Six steps to mastering your debt successfully

Posted on June 19, 2024 by Arrowroad

With Australian households being one of the most indebted in the world, this article explains six key steps to quickly get your cash flow back in the black.

Australian households are the fifth most indebted in the world, according to data from the OECD1. Based on their research, a household with a disposable income of $100,000 has a debt of approximately $203,000. With rapidly rising interest rates and rampant inflation, the cost of living will only continue to escalate.

Home loans, credit cards, car loans, and personal loans all contribute to financial pressure. One and a half million Australian households are currently under mortgage stress2, so if you feel overwhelmed by debt, then rest assured you’re not alone. But with dedication and a smart strategy, you can get your cash flow back in the black.

1. Know where you stand

When it comes to reducing debt, planning is critical. But before you can work out how to reduce your debt, you need to clearly understand your current money situation. That’s not always easy when you’re struggling just to get through the week. The first step is to figure out exactly what you owe. List your debts and monthly repayments, then calculate the total.

2. Understand where your money is coming and going

Determine your monthly income, including salary, benefits, and any other investment earnings. Then list your essential living expenses for things like accommodation, food, electricity, gas, internet, phone, and transport. Highlight any non-essential expenses that you can eliminate or reduce. Compare money in versus money out to calculate exactly how much debt you can afford to pay off each month. To make this process easier free budgeting tools are easily accessible via the Government’s “Moneysmart” website.

3. Prioritise your debts

Figure out which debts have the highest interest rates and pay them first. Due to the high interest rates for credit card debt, you should pay off your card in full each month if possible. This might include personal loans and credit cards. When considering critical expenses such as mortgage repayments, council rates, taxes, and utility bills, if you genuinely can’t afford to pay these, then you may be able to request financial hardship assistance from the service provider. If possible, it is better to be proactive in approaching your providers to work out a payment plan. Contact a financial counsellor who will be able to assist you.

4. Avoid bad debt

Once you begin to pay off your loans, don’t be tempted to go further into debt, and especially take care to avoid bad debt. Good debt is money owed for things that can build wealth or create an income stream, such as home loans, education loans, or a car loan (if driving is essential for your job). Bad debt refers to money owed for consumer products that don’t improve your financial situation, such as holidays or entertainment.

5. Build a safety net

Once you’re on top of your debt obligations, you can use any surplus income to build an emergency savings fund. If you’re a homeowner, then a good way to do this is to request an offset facility on your home loan. This way you can pay off additional principal each month, reducing your interest repayments, and then withdraw from this buffer to cover unexpected emergency expenses.

6. Seek help if you need it

Don’t be afraid to ask for help. If you’re feeling overwhelmed by your situation, or if you need to get your debt master plan back on track, then you can always seek advice from a financial counsellor or professional financial planner.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

  1. https://data.oecd.org/hha/household-debt.htm ↩︎
  2. https://www.news.com.au/finance/economy/interest-rates/how-interest-rate-rises-could-send-hundreds-of-thousands-of-aussies-into-mortgage-stress/news-story/e4b8476a13b3712d2def0f25178265f3 ↩︎
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As interest rates rise, so does the risk of losing your home

Posted on June 19, 2024 by Arrowroad

With housing prices soaring, and mortgages growing, have you considered what may happen when interest rates increase? This article discusses how just a small increase in interest rates can impact your budget and what you can do to prepare yourself financially.

With inflationary pressures, in addition to possible interest rate increases, you could find yourself amongst a growing number of Australians struggling to meet their home repayments.

Households in financial stress is increasing. There are some simple effective steps you can take if you are concerned about your financial position. As always, start with understanding where your money comes (income) and goes (expenses), by drafting or updating your budget.

If you’ve tried and failed to create a meaningful budget, speak with your financial planner as some very simple, cheap, and clever software programs can help you get one in place.

Look for costs you can reduce, or better still, do without entirely. Downsizing to one car in the family rather than two, for example, is estimated to save between $8,178 for a light car to just over $20,000 for an all-terrain vehicle each year in related costs1. These savings could be re-directed to help pay off your mortgage.

When was the last time you reviewed your mortgage? You could speak with a mortgage broker to determine whether there are better and cheaper home loans on the market that you can take advantage of. Remember every dollar of interest you save, means an extra dollar reducing the total size of your mortgage

If interest rates do increase and you can no longer meet your monthly repayments, it’s better to be proactive and speak to your bank or home loan provider as soon as you become aware that there may be a problem and ask for their help to find a way forward.

