Written by Hudson Adviser Kris Wrenn
It’s fairly common news now what we can expect NOT to happen after the unexpected re-election of the Coalition, with respect to negative gearing, CGT, franking credits, etc.
But what CAN we expect from the Coalition based on recently legislated and proposed Bills?
INCOME TAX CUTS
Some of this is legislated and some proposed. In the 2018 budget we saw a range of cuts proposed, between then and 2024. For the current financial year the second tax bracket of 32.5% has been extended out from $87,000 to $90,000. For the 22/23 and 23/24 FY however most brackets are set to change, with the 19% rate extending out from $37,000 to $40,000 and the 32.5% extending from $90,000 out to $120,000. From the 24/25 FY a huge change is planned, with effectively a removal of a tax bracket and anyone earning between $41,000 and $200,000 will pay a marginal tax rate of 32.5%.
Note that all of the above is now legislated, however they have now proposed that the $41,000 threshold in tables 2 and 3 increase to $45,000 and the 32.5% tax rate in table 3 decrease to 30%.
Additionally to the above, in the April budget they introduced the “Low and Middle income tax offset”, which would provide up to an additional $530 to low income earners, which reduces as you earn more, and becomes nil once you earn $125,333. This is legislated, and they have since proposed to increase the “benefit” to $1,080 from $530 and have it phase out at $126,000.
So in summary, we are talking income tax cuts across the board already legislated, with further cuts now proposed.
COMPANY TAX WRITE OFFS
Already Legislated – Instant tax write off for small businesses up to $20,000, set to rise to $25,000 next year and $30,000 the year after.
As per last years budget, the coalition will continue its plan to allow “catch up” concessional contributions. This is whereby if you haven’t used the previous financial year’s $25,000 contribution limit, you can use it the following year in addition to the $25k for that year. This will now be available from July 1st and any unused contributions from 18/19 can be contributed in 19/20.
Work test requirements to be pushed out to age 67. Reminder that the work test is whereby after the age of 65 you need to work 40 hours in a consecutive 30 day period in order to contribute to Super. This has been brought in to reflect the fact that the age pension age has increased from 65 to 67 and for mine, is a welcome change allowing a bit more flexibility.
Likewise, the use of the bring forward rule will apply to those aged up to 67, instead of 65. Another way of putting it is that you need to be aged 66 at some stage of the financial year in order to use the bring forward rule in that year.
Possible related changes – Given that the work test is to be pushed back to age 65, there is the belief that other aspects of Super relating to age 65 may also be pushed back. For example, the “condition of release” that is turning 65, may be put back to 67. Similarly, regards the downsizers rule allowing a $300k contribution if you sell the family home – currently it is only available to those over 65. Will this become 67 also?
Spouse contributions – age of eligibility being extended from age 69 to age 74.
Insurance to be cancelled for inactive Super accounts – as per our recent one-off publication.
Super exit fees banned.
FIRST HOME DEPOSIT SCHEME
The Government is set to “guarantee” loans for first home buyers, and further more that no lenders mortgage insurance will apply. Eligibility requirements include the fact that you must save a 5% deposit. You will need an individual income of under $150k or combined income (with spouse) of under $200,000. Finally, the value of the properties will be capped to a level not yet specified. The cap will be regionally done, i.e. higher value allowed for Sydney, etc. Interestingly the Government is saying that the number of people allowed to do it will be capped at 10,000, so presumably they will be working on a “first come, first served” basis. This kick starts on 1st January 2020.
As well as additional funding from the Government they intend to try and simplify the means testing forms for those entering an aged care facility.
LAPSED BILLS gone by the wayside due to the election
SS not to affect SG – Currrently, believe it or not, if a person earns $100k and salary sacrifices $10k, the employer only technically has to pay Super Guarantee (9.5%) on the $90k. This was due to be prevented but the bill has lapsed, and it is suspected this proposal will be reinstated.
NON RESIDENTS CAN’T USE CGT exemption – currently, if a person goes over seas they can still use the 6 year rule and sell their old PPR CGT-free within a 6 year period. This allowance was set to be removed for non-residents and the bill has now lapsed and it is unsure if it will be re-instated.
