Posts by The View From Here
Super vs. Property: What Works For Retirement Income
Some love it so much that they believe property is a better option for providing a retirement income. They see a bricks and mortar investment as a more tangible and solid approach than say, superannuation, preferring to take their super as a lump sum on retirement to buy property. They may also choose to invest a windfall, such as an inheritance, or the proceeds from downsizing the family home, in property instead of their super.
So, given that a retired couple above age 65 needs an estimated yearly income $73,337 to lead a comfortable lifestyle, could a property investment do the job?ii
While it’s true that a sizeable property portfolio could deliver rental income to equal a super pension, it might mean missing out on some useful benefits.
After all, super is a retirement savings structure with significant tax advantages. It also has the flexibility to provide investments in a range of different asset classes, including property.
Meanwhile, super fund performance has, generally speaking, outstripped house price movements over the past decade. Super funds (invested in an all-growth category) returned an annual average of 9.1 per cent during that time while average house prices in Australian capital cities grew 6.5 per cent per year over the same period.iii, iv
The performance of superannuation and property
Superannuation: Diversified Fund Performance
| Fund category | Growth Assets (%) | 1 Yr (%) | 3 Yrs (% pa) | 5 Yrs (% pa) | 10 Yrs (% pa) |
| All Growth | 96 – 100 | 12.7 | 6.1 | 8.3 | 9.1 |
| High Growth | 81 – 95 | 10.8 | 5.7 | 7.7 | 8.4 |
| Growth | 61 – 80 | 9. | 4.9 | 6.3 | 7.2 |
| Balanced | 41 – 60 | 7.4 | 3.9 | 4.8 | 5.8 |
| Conservative | 21 – 40 | 5.5 | 2.6 | 3.3 | 4.3 |
Property: Capital city average prices
Not that past performance can give you any guarantees about what will happen in the future. Indeed, the average numbers smooth out the years of high returns and the years of negative returns. More important considerations in making an informed decision are your financial goals, your investment timeframe and how much risk you’re comfortable with.
Liquidity
One of the most significant differences between super and property investments is liquidity, or how quickly you can convert your investment to cash.
With super, assuming you’re eligible, funds can be accessed relatively easily and quickly. On the other hand, if your wealth is tied up in property it may take some time to sell or it may sell at a lower price.
Nonetheless, market cycles affect both property and super investments. They can be affected by volatile conditions and deliver negative returns just at the time you need access to a lump sum.
Long-term investing
Superannuation is designed for long-term growth, often spanning decades as you accumulate wealth over your working life. The magic of compounding interest can lead to substantial growth over time, depending on your investment options and the state of the market.
Property investments, on the other hand, can be invested for short, medium, and long-term growth depending on the suburb, the street, and the type of house you invest in. Of course, there are additional costs in buying a property (such as stamp duty) plus costs in selling (including capital gains tax). If there’s a mortgage over the property, you’ll need to factor in the additional costs of repayments and interest (bearing in mind that interest on investment properties is tax deductible).
Risk appetite
Investors’ attitudes towards risk also play a role in choosing between super and property.
Superannuation funds can be diversified across various asset classes, which helps to reduce risk. But property investments expose investors to a single market meaning that while there might be a big benefit from an upswing, any downturn may be a blow to a portfolio.
Making an informed choice
Ultimately, any decision between superannuation and property should align with individual financial goals, risk tolerance, and investment strategies. And, of course, it doesn’t need to be one or the other – many choose to rely on their super while also holding investment property so it’s best to understand how super and property can complement each other in a well-rounded retirement plan.
We’d be happy to help you analyse your retirement income strategy to develop a plan that works for you.
i Monthly Housing Chart Pack – September 2024 | CoreLogic Australia
iii Super funds deliver strong result in FY24 | Chant West
iv SQM Research Weekly Asking Property Prices , 1 October 2024 | SQM Research
Holidaying off the tourist trail
Travel is booming – and creating some headaches
It’s no secret that we Aussies love to travel outside our own country. Last year nearly 10 million of us headed overseas, marking a 12 per cent increase from the previous year, and this year is shaping up to continue the trend.i And it’s not just us enjoying getting out there and travelling the world, global figures anticipate international travel will soon exceed pre-pandemic levels and surpass 2 billion for the second time ever.ii
That adds up to a lot of people out there travelling and some popular destinations are showing the strain with skyrocketing prices, excessive queues, damage at historical sites and environmental impacts all being felt.
