FINANCIAL SECURITY FOR THE SELF EMPLOYED AND CONTRACTORS

The trend of more flexible work arrangements is becoming increasingly popular as more people work as contractors rather than employees.  

The benefits include building a wide range of skills, flexibility around children or allowing time to travel.  The downside includes no superannuation, annual leave and sick leave and no consistency of income.

Here are a few tips to ensure you make the most of your contracting dollar:

1.     BUILDING A CASH BUFFER

Building and maintaining a cash buffer is critical as a contractor.   It is a good idea to have about 3 - 6 months wage up your sleeve.  This may seem like a lot and hard to achieve.  One step at a time.  Work towards it as it will give you peace of mind should you be faced with the unexpected.

2.     MAKE SURE YOU ARE PAID WHAT YOU ARE WORTH

Ensure your hourly rate covers an allowance for holidays, sick leave and superannuation.  Have you researched your going rate in the industry?  Know your minimum fall back position in pay negotiations - know whether to accept a less than ideal contract or walk away.

3.      MAKE THE MOST OF TAX DEDUCTIONS

Keeping receipts for home office supplies or for a laptop that you need for work may be a valid tax deduction. Depending upon how you are paid and where you regularly work, some of your travel costs may even be tax deductible. Have a chat to your accountant or consult the ATO website for the range of costs that might be tax deductible to you.

4.      KEEP NETWORKS & SKILLS FRESH

It will be your responsibility to invest your own money in the occasional course to make sure you are up-to-date. LinkedIn (like it or hate it) has made the job of keeping in touch and extending your professional network much more straightforward. LinkedIn allows you to stay connected with colleagues and associates long after they leave their current employer.

Contracting, like any form of self-employment has its ups and downs. The flexibility and freedom does come with some barriers and uncertainty, but that doesn’t mean you have to forego your financial security and independence. Some things that are worth going after, may take a little more work and planning.

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THE FEDERAL BUDGET SUPER REFORMS – HOW WILL THEY IMPACT YOU?

From 1 July 2017, a range of super reforms are set to come into play.   What are the changes and how will they impact you?

The Australian Government’s office of Treasury, state once implemented, these changes will help to improve the fairness, sustainability, flexibility and integrity of the superannuation system. 

They also state that the legislated superannuation changes are only expected to affect 4% of all individuals with superannuation.

If you earn less than $40,000 or are self-employed you will benefit from more flexible super contribution rules. If you are a high income earner or have a large super balance there are new contribution limits and a balance cap that will change how much you can add to your super.

Explained in summary here are the main changes and who they will affect:

LOW INCOME EARNERS

Those earning up to $37,000 a year will receive a Low Income Superannuation Tax Offset (LISTO) contribution to their super fund. The LISTO contribution will be equal to 15% of their total pre-tax super contributions for an income year, capped at $500.

Individuals with a total superannuation balance of less than $500,000 just before the beginning of a financial year can carry-forward unused concessional cap space (for up to 5 years) to use if they have the capacity and choose to do so.

HIGH INCOME EARNERS

Anyone earning more than $250,000 a year will have their concessional superannuation contributions taxed at 30% (this was $300,000 previously)

RETIREES OR THOSE APPROACHING RETIREMENT

From 1 July 2017, the amount of money a person can transfer into their superannuation account during the retirement phase will be capped at $1.6million. 

Individuals under the age of 65 - as well as those aged 65 to 74 - who meet the work test, will be able to claim a tax deduction for personal contributions to eligible superannuation funds up to the concessional contributions cap.

ANTI-DETRIMENT RULE NOW ABOLISHED

Under this new law, a super fund will not be able to pay a refund of a member’s lifetime superannuation contributions tax payments into a deceased estate. Likewise, the super fund will not be able to claim a tax deduction for this payment.

There is quite a lot of information and we have only provided a snippet here.  Remember, it is imperative that you speak to your financial adviser before making any decisions regarding your super and your financial future.

