February Newsletter
In this edition:
The Importance of Estate Planning
5 Money Rituals to Adopt
Access to Advice Boosts Economy
Financials Return to Strong Dividends
SMSFs to Enter SuperStream Regime
Is a Primary Residence Tax a Fairer Future?
Importance of estate planning when disputes arise
It may seem like we focus on estate planning a lot for something that is not the core of our business. But when issues like those detailed below cross my desk on a regular basis, it is difficult to find a reason not to stay on top of your estate planning – and update your will, power of attorney (POA) and advance care plan now if it needs to be done.
Power of Attorney
A worrying development is a recent issue we have come across in our business where a client (agent) has a Power of Attorney for a spouse (principal) with declining mental capacity. The solicitor will not allow the POA to access the spouse’s will as this is not a power specifically granted under the POA arrangement - or indeed most POA agreements. I consulted with a local solicitor on this matter and he confirmed that under recent guidance from the Law Society, in the absence of a specific mandate, the will is a document outside the scope of the attorney’s authority.
If you are concerned that you may be impacted by this, we recommend that you touch base with your solicitor and update your documents if necessary.
Contested Wills
In Moore v Aubusson [2020] the plaintiff couple were awarded $9 million after they sought a declaration that the defendant executor held the whole of the deceased's estate on trust for them. They didn’t get the whole $12m but it was a significant raise on the $25,000 left to them in the will.
One of Australia's richest families is also currently locked in a legal dispute over their father's will, which left out a child conceived by artificial insemination. The plaintiff has applied to the Court for access to financial records and any other documents evidencing ownership by her father of any asset during the preceding seven years before his death.
The case has not yet been resolved.
5 money rituals to adopt
It’s common to find with people that are making successful strides that they’re following a reliable and consistent plan in the form of a ritual.
Whilst we all have daily rituals, you may want to ask yourself what type of plan you have around your money. A ritual is one of the most effective self-empowerment tools that is freely available, that you can implement each day. So why not start a money ritual and take strides toward your wealth goals?
You are the company you keep
The people you surround yourself with often reflect your values and therefore influence your behaviour and habits. As they say: birds of a feather flock together.
Consider approaching a mentor who is where you see yourself in 5-10 years’ time and learn from their habits. Perhaps they have some lived knowledge and experience that they could pass down to you.
Monitor your money
Make it a habit to check where your money is flowing and what you’re spending the most on so that you can make some cuts. This technique will help you to identify and eliminate wasteful spending, as well as promote progressive action such as saving and investing. To hold yourself accountable you can use an app such as Wallet to categorize your transactions, track cash flow and monitor spending.
Use positive language when talking about money
Noticing the language you use when you discuss finances can give you a huge insight into your financial mindset and whether or not it’s positive or negative. To become better at managing money, and minimise pressing financial stress, it’s important to consciously re-frame the way you think about money and to develop a positive money mindset.
Negative self-talk can be extremely destructive, and can leak into other areas of your life, influencing how you feel overall and what you believe. If you constantly tell yourself that you’re not good with money, this thought becomes internalized, accepted and then evolves into your reality.
Stay abreast of financial news & education
Allocate some time each day to take note of what’s occurring in the finance world so that you can stay up to date and well-prepared for any changes and opportunities. There are many subscription services that provide access to daily email updates delivered straight to your inbox, such as Switzer Daily.
Tom Corley, the author of Rich Habits: The Daily Success Habits of Wealthy Individuals, notes that less financially successful people read for entertainment, whereas rich people read for self-improvement. “The rich are voracious readers on how to improve themselves,” says Corley, as he found that 88% of them read for self-improvement for 30 minutes a day.
Create a money mantra
You don’t have to be a yoga guru to embrace a daily mantra. Having a key phrase that you repeat daily that aims to empower you, can change how you feel about you and your money. It has the ability to help you to continually direct your thoughts to a positive state and can be as simple as “I deserve wealth and financial stability.”
Read the full article
Credit: www.pttfinancial.com
Access to advice a boost for the economy
Greater access to professional advice could deliver more than half a trillion dollars to the Australian economy, reduce spending on Age Pension and increasing incomes, according to research from CPA Australia and CoreData.
The study of 1,244 consumers and 815 small and medium enterprises found that if properly implemented professional advice was available to all Australians, the economic uplift could be worth $630.3 billion a year, while Age Pension spending would be reduced by 21.6%.
Dr Jane Rennie, CPA Australia general manager of external affairs, said over 60% of the Australian population did not currently receive professional advice.
“While the potential economic benefits are tremendous, realistically it’s unlikely we will ever have a fully advised population. However, any increase in the uptake of professional advice from its current level could deliver an economic windfall.
“The economic and health benefits of seeking professional advice are compelling, which begs the question, why don’t more Australians seek professional advice?” Rennie said.
Read the whole Money Management article here
Financials return to strong dividends
Following the lifting of dividend restrictions by the Australian Prudential Regulation Authority (APRA), financials are returning to strong dividends but it may take two years to reach pre-COVID levels.
Last year, APRA implemented rules which saw banks and other financials unable to pay a dividend of more than 50% of earnings in order to ensure firms retained a sufficient level of capital in the pandemic. This led to bank dividends being cut by an average of 60% in 2020, a blow for retirees who relied on bank shares for income.
However, these restrictions were lifted in December 2020.
Particular focus was given to Commonwealth Bank which paid a dividend of $1.50 per share, a 53% increase on the same period a year ago.
Peter Gardner, portfolio manager at Plato Investment Management, said: “There would have been quite a few retirees and other investors sweating on CBA’s dividend announcement and what we have seen is a strong indicator that recovery in the sector is well underway.
“The dividend is in line with our expectations that bank dividends will move toward more normal payout ratios of 70%-80%, however, pre-COVID dividends may still be another 24 months away.”
See the article from Investment Centre here
SMSFs enter SuperStream regime from March
There will be some changes for self-managed super funds (SMSFs) due to measures announced by the government in 2019.
SuperStream is a data and payment standard used for digital transactions within the super industry. SuperStream rollovers can be processed faster, more efficiently and with fewer errors.
Any super rollovers to or from your SMSF will require you to use SuperStream from 1 October 2021. However, you can voluntarily enter the SuperStream system from 31 March 2021.
These changes will impact your SMSF if your members want to:
rollover funds to your SMSF, such as transferring money from any other super fund to your SMSF
rollover funds from your SMSF, which includes when you are winding up your SMSF
receive and action certain release authorities including first home super saver (FHSS) scheme more quickly
To use SuperStream you will need:
an electronic service address (ESA)
an Australian business number (ABN)
to ensure your SMSF details are up to date, including your SMSF's bank account.
Is a tax on the family home the fairest way forward?
The NSW Review of Federal Financial Relations Report ‘Supporting the Road to Recovery‘, first released as a draft at the National Press Club in Canberra on 1 July 2020, highlighted a number of clear areas of tax reform.
One suggested reform area which will have the attention of every Australian with visions of climbing the property ladder is the abolition of stamp duty in favour of a broad-based land tax – basically an annual tax on everyone’s home.
It is a common misconception that GST, now 20 years old, was supposed to pave the way for the complete abolition of stamp duty. Probably unbeknownst to most taxpayers, the scope and rates of duty on land-based transactions has actually increased (not decreased) since the introduction of GST. In addition, foreign surcharges have been introduced in all states.
The NSW Government raised around $7 billion, or 24 per cent, of annual tax revenue from transfer duty in 2018-19, making it the State’s second largest source of tax revenue.
Read the full Thomson Reuters article or download the final report