Here are some considerations for adjusting your investment risk when nearing retirement: Consider moving towards capital preservation – As you near retirement, you may want to put capital preservation before aggressive growth. Moving part of your investment portfolio into more conservative assets, such as bonds, can help preserve your retirement savings. Reduce exposure to shares – While shares historically offer higher returns over the long term, they also come with risk. You may want to consider reducing your exposure to shares as you approach retirement to minimise the impact of market downturns on your portfolio. Focus on income generation – Shift your investment focus from growth oriented assets to income generating investments that provide a steady stream of cash flow. Dividend paying shares and bonds can help top up your retirement income while offering more stability. Consider your longevity – Plan for the possibility of living longer than expected and the impact it may have on your retirement savings. Consider an investment that offers protection against inflation and longevity risk, such as annuities or inflation indexed bonds, to help ensure income security throughout your retirement years. Summary Growing your money in retirement requires careful planning, prudent decision-making, and ongoing management of your investment portfolio. By following the steps outlined above and adjusting your investment risk as you near retirement, you can improve your financial security, protect your retirement savings, and enjoy a comfortable and fulfilling retirement lifestyle. Source: MLC

Here’s a quick checklist to help you prepare for the end of financial year and maximise your tax time benefits. Understand your sources of income When it comes to tax, your wages are just the start. Income can come from all sorts of areas. Interest you’ve earned from bank accounts. Dividends you’ve received from shares. Employee share options you may be entitled to. Capital gains you’ve received from the sale of an asset. Rental income from an investment property. Redundancy payments when you’ve left a job. Any taxable Centrelink payments you may have received. Consider what deductions you can claim The rules around work related expenses do change from time to time so make sure you check what you can claim, particularly if you’ve been working from home more over the past couple of years. And did you realise you may be able to claim a tax deduction from super contributions? You may be eligible for a tax offset of $540 if you make a super contribution for your spouse and your spouse’s income is under the relevant threshold. Think about when to sell any investments Stick or twist? Sell or keep hold? When it comes to how capital gains from selling an asset are taxed, timing is everything – whether it’s a parcel of shares, an old car or even an investment property. Don’t forget the upcoming tax changes may mean that from 1 July you’re paying less tax, so that might affect when you decide to divest any investments and incur a capital gain – this year or next. Document your donations It’s great to give to your charity of choice but don’t forget your potential tax deductions. So hang on to your receipts and keep a record of your donations. Understand the Medicare levy If you earn over a certain amount you’ll need to pay the 2% Medicare levy to help fund the private health system. But there’s a potential rebate available if you take out private health insurance. So you might want to work out your best approach, particularly as you make progress at work and start to earn more money. Get your retirement income right If you’re retired, the good news is you can potentially earn a higher level of income before you start paying tax. But it can depend on your age and the type of income you receive. Get your investment property affairs in order If you’re renting a property out then you’ll probably be aware there are plenty of tax deductions you can claim for things like depreciation, cost of repair and maintenance, interest costs on your loan and fees that you pay for a real estate agent to manage your property. Source: AMP

Many people are finding themselves in a situation where they need to provide financial support to their aging parents. Balancing the responsibility of helping your parents financially while saving for your own retirement, is no doubt challenging. Effective financial planning can help you provide for your parents while still securing your own financial future. Assessing your parents’ financial situation Review assets and savings It can be tough to start a conversation about money with your parents, but it’s one of the most important conversations you can have. Having access to their financial information will give you a better understanding about their situation. More importantly, you’ll know if you’re going to be required to help them financially in a significant way. Ideally you want a clear picture about the assets they own, savings and debts, plus an understanding of their income and expenses. There are budget planners and phone apps you can use to get visibility around spending habits. You may also want to use the MoneySmart retirement planner calculator to give an idea of how long their money could last. If you find they don’t have enough income to support their retirement, there may be things they can implement to change it. This could include cutting down expenses, moving to a more affordable home or renegotiating their debt. It’s also important to make sure they are maximising any social security entitlements.   