Is your Will drawn up? Do you have a power of attorney?
Aside from ensuring your investments are right for you, your accountant and financial adviser should have a healthy interest in ensuring a few other things in your life are addressed. Ensuring you're prepared and taking the appropriate steps to tie up loose ends if you can't make decisions, or aren't around to make decisions, will be a key step.


What is the common reminder you'll hear when addressing these issues? The choice of executor, or power of attorney, is incredibly important. Choose them carefully, we need to find someone who is judicious and able to set aside any personal issues to carry out our wishes as we had intended. This all seems incredibly simple. We all believe we possess the appropriate sense and judgment to bypass the good-for-nothing choices. We will appoint a solid and respectable person. One with a good job, stable family life, and responsibilities that highlight they grasp the importance of the task. That person will carry out our wishes as we had intended.

Next issue. Well, not so fast…

"What's the problem", you ask?

People change. The upstanding stable individual we entrust with our affairs today, might not be the upstanding stable individual who should be entrusted with our affairs in five- or ten years' time. Dynamics can alter very quickly due to various reasons. Mental health issues, relationship changes or life milestones can suddenly trigger thinking or behaviour not previously associated with the trusted person.

We often get a look under the hood of life planning matters on a regular basis and these changes, unfortunately, do happen. Someone involved in a current case we're privy to has given us permission to highlight the perils of unexpected behaviour. It can rear its head and leave parties bogged down in a legal quagmire for years. Not only is time wasted, but estates can be frittered away. If the deceased knew what was occurring with their assets, well the phrase, 'turning in their grave' was coined for a reason.

Cynthia and James (not their real names) were made executors of their Aunt's estate. Both were everything you'd want as executors. Reliable and trustworthy, both in professional jobs and without any personal differences. You'd expect them to finalise everything in short order. Their Aunt passed away nearly a decade ago and they're still battling it out over her estate. And 'battling' gives the impression this is two parties at war. Nothing could be further from the truth. Cynthia would like to move on; no one really knows what James wants. Since their Aunt passed, James developed an intense hatred for Cynthia.

The estate comprised a modest house and a small amount of money. Combined, it wasn't a large sum and it's been getting smaller by the year (it's not in a location where real estate prices have readily appreciated). Every action by Cynthia has prompted an opposite reaction from James. This has drawn the lawyers into the fray.
Initially, Cynthia wanted to buy the property herself. That wasn't going to work because James decided he wanted to buy the property. Stalemate. Eventually, Cynthia decided she wanted to sell the property and be done with the issue. James then decided while he was happy to keep his share, he no longer wanted to buy the property. Further frustrating Cynthia.

This has kept the estate from being settled and there doesn't seem any prospect of it being settled soon. The pair communicate through lawyers and while Cynthia could take the matter to court and likely win an outcome, she'd rather be fair and equitable so both parties walk away with an even share.
The small sum of money left within the estate has been drained. The pair are now covering the associated property holding costs and legal fees out of their own pockets.

Usually the moral of the story is how we need to be careful in who we choose to carry out our wishes. Being especially careful with the personalities of those chosen. There are countless tales involving poor choices of executors and the associated headaches they bring. Cynthia's story shows you might well be making the most judicious choice at the time, but through no fault of your own an executor does a 180 and kicks off with unexpected behaviour.

So what do you do if you're concerned about this?

It may mean continually looking for warning signs, but if those warnings don't emerge and you want a truly independent executor, you'll need to appoint an independent third party into the role. This may be a last resort, but the above example demonstrates why it may also be appropriate.

Well, it's finally happened. The Australian official interest rate was lowered to 1% last week. This is a new low that we perhaps never thought we'd see in this country, having been protected by our mining boom when most other developed countries were riding down the wave of the GFC 10 years ago. One commentator has asked whether Australians are now simply going through what the US and Europe went through 6 and 7 years ago, only on a delayed time frame? So, what will the latest interest rate cut mean for you? We've listed some relevant points to keep in mind:


For savers
These are the investors who will be feeling the interest rate drop the most. For a term deposit now, you'll be doing well to earn over 2%, which is particularly painful when inflation is running at 2.5%. If you haven't already, now is the time to consider adding additional asset classes to your investment mix and taking on some more risk.

For bond holders
Bonds (also known as fixed interest) are not dissimilar in nature to term deposits, but they can be bought and sold, which means the underlying price of the bond can change. When interest rates are falling it's normally a good thing for bond holders, as the price of the bond will increase and therefore the overall value of the bond will go up. When interest rates rise, however, bonds will tend to behave in the reverse manner and the underlying value of the bond will drop for a period of time until an adjustment is made towards the higher yield (income) that the bond will generate. A good rule of thumb for bonds is to aim for a return of between 1.5% and 2% better than the cash rate, provided the bond term is around 5 years. A shorter-term bond can actually perform better when interest rates are rising.

For mortgage holders
If you have debt, this is your chance to get ahead and you should grab it with both hands. Contact your bank and ask for a mortgage review, as a typical variable home loan should now be costing you well under 4%, ideally closer to 3.65%. The real key is to keep making the same repayments during this time and more of your repayments will go towards actually paying off your loan balance and less will go towards paying the interest component.
Also, be aware of the temptation to borrow more while interest rates are down. At some stage, they'll come back up and if you haven't done the work to reduce debt while rates are so low, you'll be in for a rude shock when they're higher.

For property owners and investors
Money and capital will always flow to the areas where it can receive a better rate of return for a certain amount of risk. When interest rates drop, it's not uncommon to see money poured into the property market if people have been sitting on cash for some time. And while most property investments will give you a better return than you would receive from leaving money in the bank, the rental income has also come down over time. For example, a commercial property once returning 9% income is now more likely to be returning around 5%. This is still superior to the cash rate.

For share investors
For those who invest in shares, we're now seeing the income generated by dividends as being at a higher rate than bank interest. This is historically unusual, but the income generated by shares (particularly when franking credits are included) can be very attractive to investors. Of course, share values can move up and down on a daily basis, but a large degree of spread across your share mix will help to smooth your ride. Initially, the share market has gone up after the interest rate drop as investors have diverted money into buying more shares, looking for a better return than bank interest.

The interest rate drop can be seen as both a blessing and a curse, depending on your personal situation. If you'd like to discuss how to make the best use of the rate drop, please don't hesitate to contact us. We're only a phone call or email away.

Now that we've rolled into the new financial year, the 1st July also marks some changes to most superannuation funds. We've detailed the most important changes below, and most of these changes revolve around the new "Protecting Your Super" laws. These laws include several measures designed to ensure that super account balances are not being unnecessarily eroded by fees and insurance premiums, particularly for accounts that have a low balance or have been inactive for a certain period.

So, how does the new legislation work?

1. Inactive, Low-Balance Accounts
Under the Government's "Protecting Your Super" package, if you have a super account that has been inactive for 16 months with a balance of less than $6000, it will be transferred to the ATO. Workers often end up with multiple inactive super accounts when they open a new account with a new employer but neglect to transfer funds from their old one. If you have ever changed your name, address, job or lived overseas, you may have unintentionally lost track of some of your super. Following the transfer, the ATO will keep your money safe and you will pay no fees. Within 28 days of receiving your money, the ATO will try to transfer the cash into your active super fund, if you have one, and where the transfer would take your balance to $6000 or more.