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Written by Hudson Adviser Ivan Fletcher
If this does not impact you it may impact other family members or friends, so feel free to pass this article on.
SAVE YOUR INSURANCE BEFORE 30 JUNE 2019
Under new superannuation laws, which start on 1 July 2019, super funds must CANCEL (WITHOUT DELAY ) your insurance cover if no money has been added to your account (e.g. a contribution or rollover) for 16 continuous months, unless you let them know in writing that you’d like to keep your insurance. The intended purpose of the new super laws are to make sure super members do not pay for more cover than they need? need (or perhaps have never really elected to have in the first place), in order to give your super the best chance to grow.
My CONCERN – With this Sweeping Legislation
The unintended consequence can be that a member with a deliberate and intentional insurance policy (Death Cover, TPD or Income Protection) within their super fund could have this CANCELLED effective 30 June (1 months time) if the super fund in question has not received contributions in the last 16 months.
There could be several reasons why you do not have recent contributions to a super fund. One that is common is someone who has only retained an old super account for the existing insurances but has the lions share of their balance plus all current contributions going to another preferred super fund.
The point is – the New legislation could have unintended consequences by causing your super fund to cancel your insurance and the onus is on YOU to act before 30 June to ensure it is kept active.
Low Risk - If your insurance is in the same super fund that receives regular contributions (e.g. employer or personal contributions every month or every quarter), then it is highly unlikely you are at risk as you need a 16 month absence of contributions to trigger the cancellation of your insurance (bear in mind that this can happen at any time in the years to come if you suddenly have an absence of contributions).
High Risk (non working spouse) – If you are currently not working due to family duties (example on maternity leave) then you could easily travel 16 months without contributions and thus your Super fund would be forced to cancel your insurances (unless you OPT IN).
High Risk (multiple funds) - If you have multiple super funds but only one receives contributions, then you are High Risk of having any existing insurances in your dormant super funds cancelled.
High Risk (Self employed) – If you are genuinely self employed (ie do not receive any wages) and are not legislated to pay yourself super regularly, in leaner times of your business, optional super contributions may be cut to nil as your ride out the lull in your business. After 16 months, of abstaining from voluntary contributions, you will lose your Insurance (unless you OPT IN).
What is Your Super Fund Doing ?
As per Legislation requirements your super fund should have communicated in hard copy to you via your MAILING ADDRESS in April, warning you that from 1 July 2019, they may cancel insurance cover on accounts that have been inactive (i.e. no money has been added via contribution or rollover) for 16 continuous months.
Does Your Super Fund Have Your Current Mailing Address ?
If they can’t reach you, then they can’t warn you.
What You Need To Do ?
1. I highly recommend you check to see if you have any super funds that are idle or passive/inactive from a contribution perspective that also has some form of insurance policy within the super Fund.
2. Once identified, contact those super funds to OPT IN to keep your insurance (if that is your preference).
You only have to do this once (not every year). Every super fund will have a method (hard copy form or via login) for you to communicate your intention to Opt In.
You can of course review your level of insurance cover and reduce it at any time.
The purpose of this email is to avoid UNINTENDED CANCELLATION by your Super Fund upon 30 June.
Small Balances Transfer to ATO
Accounts which have been inactive for 16 months and have balances of less than $6,000 and DO NOT hold insurance, may be transferred to the Australian Tax Office (ATO) starting from October 2019, subject to some exceptions. The ATO will now be required to consolidate transferred monies to an active account within 28 days of being satisfied it is possible to pay that amount to an active account.Read in full + comments 0 Comments
Written by Hudson Adviser Phillip McGann
I have attached the most recent Morningstar Long-term Asset Class Returns list up until 30 April 2019 and it – as always - makes for interesting reading.
We have highlighted this list previously in the Hudson Report and for good reason.
It underlines one of our central premises of the importance of “Time IN the market and not Timing OF the market” to secure long term success in investing.
Some pertinent points from the table:
1) Australian Shares have underperformed International shares over the past ten years but not over the past 25 years. As the world has globalised and certain sectors of modern society – technology and advanced healthcare – have become more and more important the dearth of Australian listed companies in this sector has impacted our longer term returns. This is likely to continue as the local market is still very much concentrated in financial and resources sectors.