Review health costs and insurance As your parents age, their health can become more fragile, and the cost of medical care can increase significantly. Being aware of the potential financial burden that healthcare can place on your parents, is therefore important. Understanding your parents’ private health insurance coverage and any available healthcare subsidies or concessions is also essential.   Consider home maintenance costs Many elderly parents wish to age in their own homes. However, this may require modifications for safety and accessibility. These types of changes come at an expense so they may need to factor in additional costs for things like installing ramps, home repairs or transport assistance.       Government assistance programs Australia offers various government programs designed to assist aging individuals. Some of these include: Age pension: if they’re eligible, your parents may be able to access the full or part Age Pension. This provides financial support to help cover living expenses during retirement. Aged care support: if your parents qualify, they may be able to access the aged care system which is designed to help seniors access various services, such as in-home care or residential care, depending on their needs. Carer allowance/ Carer payment: these payments provide financial assistance to individuals who take care of elderly parents or relatives who have a disability, illness, or age-related condition.   Assessing your own financial situation Before you can effectively help your parents, it’s important to evaluate your own financial position, as this information will serve as the foundation for your future financial planning. Here’s how to go about it: Current savings and investments: knowing what your current financial resources are is crucial for planning future expenses. This means reviewing your savings and super accounts. If you have any investments such as shares or property, tally up their value. Debt: evaluate any outstanding debt, such as mortgages, loans, and credit card balances. It’s crucial to know your total debt and the interest rates associated with these obligations. Retirement goals: define your retirement goals, including the age at which you plan to retire and your desired lifestyle in retirement. This information will help you calculate how much you need to save. Budgeting: learn how to create a budget that takes into account your daily living expenses, savings goals, and funds available for supporting your parents. Check out our article on the 50/30/20 budgeting strategy to help you with this. Invest in your own retirement If you find you need to make financial adjustments to increase your retirement savings, one option could be to contribute more to your super on a regular basis using your before-tax or after-tax income. There are tax benefits that come with this too. For example, if you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction. This means you’ll reduce your taxable income for the financial year and potentially pay less tax, while adding to your super balance. It’s a win-win. There is a cap for concessional (before-tax) contributions which is currently $27,500 per financial year. If you have not contributed the whole $27,500 in a financial year, you may be able to carry forward the unused amount to the next year. This means you could contribute more than $27,500 in one year, if you meet certain criteria. However, if you exceed your concessional contributions cap, the excess concessional contributions are included in your assessable income. These are taxed at your marginal tax rate (the tax rate you pay on your personal income) less a 15% tax offset. Other taxes may also apply. Set clear boundaries It’s an admirable thing to help your parents but be clear about what that help consists of. For example, it’s one thing to help out with their bills occasionally, but it’s another to have your name placed on loan documents! If that isn’t the type of help you had in mind, it’s important to communicate that and stick to it.   Seek professional help Enlisting the help of an expert, such as a financial adviser or coach, may alleviate some of your pressure. Better yet, financial experts can assist in developing appropriate strategies to ensure you’re meeting your own retirement goals as well as supporting your parents. For example, you may need to reduce your current spending to help your parents retire more comfortably. That’s a short-term cost to you but if it means your parents can keep important assets like the family home, you may benefit from that in the long-term.     Source: MLC

