We’ve all heard about the “lost billions” sitting in idle superannuation funds around Australia but are you aware of what’s happening to hundreds of millions of dollars sitting in “inactive” bank accounts? Read on, you may be very surprised.

The Australian Securities & Investment Commission (ASIC) is now able to collect total balances from Australian’s bank accounts that have remained untouched for three years. Previously, this money could be collected after a seven-year period of no transactions. There is more than $630 million waiting to be claimed, most of which has already been transferred from bank accounts into the federal government’s Consolidated Revenue Fund. That should be enough to prompt action!

This could be a true story

Your elderly, and very wealthy, Aunt Mary has accumulated a vast fortune that is scattered throughout many bank accounts. She relies on one account to cover her living costs but doesn’t touch the others, believing they are safely accumulating interest and are best left that way. She moved into a retirement village a few years ago and forgot to tell each bank of her new address. 

Mary decides she wants to share her wealth before she dies, so she digs out all of her bank books and heads off to each bank to see how much she has available to divvy up between her numerous progeny.

You can imagine her horror when the teller at the first bank advises Mary that the account is no longer active with that bank and therefore they have no record of any balance. Even though the teller gently explains what has occurred and how to reclaim her money, Mary is devastated. She receives the same astounding news at all four banks she visits. In shock, she believes that she has lost most of her life savings.

How would you feel if this happened to you or an elderly relative? It would be very upsetting – but there is a happy ending.

It is still your money

This money still belongs to its rightful owner. Although it’s now held in the Consolidated Revenue Fund, a simple process will release all of the funds, plus interest!

Here’s how it’s done:

1. Visit www.moneysmart.gov.au and search for “claim money from bank account”;
2. Follow the instructions on the page starting with a simple search;
3. If a search shows money is being held in your name proceed through the three steps explained on that page.

Any money reclaimed is paid back with interest. And even better, the interest is not taxable.

Prevention is better than the cure

So that you don’t have to go through this whole process to reclaim your own money, review your bank accounts. If you have too many, consolidate them into one or two manageable accounts and make sure each bank holds your current contact details. 

Just one transaction every two years will deem your accounts active. And don’t forget to share this with your elderly relatives.

Sources:
NFP:
ASIC’s MoneySmart website www.moneysmart.gov.au
ASIC website www.asic.gov.au Changes to the Commonwealth unclaimed money laws
ASIC Unclaimed money report – bank accounts: www.asic.gov.au/asic/asic.nsf/byheadline/Unclaimed+money+bank+account+list? (accessed January 2014)
Business Insider Australia “ASIC Has Collected More Than $400 Million From Inactive Bank Accounts This Year: Report” Liz Tay (October 2013)

Call (02) 4926 2300 or email us. 
If you wish to discuss reclaiming your money and how you can go about it, please call the team at Leenane Templeton.

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Add to this the reality that many of us are going to outlive our savings, and the age we qualify for the Government pension is rising, then it’s no surprise that aged care and estate planning are hot topics for government, financial advisers, and families alike.

So what are some important things to consider when looking to plan your life, or that of a loved one, after retirement?

Five core issues

1. The costs.

Establish entry fees and bonds and ongoing costs of nursing homes and hostels. For residential care make sure you understand the costs are for things like daily care fees, and income-tested fees.

2. The family home.

Consider if someone will continue to live there, or should it be sold or rented out? You might consider options such as a reverse mortgage.

3. Social security.

Find out how to maximise your age pension entitlement by structuring your assets in the most effective way.

4. Tax.

Look at what special tax offsets may be available when living in residential aged care.

5. Estate planning.

Have you or your loved ones sorted out a power of attorney or enduring guardianship?

Government help

In July 2014, the Australian Government launched the Let’s talk about changes to aged care campaign (myagedcare.com.au). The changes included:

• greater support to stay independent and in your own home and community with more home care packages to meet your needs
• older people being asked to contribute to the costs of care, if they could afford to do so
• increased flexibility in ways to pay for accommodation in an aged care home
• Centrelink providing income testing for people receiving home care, and both income and asset testing for people receiving residential care.

Estate planning

A huge part of aged care planning is estate planning. At its most basic, estate planning is about working through what you want to do with your assets when you die. It’s much more than just a Will. Effective estate planning is about protecting your assets and empowering you with the information and knowledge you need to make informed, conscious choices so that your family is not left stranded or your assets eroded or exposed to systems, processes and challenges that you may not be aware of or have even considered.

Financial planning

Whatever your preferred choices are for aged care there is a need for preparation and sound financial planning.

Source: BT Financial, October 2014

Call Leenane Templeton on (02) 4926 2300 or email us.

Our team of expert financial planners are at hand to assist with your financial position ahead of retirement. Living Long – Living Well.

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A snapshot of DisabilityCare

DisabilityCare Australia is aimed at those who are most in need, providing long term, high quality support for people who are born with, or who later acquire, a permanent disability that significantly affects their communication, mobility, self-care or self-management.

Support may be provided if the disablement is permanent or where early intervention can reduce the impact on the individual’s ability to function (primarily aimed at children).  Participants in the scheme will have a personalised support plan developed and the necessary funding provided.   It will also include a comprehensive information and referral service, to help people with disabilities who need access to mainstream, disability and community supports.

Once fully operational, the scheme will provide support to about 460,000 individuals[1] – a fraction of the four million Australians who suffer some type of disablement and the 1.25 million with severe or profound disablement according to the ABS[2].

