Increasing insurance premiums. A tale as old as time.
Over the past 12-18 months, we've seen a recalibration of personal insurance and personal insurance premiums. While it's important that insurance providers are profitable (so they're equipped to pay policy holder claims), this recalibration has led to price increases, which, in many cases, have been significant.
If you're holding your income protection insurance through your superannuation provider, you may not yet have noticed that premiums have increased - out of sight, out of mind. But it's worth checking - some industry funds are now 3 to 4 times more expensive than comparable polices!
So, what can you do about it?
Addressing increasing premiums
Where premiums are causing cashflow stress, there are several things you can look at to reduce the impact of these premiums and maintain the benefits of your insurance. Potential solutions include:
Importance of acting now
If you have questions about your income protection insurance, it's crucial that you have these policies reviewed as soon as possible.
In December 2019, the Australian Prudential Regulation Authority (APRA) announced a number of legislative changes to personal insurance that are designed to make the industry as a whole more sustainable. The first of these came into effect on 1 April 2020 but even more significant changes are due to take place next year, on 1 July 2021.
For policies that commence after 1 July 2021, insurance companies will be able to review the terms of your insurance contract every five years. In this instance, their ability to review includes changing the terms of the policy (including medical definitions), changing the amount for which you're insured and placing tighter controls on longer term claims.
In effect, these changes act to remove certainty and peace of mind - the very reason we have insurance in the first place - and will impact you regardless of whether you hold income protection personally or through your superannuation.
So pull out your income protection policy this weekend and see where you stand.
If you have any questions or concerns about how the new changes will impact you, please contact us on (07) 3363 5800 or firstname.lastname@example.org.
|Posted in: Insurance||0 Comments|
Current social events have, once again, reinforced the importance of investing time and energy in making a positive difference and not letting opportunities to change the world and impact future generation pass us by. Whether it be environmental or social issues, much has been pondered, written, and debated about the best ways to practice social responsibility.
In line with this shift in social thinking, over the past few years we've similarly witnessed an increased awareness from our clients, not just in regard to their ability to impact those around them, but also to make a difference in the way they choose to invest.
So what is 'socially responsible' investing (SRI)?
Socially responsible investing involves applying additional criteria to your investment options with the purpose of either increasing your investments in areas that align with your values and assist to create positive change (think, clean energy, waste reduction, education or healthcare), or reducing your investments in areas that don't (think fossil fuels, armaments and tobacco).
The rise of globalisation in the late '90s and early 2000s blurred the lines and made decisions about what to include in your SRI portfolio challenging, which in turn led to an increase in the cost of socially responsible portfolios.
Unfortunately, this increased cost of investment led many to put socially responsible investing in the too-hard basket, with people instead having to look elsewhere for ways to make a difference in their local communities or to show support for companies they wanted to champion.
The winds of change
In a positive move for investors, the increased debate over social and environmental issues, globally, has led to socially responsible investing becoming increasingly in demand, and therefore, more mainstream. As a result, the costs associated with these portfolios has reduced significantly. Now, many of the largest fund managers in the world have SRI investment options. Given the significant impact of fees on overall returns, we're excited about these moves and the potential they create.
For example, in May, one superannuation fund announced that from 1 July, they'd be making some significant changes to the way their socially responsible fund was managed; starting with a reduction in the management fee from 1.09% to 0.45%. This effectively removed one of the biggest barriers that has historically impacted many investors' ability to participate in this area.
It's also interesting to note that the returns achieved by some socially responsible managers are now increasingly comparable to their peers practicing a more traditional investment approach.
Despite the exciting opportunities that changes in this space brings, however, it's important to note that any investment should be made in line with your personal longer-term objectives. As always, a good adviser will be able to walk you through the complexities of the different investment options available and help you to design something that's right for you.
If this sounds like a conversation you'd like to have, then reach out on 07 3363 5800 or email@example.com and we can discuss your best path forward.
|Posted in: Investment Stock market||0 Comments|
The Australian and state governments have announced a number of concessions designed to boost cash flow for businesses that employ staff and purchase and depreciate business equipment. These concessions are available to businesses with turnover (gross income) up to $50 million.
Rather than repeat all the detail, we've summarised the salient points and provided a link to the government concessions.
The second fact sheet for economic reports to the coronavirus can be found at this link.
Boosting cash flow for employers
These are tax-free cash payments to your business bank account and are only available to businesses that actively employed staff as at 12 March 2020. The legislation has included integrity measures that prevent businesses from trying to manoeuvre into satisfying the eligibility criteria.
The only action required is to prepare and lodge your monthly or quarterly BAS, where gross wages and tax withheld are disclosed. In other words, no separate forms or submissions are required. The cash is then automatically refunded to your business bank account within two weeks.
Cash payments of up to $100,000 - $50,000 maximum spread between two designated time periods - for the periods between March and June 2020, and a second $50,000 for the periods June to September. You need to employ staff in both periods to be eligible for both payments.