Cyber criminals are targeting people based on personal details and preferences – and reeling them in with professional looking follow ups. Find out how to protect yourself. Next time you like or follow a friend or a brand on social media, keep in mind that it may not be just your friends and family who are watching. The personal nature of posts and other activity on social media provides would-be fraudsters with lots of detailed information about people, their connections and their personal preferences. Even seemingly harmless posts, messages, photos or videos can be used to develop detailed profiles of people, according to the Australian Cyber Security Centre. Swindlers may use that information to try to scam you by tricking you into handing over money or personal details online. Social cybercrime costing Aussies millions Losses to social media scams reached $95 million in calendar year 2023, an increase of 19% compared with the $80 million lost in 2022. This figure had been increasing dramatically, up from reported losses of $56 million in 2021 and $27 million in 2020. In the December quarter last year alone, reported scams originating on social cost Australians $15.9 million. Scams are more likely to affect older Australians All age groups report being affected by scams. However, the likelihood that people could be targeted on social networks appears to increase for older Australians. Those aged over 65 experienced the highest losses of any age group to cybercrime originating on social networks, reporting 30% of all such incidents. This represents a 57% increase compared with the previous quarter for this age group. People in this age bracket were also most affected by investment scams, as well as dating and romance scams. What to look out for when it comes to scams Scams that start on social networks can take many forms. Many of those who were contacted on social media report that they were targeted with an ad, a post, or a message on an online forum. According to the Australian Competition and Consumer Commission (ACCC), some people reported placing an order after seeing an ad, but never receiving their goods. Others reported seeing advertisements that appeared to be from a real, online retailer. The biggest proportion of losses came from contact that originated via WhatsApp (47% of losses) and Facebook (20%), according to the ACCC. This was followed by Instagram (9%), as well as online dating sites (9%). Scammers may use sophisticated tactics Scammers have also been known to use social media to create fake news stories, sometimes featuring well known celebrities who appeared to endorse investment opportunities. In some cases, people were followed up with personalised, highly professional looking communications that appeared to be legitimate. Dating sites may also be involved. After pretending to be a real person who wants a relationship with you, often over many weeks or months, a scammer may ask you to invest your money or cryptocurrency in ‘opportunities’ that turn out to be fake. How scammers use personal data to target people In many cases, scammers use personal, highly sensitive data to trick people into making fraudulent online payments. In one example reported to the ACCC, people received a friend request on Facebook featuring an actual funeral notice that had originally been shared by a legitimate account. They were asked to help the bereaved family pay for a live stream of the funeral by making a credit card payment to a funeral streaming account. Staying safe from scammers online Tips and resources to help you avoid scams: If you think a phone call sounds suspicious, hang up. Never share passwords or personal information, especially with someone you don’t know. Don’t open SMS or email links or attachments unless you know who they’re from. Protect your computer with antivirus software. Don’t send money or personal details to people from unusual locations. Don’t accept a message or friend request on social media from someone you don’t know. Be wary of unexpected contact, particularly if you’ve replied to something online. Do your own checks on any investment opportunity to make sure it’s real. Beware of promises of low risks with high returns. Consider seeking independent financial advice before you invest. Check your bank account and statements regularly to watch out for unusual activity.     Source: Colonial First State  

Planning for retirement is a daunting task but it’s too important not to think about – especially for women. Fortunately, there are some small steps women can take today to protect and grow their finances for the future. It’s probably no surprise to hear that Australian women often retire with less money saved up than their male peers. New research* confirms that even in 2024, this is still the case. There are several reasons for this, including well-documented wage gaps and taking time out of the workforce for caring responsibilities. Not only do women end up investing less money through super over the course of their careers, but they’re also missing out on the compounding effects of super which grow balances over time. Women are also less likely to invest their money outside super than men. Data shows that while 38% of men have invested their money, only 26% of women have done the same. Similarly, the research found that while 78% of men have made plans for their financial future, only 67% of