2. Check Your Super
If you have linked your MyGov account to the ATO, you will be able to see all your super accounts – including any you may have forgotten – in the one place. There, you will also have an ability to consolidate all your funds into your preferred main account, with the click of a button. The process can be completed entirely on the MyGov site, although some follow-up paperwork may be required by some funds.

3. Banning of Exit Fees
Not only can you consolidate funds or switch from one super fund to another more easily, you won't have to pay an exit fee from your current fund. For example, there will be no penalty if you choose to move from a non-performing fund to one of the top investment performers.

4. Removal of Insurance Cover
If your super account was declared inactive, your death and total and permanent disability insurance cover attached to it may have been canceled, to prevent further erosion of funds. Super funds have been busy in the past few months informing fund members via email and the post that their insurance would not continue unless they choose to "opt in" for coverage. If your cover has been canceled but you wanted to keep it, you will now need to re-apply through the insurer's standard application and assessment process. This may require you to provided medical evidence and history to the insurer. We are not in favour of this new legislation as we feel many people will unknowingly lose their insurance cover, which is vital in the event of a claim.

5. Catch-up Contributions
Perhaps the most exciting change is the introduction of the catch-up contributions rule, which the Coalition was able to bring in after winning government. You can now boost your retirement nest egg by utilising unused concessional contributions cap amounts from previous years.To qualify to make catch-up contributions, you must have less than $500,000 invested in your super account as of June 30. You also must not have used your entire $25,000 annual concessional contributions cap in the previous financial year. You can carry forward up to five years of unused concessional contributions caps for use in a later financial year. The five-year carry forward period started on July 1, 2018, meaning that the 2019-2020 financial year is the first in which you can make catch-up contributions. The rolled forward amounts expire after five years.

If you'd like more information on how any of these changes may impact you, please remember we're only a phone call or email away.

Although nobody likes to think about serious illness or injury, much less plan for it, the truth is that Australians are being diagnosed with cancer at increasing rates each year, in addition to increased incidents of heart disease and stroke. Medical science has become so sophisticated in recent years that most people survive serious health problems. In many cases, they not only survive but go on to live for years. Although this is great news for all of us, it also draws our attention to the cost of surviving a serious medical event, and the effect it can have on our families, lifestyles, and our ability to earn an income. Along with the price of experiencing life-saving medical intervention, unless you are independently wealthy or have a comprehensive insurance portfolio in place, the cost of a major medical event can be financially devastating, particularly if you are no longer able to work and earn an income. For this reason, it's important to consider the benefits of trauma insurance.

Trauma Insurance is also known as critical illness or accident insurance.

Trauma insurance can pay a lump sum in the event that you are diagnosed with a serious illness or suffer a serious injury, regardless of your ability to return to work. Each insurance provider has their own language and list of medical conditions covered. Generally, most trauma insurance policies cover cancer, heart disease, and stroke, and can be purchased as a stand-alone policy or along with a life insurance policy.

Generally, most insurance providers pay on trauma insurance claims after you have survived for 14 days past the particular diagnosis. Having a critical illness insurance policy in place can mean the difference between surviving your diagnosis and maintaining your quality of life, and experiencing serious financial hardship as a result.

Click here to Meet The Outridges

Who needs critical illness insurance?
If you are unsure about whether or not a critical illness insurance policy can benefit you, we can assist you in this area, as it's our view that everyone who can afford this type of insurance should have some of it. There are a number of reasons other than medical expenses for considering critical illness/trauma insurance; other areas that are at risk whilst you may be unable to work, or whilst you may be unable to work in your career are relevant if you:
1. Have a mortgage
2. Have a family who depends on you financially
3. Have credit card debt
4. Have other debts that must be repaid
5. Lack of sufficient cash reserves to cover unexpected medical and hospital bills
6. Own your own business
7. Have business partners
8. Hold a key position at work, such as a company director or manager
9. Are self-employed

The cost of treatment for a critical illness can be astronomical, and while private health cover usually helps, there is always a gap.
If you'd like an obligation free assessment of your personal insurance needs, including the suitability of trauma insurance, please don't hesitate to contact us.

Last week the Treasurer, Jackie Trad, delivered the 2019-20 Queensland State Budget. The Government provides for a $189 million surplus in 2019-20, with surpluses averaging $443 million over the four years to 2022-23. The State Government's outlook indicates Queensland's economy is on track to grow by 3.0% in 2019-20 but is likely to slow to 2.75% p.a. in each of the three years to 2022-23. In a budget strongly focused on infrastructure spending and support for regional areas, there are several new initiatives for business. These include:


*Image courtesy of abc.net.au

 Taxation
  • The tax-free threshold for businesses having to pay payroll tax will increase from $1.1m to $1.3m (effective 1 July 2019). The payroll tax rate for businesses with payroll up to and including $6.5m will remain at 4.75%
  • The payroll tax rate for large businesses with a payroll above $6.5m will have a new rate of 4.95%, up 0.2%. (effective 1 July 2019).
  • The payroll tax rate for medium-size businesses in regional Queensland* (up to and including $6.5m) will decrease by 1% to 3.75% (effective 1 July 2019).
  • The payroll tax rate for large businesses in regional Queensland* ($6.5m and over) will be reduced by 1% to 3.95% (effective 1 July 2019).
  • A payroll tax rebate up to $20,000 for businesses who have a net growth in total full-time employees will be provided for the 2019-20 and 2020-21 financial years.
  • A "Back to Work" initiative providing up to $20,000 in financial support for businesses that employ eligible jobseekers. Full details of this continued program at backtowork.initiatives.qld.gov.au
  • The Apprentice and Trainee payroll tax rebate, which is paid at 50% of apprentice and trainee wages will be extended for two more years. Details of the rebate are available at business.qld.gov.au
  • From 30 June 2019, land tax rates will increase from 2% to 2.25% for companies and trustees with landholdings of more than $5,000,000 but $10,000,000 or less.
  • From 30 June 2019, land tax rates will increase from 2.5% to 2.75% for companies and trustees with landholdings of more than $10,000,000.From 2019-20, the land tax absentee surcharge rate will be harmonised with Victoria and New South Wales with a 0.5% increase, and application of the surcharge widened to include foreign corporations and trustees of foreign trusts.

  • Skills
  • $80 million in 2019–20 as part of a $420 million, six-year commitment to the Skilling Queenslanders for Work program.
  • $105.8 million in 2019–20 for upgrades and improvements in Queensland's training infrastructure.
  • Additional funding of $5.5 million over three years for the Micro-Credentialing Pilot to support industry-led skills development designed to address emerging workforce skills requirements.
  • $4.6 million over five years for the Digital Engagement Strategy to improve the online accessibility of vocational education and consumer training information for young people.
  • $300,000 over two years to establish a Higher Level Apprenticeship Pilot, to provide opportunities to partner with industry to develop new pathways to layer specialised skills and knowledge with the traditional apprenticeship model.