Tensions are high in some areas with tourists in Barcelona, Spain recently doused in water by frustrated locals and authorities in the historic city centre of Florence banning new short-term holiday rentals to try to relieve some of the pressure of over-tourism.
Taking the road less travelled can help areas suffering from over-tourism and support those communities who would welcome more visitors.
Supporting communities that need it
Tourism plays a significant role in the economic growth of many communities around the world and there are many places that would really benefit from the tourist dollar. The money you spend as you travel can contribute meaningfully to local economies and help support small businesses, artisans, and entrepreneurs, ensuring that future generations can continue to enjoy unique destinations.
But there are plenty of less altruistic reasons to seek out the hidden gems when you travel though.
Authentic Encounters
One of the lovely aspects of traveling to less touristy places is the opportunity to immerse yourself in local cultures. Away from tourist hotspots, communities maintain their unique traditions, cuisines, and ways of life. Imagine strolling through a market where locals gather to sell fresh produce, handicrafts, and homemade delicacies, or stumbling upon a hidden café where the owner shares stories of their town’s history. These encounters create lasting memories and offer a genuine glimpse into the daily lives of people from different corners of the world.
Unspoiled natural beauty
Nature enthusiasts will find bliss in exploring destinations that are off the typical tourist radar. Picture deserted beaches with powdery sand and crystal-clear waters, hiking trails winding through lush forests, or breathtaking untouched landscapes. Whether you’re seeking solitude in nature or hoping to capture stunning photographs without a sea of selfie sticks in the background, less touristy places often boast natural beauty that remains unspoiled and awe-inspiring.
Affordable adventures
Traveling to less touristy places can also be kinder to your wallet. Accommodation, dining, and activities in popular tourist hubs tend to come with inflated price tags due to high demand. In contrast, destinations that are yet to be discovered by the masses often offer more affordable options. You might find charming family-run guesthouses, budget-friendly eateries serving local dishes, and reasonably priced excursions that allow you to stretch your travel budget further.
Destination dupes
Doing a little homework can point you in the direction of alternatives to popular destinations.
For example, instead of Venice – which is literally sinking under the weight of tourism -consider visiting the town of Trieste, an old port town by the Adriatic Sea. If you are after stunning beaches and clear aqua water, Palawan in the Philippines is a good alternative for the Maldives. Or for an alternative to over touristed St Tropez in France, Turkey’s Bodrum coast offers comparable glamour and affordable luxury. Doing a little research can uncover similar destinations that offer the experience you are seeking, with all the benefits and none of the problems of the overhyped placed.
While the allure of ticking off the list of famous places is understandable, exploring less touristy places offers a wealth of unique experiences to the visitor, and benefits the local communities. So, the next time you plan an overseas holiday, think outside the square of the obvious destinations, and discover the hidden gems.
i CATO reveals new trends with Australia’s 10m international travellers – Travel Weekly
Insuring against loss of income
With income protection insurance, you can be paid some 70 per cent of your income for a specified period to help when you cannot work.i
The most common claims are for illnesses such as cancer, heart attack, anxiety and depression.ii Payments generally last from two to five years although you can take a policy up to a certain age, such as 65, and the amount is generally based on 70 per cent of your income in the 12 months prior to the injury or illness.iii
For some, income protection insurance may be part and parcel of your superannuation although more commonly this is limited to life insurance, and total and permanent disability cover. But, if you do have income protection insurance in your super, check the extent of the automatic cover as it can be modest.
Alternatively, you could take out a policy outside super where you will enjoy tax deductibility on the premiums. Income protection insurance is the only insurance that is tax deductible. Other life insurance products outside super such as trauma insurance are not tax deductible.iv
Work out a budget
There are many considerations when looking at income protection insurance and the best place to start is to work out your budget, thinking about how much would you need to maintain your family’s lifestyle if you are unable to work. Then you are able to decide on the appropriate level of income protection insurance as well as other factors that affect premiums such as how quickly you might need the payments to start and how long these payments will last.
Many people think income protection insurance is expensive, but you can fine tune policies to suit your budget by changing the percentage payment amount, the length of time for which you would receive the payment and how soon you start getting a payment once you cannot work. Reducing these parameters can reduce your premiums.
Check the policy details
It is important to be mindful of a number of factors that might affect the success of any claim you might make. So, make sure you read the product disclosure statement.
