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A step by step guide to help you through the decision making process. Firstly, what is life insurance? “Life insurance” is the general term we give to the range of insurance that looks after you if something unexpected happens to your body or mind. They are designed to protect your quality of life and the future you’ve planned for your loved ones. The category of life insurance includes: Life Insurance (sometimes called term life insurance or death cover) Total and Permanent Disability Insurance Critical Illness or Trauma Insurance, and Income Protection Insurance. Step 1. Which type of insurance do you need?  Each insurance protects your life in a different way. So the first thing to consider is, which types of insurance do you need to help you live the life you’ve planned? Life Insurance: If you want to protect your family’s future and give them options if you die or are diagnosed with a terminal illness, then that’s Life Insurance. Total and Permanent Disability Insurance: To help you live a better quality of life if you become permanently disabled and can’t work again, then Total and Permanent Disability (TPD) Insurance could be for you. Critical Illness or Trauma Insurance: If you have a serious illness that’s covered by the policy, like certain malignant cancers, then Critical Illness or Trauma Insurance helps support you while you recover. Income Protection Insurance: If you want to have an income to pay your living expenses, if you can’t work as the result of an illness or injury, then that’s what Income Protection Insurance is for. Step 2. How much do you want to be insured for? Everyone’s life and budget is different. So considering how much you want to be insured for is an important step. Life Insurance cover, TPD and Critical Illness or Trauma Insurance are paid as lump sums. Income Protection Insurance is a monthly payment if you can’t work as a result of injury or illness. Step 3. If you choose Income Protection Insurance, how long do you want your Waiting and Benefit Periods? A Waiting Period is the length of time you have to wait after an injury or illness that stops you from working, before you start accruing Income Protection Insurance benefits. It could be 4, 6, 13 or 26 weeks (shorter Waiting Periods generally cost more in premiums). A Benefit Period is the maximum length of time you could receive your Income Protection Insurance payments. (The longer your Benefit Period the higher your premium). Step 4. How do you want to structure your policy? To get the insurance plan that’s right for you, you should also consider how best to structure your policy. Some of the things to consider are: Variable Age-Stepped Premiums vs. Variable Premiums Variable Age-Stepped Premiums Variable Age-Stepped Premiums are calculated based on your age as at each Policy anniversary and the length of time you have had your Policy. Variable Age-Stepped Premiums generally increase as you age. The increases will generally be more significant as you get older. Variable Age-Stepped Premiums can also increase with the length of time you have had your Policy. This means your premium will generally increase at each Policy anniversary. Variable Premiums Variable Premiums are based on your age at the Plan start date. Each additional amount of cover will be priced based on your age at the date of increase. This will generally have a higher premium rate than the original cover. Variable Premiums are not fixed. There are a range of reasons why they may increase Variable premiums end at the policy anniversary before age 65 or 70 and will change to the corresponding Variable Age-Stepped premiums from that time until your Policy expiry. Standalone vs. Bundled Cover There are a number of different ownership options available depending on the plan you choose. The different types of ownership determine how the premiums are funded and may have different tax implications in respect of the premiums and benefits paid. The plans structures available are: Standalone: A claim paid under a standalone plan will not reduce the benefit amount of another standalone plan. Attached/Attaching: When a plan is attached to another plan, a claim paid under a plan will reduce the benefit amount on all other plans that it is attached to. All attached plans have the same policy owner(s) and are issued under one policy. Step 5. Enjoy This Australian Life The most important question to ask yourself is, how will life insurance help you protect those you love or assist your return to wellness, so you can continue to make the most of This Australian Life? Source: TAL

For many Australians, lifestyle choices are often seen as rewards for hard work. The big house. The new car. The overseas holidays. The designer labels. On the surface, these purchases seem like signs of financial success but when you dig deeper, they often come with hidden trade offs – and many don’t realise it until it’s too late. Buying vs. affording: there’s a difference Earning a high income doesn’t guarantee you can afford everything you want. People earning $150,000, $300,000, even $700,000 a year, can still feel like they are only just keeping up. The issue isn’t income – it’s spending. Many households end up locked into expensive lifestyles without considering: The full long-term cost. The impact of interest rates and inflation. The risk of unexpected changes to income. The opportunity cost of not building wealth. It’s one thing to buy something. It’s another to afford it in a way that doesn’t limit your financial freedom. What does ‘affordability’ really mean? Affording the big house or the luxury car isn’t just about managing repayments today. You can afford it when you can: Maintain your savings and investments. Absorb unexpected expenses without stress. Keep lifestyle choices aligned