    Innovation
  • $19 million over four years to support the Queensland Hydrogen Industry Strategy, with Gladstone being a key focus for hydrogen development.
  • Additional funding of $105 million from 2018-19 in the Advance Queensland initiative
  • $8.6 million over two years to establish FibreCo, to improve internet speed in regional Queensland.

    Infrastructure
  • Government capital works program totaling $12.9 billion in 2019-20 and $49.5 billion over the next four years.
  • The Budget provides $5.6 billion in transport infrastructure in 2019-20, including $1.480 billion to commence major construction work on Cross River Rail.
  • $1.227 billion in 2019–20 for the construction of new schools and education facilities, as well as significant enhancements to existing buildings.
  • $2.66 billion in energy and water infrastructure in 2019-20, including $153.6 million to upgrade dams and water supplies in South East Queensland
  • $777.7 million in 2019–20 on investment in hospitals and health facilities.

    Regional
  • $70 million additional funding for local government regional infrastructure projects
  • $1.599 billion in capital grants in 2019–20, including $50 million as part of the Works for Queensland program for infrastructure in regional communities.
  • $30 million over two years to contribute towards the construction and operation of a new common user terminal at the Port of Townsville
  • $193.5 million for the Port of Townsville Limited, Channel Capacity Upgrade project.

  • Further important changes for small businesses to note:
    The Fair Work Commission has announced a 3.0% increase to minimum wages. The increase applies from the first full pay period starting on 1 July 2019. The new national minimum wage will be $740.80 per week or $19.49 per hour.
    *for eligible employers with 85% of their employees outside of South East Queensland
    Now that the end of the financial year is just around the corner, it's time to put some real focus into your tax minimisation strategies. It's also a time to start thinking ahead to the new financial year and to get your thoughts clear on what you'd like that to look like. 



    Listed below are some ideas for you to implement, but just make sure you've got them covered before June 30:
    Pay & Delay if You Can

    Now is a perfect opportunity to pre-pay some expenses that you'll likely carry through with you into the next financial year. For example, see if you can pay for subscriptions, the cost of your income protection policy, conferences and membership fees all before June 30. Also, ask your lender if you're able to pre-pay any of your interest for the next financial year. Then if the opportunity arises, see if you can put off receiving income before the June 30 deadline. This might be achieved by holding off on issuing invoices or even reviewing your term deposit maturity dates.

    Mortgage Offset Account

    This is more often viewed as a strategy to cut interest costs and the length of the loan on a ­mortgage. The other side of the equation is a tax saving on money that would otherwise have been parked in a savings account and earning interest, on which you would be taxed at your marginal tax rate. Say you've accumulated some cash or sold some assets and you're not sure what to do with the proceeds. If you've got a home loan, putting this extra cash into an offset account can not only reduce the amount of interest payable on the loan but it will also stop you paying tax on the interest you would otherwise have earned.

    Discretionary Family Trust

    An effective way to hold investments, a trust is a separate investment structure where assets are controlled by one or more persons (the trustee/s) on behalf of a group of other persons (the beneficiaries). A discretionary trust allows the trustee to decide who gets the income and capital the trust owns. These can suit someone on higher tax brackets with family members listed as beneficiaries who are on lower rates. For example, rental income from an investment property owned by the trust could go to members of the trust on lower incomes. The trust does not pay tax, but the beneficiary does, with income and capital gains derived by a trust generally assessed at the tax rates of the beneficiary.

    Reduce Capital Gains 

    If you're sitting on capital losses on some of your smaller share investments and you don't have a long term plan to continue holding these, it may be a good time to sell these shares and use the losses to offset against any gains you've made earlier in the year.

    Top Up Your Super & Salary Sacrifice 

    Topping up your super can be one of the best deductions around, as you're still the holder of the money, minus the 15% contribution tax. This is different from claiming a deduction on paying bank interest as once that expense is paid, the bank has the money rather than you. Concessional contributions are allowed for up to $25,000 per person under 75, so make use of these limits. For a couple, that's up to $50,000 between them that can be set aside to accumulate in a lower tax environment. Don't forget that if your employer is making contributions for you, you're only able to salary sacrifice by the difference to take you up to the $25,000 limit.

    Small Business Immediate Asset Write Off of Up to $30,000
    If you're a small business, this is definitely something you want to make use if you need new capital items. If you buy an asset and it costs less than $30,000, you can immediately deduct the business portion in your tax return.
    You are eligible to use simplified depreciation rules and claim the immediate deduction for the business portion of each asset (new or second hand) costing less than $30,000 if:
    you have a turnover less than $50 million (increased from $10 million), and
    the asset was first used or installed ready for use in the income year you are claiming it in.

    Charitable Gifts 

    If you're thinking of making a charitable donation it's best to do so before June 30 as you'll most likely be able to claim the full donation amount.

    The New Financial Year Done Right

    If you've got your house in order in the lead up to June 30, now is a perfect time to cast your mind ahead to the beginning of July. Many people make the mistake of not using this time wisely to plan the year ahead, and to get clear on what you'd like your finances to look like. Here are some of our tips to get you started:

    1. Time for a budget
    Regardless of whether you're in business yourself or working for wages, use the start of the financial year as a time to refresh that household or business budget. This means mapping out all of the income you're likely to receive over the year, next to all of the expenses you're likely to incur. If there's a surplus, this is your most important number, because it's what you do with this surplus that will play a big part in determining your year ahead. You may decide it's time to accelerate your debt reduction, or make an investment with what's left over.

    2. Superannuation contributions done early
    If you make top-up contributions to super during the year, there's no reason why you can't accelerate that in July, which really just gives your superannuation that little bit extra time with a larger amount invested.

    3. Get your kids investing
    If saving and investing is good enough for you, it's also good enough for your kids. This might be in the form of encouragement towards that house deposit, or a small investment portfolio for them to use in the years ahead. Getting your kids involved with some education around their finances is a great gift you'll be giving them.

    This is by no means an exhaustive list, and if you need any help with any of these points, please don't hesitate to contact us on 5482 2855.

    We have recently taken the decision to adopt an online client portal which will give our accounting clients safe access to their documents, online. This online document sharing platform will increase the security of your documents. Unfortunately, we live in an age in which a small number of people make it their business to intercept emails and steal information. For this reason, emailing documents unencrypted is not entirely secure and can put your information at risk.

    To combat this, we are introducing a client portal that sends your documents to a secure website. You will have your own login details and will be able to see any documents we send you. You'll have access to them any time, and from any location. All you need is access to the internet (this can also be via a smartphone or tablet). This means that you won't need to search for old emails from us to find documentation or information. It will all be readily available through the portal. There is a search interface that will allow you to search based on document type, date sent and policy number/provider. Through the portal, you'll also be able to sign off on documents via the internet. This means no trips to the post office to send signed documentation back to us.

