Letter from the editor

Transcription

1 THE BUDGET EDITION MAY 2017

2 Letter from the editor Welcome to the Budget edition of 360 Magazine. After last year s numerous changes to superannuation, we were pleased to see minimal super changes were proposed this year. There were nonetheless some big announcements. First-home savers, downsizers and small businesses are all winners in this year s Budget while taxpayers face an increase in the Medicare levy. To read about the announcements in more detail, head straight to page 2. It s getting close to the end of the financial year now, and we want to make sure you re prepared for the upcoming changes to super. The changes will be in place on 1 July Refer to page 4 if you need a reminder! If you are approaching retirement and want to know more about your options, the Intrust360 team is here to give you the advice you need. For more information on any of the topics covered, please contact Intrust360 on Kind regards, Brendan O Farrell Disclaimer While every effort is made to ensure accuracy of information, IS Industry Fund Pty Ltd, IS Financial Planning Pty Ltd and Adviser Network Pty Ltd accepts no responsibility for hardship caused by typographical errors, or omissions in this document. The information is not a substitute for professional advice and IS Industry Fund Pty Ltd, IS Financial Planning Pty Ltd and Adviser Network Pty Ltd does not accept any liability, either direct or indirect, arising from any person relying either wholly or partially on any information shown in or omitted in this document. This information has been prepared without taking into account your particular financial needs, circumstances and objectives and is therefore not suitable to be acted on as investment advice. You should assess your own financial situation and may wish to consult an adviser before you make any changes to your financial affairs. Issued by IS Industry Fund Pty Ltd MySuper Unique Identifier: ABN: AFSL No: RSE Licence No: L Intrust Super ABN USI/SPIN: HPP0100AU RSE Registration No: R IS Financial Planning Pty Ltd ABN trading as Intrust360 is a wholly owned subsidiary of IS Industry Fund. Intrust360 is a corporate authorised representative of Adviser Network Pty Ltd ABN: AFSL: Corporate Authorised Representative Number: THE BUDGET EDITION

3 Contents 2 Budget news We ve analysed some of the major announcements in this year s Federal Budget. 4 1 July super changes checklist What do you need to put in place when the super reforms take effect? 6 Budget tips Cut down on unnecessary expenses and find more savings! 8 Australians are fixing their mortgage rates Despite the steady cash rate, more banks have been increasing their interest rates. Is now the time to fix your home loan? 10 Brendan s Banter Markets performed well in March, and the Federal Budget announcement brought positive news for super. 12 $20,000 tax write-off for small businesses This generous tax write-off has been extended for 12 months! We show you how you can still take advantage of it. 14 PLANNING TO RETIRE THIS YEAR? There are some important details you will need to think about before you officially retire. 16 Costs of education Not many people realise that you need to start saving for your children s education as soon as you start planning to have them. 18 Starting over after divorce Though not many of us will consider it, divorce can have a significant impact on your super. 20 ways to recover financially after divorce 21 CHOOSING AN INDUSTRY FUND COULD MEAN A BIG DIFFERENCE TO YOUR BALANCE One thing that continues to remain steady is the outperformance of industry funds over retail funds intrust360.com.au [ 1 ]

4 The 2017/18 Federal Budget On Tuesday, 9 May 2017, the Treasurer, Scott Morrison, released the 2017/18 Federal Budget. The measures proposed in the Budget affect first-home buyers, downsizers, taxpayers and small business owners. We ve broken down a few of the major announcements below. [ 2 ] 360 THE BUDGET EDITION

