What a brilliant concept!
Did you know that there are over 900,000 Australians who own small parcels of shares that add up to in excess of $93 million? If you are one of these investors, you might be very interested in this unique service that will not only save you money but help those in need.
ShareGift Australia provides a unique opportunity for people who own a few shares, or even a lot, and want to make a difference. A not-for-profit organisation and registered charity, ShareGift Australia provides investors with a convenient and cost-effective way to sell small parcels of shares that would normally be expensive to trade and then donates the proceeds to charities.
In just nine years, it has been responsible for donating over $1,357,000 to more than 400 Australian charities.
How does it work?
It is really quite simple. ShareGift Australia facilitates the sale of shares at full market value on behalf of the shareholder (via its supporting brokers) and then distributes the funds to eligible Australian charities. If the proceeds of the sale exceed $50 the shareholder can nominate a charity to receive a distribution.
It is an excellent way of donating because the benefactor doesn’t pay brokerage plus they receive a tax deduction of the full sale proceeds (if the donation is over $2.00).
Who benefits?
In a nutshell, everyone involved. Here’s a true story to explain…
A shareholder, let’s call her Anne, received a letter from her adviser about ShareGift Australia and was extremely interested in how it all worked. Anne was a generous but cautious person so decided to test the service with a few shares worth around $100. As the donation exceeded $50, she was invited to nominate a charity. Anne was impressed with how easily it all worked and not only did she save money by not having to pay brokerage on such a small sale, her charity received a distribution in that quarter.
She was impressed by how easy the process was and so decided to donate a larger parcel of shares valued at just over $24,000. Anne chose to donate shares directly rather than go to the trouble of selling the shares herself and donating the cash that was left over. As part of its due diligence, a representative from ShareGift Australia called Anne to confirm the donation and was delighted by her generosity. On this occasion the ShareGift Australia Board determined that the entire amount be distributed to Anne’s recommended charity. Anne was over the moon to learn that her charity received almost $25,000, not to mention how pleased the charity was to receive this wonderful gift.
Other options
ShareGift Australia is a flexible service because every share makes a difference. You can donate one or 100 shares, you can bequeath shares in your will or you can even donate cash.
For full information about this brilliant concept, visit the ShareGift Australia website. If you have any share odds and sods you want to sell, this could be the perfect solution.
Contact us on 03 9836 8399
Sources:
Share Gift Australia website www.sharegiftaustralia.org.au
An alternative to SMSFs
It’s a widely known fact that Aussies love to travel, and although the majority return home, over 420,000 Australians left our shores, for the long-term or permanently, in the twelve months to August 2016. For those who decide to make another country home, superannuation preservation rules apply to most, but what about those who have a self-managed super fund?
Generally speaking, provided you satisfy the work test, and your objective is to eventually retire in Australia, there are few restrictions to making contributions to your Australian super fund. However, if you are the trustee of your self-managed super fund (SMSF), the rules of the game no longer apply.
According to the Australian Taxation Office (ATO), SMSF trustees may travel overseas, but when planning an extended stay – more than two years – or a permanent move, trustees may be in breach of SMSF regulations which can incur criminal and financial penalties. In addition, funds that don’t meet SMSF criteria may be taxed at the highest marginal rate.
Members of a SMSF must be either a director or trustee, and whether you’re a trustee or not, you may wish to consider your options for super before you make the big move.
One option gaining favour among expats is Small APRA Funds (SAFs). As the name suggests, these funds are regulated by the Australian Prudential Regulation Authority (APRA) and provide a superannuation environment for funds with up to five members where the fund does not meet the normal definition of a SMSF.
The main feature of SAFs is that it provides a super fund with an independent trustee, ensuring arm’s length governance, although trustee fees do apply. Other benefits of SAFs include:
- the ability to acquire business real property at market value from related parties;
- members not involved in the decision making process, are protected under a ‘culpability test’, the test applied to a SAF in place of the compliance test applied to a SMSF. SAFs failing to pass the culpability test generally do not lose tax concessions;
- provision of a member enquiry and complaints mechanism.
