On Friday 23rd August, Daniel was invited as a guest on ABC Radio National’s Modern Dilemma segment. It was a light hearted discussion based on a listener’s real life situation, which focused on the competing lifestyle factors and peer pressure that a retiree might face when deciding to downsize their home. Below is an exerpt from the ABC website:

  • You’re in your late 60s and on a pension, so you begin contemplating a lifestyle change.
  • You have partly paid off your home, but the house is old and the garden is large and you live alone.
  • Should you sell up and buy in a retirement community, or hold on to your house?

Tour Guide, actor and story teller Kathryn Bendall and Financial Advisor Daniel Budreika talk through this one.

You can listen to the segment here.

Planning for Prosperity’s Bob Budreika was recently featured in a News.com.au article around the new life insurance changes that are due to take effect from 1 July 2019.

You may not know you have it, but losing your life insurance could create one of the most painful financial problems of your life.

Less than three months before more new superannuation rules kick in, Australians are being urged to check their super and the life insurance held inside it.

From July 1, people with inactive super accounts with balances below $6000 will have them automatically shut down and the money transferred by the Australian Taxation Office into one of their larger super accounts.

This could lead to the cancellation of life insurance and disability cover that may be difficult to get back.

Integrity Life’s general manager of distribution, Suzie Brown, said under the new laws people who had not made a contribution or other changes to their account within 16 months would lose default life insurance as the account was consolidated.

“If your health or circumstances have changed since you joined your super fund, or you are in a higher risk occupation, it might be more difficult to obtain the cover you lost,” she said.

Ms Brown said people could check their super accounts and find lost super by visiting my.gov.au and linking to the ATO.

“To check your insurance cover within your super, contact your super fund, check your annual statement or access your online account,” she said.

From May 1, super funds will be contacting members with inactive accounts.

“If you don’t respond, you will lose your insurance cover,” Ms Brown said.

Another looming change is making life insurance in super “opt-in” for new members under 25 or with low balances.

Planning for Prosperity senior adviser Bob Budreika said people should check their super funds for insurance and take control, even though he was “totally miffed” by the rules changing.

“I can’t believe how silly it is,” he said. “As a parent, if I had a 22-year-old who become incapacitated, who would pick up the tab if they have got no money? I will tell you: the Bank of Mum and Dad.

“They’re saying a person who is 20 will never have an accident, disability and never die in that (under-25) time frame. That’s like saying why would you have car insurance, and why would you have home insurance?”

April 16, 2019. Source: News.com.au. Author: Anthony Keane.

Planning for Prosperity adviser, Daniel Budreika was featured in a News.com.au article about cashflow and bugeting. Below is an excerpt from the article.

Planning for Prosperity financial adviser Daniel Budreika said the best way to beat financial stress was to “get back to basics” and know what you earned and spent.

“I have noticed that people don’t know how much it costs to run their household — I think most people just wing it,” he said.

“They get used to living on their income and their expenses match it accordingly.”

Mr Budreika said there were many free apps available to help people track their spending.

Click here to read the full article.

February 24, 2019. Source: News.com.au

Much has been written about the effects of the changes to the asset test assessment from Jan 1st 2017 for those receiving the Aged Pension.  There is another section of the retired community that hasn’t had the same publicity:  those people in Aged Care.  Their situation is quite different because they have existing agreements with the facilities and there is an expectation that both parties will honour their contracts.

Pensioners will have reduced income

The reduction in the assets test threshold means that many pensioners will have reduced income or even have their benefits cut off entirely.  This could put pensioners, and their Families in an awkward situation especially if they own fixed assets that can’t be easily cashed in such as real estate or term deposits.  I can see that this will be a stressful time for many families as they need to review the financial position and make appropriate decisions that’s in the best interest of the family member in aged care.  Then there’s the aged care facility that’s relying on receiving ongoing resident care fees.

