Innholdsfortegnelse for April 2016 i Money Magazine

Do you have the confidence to invest? A chat with a few parents at my son’s basketball game suggests to me that not many of us do. As one father pointed out, he’d like to invest in property but APRA’s 10% speed limit on investment loans makes it too difficult for him, as a small business owner, to buy (see page 42). Another parent said he couldn’t sustain the sharemarket volatility any more. As Pam Walkley points out (page 80), the S&P/ASX 20, the “blue chip index”, is down 24% in a year, compared with a 16% fall in the All Ords Index. I am focusing on my super, despite all the talk of changes. Returns – if your fund is one of the top 10 (see page 70) –…

Most of us should hold assets such as shares and property OUR COVER STORY this month is about how we can earn a bit more income. As a now 60-year-old with a transition to retirement pension, this is a big issue for me and, I suspect, for many readers. For younger readers, even if investing for income is not a problem for you, I know it is for your parents or grandparents, so read on anyway! But I had better start with a bit of common sense and plain English. The world of money and those who make a living managing it just seem to love confusing the living daylights out of us with complex names, such as “transition to retirement”. These make absolutely no sense to anyone. Even worse,…

THE STORYTELLER’S SECRET Carmine Gallo PAN MACMILLAN AUSTRALIA RRP $29.99 Storytelling is a valuable craft that can be used to sell a product, entertain a crowd or help raise money for charity. Steve Jobs did it brilliantly, as do Richard Branson, Elon Musk, Bill Gates and Mark Burnett. But what is the secret behind a good storyteller? In his second book, Carmine Gallo reveals the secrets behind the words that inspire and educate, launch movements and change lives. An entertaining storyteller himself, Gallo explains how to craft the most powerful message. “Storytelling is not something we do,” he writes. “Storytelling is who we are.” Gallo recounts how great storytellers such as Mark Burnett went from being a Venice Beach T-shirt vendor to television’s most successful producer and how the city…

The tax office has issued a warning to people with a higher education loan program (HELP) or trade support loan (TSL) debt who plan to move overseas for more than six months: they must report their overseas contact details within seven days of leaving the country. It is part of a crackdown announced last year on Australians who take out the loans and then move overseas either temporarily or permanently. Often they stop making repayments because they are no longer in the Australian tax net. From July 1, 2017, anyone living overseas and earning above the minimum repayment threshold must make loan repayments, just as if they were living in Australia. The ATO says, at a minimum, you must report your international residential and email addresses within the seven days.…

By spending less than they earn, Bryce and Steph have made a great start in setting themselves up for the future. The next step is to set goals, as these will drive future investment decisions, including how much risk to take. The need to buy a home, particularly in what is considered an overheated market, should not be a concern. With a possible relocation and a desire to start a family on the horizon, it does not make sense to tie themselves to a mortgage and ownership costs. Renting in the short to medium term will help Bryce and Steph maintain their strong savings discipline and grow their wealth. As tax rates in Japan are somewhat more favourable than in Australia, if Bryce decides to move there for an extended…

Q I am 24 and my husband is 27. I earn $50,000 a year and my husband earns $58,000. We have $83,000 in superannuation, an investment property worth $300,000 (owing $230,000) and $5000 in shares. We moved into our first home three months ago. Our loan started at $385,000 and we have worked hard paying down the principal (currently at $370,000). We have $40,000 in savings which is offsetting the mortgage. Before we start a family I was wondering how we can really set ourselves up for the future and retirement. As we have time on our side, I would love some advice as to whether we are on the right track and where we should invest our money. Should we contribute more to our super? Should we pay down…

This classy Macedon Ranges boutique winery is owned and operated by Phillip Moraghan and Jenifer Kolkka with fastidious attention to detail the key to all they do. 'The Curly' is a small batch of their pinot made with only whole bunches added to the fermentation. When handled well, as it is here, it gives marvellous complexity to a distinctive pinot. The 2013 has the light frame yet intense flavour and plush silkiness of pinot noir yet with wild herb aromas and briary, cranberry flavours that linger. It is quite tight and unevolved and will improve with time in the bottle.…