There may be some simple steps you can take such as consolidating expensive credit card debts or personal loans into your low-cost home loan to reduce your overall repayments.

The most important thing to keep in mind is to not wait until you’ve fallen behind on your mortgage repayments. You will always be better off financially if you take control of the situation rather than wait until the bank steps in and sorts the situation for you.

The information provided herein is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation, and needs, and it is important for you to consider these matters and to seek appropriate legal, tax and financial advice.

  1. https://www.datocms-assets.com/49357/1626740597-2020-vehicle-running-costs-v2.pdf (RACT Report 2020) ↩︎
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Avoiding an inheritance headache

Posted on June 19, 2024 by Arrowroad

This article follows the journey of a grieving daughter who recently lost her mother, and now has the task of sorting out her mother’s estate along with how to best utilise her substantial inheritance.

It was the overwhelming silence that hit Judy, the first time she visited her family home after her mother’s passing. With that thought came the slow, deepening realisation that she was going to have to cope with a lot more than the heart-breaking grief.

As she sat alone, surrounded by the possessions her mother had accumulated during her long, happy life, Judy felt completely lost as to how she was going to deal with packing up her mother’s house, much less sorting through the other assets.

Judy of course is not alone. More than $100 billion in assets were transferred by inheritance in 2018, more than double that in 20021. The Productivity Commission believes this number is set to double by the year 2050.

Judy found herself at the office of her mother’s solicitor a few weeks later.

They began by going through her mother’s Will and setting in motion the legal requirements to close her mother’s bank accounts, and credit cards, and so slowly, settle her mother’s Estate.

As an only child, Judy’s mother had left her everything, so at least there were no issues surrounding the Will and what would happen next, but Judy was clearly lost, which prompted her mother’s solicitor to reach out to her.

“As terrible as today is, every day will slowly get better until there comes a day when you will think of your mother and be filled with happy memories,” he said. “She was so proud of you, she would really want you to make the most of this inheritance, so let’s make sure you do.”

He then suggested three things.

Make a list of what needed to be done, work through that list as slowly or as quickly as felt right for Judy, and then, he recommended a caring financial planner and accountant who could help with the rest.

As Judy progressed along this journey, she learnt she would inherit her mother’s Estate tax free, (this may have been different if assets were within Superannuation), and that she had two years to sort through her mother’s assets, sell what needed to be sold and transfer other assets to her name. 

Once this time passed, transferring assets would ‘trigger’ a capital gains event and she would have to pay tax on any gains in the value of assets that would be transferred after that time.

Her new accountant and financial adviser walked her through what had to be done.

The biggest asset was her mother’s home. As Judy had her own home and didn’t want to move, it needed to be sold. The thought of keeping it and renting it out just seemed too painful and full of complications.

During one of their early meetings, Judy said in a guilty voice that she would like to use some of the money left to her to buy a new car, and would this be ok? Her accountant thought that was a very good idea and even suggested Judy go on a short holiday just to clear her mind.

It would help her prioritise what she wanted to do long term with the money from the sale of her mother’s home and the other assets left to Judy. It was good advice. Judy needed time to think things through.

When she returned from her break, with her accountant’s help, she developed a strategy. She would use most of the cash from the sale of her mother’s home to pay out her own mortgage. Judy knew her mother would be very pleased with this decision.

After paying for her new car, Judy decided the rest of the money would slowly be moved into her superannuation account, when and how the contribution laws allowed, and where it could sit in a tax benign environment building to secure her future.

And slowly, she started to focus more on the happy memories she had of her mother.

Estate planning is a team effort. For more information, please speak with your Accountant, Solicitor, and Financial Adviser.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

  1. https://www.pc.gov.au/research/completed/wealth-transfers/wealth-transfers.pdf ↩︎
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End of Financial Year 2024 Tips

Posted on June 19, 2024 by Arrowroad

As the end of the financial year approaches, it’s essential to get your financial planning in order. Here are some tips to help you make the most of this financial year and prepare for the next.

1. Super Contributions

Super Contributions: If you haven’t considered your super contributions for the financial year yet, now is the time. Don’t wait until the last minute to make your contributions.