5 Superannuation First Home Super Saver Scheme First-home buyers will be able to save for a deposit from 1 July 2017 by making voluntary concessional [before-tax] and non-concessional [after-tax] super contributions. Contributions will be limited to $15,000 per year [up to a total of $30,000] and will count towards the relevant contribution cap. Withdrawals can be made from 1 July Concessional contributions plus deemed [90 day Bank Bill rate + 3%] earnings withdrawn will be taxed at the person s marginal tax rate, less a 30% tax offset. Downsizing the family home Individuals aged 65 or older will be able to make non-concessional [after-tax] super contributions of up to $300,000 from 1 July 2018, using proceeds from the sale of the family home. This limit will be in addition to the ordinary non-concession contribution cap, and apply on a per person basis. Unlike other non-concessional contributions, it will not be necessary to meet the work test or have a total super balance under $1.6 million. It should be noted that the contribution will only be available where the home has been owned for at least 10 years. The amount contributed will not be exempt from the assets test used to assess eligibility for the Age Pension. Tax changes Medicare levy increase From 1 July 2019, the Medicare levy will increase from 2% to 2.5% pa to fully fund the National Disability Insurance Scheme [NDIS]. The NDIS is an insurance scheme to support Australians with a disability, their families and their carers. This increase will flow to a range of other taxes such as Fringe Benefits Tax. Extended tax write-off The ability for small businesses with an annual turnover of $10 million or less to claim an immediate deduction for eligible assets costing less than $20,000 each will be extended for 12 months to 30 June HELP thresholds and rates From 1 July 2018, Higher Education Loan Program [HELP] repayments will commence once individuals reach an income of $42,000 [currently $54,869]. Also, the repayment rate will start at 1% and increase progressively to 10%. Family Tax Benefit Part A and B The Government is not increasing the maximum rate of Family Tax Benefit Part A, and the Family Tax Benefit [Part B] rate will not be indexed for 2 years. Social security and pensioners Pensioner Concession Card Individuals who lost entitlement to the Pensioner Concession Card as a result of the 1 January 2017 assets test changes, will be reissued with the card from 9 October Energy Assistance Payment Eligible pensioners will be entitled to a one-off Energy Assistance Payment of $75 for singles and $125 per couple from 20 June Payments will be made in the week beginning 26 June Only Australian residents who qualify for the Age Pension, Disability Support Pension and Service Pension will be eligible. Working Age Payments reforms Newstart allowance recipients aged 55 to 59 will only be able to meet up to half of their participation requirements through volunteering. Recipients aged between 60 and Age Pension age will have a new activity requirement of 10 hours per fortnight that can be met through volunteering. Residency requirements for pensioners To be eligible for the Age Pension or Disability Support Pension [DSP], claimants will need to have 15 years of continuous Australian residence from 1 July 2018, unless they have either: 10 years continuous Australian residence, with 5 years of this being during their working life, or 10 years continuous Australian residence, without having received an activity tested income support payment for a cumulative period of 5 years. Please note that these measures need to be passed through Parliament, however, if you have any questions about how the Federal Budget proposals could impact you, get in touch with Intrust360 today. Give us a call on intrust360.com.au [ 3 ]

6 1 July super changes checklists Last year s superannuation reforms, legislated in November 2016, will be in place from 1 July There s only one month left before the rules change! We ve put together some checklists to help you keep on top of the major changes and take any appropriate action. If you need any assistance with the upcoming reforms, call Intrust360 on [ 4 ] 360 THE BUDGET EDITION

7 REMINDER: The work test is still in place When the Federal Budget was first announced in 2016, it was proposed to remove the work test requirement for those aged to make super contributions. However, after negotiations in Parliament, it was decided the work test will remain in place. Those aged will still need to work at least 40 hours over 30 consecutive days in the financial year before they can make super contributions. Super reforms what should you do? BEFORE 1 JULY: Make extra after-tax contributions The after-tax contribution cap is being reduced from $180,000 to $100,000. If you were planning to make any extra contributions to super, you only have one month left to take advantage of the $180,000 annual cap. Increase your salary sacrifice The before-tax contribution caps are also reducing to $25,000 on 1 July The current caps are $35,000 for those who are 49 and over [as at 1 July 2016] and $30,000 for those under 49 [as at 1 July 2016]. Reduce your pension account if it is over $1.6 million A transfer balance cap of $1.6 million is being introduced on all pension accounts. If your pension balance is above $1.6 million, you will need to transfer the excess to an accumulation account or withdraw it from super. Talk to your adviser about your TTR account From 1 July 2017, investment earnings on Transition to Retirement [TTR] accounts will be taxed at 15 per cent. If you have opened a TTR account, the benefits of the strategy may change. Talk to Intrust360 about your account to see how this change affects your strategy. AFTER 1 JULY: Consider making contributions to your partner s account The thresholds for the spouse contribution tax offset are being increased. If your partner earns less than $40,000 and you contribute to their super account, you may receive a tax offset on your contribution [up to $540]. Previously, this tax offset was only available to those whose partners earned less than $13,800. Talk to your adviser about tax-deductible contributions Tax deductions are being made available to all individuals who make personal contributions to their super accounts. If you are currently unable to contribute to your super through salary sacrificing, this tax deduction could help you make tax-advantaged contributions. Call to book an appointment with an Intrust360 financial adviser, and find out how to take advantage of this deduction. Reduce your contributions to stay below the caps The after-tax contribution cap is being reduced to $100,000 and the before-tax cap to $25,000. If you currently make regular contributions that are equal to or close to the current contribution limits, you will need to adjust these. If you contribute more than the new caps allow in the 2017/18 financial year, you could be liable for penalties. 360 intrust360.com.au [ 5 ]