What is it? Kogan reverse-cycle portable air conditioner How much? $319, free shipping Info: With 3.5kW of power, a three-speed fan function and a dehumidifier setting, Kogan’s reverse-cycle air conditioner is the best value on the market. The unit comes with a window exhaust kit for ventilation and a self-evaporative water system for drainage. What is it? Delonghi “Pinguino” portable air conditioner How much? $599 Info: According to the Bing Lee website, the 2.85kW Delonghi unit has a “low global warming impact”. There is no universal energy efficiency standard for portable air conditioners, so keep this in mind when you’re looking. The unit also comes with a three-speed fan function and dehumidifier setting.…

INCOME INVESTING ISN’T EASY! When returns on safe havens such as term deposits aren’t keeping up with inflation, it can turn investors into income-hungry yield chasers. And that’s when things can get ugly – on an empty stomach we often consume things that we shouldn’t. As Money’s chief commentator, Paul Clitheroe, says on page 32, you want more than the returns available on term deposits but you don’t want to wake up from an afternoon nap to find that your portfolio is worth 20% less than when you put your head down. So here’s the challenge: build a portfolio that delivers a reliable income stream. Sam Henderson points out that it’s a tough call given the falls in the capital value of many of Australia’s top listed companies (the S&P/ASX…

By focusing on value rather than price, capital appreciation can supplement the portfolio’s overall return Key variables should be taken into account when you set up an investment portfolio. As the investor’s primary objective is to generate reliable income from an initial capital outlay of $50,000, Fat Prophets has provided a model portfolio which illustrates how the interpretation of certain variables can influence decisions and the ultimate composition of the portfolio. As is the case with many things in life, the quality of any given output is often determined by the foundations on which it is built. In this respect, an investment portfolio is no different from a house, with durability through weather patterns or investment cycles determined to a large extend by its foundations. For this reason, it is…

Your home is probably the most expensive thing you’ll ever own and so it should be adequately protected against whatever life throws at you. However, choosing the right home and contents insurance can be difficult, with hundreds of policies offering different levels of cover and exclusions. Here are some handy hints to help you get the most out of your policy and avoid common pitfalls: • It’s best to choose your policy based on how it fits your needs as opposed to the price. Don’t just be tempted by the cheapest premium; spend some time weighing up what you need from your policy and whether additional extras (for example, accidental damage and motor burnout) are necessary. • Make the most of insurance calculators to accurately assess the value of your…

After the excitement of buying your home, it’s tempting to relax and focus on paying off your mortgage. But taking time to understand the insurances you need and how to pay your premiums in the face of unexpected hardship could well be key to keeping your biggest asset. On top of the more obvious insurances for home and contents protection, which are often offered through home loan packages, you can protect your mortgage repayments with income protection, life and trauma insurances. A good financial planner can help with which products suit you, and which ones may be payable through superannuation, or are tax deductible, making them friendly to your household cash flow. Important aspects to look for include how quickly insurance payments kick in if you’re unable to work or…

Pros • Nothing ventured, nothing gained. Even though the lawyers might get a big slice of the compensation, you could end up with something. If the action fails, generally you are no worse off. Cons • These actions are complex, expensive and risky so it is important to go with a large firm with a good track record backed by significant resources and the best lawyers. My call • I would never tackle a large institution on my own. The risk of losing and the legal costs incurred on the way are too huge. This is a stress-free route with someone else organising enough claimants to make a major court action worthwhile.…

Out of Milk Cost: Free OS: Android, iOs Shopping without a list is hazardous for your budget because you’re more likely to make impulse or unplanned purchases. Stick to a list, do your shopping and then get out of there! With Out of Milk, you can add items to your list as they come to mind because your phone is generally within reach. You can also keep track of what’s in your pantry by using the “pantry list” function. So if you go shopping and can’t remember whether or not you have pantry staples such as flour and sugar, you can refer to your list so that you’re not doubling up and wasting money. Splitwise Cost: Free OS: Android, iOs Splitting expenses with your friends, family, roommates or work colleagues…

The first is to ask your new bank if it can organise the funds transfer for you. If it agrees, it will contact your bank for a list of your direct debits and credits over the past 13 months. It will then go through them with you to select which ones you want to carry over. It won’t include BPAY records for payments, payee list or recurring payments, so you’ll have to sort out them yourself. If your new bank can’t get in touch with your previous bank, you’ll have to provide the 13-month list of debits, credits and payees yourself. You should also ask your new bank to notify payees of your new account details. After you have transferred your funds, you’ll have to contact your old bank about…

