What’s ahead? – Global Economy

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Can you believe it’s been almost a decade since the global financial crisis? Although the global economy is still in recovery all the political uncertainty in Europe and the US is certainly creating fresh confusion in the market.

So when did all the confusion start? In my opinion just over a year ago when Britain voted to leave the European Union – Brexit. From there we have had a barrage of surprises including:

  • The US election – President Donald Trump!
  • Emmanuel Macron winning the French Presidential election.
  • UK Prime Minister Theresa May gambling on a general election only to end up with a hung parliament.

That’s a lot of unpredictable outcomes for one year. As every investor knows, markets don’t respond well to uncertainty. So what can we expect in the months ahead?

Brexit Talks Begin

Brexit negotiations are finally underway. The process involves two stages – first there are the technical negotiations over who gets what in the divorce. This will be followed by crucial trade talks about the nature of Britain’s relationship with the EU and its 27 member states going forward.

As at April 2017, 47% of the UK’s total exports and 51% of imports were to and from the EU.* UK business leaders are calling for a ‘soft’ Brexit which would allow for the continuation of tariff-free trade in goods and services between Britain and the EU’s 27 members. But some conservatives are pushing for Britain to go it alone, or a ‘hard’ Brexit.

Whichever way the talks go, there are likely to be financial winners and losers. The early market response has been to sell down the value of the British pound and British shares, although a weaker pound is good news for companies with foreign earnings.

The market has responded more positively to President Macron’s victory and the success of his new party’s candidates in France’s June elections. Macron has promised market-friendly reforms to boost the sluggish French economy.

What about Trump?

The market’s early positive response to the election of President Trump has lost its gloss as key policy changes including tax cuts and infrastructure spending which were intended to boost economic growth now look in doubt.

With the focus on political uncertainty on both sides of the Atlantic, the US Federal Reserve’s latest rate rise barely registered on financial markets. The Fed raised its key interest rate for the third time in six months to a range of 1% to 1.25%, with one more rise anticipated this year. This signalled the central bank’s ongoing confidence in the slow but steady economic recovery.

Markets appear to be playing a waiting game, with no clear signal to push the US dollar or bond yields higher. After a record-beating run, US shares have held onto their gains but drifted sideways in recent months. The S&P 500 index rose about 18% in the year to June.**

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Sources: Bloomberg; MSCI; RBA

In our Backyard

Well, Australia’s record-breaking economic run continues. While growth slowed to 1.7% in the March quarter as the economy was hit by bad weather, low wages growth and slow consumer spending, it was a far cry from the recession some were predicting.

The residential property boom in Sydney and Melbourne is also cooling.*** In the three months to May, Sydney prices were steady while Melbourne prices rose just 0.7% . Prices in Perth, Hobart, Darwin and Canberra fell while Adelaide and Brisbane posted catch-up gains. While this is good news for homebuyers, it also gives the Reserve Bank more room to lower interest rates to stimulate the economy if needed.

In recent months, the Aussie dollar has traded around US75c but last week reaching over US80c . This is up from its low of US68c in January last year, but longer term the trend is likely to be down as the gap between local and US interest rates closes and foreign money looks for better returns elsewhere.

Australian shares have performed well, up more than 11% in the year to June.**** But to put this in perspective, along with the US market rise of 18%, French, German and UK shares rose around 27%, 34% and 22% respectively.***** In Asia, the Japanese market has been the standout performer with a rise of 29%.

What can we expect?

Despite political challenges and uncertainty, global share markets continue to hit new highs while, as the graph shows, local shares are below their pre-GFC peak. For local investors, Australian shares remain attractive for their yields but global shares are likely to continue to provide superior returns going forward.