    One click through the portal and you will have signed a document, with the signed copy automatically sent back to us. We want you to be confident that we are compliant with upcoming changes to data protection regulations, and that we remain at the forefront of technological advances designed to improve your peace of mind and ease of signature. The real benefit to you is security and speed of access along with becoming much less reliant on the slow and expensive services of Australia Post. This is the future of document sharing and we are pleased to be introducing this measure which will increase your security as well as your access to documentation. If you would like to use this facility or have any questions, we ask that you contact Sharon Parker of our office on 07 54804804 or via email at sharon.parker@schuhgroup.com.au, and she will assist you with the setup.

    How Did the Election Affect the Markets?

    The Australian share market has closed flat after yesterday's trade, with gains for tech stocks and the major mining companies slightly outweighed by a decline in telecom and consumer staples shares. The benchmark S&P/ASX200 index closed down 4.1 points, or 0.06 per cent to 6,451.9 points at 1615 AEST on Monday, while the broader All Ordinaries was down 0.8 points, or 0.01 per cent, to 6,544.8. 


    The Australian share market enjoyed a post-election bounce last week after the Coalition's surprise election win, however, AMP Capital chief economist Shane Oliver expected the share market will quickly move on from the election result. 
    "With the return of the coalition with its more pro-business policies and uncertainty now removed around changes... it's possible we will see a bit of a short-term bounce in the share market," he said. Dr. Oliver said the Coalition win removed uncertainty on excess franking credits, changes to negative gearing and capital gains tax adversely affecting the property market, and increased industrial relations regulation.

    The shock result has wide-ranging implications for a slew of listed companies, from banks to builders and resources firms, with Labor's plans to scale back tax incentives for investors and take tougher action on climate change now dead. ??Property-related shares, banks, and retail shares could be the key beneficiaries, he said. "Against this, though the Australian share market has already performed pretty well over the last few months and is likely be dominated by issues around global trade, slowing growth, interest rates and the iron ore price and so will quickly move on from the election I suspect," Mr Oliver said.

    In property news, the Sydney and Melbourne property markets are showing early signs of ending their steep slides, with a strong bounce in auction clearance rates on the first Saturday after the federal election. Preliminary figures from CoreLogic show that 69.9 per cent of homes that went under the hammer in Sydney found a buyer, while 62.9 per cent of auctions in Melbourne cleared. ??Those figures will be revised lower once extra results are submitted by agents, but Westpac senior economist Matthew Hassan expects the final result to come in about 65 per cent for Sydney and 60 per cent for Melbourne - the highest rate since April last year. "Demand has clearly seen an initial boost from the clearer prospect of interest rate cuts and the removal of uncertainty around housing related tax policy following the Coalition's re-election," Mr. Hassan wrote in a note. "Prospective changes to loan serviceability assessments have likely given support as well." Last week, bank regulator APRA flagged a change in the way banks assess home loan applications, which would result in people being able to borrow larger sums. ??

    While these results may give investors some short term cause for optimism, we recommend your focus remains on your long term investment plans and goals.

    What the Coalition Win Means For You

    After a long election campaign, Scott Morrison has claimed victory on the weekend and Australians are set for three years of Liberal government. So what does this mean for you? Labor and the Coalition had offered voters a slew of different options before the election, with the parties agreeing on few policy pieces. Here's what you need to know how the Coalition is back in power.

    TAX:

    YOUNG FAMILIES
    1. Tax offsets mean young families will receive a tax cut up to $1080 for every ATO tax return for workers making between $48,000 to $90,000, from July of next year.
    2. Workers making less than that will still receive tax cuts, but slightly less than those promised under Labor.
    3. Those earning over $180,000 will avoid higher taxation proposed by Labor.
    4. The Coalition has promised to continue legislated tax cuts over the coming three years.

     SUPERANNUATION
    1. Removal of the work test requirement for those aged over 65 but under 66 as well as an extension of the 3 year bring forward rule to these members
    2. Increasing the age limit for spouse contributions from 69 to 74 years.
    3. LRBAs will remain available but will be counted against the total super balance if related party loans or if the member has an unrestricted non-preserved balance
    4. Fixing the actuarial certificate legislation to remove their need where they are demonstrably unnecessary – 100% pension all year.
    5. Increase the maximum member number to 6
     More importantly, we can expect the following items to continue;
     - Franking credit refunds
     - Absence of the 10% rule
     - Catch up concessional contributions

     HOUSING
    1. The government introduced a new $500 million First Home Loan Deposit Scheme for first homebuyers to help them get a foot in the door. This will give 10,000 first homebuyers the opportunity to buy a home with only a five per cent deposit, as opposed the usual 20 per cent.

     HEALTH
    1. The Morrison government made major pledges to mental health funding before the election, promising $461 million for a youth mental health and suicide prevention strategy, along with added mental health funding for people affected by natural disasters, and Aboriginal and Torres Strait Islander people.
    2. It also matched the ALP's pledge to lift the Medicare rebate freeze by July 1.
    3. A slew of new drugs will be subsidised, and Victorians have been promised a $496 million medical facilities package.

     CLIMATE CHANGE
    1. Climate change policy was a major talking point at the 2019 election and continued to be a divisive point for the Coalition. The party won't make major changes over the next three years.
    2. The Morrison government have outlined a $2 billion climate solutions package which is being rolled out over 15 years.
    3. There's no plan to boost renewables - and Mr. Morrison has committed to a coal upgrade project in NSW.

     EARLY CHILDHOOD AND CHILDCARE
    1. The government made no changes to its Child Care Subsidy package, from July 2018, and no new childcare policies were flagged before the election.
    Although $453 million has been earmarked to guarantee another year of preschool funding for four-year-olds.

     SCHOOLS
    1. The Coalition will follow through with the Turnbull government's $23.5 billion commitment to schools over 10 years. This promise was mirrored by the Labor Party before the election.

     HIGHER EDUCATION
    1. The Morrison government has pledged $525 million towards boosting 80,000 apprenticeships and vocational education and training.
    2. The government has also allocated $94 million towards scholarships for students to wanting to study at regional universities.
    3. Those aspiring to become commercial pilots will also be able to get VET loan assistance.

     WORK
    1. A crackdown on dodgy employers will spell criminal punishments for the major exploitation of workers, and there will also be a national registry scheme for shifty labour hire firms.

     ENERGY
    1. The Coalition has pledged $1.38 billion in equity investments towards the Snowy Hydro 2.0 project.
    If you would like to know how any of these points may directly impact you, remember we're only a phone call or email away.

    We're now less than 2 weeks away from the election and pre-voting booths have already opened. As a final lead up to the election, we've summarised the key policies of both major parties, along with some of the lesser known policies:



    As always, if you have any questions about how these topics may impact you, please don't hesitate to contact us.

     

    The Australian share market has had its worst day in three weeks with the financial and energy sectors weighing heavily as analysts await economic clues from the US and China. The benchmark S&P/ASX200 index finished 26.1 points, or 0.41 per cent, lower to 6,359.5 points at 1615 AEST on Monday, while the broader All Ordinaries slipped 23.6 points, or 0.36 per cent, to 6,449.6 amid thin volumes. Data out of China later this week will be significant to watch, and the US Fed meeting will be particularly important, something we might feel the impact of here.