As 2016 rolls on, we may be coming off the recent boom years for property. And although we are not in an era of austerity, recent renovation trends are leaning towards the simple and affordable. With a dollar-savvy renovation, it is all about creating the wow factor without the media rooms, feature walls and mosaic tiles. These have been replaced with clean lines, simple colours and value for money. When you’re working on how to prioritise your spend, it’s important to look at the key areas that will create the look you’re after and give you maximum impact for your dollar. So if you want to make your budget stretch a bit further in 2016 and achieve a fabulous renovation, you need to make simplicity your friend. So my 5…

If you’re a property investor looking to expand your portfolio, then you’ll know how much a deposit can get squeezed by all the added costs. Stamp duty and legal costs often total in the tens of thousands, so investors are regularly challenged by having to buy with smaller cash deposits. Despite reports suggesting banks are starting to ease interest rate hikes on investment lending, the reality remains that the loan-to-value ratio requirements are still restrictive. So for many investors it is the size of their available deposit that is becoming the limiting factor and potentially forcing them to buy in a less than ideal growth area. The key for investors is to look for a lender that will not only accept smaller deposits for investment property purchases but will also…

Of all the investment choices available, few evoke more passionate responses than gold. Views on gold as an investment are polarisers and tend to be more a matter of philosophy rather than fact. People either love it or hate it. Gold makes up 10% of all our client portfolios, so we often get asked why. These are the top two benefits we see of owning gold as part of a portfolio: • A diversifier. It is an excellent portfolio risk-reduction tool. During times when assets such as shares are falling, gold often rises, which helps to cushion the impact of sharemarket volatility. For example, over the first two months of 2016, while the Australian sharemarket fell 6.5%, gold (in Australian dollars) rose 18.5%. In finance-speak, gold helps to improve the…

AS EVERYONE KNOWS – OR should know by now – the more you pay in super fees the less you get in retirement. While MySuper rules have forced fees down for default products, once you select other investment options all bets are off. Default funds cost about 1% thanks to the previous Labor government’s initiative to make funds more transparent, easy to compare and cost effective. Its aim was to protect disengaged members and ensure they weren’t overcharged. This was done by means of a simple “dashboard” that included fees, costs and net returns using standardised information. The result? Fees fell by 40% on the retail products owned by the big financial institutions, bringing them into line with industry funds. But it’s a different matter once you leave the safety…

Your super fund may not charge all these fees but it is always worth checking that you are not paying more than you should. • Administration fee. To cover the cost of keeping your super account. • Management or investment management fee (also known as MER). For managing your investment – it can vary for different investment options. • Contribution fee. To cover the administration expense of receiving and investing your contributions. • Adviser service fee. For personal advice provided about your super and other investments. Your adviser may also receive commission for certain investments recommend to you. • Insurance premiums. For cover provided through your super fund. Many funds have a set default option. You can usually choose to lower or increase your level of cover based on your…

Risk of recession – here or globally – seems low THIS YEAR HAS STARTED ON A rough note for shares as last year’s worries about the global economy reared their head again, dragging the Australian sharemarket – as measured by the ASX 200 – into “bear market territory”. Oddly enough, local economic news has been mostly better than expected. Our assessment is that all the handwringing about the global outlook has been overdone. It’s almost as if many saw The Big Short and concluded that another GFC must be just around the corner, so they better sell now! To be sure, there are things to worry about. There are five fault lines running through the global economy: the malaise in emerging markets; uncertainty around China; the collapse in commodity and…

BHP’s ups and downs I was recently reading Money’s November edition and noticed that Paul Clitheroe recommended readers should buy $10,000 of BHP shares. Since then the share price has fallen some 40%. So does he still stand by this recommendation considering the predicament BHP finds itself in? Mario, email Paul’s response: Dear Mario, back in November when BHP was at $22 I was quite happy to hold it in my portfolio with a 10-year-plus view and felt if readers also did this as part of a long-term investment plan for the kids it would not be a bad plan. Recently BHP has been trading at around $16, and at that price I am even happier to buy and hang onto it. With a rapidly growing global population, the demand…