Every insurer has a different definition as to what will trigger a payment, so you need to understand the difference between “own occupation” and “any occupation” for cover. For example, if you are a surgeon and lose capacity in one of your hands, you will receive a payout from your insurer if you have specified “own” occupation because you can no longer work as a surgeon. But if you opt for “any” occupation, then the insurer could argue that you could still work as a doctor just not as a surgeon and the claim may not be paid.
It is also wise to understand that if your policy does not seek your medical history, it is likely there could be limitations to what illnesses are covered.
Another consideration is whether you have stepped or level premiums. Stepped premiums start low and usually increase as you age. Level premiums begin at a higher rate but typically don’t increase until you reach 65. In the long run, level may work out cheaper for some.v You must work at least 20 hours a week to take out income protection insurance and you can usually only buy a policy up to the age of 60. Also, if you receive a payout, you need to declare that income on your tax return.
If you want to check that you have sufficient cover to protect you and your family should you lose your income, then give us a call to discuss.
i Income protection insurance | Moneysmart ( moneysmart.gov.au)
ii The Most Common TPD Claims in Australia with Examples | Aussie Injury Lawyers
iii Income protection insurance | Moneysmart ( moneysmart.gov.au)
v Income protection insurance | Moneysmart ( moneysmart.gov.au)
How do retirement income options compare?
You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.i
Account-Based Pension
An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.
Some considerations:
- Tax benefits – Investment earnings, capital gains and withdrawals are tax-free, unless you have an untaxed component within your super.
- Payment flexibility – Subject to pension minimums, most super funds allow you to adjust the payment amount and frequency, and even make partial or full lump-sum withdrawals if needed. You can also return to work and continue to receive a pension.
- Longevity and market risks – You might outlive your account balance, especially if your withdrawals are high or your investment returns are poor.
Transition to Retirement
A transition to retirement (TTR) strategy allows access to some of your superannuation while still working, if you have reached age 60 (based on current rules).ii
Some considerations:
- Flexible work options – You can reduce your working hours and supplement your income from your super.
- Limits on pension rates – Similar to an ABP, there is a minimum annual pension rate. However, there is also a maximum annual withdrawal of 10 per cent of your TTR account balance.
- Reduced retirement savings – Drawing on your superannuation while still working means your retirement savings might grow more slowly.
Annuities
An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.
Some considerations:
- Predictable income – Provides a stable income stream, which can be reassuring for financial stability and provide an income for as long as you live.
- Lack of flexibility – Once you purchase an annuity, the terms are generally fixed and you cannot alter the income amount. There’s a restriction on capital withdrawals or in some instances no access to capital at all.
- Inflation risk – Fixed non-inflation-linked annuities may not keep pace with inflation unless specifically indexed to inflation.
Innovative Retirement Income Stream
An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.
Some considerations:
- Age Pension benefits – Centrelink only counts 60 per cent of the pension payments received as assessable income and only 60 per cent of the purchase price of the product counts as an assessable asset until age 84 when it is reduced.
- Certainty – Some IRIS products offer a stable guaranteed income stream, providing financial security.
- No minimum requirements – IRIS products do not require an annual minimum amount, instead just requiring at least one annual payment.
- Complexity – Features vary widely between different IRIS products and may involve complex terms or conditions.
Next steps
How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.
i Planning to retire | Australian Taxation Office (ato.gov.au)
ii Transition to retirement | Australian Taxation Office (ato.gov.au)
Enjoy the now and secure your future
The worry about not getting the balance right and making unnecessary sacrifices now – or not having enough money for the things you want to do in the future is a common and valid concern we hear when we talk to clients. You want to be living your best life now which means not living too frugally or worrying about your future. At the same time, you don’t want the choices you are making now in how you live your life to impact or make impossible the wonderful life you envision for yourself down the track.
Balance whatever your stage of life
We all have financial goals – whether you are saving for your children’s education, working towards that once in a lifetime round the world trip, freeing up finances for a gap year, or setting yourself up for a wonderful retirement. It’s important to balance your ‘now’ with your ‘future’ when it comes to spending, saving, and investing to make sure you can achieve those goals. You don’t want to regret your spending – or on the other hand live a frugal life and look back on opportunities you missed while you were squirrelling it away.
The tension between the ‘now’ and your ‘future’ with respect to your finances can be even more heightened when you have retired. It can be a strange adjustment suddenly not having a wage coming in and living off your savings, super and investments. It’s common, and quite understandable, to worry about not having enough to last the distance, particularly given that a 65-year-old today may live well into their 90’s and could spend up to three decades in retirement.i No one wants to outlive their savings.