Timing of Super Contributions: The timing of super contributions is crucial. Contributions count towards the relevant cap in the financial year they are “made” or “allocated” to your account.

Concessional Contributions: These include employer contributions, salary sacrifice, and personal contributions claimed as a tax deduction. The cap for 2023/24 is $27,500, but it will increase to $30,000 from July 1, 2024.

Non-Concessional Contributions: The cap for 2023/24 is $110,000. If your total super balance (TSB) on June 30, 2023, is $1.9 million or more, your cap for 2023/24 is nil.

Government Co-Contribution: If your income is below $58,445 in 2023/24, consider making a non-concessional contribution to receive a government co-contribution of up to $500.

2. Spouse Contributions

Tax Offset: If you make spouse contributions and your spouse’s income is less than $40,000, you may be eligible for a tax offset of up to $540.

Contribution Splitting: Splitting concessional contributions with a spouse can equalize super balances, access tax-free super sooner, and reduce your total super balance.

First Home Super Saver Scheme: Consider making eligible contributions of up to $15,000 per financial year to take advantage of the scheme.

3. Income Streams

Minimum Pension Payments: Ensure you have taken the minimum pension payment from retirement phase income streams before July 1.

Transition to Retirement Income Streams: Review your pension to ensure the appropriate amount is taken before June 30.

4. Self-Managed Super Funds (SMSFs)

Investment Strategies: Review and document your fund’s investment strategy.

In-House Assets: Ensure the level of in-house assets does not exceed 5% of total assets as of June 30.

5. Social Security

Gifting: Consider making gifts before July 1 to utilize the gifting limit of $10,000 per financial year.

6. Taxation

Tax-Deductible Expenses: Maximize your tax deductions by prepaying eligible expenses like interest on investment loans, income protection insurance premiums, and business expenses.

Capital Gains Tax Management: Conduct a portfolio review to offset gains and losses, but avoid wash sales.

7. Ceasing Employment

Timing: Consider the timing of your employment termination and receipt of termination payments to take advantage of lower tax rates or higher tax-free components.

8. Upcoming Changes

Paid Parental Leave Scheme: The scheme will become more generous for children born or adopted on or after July 1, 2024.

Preservation Age Increase: The preservation age will increase to 60 starting from July 1, 2024.

Deeming Rates: The current freeze on deeming rates will end on June 30, 2024.

9. Other Matters

Review Insurance and Expenses: Compare insurance cover and other expenses to see if better deals are available.

State-Based Payments and Rebates: Check if any state-based payments, rebates, concessions, or vouchers are available or due to expire.

By planning ahead and making strategic decisions, you can maximize your benefits and set yourself up for a successful new financial year.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional.  We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

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Dealing with Redundancy

Posted on June 19, 2024 by Arrowroad

Last updated on 13th May 2024

The restructuring of a business may lead to a reduction in staff numbers and redundancies. Redundancy can be a shocking and unsettling time for many affected people.

You may be one of the people made redundant as a result of organisational changes by your employer. If so, you may experience a range of emotions from shock and anger to relief and hope. On the flip side, the change can be the start of new possibilities such as a career change, the chance to reskill or retrain, or the ability to take a well-deserved break or holiday.

Redundancy may provide you with a substantial financial windfall if you have been a long-term employee. But careful consideration should be given to how best to use the redundancy payments to protect your future. It is important to understand the payments you are receiving, the tax implications, and the choices available to you. Payments received as part of a genuine redundancy program can be concessionally taxed to help your money last longer.

The steps you should consider for dealing with your redundancy are illustrated in the diagram below:

Employment Termination Payment

When you cease employment, the lump sum paid by your employer may comprise a number of payments. The first step is to identify which parts are included in the definition of an employment termination payment (ETP) and which are not.

Amounts potentially included in the employment termination payment:

  • Unused rostered days off (RDOs)
  • Payments in lieu of notice
  • Unused sick leave
  • A gratuity or golden handshake
  • Compensation for loss of job
  • Genuine redundancy and approved early retirement scheme payments above the tax-free amount

Amounts NOT included in employment termination payments:

  • Unused annual leave and/or leave loading
  • Unused long service leave
  • Salary, wages, and allowances owing to the employee for work done or leave already taken
  • Compensation for personal injury
  • An advance or loan
  • The tax-free portion of a genuine redundancy or approved early retirement scheme payment

Taxation of Employment Termination Payments

If you receive amounts classified as an employment termination payment under a genuine redundancy or approved early retirement scheme, part of the payment may be tax-free based on the number of years with that employer. To receive some of the payment tax-free, you need to be under Age Pension age when your employment was terminated.