Buying a car can be an exhausting exercise, and it becomes even more fraught when insurance is involved. Car dealers are selling life insurance that costs up to 18 times more than buying it through other channels. What makes it even poorer value is a low payout rate of $6 million, or only 6.6% of gross premiums of more than $90 million. Many consumers find it hard to say no to the hard sell from car dealers when they are offered the add-ons, according to an investigation by the regulator, ASIC. It found that one in 10 policies were sold to consumers aged 18 to 21 who rarely need life insurance because they don’t have dependants. ASIC says consumers typically pay $1355 for life insurance through a car dealer against…

BetaShares Managed Risk Global is a fund with a twist because it is designed to potentially provide a smoother performance when world sharemarkets are falling. The fund is an exchange traded product (ETP) managed fund and trades on the ASX (code WRLD). It is one of a new breed, joining BetaShares’ 22 other ETPs, including a managed risk Australian share fund. The fund does not track a specific index. BetaShares buys passive investments indirectly in 1500 of the largest companies around the world. Some 58% are in the US, 9% in Japan and 7% in UK with smaller allocations to other countries. Its key feature is that it sells futures contracts against these investments opportunistically to hedge against anticipated market corrections. The fund charges 0.39%pa. The performance of the fund…

OnMarket Cost: free OS: iOS, Android Retail investors tend to miss out on initial public offerings (IPOs). According to OnMarket, they received only a 15% share of IPOs in 2015, as priority goes to institutions. OnMarket Bookbuild’s platform aims to give small investors a bigger slice of the pie. It allows them to bid directly on an IPO in a “swipe-right” style (it’s similar to the Tinder dating app). It costs nothing to download OnMarket and register, and new users will receive $500 in credit to kick off their investing. You don’t need a broker to buy shares – simply fill in your investment details and use BPAY. Got your eye on a particular float? Set an alert and you’ll be notified when an opportunity is available. You can even…

“I was running around like a headless chook because things were growing so fast ... ” HANNAH VASICEK believes entrepreneurs are born, not made, and she certainly got going early. “The hustle was in me very young,” she grins. “I was selling lollies on the school bus. We had 20 hours a week on the bus and I’d buy a box of lollies wholesale for $20 then sell them individually and make a profit of about $100 a box.” Much of those early earnings became seed capital for Hannah’s next tiny venture which, in less than a decade, has become a business turning over more than $US1 million ($1.4 million) and last year beat an impressive field to be named Telstra’s Business of the year in Tasmania. Hannah was 16…

The strategy of paying off outstanding HELP debt with surplus cash may be appropriate for Bryce and Steph because the government is offering a 5% discount to early voluntary repayments, where the repayment is $500-plus. Indexation maintains the real value of the debt by adjusting it in line with the consumer price index. This is applied to the unpaid balance on June 1 each year. In 2015, it was 2.1%. By making an early repayment, they also save on the indexation, so in reality the discount is about 7.2%, as the 5% discount is applied to the repayment made, rather than the outstanding debt. Bryce and Steph are repaying their HELP debt through the taxation system as their current incomes are above the compulsory repayment threshold. The threshold is adjusted…

What is it? Show your mum the love this Mother’s Day (Sunday, May 8) with a donation to the Breast Cancer Institute. Every donation receives a Mother’s Day card that acknowledges the contribution. Cards can be sent to you in the mail, printed off at home through your computer or sent to your loved one via email. The appeal, which has been conducted for over 10 years, raises essential funds for research. Where your money goes: The program brings together more than 700 researchers in 83 institutions in Australia and New Zealand, and connects them with leading researchers in 40 countries. By pooling resources and sharing knowledge, the institute hopes to speed up the search for a cure. Funds go to current clinical trials and the development of new ones.…

First of all, I love this concept! The idea of building a simple, low-cost, liquid and top-performing income portfolio should be exciting for any investor. With interest rates at a miserly 2% and term deposits at 3% or less, it’s seriously challenging for those of us looking for portfolios with an income bias. Essentially, these are perfect for retirees, superannuants or those just needing some extra income from their investments on which to live. The challenge has been exacerbated in the past 18 months by the falls in the capital values of many of Australia’s top listed companies associated with high yield. And what was previously considered safe and sound has more recently been volatile and performed poorly. Take the ASX top 20 stocks, for instance: ANZ off 40%, CBA…