    The domestic energy sector suffered a 0.74 per cent drop after US President Donald Trump pressured the Organisation of the Petroleum Exporting Countries to raise crude production to ease petrol prices at the weekend.
    Santos, Woodside Petroleum, Oil Search, Origin Energy and Beach Energy were down between 0.4 per cent and 1.24 per cent.

    All four major banks were lower as all but CBA prepare to release their first-half results over the next week, dragging down the heavyweight financial sector by 0.6 per cent. ANZ was down 0.26 per cent to $27.33, Commonwealth was down 0.45 per cent to $75.11, NAB was down 0.9 per cent to $25.44, and Westpac was down 0.58 per cent to $27.58.

    The relatively small property trusts sector was the biggest loser in percentage terms, dropping 1.76 per cent. In materials, mining giant BHP was up 0.59 per cent to $37.82, Rio Tinto was up 0.13 per cent to $97.75, and Fortescue Metals was up 0.83 per cent to $7.25.

    In overseas markets, the S&P 500 set an intraday record high on Monday, bolstering the view that the decade-long bull market has further to run after consumer spending rose in March and inflation data was benign. The benchmark index topped its intraday record of 2,940.91 hit on Sept. 21, rising to a session high of 2,949.52. The S&P 500 is now up more than 17% for the year to date. The index along with the Nasdaq posted another record close as well on Monday.

    What this means for you:

    The day to day market movements in different industries and also around the world can give all of us reason to become distracted by short term news headlines. And while it's important to be aware of the broader economic environment, a more fundamental issue is to stay focused on your investment objectives and follow through with those in a disciplined manner. Markets will move up and down, leaders will come and go, but a few core elements remain:

    1. Investing needs to be for the long term - if you don't want to hold an investment for 10 years, don't bother holding it at all

    2. Diversification will help to smooth your investment ride over the years ahead

    3. People who create wealth over a long period of time always spend less than what they earn, and they invest what's left over wisely.

    Remember we're only a phone call or email away if you'd like to discuss any of these ideas in more detail.

    What to Consider Before Buying a Business

    Have you ever fancied the idea of buying a business and being your own boss? Or perhaps you're already in business and you're considering buying another to add to your existing operation? Listed below are some of the key points we feel you need to consider before taking this step:


    1. Be really clear on your understanding of the industry you're getting in to. Consider, do you have any prior knowledge of this industry other through observation? Is it the kind of industry that can be learned about quickly or, is it really "generational"? If you have limited prior knowledge, be prepared for a very steep learning curve and also consider where you'll get your learning from.

    2. Also, understand how easy or difficult the industry is for people and other competitors to enter. For example, a lawn mowing business is relatively easy for participants to come and go from because it requires a relatively low amount of capital to get started. On the other hand, farming requires a large amount of investment, which means it may be harder for real competitors to enter.

    3. It will pay to be very clear on who your market place (customers) are and then how you intend to reach them. For example, are you a specialty store owner or service provider and who are your customers? Where are you then most likely to get more of those customers?

    4. Is the market place you're entering already saturated? Setting up another coffee shop in an area that already has many coffee shops may just be a recipe for disaster unless you have a very significant point of difference that people are willing to pay for.

    5. In that vein, does the business you're buying already have a unique proposition? If so, will that unique proposition leave when the previous owner also leaves? Or, is it the staff that really set the business apart and will they stay on when there is a change in ownership?

    6. How easy or difficult will it be for you to get finance for the business you'd like to buy? This can depend on your existing level of borrowing as well as on the nature of the business you're buying. For example, if there's a heavy reliance on the goodwill component of the business, a bank may look less favourably on this, when compared to something that can easily be valued such as machinery.

    7. Is all the infrastructure of the business already in place or is this something that will need further investment in during the years ahead? In this sense, you'll need to check the length of any leases in place, as well as the age of the machinery that's already there.

    8. Finally, we suggest you do a forward projection for 3 years time – one where everything goes to plan and then another that allows for significant contingencies of less growth. How does the business look if there's an economic recession?

    If you're weighing up any of these options or if you'd like more of our input on these ideas, support you in working through due diligence or look at a potential opportunity please don't hesitate to contact us.
    We're hearing a lot of commentary at the moment about the relative difficulty in getting a loan now that the banks have tightened their lending criteria. However, further discussion needs to be had on lending in general and the role that debt plays in wealth creation, both good and bad.


    You may have heard the terms "good debt" and "bad debt" in the past, and they relate to two quite different scenarios. Bad debt is basically when you use a loan to buy something that loses value over time or doesn't offer you any return on the investment - so no way for you to make money on the purchase.

    As an example, a loan to buy a new car is considered bad debt, because the car loses value as soon as you purchase it. Added to this is the concept that any type of interest payment you're not able to claim a deduction on is also bad debt, and in this category, we would include your private home loan debt. In this instance, you need to earn an income, pay tax on that income, and then pay off your interest with whatever is left over.

    By comparison, Good debt relates to lending you've undertaken that will give you some kind of return in the future and is also taken out on an asset that will increase in value. Further to that, the interest on the loan is tax deductible. An example of good debt is a loan for an investment property where the property is increasing in value and the interest on the loan is tax deductible.

    The key to managing debt is to adopt some of the following principles:

    1. At all costs, minimise as much as possible your exposure to bad debt. In practice, this means paying off your home loan as quickly as possible, getting rid of credit card debt and using your savings rather than borrowings for things that depreciate – such as car loans or even furniture.

    2. Make sure that your cashflow is sufficient to allow you to continue making your repayments, even if interest rates increase. This means that you need to allow a safety buffer with your level of borrowing. Calculate what your repayments would look like if interest rates lift as much as 1 percent over the life of the loan – can you afford the repayments and does it add time to the length of the loan?

    3. Always direct the bulk of your debt repayments towards those loans that are costing you the most in interest. This will usually be credit card debt first, followed by personal loans and car loans, then loans attached to property. Student loans are usually the cheapest and can be left until last.

    4. Where possible, consolidate your debt into a single manageable amount.

    5. Debt consolidation involves rolling all your existing debts into one loan. This may help you to better manage your repayments, but it may also make your situation worse if the interest rate or fees in the new loan are higher than they were with your original debts.

    Before you consolidate anything, these are some things you should do before you sign any debt consolidation loan contracts:

    1. Compare the interest rate, fees and charges - Make sure you will be paying less for your new loan by comparing the interest rate, including fees and other costs, against your original loan. Some lenders charge penalties if you pay off loans early and some charge application and legal fees, valuation and stamp duty if the new loan is secured against a home or other assets.

    2. Check the terms - Beware of longer loan terms. Even if the interest rate is lower on the new loan, paying off a short-term debt (like a credit card or personal loan) over a very long term means you will still pay more in interest and fees.

