Profile Blog - Category ‘Financial Planning’

The Retirement Income Review questioned if consumers understand the end purpose of the retirement system and if more needs to be done to make it clearer.

The Retirement Income Review (RIR) has questioned whether the purpose and objective of the retirement income system is well understood by the Australian populace and is seeking evidence as to the level of understanding across the wider community.
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Watch as the world population changes every second of the day or see where everyone is.

 

 

Knowing exactly what’s happening with the World’s population can be both intriguing and a bit scary at the same time. Just getting one’s head around the rate of increase and where all these people live is a daunting task. But given the issues facing the world today learning a bit more about all its peoples is worth knowing.

Click here to view the interactive information contained in the image below but also click here to see how all these people fit across all the countries of the world.

 

 

 

 

 

Detail on what the second stimulus package means to your hip pocket, Centrelink payments and staff retention.

The announcements for individuals, retirees, households and employers: 

  • Temporary early release of superannuation for those in need
  • Reducing the minimum drawdown rates for superannuation income streams for the 2019/20 and 2020/21 years
  • Reducing the deeming rates by a further 0.25%
  • An additional $750 lump sum for pensioners and concession card holders
  • Additional income support payments for the unemployed
  • Keeping staff employed

NB: There is another article on our site that covers details of Stage 1 of the Government’s Covid-19 stimulus package.

Release of super funds:

The Federal Government has decided to allow financially stressed people to access $10,000 tax free of their super fund this financial year and $10,000 next financial year.

Treasurer Josh Frydenberg made the announcement on Sunday as part of a broader $66 billion stimulus package to mitigate the fallout from the outbreak that has killed more than 13,000 people worldwide and is tipped to plunge the global economy into a recession.

“These extraordinary times demand extraordinary measures,” the treasurer said in a statement. “The government is taking unprecedented action to strengthen the safety net available to Australians that are stood down or lose their jobs and increasing support for small businesses that do it tough over the next six months.”

Eligibility: One of the following requirements must be satisfied for the early release of super:

  • You are unemployed; or
  • You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance; or
  • On or after 1 January 2020:
    • You were made redundant; or
    • Your working hours were reduced by 20 per cent or more; or
    • If you are a sole trader – your business was suspended or there was a reduction in your turnover of 20 per cent or more.

If eligible, individuals can apply directly to the ATO via MyGov (www.my.gov.au) and will be required to certify that they meet the eligibility criteria. The ATO will then issue a determination and contact the super fund directly to release the money.

It is anticipated that payments will be available from mid-April. Payments will be received tax free and will have no impact on existing income support payments.

Reduction of minimum pension drawdown requirements

As we saw in the Global Financial Crisis (GFC), a temporary reduction to the minimum payment rules will apply for superannuation income streams to assist retirees who would otherwise be forced to sell down assets to meet their minimum pension.

For the 2019/20 and 2020/21 financial years, the minimum drawdown rates will be:

Deeming rates.

Further to the recent decrease in deeming rates announced earlier this month, the Government will reduce deeming rates by another 0.25% from 1 May 2020. The new rates are provided in the table below.

Additional $750 lump sum payment 

Two separate lump sum payments will now be available to eligible social security, veteran and other income support recipients and eligible concession card holders as follows:

Payment one – available to those eligible income support recipients and concession card holders at any time between 12 March 2020 and 12 April 2020.

Payment two – available to eligible payment recipients and concession card holders on 10 July 2020.

The two lump sum payments will be received tax free and will not impact existing income support payments.

The payment will be made automatically from July 13 to about 5 million Australians, including those receiving the age pension, a carers allowance or family tax benefit and Commonwealth senior card holders.

For payment one, the qualifying payments and concession cards are as follows:

To be eligible for payment two, the same list applies EXCEPT if you are entitled to the Coronavirus Supplement (explained below).

Additional income support for the unemployed and faster access

The Government will introduce the Coronavirus Supplement, a $550 per fortnight payment available for the next six months to eligible payment recipients. Additionally, access to income support will be expanded and the claims process accelerated to ensure timely payments for those in need.

Eligibility: The payment categories eligible to receive the Coronavirus Supplement are:

  • Jobseeker Payment (including all the payments that are currently moving to Jobseeker Payment)
  • Youth Allowance Jobseeker
  • Parenting Payment
  • Farm Household Allowance
  • Special Benefit recipients

While the Coronavirus Supplement is available (temporary measure for approximately six months), the Government will expand access to income support (such as Jobseeker Payment) to:

  • Permanent employees who are stood down/lose their job
  • Sole traders/self employed
  • Casual workers
  • Contract workers

The standard allowance income test must be met however the assets test that normally applies to allowances (ie $1 over the asset test threshold results in no payment) will be waived for the Coronavirus Supplement period.