with your financial goals. Continue progressing towards financial freedom. Without these conditions, you might be stretching beyond your limits. The pressure of lifestyle creep As income grows, spending tends to grow too. It starts small – an upgrade here, a nicer holiday there – but over time, it can lead to: Reliance on debt. Reduced savings. Higher financial stress. Limited flexibility in case of emergencies. Some clients may feel like they’re working harder than ever but getting nowhere. Often, it’s not because they don’t earn enough – it’s because the lifestyle has crept up faster than their wealth. Four questions to ask before the big purchase Before making a major lifestyle choice, consider: Am I investing for my future at the same time? If the purchase limits your ability to invest, you might be prioritising short-term enjoyment over long-term security. Can I handle unexpected costs? Could you manage if interest rates rose, if you lost work for a few months, or if you faced a major expense? Is this decision aligned with my values? Are you buying for you or for how it will look to others? Will I still feel free? Financial freedom is about choice. If the purchase locks you into more work, more debt or more stress, is it really worth it? Finding the right balance It’s not about never having nice things. It’s about doing it on your terms. When you build wealth first, you can enjoy these lifestyle choices without worrying about how to fund them. Being intentional with money helps you: Avoid unnecessary debt. Maintain flexibility. Achieve long-term goals. Enjoy luxuries without the pressure. A lifestyle that works for you Ultimately, it’s about balance. You can have the house, the holidays and the nice things – but make sure they don’t come at the cost of your financial future.Source: Money & Life

Unsure how your relationship status affects your taxes? We’ve made it simple with our couples’ guide to tax. If you’re newly married, engaged or living with your partner, you might not be aware that there are some implications for your taxes. In Australia, you’re not required to lodge a combined tax return with your spouse each year. Instead, you need to declare your spouse’s taxable income on your individual tax return. The Australian Taxation Office (ATO) uses your joint income to work out whether: you’re entitled to a rebate for private health insurance (and how much) you need to pay the Medicare levy surcharge you’re entitled to a Medicare levy reduction you’re entitled to the seniors and pensioners tax offset. So, first things first, how do you know if you have a ‘spouse’ in the ATO’s eyes? Do I have a spouse or de facto partner? As far as the ATO is concerned, your spouse “includes another person (of any sex) who: you were in a relationship with that was registered under a prescribed state or territory law although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple.” You must declare all of the taxable income your spouse receives in your return, including: salary and wages dividends interest rental income foreign source income pensions and child support payments. How does this affect my tax return? There are some implications for your taxes, especially in the following areas. Private health insurance rebate The amount of rebate you qualify for is based on your income, so you might receive a different level of rebate as a couple than you did as an individual. You can check the rebate rates and income thresholds on the ATO website. Medicare levy surcharge High income earners who don’t have private patient hospital cover are charged a Medicare levy surcharge. If you have a spouse, the ATO will use your combined income to work out your Medicare levy surcharge. It’s calculated as a percentage of your income (up to 1.5%) and is payable in addition to the Medicare Levy. You may need to pay the Medicare levy surcharge if you don’t have private patient hospital cover. For more information visit the ATO website. If you’ve recently gained a spouse for tax purposes, and you don’t have private patient hospital cover, make sure to check whether your combined income puts you over the income threshold. Taking out private patient hospital cover will mean you don’t need to pay the surcharge – and you’ll be covered in case of an emergency. Medicare levy reduction There’s also a Medicare levy reduction available to low income earners. If you have a spouse and your family taxable income is below the threshold you might be eligible for a reduction. Combining your homes? Something that’s often overlooked when moving in with a spouse is the way it affects the capital gains tax (CGT) exemption on your main residence. If you both owned and lived in your own homes before moving in together; or you’re in an established relationship but lived separately during the year; and you plan to sell one or both of the properties, there could be CGT implications. Working out your CGT obligations can be tricky, so seek advice from a tax professional when preparing your return. If you’re still not sure whether you need to include your spouse’s details on your return, seek advice from a tax agent or speak to the ATO. If you leave your spouse out, the ATO could amend your tax return and there could even be financial penalties. Source: Money & Life  

