After years of watching the Federal Government tinker with superannuation rules, most professionals in the industry have been pleading for the system to finally be left alone. By its very nature super is a long-term investment - it's hard to plan for the distant future when every year the government shifts the goalposts.
Unfortunately we're going to need to put a good bend on the ball again because in 2017/18 those posts are moving once more.
Without doubt the biggest concern for most medical professionals is the reduction in the cap on before-tax concessional contributions. This is a particular issue for professionals who are mid-career and still very much in wealth accumulation mode.
At the moment the cap is $30,000 if you're under 49 and $35,000 if you're over 49. From July 1, everyone's cap will be $25,000. Anyone who makes extra contributions through salary sacrificing for example, should speak to an adviser and take a look at how the changes will affect them.
This is a particularly urgent issue for anyone who hasn't used all of this year's cap as there's still time to put additional money in your account before the rules change.
Probably the biggest change for those near retirement is that there will now be a limit of $1.6 million that can be placed in income stream accounts.
If you have more than $1.6 million you can transfer the balance into an accumulation account or you might want to consider making a contribution to your spouse's account. There are a number of options available, but again it's important to speak to an expert who can provide advice on the best strategy for your individual circumstances.
Yes! If there's a small ray of light in the midst of all this gloom it's that from 1 July anyone can make a deductible super contribution - not just the self-employed. This will make it much easier for everyone to fully utilise concessional contribution allowances and get maximum tax benefits.
The unfortunate reality is that the changes to super that will begin next month are so wide-reaching that almost everyone will be affected in some way. The most important thing to do is take a holistic view of your investment strategy and what role super needs to play in it from 1 July.
It is absolutely still worth maximising your superannuation, but many people will also benefit from some strategic changes to their investment mix.
In short - get some professional advice and do it quickly.
|Posted in: Tax Wealth Creation Budget Financial planning superannuation Planning Investment Financial independence Diversified portfolio||0 Comments|
Far from the bitter pill of previous years, the 2017 budget has more in common with children's cough syrup - pleasant enough (if a little sickly sweet), but with an unmistakeable strangeness that's hard to identify.
So what does it all mean for medical professionals? It's a mixed bag, but on balance the news is mostly good. In fact, Chartered Accountants have even described it as a budget that positions the government for a possible early election.
So let's start with the bad news.
Funding certainty for the NDIS is certainly admirable, but using a 0.5 percent increase to the Medicare Levy is fairly blunt way to do it. For higher incomes earners the removal of the Temporary Budget Repair Levy from 1 July will offer some tax relief.
Groundhog Day is over! After a four year freeze the government is finally increasing Medicare rebates. That means more money back to patients and more money flowing through to doctors. Win win.
In an unexpected bonus the government has extended the $20,000 capital assets write off for small businesses for another year. That means if you didn't get around to upgrading your computer system or replacing surgery equipment, there's still time. There's no guarantee Mr Morrison will be quite so generous next year so it's a good time to assess your practice's needs.
The ability to salary sacrifice to save for a first home deposit is a real boon for many early career medical professionals. The housing market might still be hotter than a Colourbond roof in January, but this measure at least makes scraping together a down payment a little easier.
Under pressure from many to reform negative gearing, the government has chosen to the give the system a slight trim, rather than a haircut. The deductions that will no longer be available to property investors aren't anything to get too worried about (as far as expenses go, nothing comes close to rivalling bank interest) however, it is still prudent to make sure you're not counting on a now-banned deduction.
If you're looking for more detail on the winners and losers from this year's budget the ABC have produced an outstanding infographic you can view online here.But of course, if you're looking for specific advice about your personal circumstances, please don't hesitate to get in touch with us.
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It's a classic scene from James Dean's iconic movie, Rebel Without a Cause: two alpha males in hotted up cars driving towards a cliff. Whoever jumps first is the chicken. The trick is knowing when to make your move, so you don't end up plunging into the ocean like Jimmy's rival!
It often feels like you're playing a similar game watching interest rates drop. If you've got a mortgage, when do you flinch?
The first thing everyone wants to know is, will interest rates go any lower? While there's no way to know for certain the answer is, probably not. The current Reserve Bank cash rate is 1.5 percent - the lowest it has been in more than 40 years. While it is possible rates could go lower, most economists believe we have now bottomed out and the next movement - when it comes - will be up.
The short answer is no. Even if rates were to be cut by another quarter percent, the current rate of 1.5 percent is extraordinarily low and represents a huge opportunity for mortgage holders. There's very little to be gained by holding on for the possibility of another rate cut - it's time to jump out of the car!
The greatest opportunity mortgage holders have is to pay off large chunks of their principal while the interest component is relatively small. To do this, you have to resist the temptation posed by Splurge Fever and pour as much surplus cash as possible into your loan. Doing this will mean you'll be in a much stronger position when interest rates start to move north - and they will! It's only a matter of when.
The other thing to consider is fixing a portion of your loan as a hedge again further rate rises. What percentage you choose to fix is a discussion you should have with your financial planner, based on your individual goals and what level of risk you are prepared to accept.
Interest rates this low are extremely rare. While the fact it's been 40 years since they were last this low doesn't mean it will be another four decades before we see these conditions again, it does mean it's extremely rare. The smart move is to take every advantage possible of such a unique set of economic circumstances. Don't end up plunging into the deep, dark Californian ocean!
|Posted in: News Wealth Creation Budget Financial planning Planning Mortgages Financial independence Risk management||0 Comments|
We recently moved into our new office in Fortitude Valley, just down the road from our old base.
We're in the process of finalising our interior fitout and we'd like to invite you to be a part of it. A glass wall in our office will shortly be covered in an opaque film and we'd like to cover it with words to inspire us.
Our passion is helping you plan for financial independence, but we want to hear about what your passions are. We'd like to invite you to submit three words that describe what you're passionate about via this survey form. It can be anything you like! Whatever gets your juices flowing.
On 27 March we'll close the survey and use a selection of the submitted words on our new wall. It's your chance to genuinely make your mark on our new office!
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So you've finally finished your medical specialty. The long nights of study are over (for now!) and you've got a shiny collection of new letters after your name. And of course, along with those letters goes a bigger pay packet. Time to reward yourself for all that hard work and start living a life of luxury, right? Well, maybe not...
Unfortunately a little extra income often brings with it a damaging illness. Fluids won't help and paracetamol is useless. It's splurge fever, the almost uncontrollable urge to make lifestyle purchases now that you've got a little extra coin.
Splashing out on holidays, fancy gadgets, expensive clothes, even upgrading your car or home can all be symptoms. And if you're not careful they can quickly add up to a cracking financial headache.
So what can you do?
The good news is splurge fever is easily treated. The bad news is the best cure is prevention (what, isn't there a pill I can take???). And in the world of finance when we're talking about prevention, what we mean is planning.
There's no reason why your extra income can't mean rewarding yourself or even looking at upgrading your home or car, as long as it's part of a planned, well-managed process.
The biggest financial danger for new specialists is uncertainty. Yes, you will likely be earning more money. The big question is how much more? Unfortunately many new specialists overestimate their new income and commit to spending that becomes like a weight around their neck.
It might not be as exciting as splashing out on a new private movie room for your house, but my advice to new specialists is to follow a four-stage process for approaching this new stage of their career:
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