However, many retirees live unnecessarily frugal lives as evidenced by a 2020 Retirement Income Review which found that most people die with the bulk of their retirement wealth intact.ii Those that live frugally do so often not from necessity but because they don’t have an understanding of their financial needs, including how these will change over time, and how much they can afford to spend.
How the balance changes over time
That balance is hard to hit. It is different for different people, and your approach to saving and spending will change at various stages of your life.
If you are paying off a difficult to maintain level of debt or in the final stages of scraping together a deposit for a home, making sacrifices now in the way you live life your life might feel OK. Equally if you have spent much of your life building wealth, letting loose the reins a little and going on that cruise might be something you are extremely comfortable with.
Certainty now and confidence in the future
Whatever your stage of life, achieving the right balance comes from having an in-depth understanding of your financial situation now, and establishing and maintaining a personalised plan that takes into account all aspects of your financials – your earning capacity, level of debt, assets and very importantly, the life you want to live today and your goals for the future.
The importance of receiving support with financial planning is reinforced in a recent report which indicated advised Australians are significantly more likely to say they feel confident in achieving their financial goals (71 per cent) compared with those who are not receiving support (55 per cent).iii
The same proportion said that they were living well now, stating their finances allow them to “do the things I want and enjoy in life.” And those receiving advice are also balancing the “now” with their future needs. Those accessing financial advice also indicated they were more likely to be financially prepared for retirement and have a higher savings balance.
This confidence that comes from receiving personalised advice also means being more prepared when people leave the workforce (and a wage) behind. Advised Australians are significantly more likely to feel very or reasonably prepared for retirement (76 per cent), than those without advice (45 per cent).iv
The key to achieving a balance between living your best life now and being financially secure in the future is knowledge. If we know that tomorrow is shaping up well for us, we may worry a little less today, feel a little less guilty when we spend today and be less likely to have regrets about spending – or about missing out – further down the track.
i https://www.aihw.gov.au/reports/life-expectancy-deaths/deaths-in-australia/contents/life-expectancy
ii https://treasury.gov.au/sites/default/files/2021-02/p2020-100554-ud00b_key_obs.pdf
iii https://www.netwealth.com.au/web/insights/the-advisable-australian/understanding-australian-advice-clients-better/#download
iv https://www.netwealth.com.au/web/insights/the-advisable-australian/understanding-australian-advice-clients-better
Investment Property: Getting it right
The latest data demonstrates property’s popularity. One-in-five households (21%) owns a home in addition to their usual residence.i
Maximising taxation benefits is one key element but the ATO recently found 9 out of 10 returns were incorrect, so it’s essential to check your paperwork as we approach the end of the financial year.ii
Get your structure right
As with any investment asset, ensuring the right ownership structure for a property asset is vital because it can make a big difference to your tax position each financial year.
It’s also sensible to check if you are using the right structure to help protect your investment from creditors, provide income in retirement, or cope with the unexpected death of a part-owner.
Managing the loan
Once you establish your investment loan, tax still remains a consideration. Any deductions you claim for your loan expenses must directly relate to earning assessable rental income.iii
In cases where money from the loan is used for both private and income-producing purposes (such as a property partly used for rental and partly as your home), you must split your claims into deductible and non-deductible amounts.
If you use the redraw facility on your home’s mortgage to fund an investment property, you won’t be able to claim the interest as a deduction if you subsequently use your family home as a rental. There are also capital gains tax (CGT) implications with this strategy.iv
Costs related to loan establishment fees cannot be claimed as a deduction upfront and must be spread over the term of the loan or a five-year period, whichever is shorter.v
Rental deduction dangers
Although many investors focus on the tax deductions they can claim from a property asset, both rental income and deductions are key areas of ATO interest.
Detailed records are required to substantiate all claims and any rental income from ‑short-term arrangements and insurance payouts must be included in your return.vi
You also need to be careful not to overclaim. Many new investors make the mistake of claiming an immediate deduction for initial repairs after purchasing a property. Existing damage must be claimed over several years as a capital works deduction and is used when working out your capital gain or loss when selling.vii
Deductions such as advertising for tenants, professional property management, council rates, land tax and strata fees, building and landlord insurance, and pest control can only be claimed for time periods directly connected to earning income.
Depreciation or capital works?
Property investors are able to claim a wide range of deductions for expenses associated with maintaining and financing property assets, but care is needed.