You may consider a SAF if you feel a SMSF is not appropriate for you, for example, you may believe you’re too old for the extra responsibility, or you have a legal disability.
Conversely, the Superannuation Industry Supervision (SIS) Act, prohibits ‘disqualified’ persons from acting as trustee, in which case a SAF might be more suitable.
Disqualified persons are:
- an individual who has been convicted of an offence involving dishonest conduct – shoplifting is included in this definition;
- bankrupts;
- those who are insolvent or under administration.
Australian superannuation is terribly complex. If you are planning an extended overseas trip or permanent move, whether or not you’re a fund trustee, you must seek professional tax and financial advice.
Making the wrong decision may have results that span continents.
To discuss your SMSF planning needs contact us on 03 9836 8399.
Have a plan - just in case
It’s an old saying but it will be forever true – “the only constant in life is change”. Whether it’s due to economic downturns, new technology or extreme weather disasters; no business, job or career will ever stay the same.
And it’s impossible to know what might happen in the coming months or years in your career or industry. Although the thought of planning now for a time when your skills might become redundant or your employment suddenly ends for other reasons might sound depressing, it is good financial management.
Here are some points to consider that will put you in a better position – just in case.
Debts
Managing debt is often the greatest concern for people whose jobs are made redundant. The key debt management techniques are consolidation and reduction. Consolidation refers to rolling debts together into the loan with the lowest interest rate. For example, you might be able to re-draw against your lower interest rate home loan to pay off high interest credit card debt. This can significantly cut your expenses.
Then it’s a matter of allocating any spare cash to the outstanding loan. Being able to make extra repayments will put you in a better position if your income is lost or substantially reduced. Then if the worst happens, you will have more leverage when working out a new repayment plan with your lender. The earlier you talk to your lender the more assistance it may provide.
If you have multiple credit cards with high balances but no mortgage, an option is to transfer all of your credit card balances to just one card. Many providers offer initial low interest rates to roll over debt. Just make sure you destroy your other cards and pay off the full balance before the end of the “honeymoon” period.
Budget
In the good times, it’s easy to spend without thinking. When things get a bit tighter, it’s crucial to sit down and work out what you need to spend, and what you can do without. There is a plethora of simple templates available online and phone apps to make preparing a budget easy.
Don’t wait until money is in short supply – do a budget now and you will probably be surprised at how much extra money you can invest wisely for that rainy day.
Opportunities
There is no doubt about it, redundancy is stressful – one day you have a steady income and dreams and the next day you have lost both. But it can create opportunities.
This is a time when you can change your whole world – learn new skills or do something you’ve always wanted to do. You may be offered assistance with finding a new job or retraining. Make the most of every offer.
If you have done some simple planning, job redundancy may not be a negative experience – you might actually be able to enjoy the break and look forward to a new, exciting future.
Contact us on 03 9836 8399 to discuss how you can plan ahead.
Is a family guarantee right for you?
Entering the property market is no easy feat for a first homebuyer, but even parents who aren’t prepared to hand over cash for a deposit may help by being a guarantor on a loan. Before taking the plunge however, it’s crucial to be aware of the implications involved.
Here are three questions to ask yourself to see if a family guarantee is right for you:
1. Am I financially fit to be a guarantor?
The very first thing you should be certain of is whether or not you are in a financially capable position to pay off the loan if the borrower finds that they can no longer do so. There can be many disruptions to an income, such as loss of employment or a serious accident, and some types of guarantor loans hold the guarantor legally accountable to ensure the mortgage is paid off.
You need to be in a strong financial position and have enough equity in your property to be a guarantor. Some banks even want to make sure that the guarantor can service the full debt as well, so it’s always advisable to get independent legal or financial advice if you’re considering it.