8 Budget tips Cutting unnecessary expenses from the family budget is one of the best ways to find ourselves more savings. We ve compiled a list of areas where you might be able to cut expenditure leaving you with more money to spare! [ 6 ] 360 THE BUDGET EDITION

9 Transport Save on fuel Checking your tires, limiting your air conditioner use and removing excess luggage can help reduce your petrol use. Resolving to walk to all destinations within one kilometre of your home is also a good way to get the step count up and the fuel bill down. Carpool Driving to and from work and paying for parking Monday to Friday can add up. If you have work colleagues living near you, you could split fuel and parking costs by carpooling. Pay registration annually It can often be cheaper to pay some bills annually rather than in smaller increments car registration is one such bill! Travel Choose the off season Avoid school and public holidays if you can, and consider visiting your destination at a less popular time. You ll find the prices are considerably cheaper! Be flexible with the dates Consider the prices for your accommodation and plane tickets across a whole month, rather than for a specific date, and find the cheapest option. Research Find the best deals and discounts on accommodation and tickets for attractions and transport by spending time researching before you travel. Other expenses Budget your gift giving Save money on buying gifts by sticking to a budget and planning ahead. Buying last minute often means you ll end up spending more than you intended. Often the best value retail sales promotions occur just after Christmas. If you have the space, buying and storing could save you money. Bring food from home Pre-plan your lunches and bring them to work, or make your coffee at home and bring it in a travel mug. These everyday purchases can end up costing a lot of money week to week. Wait for the sale If you re spending excessive amounts of money on clothes or home appliances, wait for the sales and grab a bargain then. The wait might also help you decide if you really need to make the purchase. 360 intrust360.com.au [ 7 ]

10 Australians are fixing their mortgage rates [ 8 ] 360 THE BUDGET EDITION

11 Interest rates remain at record lows as the Reserve Bank continues to leave the current cash rate of 1.5% on hold. With anticipation that interest rates could increase this year, it s only logical that more Australians will start opting for fixed-rate home loans. The risk in a fixed loan is that if interest rates drop, borrowers are locked in to the fixed term of the loan. In the current climate, however, if there s going to be any movement of interest rates, it s likely to be up, not down. Last year, interest rates reached an all-time low after the Reserve Bank cut the cash rate twice. Prices boomed in the housing market as a result. Now, housing prices are at such significant highs, particularly in Sydney and Melbourne, there is growing concern that first-home buyers are being priced out of the market. Federal Treasurer, Scott Morrison, said the housing affordability crisis is becoming an important issue in Australia. He said that challenges in accessing secure and affordable housing can have flow on effects to other social and economic areas. Improving housing affordability right across the housing spectrum must therefore be a key policy goal for Governments at all levels, including the Commonwealth, he said. But it s not just investor interest rates that are rising. Many of the big banks are raising rates on both owner-occupier and investor rates, despite the steady cash rate, citing higher funding costs. With all these factors combined, it seems interest rates may steadily rise. Joining the growing number of home-owners who are fixing their home loans might be a good way to circumvent any further rate hikes. Even if you don t want to fix your home loan, it could be a good idea to shop around. This applies particularly to those with a mortgage on an investment property. If banks are responding to regulator pressure by raising investor loan rates, you might be able to find a better deal with another lender. Many people tend to stick with their home loan because they think it is easier than refinancing elsewhere. But refinancing with a better deal could end up saving you thousands on your mortgage repayments. With this issue in mind, regulators are putting pressure on the banks to limit the number of investor loans. It s hoped that this might ease the pressure on house prices in the market. In response, banks have been increasing rates on many of their investor home loans. 360 intrust360.com.au [ 9 ]