Claims for depreciation of assets with a limited effective life (such as freestanding furniture, washing machines and TVs), can be made each year, but deductions for capital works must be spread over 40 years following construction. Capital works include improvements or alterations such as adding a driveway or altering the building.viii
Improvements such as renovating a bathroom, are a building cost and must be claimed at 2.5 per cent annually over 40 years from completion.ix
Check your CGT
When it comes time to sell your investment, an important consideration is capital gains tax (CGT). The key to making your investment tax-effective is to ensure you have identified all legitimate expenses contributing to the property’s cost base so you can correctly calculate the capital gain or loss.
The property’s cost base includes the price paid plus your buying and selling costs (such as stamp duty, legal fees and the agent’s commission). You are not permitted to include amounts already claimed as a deduction, including depreciation and capital works.
Any capital gain must be included in your tax return for the income year the property is sold, while capital losses can be carried forward and used in future years.
To ensure you are making the most of your investment assets, call our office today.
i Housing Occupancy and Costs, 2019-20 financial year | Australian Bureau of Statistics (abs.gov.au)
ii https://www.ato.gov.au/Media-centre/Speeches/Commissioner/Commissioner-s-address-to-the-Tax-Institute-s-Tax-Summit-2022/
iii, iv https://www.ato.gov.au/api/public/content/530c1d629e07404aa4405dbe664b8011?v=0ced7a8c
v https://www.ato.gov.au/individuals-and-families/investments-and-assets/residential-rental-properties/top-10-tips-to-help-rental-property-owners
vi https://www.ato.gov.au/Media-centre/Media-releases/Get-your-rental-right-this-tax-time/
vii, ix https://www.ato.gov.au/Individuals/Investments-and-assets/Residential-rental-properties/Top-10-tips-to-help-rental-property-owners/
viii https://www.ato.gov.au/tax-and-super-professionals/for-tax-professionals/prepare-and-lodge/tax-time/tax-time-toolkits/tax-time-toolkit-for-investors
How to end the financial year on a high note
Topping up super
One important item for the To Do list is to top up your super with either concessional (pre-tax) or non-concessional (post-tax) contributions. For example, you could make a voluntary concessional contribution up to the limit allowed and then claim a tax deduction on your personal assessable income for it.
Consider making additional contributions to your own super account or your spouse’s account, to take advantage of tax concessions.
If you have unused concessional cap amounts from the previous five years and a super balance less than $500,000 on June 30 the previous year, you may be eligible to make a catch-up (or carry-forward) contribution greater than the annual limit.
Maximising contributions not only helps you build your retirement savings but can also provide valuable tax benefits. But it’s critical to be mindful of your caps and to ensure that you make any super contributions before the end of the financial year to meet the deadline.
Reviewing investments
Reviewing your investment portfolio is a valuable task at any time but particularly now.
For example, you could take a look for any capital gains or losses that could be used strategically to manage your tax liability.
Also, it is worth considering how your portfolio performed over the past 12 months against your goal of capital growth, income, or balance.
You may decide to readjust your goals or your investments to help steer performance in the right direction for the next 12 months.
Of course, if you’re planning any changes, it’s important to check in with us to ensure you’re making informed decisions about your investments.
Paying expenses early
Another useful strategy at tax time can be to bring forward any deductible expenses or interest payments before 30 June to reduce your taxable income.
That could include incurring expenses on an investment property, prepaying interest on investment loans, making charitable donations, or claiming eligible work-related expenses.
Make sure you keep detailed records and receipts to support your deductions.
The ATO’s myDeductions app is a great place to start for free record keeping and to assist you to be ready for tax time.
Setting up salary sacrifice
As you look ahead to the new financial year, consider whether a salary sacrifice arrangement might be right for you.
Salary sacrifice allows you to divert a portion of your pre-tax salary directly into your superannuation, which effectively reduces your taxable income and boosts your retirement savings.
You will need to think carefully about your living expenses to work out the amount you can afford to contribute to your super, ensuring you do not exceed your concessional (before-tax) contributions cap of $27,500 (which will increase to $30,000 from July 1 2024) to avoid paying any extra tax.
Your employer or payroll department can help you set up a salary sacrifice arrangement.
Checking your budget
This is a good time to revisit your financial goals and how you’re tracking, and then put together a strong budget for the new financial year that will help get you further along the track.
Take the time to review your income and expenses and identify any areas where you can cut back spending or improve your income.
