Summer Newsletter 2010 Money Works Financial Planning Pty Ltd
December 2010
A Word from Chris Let me begin by wishing you all a wonderful, relaxed Christmas and of course a prosperous New Year for 2011. I certainly hope your dreams and goals for 2011 are realised and we hope we can play a major part in these objectives. I would ask, that over the Christmas period, you give a thought to those who won’t be spending Christmas with family and friends or who won’t be enjoying a Christmas meal with all the traditional trimmings. In our country alone there are more than 105,000 homeless on any given day, who won’t be sharing the joys of this festive season with loved ones this year.
Inside this issue:
A Word from Chris
1
Are you properly insured?
2
Transitioning to Retirement
3
Aviva Investors Market Monitor
3
Onsite
4
Tech Support
As you may have read in our previous newsletter, I was involved in a 2 week mission to Cambodia with my Rotary Club, the Rotary Club of Kent Town. We organised for 2 containers with medical equipment be sent to the Battanbang Referral Hospital. There were 30 wheel chairs, 40 beds, four operating tables and much more. This equipment came from Donations in Kind, which is a Rotary Partner. They collect second hand equipment which is still in good working order, and store it at a warehouse in Salisbury until it is needed. We had a total of ten members from the club along with Ms. Kate Taylor of the 2H foundation. Kate was the inspiration for this project as she originally came to the club 18 months ago telling us about the foundation and the work that
it was doing. problem rectified at no cost to (For information about 2H, go them. The surgery is funded to birthingkitfoundtion.org.au). and sponsored by Australian Business’s, including the We arrived in Phnom Penh and ABC Vision Centre in toured the city before heading Sydney. I was fortunate to up to Battanbang. We spent witness a couple of these some time with the administra- procedures which I found tors and health officials of the amazing. The eye surgeons hospital. Our original plan was are very well trained and to unload the containers and extremely talented in these prepare the wards but as the operations. containers hadn’t arrived at the hospital (although they had We then went to Sien Reap to arrived in Cambodia) we were spend a few days looking at unable to achieve this goal. We the temples of Angkor Wat asked if we could help some and other ancient temples. All other way and found ourselves in all, it was a wonderful, life cleaning, washing and painting changing experience, one that some 59 beds from the hospital I shall never forget. One of that looked like they had come the most distressing factors out of the “Ark”. They were was the poverty of Cambodia, covered in filth and rust, and like many Southeast Asian badly in need of repair. We Countries there was a vast were able to paint all 59 beds, a difference between the haves feat achieved mainly by yours and the have nots. You and I truly, going to a local hardware could sell up everything we shop (not Bunning’s or Mitre have here in beloved South 10) stocked mainly by 3rd Australia and move over there world handyman gear purchas- and live like kings and ing a compressor and spray queens. Were it not for gun. Instead of painting each organisations like the 2H one by hand which took an Foundation, and there many average of 35 minutes it took like minded organisations, us just 7 minutes per bed with which help these people, the spray gun. things would be even worse. We need to continue to The following day we were remind ourselves just how trained in Eye Testing for lucky we are. vision impairment through Cataracts and Pterygium So in closing while spending growths. The basic eye test Christmas day with your uses a simplified eye chart. We loved ones and friends, have a then headed out to a village thought for those less approximately 30 km outside fortunate. Not only in of Battanbang where we tested Cambodia or other 3rd world approximately 250 local village countries, but also for those in people. We identified 32 our local community that Cambodians with poor sight won’t have a Christmas. through either Cataracts or Pterygium. These people will Merry Christmas to you all attend the 2H clinic in with our Very Best Wishes. Battanbang to have the sight Chris, Vicki and Emma
Summer Newsletter
Page 2
Are you Properly Insured? The Insurance Gap: As it stands, Australians are underinsured. In fact, the gap between life cover we have and the life cover we need is estimated at around $1.37 Billion.1 The Facts: Heart disease kills one Australian every 10 minutes.2 42,000 Australians are expected to die from cancer this year alone.3 96% of Australian families lack enough life insurance to protect their families for 10 years or more, meaning only 4% of families are adequately covered.4 Someone in their mid-30’s with two young children and earning around $50,000 pa will need life insurance cover of between $500,000650,000, or 10-13 times their annual pre-tax income. 5
cost of a beer, you can get TPD cover of $750,000. Trauma cover Pays you a lump sum if you suffer a specified and serious illness, such as a heart condition or cancer. For around $7.20 a day, or less that the cost of a newly released DVD, you can get trauma cover of $500,000. Income Protection Replaces around 75% of your income if you are sick or injured and can’t work. For around $1 a day, or less than the cost of a chocolate bar, you can get income protection of $3,000 per month. Like to know more? If you would like to know more about insurance and whether or not you have the right level of cover for you and your family, please call our office for an appointment.
