THE ONE
First edition 2014
What’s out now,
the new Government is in?
After winning office last year, Tony Abbott and the Coalition Government are determined to wind back a
number of Labor’s initiatives. Let’s take alook at what they are proposing to do with respect to personal finances
Tax rates
The new tax rates that were proposed
to change on 1 July 2015 under Labor are
no longer going ahead. The proposed
changes include an increase in the tax-free
threshold, from $18,201 to $19,401. This
would have been offset by increasing the
32.5 per cent tax rate to 33 per cent. Instead,
under the new Government, the existing
tax rates will remain as shown in the
following table, however, from 1 July 2014
the Medicare levy will increase from
1.5 per cent to 2.0 per cent.
Taxable income
Marginal tax rate
$18,201 – $37,000
19% + Medicare levy
$37,001 – $80,000
32.5% + Medicare levy
$80,001 – $180,000
37% + Medicare levy
$180,001 and over
45% + Medicare levy
Tax on income within an
account-based pension
Currently account-based pensions
are tax free, however, under Labor,
it was proposed that a tax rate of
15 per cent be applied to Investment
earnings over $100,000 in account-based
pensions – just like super money in the
accumulation phase. The Government
has decided this is too much of an
administrative burden and has stated that
this proposal will not be implemented.
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Increases to superannuation
guarantee contributions
Labor had legislated to increase
superannuation guarantee (SG)
contributions over the next seven years
to 12 per cent. We are unlikely to see the
SG rate go to 12 per cent before 2021.
The current SG rate of 9.25 per cent is
set to stay until 30 June 2016 and increase
to 9.5 per cent from 1 July 2016 onwards.
Education expenses
There had been a proposal to cap
self-education expenses at $2,000 per annum.
While this was primarily aimed at those
going on unnecessary overseas conferences,
it unwittingly caught some occupations
where self-education legitimately exceeded
$2,000 per annum (such as nursing).
The Government has made it clear that
this cap will not be implemented.
Sale of the family home
It had been proposed that, if you owned
your home for more than 25 years and sold
it whilst receiving the age pension, then
$200,000 from the sale of your home would
be exempt under the income and assets
test. This proposal was never legislated
and now looks unlikely to become law.
This is not an exclusive list of all the
wind-back measures and may not be all
the changes we see. Speak to us to find
out how any of these or other changes
announced in the future could impact you.
In this issue...
• What’s out now the new
Government is in?
• Money doesn't
grow on trees
• Avoiding the
urge to splurge
Money doesn’t grow on trees
Children certainly don’t come with an instruction manual. From the time they’re learning to crawl parents
begin teaching their children about right and wrong, personal safety, manners and morals. Over time,
children are taught about stranger-danger, healthy eating and personal accountability. Interestingly however,
many Australian parents leave out one of the most important ‘survival skills’ their children will need into the
future - how to take care of themselves financially.
Earning, saving and sharing
Teaching children about how to manage
their personal finances from a young
age will have a profound impact on their
attitude to money in the future.
We certainly teach our children about
spending money, but making this the only
facet of money management they are
exposed to is frought with danger. Exposing
children to the emphasis of buying can
come at the expense of other important
money skills that children need to learn –
earning, saving and sharing.
It’s more about character
than coin
Giving children the skills to control their
finances is not only beneficial in their
financial wellbeing - it also contributes
to the forming of their personality and
other unique attributes. The lessons on
self-control, conviction, resourcefulness,
contentment and compassion are
all valuable in shaping a well-rounded,
socially aware and responsible person.
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Do I look like an ATM?
In this age of online banking, and plastic,
it’s difficult for children to understand
the value of transactions because all they
see is you giving a card to a salesperson
and then being handed the goods.
Where to start?
The Government-sponsored Financial
Literacy Board is piloting a new education
program (you can visit the website,
www.teaching.moneysmart.com.au)
that will integrate the teaching of money
management skills into English and maths
classes in Australian primary schools. Whilst
this is a positive initiative, the child’s attitude
starts to form before they start their
education, so there are some simple things
you can do to put them on the right track.
1. Let your children watch you do online banking so they can
see how you manage money each month to pay for recurrent
and unexpected living expenses.