women had done similar. Women were also less likely to set financial goals or create and stick to a budget. Knowledge is power It’s important to note that women care about their finances just as much as men. In fact, women are more likely to feel worried about their finances or guilty that they’re not doing enough to manage finances compared to their male peers. So what’s holding them back? One major hurdle is confidence – or more specifically, that women aren’t as confident with money and investing as men. It’s hard to make good financial decisions when you don’t trust you know what a ‘good’ decision looks like. Luckily, financial ‘confidence’ is strongly linked to education. The more we know about super and investing, the more confident we can be in our decisions. What’s more, there are several easy ways for women to brush up on their financial knowledge and back themselves: Read correspondence from your super fund Super is the largest financial asset most Australians will own outside of a family home, but women are far less likely than men to closely read letters or emails from their fund. These messages include important information about your account and can help demystify the super system, so you have a better grasp on the returns you receive and what’s influencing them. Check out online education hubs There’s plenty of useful information available online to help you navigate investment markets, super, insurance and more – just be sure to check you’re dealing with a reputable source. Get help from a professional A core part of a financial adviser’s job is to help educate clients about their finances so they can make informed decisions about their money. Working with a financial adviser can help you map out a plan for your future so you’re more likely to reach your goals. * Source: CFS commissioned survey of 2,966 Australians and research was completed in March 2023. Findings and statistics in this article are based on this research. Source: Colonial First State

The total superannuation balance or TSB was a significant change introduced as part of the Government’s superannuation reform package, taking effect on 1 July 2017. However, unlike other changes, such as the pension transfer balance cap, the total superannuation balance has generally been overlooked despite its broad implications. If legislated, the Federal Government’s proposal means an additional 15% tax on superannuation earnings applies when a member’s TSB exceeds $3 million. With the potential additional tax for balances over $3 million putting TSB back into the media spotlight, it is time for a refresher. In simple terms, TSB is the total amount of money a member has in superannuation, assessed by the ATO each 30 June. It can be calculated by: Adding: The accumulation phase value of the member’s super interests that are not in the retirement phase. The retirement phase value of the member’s super interests. The amount of each rollover super benefit not already reflected in the accumulation phase value or the retirement phase value (that is, rollovers in transit between super funds on 30 June). In certain circumstances, the outstanding balance belonging to a limited recourse borrowing arrangement (LRBA) in an SMSF entered from 1 July 2018 if either: The LRBA is with an associate of the fund. The member has satisfied a condition of release with a nil cashing restriction. Subtracting: Any personal injury or structured settlement contributions paid into the member’s super funds. There can often be confusion between the TSB and the transfer balance cap. TSB is the total value of someone’s superannuation assets and is used to calculate their eligibility for various concessions and strategies. The transfer balance cap is a lifetime limit on the amount a person can transfer into a tax-free retirement pension account. The confusion arises because a member’s TSB must be below the general transfer balance cap, set at $1.9 million, to benefit from measures like non-concessional contributions. The three-year bring forward rule for non-concessional contributions is also reduced for TSBs over $1.68 million. A member’s TSB is also a consideration for the following strategies: Carry-forward concessional contributions: A TSB of less than $500,000 is required to use carried-forward concessional contributions. Work-test exemption: A TSB less than $300,000 is required to use the work-test exemption. Government co-contribution and spouse contribution: Both require a TSB less than the general transfer balance cap to be eligible. Exceeding the TSB for a particular strategy can have costly ramifications. Anyone looking to implement a superannuation strategy should be mindful of their TSB each 30 June, accessible through the ATO online services portal on MyGov. Members in large super funds can view their 30 June balance on MyGov in mid-July. For SMSFs, the MyGov TSB will be available after lodging the annual return. Minimising the impact of the total superannuation balance measure Couples should aim to maintain even balances through contribution splitting or a recontribution strategy. Also, thought should be given to the timing of contributions, as the ATO assesses TSB on 30 June each year. Contributions made in July only count toward the next 30 June, allowing an additional year of tax-effective strategies. In contrast, a contribution made in June may create restrictions. Source: Bell Potter