This exercise not only helps you understand your financial habits but also allows you to reallocate funds towards your goals, such as paying down debt, building an emergency fund, or increasing your investment contributions.
Consult with professionals
Don’t forget to check in with your trusted advisers – financial advisers, accountants, or tax professionals – to make sure you are making the most of any opportunities for financial growth and maximising tax savings.
Taking advantage of our expert advice to review your current financial situation and goals, and check that you are making the best decisions for you can make a difference. It provides peace of mind, ensures that you are complying with any obligations and, importantly, puts you in the best position to achieve your financial goals.
2024-25 Federal Budget Analysis
What does the Federal Budget mean for me?
It’s a Budget for the here and now, he says, but also for the decades to come.
More than $8.4 billion has been allocated to quick-fix cost-of-living adjustments along with the previously announced Stage 3 tax cuts and the waiving of $3 billion in student debt.
With a federal election due next year, the Federal Government has announced spending of almost $83 billion on housing, infrastructure, health and a Future Made in Australia project to build a more resilient economy for the future.
The big picture
While Treasury is forecasting a $9.3 billion surplus for 2023-24 after the previous year’s $22.1 billion surplus, the books will look considerably different the following year with a $28.3 billion forecast deficit expected.
That’s against a backdrop of an uncertain global economic outlook with wars in the Middle East and Ukraine as well as slowing growth in China and elsewhere.
“Most advanced economies recorded subdued outcomes during 2023, with around a third of OECD nations recording a technical recession,” notes Treasury in the Budget papers.
“Global inflation has moderated but remains too high, and there are risks it will persist. Tackling inflation remains the primary focus but, as inflationary pressures abate and labour markets soften, the global policy focus will increasingly shift to managing risks to growth.”
There are some bright spots for Australia though.
Treasury is forecasting inflation could return to the target rate of between 2 and 3 per cent earlier, perhaps by the end of the year, the Treasurer says.
Jobs growth is stronger here than in any major advanced economy and real wages are growing again for the first time in almost three years.
Cost of living
This year’s Budget aims to help out those struggling to pay the bills with a range of tax cuts and subsidies.
Every taxpayer will pay less tax as part of the Stage 3 tax cuts announced earlier this year. The average tax cut is $36 a week or an annual $1,888.
More than 10 million households will receive a total rebate of $300 on their electricity bills and eligible businesses will receive $325.
The government says its Energy Bill Relief Plan has kept electricity price increases to two per cent through the year to the March quarter this year. Without it, prices would have increased by 14.9 per cent.
While it won’t provide immediate relief, the government has grocery prices in its sights. It’s taking steps to make a Food and Grocery Code mandatory with penalties up to 10 per cent of turnover for major breaches. It also directed the Australian Competition and Consumer Commission to investigate pricing and competition in the supermarket sector.
Commonwealth Rent Assistance has been increased by a further 10 per cent, there is a $138 million boost to emergency relief funding and financial support services, and the freeze on the deeming rate for income support recipients has been extended. The deeming rates are used by Centrelink to predict earnings from super and investments over the 12 months ahead. The lower deeming rate will remain at 0.25 per cent and the upper rate will remain at 2.25 per cent until 30 June 2025.
Anyone with a student debt will welcome a change to the indexation rate for the Higher Education Loan Program (HELP). The government says it will cut $3 billion in student debt for more than three million Australians.
Health
Medicines can be a big cost for many people and a new $3 billion agreement with community pharmacies is expected to help. The government is expecting the deal to deliver cheaper medicines and better patient health.
There will be a one-year freeze on the maximum patient co-payment and a five-year freeze for pensioners and other concession cardholders. This change means that no pensioner or concession card holder will pay more than $7.70 (plus any applicable manufacturer premiums) for up to five years.
Almost half of Australians live with a chronic health condition and the Budget provides more than $141 million for research and services for conditions including bowel and skin cancer, diabetes and dementia.
The government is also providing an extra $411 million to the Medical Research Fund to continue research for low-survival cancers.
And, in a strengthened mental health package, the government has committed more than $888 million over eight years to improve access to services and support.
Aged care
Providing further support for the recommendations of the Royal Commission into Aged Care Quality and Safety, the Budget allocates $2.2 million to develop a new Aged Care Act. The Act is expected to establish a new Support at Home program and improve the standard of in-home aged care.
An extra 24,100 Home Care Packages will also be made available to reduce waiting times and wait times for the My Aged Care Contact Centre will be reduced.