Some waiting periods will also be reduced or waived. The standard one week Ordinary Waiting Period, the Liquid Assets Waiting Period (LAWP) and the Seasonal Work Preclusion Period will all be waived.

How to apply: The Government is encouraging all applications to be made online or over the phone if internet access is not available. Measures have been adopted to accelerate the claims process such as removing the requirement for Employment Separation Certificates and the need to make appointments with an employment service.

The commencement date for the Coronavirus Supplement and the expanded access to income support is 27 April 2020.

Casuals and sole traders

If you’ve found yourself affected by the economic downturn, you’ll be able to access a “coronavirus supplement” of $550 a fortnight for the next six months.

That’s on top of other benefits — so if you’re already receiving payments through Jobseeker (formerly known as Newstart), you can claim both.

Sole traders and casual workers who are currently making less than $1,075 a fortnight will be eligible to receive the full supplement.

In practice, that means if you’re a single parent (receiving a maximum fortnightly payment of $612 through Jobseeker), for example, and you meet the criteria, you’ll take home about $1,162 a fortnight.

“This means anyone eligible for the maximum Jobseeker payment will now receive more than $1,100 a fortnight, effectively doubling the Jobseeker allowance,” Treasurer Josh Frydenberg said.

Sole traders or casual workers who have had their income or hours reduced by 20 per cent or more as a result of coronavirus will also be able to access to up to $10,000 of their superannuation tax-free.

Employers who want to keep staff

Not-for-profits and small businesses with a turnover under $50 million will receive a tax-free cash payment of up to $100,000 to help them retain staff and continue operating.

The Government expects 690,000 businesses employing 7.8 million people and 30,000 not-for-profits will be eligible for measures in the stimulus package.

It doesn’t mean extra pocket money if you’re an employee, but by linking the payments to staff wage tax withholdings, businesses will be given an incentive to hold on to more of their workers.

“We know that small businesses are enormously resilient but this is really hurting them,” Mr Morrison said.

“Whether it is a coffee shop or mechanic or hairdresser… by providing at a minimum $20,000 and up to $100,000 for small businesses who employ people, [it] gives them a chance to get to the other side.”

Expect more to come…

An important thing to keep in mind is that this is the second suite of measures announced by the Government in just a matter of weeks.  Details about the first stimulus package can be read here.

For more information

For more information on these measures and other announcements made by the Australian Government visit treasury.gov.au/coronavirus or speak with your Financial Planner or Accountant.

Source:  Several sources and the ATO.

FACTUAL INFORMATION & GENERAL ADVICE WARNING This communication is issued by Profile Financial Services Pty Ltd. (ABN 32 090 146 802), holder of Australian Financial Services Licence and Australian Credit Licence No. 226238. It contains factual information and general advice only, and does not take into account any investor’s individual objectives, financial situation or needs. It should not be relied on by any individual. Before making any decision about the information provided, investors should consider its appropriateness having regards to their personal objectives, situation and needs, and consult their adviser. Any indicative information and assumptions used here are summarised, are not a product illustration or quote, and also may change without notice to you, particularly if based on past performance.

In the past few weeks, we have seen economies be brought to a standstill by COVID-19, unprecedented social measures announced by governments around the world, and a new, unusual rhythm of living that many of us are still settling into.

         

In the past few weeks, we have seen economies be brought to a standstill by COVID-19, unprecedented social measures announced by governments around the world, and a new, unusual rhythm of living that many of us are still settling into.

Although it might feel like things are calming down a little as markets begin to seesaw with less extremity, it's still the case that uncertainty ahead is likely to be the only constant. Even for the most measured of investors, staying the course in such times can be challenging, and perhaps particularly so for those who have retired.

You may have read in the news that many investors are “buying the dip” and taking advantage of trading opportunities caused by the volatility, with the view that share prices will eventually rise again. But for many in retirement, the first instinct is not to capitalise, but to protect. And advice to stay the course, while important, can feel a little off base when your super fund's portfolio has dropped sharply and you are starting to feel a bit helpless.

Here are three options to consider if you're in the retiree camp.

Reassess your asset allocation

Staying the course doesn't necessarily mean do nothing. More practically, it means sticking to your investment plan but periodically re-evaluating your asset mix to ensure it's still aligned to your goals, time frame and appetite for risk.