If you would like to discuss your investment strategy in the light of current world political and economic events, don’t hesitate to give us a call.

https://www.uktradeinfo.com/Statistics/OverseasTradeStatistics/Pages/EU_and_Non-EU_Data.aspx

** All market figures as at June 27.

*** https://www.corelogic.com.au/news/multiple-indicators-point-to-softer-housing-market-conditions

**** http://www.marketindex.com.au/asx200

***** https://tradingeconomics.com/stocks

Tax Tips #1 – 2017

 

# 1 KEEP ACCURATE RECORDS

Do you come to the end of each tax year dreading the time it’s going to take to get your records together to lodge your return? Well, with a little bit of planning that can all change and now is the best time to start.

Whether you are an employee or self-employed, you need accurate records of your income and tax-deductible expenses for the financial year and simply retaining hard copies of receipts in a shoe box can prove to be a dangerous game. Imagine the horror when you go to dig out all your receipts for the accountant at the end of the year to find that some are completely blank . . . . oops, the ink just isn’t what it used to be!!

So, what records do you need to keep? All your income and allowable expenses relating to earning that income can be claimed. Let’s look at these now.

Income source includes your employment, government benefits you may have received, investment returns and business profits. It also includes any other income you may have earned throughout the year such as certain insurance proceeds, foreign income or shares you have received as part of an employee share plan.

If you are an employee, you will be provided with a payment summary (group certificate) after the end of the financial year (June 30). If you are running your own business, you will need to have your financial books to determine the net profit (or loss) of your business for the financial year.

When it comes to expenses, these are generally expenses you have incurred that are directly related to the earning of your income and can include:

  • Vehicle and travel expenses
  • Clothing, laundry and dry-cleaning expenses
  • Gifts and donations
  • Home office expenses
  • Interest, dividend and investment expense deductions
  • Self-education expenses
  • Tools and equipment

These expenses are generally deductible against your income which then reduces the tax you must pay. The best way of storing this information is electronically (ensuring you backup all your files regularly). Depending on your personal preference you could use folders on you home computer to do this or an app on your mobile phone. There are so many great apps out there but perhaps two of the more popular ones would be One Note or Evernote. There is an app that can be used with Evernote called Receipts by Tidal Pool Software that is worth a look. If using your home computer, I’d suggest creating a folder for the tax year and then sub-folders for the different categories outlined above. You can then start scanning and storing to your heart’s content.

I keep a pencil-case in my bag that I pop receipts into. Each month I then scan them all at once and file them. For you, it may mean scanning once a quarter, it really depends on how many expenses you may have. I promise you this, it will save you so much time and stress in the long run.

Happy EOFY – Tips

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With only 18 days to go until the end of the financial year there is still time to reduce your tax liability but you will have to act quickly. Here are a couple of strategies that could help to either reduce the tax you need to pay or maximise your savings:

Pre-pay your Income Protection Insurance

Did you know that if you pre-pay your income protection insurance before the end of the financial year you can claim the entire premium in this year’s tax return? It’s true, and if you need some extra deductions this year because of a higher than usual income this could be a great way of reducing your tax liability. On top of the tax deduction you will also be saving money by paying your premiums annually as insurers also offer discounts for annual premiums.

Claim a personal tax deduction for superannuation

If you are self employed or earning less than 10% of your total assessable income plus reportable fringe benefits and reportable employer superannuation contributions from employment you may be able to claim a tax deduction for all or part of your personal contributions to superannuation. This can be a great way to build your retirement savings while also reducing your taxable income. There are yearly age based limits on how much you can contribute which are $25,000 if you are 59 and under and $35,000 if you are over 60 years of age. You will also need to let your superfund know that you intend to claim a deduction before June 30 so please check with your accountant, tax agent, or financial adviser to ensure that the appropriate notice has been lodged and check if you meet all the conditions.

Spouse superannuation contributions

You may consider making a contribution to your spouses superannuation. If you do you may be entitled to a maximum tax offset of up to $540 for the financial year. There are various conditions that must be met in order to claim the deduction with the full deduction available on assessable incomes of $10,800 or less reducing to nothing at an assessable income of $13,800. This makes it a great strategy for those with a partner on a low income.