Investing your money may be an effective way to help you build long-term wealth. While it can seem overwhelming at times, given the breadth of options available, you don’t need to be a financial expert to be successful at it. But as Warren Buffet says: “Risk comes from not knowing what you’re doing.[i] So understanding the basics is important. To help you better prepare and potentially reduce your risk, here are some things to consider before investing. Set clear financial goals Before investing, consider creating a plan. This helps you put into perspective not only your investment goals, but when and how you want to achieve them. It can also help to remove the likelihood of emotions influencing your investment decisions. Start by asking yourself what you aim to achieve through your investments. Are you looking to build wealth for retirement, save for a down payment on a house, or fund your child’s education? Your goals can influence your investment strategy and the level of risk you’re willing to take. Review your timeframe and comfort with risk Before investing, it’s important to consider how much time you’re giving yourself to build towards your financial goal and how much risk you’re prepared to take on to get there. For example, an investment plan for retirement may look very different to someone who is much younger. If you’re looking to access your money in a shorter time frame, remaining invested through ups and downs in the market may be unlikely, so a less risky investment approach may work to your favour. Research the market Understanding what’s going on in the market, domestically and globally, is important as it may have an impact on your investments. This can include things such as growth, unemployment rates, interest rates and inflation and even political events. Check your emotions There’s no denying that the nature of investing can be emotional. There are times where you may feel tempted to change your investment strategy because an area of your portfolio isn’t doing well, or you received recent news the market is going to plummet. While these events may cause you to react quickly, such as selling off your assets, it’s important to consider your investment strategy. If your approach is intended to be a long-term plan, making decisions based on short-term market fluctuations, may greatly affect what you set out to achieve. Consider where to invest your money You may choose to divvy up your money across a variety of asset classes such as shares, cash and bonds, or you may choose to invest your money in a single asset class, such as a residential property. Diversification One of the main advantages of investing in different asset classes, is the ability to diversify your risk. This means if one of your investments doesn’t perform well, your losses may not be as severe as your other investments will help to level it out. On the flip side, it does take more effort as you’ll need to remain up to date across a variety of market sectors. Understand investment options in Australia There are many ways you can go about investing your money depending on how confident you feel and whether you’d prefer to take a more passive or active approach to managing your money. Here are some of the most common: Shares: when you own shares in a company, you become a shareholder and have the potential to receive dividends (income distributions) and benefit from capital gains (profits when you sell the shares at a higher price than you bought them). The Australian Securities Exchange (ASX) is the primary platform for trading shares in Australia. Bonds: bonds are debt securities issued by governments, corporations, or other entities. When you buy a bond, you are essentially lending money to the issuer in exchange for periodic interest payments and the return of the bond’s value when it matures. Bonds are generally considered lower risk than shares but offer lower potential returns. Property: you can invest in residential or commercial properties, either directly by purchasing property or indirectly through real estate investment trusts (REITs). Rental income and property appreciation are common ways to generate returns. Managed funds: managed funds pool money from multiple investors to invest in a diversified portfolio of assets. Professional fund managers make investment decisions on behalf of investors, making them suitable for those who prefer a hands off approach to investing. Exchange Traded Funds: ETFs are similar to managed funds but trade like shares. They aim to replicate the performance of a specific index or asset class. ETFs offer diversification, liquidity, and lower risk to some other investment options. Term deposits and savings accounts: term deposits have fixed terms and offer a fixed interest rate, while savings accounts provide more flexibility but typically offer lower interest rates. They are suitable for conservative investors looking for capital preservation and a modest return. Super: super is a long-term savings vehicle designed specifically for retirement. Cryptocurrency: highly volatile, cryptocurrencies like Bitcoin and Ethereum have gained popularity as alternative investments. Some investors allocate a portion of their portfolios to cryptocurrencies for potential high returns, but they come with significant risk and should be approached cautiously. Source: MLC [i] https://www.cnbc.com/2017/05/01/7-insights-from-legendary-investor-warren-buffett.html