    3. Check the company is licensed - Lenders and brokers that are not licensed are operating illegally. Search ASIC Connect's Professional Registers to check your lender is licensed.

    Remember we're only a phone call or email away if you'd like to discuss any of these ideas in more detail.

    Top Tips to Minimise Your Tax in 2019

    Now that the end of financial year is just around the corner, it's time to put some real focus into your tax minimisation strategies. For many of us, living with the benefits we have in Australia does mean that we have to pay a portion of our earnings in tax, but no one wants to pay more than their fair share. Listed below are some ideas for you to implement, but just make sure you've got them covered before June 30:


    1. Mortgage offset account
    This is more often viewed as a strategy to cut interest costs and the length of the loan on a ­mortgage. The other side of the equation is a tax saving on money that would otherwise have been parked in a savings account and earning interest, on which you would be taxed at your marginal tax rate. Say you've accumulated some cash or sold some assets and you're not sure what to do with the proceeds. If you've got a home loan, putting this extra cash into an offset account can not only reduce the amount of interest payable on the loan but it will also stop you paying tax on the interest you would otherwise have earned.

    2. Discretionary family trust
    An effective way to hold investments, a trust is a separate investment structure where assets are controlled by one or more persons (the trustee/s) on behalf of a group of other persons (the beneficiaries).
    A discretionary trust allows the trustee to decide who gets the income and capital the trust owns. These can suit someone on higher tax brackets with family members listed as beneficiaries who are on lower rates.
    For example, rental income from an investment property owned by the trust could go to members of the trust on lower incomes. The trust does not pay tax, but the beneficiary does, with income and capital gains derived by a trust generally assessed at the tax rates of the beneficiary.

    3. Pay and Delay if you can
    Now is a perfect opportunity to pre-pay some expenses that you'll likely carry through with you into the next financial year. For example, see if you can pay for subscriptions, the cost of your income protection policy, conferences and membership fees all before June 30. Also, ask your lender if you're able to pre-pay any of your interest for the next financial year. Then if the opportunity arises, see if you can put off receiving income before the June 30 deadline. This might be achieved by holding off on issuing invoices or even reviewing your term deposit maturity dates.

    4. Reduce capital gains
    If you're sitting on capital losses on some of your smaller share investments and you don't have a long term plan to continue holding these, it may be a good time to sell these shares and use the losses to offset against any gains you've made earlier in the year.

    5. Top up your super and salary sacrifice
    Topping up your super can be one of the best deductions around, as you're still the holder of the money, minus the 15% contribution tax. This is different from claiming a deduction on paying bank interest as once that expense is paid, the bank has the money rather than you. Concessional contributions are allowed for up to $25,000 per person under 75, so make use of these limits. For a couple, that's up to $50,000 between them that can be set aside to accumulate in a lower tax environment. Don't forget that if your employer is making contributions for you, you're only able to salary sacrifice by the difference to take you up to the $25,000 limit.

    6. Small business immediate asset write off, now up to $30,000
    If you're a small business, this is definitely something you want to make use of although this allowance has now been extended to 1 July 2020. If you buy an asset and it costs less than $30,000, you can immediately deduct the business portion in your tax return. You are eligible to use simplified depreciation rules and claim the immediate deduction for the business portion of each asset (new or second hand) costing less than $30,000 if:
     - you have a turnover less than $50 million (increased from $10 million), and
     - the asset was first used or installed ready for use in the income year you are claiming it in.

    7. Charitable gifts
    If you're thinking of making a charitable donation it's best to do so before June 30 as you'll most likely be able to claim the full donation amount. 

    Remember not to leave these items to the last minute and also know that we're only an email or phone call away if you would like to seek advice on any of the above.
    Well, it's finally out – the 2019 Federal Budget and we've summarised the main financial points that will be relevant for you below. There are benefits for almost all taxpayers, some for small business and also some for retirees:

    With effect from 1 July 2019 / Immediate Effect:
    The maximum amount of the low and middle-income tax offset will increase from $530 to $1,080 annually for people earning between $48,000 and $90,000 and the base also increases from $200 to $255. The offset then gradually reduces to zero at a taxable income of $126,000. The offset will be available for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. The LMITO will be received after individuals lodge their 2018/19 tax returns and will continue to be provided in addition to the LITO.
    The Government is increasing the instant asset write-off threshold from $25,000 ($20,000 up to 28 January, 2019) to $30,000 per asset until 30 June, 2020. The increased threshold and expanded eligibility will apply to eligible assets that are first used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 to 30 June 2020.

    Medium sized businesses do not have access to the small business pooling rules and will instead continue to depreciate assets costing $30,000 or more (which cannot be immediately deducted) in accordance with the existing depreciating asset provisions in the tax law i.e. Table A and Table B. Eligibility for the scheme has been expanded from small businesses (up to $10 million in annual turnover) to medium-sized ones (up to $50 million).

    1. The company tax rate for small and medium-sized companies with an annual turnover of less than $50 million has been lowered to 27.5 per cent. This rate will be lowered further to 25 per cent by 2021-22. In addition to existing incentives for Identified Skills Shortages, employers will be eligible for a $4,000 incentive payment totalling up to $8,000. Apprentices will be eligible for $2,000, paid at key milestones in the apprenticeship.
    2. An income tax exemption will be provided for qualifying grants made to primary producers, small businesses and non-profit organisations affected by the North Queensland floods.
    3. Payments to primary producers in the Fassifern Valley, Queensland affected by storm damage in October 2018 will be treated as exempt income.
    4. There will be a one-off Energy Assistance Payment (Income Tax Exempt) of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 April 2019 and who are resident in Australia.
    5. The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2018/19 income year.
    6. The start date of amendments to Div 7A will be delayed by 12 months to 1 July 2020.
    7. For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.
    8. From 1 July 2019, net income generated from the forced sale of livestock will be exempted from the Farm Household Allowance payment assessment, when that income is invested into a farm management deposit.

    With effect from later years:

    1. The calculation of exempt current pension income will be simplified for superannuation funds from 1 July 2020, allowing a preferred method of calculation and removal of some actuarial certificates.
    2. From 1 July 2020, Australians aged under 67 years will be able to make voluntary contributions without meeting the work test and other age-based rules will be streamlined. The changes to the contribution rules apply to both concessional and non-concessional contributions. The extension of this rule by two years may mean an individual who is 66 at the beginning of 1 July 2020 would be eligible for bring-forward contributions.
    3. The restrictions on claiming the spouse contribution tax offset will be eased from 1 July 2020, giving 70 to 74-year-old spouses eligibility.
    4. SuperStream will be expanded from 31 March 2021 to include electronic ATO requests for release of superannuation funds and SMSF rollovers.
    5. Australian Business Number (ABN) holders will be required to lodge their income tax return from 1 July 2021 and confirm the accuracy of their details on the Australian Business Register annually from 1 July 2022 to retain their ABN status.
    6. In 2022-23, the Government will preserve the tax relief provided by the larger low and middle-income tax offset by increasing the top threshold of the 19 per cent tax bracket from $41,000 to $45,000 and increasing the low-income tax offset from $645 to $700.
    7. There are tax cuts for middle and high-income earners from 2024 by flattening brackets so those earning between $45,000 and $200,000 all paid a marginal rate of 30%, down from 32.5%. From 1 July 2024, the 37% bracket will also be abolished.