Insurance; we don’t need it until we do. Learn all about the value of insurance for protecting your health, income and loved ones when life throws you a curveball. Protecting your wellbeing and your wallet “Do I really need this insurance?” It’s probably a question you’ve asked at some point when deciding whether to part with your money. But maybe the real question should be “What if I became ill, how would we cope?” Your health and wellbeing is the most important asset you have, so it pays to put in the hard yards and get your head around the tricky topic of insurance. Illness or injury can strike at any age or life stage, and it certainly doesn’t wait for the most convenient time to happen. Having peace of mind about having enough money if things take a nosedive could be your best investment yet, as well as helping you sleep at night. When insurance is a good idea Often insurance can come on your radar off the back of someone you know falling really ill or when you read something scary in your news feed. These events can make you stop and think but you don’t need to wait for a warning signal. In fact, getting on the front foot ahead of major life changes is often the best reason to get your insurance sorted. Here are some scenarios to have a think about: Landing your dream job – no job is completely secure and if you’re about to ramp up your income your lifestyle is probably going to upgrade too. If one day you lost your income, how long would you be able to pay the bills? Switching to an income that’s up and down – while the gig economy or a well paying contract has its lifestyle benefits, there is a trade off. You don’t benefit from things like sick leave or annual leave and if your income takes a sudden downturn, you might be left struggling for cash. Starting a family – when you settle down with a partner or have kids, it’s not just about you anymore. You’re going to have someone who truly depends on you and what happens to you will have a big knock on effect on them. Starting a family might also mean taking on a bigger mortgage. Getting your head around the important lingo – Insurance jargon is one thing you’ll need to make peace with as you navigate your options. If you’ve looked at the insurance section of your super statement, you may notice ‘Death’ insurance – but did you know it may also cover you for a terminal illness diagnosis? And what on earth is TPD? How do you know what constitutes Total and Permanent Disability? Don’t worry, we’ve got all the details below. Reading the fine print But first, a word about insurance policies. While having a general understanding of what type of policy covers what, it’s no substitute for reading your insurance product disclosure statement (PDS) and knowing exactly what you’re getting. Just like travel, or home and contents insurance, policies and the amount they pay out can vary a lot. So it’s worth reading the fine print on something so important in your life. Protecting your income If you’re working and you, or your family rely on your income to cover the bills, you should be giving serious thought to taking out insurance to protect your income. You have two options for this: Income protection – if you become ill or injured and can’t work for a short period of time, income protection will provide monthly payments up to around 70-85% of your income to help cover your expenses. This cover is available directly through an insurance company or via your super fund but it may not be automatic – you may have to opt in or apply for cover. Some generous employers may build income protection into a benefits package and pay your premiums for you. Total and permanent disability insurance (TPD) – as the name suggests, this cover is designed for when you experience a permanent disability that prevents you from ever working again. For example, if you were to have a serious heart attack or stroke that required six months’ of rehabilitation and you’re unable to return to work again for a job you’re qualified for, this cover may pay out. Again, you can get this type of cover directly through an insurance company or via your super fund. In fact, this cover may already be automatically included within your super fund. Cover is also available outside super, where you can apply for ‘own occupation’ insurance. Instead of paying out only if you are unlikely to ever work again in any reasonable job you could do, own occupation cover will pay you if you can’t return to the job you were working immediately before you were injured or became ill. Life cover – also known as ‘Death’ cover which pays a lump sum amount of money if you die. The pay out goes to whoever you nominate as beneficiaries or your estate. As with TPD, you may receive this type of cover automatically as part of your employer’s default super fund. And some life cover will also pay out if you are terminally ill, meaning you can use the funds to help your family before you pass away. Covering yourself for critical illness One of the most important types of insurance you can get is the one you can’t get through your super fund. Trauma (also known as critical illness) cover will pay you a lump sum of money if you are diagnosed with a serious illness, such as coronary and cancer illnesses. These conditions often need years of treatment or rehabilitation, which can be very hard to manage without any financial support. Trauma cover can work hand in hand with income protection, which gives you regular payments instead. Trauma cover isn’t cheap but it certainly pays off if you … Read more