2) Cash returns over the three decades appear respectable in comparison to the more volatile share market returns – but the current zero or negative official rates in many countries of late and for the foreseeable will likely dial this return way down as recent returns illustrate.
3) A-REITS (or the old Listed Property Trusts as they used to be called) are a long term sustainable performer. In their most simple guise of being landlords on commercial property they are arguably a lower risk inclusion in many portfolios. What sent many in a major tailspin during the GFC (as shown up in the historical drawdown section of the table) was the financial engineering that combined being landlords as well as major developers of property. That all came undone when the global recession hit, banks called in loan covenants, occupancy fell and many over indebted developers collapsed or were forced to raise capital at extremely low share price levels. In this sector if you stick to the “simple model” the returns can be sustainable and attractive over the longer term.
4) Infrastructure has matured as a sector of the past decade as the third world modernises and the first world rebuilds old assets as huge amounts of capital (with large doses from private sources) is pumped into providing major capital intensive assets such as airports, railroads, ports and telecommunications. This sector has performed very strongly and consistently for the past decade and should be an inclusion in all investors portfolios at all life stages.
5) Hedge Funds are often not worth the fees they charge when compared to traditional asset classes and they are so difficult to decipher which will work out and which will still be here in 10 years time.
6) The historical drawdown figures are very sobering and reinforce the central premise above that you need to be invested for the long term. There is a very strong argument that younger investors – particular when it comes to Super which is so restrictive in its access – should invest primarily in growth assets for the many decades they will be invested. Yes there will be massive pull backs but also there will be recoveries and as these figures show. Over the longer term even the slight difference in returns will make a massive difference in actual retirement dollar amounts.
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I want to put those fears to rest and encourage any pet owner not to hesitate – go forth and enjoy an extended holiday with your loved friend. You won’t regret it and for many it will make the holiday so much more enjoyable. Afterall they are great company.
Like everything with RV’ing a compromise is often called for. By this I mean; whilst there are now many caravan / holiday parks that welcome pets - National parks do not.
But don’t let this put you off. We spend 4 years travelling with ‘Teddy’ our miniature Schnauzer and never missed out. Australia is a big place with so much to see even if you do miss a few National Parks.
But for us, when it came time to explore a famous National Park we looked for the closest campsite that permitted animals (be it free camp or paid park) where we knew there would be other pet owners. A social visit was all it took to arrange for a pet sitter, in return we did the same for them the next day. Easy…and we made a new set of friends in the process.
Vets: Quite often local vets allow you to leave your pet for short term boarding if there are no other options in the area. It’s definitely worth making a phone call if there’s vets in the area and you can’t find an alternative pet sitting service.
Now that you are convinced here are a few pointers to ensure your trip is a success.
Before you leave:
- Ensure your pet is fully vaccinated and its registration is up-to-date
- Have your pet Microchipped – the best way to identify a pet that goes walkabout
- Put your pet’s name and your mobile number on a name tag attached to their collar
- Ensure you have the appropriate equipment to transport your pet
- Make sure you pack everything your pet will need for the duration of the trip, as you may not be able to buy the products when travelling in regional areas.
Items to pack for your pet:
- Vaccination papers – very important if you want to leave your pet at a boarding kennel for a day, E.g. National Park visit where pets are not permitted. Kennels may refuse to take your pet if you are unable to provide proof of vaccinations.
- Food, water bowl and treats
- Grooming equipment, such as clippers, brushes, shampoo
- Toys, blankets (coat if required)
- Plastic bags or ‘Pooper Scooper’ to clean up after your pet and keep Australia beautiful
- Collar and lead – a pre-requisite of caravan parks
- Any medication your pet might require
- Sleeping bed, folding kennel.
Sleeping mate: Not everyone wants to have their dog sleep inside. An RV can be a cramped space for two without a four-legged friend claiming territory, not to mention their smell will permeate your living space for years to come – not good for re-sale. And pet hair is a bugger to remove.