Single Aged Pensioners

The Centrelink changes will be complicated enough in a couple relationship but this is even more difficult when a spouse dies and becomes a single Aged Pensioner.  The asset test limit for a single person doesn’t provide much leeway so this group of pensioners are more vulnerable.

Aged Care loan maybe a solution

A solution that has merit is an Aged Care loan where the principle home of the aged care resident is used as security to either arrange a lump sum or regular draw down income payments.  There are significant advantages including retaining the Family home and arranging the loan proceeds so as to not impact Centrelink benefits.

Using Superannuation to buy investment propertyMany people we deal with are blissfully unaware that their super beneficiaries may end up paying a large amount of tax on their account balance when they pass away.  This applies to all people but particularly those who have relied upon their employer mandated contributions or made personal deductible contributions, such as small business owners.

Super is either Taxable or Tax free

Most people only see their super balance as one figure but underneath, it is actually made up of two important components; taxable and tax free.  Every time a contribution is made it gets allocated to one of these components and has an effect on how super withdrawals are taxed when money is released.  Most commonly this is in retirement before age 60 but it also includes early release for situations like total and permanent disability and death benefits.  For the majority of someone’s working life they can be forgiven for not taking any notice of this – and for good reason – there are more important things to focus on, however, as people near retirement it is something to be aware of.

What is Tax Free Super?

For the purpose of this article I am going to focus on what happens to this money when you pass away.  Fortunately the names given to the components give you a good indication as to how they might be applied from a tax point of view.  As you can imagine, the ‘tax free’ component, as it suggests, is released tax-free.  Money is allocated to the ‘tax free’ component when a tax deduction has not been claimed at time of contribution.

What is Taxable Super?

Unfortunately, the more common form of super contributions are from employers or small businesses where a tax deduction was claimed either by you or the business owner making the contribution.  This includes all Super Guarantee 9.5%, salary sacrifice and personal deductible contributions.  These contributions have 15% tax taken out on the way in and get recorded under the ‘taxable’ component.  This is the money you need to be concerned about and who it will be left to as a nominated beneficiary when you die.  If the person (or people) you have nominated are classed as dependents, your super balance will be paid out to them tax free.  This can include people such as; your spouse, ex-spouse, children under 18 years or anyone else who was financially dependent or in an interdependency relationship with you at the time of your death.  You will notice this does not include nominating your estate or other people, such as adult children.  If a non-dependent beneficiary has been nominated the taxable component will be taxed at 15% plus Medicare (currently 2%) = 17%.

How taxable super can impact your ‘Estate Tax’

Let us look at an example.  Peter has recently re-married and has two adult children in their 30s that he would like to leave an inheritance to.  He has a super account balance with $300,000 which has been made up of mostly employer contributions over his working life.  His taxable component is $280,000.  Peter currently has his two adult children listed as the nominated beneficiaries on his super fund.  If Peter were to pass away, his children would pay 17% tax on his $280,000 taxable component, which works out to be $47,600!   This is significant and would most likely be a rude shock to his children.

On the other hand, had he left his super money to his new wife, she would pay zero tax on this money.  Both of these outcomes are problematic as neither meet Peter’s wishes.  Rest assured, with careful strategic planning there are alternative ways to reduce this ‘estate tax’.

Planning for Pronews-com-ausperity’s Daniel Budreika was quoted in this article on How to play catch-up with your Super

Daniel pointed out that ‘every bit counts’:

Daniel summed it up by saying:

It all boils down to adding more money to super than your employer puts in.  There is no free lunch — you have to give something up.

Super | Every bit counts

Bob Budreika was recently quoted in a News.com.au article on grandparents who gift to their grandchildren

Grand parents gifting
Image sourced from News.com.au article

“People aren’t aware that you can have superannuation for children — there is no age minimum,” Budreika says. The super option isn’t for everyone, because the grandkids won’t be able to touch it until at least age 70 based on today’s rules, and governments of both sides are constantly changing the super rules.”

The full article can be read here

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