2. Encourage your children to play ‘shop’ at home.
3. Let them help put coins in the parking meter
4. Explain the reasoning behind your budget and how it helps
the family to take holidays or go to the football.
5. You may want your children to earn their pocket money by
doing age-appropriate things around the house, like watering
the plants or setting the table. You can then have them save
some of the money to create a savings routine from an early age.
6. For teenage children, you might raise the prospect of setting
up a trust in their name through which your child can invest
some of their savings in a managed fund or shares. This can be
a daunting task for a parent and it may be useful to talk to one
Talk to your children about money and keep talking to them about
it as they grow. The lessons learned will stay with them for life.
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Avoiding the urge to splurge
It doesn’t matter how much money you have or make, sometimes it just doesn’t feel like it is enough.
When you create and stick to a budget, at least you know how much you actually have and you can
avoid that urge to splurge.
Budgeting shows you where you are
financially and helps you map out a path
to where you want to be. By creating
a budget and setting aside a few minutes
a week to keep track of your money,
you will be able to:
• make informed decisions about what
to do with your money
• figure out what changes you should
make in your spending habits
• start getting into good saving habits.
Step 1 – track what
is coming in and out
The first thing to do is figure out what
money you have and where it goes. Try
to keep a diary of your expenses and your
spending for a couple months. This will
enable you to calculate where your money
is and how much spare cash you have after
everything is paid.
Your payslip is a great place to start when
looking for the money you make. Be sure
to check out any other sources of income,
such as Centrelink bebefits, rental income
or money from relatives. Your income
could be periodical or come in chunks,
so it might be easiest to average your
monthly income.
you have such as credit card bills, rent
or mortgage payments, and grocery
bills. Don’t forget items that pop up
unexpectedly such as holidays, birthdays
or insurance premiums.
Step 2 –
manage your budget
Step 3 – make goals
and stick to them
Regardless of whether your budget is
in the red or in the black there are things
you can do to be thriftier. Some easy ways
to reduce your spending are:
It is time to get your money to work for
you by making financial goals:
• Find small, non-essential items you can
cut back on. What can you do without?
• Are there any direct debit payments
which are being paid without you
actually using the service? This could
be an old internet provider or a gym
you don’t go to any more.
• Check out your interest rates. Is there
shop around for a better deal?
• Can you get a better deal on your
services? Sometimes switching your
phone, mobile, gas or electricity can
provide you substantial savings, it helps
to look at all your options.
• Can you pay more than the minimum
on your debts? Whether it’s personal
loans or credit cards, paying the
minimum will hardly make a dent as
If you’re having difficulties repaying
your debt, speak to your lender. Whatever
happens, don’t ignore the problems.
By being open and honest about your
financial difficulties with your lender,
to review your repayments and look
at other solutions to help you out.
Disclaimer
This newsletter is for information purpose only and does not constitute advice and does not take into account any of
your objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product,
you should obtain and read the product disclosure statement. Neo Financial Solutions: AFSL 385845 ABN 64 141 607 098.
• Short term goals – make them
achievable in a realistic timeframe.
They could be as simple as paying off
your credit card or saving up for a family
holiday. Make sure you reward yourself
when you have achieved them.
• Long term goals – these can be harder
to achieve as they seem so far away,
but look at goals such as saving for
a deposit, paying off your mortgage
quicker or saving for your retirement.
• Expect the unexpected – it is a good
idea to put some money aside for
emergencies or unexpected events.
You could aim to save enough to cover
the cost of replacing an expensive
household item, but a lot of people aim
to have three months’ pay saved up.
Once your goals are made, stick to them.
But don’t beat yourself up if you slip up for
a month or two; simply reassess your goals
and get back to them.
Step 4 – speak to
a professional
We are always here to help. If you feel that
you are in over your head and or just want
to get a step up with your finances, speak
to us about how we can help you create
a financial strategy that will help achieve
your financial goals.
NEO Financial Solutions Pty Ltd
90 Edward Street
Perth WA 6000
Phone: (08) 9227 1472
Email:
[email protected]
www.neofs.com.au