2. Do the benefits outweigh the risks?
It’s no secret that it can take a long time to save for a deposit and by becoming a guarantor, you offer the borrower the chance to enter the property market sooner.
Lenders may treat the loan like an 80 per cent lend, so you avoid the costly lender’s mortgage insurance (LMI). You also don’t have to save up for a full deposit for the purchase, or sometimes any deposit at all.
However, any time you borrow money or a bank places a mortgage over your property, there are definitely things that need to be taken into account. While in some instances it may be suitable, it’s definitely not a first option as there are certain factors that can put you or your property at risk. Your ability to borrow will also be reduced after using a guarantor.
3. Are there other ways I can help without being a guarantor?
If contributing to a deposit is an option, it allows you a little help without needing to put yourself or your property at risk, but there are some extra hoops to jump through if a deposit includes gifted funds.
With gifted funds, if [the deposit is] less than 20 per cent of the property’s purchase price, then the banks will most likely want to see five per cent of genuine savings. Having said that, there are a few lenders that will allow you to use rent as genuine savings. So, if you’ve been renting for a while, it shows that you have the propensity to make repayments and then the reduced (less than 20 per cent) deposit may be used in that regard.
We can provide access to tailored loan products and expert knowledge, and meet the highest educational and ethical standards. Contact us today on 03 9836 8399.
Source:
Reproduced with the permission of the Mortgage and Finance Association of Australia (MFAA)
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
Life's financial turning points: good and not-so-good
The marriage and divorce statistics for 2015 sadly suggest that 43 per cent of Australian marriages may end in divorce. Significantly, this number-crunching does not include separations of de facto couples.
Unfortunately, the breakdown of a relationship is a reality for many couples and it is a reality with typically damaging financial and emotional consequences.
We face a series of widely-shared financial turning points during our lives. Yet how we handle them obviously differs widely.
ASIC’s personal finance website MoneySmart has long published a comprehensive feature, Life’s events – last updated this month – with tips about how to deal with our financial turning points, the good and not-so-good. And unsurprising, the breakdown of a personal relationship numbers among the life events on ASIC’s list.
Financial turning points include receiving our first pay, joining our first super fund, leaving home for the first time and entering a personal relationship. Among the others are buying our first (second or third) home, dealing with serious illness in our families, coping with a partner’s death, losing our job and eventually retiring.
A decision to begin saving seriously to meet our long-term goals and the creation of our first financial plan are high among our key financial milestones.
Thinking about the feasibility of ‘downsizing’ to a smaller home as we age is becoming more common and finding suitable age care is climbing higher in the list of life events with the ageing of the population.
There are straightforward ways to help prepare for financial turning points such as budgeting, saving, investing, obtaining adequate insurance, considering quality professional advice when necessary and estate planning.
How we cope as investors with sharply rising or sharply falling investment markets can be a life-changing event. Investors who set an appropriately-diversified strategic portfolio, and who remain disciplined and focused on their long-term goals are best-placed to cope with market upheavals.
It is critical to try to stop one life event having negative implications for another life event. For instance, a failure to remain disciplined during a fall in share prices of the magnitude that occurred during the GFC may reduce your standard of living in retirement – even though that retirement may be many years away.
Planning for life’s financial events is at the core of sound financial planning.
If you would like to discuss anything in this article, please call us on 03 9836 8399.
Source:
Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
© 2017 Vanguard Investments Australia Ltd. All rights reserved.
Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
What is an annuity?
The term ‘Annuity’ is often mentioned in the financial press or TV advertising, but what actually are annuities and how do they work in practice?
The word annuity itself originates from the meaning ‘annual’ and can by definition, be described as ‘a yearly allowance’. To explain them in plain English is as a ‘really long term deposit, one where it is known exactly what the interest rate will be all the way along and when the payments will stop’.
Although many people may immediately think an annuity is locked away forever, that’s not always necessarily true. Like a term deposit an annuity can actually be cashed in before the term expires (even the lifetime ones in some cases). This may not always be the best course of action but don’t immediately disregard annuities if this is your main concern.