12 Brendan s Banter News in super The news that had the industry abuzz over the last few months was the potential for superannuation to be used to help combat the housing crisis. The Government has been under pressure to address housing affordability. It has been proposed in the 2017 Federal Budget that superannuation could be somewhat involved in the solution. The proposal is called the First Home Super Save Scheme. The scheme will allow first-time home buyers to make voluntary concessional [before-tax] and non-concessional [after-tax] contributions to their super, to help them save for a deposit. Contributions will be limited to $15,000 per year [up to a total of $30,000] and will count towards the existing contribution caps. The scheme starts from 1 July 2017, and savings will be able to be withdrawn from 1 July Here is a case study that the Government has provided to explain the scheme: Boosting Michelle and Nick s first home deposit Michelle earns $60,000 a year and wants to buy her first home. Using salary sacrifice, she annually directs $10,000 of pre-tax income into her superannuation account, increasing her balance by $8,500 after the contributions tax has been paid by her fund. After three years, she is able to withdraw $27,380 of contributions and deemed earnings on those contributions. Her withdrawal is taxed at her marginal rate [including Medicare levy] less a 30 per cent offset. After paying $1,620 of withdrawal tax she has $25,760 that she can use for her deposit. Michelle has saved around $6,240 more for a deposit than if she had saved in a standard deposit account. Michelle s partner Nick has the same income and also salary sacrifices $10,000 annually to superannuation over the same period. Together they have $51,520 that they can put towards a deposit, $12,480 more than if they had saved in a standard deposit account. market outlook Intrust Super s financial year to date [FYTD] Balanced option return, as of April 2017, was a high 10.12% 1. Long term returns remain strong as well, with the rolling five-year Balanced Option result at 10.35%¹. Overall, market returns are looking positive. There s been improvement in global economic activity, and growth has stabilised in the major economies. The recent French election brought some relief for the European Union when Centrist Emmanuel Macron won the presidency over his anti-euro opponent Marine Le Pen. This brought back some certainty in international markets, improving volatility, but investors remain cautious. There remains a fragile economic environment and continued political uncertainty in Europe. A number of European elections occurring over the next year are likely to continue affecting international markets. Intrust Super ensures our portfolio is well diversified to help withstand unexpected future market volatility. ¹Source: SuperRatings Fund Crediting Rate Survey Balanced [60-76] Index April Past performance is not an indication of future performance. After last year s numerous changes to superannuation, it s pleasing to see that there were fewer proposed changes to super in the 2017/18 Budget. Our members need stability, and super funds need to keep focusing on getting the best returns for members. For the time being at least, there should be minimal disruption to our members retirement outcomes. Remember, the announcement of the Federal Budget is only a proposal. The measures in it will still need to be passed through Parliament. [ 10 ] 360 THE BUDGET EDITION

13 Core Super, Executive Super and Select Super returns as of 30 April 2017 Stable Conservative^ MySuper Balanced Growth Combined Shares^ Cash Bonds [fixed interest] Property Australian Shares International Shares Monthly 0.69% 1.05% 1.69% 2.18% 2.59% 0.16% 0.61% 0.34% 1.27% 3.78% FYTD 5.05% 6.19% 10.12% 12.88% 14.89% 1.85% 1.04% 7.72% 13.43% 16.15% Rolling 1 year 6.39% 7.84% 11.66% 14.45% 16.45% 2.26% 3.27% 9.79% 15.16% 17.43% Rolling 3 years 5.83% 6.07% 8.91% 10.86% 10.75% 2.44% 4.57% 10.48% 9.13% 11.34% Rolling 5 years 6.25% 7.81% 10.35% 12.28% 13.23% 2.96% 4.73% 8.61% 11.59% 14.89% Rolling 7 years 5.93% 6.41% 8.21% 8.78% 9.25% 3.30% 5.64% 9.50% 8.04% 10.47% Rolling 10 years 5.02% 4.33% 5.28% 4.60% 4.63% 3.64% 5.96% 6.04% 4.62% 4.03% As investment markets move up and down over time, it is important to remember that past performance is not an indication of future returns. Please note that the investment returns shown above have been rounded. This means there may be minor discrepancies when adding to achieve the compound return. *The Conservative and Combined Shares investment options are available in Executive Super and Select Super only. Super Stream returns as of 30 April 2017 Stable Conservative Balanced Growth Combined Shares Cash Bonds [fixed interest] Property Australian Shares International Shares Monthly 0.80% 1.21% 1.92% 2.47% 2.93% 0.19% 0.71% 0.38% 1.38% 4.28% FYTD 5.83% 7.10% 11.53% 14.66% 16.83% 2.17% 1.20% 8.76% 14.68% 18.46% Rolling 1 year 7.35% 8.96% 13.28% 16.44% 18.50% 2.64% 3.79% 11.11% 16.59% 19.92% Rolling 3 years 6.30% 7.12% 10.08% 11.84% 11.40% 2.83% 5.23% 11.64% 10.47% 12.57% Rolling 5 years 6.96% 8.98% 11.58% 13.39% 14.15% 3.46% 5.48% 9.56% 12.87% 15.82% Rolling 7 years 6.58% 7.28% 9.08% 9.49% 9.80% 3.77% 6.54% 10.40% 8.82% 11.05% Rolling 10 years 5.55% 4.83% 5.74% 4.86% 4.86% 3.77% 6.90% 6.67% 5.06% 4.36% As investment markets move up and down over time, it is important to remember that past performance is not an indication of future returns. Please note that the investment returns shown above have been rounded. This means there may be minor discrepancies when adding to achieve the compound return. 360 intrust360.com.au [ 11 ]