In light of all this volatility, perhaps you are now realising your tolerance for market risk is not as high as you previously thought – or you were comfortable but hadn't got around to updating/reviewing since you retired. In a severe market event like this you want to avoid trading in response to market moves and locking in losses. But it does make sense to revaluate your risk tolerance and consider how to rebalance your portfolio and lean towards fixed income products. One way to do this can be to redirect your investment distributions to conservative fixed income funds so you can build up the defensive portion of your portfolio over time.

Rethink discretionary spending

Reducing spending where possible goes without saying during difficult times but nobody would label it an ideal solution. But while you can't control the market nor predict its movements, your discretionary spending is however a factor that you can adjust.

For example, let's say your portfolio was valued at $950,000 at the beginning of the year.

Assuming a six per cent average annual return throughout retirement, you estimate you have a total amount of $4,750 to spend a month. If all other factors remain the same but your portfolio balance declines by 25% (to $712,500), your estimated monthly income drops by almost $1,200 a month (to about $3560).

For the time being, tightening your belt slightly in step with your reduced portfolio balance might help ease financial stress and help navigate through the crisis.

Relay concerns to a trusted adviser

The value of a good financial adviser often shines most brightly during periods of market uncertainty. When you're not sure what best to do, advisers can offer guidance and support that's tailored to your individual circumstances.

According to some research Vanguard recently conducted into the value of financial advice, it was noted that instead of purely focusing on portfolio and financial value, it is also worth assessing the value advisers can bring from an emotional standpoint.

Peace of mind can't be quantified in dollar terms but it is perhaps just as important as the figure on your portfolio statement. A second, professional opinion can calm your nerves or boost your confidence during these unsettling times. And if you're feeling particularly affected by the last few weeks, it might also help you readopt the right mindset to make considered investment decisions for your future.

Staying the course isn't always as easy as it sounds, but by keeping emotions in check and focusing on the factors you can control, you might weather this storm better than you think.

 

Written by Robin Bowerman
Head of Corporate Affairs at Vanguard
15 April 2020
vanguardinvestments.com.au

 

 

 

The Government has decided to extend a lower JobKeeper for a further six months (13 fortnights) from 28 September this year, with eligibility based on actual rather than projected turnover declines.

 

           

The key features are:

  • Only those businesses whose actual GST turnovers in each of the June AND September 2020 quarters have declined by 30% or more (or 50% or more – businesses with a GST turnover of $1 billion or more) compared with the same periods in 2019 will be entitled to JobKeeper in the December 2020 quarter.
  • Only those businesses whose actual GST turnovers in each of the June, September AND December 2020 quarters have declined by 30% or more (or 50% or more – businesses with a turnover of $1 billion or more) compared with the same periods in 2019 will be entitled to JobKeeper in the March 2021 quarter.
  • The JobKeeper payments will be lower and there will now be two tiers:
    • For employees who, in the four weeks of pay periods before 1 March 2020, were working in the business for 20 hours or more a week on average – for the December quarter, $1,200 a fortnight; and for the March 2021 quarter, $1,000 a fortnight
    • For other eligible employees (both permanent part time and casual) – $750 a fortnight for the December 2020 quarter and $650 a fortnight for the March 2021 quarter
  • Business participants who are not employees remain eligible on the same basis as employees.
  • Employers must pay employees first before they can receive JobKeeper.

The new turnover tests will be harder to fulfill than those applying to JobKeeper 1.0. 

Each quarter is tested for actual GST turnover, – averaging is out and the single month test is out. 

One difficulty all employers who remain eligible will face is timing the calculation of their turnover for the September and December 2020 quarters with the payment of staff.  With BAS deadlines of 28 October and 28 January respectively, the ATO “will have discretion to extend the time an entity has to pay employees in order to meet the wage condition, so that entities have time to first confirm their eligibility for the JobKeeper Payment”.  But delaying BAS lodgement can also delay receipt from ATO.

As far as employees are concerned, the eligibility rules are unchanged.  In that regard, the employee must have been on the books as at 1 March 2020 as well as being a current employee for the relevant JobKeeper fortnight.  The rules which exclude persons who were not long-term casuals as at 1 March also remain, as do the rules excluding most temporary workers who are neither citizens nor permanent residents.

The long term casual test has two relevant dates –  1 March being the date on which the employee has to meet the basic criteria (including the long term casual test) and the JobKeeper fortnight the subject of the claim and for which the employer must have paid the employee.

 

 

Federal Government

 

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