The big real estate investment trusts now offer a better risk-adjusted return than a lot of other sectors The low interest rates on offer mean investors really need to look beyond traditional bank deposits to earn some good income. Luckily there are a number of income-generating opportunities in the investment universe that can also be easily accessed by retail investors. So, let’s get down and dirty digging up dividend plays! You really can’t go past investing in some quality dividend-paying companies. OK, investing in companies does come with risks and it’s important that investors can recognise the dividend stayers from those companies with the dividend traps – those companies whose dividend yield has increased simply because their share price has fallen. Look for companies that pay fully franked dividends and…

How much influence do your children have on your shopping cart? According to poll data from researcher Roy Morgan, kids are in control of the shopping trolley when it comes to breakfast cereals and spreads, sweets, shoes and toys. The research suggests this is the result of carefully targeted marketing campaigns, especially when it comes to food. Of the children surveyed, when asked to nominate the items they “mainly decide” to buy, 40% of six-to-nine-year-olds were in control of choosing a brand of cereal, 38% for breakfast spreads, 35% for sweets and 32% for chips. While giving your children a say over the shopping list can help them learn about decision-making, it’s also important to teach them about healthy choices. They are easy targets for junk food ads and this…

AT SOME POINT, EVERY small business has to increase prices to keep up with the cost of doing business and stay solvent. A report by accounting software provider MYOB shows that pricing will be a major consideration in 2016 for almost a third of small businesses. Many businesses underestimate their abilities to increase prices, says Tim Reed, MYOB’s chief executive. “They feel nervous, especially if it’s a client that represents a large slice of the profitability of their business. The potential to lose that client makes them very reluctant to have that conversation.” Most customers will accept a reasonable price increase if they feel they have had a good deal with no increases for a number of years, says Reed. However, making “regular price increases that are smaller in size…

Always lend them money with strings attached MARTIN AND JOANNE 1  HELPED their daughter, Anna, and her husband, Christopher, buy into the booming Melbourne property market when they were expecting their first child. They stumped up $300,000 to cover the deposit and to keep the mortgage repayments more manageable on their $1 million home, so Anna could take time out of the workforce to spend with her baby, Esther. Ten years later, Anna and Christopher separated. Christopher made a claim on half the house, even though $300,000 was a gift to Anna. More parents who have the financial resources are helping their grown-up kids get into the property market. But how do parents protect a gift to their child in case their relationship breaks down? First, never give your…

Whether you love it, hate it or are just plain indifferent, the share economy is here to stay. Thanks to the success of digital start-ups such as Uber and Airbnb, it’s never been more profitable to love thy neighbour – and it’s revolutionised the way we consume goods and services. These days you can save money by buying secondhand goods online, renting a bedroom in someone’s house or even borrowing someone’s car. If you’re late to the party, that’s OK – the changing world can be a scary place and it certainly doesn’t come without risks. What is there to gain from the share economy and what is there to lose? Money has everything you need to know if you want to give it a try. UBER BY THE END…

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Property underquoting has come under the spotlight over the past few months, with laws in place in NSW and proposed for Victoria. In January, strict legislation was introduced in NSW to prevent real estate agents from understating the estimated selling price of a property, a practice that wastes the time and money of both buyers and sellers. Agents now need to be more specific about selling prices. You will no longer see properties advertised as “offers over” or “$1 million plus”. Instead, agents using a price guide can advertise a price range of only up to 10%. They must not quote the buyer a price less than the reasonable estimate of the selling price agreed with the seller, which must be backed by evidence and a rationale. Agents must keep…

LET’S NOT PANIC. WHILE NEGATIVE gearing has been in the spotlight, and could be cut back to curb perceived excesses, no one is talking about scrapping it altogether. Labor has said that if it wins the next election it will limit negative gearing to new-property purchasers from July 1 next year. It will also reduce the capital gains tax discount from 50% to 25% on new investments from then. SO IF I BUY AN EXISTING PROPERTY, I WON’T GET ANY TAX DEDUCTIONS? That’s not what is proposed. It’s important to understand that “negative gearing” only refers to the losses you’re making after deducting expenses (agent’s commissions, maintenance, borrowing costs and so on), from the income you receive from the investment (mostly rent). So you will still be able to claim…