How could the proposals impact you and your finances? May 2024 The 2024 Federal Budget provides cost of living relief through 1 July tax cuts, lower power bills, higher welfare payments and support for small businesses. Note: These changes are proposals only and may or may not be made law. You should speak to your financial adviser to understand more about how these proposals could apply to you. Cost of living Energy bill relief. All Australian households will receive an energy rebate of $300 and eligible small businesses will receive $325 from 1 July. It’s not yet known exactly when rebates will be applied to accounts. Student debt indexation changes: Higher Education Loan Program (HELP) loan holders will benefit from changes to indexation, with debts to be increased by the lower of inflation and wages growth. Currently, these debts are indexed to inflation annually on 1 June. The change will be backdated to 1 July 2023 and an ‘indexation credit’ may be provided to reduce outstanding loan balances. If a voluntary payment is made to reduce the HELP balance and any indexation, it’s important to leave enough time after the payment is made for it to be processed by the ATO. The ATO usually release payment cut-off dates and publish this on their website. Freeze on cost of PBS medicines: The maximum Pharmaceutical Benefits Scheme (PBS) co-payment of $7.70 will be frozen for pensioners and Commonwealth concession cardholders until 31 December 2029. For all other Medicare card holders, the co-payment of $31.60 is frozen until 1 January 2026. The co-payment is the amount that must be contributed towards the cost of PBS subsidised medicines. Personal taxation Tax cuts for all taxpayers: From 1 July, 13.6 million taxpayers will pay less tax compared to the current financial year, when the re-worked Stage 3 tax cuts take effect. The tax savings depend on taxable income. The table below outlines the new rates and thresholds from 1 July 2024, as well as the current financial year. The tax cuts aim to provide cost of living relief, but may also be used to reduce debt, invest or top up super. Current financial year (2023/24) From 1 July 2024 Taxable income Tax rate* Taxable income Tax rate*   Up to $18,200 Nil Up to $18,200 Nil   $18,201 – $45,000 19% $18,201 – $45,000 16%   $45,001 – $120,000 32.5% $45,001 – $135,000 30%   $120,001 – $180,000 37% $135,001 – $190,000 37%   > $180,000 45% > $190,000 45%   * Plus Medicare levy/surcharge where applicable. Business taxation Instant asset write-off extended: Small businesses with a turnover less than $10 million will be able to claim an immediate tax deduction for the full cost of eligible assets costing less than $20,000 for another 12 months until 30 June 2025. The $20,000 threshold applies to each eligible asset purchased. Also, the asset must be first used or installed ready for use between 1 July 2024 and 30 June 2025. Superannuation Super on Paid Parental Leave: Superannuation Guarantee contributions will be paid to all recipients of Government-funded Paid Parental Leave from 1 July 2025. Contributions will be at the same rate as employer contributions under the Superannuation Guarantee, which will be 12% from 1 July 2025. Social security and aged care Deeming rates to stay frozen in 2024/25: The ‘deeming rates’ that are used to assess income from financial investments (such as bank accounts, shares, and managed funds) will remain unchanged until 30 June 2025. Instead of assessing actual investment and bank account earnings, the deeming rates are used to determine the income that certain financial investments earn for the purpose of calculating entitlements to certain payments and benefits. This may benefit Age Pensioners, other income support recipients and concession card holders. Support for renters: On 20 September 2024, the maximum Commonwealth Rent Assistance payment will increase by 10%, in addition to the regular half-yearly indexation. Rent Assistance may be available for people who pay rent and receive certain payments from Services Australia. More work flexibility for carers: From 20 March 2025, Carer Payment recipients will be able to work up to 100 hours at any time in a four week period without losing their payment. This is known as the ‘participation limit’ and it’s currently a maximum of 25 hours every week. Also, travel time, education and volunteering activities will no longer count towards the participation limit; only actual hours worked. More home care packages: An additional 24,100 home care packages will be made available in 2024/25. These packages will provide ongoing care to help older Australians to stay in their homes for longer. Sources: www.budget.gov.au © 2024 IOOF Service Co Pty Ltd. All rights reserved.