Co-Contributions

Have you heard of this one before? If you earn less than $48,516 in this financial year this is something to seriously consider as the Government is giving money away which doesn’t happen very often. I bet your dying to hear how this works . . . quite simply if you earn $33,516 or less this financial year, the government will contribute into your superannuation fund (tax free), $0.50 for every dollar that you contribute to super up to a maximum $500. So, if you contribute $1,000 into super before the end of the financial year the government will contribute $500. If you contribute $300 the government will contribute $150. That’s money for jam!!

For incomes above $33,516 the rate of contribution will decrease until it cuts out at $48,516. There is a great calculator you can use on the Money Smart website https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/super-co-contribution-calculator  to determine how much co-contribution you are entitled to, give it a go.

Happy EOFY!!

 

Tammy

 

The information provided is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from an adviser.

 

Happy EOFY – Tips for property investors before its too late!!

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Wowsa!! Can you believe that it is the end of financial year in just 18 day? How time flies . . . . if you are a property investor you still have time to make the most of a clever strategy to reduce your tax bill this year. Want to know more? Please read on . . . .
Have you ever heard of interest in advance? It’s a strategy that allows you to pre-pay the next year’s interest on your investment loans in advance. That’s right in advance!! It is only available on fixed rate investment loans and the conditions of these loans do vary between different lenders but it is a strategy worth considering.
There are several reasons why paying interest in advance can be a benefit for investors. The main reason is usually to gain tax benefits. It works by paying the interest that will be accrued in the following financial year (FY2014/2015) in the current financial year (FY2013/2014) and offsetting it against income earned in the current financial year (FY2013/2014). By why would you do it? Well, if an investor’s income was unusually high during the financial year or if a lower income is expected in the next financial year tis could be a good reason in order to maximise your tax deduction.
Lenders will also often incentivise clients to pay interest in advance by offering them a discount which results in less interest being paid overall. For investors looking to simplify their finances, by paying interest in advance, especially on an interest only loan, they can eliminate the need for periodic payments throughout the year. In terms of budgeting, paying interest in advance means that investors can enjoy a discounted fixed rate for the whole year, regardless of rises or falls in interest rates.
The interest in advance option is available to both new and existing investment loan clients. If you are considering it for yourself please consult a financial adviser to make sure that it suits your individual requirements.
Another way you can reduce your tax liability is to bring forward expenditure to before 30 June, if you are planning on repairs on your investment property. Care should be taken in determining whether a maintenance or repair is deductible or if it is considered a renovation or of a capital nature. Please consult a tax agent to make sure the work you are planning is deductible.

Hold the phone . . . My insurance is costing me what?

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An interesting finding came out today from a leading life insurance provider which I couldn’t resist writing about as it’s something that is close to my heart. They found that the highest peak of ‘living insurance’ (income protection, trauma, and TPD) cancellations were between the ages of 45 – 50 years of age and that a high percentage of these clients were suffering from a claimable event only 1.5 years after their policies were cancelled.

This to me wasn’t a huge surprise, more often than not clients are placed on a stepped premium structure to make the premiums more affordable initially. But this short-term affordability may be hurting your wallet more than you know. . . granted, stepped premiums are cheaper than level premiums initially but these premiums increase each and every year, sometimes by extraordinary amounts as you get older and more likely to claim.

I’ve completed a comparison on a 30 years old male, non-smoker who takes out $250,000 of trauma cover on both stepped and level premiums and you will be stunned to see the increases in premiums. It starts out nice enough with year one being only $48 a month for stepped and $81 for level. “Wowsa”, you may say “That’s an incredible premium for level!”. But you need to look longer term, level premiums can have small increases from time to time but they are negligible when compared to the increases in stepped premium and would only happen perhaps once every couple of years if at all (depending on the policy). When you compare the same individual at 10 years the premium for stepped is now more than level at $99 a month. At 15 years (the magic 45 years of age) the premiums has almost doubled in just 5 years and is now $175 a month. Is it any wonder that most cancellations happen at this age? I did leave the best to last for you, can you believe that at age 60 the premium on stepped is a staggering $1,003 per month or $12,039 per year.