Meanwhile, the government has allocated funding to beef up the regulatory capabilities of the Aged Care Quality and Safety Commission.
To support fair wages for care workers, the government has committed to fund a further increase in the award wage for direct and indirect aged care workers. The government is also providing $87.2 million for initiatives to attract nurses and other workers into aged care.
Housing
With housing affordability affecting millions of Australians, the government has allocated $6.2 billion in the Budget on a range of initiatives.
There’s a further $1 billion for states and territories to deliver new housing, more student accommodation, an increase in funds for homelessness services and more concessional loans for community housing providers.
The Build to Rent market will receive a boost with a plan to allow foreign investors to purchase developments with a lower foreign investment fee.
The government is also supporting 20,000 new fee-free TAFE places for courses in the construction sector.
Infrastructure
The government aims to stimulate the economies of the states and territories with funding for a number of major infrastructure projects.
There’s $21.6 billion for Queensland over 10 years for projects including the Sunshine Coast rail line and Bruce Highway works; $20.8 billion over 10 years for NSW for various road upgrades; $19.2 million in Victoria for the North East Link and other projects.
Attracting investment
Aiming to shore up Australia’s economic fortunes, the government has created a comprehensive package of projects to lift our manufacturing industry and position us to take advantage of net zero.
The Treasurer says the world’s commitment to net zero by 2050 will demand “the biggest transformation in the global economy since the industrial revolution”.
He believes Australia’s energy, resources, regions, researchers and workers can all play a part in creating a “renewable energy superpower”.
To that end, the Budget includes $13.7 billion in production tax incentives for green hydrogen and processed critical minerals, $1.7 billion to develop new industries using green metals and low carbon fuels and $566 million to map the geological potential of the entire country to get a better picture of our critical minerals and groundwater.
There will be major work on attracting new investment by reforming investment settings and regulatory processes.
The government says it will make it simpler to invest in Australia to entice more capital both from overseas and at home. It will work with business, governments, unions, communities and other experts during 2024 to come up with the best approach.
Supporting women and families
With escalating rates of family violence and an alarming increase in the incidence of violence against women, the Budget includes funding to support a range of programs.
More than $925 million will be spent over five years to provide support for victim survivors leaving a violent intimate partner relationship and a program to strengthen accountability for systemic gender-based violence in higher education.
The government will invest more than $56 million over four years to improve access to sexual and reproductive healthcare for women including training GPs to provide better menopause care.
A newly released national gender equality strategy will drive government action on women’s safety, sharing, economic equality, health, leadership and representation.
In a move to take the pressure off parents, superannuation will be paid on government funded Paid Parental Leave (PPL) for parents of babies born or adopted on or after 1 July 2025.
Looking ahead
The stimulus provided by this Budget will bring some relief in the short term, but our economy will be relying on the big ideas, such as the Future Made in Australia project, to provide the resilience we need in an uncertain global economy.
Treasury is forecasting slow global growth and only 1.75 per cent growth in Australia this financial year and 2 per cent next year along with a significant deficit.
But the Treasurer is confident he has delivered “an inflation-fighting and future-making Budget” with “responsible relief that eases pressure on people and directly reduces inflation”.
It’s one that will “forge a new economy and a new generation of prosperity”, he says.
If you have any questions about the Budget measures announced, please don’t hesitate to contact us.
Information in this article has been sourced from the Budget Speech 2024-25 and Federal Budget Support documents.
It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.
Powering down for a relaxing holiday
Even those who manage to resist taking work away with them and checking work emails while on holiday, can spend a lot of time on a digital device! And while you are glued to that device, chances are you are not ‘in the moment’ enjoying your time with family and friends fully or the delights of wherever you are vacationing.
Digital addiction
It’s not an overstatement to say that during our everyday lives we are glued to our devices. The average person spends around five and a half hours a day on their phone – that’s over two months over the course of a year!i
We also tend to check our phones on average around 8 times an hour – almost once every 8 minutes. And just over half of Aussies (50.65%) consider themselves addicted to their phones.ii Throw in the amount of time we spend on tablets, laptops and other devices and it’s clear we generally spend a lot of time in front of a screen.
A vacationing trend
A new trend that may help to curb our online addictions is known as a ‘digital detox’ holiday.
Resorts and lifestyle destinations have got on board and many offer wellness packages offering a respite from the fast pace of online life with no phones, texts, emails, social media use or web browsing for the duration of your stay.