Some prominent economists, including John Daley, chief executive of the Grattan Institute, are proposing that all property owners, regardless of whether they are home owners or investors, pay a broad-based property levy, saying it could raise $7 billion a year. The proposal is for a levy of $2 for every $1000 of unimproved land value. The Grattan Institute says the annual charge on a median-priced Sydney and Melbourne home would be $772 and $560 respectively, with lower average rates in other cities and regions. The proposal is outlined in Property Taxes, a working paper from the independent think tank, on tackling Australia’s weakening fiscal position. In July 2015, Daley argued that the levy would be the best way for states and territories to raise revenue to address their deteriorating budgets.…

Women’s relationship with superannuation is problematic. For a start, men’s balances are higher, mainly because they’re less likely to take time off work to rear children. Research by Commonwealth Bank and the SMSF Association (SMSFA) shows the gap exists in self-managed super sector too, where more women (61%) than men (27%) say their balances were affected because they took a break from work to care for family. The February study reports men are significantly more likely to be the sole decision-maker in an SMSF with multiple trustees even though women account for almost 50% of trustees overall. Women were also found to be less confident of their understanding of asset classes. SMSFA head Andrea Slattery says the study shows women need support – especially in the case of a relationship…

According to researcher Rainmaker, the super industry earned an estimated $30 billion in revenue in 2014-15. Not-for-profits, which account for 41% of funds under management, drew 37% of these fees, mostly from MySuper products. By contrast, retail funds, with 30% of funds under management, were paid 52% of the fees – most from choice investments via platforms. Almost $4 billion is still being paid in commissions, says the research. Choice fees are opaque, says Tom Garcia, the chief executive of the Australian Institute of Superannuation Trustees. “In a compulsory super system, consumers deserve better and need a lot more protection than they currently have. All super products – MySuper and choice – should be able to be compared. There also should be greater uniformity in the definition of fees.”…

The global ETP market has assets of around $US3 trillion ($4 trillion) with 5700 funds on 63 exchanges in 61 countries. Terms you will come across as you navigate this crowded field include: • Exchange traded products (ETPs) The umbrella term for all listed or exchange traded funds. Includes commodities such as oil. • Exchange traded funds (ETFs) Traditional asset classes such as shares, property and fixed income. • Exchange traded managed funds (ETMFs) Actively managed funds that don’t reveal their daily holdings. They charge higher fees and typically have higher trading turnover. • Rules-based ETFs Non-traditional passive funds that follow a specially designed index.…

We have already seen household names such as BHP Billiton, Rio Tinto and Woolworths slash their dividends to reflect the more challenging economic backdrop, while the sharemarket is expecting minimal growth in the dividend payments of major banking and financial services stocks. Dividends are hugely important to Australian investors. They invest in the biggest ASX-listed companies, often with expectations that the annual dividends will provide an ever-increasing, reliable source of income. But let’s consider the extent to which the dividends paid to shareholders by these top companies are sustainable. Analysis of Australia’s top 20 stocks shows that they are currently distributing nearly 80% of earnings to shareholders as dividend income with the payout ratio – the percentage of corporate earnings that are paid as dividends – currently as high as…

RESEARCHER ROY MORGAN SAYS that, in 2015, more than 12 million shoppers in Australia visited a supermarket at least once in seven days on average. Their revenue is projected to reach $88.1 billion this year, so owning a supermarket should be a winner. The truth, however, is that it’s arguably the most fiercely competitive industry here and consumers seem to care only about price. That means they’re effectively selling a commodity and there will always be pressure on profit margins. Citing Roy Morgan again, in 2014 55.8% of Australian grocery buyers said “high standards of food safety” were the factor that mattered most to them when supermarket shopping. A similar proportion of those surveyed also cited location, while 54% nominated “good value”, 52.6% said convenient trading hours and just 5%…

Simple recipe for enjoying a bigger cake I have followed two fundamental principles during my life: if you want money, don’t spend it, and if you want a long life, don’t die. Thus far these philosophies have served me well, and am now enjoying that comfortable retirement we all aim for. From the day I commenced work I adopted a policy of having part of my salary deducted and paid directly into my bank account, and with each pay rise I increased that deduction proportionately. If I couldn't afford to pay cash for something I did not buy it, with the exception of my first suit, first car and house. Unlike today's youth I restricted myself to what I could afford and maintained a growing bank balance and zero debt,…

