Each year in early May, the Treasurer delivers the Federal Budget and many people across Australia listen intently. The Budget tells us how the government intends to spend its revenue in the coming year, whether it can afford to give us tax cuts, and whether it expects to spend more (deficit) or less (surplus) than it receives.

Budgets are also important on a personal level, especially when living costs are rising and uncertainty abounds in global financial markets. So it’s worth having a look at how we’ll cope with the increasing cost of living. 

Save more or spend less?

Is it easier to save more, or to spend less?

They might sound like the same thing. After all, saving is what we do with whatever’s left over after spending, isn’t it? 

Well, not quite. You see, it’s easy for spending to get out of control, and many people actually find it easier to focus on reducing their spending than saving towards a goal. 

Take control

To begin with, work out where your money goes. Start by keeping track of everything you spend and what you spend it on. Split it into categories based on necessity. Things like mortgage repayments, utilities and essential food obviously go in the ‘must spend’ group. Some things will be ‘optional but important’, and others will fit into the ‘frivolous’ category. 

Do I really need this?

After a few weeks you’ll have an idea of where your money is going then it’s time to start asking yourself a couple of questions:

• Do I need to spend this much on this category?
• When I over-spend, what can I do to prevent it happening again?

It’s worth remembering that every year in Australia we spend billions of dollars on food we don’t eat, clothes we never wear and services we don’t use. So for many people, gaining control over spending doesn’t mean ‘doing without’, it just means being sensible about spending. There are a lot of things you can enjoy for free, and you can even turn a ‘thrift campaign’ into a hobby.

Watch debt 

Pay off credit cards within the interest-free period to avoid high interest costs. If that’s not possible, investigate consolidating high-interest debt into home loans or other lower cost loans. When borrowing, make sure you leave a ‘comfort zone’ to ensure you can meet your commitments. 

Talk to us about preparing a personal budget that doesn’t require you to do without or give up everything you love.
Call (02) 4926 2300 or email. 

To discuss your budget and how you can better manage your finances, please do not hesitate to contact the expert and friendly team at Leenane Templeton. 

The post How’s your budget – surplus or deficit? appeared first on Newcastle Financial Planners & Financial Advisors.

If the need for residential aged care is nearing you or a loved one, following these five steps will help you make a smoother transition.

1. Get your eligibility assessed

Before you can enter an aged care facility and receive Government support, your health situation must be assessed by the Aged Care Assessment Team (ACAT). The assessors are generally health professionals who specialise in aged care assessment.

This is a free service that can be done at home, in a health centre or hospital. The purpose is to determine whether you are eligible to move into residential aged care, or can access a range of care services that would enable you to stay in your home longer.

2. Find a suitable aged care facility

Once Aged Care Assessment Team has determined your eligibility for residential aged care and the care services you may need, it’s a good idea to visit a few facilities.

Remember each facility is different and not all aged care facilities will be able to meet your care needs.

3. Work out the cost

While the Government provides some funding for residential aged care facilities, those who can afford it are expected to contribute to the cost of their care.

The four different fees you may be asked to pay include:

• an accommodation payment – for your accommodation in the aged care facility, which may be paid as either a lump sum, regular instalments or a combination of lump sum and instalments
• a basic daily fee – which will usually be payable by all residents and is a contribution towards daily living costs, such as nursing, personal care and meals
• a means-tested care fee – which is an additional contribution towards the cost of care that you may need to pay depending on the assessment of your income and assets, and
• an extra services fee – which may be payable if you choose a higher standard of accommodation or additional services and it varies from place to place.

4. Seek financial advice

Moving into residential aged care can be financially challenging. However, obtaining financial advice can help reduce a lot of the stress by helping you to:

• determine which fees may be payable
• implement strategies that could reduce your care costs and/or increase social security entitlements, and
• ascertain whether care at your preferred facility(s) is affordable for you.

In conjunction with a solicitor, your financial planner can also help to ensure your estate planning affairs are addressed as you will need to consider:

• selling, renting, retaining or transferring ownership of your family home
• reviewing your enduring power of attorney
• reviewing your Will (including the benefits of including provisions in your Will that establish a testamentary trust upon your death), and
• reviewing your superannuation death benefit nominations.

