Herald Sun 17.5.2012

Super funds have taken a battering in the past two weeks, with almost all gains for this financial year swept away in a sea of red ink. Concerns about Greece leaving the eurozone has sent stock markets from Frankfurt to Wall St into tailspin, and the uncertainty could last for months.

The Australian market has fallen almost 6 per cent this month, wiping $80 billion off the value of Australia’s top companies. Fearing a rerun of the past two years, when early gains were extinguished in a long bout of volatility, investors are fleeing.

In its worst day’s trading this year the ASX 200 dropped 2.3 per cent, wiping off almost $30 billion, with falls across the board. The only winners were in the defensive utilities sector, while miners and banking stocks were bashed.

SuperRatings research manager Salvador Saiz said any positive momentum had stalled. “The last couple of weeks have taken the wind out of the sails of any recovery,” he said.

“Before May it was looking like a good year, with returns for the 2011-12 financial year at 2.3 per cent.” But after the past two weeks, account holders with balanced investment options have seen that whittled away, with the typical account up only about $200 for every $100,000 in their superfund this financial year.

The Australian dollar also crashed its lowest point since November, falling below US98.7c yesterday.

It was trading at $US1.08 in February. This downturn come as fresh economic data shows Australian consumer confidence in May was hovering at close to its lowest level this year, despite a 50-point interest rate cut this month. IG Markets strategist Stan Shamu said investors were running scared.

“Many investors have been caught out,” he said. “The resources completely collapsed, with the big miners down more than 3 per cent.”

Market Shocks

• 6% drop in stock market since May 1
• $80b wiped off the market
• US99c current rate for Australia dollar, down from a peak in February of$US1.08
• 3.5% rise in super since Jan 1 in balanced fund
• 0.2% rise in super since July 1, 2011 in balanced fund

• Economic growth to slow 3 per cent this year before rising in 2012/13.
• Unemployment to stay at 5.5%.

• Increase to the rate of Family Tax Benefit A.
• Don’t waste any more time collecting school-related receipts, with the new Schoolkids Bonus replacing the Education Tax Refund and delivering a bigger payment to parents without the need to justify their expenses.

• Crackdown on rich tax breaks by doubling tax on superannuation to 30 per cent for those earning over $300,000.
• Superannuation contribution cap for over-50s are being halved to $25,000 for two years for concessional contributions such as employer payments and salary sacrifice, therefore contribute more before June 30 if you can.
• The superannuation co-contribution payment for low and middle-income earners is being halved to $500 from July 1. Make a contribution before June 30 if you qualify.

• Scrapping of planned company tax rate reduction as promised last year.
• Tightening of the Net Medical Expenses Tax Offset. You may not be able to avoid the tough new means test for the medical expense tax offset, but prepaying your annual private health insurance bill before June 30 can save you money if you are going to be hit by cuts to the insurance rebate from July
• Removal of mature age workers offset rebate.
• Increase in the medical safety net caps with Medicare.
• The promised $500 standard tax deduction disappears before it even begins.
• The planned tax break for $1,000 of interest income has been scrapped too, but shopping around for a better savings account deal can deliver you good gains regardless.
• If you’re lucky enough to be in line for the golden handshake, new rules mean timing will be important to maximise the money you receive, so seek advice.
• Small business owners can hold off on purchases until July 1 when new instant tax write-offs for assets under $6,500 begin.

Learn How To

• Take control of your superannuation and your future
• Enjoy a tax free income in your retirement
• Safely build a property investment protfolio
• Maximize your property tax deductions

Is your current investment property giving you the best possible return?

Are you using the Government’s new rules to build your savings much faster, pass less tax and ease into retirement?

Are you maximising your current tax benefits via your investment property?

Is your loan the best that it could be?

Are you aware that you could arrange your investments and finances so you never pay tax in retirement?

Did you know that you can use your superannuation to buy investments yourself?

If you are ‘Not Sure’ about any of these questions, or have some of your own, attending this FREE seminar will be one of the best investment decisions you will ever make.

Recieve a free copy of ’7 Steps to Wealth’ by John L Fitzgerald when you attend our seminar.

The government has released draft legislation which proposes changes to the company director penalty regime in the tax law. The main aspects of the proposed amendments involve:-

• Extending the director penalty regime to make directors personally liable for their company’s unpaid superannuation guarantee amounts (the compulsory 9%)
• Ensuring that directors cannot discharge their director penalties by placing their company into liquidation when unpaid PAYG withholding or SGC remains unpaid

The government intends to introduce the amendments into Parliament in the next few weeks.

“An independent person working the same job would be paid a salary, so why would you not pay the business owner?”

Building a salary into a business also allows the owner to compare the business performance against prior year results and competitor’s results. This allows business owners to assess the value of their business.

Seven things to ask before retirement

Deciding when to retire can be one of the scariest decisions you will make. Get the timing wrong and it can affect the way you live for decades. It used to be simple. Most would aim for 55, 60 or 65 years of age, and their superannuation would give them some money in retirement which could be topped up by a generous age pension.

Those were the days. Today the age pension has been watered down and superannuation-guarantee contributions are not enough on their own to fund a decent retirement.

Over the next 10 years, 1.4 million Australians will be faced with that critical ‘when to retire’ decision. But you can reduce the risks of pulling the retirement trigger by asking yourself these seven important questions.

What sort of lifestyle do I want?

Retirement should be one of the happiest times of your life. Sit down and cost a decent retirement lifestyle. Include expenses that make you happy: the golf membership, a dinner out every week or so, regular holidays. Life is for living, so be realistic or you’ll be miserable and grumpy during retirement.

The result will look a bit scary.

How long do I intend to live for?

You don’t need to play God, but looking at your genes can help. If you come from a long line of stayers, then you are more likely to follow suit. But be conservative in the longevity guess. It is better to go early with a bit of spare cash left over for a surviving partner or your children than it is to run out.

Will I be debt-free?

In past generations, people were generally debt-free when they retired, so loan repayments didn’t really come in to the financial equation. Today it’s a lot different; with a recent survey showing almost 50 per cent of all retirees will not have paid off their home by the time they retire.

Loan repayments are a crucial element when calculating a retirement budget – not only home loans but also credit cards.

Do I intend leaving anything for the kids?

Some people still aim to leave money for their children. Frankly, we reckon adult children should be big enough to look after themselves. However, everyone’s different and there could be some good reasons for leaving money. Just make sure you plan and budget for it when making that retirement decision.

Can I earn other income in retirement?

Earning extra cash during retirement can make a huge difference to lifestyle, not only from a financial point of view but also in terms of keeping physically and mentally active.

How much will I need to have in super?

Now that you’ve looked at retirement expenses, income sources and lifestyle considerations, it’s time to crunch the numbers. Go to your bank’s website and in the superannuation section there will be a calculator to do all the sums.

A general rule for retiring at age 60 is that super of $436,000 will generate income of $25,000 a year for the average lifespan. Allow a bit more for women because they live longer. To generate $45,000 a year you will need a retirement balance of $788,000.

Will I need to, and can I, change my strategy?

Now that you have the facts, sit down with us to assess super contributions levels, and revise retirement dates and investment strategies to achieve that target superannuation payout.

Key Steps

• Don’t panic
• Seek advice
• Pay off debt
• Decide where you want to live
• Get a health check
• Make some important lifestyle decisions
• Discuss with your partner.

The important thing to consider is how is your superannuation performing? How much will you have in superannuation? Will it be enough for you & your family? The answer to these questions and many more can be difficult to find answers for – you need to speak to us immediately to see how we can help. Remember, “The earlier you plan, the greater chance you have of achieving your goals and objectives”.