So, why have an annuity within a portfolio? If you have read this far, stay with us as they do make a lot of sense when used appropriately.
Annuities play an important role in cash flow management, and can provide much needed certainty when stock markets are volatile and it seems like the rest of the portfolio is heading south.
They can also be used for different terms – from one year up to the day when we meet our Maker. Annuities can be set up to pay 100% of the amount invested back when the term is over, or just some of it (if that meets a specific objective).
Let’s look at a simple example
Vicky is 62, retired, and knows she needs $35,000 to meet her annual income requirements. What she also knows is of that amount, $10,000 is enough for her basic ‘fixed’ costs – all the main bills, etc. The rest is her ‘lifestyle’ money. Her financial adviser recommends that she purchase an annuity to pay for these fixed costs.
The income is fixed, and (like the bills!) can be indexed to inflation. Vicky will then have the certainty that over her lifetime the annuity will always be there to pay the bills she has to pay – no matter what investment markets do, or even what the politicians decide to change. Her other everyday costs are covered by her pensions: the Age Pension and Account Based Pension from her super. All have a purpose and provide her with peace of mind, but perhaps none more so than the annuity. Saying that, the annuity is not going to grow 20% in value in any given year, but that’s not what it’s designed to do (it’s also not going to drop 20% either!).
What about SMSFs?
Annuities can also be used in Self-Managed Super Funds. A strategy here can be to set aside say three years of annual pension payments, while the rest of the portfolio provides the growth component.
Vicky’s case study illustrates a very simple concept. There are however many ways to use an annuity in a financial plan – too many to go into detail here. The tax and Centrelink treatment is also complicated, but if the idea behind an annuity appeals contact us on |PHONE|to find out how one might fit into your retirement income strategy.
The joys of home cooking
Even with the proliferation of ‘time-saving’ devices, it seems that life is getting busier with less time available to take care of simple domestic matters. One of these tasks, which for many used to be a pleasure not just a duty, is the home-cooked meal.
After a hard day, the last thing most of us want to do is “slave over a hot stove”. Usually when we’re tired we want a quick solution, hence the increasing popularity in Australia of eating out.
TV cooking programs focus on the creativity and flair of the chef and they can be inspiring. If you’re keen to try some new ideas, here are our top five tips to add some ‘oomph’ to your home cooked meals.
1. Spend the time when you can
On weekends, give yourself plenty of space and time to enjoy the experience of cooking a complete meal. If you’ve been absorbed in the kitchen for a couple of hours, consider a quick walk around the block before sitting down to eat. It clears the senses which will help you enjoy your masterpiece more.
2. Make a meal go further
Why not prepare two meals in one and take the next night off? Leftovers can be just as tasty. Or exchanging rice for pasta mixed with the previous night’s sauce can create a totally new taste.
3. Keep things simple
When your time or patience is limited, try a quick and easy option to create delicious meals for the family. Look for recipes on jars of ingredients, or in the hundreds of cookbooks focused on this growing need.
4. Get everyone involved
There’s little doubt that people appreciate what they work for. Send your partner and the kids to your local supermarket with a shopping list, or give them each one part of the meal to prepare. Make it a team experience.
5. Avoid waste at the end of the week
Get creative if your vegies are starting to wilt and there are other bits and pieces left in the fridge. Set yourself the challenge of putting together a combination of ingredients you wouldn’t normally use and see what transpires.
By following these ideas you can turn the chore of preparing home-cooked meals into a pleasurable experience and make the most of your valuable time.
Responsibilities of an executor
If you’re the eldest sibling in the family, or deemed to be the “most responsible”; if you’re seen to be a good friend by someone; or a fine upstanding citizen by others, chances are you will be asked to be an executor of someone’s will.