For 2023/24, the tax-free amount is:

Formula:
$11,985 + [$5,994 x each completed year of employment]

In addition, if you were employed by your employer before 1 July 1983 or left employment due to invalidity, the ETP may include a further tax-free component.

The remaining balance is an ETP that is taxable. The ETP must be taken in cash, and lump sum tax is deducted by your employer. The tax deducted depends on your age, as shown in the table below for 2023/24.

Employment termination payment:

  • Amounts up to $235,000
  • Under preservation age: 30%*
  • Over preservation age: 15%*
  • Amounts over $235,000
  • Both under and over preservation age: 45%*
  • *Plus Medicare levy.

Taxation of Unused Leave Payments

Unused annual leave and long service leave payments are not part of the ETP but may still receive concessional tax treatment if received due to redundancy or approved early retirement.

The payments are included in your assessable income, but the tax is limited to the rates shown in the tables below. However, as they are included in assessable income, they may impact your entitlements to other tax offsets or benefits. The following rates of tax are deducted by your employer.

Leave payment proportion and tax:

  • Unused long service leave
  • Pre 16 August 1978 proportion: 5% is included in your assessable income and taxed at your marginal rate*
  • Post 15 August 1978 proportion: 100% is included in your assessable income and taxed at 30%*
  • Unused annual leave
  • All amounts: 100% is included in your assessable income and taxed at 30%*
  • *Plus Medicare levy.

The Impact on Centrelink

Before making plans for spending the money, you should also consider the future and your prospects for returning to work.

The payments received may create a ‘waiting period’ during which you will either not qualify for any income support from Centrelink or qualify for a reduced amount. This can be a substantial period of time, so you need to ensure you have access to money to meet your living expenses during this time.

The Upside of Redundancy

If you plan ahead and use the redundancy payments wisely, you can take some of the stress out of redundancy. Some options available to you include:

  • Repaying Debt: Use your net redundancy payment to reduce the burden of outstanding debt. This can include paying down your mortgage, personal loans, and credit card debt.
  • Commence a Savings Strategy: You can use part of your net redundancy payments to commence a savings plan to meet your medium to long-term objectives.
  • Buy an Investment: This can be an opportunity to invest in an asset that has the potential to provide you with a combination of capital growth and income over the long term. This may include purchasing a property or a portfolio of diversified growth assets.

Redundancy can be a challenging time but don’t lose sight of the significant upside that it can also provide with careful planning and advice.

Disclaimer: This article contains general information only and does not take into account your individual objectives or needs. Before making any decision regarding a financial product, seek advice from an appropriately qualified professional. The information is believed to be accurate but should be confirmed with your tax or legal adviser.

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Understanding Centrelink Concession Cards

Posted on June 19, 2024 by Arrowroad

Last updated on 20th Mar 2024

Centrelink provides several types of concession cards that can be used to reduce medical and pharmaceutical costs and, in some cases, provide other discounts. Here’s a breakdown of the different cards available:

Types of Concession Cards

  • Pensioner Concession Card (PCC)
  • Health Care Card (HCC)
  • Low Income Health Care Card (LIHCC)
  • Commonwealth Seniors Health Card (CSHC)

Types of Concessions

  1. Federal Government Concessions
  • Bulk-billed medical appointments (at the provider’s discretion)
  • Cheaper medicines under the Pharmaceutical Benefits Scheme (PBS)
  • Lower thresholds before the PBS and/or Medicare safety net applies

  1. State/Territory/Local Government and Private Business Concessions
  • Discounts on local council rates
  • Health services (e.g., dental, optical, home care, hearing services)
  • Education (e.g., school fee relief, training programs)
  • Transport (e.g., car registration, driver’s licence fees, public transport fares, taxi fares)
  • Utilities (e.g., electricity, gas, and water rates)

Pensioner Concession Card (PCC)

The PCC provides the widest range of concessions and is typically available to those receiving a Centrelink pension (e.g., Age Pension, Disability Support Pension, Carer Payment). If you receive a qualifying pension, the PCC will be automatically granted.

