Tag Archives: Centrelink
Let’s talk about aged care
By Robert Wright /May 17,2019/
Aged care can be a tough subject for many families to broach, but as we enjoy longer lives, there’s a growing likelihood that at least part of our final years may be spent in aged care.
The decision to move into aged care can come with a raft of emotional issues, in addition to financial considerations. That could be because nursing home accommodation can involve substantial costs, especially for self-funded retirees who need their finances to last the distance.
The cost of an aged care facility
New residents entering aged care may be asked to pay an upfront refundable accommodation deposit. There is no set level for this deposit – the only proviso is that residents must be left with at least $49,500 in assets (excluding the family home) after the deposit has been paid.
The deposit works like an interest-free loan to an aged care home. Any income earned from the deposit is used by the aged care home to improve accommodation and services for residents.
As aged care facilities are generally free to set their accommodation payments up to a certain limit, it’s usually open to negotiation between families and the home’s staff. This can be a source of discomfort as it means revealing your financial worth to complete strangers, however, simply being aware of how the system works can help you plan for it.
How do I pay my accommodation costs?
You can choose to pay for accommodation by:
- a lump-sum style ‘refundable accommodation deposit’
- interest-type payments called a ‘daily accommodation payment’, or
- a combination of both.
The refundable accommodation deposit is generally returned to residents or their estate, if they move out or pass away.
Unfortunately, you will not receive the original sum back if you have arranged to have fees deducted from it.
Accommodation deposits vary widely and in some of our capital cities, amounts can run into hundreds of thousands of dollars. This makes it extremely important to consider all the facilities available and consider if a particular aged care home is the right place for you or your loved one.
Unfortunately, high demand for aged care, particularly high level care, often means families who haven’t done their research accept the first place that becomes available, which can see a mad scramble for deposit money.
Basic daily fee
In addition to accommodation costs, a basic daily fee is charged for your day-to-day living costs such as meals, cleaning, laundry, heating and cooling. Everyone entering an aged care home can be asked to pay this fee.
The maximum basic daily fee for new residents is $51.21 per day. This equals 85% of the basic age pension rate and it increases on 20 March and 20 September each year in line with changes to the age pension.
Means-tested care fee
This is an additional contribution towards the cost of care that some people – self-funded retirees in particular – may be required to pay. The Department of Human Services will work out if you are required to pay this fee based on your income and assets.
There are annual and lifetime caps that apply to the means-tested care fee. Once these caps are reached, you cannot be asked to pay any more means-tested care fees.
Funding it all
Meeting the future cost of aged care is just one aspect retirees need to factor into their investment portfolio.
The way your portfolio is structured can impact your age pension entitlements as well as the costs you’ll pay for aged care.
Source: BT
Federal Budget 2019: What it means for you
By Robert Wright /April 03,2019/
The Federal Treasurer, the Hon. Josh Frydenberg MP, delivered the 2019 Federal Budget on 2 April 2019.
As widely predicted, the announcement included a range of tax cuts for both individuals and businesses. The Treasurer also announced increased funding for regulators to encourage tax and superannuation compliance, a number of positive changes to superannuation, and an affirmation of previously announced aged care measures.
This summary provides coverage of the key issues of most interest to you.
Highlights
Personal income tax
- Increases in the low and middle income tax offset to apply in 2018-19.
- Other tax benefits (tax rates/thresholds and low income tax offset changes) to commence in 2022-23 and later income years.
Business owners
- Extension of the provision allowing small business to instantly write-off asset purchases.
- Further consultation on Division 7A reform.
Superannuation
- Work Test changes.
- Spouse contributions.
- Bring-forward of the NCC cap.
- Tax relief for merging superannuation funds.
- ECPI administration simplification.
Social Security
- Energy Assistance Payment.
Aged care
- Improving the quality, safety and accessibility of aged care services.
Personal income tax
The Government will lower taxes for individuals by building on its legislated Personal Income Tax Plan, announced in the 2018 Federal Budget. The changes to the plan will provide immediate relief to low and middle income earners, support consumption growth and ease cost of living pressures.