After you’ve enjoyed the warm feeling of being wanted, just pause for a moment and take stock of what it really means to assume this most important role.
You need to be aware that when the person dies, you will be required to spend a significant amount of time executing your responsibilities – and these can be onerous.
The actual functions will vary from one situation to another and, to some extent, depend on the surviving family members. However, the legally defined duties of the executor include:
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Arranging the funeral;
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Determining the assets and liabilities of the estate;
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Applying to the court for probate, if required;
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Determining what assets may need to be sold to pay outstanding debts – this may be defined in the will or by established legal definitions;
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Arranging the sale of all assets which are not to be directly transferred to the beneficiaries – including the home, investments, business interests and personal chattels;
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Lodging tax returns for the estate and the deceased;
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Paying the debts;
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Publishing a notice that you intend to distribute the remaining assets to the beneficiaries;
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Distributing the remaining assets to the beneficiaries according to the terms of the will.
For all this you may find yourself in the middle of family disputes and even subject to legal action from a dissatisfied beneficiary or creditor. If placed in this position, the executor needs to be able to manage his or her responsibilities as impartially as possible.
The executor can be held personally liable if a beneficiary suffers financial loss as a result of the executor’s actions or inaction, and in some instances, be legally liable for any losses incurred.
If, after considering all of this, you don’t think you can honour the person’s request and fulfill the role appropriately, it might be best to decline the offer.
If you’re feeling bad about not accepting, you could suggest that your friend or relative engages a professional executor in the form of a trustee company (or public trustee) or firm of solicitors. This will also ensure the executor outlives the person making the will.
For more information about Estate Planning please contact us on |PHONE|.
Sources:
Your State Government website and search for “Duties of an executor”
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee takes any responsibility for their action or any service they provide.
Building an emergency fund
An emergency fund (also known as a rainy day fund or savings buffer) gives you some breathing space to deal with life’s ups and downs. You can use this money if something unexpected happens to you or your family, like your car
needs major repairs, or you need to buy a new washing machine.
Here we show you how to build an emergency fund to protect yourself if things go wrong.
What is an emergency fund?
An emergency fund is an amount of money you have set aside to help cover the cost of any urgent and unexpected expenses. Having a savings buffer means you won’t need to borrow money if a crisis happens and you need money quickly. It can give you peace of mind that you can face any bumps in the road.
Start small to build your savings
The secret to building a savings buffer is to start small and save regularly. It doesn’t matter how much – or how little – you save, you just need to make a start, and then keep going.
For example, if you save as little as $10 or $20 per week, you’ll have $520 or even $1,040 by the end of the year. That’s the start of a solid amount of savings that will give you some financial breathing space.
Use MoneySmart’s savings goals calculator to help see how a little saved each week help you reach your savings target.
Automate your savings
Saving regularly is the best way to build up your savings balance. Set up a separate high interest savings account for your savings to go into via automated payments set up with your bank. You can also ask your payroll department if they can send part of your pay to your savings account.
Then you can set and forget, knowing that your savings are growing without you having to transfer them every time you get paid.
If you find a savings account that offers bonus interest for every month you don’t make a withdrawal, you’ll be less likely to touch the money unless it’s an emergency.
If you have a home loan with an offset account, you can use this account as your emergency fund. That way, the money will be working to reduce your interest payments, but will be available to use if you need it.
Ways to save every day
Track your expenses
It’s easy to lose track of the money you spend everyday. Download MoneySmart’s free TrackMySPEND app to help identify areas where you can save.
Avoid impulse buying
Every dollar you spend on an impulse purchase is another dollar you don’t have to build your savings. Check out our tips on how to reduce the urge to impulse buy.
Save spare change
Who said piggy banks are just for kids? Get an empty jar or ice cream container and put your spare change into it at the end of each week. When the container is full, deposit the money into your emergency fund.
Do a budget
A budget can help you get a better picture of your finances, allowing you to plug any spending leaks you might find. ASIC’s budget planner can help you work out what your household expenses are.