14 $20,000 tax writeoff for small business owners [ 12 ] 360 THE BUDGET EDITION

15 As announced in the Federal Budget, small business owners have an extended opportunity to take advantage of some generous tax breaks. While assets that are bought for use in a business can generally be written-off over time, there is an immediate tax deduction currently available to small businesses. As announced in the Federal Budget, small business owners have an extended opportunity to take advantage of some generous tax breaks. While assets that are bought for use in a business can generally be written-off over time, there is an immediate tax deduction currently available to small businesses. In May 2015, the Federal Government introduced a new scheme allowing small businesses to claim an immediate tax deduction on assets under $20,000 required for use in the business. The scheme was set to expire on 30 June The Government has proposed in the 2017/18 Federal Budget that this scheme be extended to 30 June The extension will give small business owners more time to take advantage of the tax deduction. Purchases such as cars, furniture, kitchen equipment and machinery can all be claimed. There are some exceptions to the included assets, however, so make sure you refer to the ATO website to ensure your purchase falls under the right criteria. Items purchased for more than $20,000 will not qualify for the immediate tax deduction. Only purchases that come under the $20,000 threshold will qualify for the deduction. While many equipment and vehicle purchases are likely to be above the $20,000 threshold, secondhand purchases are included. So, purchasing equipment second-hand could help you meet the requirements. Please note that the immediate tax deduction is only available to small businesses, that is, businesses with an aggregated turnover of less than $2 million. If you are interested in taking advantage of this scheme, please seek advice from a suitably qualified tax professional. Super and business owners some things to think about: Many business owners opt to put excess money straight into their business. As there is no legal obligation for business owners to contribute to their super, many delay thinking about their retirement to focus on running the business now. But there are a few reasons super could be worth thinking about: Superannuation is one of the most tax-effective ways to invest your money. Tax deductions are available to selfemployed people for contributions to super [as long as no more than 10% of your income comes from an employer]. Making regular super contributions could provide some insurance against a business that proves difficult to sell. Compound interest and investment earnings in superannuation can help your retirement savings grow over time. If you manage to accumulate a significant amount of money in super by the time you retire, you might be able to live off the investment earnings, rather than drawing down on your capital. If you run into any financial issues, your super may be protected should you need to declare bankruptcy. It could provide you with some financial security. If you re wondering about the advantages of contributing to super as a business owner, talk to our financial advisers. Intrust360 will be able to look at your situation and recommend a financial plan to suit your needs. Call to book an appointment. 360 intrust360.com.au [ 13 ]

16 Planning to retire this year? There are a lot of things to think about as we get closer to retirement age. If your mind is occupied with your plans for the future, your retirement date can easily creep up on you. If you re less than a year away from retiring, you will need to start thinking about the particulars that are required. Review your assets Knowing exactly where your assets are and how much they re worth is going to be a huge help in retirement planning. Writing out an inventory of your assets is a good place to start. This includes your home, any investment properties, your share portfolio, your super balance any assets you currently own that can help to add to your wealth. Taking stock of these assets will help you gain a better understanding of the income you could still receive once you cease employment. By creating an inventory of your assets, you can start to make plans. Perhaps you could sell your current home and downsize. You could use the excess to boost your retirement savings. You could also look at selling some assets to purchase an investment property, if you would prefer to receive regular rent as an income stream. At Intrust360, we can help you go through this process. We can give you advice on the level of risk in your portfolio. We will be able to determine your portfolio s potential for investment returns and earnings, and any strategies you might implement to improve your income capacity in retirement. Give us a call on [ 14 ] 360 THE BUDGET EDITION