The whole idea of insurance is having the right cover at the right time. When it comes to personal insurance you are protecting the most important person when it comes to accumulating wealth for your retirement and your family . . . . ‘YOU’.  Consider level premiums for all or part of your cover to ensure that you do have the RIGHT cover at the RIGHT time.

Contact me for a complimentary review of your insurances today. Are you paying too much?

Tammy

tammy@oxleybridge.com.au

Do you have the budget blues?

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The 6 letter word that makes you duck for cover. We all know we should have one but how many of us actually do? Are you living pay day to pay day counting down the days until the next instalment? Credit cards spiralling out of control as you struggle to make ends meet? or, do you simply have no idea how you are going and just flying on a wing and a prayer hoping that it will all just work out?

If you answered yes to any of these than a budget can quite simply change your life. Even if you are making more than you spend a budget can make a huge difference to your overall financial health by putting your hard earned cash to work for you rather than throwing it away on the latest shiny new ‘thing’.

So why do you need a budget? Let me count the ways . . .

 

1. It will ensure that you don’t spend money you simply don’t have 

After my last blog I think we all familiar with Generation X’s love affair with debt so this point may be hitting home for many. The problem with plastic is that many people aren’t even aware what they are overspending on their cards until they are literally drowning in debt. The good news is that if you create and stick to a budget, you’ll never find yourself in this precarious position. You’ll know exactly how much money you earn, how much you can spend and how much you need to save – Perfect!! I know that keeping track of a budget isn’t nearly as much fun as going on a shopping spree with your Visa Card. But would you rather be going on that dream holiday or putting a deposit down on that home you’ve been saving for or making an appointment with a debt counsellor this time next year? l know which one I prefer. 

2. It will help you identify your ‘bad’ spending habits

Are you guilty of throwing your hard earned cash away? Building a budget forces you to take a really close look at your spending habits. When you do this you may notice that you’re spending money on things you simply don’t need. If you are really honest with yourself, do you honestly watch all the channels on your Foxtel subscription? and, do you honestly need that new pair of shoes? Budgeting allows you to rethink your spending habits and re-focus on your financial goals.

3. It will help you prepare for emergencies

Life is filled with surprises, some better than others. If you lose your job or become sick or injured it can lead to some serious financial stress. Often these emergencies arise at the worst possible time – when you’re already strapped for cash. This is exactly why everyone needs an emergency fund of at least 3-6 months of living expenses.

This extra money coupled with income protection insurance will ensure that you don’t spiral into the depths of debt after a life crisis. To get started set yourself realistic goals and start small. Even if you can only save as little as $10 – $30 each week, your emergency fund will slowly build up. You just need to start.

4. It sure beats counting sheep

Are you tossing and turning at night worrying about how you are going to pay the bills? Following a budget will give you back some control, see a way out and give you more of that blissful sleep you are yearning for.

 

Some pretty compelling reasons to get started don’t you think? But where do you start? The first step is to put aside an hour of your time to work out where exactly your money is going right now. You will need the following to help you with this part:

  • A budget planner
  • Bank Statements (personal accounts and credit cards)
  • The last copies of your bills (if you don’t pay them online)

Given that our salaries go straight into our bank accounts and the ease of paying bills on line, its easy to get all the information we need from our bank statements. Keep in mind that some bills are quarterly so you may need to go back 3 months to see how much you are paying for gas for example. If you are a cash is king kind of person then you may also need copies of your bills that are paid for in cash as well to build your budget.

There is a great simple budget planner available on the Money Smart website which can be found here:

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/budget-planner

If you are like me and like to be able to customise your input then I also have an excel spreadsheet that I have developed just for you. Send me an email and I’ll be sure to get it to you: info@oxleybridge.com.au

Once you are up and running its important to then keep track of your day to day expenses to ensure that you stay on track, there are lots of apps out there that you can use such as Good Budget and Track my Spend which are available on both iphone and android. Try them out and see which one suits you best.