Health Care Card (HCC)

The HCC is available to individuals receiving a Centrelink allowance (such as JobSeeker Payment). It will be automatically granted if you receive a qualifying allowance.

Low Income Health Care Card (LIHCC)

Low-income earners can apply for the LIHCC. Eligibility is based on average weekly income for the eight weeks before applying for the card, with the following thresholds effective from March 20, 2024, until September 19, 2024:

  • Single, no children: $769 per week ($6,152 over eight weeks)
  • Single with one dependent child: $1,315 per week ($10,520 over eight weeks)
  • Couple combined, no children: $1,315 per week ($10,520 over eight weeks)
  • For each additional dependent child: $34 per week ($272 over eight weeks)

No assets test applies. Claims can be lodged via Centrelink online (accessed through myGov) or by completing the Claim for a Health Care Card form (SS050).

Commonwealth Seniors Health Card (CSHC)

The CSHC is available for self-funded retirees who meet income thresholds and have reached Age Pension age but do not receive Centrelink benefits. To qualify, one must:

  • Be an Australian resident or a special category visa holder residing in Australia
  • Be in Australia on the day of the claim
  • Not be subject to a Newly Arrived Resident’s Waiting period
  • Provide a tax file number (or an exemption if relevant)
  • Meet the annual income test
  • Not be receiving a Centrelink or DVA pension or income support payment

No assets test applies. The income test is based on adjusted taxable income (ATI) plus deemed income from account-based pensions (ABPs). The thresholds effective from September 20, 2023, until September 19, 2024, are:

  • Single: $95,400 per annum
  • Couple (combined): $152,640 per annum
  • Illness separated couple (combined): $190,800 per annum
  • For each additional child: $639.60 per annum

Claims for the CSHC can be made online via Centrelink (accessed through MyGov), by calling the Centrelink older Australians line on 132 300, or by completing the Claim for a Commonwealth Seniors Health Card form (SA296).

Disclaimer: This article contains general information only and does not take into account your individual objectives or needs. Before making any decision regarding a financial product, seek advice from an appropriately qualified professional. The information is believed to be accurate but should be confirmed with your tax or legal adviser.

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The pros and cons of renting for life

Posted on June 19, 2024 by Arrowroad

The image of a standalone family home with a spacious backyard for the kids to play and a barbecue area for weekend gatherings was once the status symbol of society. An indicator of success and stability for all who held the title (deed).

Has this dream now been retired to its resting place alongside the black and white televisions, typewriters, and telephones with cords that once lived inside these homes?

The Great Australian Dream – A Historical Perspective:

The post-war era saw Australia rebuilding and reimagining its future.

Owning a home became more than just a need; it was a symbol. It influenced family dynamics, career trajectories, and even the layout of our cities. Suburbs sprawled, and the housing market boomed, fuelled by this collective aspiration.

The Modern Australian – A New Dream Emerges:

As the world shrunk with globalisation, Australians were exposed to diverse lifestyles. Cities became melting pots of cultures, ideas, and aspirations.

The rise of remote work, the allure of freelancing and the gig economy, and the charm of being a digital nomad (#laptoplifestyle) made it less appealing for many to be tied with a mortgage to one place.

The value shifted from owning a patch of dirt to experiencing all that life and the world has to offer – be it a jazz bar down the lane, a pop-up art exhibit, or the freedom to pack up and travel on a whim.

As a result of this new trend, more and more individuals are now choosing freedom over stability, renting for life over buying a home, or investing rather than paying off a hefty mortgage.

This shift in mindset is not just a fleeting trend but a conscious lifestyle choice for many. But what drives this decision?

Pros of renting for life:

  • Flexibility and mobility: One of the most significant advantages of renting is its flexibility. Without being tied down to a mortgage or a specific location, renters can easily move cities, neighbourhoods, or even countries. This mobility is especially beneficial for those whose careers require frequent relocations or those with a wanderlust spirit.
  • No maintenance hassles: Owning a home comes with its fair share of responsibilities, from fixing leaky roofs to mowing lawns. Renters, on the other hand, are often free from these burdens, with maintenance issues typically being the landlord’s responsibility.
  • Financial flexibility: Without the commitment of a hefty down payment and ongoing mortgage repayments, renters often find they have more disposable income. This can be channelled into investments, travel, or other life experiences.