17 Review your finances Reviewing your finances might be the most important step to take before retirement. If you don t know how much your current lifestyle is costing you, you won t be able to plan effectively for your retirement. The last thing you want is to return to work a few years down the track because you re worried about your finances. Starting a personal budget is a great way to keep on top of your expenses. Regularly tracking your spending will give you a better idea of where your money is going. Consolidating debt and focusing on paying it down will put you in a great position for retirement. Sticking to a budget could also help your retirement savings. You might find areas where you could cut down on spending and give yourself more savings month to month. You don t have to start a budget to keep better track of your expenses. Just reviewing your bank statement and bills regularly will also help. Any method of tracking your expenditure will help you understand where your money is going. This will help you work out if your retirement savings will cover your current lifestyle. Consider starting a TTR strategy Starting a Transition to Retirement [TTR] strategy is something you could consider. There are two ways a TTR account could help. You can start a TTR account to help you slowly start to retire. A TTR account is designed to help you reduce your work hours and supplement your income by accessing your super. Doing so can help you gradually retire. It means you can start to slow down at work without reducing your income. The second TTR strategy can give your super balance a boost. It involves salary sacrificing to your TTR account, and drawing down on your balance to ensure your take-home income is unchanged. This can be an effective way to pay less tax and keep the benefit in your super balance. Remember, investment earnings in a TTR account will no longer be tax free after 1 July If you are under 60, using this strategy may not be as beneficial after this date. Top up your super With the work test still in place for those between age 65 and 74, contributing to super can be trickier after retirement. If you are over 65 and plan to retire this year, it could be your last chance to contribute to your super. Those over 65 need to have worked at least 40 hours over 30 consecutive days in the financial year to be eligible to make contributions to super. Once you reach 75, you won t be able to make contributions at all. You ll need to plan your contributions carefully. Contribution caps will fall from 1 July If you re in a financial position to contribute more to your super, you should do so before 1 July. Extra contributions made after tax or through salary sacrifice can make a huge difference to your retirement savings. Estate planning Estate planning might not be directly related to your retirement, but it is an important thing to consider before you retire. Estate planning doesn t only cover the distribution of your assets, but also ensures your health care wishes will be fulfilled. Updating the beneficiaries to your super account is important too. Superannuation is handled differently to the rest of your assets. If you have not nominated any beneficiaries, the Trustee of your super fund is obliged to pay your benefit to your dependants, regardless of the wishes in your will. It is therefore important to nominate a beneficiary. A binding or non-binding nomination helps to ensure the Trustee pays your super benefit where you want it to be paid. Make a plan If you re planning to retire this year, give the team a call on Intrust360 can give you the advice you need to plan your retirement effectively. If you re interested in starting a TTR strategy, come in and talk to Intrust360! We can take you through the benefits and help you get started. Call to book an appointment on intrust360.com.au [ 15 ]

18 The costs of education Education costs are something we spend a lot of time warning clients about at Intrust360. Not many people realise that you need to start saving for your children s education as soon as you start planning to have them. School fees have risen sharply in the last 10 years¹. And it s unlikely that they ll slow down any time soon. Even if you intend to send your child to a state-run school for their entire education, it could cost you over $60,000 [for a child born in 2017] ¹. It s the price of private and systemic schools that cost Australian parents the most. For a child born this year, attending a private school in metropolitan Queensland could cost more than $372,000 over the course of their education¹. This amount includes fees and charges, extracurricular activities, uniforms, equipment, travel and computers. For a family of three, this rises to more than $1,116,000. That s more than double the current median house price in Brisbane². And the cost is likely to rise even further. While the yearly cost of a private school education might be less than $20,000 in 2017, it s likely to be over $35,000 by 2029¹. If a private or systemic education are part of your children s future, it s important to start planning now. ¹Source: Australian Scholarship Group education calculator ²Source: Domain Rental and House Price Report December Quarter 2016 [ 16 ] 360 THE BUDGET EDITION