Imagine an extra $500 landing in your super fund, courtesy of the government, simply for being proactive about your financial future. If you’re a low to middle income earner making after-tax contributions to your super without claiming a tax deduction, you could be eligible for this often forgotten about super boost. Here’s how it works. How does the super co-contribution scheme work? The superannuation co-contribution scheme is a government initiative aiming to assist low to middle-income earners save for their retirement. What that means is, depending on the amount of income you earn each year, the government may add to your super when you make a voluntary after-tax contribution, which you don’t claim a tax deduction for. The amount you receive will depend on how much you contribute as well as your income. Are you eligible for a super co-contribution? To be eligible for a super co-contribution from the government, generally you must: make an after-tax contribution to your super fund, which you don’t claim a tax deduction for lodge your annual tax return for the relevant year have a total income that’s less than $60,400 in the 2024/25 financial year for at least a part co-contribution (more info on this below) receive 10% or more of your income from eligible employment and/or running a business be less than 71 years old at the end of the financial year that you’re making the contribution have a total super balance below $1.9 million as at 30 June of the financial year prior to the year that you’re contributing not have exceeded your non-concessional contributions cap for the year not have held a temporary visa at any time during the financial year (unless you’re a New Zealand citizen or it was a prescribed visa). What do you need to do to get the super co-contribution? Provide your tax file number to your super fund You don’t need to apply for the super co-contribution but you will need to make sure you’ve provided your tax file number to your super fund. Generally, your super fund can’t accept after-tax contributions, or receive co-contributions on your behalf, if you haven’t provided your tax file number. Lodge your tax return You’ll need to lodge your annual tax return for the relevant year. The Australian Taxation Office (ATO) will then use the information provided in your tax return and the contribution information from your super fund to work out your eligibility. If you’re eligible, the ATO will automatically calculate the appropriate amount that’s owing to you and will typically deposit this into the super fund which you have made the contribution to. If you’ve recently retired and have closed your super account, it may be possible to have your co-contribution paid to you directly. How much will the super co-contribution be? If your total income is equal to or less than $45,400 in the 2024/25 financial year and you make after-tax contributions of $1,000 to your super fund, you’ll receive the maximum co-contribution of $500. If your total income is between $45,400 and $60,400 in the 2024/25 financial year your maximum entitlement will reduce progressively as your income rises. If your income is equal to or greater than the higher income threshold of $60,400 in the 2024/25 financial year, you won’t receive any co-contribution. You can use the ATO’s co-contribution calculator to estimate your entitlement and eligibility. What counts towards your total income? Your total income for this purpose includes your assessable income, reportable super contributions and any reportable fringe benefits, less any amounts you’re entitled to claim as a tax deduction for running your own business. Reportable fringe benefits typically arise where non-cash benefits are provided to you by your employer, such as a company car or lease vehicle. Are there other things you should be across? The income thresholds mentioned above are indexed each year in line with increases in average weekly earnings and may change in future financial years. If you exceed concessional and non-concessional super contribution caps, additional tax and penalties may apply. The value of your investment in super can go up and down, so before making extra contributions, make sure you understand, and are comfortable with, any potential risks. The government sets general rules around when you can access your super, which typically won’t be until you reach your preservation age of 60 years old and meet a condition of release, such as retirement. Where to go for further information Check the ATO’s website for up to date information. Source: AMP

#1: Set clear retirement goals The very first step in retirement planning is to define what you want your retirement to look like. When you hear the word retirement, what do you think of? Consider the following questions: When do you want to retire? Determine your ideal retirement age, keeping in mind that it may affect your savings strategy. While most of us may dream of retiring early, there are generally two retirement age rules that affect when most Australians can retire. These retirement age rules are the same for both men and women. Age 60: this is the earliest age where it’s possible to access your retirement savings under the ‘retirement’ condition of release or start a ‘transition to retirement’ pension. Age 67: this is the age when you can access Australia’s Age Pension, provided that you meet the eligibility criteria – which includes a residency test, income test and assets test. What lifestyle do you envision? Think about where you want to live, what activities you want to pursue and whether you plan to travel. Maybe it’s extensive travel, volunteering for a charity, spending more time with your family and friends or even still working part-time. What are your anticipated expenses? Estimate your future costs, including housing, healthcare, travel and leisure activities. You may also want to financially help your children or grandchildren. Having a clear vision will help you set specific, measurable goals. #2: Assess your current financial situation Next, take stock of your current finances to understand your starting point. This includes: Income sources: Identify all sources of income, such as salaries, rental income or investment returns. Assets and liabilities: List your assets (savings, investments, property) and liabilities (mortgage, loans) to gauge your net worth. This assessment will help you determine how much you need to save and invest to reach your retirement goals. You should also understand how much you currently have in super. Super is a long term investment vehicle that carries you through two phases of life. There is an accumulation phase followed by a retirement phase but it’s important