Cons of renting for life:

  • No asset accumulation: One of the most significant drawbacks of renting is the lack of asset accumulation. While homeowners build equity in their property over time, renters do not have this advantage. The money spent on rent does not contribute to an investment that can appreciate over time, and you are unable to benefit from your own home being Capital Gains Tax free.
  • Lack of stability: Renting can sometimes mean a lack of long-term stability. Leases can end, rents can increase (which we are currently experiencing on a massive scale), and there’s always the possibility of needing to move on short notice. This becomes particularly relevant in our later years when our ability and/or desire to be mobile and flexible has likely reduced.
  • Limited personalisation: Renters often have restrictions on how much they can personalise or modify their living space. This limitation can be a drawback for those who wish to make a space truly their own.

The decision to rent for life or pursue homeownership is deeply personal. It depends on individual priorities, financial situations, and life goals. While renting offers unparalleled flexibility and freedom, homeownership provides a sense of stability and long-term investment.

Ok, maybe it’s a little soon to be retiring ‘The Great Australian Dream’ just yet. 

While this dream is still alive for many, it’s important to recognise that it has competitors – new dreams shaped by modern values, aspirations, and global influences.

Neither is superior; they’re simply different paths to the same goal – a life of fulfilment, joy, and contentment.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional.  We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

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Do You Need More Than Workers’ Compensation?

Posted on June 19, 2024 by Arrowroad

Regardless of the type of work you do, there is always a possibility of falling sick or getting injured. That’s why every Australian workplace has a health and safety obligation to provide safe work premises, assess risk and have workers’ compensation insurance.

What is workers’ compensation?

Workers’ compensation is a form of insurance payment paid to employees if they are injured at work or become sick due to their employment. Payments may cover:

  • wages while you can’t work
  • medical expenses and rehabilitation costs

The injury or illness must be work-related to receive workers’ compensation benefits.

If you’re self-employed, a sole trader or an independent contractor, you may need to arrange your own workers’ compensation cover.

Protection at work

A report released by Safe Work Australia in 20231 showed:

  • 3.5% of the working population experienced a work-related injury or illness in 2021-2022 (497,300 workers),
  • Only 31% of workers received any form of workers’ compensation for their injury or illness.

Whilst workers’ compensation offers some level of protection, it still only protects you for injuries or illnesses that occur at work or as a direct result of work – and then any claim made must meet eligibility requirements. In Australia, entitlements and eligibility for payments vary from state to state. If you suffer from an injury or illness that does not qualify for a workers’ compensation payment, there’s a real possibility that you could be left without income and with large medical bills.

The best way to cover the gap

While workers’ compensation is beneficial, it may not provide enough financial support for you and your family, even if you have a successful claim.

Considering that the vast majority of Australians suffer from injuries and illnesses not related to work, relying on workers’ compensation alone may leave you short on financial protection.

So, how can you ensure you still have an income when you can’t work?

Income Protection

Income Protection goes to work when you can’t and can cover you for well beyond what worker’s compensation may provide.

  • It replaces a percentage of your income if you suffer from any sickness or injury, both at work and outside of work
  • It covers you for both temporary or permanent disability
  • You’re covered 24/7, worldwide
  • You can generally get cover if you’re an employee, contractor or self-employed
  • Premiums can be tax-deductible to you subject to the ownership structure
  • Policies can be tailored to meet your specific needs.

Although workers’ compensation might provide some coverage for injuries and illnesses sustained at work, including Income Protection in your personal protection plan can give you peace of mind, knowing that you’re covered in various situations, both at and outside of work. This way, your ability to earn an income will be secured.

If you want to explore your options for Income Protection, get in touch with your financial adviser today.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional.  We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

  1. https://www.safeworkaustralia.gov.au “Analysis of ABS Work-related injuries survey data, 2021-22” ↩︎
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Five Step Super Health Check

Posted on June 19, 2024 by Arrowroad

1. Check… that your Super is consolidated

Multiple accounts mean multiple fees, eating into your retirement savings. Use the ATO’s online services to track down lost super and consolidate your accounts easily.

Important Note – Make sure to check your insurance status before attempting any consolidation!

2. Check… how you are invested

Your super’s investment strategy should match your risk tolerance and retirement goals. Are you too conservative? Or too aggressive when it comes to investing?

Adjusting your investment mix can significantly impact your super’s growth over time.