19 Prepare for the costs The differences in costs for a child born in 2005, beginning high school in 2017, and a child born in 2017, beginning high school in 2029, are shown below: Graph 1 education costs for a child beginning high school in 2017 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $18,920 $13,787 $4,195 $4,365 $4,341 $4,423 $4,511 $4,606 Year 7 $19,862 $20,863 $21,929 $23,061 $24,267 $14,445 $15,143 $15,885 $16,674 $17,513 Year 8 Year 9 Year 10 Year 11 Year 12 State Systemic/Catholic Private Graph 2 education costs for a child beginning high school in 2029 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $35,093 $25,052 Year 7 $37,048 $39,126 $26,413 $27,858 $41,333 $29,394 $43,675 $46,163 $31,024 $32,755 $5,462 $5,616 $5,780 $5,954 $6,137 $6,331 Year 8 Year 9 Year 10 Year 11 Year 12 State Systemic/Catholic Source: Australian Scholarship Group education calculator Private As you can see, by 2034 [the final year of high school for children born in 2017], private schooling is likely to cost $46,163. That s $39,832 more than the projected cost of a state-run school. If you d like some help to plan for your child s education financially, come in and talk to the advisers at Intrust360. Just call to book an appointment. How to save money on education expenses It s not just the school fees that are a struggle to cover when it comes to education it s all the related expenses as well! There are a few ways to help ease the costs, no matter which school system you intend to use. Shop around for stationary If you can, a good way to save on costs is to shop for school supplies yourself, rather than ordering through the school. Purchases like pencils, pencil cases and exercise books are available everywhere. You might be able to find supplies much cheaper by shopping around yourself. Write a list, compare prices and stick to a budget. And don t buy any new supplies if last year s purchases still work fine. Quality second-hand uniforms Buying clothes second-hand is one of the biggest ways to save money on school uniforms. If your child s school doesn t offer second-hand uniforms, talk to other parents. They might have clothing their children have grown out of. Your kids probably won t love that idea, but if the clothes are still good quality, they may not even notice! Save on everyday costs Simple things like sending kids on public transport and planning school lunches can help reduce everyday costs. By planning school lunches, you can buy sale items and avoid that last-minute need to order from the school canteen. Driving your kids to and from school can be expensive as well. Concession tickets are generally available for students on public transport. If your children are old enough, public transport could be a cheaper option. 360 intrust360.com.au [ 17 ]

20 Starting over after divorce By Andrew Henderson, Intrust360 financial adviser Divorce can impact many aspects of our lives. Separating from your partner takes time to recover from, both emotionally and financially. One thing I find a lot of clients don t consider in the aftermath of their divorce is their super. [ 18 ] 360 THE BUDGET EDITION

21 Reassess your super situation Divorce changes your superannuation needs, rights and obligations. It s possible your own super balance is quite low, and you were planning to rely on your partner s balance to get you through retirement. It s also possible that you have had to split your superannuation balance with your separated partner. Your divorce likely means that the rest of your work life, and your subsequent retirement, will now be spent apart from your former spouse. Superannuation interest [usually meaning a member s superannuation account] can be divided between partners by agreement or court order during divorce or separation. There are other ways the splitting of superannuation can be handled, but, in my experience, this is the most common. This can mean your retirement savings have been significantly diminished. Take, for example, one client. Before separation, her husband had $433,000 in super and she had $223,000. This meant a total retirement pool of $656,000, above the Association of Super Funds of Australia [ASFA] s standard for a comfortable retirement for a couple [$640,000]¹. After separation, they agreed to split their superannuation equally. This meant both husband and wife ended up with $328,000 each. While this was a fair split that both parties agreed to, it meant both their retirement savings were significantly setback. And unfortunately, it s generally the case that living as a single person can be more expensive than living as a couple. ASFA s retirement standard is $545,000 for a single person¹. This was $217,000 more than either partner now had in super. After splitting their assets and their super, both parties had a lot of catching up to do to get their retirement savings back up to meeting, and exceeding, that standard. Boosting your super If you find your super has been reduced after your separation, there are several ways you can give it a boost. If you can afford to, making contributions through salary sacrificing can be a tax effective way of boosting your super. Remember, the before-tax contribution caps are changing on 1 July If you can contribute more than $25,000, you will only be able to do so before 1 July After-tax contributions will also help your super recover. You can make payments to your super account from your after-tax income at any time. The after-tax contribution caps are also reducing on 1 July 2017 [to $100,000]. If you can contribute up to $180,000 this financial year by selling any investment assets, you will only be able to do so before 1 July If you are eligible, there are also a few ways Government entitlements could help you build up your balance. If you earn less than $51,021 and make after-tax contributions, the Government will make a co-contribution into your account [up to a maximum of $500]. If you earn less than $37,000, the Government will pay 15% of any before-tax contributions you or your employer has made to your super, up to a maximum of $500. Seek advice Whatever position your superannuation is in following your divorce, I would strongly recommend you seek financial advice. Receiving financial advice can be the best way to help you recover financially. Give me a call on to book an appointment. Your first consultation is completely free! Whether your superannuation has been split or you will no longer retire with combined superannuation balances, it s important to consider your super after divorce. Reassessing your retirement plans and considering your new position is a crucial step toward financial recovery. 360 intrust360.com.au [ 19 ]