Low and Middle Income Tax Offset from 1 July 2018
The Government will provide a further reduction in tax provided through the non-refundable low and middle income tax offset (LAMITO).
LAMITO for 2018-19 and 3 subsequent income years
This measure increases the effective tax-free thresholds as follows:
Increase in tax bracket thresholds from 1 July 2022
From 1 July 2022, the Government will increase the top threshold of the 19 per cent personal income tax bracket from $41,000, as legislated under the plan, to $45,000.
Low Income Tax Offset from 1 July 2022
From 1 July 2022, the Low Income Tax Offset (LITO) will be increased to a maximum $700 for those with taxable income less than $37,500. LITO will phase out at 5% in the income range from $37,500 to $45,000, and at 1.5% thereafter.
Reduced marginal tax rate from 1 July 2024
From 1 July 2024/25, the Government will reduce the 32.5 per cent marginal tax rate to 30 per cent. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates, improving incentives for working Australians. In 2024/25 an entire tax bracket, the 37 per cent tax bracket will be abolished under the Government’s already legislated plan. With these changes, by 2024/25 around 94 per cent of Australian taxpayers are projected to face a marginal tax rate of 30 per cent or less.
Medicare levy thresholds for 2018/19
The threshold for singles will be increased from $21,980 to $22,398. The family threshold will be increased from $37,089 to $37,794. For single seniors and pensioners, the threshold will be increased from $34,758 to $35,418. The family threshold for seniors and pensioners will be increased from $48,385 to $49,304. For each dependent child or student, the family income thresholds increase by a further $3,471, instead of the previous amount of $3,406.
On-time payment of tax and superannuation liabilities
The Government will provide $42.1 million over four years to the ATO to increase activities to recover unpaid tax and superannuation liabilities. These activities will focus on larger businesses and high wealth individuals to ensure on-time payment of their tax and superannuation liabilities. The measure will not extend to small businesses.
Business owners
Increasing and expanding access to the instant asset write-off
From 7:30 PM (AEDT) on 2 April 2019 (Budget night), the Government is increasing and expanding access to the instant asset write-off.
The Government is increasing the instant asset write-off threshold from $25,000 to $30,000. The threshold applies on a per asset basis, so eligible businesses can instantly write off multiple assets.
Medium sized businesses will now also have access to the instant asset write-off.
The increased and expanded instant asset write-off will apply from Budget night until 30 June 2020.
Arrangements prior to Budget night
The Government has already legislated a $20,000 instant asset write-off for small businesses. Eligible small businesses can already immediately deduct purchases of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2019.
On 29 January 2019, the Government announced that it would increase the instant asset write-off threshold for small businesses from $20,000 to $25,000 and extend the instant asset write-off for an additional 12 months to 30 June 2020.
These changes interact with the changes being announced as part of Budget. This means that, when legislated, small businesses will be able to immediately deduct purchases of eligible assets costing less than $25,000 that are first used or installed ready for use over the period from 29 January 2019 until Budget night.
Further consultation on amendments to Division 7A
The Government will defer the start date of the 2018-19 Budget measure, Tax Integrity – clarifying the operation of the Division 7A integrity rule, from 1 July 2019 to 1 July 2020. Division 7a is part of the Income Tax Assessment Act 1936, and aims to prevent profits or assets being provided to shareholders or their associates tax free. The 2018/19 Budget measure was intended to address unpaid present entitlements. Delaying the start date by 12 months will allow additional time to further consult with stakeholders on these issues and to refine the Government’s implementation approach, including to ensure appropriate transitional arrangements so taxpayers are not unfairly prejudiced.
Superannuation
Work test changes
From 1 July 2020, Australians aged 65 and 66 will be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the Work Test.
Currently the Work Test (a minimum of 40 hours worked over a 30 consecutive day period in the financial year of contribution) applies from a superannuation fund member’s 65th birthday.
This change will align the superannuation Work Test with the eligibility age for the Age Pension, which is scheduled to reach age 67 from 1 July 2023.