Source for facts:  http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/Superannuation-Reforms

GIVE YOUR MUM THE GIFT OF FINANCIAL SECURITY THIS MOTHER’S DAY

Our Mums, the ones we rely on for comfort, advice and support are probably the least likely thought of for needing financial advice.  However, they are probably the most vulnerable.  Particularly if they have recently become widowed or divorced (Recent statistics indicate that the majority of women over the age of 65 are single. 

Recent figures suggest that life expectancy for women is 89 years of age. It is crucial your Mum is going to have the money to live comfortably to have fun as well as take care of bills, health costs, holidays etc.

Your Mum might already be behind the eight ball with her savings and superannuation if she took time off to be a stay at home Mum.  She also may have earned less than her husband for the majority of her career too. 

A financial planner can help ensure she has an emergency fund, spending and investment plan, superannuation, insurances and estate planning all set up to suit her personal circumstances.  She will also need to consider a plan for long term care if required.  Having financial freedom can take a lot of stress away and make the way for your Mum to enjoy the best years of her life.

This Mother’s Day why not consider giving your Mum a consultation with a financial planner rather than the usual flowers or chocolates.  What could be a better gift than safeguarding their financial future.   Happy Mother’s Day!

Contact Amanda now to arrange a consultation https://amandamccall.com.au/contact-financial-services-brisbane

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EXTEND YOUR SUPER

Are you looking at your Super balance and becoming a little nervous as to whether it will be enough?  There are a few things you can do to ensure you make the most of your Super.

1.     REVIEW YOUR SUPER FUND

Conduct a review of your Super Fund, ensure it has low fees and a solid history of strong returns.  Most funds offer life insurance, total and permanent disability cover and income protection. Firstly check that your super policy does offer these options.  Generally, buying this insurance through your super fund can be cheaper and premiums are deducted from your super account.

2.      SALARY SACRIFICE

While you are still employed, make extra contributions through salary sacrifice.  This means giving up some of your pre tax pay and putting it into your super.  This saves you on tax as monies going into Super are only taxed at 15%.

3.      CONSIDER A TRANSITION TO RETIREMENT STRATEGY

If you are still working and keen to do so for the time being this kind of strategy can help you ease into retirement.  You can us some of your Super as an income stream.  This can also have tax benefits.

4.     GOVERNMENT ENTITLEMENTS

Do the research and find out what you are entitled to as it will affect the amount of Super you need to draw on to supplement your income.

5.     KEEP UP TO DATE WITH CHANGES

Ensure you keep up to date with changes to laws affecting your Super or government entitlements.  The federal government recently passed significant changes to superannuation.  You can read more about these changes here http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/Superannuation-Reforms

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OUR COMFORTABLE RELATIONSHIP WITH DEBT

There is no doubt about it, Australians have some of the highest amounts of debt in the Western world. 

This is growing due to the attitudes around finances with younger Australians.  Millennials were found to be around twice as likely as the average Gen X or Baby Boomer to believe they could not maintain their lifestyle without borrowing, or without borrowing, they ‘would not have any quality of life’.

In the last 12 months, Millennials have applied for more than twice as many credit cards, mortgages, and personal loans as the average Gen X or Baby Boomer. (Canstar.com) 

It has never been easier to spend money you don’t really have with the offers of credit cards, zero per cent balance transfers, interest-free store loans etc.  flashed in our faces constantly.

You may not see an issue with this whilst you have a well paying job, equity in your home  and a good economy.  However, it could cause major concern if the situation were to take a turn for the worse. The sudden loss of a job or a serious illness of a family member could place significant stress on the household and impact upon your ability to maintain repayments. A small decline in house value could see you in a position where your home value is less than your mortgage.

Debt is really about spending money you don’t have.  It is easy to then, spend more than you earn.  It is important you understand and know exactly what comes in and out of your bank account and developing a way to track this.  And if you are in too much debt working out a plan of attack to reduce this debt.

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