Launch sites

The DisbabilityCare scheme will initially only rollout to five launch sites commencing from 1 July 2013 and will cater for different parts of the community[3].   These include:

The launch sites will run for a number of years before the scheme is fully rolled out in 2018-19 and will initially only provide assistance up to 14,000 Australians[4].

What DisabilityCare is not

Since the DisabilityCare scheme is primarily concerned with providing necessary funding and support for those that are disabled, the draft scheme rules outline the things to be considered if funding is to be provided.  This includes what it is reasonable to expect families, carers, informal networks and the community to provide.  In practice, this means that those with greater support from families and others in the community will receive less funding than someone without that same level of support.

Why life insurance is still important

1. The DisabilityCare scheme will not cover people for loss of income nor assist with other living expenses such as paying the rent or mortgage.
2. Life insurance is primarily concerned with whether the insured person meets the insurance policy terms and conditions regardless of the level of support available to them through their families, carers or the community in general.
3. Income Protection can provide individuals with a regular income while temporarily unable to work and may also include payment of rehabilitation expenses.
4. Critical illness or total and permanent disablement insurance gives individuals greater flexibility over how they use their lump sum benefit.
5. Lump sum insurance benefits can be used to support rehabilitation, pay for necessary aids or future medical costs or to provide an income over the longer term.
6. Part of a life insurance benefit could also be used to pay for a holiday for the family or to supplement income that is foregone as the individual is able to gradually return to work at their own pace.  This freedom helps to alleviate the stress and anxiety on individuals and family members.

A practical example

John is 53, married to Ann with two high school age children.  He suffers a stroke and is unable to work for six months but expects to be able to gradually return to work, albeit in a reduced capacity.

If John has long term income protection cover then he’d receive the full monthly benefit while he is totally disabled and a partial benefit when he does eventually return to work in a reduced capacity provided he met the insurance policy terms.  This benefit would cover John’s loss of income.

If John has taken out Crisis Recovery cover then he would receive a lump sum benefit provided he meets the insurance policy terms.  This amount could be used to pay for out of pocket medical expenses and modifications to his car and home.  John has control over how he chooses to spend this amount and could decide to take an extended time off work.  This amount could also cover any income foregone if Ann chose to stay at home to care for John.

If John was relying on qualifying for support under DisabilityCare, provided he was accepted for funding support, this could cover things like ongoing physiotherapy to assist with improved functioning and perhaps a motorised wheelchair to assist John’s mobility but would not provide income replacement support or cover other day-to-day living costs.

Impacts to underinsurance

Australians already chronically underinsure their lives.  According to RiceWarner,[5] for total and permanent disability, the level of underinsurance is over $8 trillion and, for income protection alone, more than $600 billion.  According to their research, the level of insurance cover held by individuals is less than 20% of their insurance needs.

This is concerning given the number of Australians who will be impacted by accidents or illness each year.   A 2008 survey conducted by the Melbourne Institute[6] found that more than 235,000 working-age Australians, living as members of a couple, with dependent children, had suffered a serious illness or injury in the previous 12 months.  This same survey found that more than 17,000 of this same group were unable to continue working due to illness, disability or injury during the previous 12 months.  This emphasises the need for adequate levels of life insurance.

This should not necessarily be a choice between DisabilityCare and life insurance.  It’s impossible to predict whether a future disablement will be severe enough to qualify for DisabilityCare.  Life insurance allows individuals to take control should the unexpected happen, whether it’s to replace income or provide a lump sum that can be used for a variety of purposes, such as to cover debts and other expenses.

DisabilityCare is a big step forward and will assist many people – but in our view, it’s not a substitute for life insurance.

To find out how you and your family can benefit from life insurance, contact our office and speak to our expert staff.

Source: AIA, August 2013

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There are a few common financial planning strategies that may be appropriate for businesses and individuals looking to take control of their finances and plan for the future.

Concessional contributions.

The contributions cap for concessional contributions for those aged over and under 50 is $25,000 for the 2012/2013 financial year. Those which have exceeded this limit will face a penalty tax of 31.5%, in addition to the 15% tax payable on contribution. The excess concessional contributions also count towards the non-concessional cap. For those aged 65 or over, they must first satisfy a work test in order to make super contributions.

Government co-contributions.

There are government incentives in place for making after-tax contributions to super, with the government co-contribution scheme designed for low to middle income earners earning up to $46,920 (2012/2013). For those who have made an after tax contribution and are earning up to $31,920, the government will contribute up to a maximum of $500 tax-free into the super fund. For example if the non-concessional contribution  is $800 for someone earning up to $31,920, then the Government will contribute $400, representing an instant return of up to 50% on contributions.

The amount the government contributes decreases by 3.33c for every dollar above the $31,920 and cuts out at $46,920. It is exempt from being included as income in tax returns.

Spousal contributions.

Making an after-tax contribution to a dependant spouses’ superannuation account can result in a tax offset, provided that the spouse is under 65, or up to 70, provided they are still working.

Those who contribute at least $3,000 to the spouses’ account are eligible for the full tax rebate of $540, as long as their spouses’ assessable income is less than $10,800 for the year. If less than $3,000 is contributed then the rebate will be equivalent to 18% of the contributions.

If the spouses' income is higher than $10,800, the rebate decreases until it is capped if the income exceeds $13,800 a year.

Contact our friendly expert staff for further information TODAY!!!

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