to note that these aren’t mutually exclusive. You can have some of your super in an accumulation account and some in a retirement account as you navigate your way between the two. Understanding the difference is important though, as each phase has different tax treatment, rules and potential strategies. #3: Estimate your retirement income needs So, how much is enough? While we all hope for a simple answer, how much money you need in retirement differs for everyone. How much are you spending today? Do you think you’ll spend more, less or the same in retirement? And by how much: 5%, 10%? Consider: Government benefits: understand your eligibility for the Age Pension. For information about payments for veterans, see income support on the Department of Veteran’s Affairs (DVA) website. For other types of payments, including carers allowance, use Centrelink’s payment finder. Pension plans: if you have a pension, understand its benefits and when they will be available. Withdrawals from retirement accounts: plan how much you’ll need to withdraw from your savings to cover any gaps. Consider trying a retirement calculator to determine how much you’re likely to have if you continue saving at your current rate and compare that to how much Association of Superannuation Funds of Australia (ASFA) indicates you might need. #4: Create a savings and investment strategy With your retirement income needs estimated, develop a strategy to accumulate the necessary funds. This involves: Setting a savings target: Based on your income needs and how much you’ve saved so far, determine how much you need to save annually. Choose appropriate investment options: Decide how to invest your savings, balancing risk and return. Diversification is key to managing risk in retirement. As you approach retirement you may prefer to dial down the risk of your investments (both inside and outside of super) and opt for a more conservative strategy. Speak to a financial planner – they can help you with this. It is also important that you understand and review how your super is invested. #5: Monitor and adjust your plan Retirement planning is not a one-time task; it requires ongoing monitoring and adjustments. Regularly review your financial situation, savings progress and market performance. Consider: Life changes: Major events, such as marriage, divorce, or the birth of a child or grandchild, can impact your retirement plans. Review your investments approach: Regularly review your investments to ensure they still meet your financial goals, risk level and personal circumstances. A financial planner can also assist you with this. Manage withdrawal rates: Be aware of how much you’re withdrawing from your pension (if you have one) each year to avoid going through your savings too quickly. Establish a routine for annual reviews or consult a financial planner to keep your plan aligned with your goals. #Extra tip: start planning today Whether you’re 25 or 55, it’s never too early or too late to start preparing. The earlier you start planning for retirement, the more prepared you’ll be for the future you envision. And by acting early, you can take advantage of compound interest, allowing your savings to grow significantly over time. Plus, starting early gives you the flexibility to navigate unexpected expenses and life changes without financial stress. Don’t wait for the perfect moment – begin mapping out your retirement goals today. Your future self will thank you! Source: MLC

It’s important to understand the tax implications of your investments especially when markets move up and down. Our five step end of financial year checklist will help keep you on top of your tax for 2024-25. As the 2024-25 financial year draws to a close, it’s important to understand the tax implications of your investments. This is particularly important when markets are volatile, as the capital gains tax on your investments will be affected by when you made your investment, when you sold it and whether your investment increased or decreased in value. What is capital gains tax? Capital gains tax (CGT) is the tax you pay on profits made from the sale of investments, adjusted for any cost base amounts and any eligible capital gains tax discounting. When you sell an asset and make a capital gain, the taxable amount of the capital gain is included as part of your assessable income for tax purposes. Although it is referred to as ‘capital gains tax’, it’s part of your taxable income. You’ll need to calculate a capital gain or capital loss for each asset you dispose of unless an exemption applies. If you have a: net capital gain in a year, it will generally increase the tax you need to pay. net capital loss in a year, you can carry it forward to a future year to offset against future capital gains. For individual taxpayers who have owned an asset for 12 months or more, there is a CGT discount of 50%, meaning you pay tax on only half the net capital gain on that asset. When you have a clear picture of your capital gains and losses, you’ll have a better understanding of your potential tax liabilities. End of financial year checklist for investors Below are some key issues to be aware of as 30 June approaches. Understand your responsibilities The Australian Tax Office (ATO) gives regular guidance on capital gains tax and highlights its key areas of focus for each financial year, so it’s important to be aware of what it’s tracking, and what your responsibilities are. This year, the ATO has flagged it will be on the lookout for a broad range of issues, some of which include: inappropriate calculations of the CGT discount. trusts over claiming deductions to reduce net income. residents not including distributions from foreign trusts. property development income classified as a capital gain. omission of income on disposal of real property. franking account