Note, most employers won't receive the full $100,000, as the amount is calculated on PAYG withholding (disclosed as item W2 on your BAS form).
Even if you're not required to withhold tax, you're still eligible for $20,000 over the two time periods.
There are several examples in the government fact sheet explaining how the scheme would work for businesses lodging on a monthly and quarterly basis.
Payroll tax concession
Each state payroll tax authority has announced different concessions around deferring and reducing your payroll tax obligations.
Qld payroll tax information can be found at this link.
NSW payroll tax information can be found at this link.
Victoria payroll tax information can be found at this link.
Increased instant asset write-off and accelerated depreciation
These concessions relate to how asset purchases are deducted in your 2020 year-end tax return, and don't affect your immediate cash flow.
This relates to business equipment costing up to $150,000 (up from $30,000), purchased between 12 March and 30 June 2020. Unfortunately building work (such as an office or surgery fitout) does not qualify for this concession.
The tax office summary of this concession can be found at this link.
In respect to new assets purchased between 12 March 2020 and 30 June 2021, and not otherwise covered by the immediate write-off concession, an immediate deduction of 57.5% (rather than 15%) is available. To qualify, the asset must be new (not second hand) and be purchased and installed for use. Also, unfortunately, building work expenses do not qualify for this concession.
In relation to motor vehicles, you need to have a logbook to evidence business usage, and concessions are reduced for private usage and the luxury car limit.
The tax office summary of this concession can be found at this link.
If you think any of these concessions are available to you, and you have further questions, please don't hesitate to contact our office.
|Posted in: Tax||0 Comments|
Like everyone, I have passions outside of my family and work; perhaps the greatest of which is mountain biking. Most mornings I'll be on the trails of Mt Coot-tha with a great group of fellow addicts before sunrise - a chance to disconnect my mind, listen to my body and be one with nature.
This morning was no different, but after yet another 24 hours of volatile markets the slippery trail conditions seemed particularly pertinent to what we are all feeling.
What to do? Slow down, vary my line, tip toe through the hazards, or maybe just get off the bike and walk - I don't really need another coffee! Perhaps I should go faster, take a different trail, I think there is a shortcut along here somewhere, I might get ahead or make up some of the time I've lost.
If you ride, you'd know that any of these snap decisions would likely increase the risk of significant injury, and so it is with your investment strategy. The best strategy, assuming you do want the coffee at the end of your ride, is to commit to the line you know so well having ridden it many times before.
Difficult, absolutely - probably the hardest thing in life is make a decision to do or say nothing, but how often has it turned out to be the right choice in the end?
This is not to say you won't slip off your intended line, it might get a little "hairy" when the world seems to slip from under you, but this is not the time to panic. Rather a time to "rebalance" as many should consider over the coming days / weeks with their portfolios, so they remain positioned appropriately when markets turn.
If you haven't ridden this trail before, my recommendation is to make an appointment with a good financial adviser. Part of their job is to make sure that next time it rains you can commit to the line.
Unfortunately you will still slip from time to time, but the coffee will taste good.
|Posted in: Investment Stock market||0 Comments|
"When the facts change, I change my mind. What do you do Sir?" - Keynes
After a challenging week, which saw around 10% wiped from equity markets around the world, last night we saw a rally in many markets including the Dow Jones, which closed almost 1,294 points, or 5.1% higher. Not just the largest points gain in history but, more significantly, the highest percentage gain since March 2009. Have you noticed it really is all about the context?
So, while many of our clients are incredibly busy digesting, planning and preparing Australia's medical response, and the rest of us are busy emptying the shelves at Woolworths and Coles, after a difficult week, can we breathe a collective sigh of relief when thinking about our investments?
Unfortunately, I think we all realise the facts remain unclear and conjecture and emotion still fills the void in terms of the likely economic response of our governments and the final effect on earnings and growth.
Although the headlines this morning will likely appear much more positive, their main purpose will still be selling newspapers and regrettably informed by conjecture and emotion.
A "dead-cat bounce" is the term often given to what appears like the beginning of an upward reversal pattern that fails to continue and, eventually, returns to a downward trend that surpasses the previous low. I'll leave it you to decide if we're now viewing this event in the rear-view mirror or if we're merely at the end of Act 1 with more volatility to come.
As usual, it's been entertaining to read the advice of "expert" commentators. Among the loudest voices we've heard that it's a good time to "steer clear of stocks", or perhaps "a good time to buy", and, my personal favourite, "add to your portfolio, selectively", which I imagine translates into, "abandon your previous portfolio established on sound asset allocation and diversification principals and instead try a bit of opportunistic trading".
Personally, if you have a sound financial plan in place I think it's a very good time to do absolutely nothing but spare a thought for our infectious disease, emergency and other specialists who will likely be at the sharp end of this.
|Posted in: Investment||0 Comments|
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