Happy New (Financial) Year!

 Welcome Siobhan 

We are delighted to introduce a new adviser joining our practice this week, Siobhan Foley. Siobhan brings extensive technical experience to the firm and further deepens our portfolio construction and strategic advice capabilities. Join us in making her welcome.

  

End of Financial Year Tax Planning

 

 With the tax season rapidly approaching, it is an appropriate time to discuss what initiatives and strategies will help minimize your tax  obligations.

 Recent changes to tax legislation have created some additional opportunities and pitfalls to consider, including: 

  • Private health insurance rebate
  • Baby bonus and family benefits
  • Superannuation contributions
  • Distributing income using trusts and company structures
  • Home office deductions
  • Travel expenses
  • Interest payments relating to investment property and shares
  • Depreciation and capital gains tax (CGT) issues 

It’s important to ensure you allow yourself enough time to make any adjustments well before June 30th. With this in mind, please contact Chris Arandt (Tax Accountant) on (03) 9859 8791, or alternatively, via your adviser to organise a time to discuss your tax situation over the next few weeks.

 

First Home Owners and Regional Bonus

 As of the 30 June 2012, the Victorian Government will no longer distribute the $13,000 First Home Owners Bonus or the $6,500 Regional Bonus[1]. Although there has yet been no formal announcement, the $7,000 First Home Owners’ Grant is also tabled to be reviewed or eliminated in full shortly[2]. The First Home Owners’ Grant is given to all those meeting eligibility and buying an established house in Victoria[3]. The First Home Owners Bonus  was awarded in addition to the First Home Owners’ Grant to all those building new homes, with the Regional Bonus being awarded on top of both the FHOG and the FHOB to newly constructed homes in Regional Victoria only (subject to eligibility)[4]. 

 

With the bonuses close to an end, it is important to think about all the options available when buying a new home. Seeking advice from a mortgage broker can assist in finding a suitable loan by comparing loans and lenders. Allow us to assist you with those choices by speaking to our in-house mortgage broker.

 

Better Off Today 

Remember 1984? John McEnroe won Wimbledon, Bob Hawke was Prime Minister and the shoulder pads of Dynasty reigned. Whatever the memories, it may surprise you to learn that the average household is now $224 better off each week. 

 Australian household income is outpacing the cost of living over the longer term, with disposable income increasing 20 per cent since 1984, according to the latest AMP.NATSEM Income and Wealth Report Prices these days! The cost of living in Australia [i]. However, with our rising expectations and busier lives, it may not always feel like it.

 The report explores how living costs have changed since 1984. It finds that average income growth for Australian households across all income and socio-economic groups more than covered the cost of living over this period.

 Australians earning income from investments – typically self-funded retirees – did particularly well, with income growth of $547 per week above their living costs over the period. This was largely due to strong dividend growth from shares, property and superannuation income prior to 2008.

 However, cost of living pressures continued with strong price growth since 1984 across everyday essentials, including electricity by 253 per cent, rent prices by 223 per cent, mortgages by 256 per cent, petrol by 208 per cent and public transport costs by 287 per cent

 This price growth was partially offset by dramatic drops in audio visual and computing equipment, which now cost one tenth what they did in 1984, while average prices for clothing, footwear and major household appliances have changed little, and are often lower today.

Top five findings

 1.       Australians are spending more on discretionary items

The highest income households are spending around 30 per cent on basic necessities and 45 per cent on discretionary items, while the lowest income households, such as pensioners, devote a surprisingly high 30 per cent to discretionary items, such as restaurant meals and holidays.

 2.       Incomes have outpaced the cost of living

When households are split by main source of income, we find that all households, on average, easily cover the cost of living increases. The big winners are those who own their house outright, with their incomes rising by 25 per cent between 2003-04 and 2009-10, compared to 17 per cent for both renters and those with a mortgage.

 3.       Increased government payments have made a difference

Increased government payments to pensioners are likely to have contributed to the strong gains in households whose main source of income comes from the government. This group saw incomes rising above the cost of living by $69 per week over the six years up to 2009-10.

 4.       The cost of living pressures for pensioners

Considerable attention is being paid to cost of living pressures facing pensioner households. Pensioners are often considered to pay large portions of income on electricity and essential food items, both of which have grown sharply in price.

 5.       Standard of living has increased on an international level

Australians have it better than most, especially in comparison with recession hit Europe. The report shows that while our prices are higher than most countries, our incomes and general standard of living are also very high.

 On balance, we’re better off. So maybe it’s not ‘prices these days’ that are out of control, but rather the aspirational pressure we put on ourselves as a society.

 

Want to make the most of your income and savings?  Call us on 03 9859 7789.

 

 

What you need to know

This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning and other companies within the AMP Group will receive fees and other benefits, which will be a percentage of the premium you pay and/or the advice fee you agree with us. Some of the information in this article is based on our interpretation of the law. It is a summary of the subject matter covered and is not intended to be comprehensive tax or financial advice. No reader should act on the basis of this article without obtaining specific professional advice. Further details are available from us, or AMP Financial Planning Pty Limited on telephone 1300 157 173.

[1] Vedelago, C. (2012, May 26). Late rush as door closes on home grant. The Age. Retrieved from http://theage.domain.com.au/first-home-buyers/late-rush-as-door-closes-on-home-grant-20120525-1z8cn.html 

[2] Burbank (2012, May). First Home Owners Bonus’ end 30 June. Retrieved June 8, 2012 from http://burbank.com.au/edm/may2012/fhogending.aspx 

[3] State Revenue Office Victoria (2012, May, 21). First Home Owners. Retrieved June 8, 2012 from  http://www.sro.vic.gov.au/sro/SROnav.nsf/childdocs/-6BF180369BCB3975CA2575A1004420CF-B82157FB72EC77C8CA2575CA00826CDD?open

 [4] Ibid

 [i] Phillips B, Li, J, Taylor, M (2012), Prices these days! The cost of living in Australia. AMP.NATSEM Income and Wealth Report, Issue 31, May 2012, Sydney, AMP.