balance discrepancies. Previous areas of focus have included checking whether investors declared all their income and warning investors not to file their tax return before including income from multiple sources. Have a clear picture of your investments It’s critical to have a clear picture of all your investments so you can be sure to include all your investment income if it’s subject to CGT. Cash in bank accounts, high interest savings accounts and term deposits, as well as fixed interest investments such as bonds, may generate earnings that need to be included in your assessable income. Investments that may be subject to capital gains tax include: investment properties. shares owned directly, or through managed funds and exchange traded funds (ETFs). alternative investments including cryptocurrency, art and other collectibles, commodities and private equity. Generally, the family home is exempt from capital gains tax for Australian residents, providing it: has been the home of you, your partner and other dependants for the whole period you have owned it^. hasn’t been used to produce income – that is, you have not run a business from it, rented it out or bought it to renovate and sell at a profit. is on land of 2 hectares or less. If you don’t meet all these conditions, you may still be entitled to a partial exemption. You can work out the proportion that is exempt using the ATO’s CGT property exemption calculator. Understand capital gains It’s important to understand how your investments have performed so you’re not surprised by unexpected tax liabilities. Also key is understanding when any investment income is earned or when you realise capital gains. This is generally when you receive the income or you dispose of an asset, such as by selling it, triggering a capital gains tax event – which means you’ll need to report a capital gain or capital loss in your tax return#. In addition, if you invest in managed funds, part of your distributions from the managed fund may include capital gains from the managed fund selling the underlying assets, which you also need to include in your tax return. Can you reduce your capital gains tax? If you have a poorly performing investment that has decreased in value since you purchased it, and you decide to sell it before the end of the financial year, the capital loss can be used to offset any other capital gains you have made in the same year, resulting a lower net capital gain. Alternatively, where you are left with a net capital loss, you can generally carry that loss forward and use it to offset capital gains in future years. However, be aware that the ATO monitors ‘wash sales’ – which is when an investor sells an asset to realise a loss just before the end of the financial year and then immediately buys back the same asset. This type of arrangement is covered by the general anti-avoidance rules in the Tax Act and can attract significant penalties. Can you make a tax-deductible super contribution? Another way of reducing your potential CGT liability is by making a tax-deductible super contribution (taxed at 15%) to potentially reduce your taxable income which is taxed at your marginal rate (which may be higher than 15%). Under the concessional contribution ‘carry-forward rules’, if you have unused concessional cap amounts from the past five financial years*, you may be able to carry them forward to increase your contribution limit of $30,000 in the current financial year. Conditions apply, so please check with your tax … Read more

Learn how interest rates influence loans, savings and investments, and find out why staying informed about interest rates can empower your financial decisions. Whether you’re planning to buy your dream home, save for a brighter future or simply manage your daily finances, interest rates play a key role. Here’s why they matter when planning your financial future. What are interest rates? Interest rates are essentially the cost of borrowing money or the reward for saving it. When you take out a loan, whether it’s for a car, home or business, you’ll pay back the amount borrowed plus an additional percentage per year, known as the interest rate. Conversely, when you save money in a high interest bank account, an interest rate determines the extra money you earn on your savings. What is the RBA and how do they control interest rates?  The Reserve Bank of Australia (RBA) is Australia’s independent central bank. The bank conducts the nation’s monetary policy and issues its currency. The RBA determines the cash rate target, which is a base rate that impacts other interest rates such as mortgage or deposit rates. Why does the RBA raise or lower rates? The RBA adjusts the cash rate target to preserve full employment and the economic prosperity and welfare of Australia. The RBA might raise rates to curb inflation when the economy is growing too quickly, as higher rates can help cool down consumer spending and borrowing or investments. On the other hand, the RBA may lower rates to stimulate economic activity during a slowdown. Lower rates make borrowing cheaper and encourage spending and investment, which can help boost employment and economic growth. By adjusting interest rates, the RBA aims to keep inflation within a target range of 2-3% and support the overall health of the Australian economy. How do banks set interest rates? The official cash rate isn’t the only factor that influences bank lending rates but it’s one of the most important. To make money, banks need to lend money out at a higher rate than they borrow – a home loan is riskier than a deposit account (a borrower can default on the mortgage or go bankrupt, whereas deposit accounts are guaranteed by the Australian government), which is why the interest rate you receive on your savings account tends to be lower than the interest rate you pay on