Spouse contribution age limit
The maximum age at which a spouse contribution can be made will be increased from age 69 to age 74. The limit applies to the age of the spouse into whose superannuation account the spouse contribution is being made.
Currently those aged 70 and over cannot receive contributions made by another person, including a spouse, on their behalf.
This measure was announced in conjunction with the Work Test changes outlined above.
NCC bring-forward arrangements
The cut-off age for the bring-forward of up to two future years of the non-concessional contribution (NCC) will be extended by two years. This means NCCs of up to $300,000 can be made in one financial year.
Currently the bring-forward arrangement applies until 30 June in the financial year the superannuation fund member turns age 65. This will be extended to allow those aged 65 and 66 to use the bring-forward arrangement.
This measure was announced in conjunction with the Work Test changes outlined above.
Permanent tax relief for merging superannuation funds
The Government will make permanent the current tax relief for merging superannuation funds that is due to expire on 1 July 2020.
Since December 2008, tax relief has been available for superannuation funds to transfer revenue and capital losses to a new merged fund, and to defer taxation consequences on gains and losses from revenue and capital assets.
The tax relief will be made permanent from 1 July 2020, ensuring superannuation fund member balances are not affected by tax when funds merge. It will remove tax as an impediment to mergers and facilitate industry consolidation. Consolidation would help address inefficiencies by reducing costs, managing risks and increasing scale, leading to improved retirement outcomes for members.
ECPI calculations
The Government will reduce costs and simplify reporting for superannuation funds by streamlining some administrative requirements for the calculation of exempt current pension income (ECPI).
The Government will allow superannuation fund trustees with interests in both the accumulation and retirement phases during an income year to choose their preferred method of calculating ECPI.
The Government will also remove a redundant requirement for superannuation funds to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all members of the fund are fully in the retirement phase for all of the income year.
This measure will start on 1 July 2020.
Social security
Energy Assistance Payment
The Government will provide $284.4 million over two years from 2018-19 to make a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 April 2019 and who are resident in Australia.
Qualifying payments are the Age Pension, Carer Payment, Disability Support Pension, Parenting Payment Single, the Veterans’ Service Pension and the Veterans’ Income Support Supplement, Veterans’ disability payments, War Widow(er)s Pension, and permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 (including dependent partners) and the Safety, Rehabilitation and Compensation Act 1988.
This measure builds on the 2017-18 Budget measure titled Energy Assistance Payment.
Aged care
Improving the quality, safety and accessibility of aged care services
The Government affirmed its announcement on 10 February 2019 issued by the Prime Minister, Minister for Health and Minister for Senior Australians and Aged Care to provide $724.8 million over five years from 2018-19 to support older Australians through further improvements to the quality, safety and accessibility of residential and home care services.
Source: Macquarie April 2019
Retire on your own terms
By Robert Wright /August 28,2018/
As the novelist C. S. Lewis once observed, “You are never too old to set another goal or to dream a new dream.”
Retirement should be the start of a new chapter in your life – perhaps the most exciting of all. The big question, of course, is how you pay for it without a regular pay cheque. A simple way to think about retirement income is by splitting your needs into two parts:
Regular income – the money you will need each month to pay regular living expenses, like your housing, food and health care costs.
Discretionary income – your pocket money to spend on the good things in life, like travel, restaurants and trips to the theatre. These funds also cover life’s nasty surprises, like car repairs, blocked pipes and leaking roofs (hopefully not at the same time).
Let’s use this framework to look at the retirement income options you have.
Regular income requirements
These are the sorts of expenses you are already paying every month – unfortunately most of them will continue when you retire. Council rates, utility bills, groceries, health care and phone bills all fit into this category. When you’re working you cover these sorts of expenses with your employment income, but what happens when you retire? The answer lies in generating a regular retirement income stream. Here are some options to consider:
Account-based Pensions
Once eligible, you can transfer all or part of your super to an account-based pension and choose how much you receive as regular income payments. There are compelling tax benefits because investment earnings on your assets supporting this income stay within the super system. This means they are tax free, and for most people aged 60 or above, the income payments you receive are also free of tax.