Keep adding to your savings
If you happen to get any extra money during the year, for example from a tax refund, you can add this money to your savings pool.
When to use your emergency fund
Receiving an unexpectedly large or urgent expense is never a good feeling, but having a savings buffer will help to keep your stress levels down. You won’t have to worry about where you’ll get the money to pay for it, and you can focus your energy on solving the problem.
Keep your emergency fund for those expenses you really need to pay now. If you want to use your savings for something else, then set up a separate savings goal.
Case study: Briony uses her rainy day fund
Briony had been building an emergency fund for 2 years and had saved more than $1,000. To build up her savings, she had set up automatic transfers on payday from her bank account straight into a high interest savings account.
When her car suddenly broke down, she used some of the money from the high interest account to pay for it to be fixed.
Briony was relieved to know she didn’t have to put the car repairs on credit or ask her family for money. Also, because she has set up automatic transfers, she could top up her emergency fund again from her next pay.
An emergency fund gives you control over your finances in a time of crisis. By regularly saving for a rainy day, you’ll be able to weather life’s storms.
Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at www.moneysmart.gov.au
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
The climate and investing - how might one affect the other?
Regardless of one’s personal views, company valuations are already being affected as superannuation funds and other major investors respond to climate change. Investors need to be aware of some key issues, anticipate future developments, and develop appropriate strategies.
The carbon bubble
An investment bubble occurs when investors pay highly inflated prices for an asset.
The prevailing view of climate scientists is that, to have a reasonable chance of limiting global warming to no more than 2oC, most fossil fuel reserves will need to be left in the ground. Oil, gas and coal companies are valued on their potential future earnings, which in turn are based on the resources to which they have extraction rights. If a global agreement is reached that significantly reduces the amount of coal, oil and gas that those companies can produce, then they are worth a fraction of present valuations, and are currently in a ‘carbon bubble’ situation.
The other threat to fossil fuel companies comes from renewable energy. The cost of wind and solar power has fallen dramatically in recent years. While they still have some hurdles to overcome, renewable energy technologies are already reducing the demand for fossil fuels, and in many countries make up the majority of new electricity generation capacity.
Divestment
Divestment has two main aspects to it.
On one hand the ‘divestment movement’ seeks to encourage individuals and institutions to sell their holdings in fossil fuels, primarily on moral grounds. Many churches, universities and investment funds are divesting themselves of these shares. A notable example is Rockefeller Brothers Fund, a fortune originally built on oil.
There is also a purely economic reason for divesting. If the carbon bubble theory is correct, and if companies are prevented from exploiting most of the fossil fuel reserves, it makes sense to get out of the sector before prices plunge.
Norway has the world’s largest sovereign wealth fund, also built on oil revenue. Its government is a major shareholder in many of the world’s biggest mining companies and has written to these companies to raise the issue of them spinning off their coal mining activities. While politics may be involved in this action, the future performance of the fund is the primary concern.
Stranded assets
Assets become stranded when their working life ends prematurely, and their owners don’t receive the expected returns on their investment.
Fossil fuel reserves that can’t be extracted, for either political reasons or because new technologies render them obsolete, are one type of stranded asset. Fossil fuelled electricity plants also face the risk of becoming ‘stranded’ if they are unable to operate and have no chance of being sold.
So it isn’t just coal, oil and gas companies that investors need to watch, but also utilities and other industries that are highly dependent on fossil fuels.
Disruption
Global energy markets may be facing an economic disruption greater than that endured by telecoms and IT companies in the last 30 years. For investors, both opportunities and threats will emerge. The challenge will be to recognise which is which. But with Saudi Arabia investing heavily in solar power it may be wise to heed the words of former oil minister, Ahmed Zaki Yamani: “The stone age came to an end not for a lack of stones and the oil age will end, but not for a lack of oil.”
For more information about Investing please contact us on |PHONE|.
Important
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.