1_Rice Walker Actuaries, Analysis of Insurance Needs, May 2005. 2_Heart foundation, March 2009 Why insurance is so important: 3_Cancer Council Australia, March 2009 Most financial experts agree that insurances such 4_TNS Research, Investigation the issue of as income protection, life insurance, trauma underinsurance in Australia, August 2005. cover and total and permanent disability (TPD) 5_Rice Walker Actuaries, Analysis of Insurinsurance are fundamental to any good financial ance Needs, May 2005 plan. 6_The cost of insurance will depend on individual circumstances and insurance needs. All The cover you need: 6 costs examples are for a 45 year old nonLife insurance: smoking female, except income protection Pays your beneficiaries a lump sum when where the case study is a 45 year old female. you die. For around $2 a day, or less than the All rates are approximate, assuming no loadcost of buying a coffee, you can get life ings and exclusions. Policy fees and stamp insurance cover of $750,000. duty are excluded and costs are to be considTotal and Permanent Disability (TPD) ered a guide only. Rates are for policies writPays you a lump sum if you are unlikely ten for BT Insurance on Super Wrap of Wrap to work again due to total and permanent Platforms. (BT Brochure) disability. For around $3 a day, or less that the
Continued from Page 1
The children in the hospital were overjoyed to receive the clothing donated by caring people here in Adelaide
Summer Newsletter
Page 3
Transitioning to Retirement Since July 2005, when the Transition to Retirement („TTR‟) rules came into effect, strategies surrounding these rules have continued to grow in popularity. As the “aged pension” may eventually be fazed out, the aim of TTR is to ensure that people have the capacity to retire independently on their own funds. While many believe they will be able to survive with their current super plan, most don‟t realise they could be a lot better off with an effective TTR Strategy.
Account balances in pension phase, are exempt from tax on investment earnings, compared to the 15% tax applied in accumulation phase. Important: Similar advantages are available to self-employed persons by claiming tax deductions on their personal contributions to reduce their taxable income. The following example, is based on a 60 year old individual and compares retirement outcomes with and without a TTR strategy. (Australian Financial web article and table 1.1)
TTR is quite a simple concept. Anyone who has reached “superannuation accessibility age” (preservation age) but does not meet the definition of retirement, can fully or partially roll over their superannuation benefits into an alternative income stream, known as a „non commutable income stream‟. By doing so you increase the pre-tax contributions into super, which provides significant tax benefits while you are still working.
Personal Income Situation Take home salary Pension income Assessable pension income
Effectively, your superannuation fund goes from accumulation phase to pension phase. With a TTR strategy you can keep working full time, or even reduce your working hours.
Why Use a TTR Strategy
TTR strategy $80,800 $17,000 $0
Assessable income
$120,000
$80,800
Tax payable Medicare levy
$33,050 $1,800
$18,320 $1,212
Personal contribution Net income Decrease in income using TTR
$85,150
$78,268 $6,882
Total employer contributions
$10,800
$50,000
less tax on contributions
$1,620
$7,500
Net contributions
$9,180
$42,500
Superannuation situation
Here are 4 key ways an employed person, at preservation age or over can benefit from TTR strategy:
By salary sacrificing more income into your super, your contributions are paid from pre-tax dollars, which may otherwise be taxed at up to 46.5%.
Salary sacrificed contributions are only taxed at 15%.
less pension payment
Income streams have a 15% tax credit applied up to age 60. Income streams from age 60 are completely tax free.
No TTR strategy $120,000
Increase in net super (excluding investment earnings)
$17,000 $9,180
$25,500
Figure 1.1
Aviva Investors Market Monitor Global Equities UK financial stocks led the market down and then up in a volatile week for equities. With the $7billion sale of its interest in Argentina’s Pan American energy, BP confirmed asset disposals topping $20billion since April – proceeds are funding the Gulf of Mexico clean-up. Shareholders approved the £4.5 billion merger of BA and Spain’s Iberia, creating Europe’s second largest carrier after Air France-KLM. Motorola added 3.3% after the telecoms equipment maker said it will split it’s handset business from remaining operations in January 2011.
saw investors move into riskier asset classes. Yields on US ten-year government bonds rose 20 basis points to over three percent – their highest level since July. Yields on German ten-year bonds increased 10 basis point to 2.85% last week.