Annuities
An annuity is a product you can buy from an insurance company using your super or other savings. Annuities give you a set income for a defined period or for the rest of your life, depending on the product you choose. If you use your super to buy an annuity, income payments receive the same tax treatment as an account-based pension. Another advantage is reliability – you receive a guaranteed payment regardless of market performance or interest rate changes. On the downside, you have less control because you cannot choose where your money is invested, and you don’t have the flexibility to withdraw if you need extra cash.
Part-time work
Many of our clients love their work and choose to reduce their hours, or work part-time, in the early stages of retirement. Continuing work helps you to stay active mentally and continue to socialise with colleagues – but there are also financial advantages. You will receive income payments every month – money you can rely on for regular expenses. When you are still earning a salary you can continue to contribute to your super, rather than having to draw down on the balance. This could make a big difference to the value of your nest egg when you eventually retire.
The pocket money you deserve
So you’ve taken care of life’s essential expenses with a retirement (or semi-retirement) income stream. What about extra money to treat yourself to the finer things in life? The secret to retirement pocket money is quick access to cash. The financial term for this is liquidity – cash is the most liquid asset while investments like real estate are considered illiquid, as it is very hard to sell just one room of a house.
Term deposits
With a term deposit, your money is invested for a fixed period and you receive an agreed rate of interest for the term of your investment. It’s a popular way to earn money for life’s pleasures – and emergencies – because the cash you receive is easy to access, it’s liquid. Another benefit is the safety of a term deposit because your original investment is returned at the end of the term.
Dividend investing
When you buy shares in a company you are entitled to a share in the company’s profits or earnings. Companies pay a dividend to shareholders as a way of sharing profits – usually twice a year. You can use these cash dividends as pocket money for discretionary spending in retirement. By holding the shares for a length of time, the value of your underlying investment is also likely to grow.
The potential for better returns through share investing comes with additional risk. It is important to spread risk by diversifying your investments – across industries and also beyond our borders to global markets.
Bringing it all together
There is no shortage of options for your retirement income – the secret is in combining the best of them in a tax effective way based on your individual circumstances. We strongly recommend you start thinking about your retirement income now and seek financial advice early. You’ve spent your life building your nest egg – don’t let it fall from the tree.
Source: Perpetual
New rules to benefit those downsizing for retirement
By Robert Wright /August 28,2018/
Australians aged 65 and over who are downsizing for retirement can now contribute the proceeds from the sale of their main residence (up to $300,000) into super.
We take a look at what this could mean for you, bearing in mind that like with all important financial decisions, it’s a good idea to get financial advice before deciding what’s right for you.
Super benefits for downsizers
Usually, people aged 65 to 74 need to satisfy a work test to make voluntary super contributions, while people aged 75 and over are generally unable to contribute to their super.
However, that changed on 1 July 2018, with those aged 65 and over now able to make a non-concessional contribution to their super of up to $300,000 using the proceeds from the sale of their main residence – regardless of their work status, superannuation balance, or contribution history.
For couples, both spouses are able to take advantage of this opportunity, which means up to $600,000 per couple can be contributed toward super.
How does it work?
Proceeds from the sale of your main residence that are contributed into super as part of this initiative can be made in addition to any other before-tax or after-tax contributions you’re eligible to make. The government says the aim is to encourage older Australians, where appropriate, to free up homes that no longer meet their needs and make room for younger growing families.
To qualify:
- The contracts for sale must be exchanged on or after 1 July 2018
- The property that’s sold needs to have been your (or your spouse’s) main place of residence at some point in time
- You need to have owned the home for at least 10 years
- The property that’s sold must be in Australia and excludes caravans, mobile homes and houseboats.
‘Downsizing’ contributions are not tax deductible and can be made regardless of super caps and restrictions that otherwise apply when making super contributions.
Things to note
No special Centrelink means test exemptions apply to the downsizing contribution. Due to this, there may be means testing implications as a result of downsizing, which need to be considered.
Meanwhile, additional rules may apply to your situation, so make sure you do your research before making any decisions.
Source: AMP