your home loan. So an increase in the cost of borrowing money can affect you in different ways, depending on whether you’re a net saver or a borrower. Why do interest rates matter? Impact on loans and mortgages For Aussies looking to buy a home, interest rates are a key factor. A lower interest rate means lower and more affordable monthly repayments (everything else equal), On the flip side, higher rates can increase your costs, affecting your budget significantly. Savings growth Interest rates also matter for your savings. Higher interest rates mean more growth for your money over time. If you’re saving for a holiday, a car or retirement, a good interest rate can help you reach your financial goals faster. Economic influence Interest rates are a tool used by the RBA to control economic activity. By adjusting rates, the RBA influences inflation, employment and economic growth. Higher rates might slow down borrowing, investing and spending, while lower rates can encourage it. Why should you care about interest rates? Personal financial planning Understanding interest rates helps you make informed decisions about loans and savings. Whether you’re looking to buy a house or save for the future, knowing how rates affect your finances can guide your choices. Budgeting Interest rates can change over time, impacting your monthly expenses. Staying informed allows you to adjust your budget accordingly, ensuring you’re prepared for any changes in your financial commitments. Investment opportunities Interest rates also affect financial investments. They can influence stock market performance and property values. By keeping an eye on interest rate trends, you can make strategic investment decisions. Economic awareness Interest rate movements are a reflection of the economy’s trajectory. By understanding them, you gain insight into broader economic conditions, helping you navigate financial challenges and opportunities. Source: AMP

Managing debt can often feel overwhelming but there are several strategies you can implement to make the process more manageable and even accelerate your journey to becoming debt free. Here are some quick wins that can help you take control of your finances and reduce your debt more effectively. Remember, the key is to stay motivated and consistent with your efforts. Every small step you take brings you closer to financial freedom. Change your repayments from monthly to fortnightly One simple yet effective strategy to save money is to change your repayment schedule from monthly to fortnightly. By doing this, you end up making an extra month’s worth of payments each year. Here’s how it works: there are 26 fortnights in a year, so if you pay half of your monthly repayment every two weeks, you make 13 full payments instead of 12. This can significantly reduce the interest you pay over the life of the loan and help you pay off your debt faster. Attach an offset account to your mortgage If you have a mortgage, consider attaching an offset account to it. An offset account is a transaction account linked to your mortgage and the balance in this account is offset against your mortgage balance when interest is calculated. For example, if you have a $300,000 mortgage and $20,000 in your offset account, you’ll only be charged interest on $280,000. This can reduce the amount of interest you pay and help you pay off your mortgage sooner. Target the smallest debt first While it might seem logical to target the highest interest rate debt first, focusing on the smallest debt can provide a psychological boost and help you stay motivated. This approach is known as the “debt snowball” method. By paying off the smallest debt first, you achieve a quick win, which can give you the momentum to tackle larger debts. Once the smallest debt is paid off, you can use the amount you were paying on that debt to make extra payments on the next smallest debt and so on. This method can help you see progress more quickly and keep you motivated to continue paying off your debts. Seek a second job or side hustle If possible, consider taking on a second job or side hustle to increase your income. The additional income can be used to make extra payments on your debts, helping you pay them off faster. There are many options for side hustles, such as freelancing, gig economy jobs or selling items you no longer need. Even a small amount of extra income can make a significant difference in reducing your debt. Create a budget and stick to it Creating a budget is a crucial step in managing debt. A budget helps you track your income and expenses, identify areas where you can cut back and allocate more money towards debt repayment. Start by listing all your sources of income and all your expenses. Categorise your expenses into fixed (e.g. rent, utilities) and variable (e.g. groceries, entertainment). Look for areas where you can reduce spending and redirect those funds towards paying off your debts. Sticking to your budget can help you stay on track and make steady progress towards becoming debt free. Negotiate with creditors Don’t be afraid to reach out to your creditors/lenders/banks to negotiate better terms. Many creditors/lenders/banks are willing to work with you if you’re struggling to make payments. You might be able to negotiate a lower interest rate, a reduced payment plan or even a settlement for less than the full amount owed. It’s always worth asking, as any reduction in your debt or interest rate can help you pay off your debts more quickly. Use windfalls wisely If you receive any unexpected windfalls, such as a tax refund, bonus or inheritance, consider using that money to pay down your debts. While it might be tempting to spend it on something fun, using windfalls to reduce your debt can have a long-term, positive impact on your financial health. Every extra payment you make reduces the amount of interest you pay and brings you closer to being debt free. Avoid taking on new debt Finally, while you’re working on paying off your existing debts, it’s important to avoid taking on new debt. This means being mindful of your spending and avoiding unnecessary purchases. If you must use credit, try to pay off the balance in full each month to avoid accruing interest. By focusing on paying down your current debts and avoiding new ones, you’ll be able to make more progress towards your financial goals. Source: Money & Life  