You don’t have to fly off to an internet black spot or sign up for a digital detox retreat to get the benefits though. Doing your own digital detox can be as simple as switching your phone to airplane mode or better still turning your devices off for a designated time every day or for a period of time.
Breaking free
The benefits of getting away from a screen, even if it’s just for a short break, are numerous but the main benefit of having a proper digital detox is reducing stress. If your phone or tablet isn’t buzzing, beeping or vibrating in your pocket or hand every few minutes, you start to breathe deeper and slow down.
Another plus of having a break from your device is the way it can affect the quality of your interactions with others. If you are not staring at a screen you open up opportunities to engage more fully with those around you. That means better quality time connecting with friends and family.
If you are a solo traveller, it can be challenging to not have the safety blanket of a phone in your hand, however there is something special about being more aware of your surroundings and taking in the little moments as they happen, without distractions.
Open to offline discovery
While tech can certainly make travel smoother in many ways, going phone free can open up opportunities for discovery. While it’s tempting to grab your phone to check the Google score of every restaurant you pass or using Maps to locate local attractions, it can be satisfying stumbling across a great little eating place tucked away down a laneway or finding a wonderful local market on your travels.
And when it comes to sharing your discoveries, you could also try keeping it offline. Instead of snapping moments to share immediately on social media, knowing you are going to be constantly distracted checking how your posts are being received, try to treasure those moments as they happen.
Whether you digitally detox for a few hours a day, a few days, or the duration of the holidays, your vacation will benefit from you unplugging for a bit. And who knows, you may even find some of your good digital detoxing habits follow you into the New Year.
i, ii https://www.reviews.org/au/mobile/2022-mobile-phone-usage-statistics/
Financial wellbeing is a gift worth giving yourself
Overspending on gifts, parties, and decorations can quickly add-up, leaving us with unwanted debt in the New Year.
In 2022, Australians spent more than $66.7 billion during the pre-Christmas sales in preparation for the festive season. The rising cost of goods and services mean that even though many are trying to curb their spending, it is expected that we will spend a little extra this year.
5 ways to rein in Christmas spending
- Create a Christmas budget – A budget is an effective way of controlling spending. It may not sound like fun, but it helps you to understand what you would like to spend and how much debt you are prepared to live with. List all of the costs you can think of (gifts, decorations, food, travel and entertainment), then set limits for each category and stick to them diligently. Consider using budgeting apps or spreadsheets to track your expenses and ensure you stay on track.
- Embrace the spirit of giving – Instead of buying individual gifts for every family member or friend, organise a Kris Kringle or Secret Santa gift exchange. This not only reduces the financial burden for everyone, but it adds an element of surprise and excitement to the holiday festivities.
- Take advantage of sales and discounts – Begin your Christmas shopping early to take advantage of sales and discounts. Stockpiling non-perishable food items and other essentials before prices rise closer to Christmas can deliver big savings.
- Online shopping – You can often find better prices by shopping around online and various third-party websites offer cash back or rewards not available in store.
- DIY and personalised gifts – Tap into your creativity by making your own gifts. Handmade gifts can be a welcome and thoughtful way of giving. Consider creating homemade cards, photo albums, or baking treats for loved ones.
Tackle any debt now
With many household budgets feeling the pinch due to rising housing, power, petrol and other costs, debts may already be increasing. But if you are feeling burdened with debt, don’t decide to leave it until after Christmas. The time to tackle it is now before it gets out of hand.
One option to consider, is to consolidate your high interest debts into a single more manageable loan. This approach can simplify repayments and potentially reduce interest rates, making it easier to eliminate debt over time. But it is important to do your calculations carefully to make sure it is worthwhile for you and then to be vigilant about watching spending.
Another option is to take a cold, hard look at your expenses. Is there something that can be cut back, and that money diverted to repaying debt? Any reduction of your debt load will help, no matter how small. Some people like to implement the snowball method in tackling their debts: while continuing to make the minimum repayments on all your debts you pay a little extra on the smallest debt to pay it off faster. Getting rid of debts can help to inspire you to continue.
Taking control of Christmas spending and debt is crucial for starting the New Year on a positive financial note. So, start planning early, know what you can afford to spend and prioritise your financial wellbeing for a debt-free and stress-free holiday season.
If you are struggling with post-Christmas debt or need assistance to manage your finances, we are here to help. Contact our team of financial experts today to discuss strategies to regain control of your financial future. Make this Christmas season a time of joy and financial empowerment.