US economic data on the improve Over the past two months, US economic data has improved markedly. The ISM Manufacturing Index rose to 56.9 in October from 54.4 in September in response to strength in new orders. Non- farm payrolls rose 172,000 in October and 39,000 in November. Global Bonds Retail sales rose 0.6% in SeptemPeripheral bond prices finally lifted as the ber and 1.2% in October. Over ECB began purchases mid-week. the past year, sales are now 7.3%. Portuguese ten-year yields fell over one per Q3 GDP rose at an annual rate of cent, also buoyed by a US statement 2.0%. suggesting the IMF should play a greater This suggests the US economy is stabilisrole stabilising Euro zone sovereign debt ing and that the consumer may be entering markets. a period of recovery. This is significant as US and UK government bond yields rose consumer demand comprises about 70% of further as well-received economic reports the US economy.
Global markets Equity markets ended the week higher, as initial fears that Ireland’s financial crisis would spread to Portugal, Spain, and possibly Italy and Belgium, were relieved by concerted European Central Bank (ECB) purchases of peripheral bonds. While peripheral bond prices recovered as the ECB began buying the debt of weaker Euro zone members, core bond prices continued to trend down, with corresponding yields rising. Commodities generally advanced on encouraging manufacturing reports from the US and China. Copper surged to 400 cents and ounce, close to an all time high. Sourced from Aviva Investors Market Monitor Tuesday 7th December 2010
The information provided in this newsletter is of a general nature only and does not constitute financial advice or a recommendation. You should obtain and consider a Product Disclosure Statement (PDS) before making any decision to acquire a product. Please seek expert advice from a qualified and experienced Financial Planner or accountant or other professional, prior to making a decision on your financial situation. Detailed information on our services and fees is provided in our Financial Services Guide, which is provided prior to or at the first consultation and is also available on request.
135 FULLARTON ROAD ROSE PARK SA 5067 PO BOX 241 KENT TOWN SA 5071 PH: 08 8304 8088 FAX: 08 8431 8211 EMAIL:- vicki@moneyworkspl.com.au
As many of our clients have their own successful small businesses, we will be advertising on behalf of our clients in each of our quarterly newsletters. If you would like us to display your business details in our next issue, please contact Vicki on (08) 8304 8088 or email vicki@moneyworkspl.com.au
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Money Works Financial Planning Pty Ltd is a Corporate Authorised Representative of Millennium3 Financial Services Pty Ltd ABN 61094529987 AFSL 244252 Unit 7, 50 Borthwick Ave Murarrie Qld 4172
Onsite Techsupport -
Damien McGrath
Technology is vital to your business. No matter what the economic climate we all need a computer that functions well and systems in place to protect our precious data. The thing to consider with regards to your technology needs is do you have adequate protection? There are 3 simple steps to give you peace of mind. The first step is to ensure you have an up to date Internet Security program. Are you protected from viruses that can attack not just from emails, but also from website links you click on that take you to infected webpages? It is not enough to just have an anti-virus – you need a total Internet Security Program to protect your PC and your business. Although there are free anti-viruses available that do offer protection to a point, they are not effective enough to cover the various forms of attack out there these days. Second step in protecting your business is to make sure you have a backup system in place to protect you from loss of data due to a hard drive crash, theft or fire. Backup systems are a relatively inexpensive way to protect your data and give you peace of mind. The most common method is to an external portable hard drive which can be supplied with software to automate the backup process which can be supplied for under $200. The third step in protection is to have an Uninterruptible Power Supply (UPS) unit. A UPS allows for equipment like computers, monitors and modems to be protected from power outages as well as power spikes and surges. It also allows you to run for a period of time during a power failure on the internal batteries allowing you to save any files or documents that you are working on at the time of the blackout. And it will stop the corruption of database files which do not react well to sudden disconnections. At Onsite Techsupport we are happy to offer all Money Works clients a free audit during the month of January to assess if your business systems are adequately protected. For all your IT needs contact:Onsite Techsupport on 1300 318 579.