And lastly, be sure to follow me on my Facebook site Oxley Bridge Advice. Like the page and you’ll be sure to never miss any of my financial tips.

https://www.facebook.com/pages/Oxley-Bridge-Advice/1399426776988526?ref=hl

Tammy

 

 

 

 

 

 

Talkin bout my generation

British Band 'The Who'

I know what you are all thinking, “Great song!!” released by The Who in 1965 right on the cusp of Gen X and a true classic. When I think about my generation – Gen X, I think of records, VHS, Donkey Kong, microwave ovens, spiral perms and Hyper Colour T-shirts.

Growing up in the 70’s and 80’s I also vividly remember the recession. It hit in the late 80’s resulting in high unemployment, 17.00% mortgage rates and a falling property market. There is no denying that times were tough, really tough.

So what do the experts say about Gen X? Well, they often refer to us as the lost generation. Lost because more often than not, both parents were working to make ends meet. Long day care centres were full to the brim and many children (from very early ages) were coming home from school to an empty home. With the financial pressures placed on families divorce was also on the up so there were many single parent families.

Toady we are characterised as being incredibly sceptical with a ‘what’s in it for me’ attitude and some say that we had the worst music ever of which I totally disagree. On a positive note we were the best-educated generation at that time with 29% of us obtaining a bachelors degree or higher.

So what does all this mean for Gen X from a financial perspective? Well, the greatest issues facing Gen X is debt and as a result a lack of savings. According to a survey by RaboDirect, Australians aged 30-50 are the least financially secure and are struggling under a mountain of debt. When you also consider that Gen X makes up 40% of the Australian population this is a huge problem.

The survey found that one-third don’t have enough emergency money to last more than 2 months should they lose their income and one-third only just manage to make ends meet payday to payday. A whopping 40% say that their financial situation has worsened during the past year.

Why is this so? Why have we made such a mess of our finances? Experts say that we have quite simply overextended ourselves. A lack of control has resulted in over spending, 40% of Gen X’s said they would use their credit card to purchase an item they otherwise couldn’t afford. A similar amount also said that they would find it difficult to meet their current credit obligations. These competing financial priorities are making it impossible for us to balance our books plunging us further and further into debt.

With this in mind over the coming weeks I will be providing some useful tips and information to ensure that you don’t find yourself in the same predicament or, if you are there now, provide a lifeline to help you get out of it.

Today, I am going to start at the very beginning and talk about credit reports. Last month there were changes made to the way that our credit history is being recorded and reported that everyone needs to be aware of. The changes officially went live on the 12th March but the collection of data actually began in December 2012. The biggest change has to be that under the old regime banks were only required to report late payments that were more than 60 days late; this has now changed to 5 days. In practical terms this means that if you forget to pay your credit card and make the payment 6 days after the due date this will be recorded on your credit report as a payment default and will remain there for 2 years.

Now, when a lender does a credit check on you they will be able to see a lot more information than before. The additional information includes:
• Account open date and close dates
• Type of credit account such as a credit card or personal loan
• Credit limit. This is the maximum amount of credit available to you for an account. If you accept a credit limit increase the new credit limit could be included on your credit history.
• Monthly repayment history on credit accounts such as mortgages and credit cards. This will reflect whether you paid the minimum amount required on your financial commitments each month on time or not.

There has been a lot of talk about how this information may be used when assessing credit applications. It could be that if you have a number of late payments you may be offered a higher interest rate than someone that has a clean credit history. We will have to wait and see.

Here are some tips to ensure that your credit rating doesn’t suffer.
1. Pay your bills on time – If you tend to forget when your bills are due set up direct debits so that you never have to worry.
2. Keep credit to a minimum – Only apply for credit if you really need it.
3. If you are having some financial troubles talk to your lender. You will be surprised with how helpful they can be.
4. Know your credit history – you can get a free copy of your credit report from any credit-reporting agency. I recently got a copy of mine from Veda. Here is the link to the free report http://www.mycreditfile.com.au/home/free-credit-file.dot

This is just the first step to gaining control of your financial situation. Over the coming weeks I will be covering off on more useful tips so stay tuned for more.

Tammy