3. Check… what insurance you have

Most super funds offer life, total and permanent disability, and income protection insurance. Sometimes the cover offered is a default cover based on your age. Review your insurance needs to ensure you’re adequately covered based on your circumstances and without eroding your super balance unnecessarily.

4. Check… to make sure you have a beneficiary nomination

Super isn’t automatically covered by your Will, so complete a death benefit nomination form as per your wishes to help ensure your super and potentially life insurance proceeds go to your loved ones as you intended.

5. Check… your details to make sure they’re up to date

This will ensure you’re kept up to date with important information from your super fund. Simple things like ensuring you have provided your tax file number can save you from unintended losses.

By taking action on these tips, you can feel confident knowing that you’ve made these steps and that your super is in tip top shape for the year ahead!

It’s an investment your future self will thank you for!

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional.  We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

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Financial recovery: should you DIY or outsource your debt management?

Posted on June 19, 2024 by Arrowroad

Australia’s average household debt was $261,492 in 2021-22, up 7.3% from the previous year (2020-2021). Meanwhile, the average household gross disposable income was $139,064, only up 3.7% from the previous year.

We might all agree that this is an interesting study. However, it is important to consider what can we do about it.

Combine high levels of debt with rising interest rates and a cost-of-living crisis, and it’s no surprise that Australian households are reaching out to debt management companies to help regain control of their finances.

Debt management companies are private organisations that can assist by:

  • consolidating and simplifying multiple debts,
  • helping to develop a sensible repayment plan,
  • negotiating with creditors to:
  • alleviate pressure on householders, and
  • satisfy creditors’ immediate payment concerns.

Sometimes, they repay your debts – to a specified limit – and you repay them under a single loan arrangement. Terms and payment amounts can be negotiated, offering a beacon of hope and a sense that you’re taking back control.

If this sounds like the perfect solution, remember that for every pro, there’s usually a con. For example:

  • Engaging a debt management company may affect your credit score. Though you’re making regular repayments, closing or restructuring accounts may be recorded unfavourably on your overall credit history.
  • Fees and charges apply. Debt management companies are not charities. Costs may include setup and monthly fees, usually calculated on the total debt being managed. Fees are added to the overall debt, which magnifies the financial difficulty.
  • Generally structured and inflexible, debt management plans require adherence to a strict payment schedule. This can be stressful if income fluctuates or unexpected financial situations arise.

While weighing the pros and cons of a debt management service, consider these do-it-yourself strategies.

Budgeting (aka Spending plan)

Creating a budget is a 3-step process.

  1. List your income and expenses (debts, rent/mortgage, food, medical, utilities, entertainment, eating out, etc.). For debts, include:
  2. amounts owed
  3. minimum monthly payments
  4. due dates
  5. Categorise spending into a) Needs (needed to survive) and b) Wants (nice to have). Now, look for ways to reduce spending.

The government’s Moneysmart1 website lists easy ways of cutting back everyday spending.

  • Allocate saved money to debts. Identify which one/s to pay first, e.g., prioritising those attracting higher interest, like credit cards.

Negotiating

Rather than customers defaulting, most banks and utilities companies prefer to negotiate repayment terms, sometimes even offering assistance programs. 

The key is to reach out before it’s too late. Be upfront about your situation and willing to arrive at a mutually beneficial arrangement.

Remember, nobody wins when debts are not paid.

Government assistance

The Australian government provides a range of financial assistance packages and interest-free loans depending on circumstances. These include crisis payments for unexpected situations and income support payments for cost-of-living expenses.

Of course, there are conditions, but further information, including application criteria, is available from the MyGov2 website.

Financial counselling

Financial counsellors help you understand your financial position and assist you in navigating your way out of difficulty.

Some local communities offer free or low-cost financial literacy programs aimed at providing education about money and debt reduction.

Everyone’s financial situation is unique. There is no one-size-fits-all, so it’s important that your action plan is specific to your needs and that you’re 100% comfortable with any decisions you make.

What’s crucial is that you do something; being proactive is empowering and sets you on the path to financial recovery.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional.  We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

  1. https://moneysmart.gov.au/saving/simple-ways-to-save-money ↩︎
  2. https://my.gov.au/en/services/work/experiencing-financial-hardship/immediate-help-if-you-re-in-financial-hardship/financial-support-if-you-re-in-financial-hardship ↩︎
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