22 Ways to recover financially after divorce Start a budget Losing a second income can make a significant difference to your budget. This is especially true if you have children. Whatever the custody situation is, education costs and living costs will still need to be covered. Many clients who have started a simple budget have been surprised at how much it can help. Things like cutting back on expenditure, covering costs on your new single income and sorting out your property situation are much easier to handle with a budget. Update your will Circumstances have changed, and your current wishes might be different to what is currently listed in your will. Updating your will as soon as possible will ensure that your assets will be distributed as you wish them to be. Don t forget about your super in this process as well. If you haven t yet nominated a beneficiary on your super account, now might be a good time to do so. If there is no beneficiary nominated, the Trustee of your super account will pay your super benefit to your beneficiaries. If you haven t officially divorced yet, this could mean your partner could still receive your benefit. Nominating a beneficiary through a binding or non-binding nomination can help make sure your benefit is paid according to your wishes. Seek financial advice Although financial advice might be the last thing on your mind right now, speaking to someone about your financial situation can help you get a handle on your finances. Financial advisers can assist with budgeting, managing your assets and covering your living costs. Call Intrust360 today on and book an appointment. ¹ASFA s Retirement Standard, December 2016 [ 20 ] 360 THE BUDGET EDITION

23 Choosing an industry fund could mean a big difference to your balance The superannuation world frequently changes. Markets rise and fall, rules are introduced and removed and our retirement goals continually change. One thing that does seem to remain steady is the outperformance of industry funds over retail funds¹. The key differences between industry funds and retail funds is the division of profits. Where retail funds need to deliver profits to shareholders, industry funds are not-for-profit organisations. Any profits that industry funds receive can only be used to benefit members. Retail funds profits, on the other hand, must be divided between shareholders and member benefits. This can mean that industry funds charge lower fees than retail funds. But it s not just lower fees that are helping industry funds outperform retail funds. Over a rolling 10- year period, industry funds have received average returns higher than those of retail funds ¹. Intrust Super has been a 100% industry fund for almost 30 years. We are proud to deliver profits straight to our members. Intrust Super s Balanced option produced a return of 5.24% over a rolling 10-year period, compared to the average retail fund s performance of 3.03%¹. That s a difference of 2.21%. If you had a starting balance of $20,000 and an income of $50,000, that s an extra $12,264 you would have earned in interest over 10 years². That extra $12,000 could mean the difference between an overseas and an interstate holiday, or a new car and a second-hand one³. Being an Intrust Super member makes a significant difference to your retirement savings. With lower fees, your super balance has more opportunity to grow. And higher returns can help your retirement savings grow much faster². ¹Source: SuperRatings SR50 Balanced, February ²Source: ASIC s compound interest calculator. Assumptions: 9.5% employer contribution, no salary increase, consistent year on year returns. ³Past performance is no indication of future returns. 360 intrust360.com.au [ 21 ]

24 Advice on your super? ANYWHERE, ANY TIME. Know where to invest your super, how much you ll need for retirement, how much insurance you should have and how you might save on tax. Call or visit intrust360.com.au to find out more. Issued by IS Industry Fund Pty Ltd MySuper Unique Identifier: ABN: AFSL No: RSE Licence No: L Intrust Super ABN USI/SPIN: HPP0100AU RSE Registration No: R IS Financial Planning Pty Ltd ABN trading as Intrust360 is a wholly owned subsidiary of IS Industry Fund Pty Ltd ABN Intrust360 is a corporate authorised representative of Adviser Network Pty Ltd ABN AFSL Corporate Authorised Representative Number