One of the main reasons an individual would use an SMSF is for estate planning as it can offer greater flexibility to beneficiaries than what is available via a public offer fund. Where a member dies without a binding nomination, the distribution of the death benefits is at the discretion of the remaining trustees. This can result in some planning after the death of a member in order to achieve the optimal tax outcome. For example, one child may be still a minor and be entitled to receive the death benefits tax free. In this situation, the trustee could allocate a greater amount to that child and rely on an estate equalisation clause in the Will to ensure that the other children receive a greater share of the estate assets. However, there are a number of traps when using an SMSF for estate planning, particularly where there are blended families. It is possible that the individual controlling the trust does not agree with the wishes of the deceased. As they have control of the fund, they can frustrate the attempts of other beneficiaries, such as children from a previous marriage to receive their inheritance, even where the trustee has agreed there is a valid binding nomination in their favour. Nominations SMSF members have more options when making a nomination than what is available via a public offer fund. As well as having access to non-binding, binding, non-lapsing binding and reversionary nominations, members also have the option of establishing an SMSF Will. An SMSF Will is a collection of rules written into the governing rules of the fund’s trust deed which broadly have a similar format to a Will. These rules place an obligation on the trustee and they can be as complex as the member wishes specifying who is to benefit, any contingent beneficiaries and in what form. It may also be possible to provide for a ‘life interest’ death benefit pension whereby one beneficiary, such as a spouse has an entitlement to the pension payments during their lifetime, but on their death, the capital would be distributed to the beneficiaries of the first deceased, such as any children from a previous marriage. Superannuation dependants There are three types of dependants for the purposes of death benefits being paid from a superannuation fund. They are: SIS dependants, who can be paid directly from a superannuation fund dependants who are entitled to take their benefit as an income stream death benefit dependants who can receive lump sum death benefits tax-free. Relationship SIS Dependant Death Benefit (Tax) Dependant Spouse X X Former Spouse   X Child under 18 X X Child 18 or over X Only if financially dependant Financial Dependant X X Interdependent X X If a member wants some or all of their superannuation benefits to be paid to someone other than those in the above list, they would need to have that portion paid to their legal personal representative and make a provision for that person within their Will. All beneficiaries who are entitled to receive death benefits directly from a superannuation trustee are allowed, under superannuation legislation, to take that benefit as a lump sum. However, there are restrictions on who can receive death benefits as an income stream. While most of the dependants listed in this table can receive superannuation death benefits as an income stream, children of the deceased who are aged over 18 can only receive an income stream if they are financially dependent and under 25 or they are disabled. Where a child of the deceased receives death benefits as an income stream, the income stream must be commuted and the benefits withdrawn as a tax-free lump sum no later than their twenty-fifth birthday unless they are disabled. As with many aspects of superannuation, the legislation specifies what is allowable, however individual funds may have more onerous rules in place documented in their trust deed. Taxation of benefits paid to non-dependants Where the beneficiary is not a death benefit dependant, any benefits must be taken as a lump sum and the taxable component of the benefit will be subject to tax of up to 15% plus Medicare levy on the taxed element and up to 30% plus Medicare levy on the untaxed element. While the definitions of a dependant in the SIS Act and death benefit dependants in the Tax Act are substantially the same, there is a notable difference. Adult children are SIS Act dependants and therefore, can be paid directly by the trustees of the superannuation fund, however as they are not death benefits dependants as defined in the Tax Act, the benefits will be subject to tax. For tax purposes, the relevant beneficiary is the ultimate beneficiary. Therefore, a benefit that passes through the estate but is paid to a death benefit dependant beneficiary will be tax-free. There can be an issue where the benefits are paid to the beneficiaries via a testamentary trust. While it may be envisaged that the only persons to benefit from the fund are death benefits dependants, the trust may have potential beneficiaries that aren’t death benefit dependants in which case all benefits appropriated to the trust will be subject to tax. A possible solution is to provide in the will a superannuation benefits testamentary trust that limits beneficiaries and potential beneficiaries only to death benefit dependants. Source: BT