A portable kennel is an alternative to consider. Our Teddy never once came inside, she hated it. In summer she slept on a folding travel bed which kept her off the floor and in cooler or wet days I initially made a kennel from a cardboard box to put over the bed – A frame design worked best. Easily replaced, free and warm (paper is a good insulator). Both these options pack flat and are lightweight.
We then moved up to an aircraft carry case (the type use to carry pets’ onboard planes) these split in half for packing, have air holes along all sides and a locking door that can be easily removed. Throw over a tarp and you have a waterproof house that will be loved by Fido. It doubles up if you need to fly home for any reason.
Reminder: All RVs have weight limits and pet accessories all add up despite what you think they only need the basics to live well.
While travelling, look after your pet:
- Take enough water for them for the journey
- If you are taking your cat or bird, which traditionally do not like to travel, place a blanket or cover over their carry cage in the car, as this can help to keep them calm.
- Make sure they do not overheat or get too cold
- Make regular stops to exercise your dog during long journeys
- NEVER leave your pet inside a car – even on cool days. Leaving the window open can still overheat your pet with potentially disastrous consequences.
During your stay at a caravan / holiday park, make sure you:
- Respect the park’s regulations and be considerate of your fellow guests – don’t allow your pet to dominate the space.
- Always pick up any dog droppings
- Always Keep your pet under control, as much as for their safety as the safety of those around you.
- Barking dogs are not easily tolerated so do the training before you leave
With proper planning, your pet will enjoy their holiday as much as the rest of the family!
On the road, it is important to keep an eye on your pet, some animals react differently to travel and without proper care it can cause them distress. If you are planning to take them on a long car trip, it might be worthwhile taking them on a few day drives to monitor their behaviour first. Dogs can get car sick just like us. Talk to your vet if they show signs of this.
Restraining your pet is law in many states. There are now seat belts for dogs who should always travel in the back seat or tray area – never in the front seat or on your lap. A seat cover or travel hammock are a great invention: Check this one out:
Going it alone. If this it is still not for you or you don’t want to miss anything (activities, National parks etc.) then consider leaving your loved one at home with a house/pet sitter or friends.
House sitting is a great service, your pet remains in their home feeling a lot more secure than at a kennel. They soon adapt to a new carer which is peace of mind for owners. The bonus your house is also secure.
Dogs don't have a good perception of time and they don't forget you. You get the same reaction from them when you return whether you are away for a week or for a year! So, go and enjoy your trip travelling Australia and your dogs will still love you when you get home!
Time to Hit the Road
Now you have all the facts, its time to start planning that long-awaited trip. If in doubt start off with a series of weekend adventures to caravan parks close to you, going further afield the next time. It won’t take long to know if you and your pet are travellers inching to follow the sun come winter time.
What are you waiting for – just do it!
This article is an extract from Chad’s RV Newsletter ‘Aussie Life On Wheels’ which, thanks to Hudson Financial Planners, you can grab your FREE copy by clicking this link: www.AussieLifeOnWheels.com/free-issue.html
Here you will find additional informative insights, invaluable tips, lots of laughs and exciting places to visit. An entertaining read and a useful tool for all Caravan & Motorhome owners and would be owners.
Chad and his partner are veteran caravaners. (10 years into a 2-year trip around Australia!). Chad has spent years researching vans and equipment, knows most of the ins and outs of living on the road and how they earn a living from their van.
They are also long-term clients of Hudson Financial Planning.
- The All Ords is currently (30th May) 1.7% up during the month of May. Coincidentally this is roughly how much the market picked up the Monday following the general election. The gain was predominantly led by the big four banks and private health insurers, and is to be expected given Labor’s proposals relating to limiting negative gearing, possibility of higher bank levies, tougher restrictions on mortgage brokers, etc. etc. The rise represented an 11 and a half year high on our market.
- Over in the States, it has been a very different story, with the Dow Jones falling nearly 6% across the month of March. This has been off the back of bond yields continuing to decline and triggering concerns about the economic outlook for the US. Rising trade tensions with China hasn’t helped matters. The US market now sits roughly where it was at the start of February, where Australia has enjoyed about a 10% rise.
- The $AUS has fallen steadily throughout the month of May from around 70.5 to just over 69c to the $US.
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