    If you have any questions about these budget changes and how they may relate to your situation, please do not hesitate to contact us on 5482 2855.

    Industry Super Funds & Fingers in the Pie

    Following the recent royal commission into the banking and finance industry, a huge amount of bad press has ensued for retail superannuation funds. Just to be clear, a retail super fund is a super fund where the trustee role is conducted by a third-party provider, for which a fee is paid. These trustees are normally banks or financial companies.

    This compares to an industry super fund where the trustee role is still performed by a third party, but the third party may have close links to a specific industry. For example, the HESTA industry super fund is linked to the health and community services industry. A fee is still paid for trustee duties but the fees are, in many cases, lower than the retail option.
    A further comparison is the third option of a Self Managed Super Fund (SMSF) where the trustee role is carried out either by the individual members or a trustee company that is controlled by the individual members.

    Industry super funds have historically also been linked to the particular unions in that industry, however, this link was barely discussed in the recent royal commission. An interesting article appeared in the Australian Financial Review on the 15th March 2019 which stated that:

    "The Australian Council of Trade Unions has declared that the $1.4 trillion accumulated in industry superannuation funds is workers' money that the union movement will use as an industrial relations weapon to force companies to raise wages and conditions. ACTU president Michele O'Neil told a superannuation conference on Thursday that Australia's business elite was "afraid" working people might realise they had the power, through their super funds, to control decision-making by companies.'"

    The article went on further to explain how these super fund investments could potentially be manipulated. For example, if BHP is not providing good enough conditions for its workers, as deemed by the relevant union, the super fund may just reduce its holding in BHP shares – one of the top 5 companies on the Australian stock exchange.

    This type of potential market manipulation by industry super funds with vested interests is worrying to say the least, and it also leaves other super fund investors open to investment manipulation from which they stand to receive no apparent benefit. The particular industry super fund in question in this AFR article was Australian Super, which just happens to be the largest industry super fund in Australia and also one that has balances for a huge variety of investors, including many who don't happen to work at BHP.

    So where does this leave the average person and their super fund, when the banks can't be trusted and perhaps neither can the industry super funds? Superannuation will end up being most people's number one asset besides their house, which means it is incredibly important to consider what happens with this money. Our suggestions are:

    1. Whichever super fund you go with, the fund must adhere to the member's best interests form an investment perspective.

    2. Consider the fees you are paying on your super fund and whether you are getting value for these

    3. The issue of transparency around the underlying superannuation investments is a big deal – know what you're invested in and seek advice around how these investments may or may not be working for you

    In summary, superannuation is a tool to get you where you want to be in retirement, and it's an important tool. If you'd like a second opinion on how your fund is meeting your needs, we're only a phone call or email away.
    Single Touch Payroll (STP) commenced on July 1, 2018 for large employers (with 20 or more employees), however, from 1 July 2019 small employers (with less than 20 employees) are required to report details of employees' tax withholding and superannuation information to the Australian Taxation Office (ATO) at the time they process their payroll using Single Touch Payroll (STP) software.



    Single Touch Payroll is also called 'real-time payroll reporting' because it means every time a business pays their staff, all the salary information is sent to the ATO. This includes wages, deductions and superannuation information, eliminating the need for Pay As You Go Withholding Activity Statements throughout the year.

    Businesses still doing payroll manually will be forced to adopt a digital system over the next 12 months now that employers with fewer than 19 workers are caught under the Single Touch Payroll (STP) reporting regime. It has been described as the 'biggest compliance undertaking since the GST', with more than 700,000 employers technically required to become compliant with the new system by 1 July 2019.

    Employers may need to choose new payroll software if their current software does not offer Single Touch Payroll Reporting and the ATO recommends employers speak with their registered Tax Agent or Accountant to establish which software product best suits their needs.

    The ATO requested software developers to build a low-cost Single Touch Payroll solution at or below $10 per month for micro employers. A register of more than 30 suppliers of these low-cost STP solutions are on the ATO's website and we understand the Tax Office has been discussing a possible digital banking solution with the major banks over the last 12 months.

    Why STP?
    Single Touch Payroll is designed to streamline business reporting and help the ATO monitor whether employers are complying with their Superannuation Guarantee and PAYG Withholding obligations. By reporting through Single Touch Payroll, employers need not complete Pay-As-You-Go Withholding Activity Statements throughout the year and Payment Summaries will be available to employees through MyGov.

    Implementing Single Touch Payroll and lodging reports may pose some concerns for business owners. The extension of the STP reporting requirements to smaller employers raises the worry that they may not be aware of the changes and micro employers (four or fewer staff) may not have digital payroll software or access to a reliable internet connection. To assist, the ATO will:

    1. Offer Micro Employers (with 1 to 4 employees) help to transition to STP and other alternative options (for example, allowing those who rely on a registered Tax Agent or BAS Agent to report quarterly for the first two years, rather than each time payroll is run);

    2. Allow small employers to start reporting any time from the 1 July 2019 to 30 September 2019 and granting deferrals to small employers who request additional time to start STP reporting;

    3. Not apply penalties for mistakes and missed or late reports for the first year; and

    4. Provide exemptions from Single Touch Payroll reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.

    If you need any help with your payroll, withholding tax or superannuation obligations, please contact us today.

    Ladies, It's Your Time to Invest

    Last week was International Women's Day, and it brought to our attention to the idea of women as investors. Thankfully, there's some good news around this, ladies (and gents), as, on many occasions, women make great investors. And while we realise these are some broad generalisations, there are some very real characteristics and data that show why women can make great investors.



    These include:
    1. Women are better savers. On average, women save an additional 1% of salary compared to men, which adds up over a working life.
    2. Women actually log on to their investment accounts 45% less frequently than men, and they change their asset allocation 20% less frequently than men.
    3. Generally, women are less erratic than men and they make less rash moves with their investments.
    4. Women are not afraid to ask for help or speak up when they don't understand something.

    Some downsides for women are:
    1. They are often more risk-averse and prefer to invest in lower risk investments such as cash and term deposits
    2. Women can often think a property is the only asset class available for investing in over cash and term deposits

    For any investor, be they male or female, the biggest regret anyone will ever have is not starting their investment journey sooner.

