Income investing: boost your earnings through investments
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When the Federal Budget rolls around, there are high expectations for a new Government. This was doubly the case this year, with the new Labor Government backing up the initial 2022-23 Budget, delivered in May by the previous Liberal Government, with a “re-do Budget” in October.
All eyes were on Federal Treasurer Jim Chalmers this week, in the lead-up to his speech to Parliament on Tuesday night and afterwards in the post-Budget commentary and analysis. As you’d expect, those of us in the financial planning community have had our eyes glued to our screens.
As it was, none of the revelations in the Budget Papers came as a shock; at this stage, we don’t expect the changes will have major consequences that will hugely benefit or disadvantage Poole Advisory clients.
Despite cost-of-living pressures, with electricity prices touted to rise and inflation yet to peak, there was no cash splash for individuals or businesses. And the Government, less than 6 months into its first term, continues to talk down suggestions of big-ticket reform – after all the speculation, the tax cuts legislated by the previous government (but yet to come into play) remain unchanged.
Instead, Chalmers and his team plan to provide cost-of-living relief in the form of:
For Poole Advisory clients, we expect some of the biggest questions will be around the changes to superannuation.
The Government confirmed that it will deliver on its election promise to lower the eligibility age for downsizer contributions: now, if you’re 55 or over, you can make additional contributions of up to $300,000 from the proceeds of selling your home. This could be a game-changer for anyone close to retirement age who’s looking to downsize. For more on changes to super, check out Super Guide – it has a detailed breakdown.
The downsizer changes, and others, mean that it’s a great time to review your super balance and revise your financial plan against your long-term goals.
Here’s a snapshot of some of the other big-ticket items to keep an eye on when it comes to your budget and future wealth plans.
Those with young kids win, as do those whose older children who are starting to plan their investment in higher education. If you’re yet to start a family, the changing landscape will be relevant to you, too.
As expected, tax reform is not on the agenda – yet. Personal income tax stays the same, and there was minimal change in business taxation. The two biggest pieces of news in that space are new reporting requirements and tax exemptions for businesses who benefited from some Covid-19 grant programs.
However, the ATO will continue its focus on ensuring multinationals pay their fair share of tax in Australia, by extending successful tax compliance programs. These initiatives are expected to save $4.7 billion over four years.
As foreshadowed, the low- and middle-income tax offset (LMITO) has run its course.
Starting in the new year, the maximum co‑payment under the PBS will decrease, from $42.50 to $30 per script. Each year, this will save around 3.6 million Australians more than $190 million in out‑of‑pocket medical costs.
Similarly, the Government has added medicines to the PBS, including some life-saving cancer drugs, and expanded services and sites for early detection. Read the list here.
In the wake of cost-of-living concerns, interest rate pressures and inflation, the Government was up-front: our hip pockets are going to hurt for a while longer.
The current inflation rate of 5.75% is predicted to reach 7.75% in December but ease to 3.5% as we move into the 2023-24 financial year.
Rising electricity prices and grocery bills are eating into our back pockets more and more. While the Government aims to introduce a raft of legislative measures to support wage growth, that will happen at a slower rate than inflation for this year at least.
This ensures we’re earning less on average compared to what we have been in previous years.
Some Poole clients are dabbling in the crypto currency market, and the interest in the broader market continues to grow. The Government will continue to exclude digital currencies (like Bitcoin) from income tax treatment of foreign currency. This is highly technical – if you are trading in this space, work with your adviser to look closely at the rules.
Electricity prices remain high, and we have seen some tinkering around the edges of some measures that support the take-up of solar power, batteries and charging stations for electric vehicles. If you’ve been holding off on investing in renewable energy options for your home (or, for that matter, your rental property), it could be worth moving that up the agenda.
Considering a tree change? The NBN expansion could be the final motivation you need to try remote work, with full-fibre access to 1.5 million homes and businesses in the works by 2025. The upgraded connections will chiefly be done in the outer suburbs and in regional areas.
The Treasurer says the economy is “expected to grow solidly this financial year”. Soaring commodity prices and low unemployment are predicted to contribute to the long-term recovery.
None of the indicators are great, though. Unemployment is expected to steadily increase from 3.75% to 4.5% in 2023-24; the debt is growing; GDP growth is slowing; the cost of borrowing is becoming more expensive.
The changes announced on Tuesday night, along with the changing economic landscape, do have the capacity to impact on your long-term plans. It’s always a good idea to cement a strategy in to revise your financial plan at regular intervals.
As a Poole Advisory client, you already know that our approach is to evaluate your current financial situation and collaborate with you to define financial strategies that are meaningful and achievable to allow you to live a life of prosperity.
If you have further questions, or you’re ready to revisit your plan, book a complimentary Introduction Meeting with Anthony Poole today.
We look forward to working with you to create your dream future!
Compliance Disclaimer:
This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns
Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917
Wondering whether to combine finances after saying ‘I do’? Get tips on budgeting, joint accounts, and achieving your financial goals in married life.
Wondering whether to combine finances after saying ‘I do’? Get tips on budgeting, joint accounts, and achieving your financial goals in married life.
Wondering whether to combine finances after saying ‘I do’? Get tips on budgeting, joint accounts, and achieving your financial goals in married life.
Wondering whether to combine finances after saying ‘I do’? Get tips on budgeting, joint accounts, and achieving your financial goals in married life.
Wondering whether to combine finances after saying ‘I do’? Get tips on budgeting, joint accounts, and achieving your financial goals in married life.