5. Apply for an aged care facility

Once you’ve decided the type of care you want and can afford, and your estate planning affairs are in order, it’s time to apply. It may be a good idea to lodge an application with a few places and ask to go on the ‘waitlist’ in case your preferred aged care facility is not available.

If you are offered a place, you must be given a copy of the accommodation agreement before you move in. This agreement sets out the key terms and conditions and it should be reviewed by a legal professional. You must sign the agreement and decide how you will make the accommodation payment within 28 days of entering the facility. 

Source: MLC

Speak to your financial planner to discuss your aged care options.
Call (02) 4926 2300 or email us. 

To discuss your aged care options please do not hesitate to call us here at Leenane Templeton to speak to a professional and expert financial planner. 

The post Aged Care Options – Five steps to consider before entering an aged care home appeared first on Newcastle Financial Planners & Financial Advisors.

When relationships break down, child maintenance payments are often made from post-tax money. If this is a position you are facing, perhaps you might consider a Child Maintenance Trust.

According to the National Centre for Social and Economic Modelling (NATSEM), the cost of raising two children is estimated at $812,000. For those in the 45% tax bracket, every $25,000 in child support costs nearly $50,000.

Just as alarmingly, children receiving payments of ‘unearned’ income, such as support payments can attract tax rates as high as 66%.

When a Child Maintenance Trust (CMT) is established, investment assets placed into the trust generate income toward meeting child maintenance obligations. CMT income is taxed in the child’s hands at adult rates meaning that children receiving benefits from CMTs can claim the tax-free threshold, currently $18,200.

Before a CMT can be set up certain conditions apply including:

• a marriage breakdown occurring,
• both parents consenting to the trust terms,
• the contributing parent must earn in excess of the income tax threshold.

Importantly, trust assets come under the child’s control at a date pre-determined by you, for example, when the child turns 18.

A clear advantage is that CMTs protect assets so should you become bankrupt or lose your job you can continue to meet your child support obligations.

Case study – Emily

When Emily was 13 her parents divorced. Emily lived mainly with her mother and her father’s child maintenance obligation was set at $1,000 per quarter. After seeking financial advice, Emily’s father considered a Child Maintenance Trust. A comparison of Emily’s financial situation was used to determine whether a CMT was appropriate.

If Emily’s father invested a lump sum of $30,000 at 4%pa, regular quarterly drawdowns of $1,000 could be made comprising $300 income and a return of capital (return of capital is tax free).

Taxed at adult rates, the CMT income would fall below the tax-free annual threshold of $18,200 therefore no tax would be payable.

Emily’s father set up a CMT that would vest in her name when she turned 18. If Emily got a part-time job while she received these maintenance payments, her wages would be added to the payments and provided the total did not exceed the annual threshold no tax would be payable.

Outside of a CMT, Emily’s support payments would pay tax at minor rates. As her payments would exceed $1,307 pa, they would be taxed at the flat rate of 45% ($1,350).

Wages attract adult rates but would fall beneath the tax-free threshold.

Note: this case study does not consider variations in child support payments or inflation.

Sources:
www.smh.com.au Childcare, schools lead rise in cost of raising children (Stephanie Peatling 23 May 2013)
www.dobbrickfinancialservices.com.au Divorcing with children? Consider a child maintenance trust
www.ato.gov.au Tax rates applying to the income of minors
www.civiclegal.com.au Child maintenance tax detail

This has been a very brief introduction. It’s worth talking to your financial adviser about how Child Maintenance Trusts might fit into your overall financial strategy as they are not for everyone.
Call (02) 4926 2300 or email us.

Disclaimer

Our award winning and expert staff are at hand for any questions you may have in relation to a Child Maintenance Trust or any other financial planning matters you may have. Call the team at Leenane Templeton today!

The post Child Maintenance Trust – A different kind of support appeared first on Newcastle Financial Planners & Financial Advisors.