    Our tips for success include:
    1. Set yourself some financial goals –Be bold in what you set and be accountable and reward yourself when you achieve little milestones.
    2. Have a plan –Having a strategy provides direction and helps set up some discipline around achieving what you want and how you are going to get there.
    3. Take a risk –Whether it is starting a business or taking a chance on something you have wanted to develop. From day one, consider how you can turn your business into an asset to use as a cash cow or for future sale.
    4. Earn more and save more –Invest pay rises and windfalls, instead of spending them and increasing your cost of living. If you put these amounts away, you will be surprised how much they amount to. If you don't, your cost of living will increase with your pay.
    5. Structure –Having the right structure can certainly save you big dollars so think about in whose name you should hold particular investments and businesses as this can save you tens of thousands of dollars down the track.
    6. Take on debt and pay it off smartly –Using the bank's money to make you money is a great way to get ahead as it magnifies your gains… but don't forget it also magnifies your losses if things go wrong.
    7. Have buffers –Always have an emergency fund or back-up plan for contingencies such as being out of work, time off work for children or health, business is slow, an investment property being vacant for six months and the list goes on. Ensure you have between three to six months' worth of your expenses and commitments in an emergency fund or accessible if needed.
    8. Don't forget about super –Putting a little extra into super or salary sacrifice pays off in the long run and helps minimise tax. Putting a little away now will mean a big difference at retirement.
    9. Get great advice –Seek the advice of a reputable professional who understands your goals and explains things in easy-to-understand language. They will be able to provide you with the knowledge, figures and most importantly will give you options around your plans and keep you accountable for your goals.

    As a woman in today's modern society, it is important to understand your options and take action to secure your own future. If you need any advice or general information on the options, the team at Schuh Group would love to help. Call us anytime for an obligation-free appointment on 5482 2855.

    If we only did your tax we would be failing you...
    Over the years we have learned that for us to serve our clients best it is important that we support and challenge them. Like anything in life, the path to business and financial wealth will present you with opportunities that will force you to make a choice. Sometimes these opportunities will require you to grow and change. They can be daunting and at times very exciting and sometimes the right decision is right outside your comfort zone.

    We believe that money and business are a path to living a great life filled with the experiences you want. It is not just about having money, it is about having the freedom that money can provide.

    As accountants and wealth advisers it is our job to challenge you, coach you and guide you in your opportunities. Yes, we are here to help with the paperwork and ensure that the taxes are in order and your financial house is organised, however beyond this and perhaps, more importantly, we are here to provide you with the knowledge, opportunity, and support to do more. Life is short and it should be spent doing things that bring you joy with the people you love without the worry and stress of financial strain and confusion. We are proud that we are able to provide our clients with this opportunity and today are grateful to share the story of one of our clients and how working together we have been able to continue to help them grow and prosper.

    If you would like to discuss your unique situation or want to understand how the Schuh Group can further support you, we are always just an email or phone call away.

    How to Know a Good Time to Invest

    With some things in life, a good start is everything. Take the 100-meter sprint, the whole race is over in 10 seconds or less. The importance of getting out of the blocks quickly to ensure success can't be understated. In the 100-metre sprint's extended athletic cousin, the marathon, a bad start, while annoying, must be put in perspective. There are two plus hours ahead and ample time for them to regroup and overcome.
    When investing, the thought of a bad start can be a psychological hurdle. A common question an investor will ask their adviser will be a variant of "is this a good time to invest?" Concerns come with that initial investment commitment. In contrast to dollar cost averaging, where the entry is incremental and ongoing, a large sum in one hit can provoke more hesitation and second-guessing. It's a bigger unknown. It's not that the investor doesn't want to invest, but it's the fear of making a mistake – is it the right time?

    This occurs because we understand investment markets are volatile. They react to news and can quickly move in one direction or the other. This can make us feel either foolish for not waiting, or smugly satisfied for buying when we did. Overall, it's those feelings of foolishness and believing that we should have timed a better entry that we're most trying to avoid.

    Since 1980 the ASX has finished 36% of months in negative territory. So historically, the odds have been in an investor's favour, but no one wants to start their investment journey in those 36% of red months, but does it really matter?

    Whether a decline month happens in the first month or the tenth month, there's no avoiding your portfolio going down at some stage – unless it's exceptionally conservative. The concern with the first month is the psychology of immediately giving up some of your capital.
    To illustrate the futility of focusing on a poor start, we've looked at the worst month to invest during each year in the 1990s on the ASX.

    Using $1000, we've tracked market performance for a full decade. With a 10-year time hold, it's long enough to put a frustrating beginning back into perspective. There are no additional contributions, it's just tracking that initial $1000 for the next 120 months or ten years.

    Examples of market returns are often done on a calendar basis, but rarely does an investor enter the market on the first day of a particular year. They are more likely to commit to a strategy sometime throughout the year. While this experiment doesn't take into account individual days, it would be indicative of an investment experience.
    To lessen chart clutter, we've split the returns across two charts. 1990-1994 and 1995-1999.

    1990-1994

    As shown by the chart above there were varying outcomes in each of the five years.
    The best result of the bad bunch began in June 1992. $1000 invested would be in the red for the first 11 months, but across the full ten years, patience was rewarded. If an investor set aside their bad start, an average annual return of 10.76% was their reward.

    The worst result of the bad bunch began in November 1993. $1000 invested recovered quickly from its initial bad start, before encountering an ongoing rough patch that kept it mostly in negative territory until the 18-month mark. End result? An average annual return of 8.5%.

    A good return, but 2.26% lower than the leader. Yet there's no argument that the start made a difference. At varying points, it was neck and neck with the others, that time frame just had a poor finish in this experiment.
    While not part of this experiment, if both starting points extended to 25-year periods the difference between the two narrows to 0.76%. You never want to leave three-quarters of a percent on the table, but it highlights with time, things begin to even up.

    1995-1999

    The returns in the second half of the 1990s had an even wider variance over their ten-year periods, but again, their outcomes had very little to do with any poor beginning.

    The worst time to start in 1995 was January, which wasn't that bad. One negative month before delivering a 20.73% return for the calendar year. Across the ten years, the return for the ASX was 12.07%.
    Yet it didn't compare with October 1997 as a start month. In contrast to the charmed first 12 months of January 1995, an investment beginning in October 1997 was still under water 12 months later. However, the poor start meant nothing to its return over the decade, delivering an annualised return of 13.46%.

    The worst start month in the whole experiment was May 1999. The tail end of the ten-year period took in the full financial crisis along with the beginning of the recovery. This severely impacts the annualised return. Respectable at 6.29%, but anaemic in comparison to the other returns.

    It is worth noting, after four years the May 1999 start was the worst of the five scenarios, yet after eight years it was the strongest performer. Share markets have a way of rearranging perspectives like that.

    Many of these returns are quite strong, which sets aside any argument a poor start will define an investment journey. There's no curse or damnation involved if someone invests and the market moves down on them. It happens. Sometimes the rewards aren't initially forthcoming. They may prove elusive for some time, but there are never mistakes with timing. There is no possible way of getting an entry absolutely right unless it involves sheer luck.

    The other thing to remember, one person's investment experience isn't going to be someone else's investment experience, unless they're beginning on the same day. The challenges they encounter will be unique to them because of their time spent in the market and how their capital has grown or not grown to that point in time.

    Agonising over the right time to invest becomes thought and energy down the drain on something that can't be forecast. Even the best of starts will encounter turbulent markets at some point and the worst of starts can go onto flourish. Investors are better off just starting. There is no right or wrong entry point and this is a marathon, not a sprint.


     

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