If your total, permanent disability claim (TPD) is rejected, you have rights of appeal. You can lodge an internal complaint to the insurer, or to the superannuation fund if the TPD benefit is part of your super. The insurer has 45 days to make a decision on the complaint although a super fund has 90 days. If the complaint is not successful, you may then be able to lodge an external complaint against the insurer to the Financial Ombudsman Service (FOS) or to the Superannuation Complaints Tribunal (SCT) against the trustee. There are time and monetary limits on some external complaints. Alternatively, you may be able to sue the insurer or the fund, or both, for breach of contract or trust. Most TPD rejections are based on medical evidence or…

The work bonus allows the first $250 of your employment income to be disregarded from the income and assets test. It doesn’t apply to business income earned from self-employment. As a sole trader, you don’t pay yourself a wage. Centrelink assesses your net business income without using the work bonus and will deduct allowable expenses. If you’re already running a business, you’ll need to provide your latest tax return and the net income from this will be used until your next tax return is submitted. But if you’re just starting up, you’ll need to provide an income estimate. Before you commence your business, I’d recommend you set up an appointment with a financial information service officer like me. To learn more about the work bonus, visit humanservices.gov.au/workbonus.…

The regulator, ASIC, is keeping a close eye on financial advisers claiming to be independent. It has admonished fund manager Wilson Group, comparison site iSelect and Suncorp’s Citywide Insurance Brokers and Financial Planners for improper use of the description. Wilson and iSelect both accept volume-based payments and commissions from product issuers while Suncorp reps are sometimes paid by commission. While the Future of Financial Advice (FOFA) reforms banned many forms of conflicted remuneration, some commissions and volume-based payments are exempt or grandfathered. Spotlight on surcharges Cab companies and airlines continue to impose huge credit card surcharges despite the Reserve Bank’s 2015 efforts to curb excesses. Consumer advocate Choice says that while retailers have generally accepted the reforms, in some cases the surcharges imposed by cab companies and airlines were 1000%…

NAME: Bryce Steward STATUS: Under 30, a medium-risk investor QUESTIONS: Where do I invest my cash? What is the best way to become an effective share investor? What do I need to know about working in Japan? ANSWERS: Focus on the asset allocation of your investments and then buy low-cost, tax-effective exchange traded funds (ETFs). Buy defensive assets. You will save $720 if you repay $10,000 on your HELP debt before the end of the year to take advantage of the 5% bonus on early repayments that will end on January 1, 2017. If you move to Japan, consider being a non-resident of Australia and benefit from lower taxes. You are a perfect position to salary sacrifice to super. Also organise estate planning, your will and a power of attorney.…

Q We have just sold our family home and moved into a rented apartment, which is jointly owned by my wife, daughter and son-in-law and is presently negatively geared. What is the best way to preserve the money from the sale of our house should we wish to buy into a retirement village in the future? I am 64 and my wife 60. I retired in 2007 and my wife works two days a week. When I turn 65 I don’t expect to qualify for the age pension as I will fail the income test. My super tax offset exceeds my tax liability, leaving me with only a Medicare debt to pay, while my wife’s super tax offset doesn’t meet her tax liability. My initial thoughts were to split the…

The most reliably impressive budget-priced shiraz in Australia over the past five years? Without a doubt, it’s the Yalumba ‘Y Series’. And the latest vintage continues this consistency. It has gentle aromas of dark plums and spice, soft, round, fleshy texture with ripe blackberry and bramble flavours and supple, fine tannins to finish. This is a delicious, easy-drinking red for a reasonable price. Want to spend a touch more? The 2013 (or 2012) Yalumba ‘Galway’ Malbec ($19) is wonderfully succulent, even plush, with good depth of flavour, and pleasing approachability.…

I am 30 and have always been pretty good with money. My husband and I bring in over $100,000 a year and I am currently working part time. We have a Sydney home worth about $900,000 with a loan of $330,000. We own a positively geared house in Queensland which should provide us a nice passive income in our retirement. We have no credit card debt or personal loans and a combined super balance of about $250,000. Last year our three-year-old was diagnosed with a lifelong disability and since then our financial goals have taken a back seat as we try to do what’s best for our son. We are considering downsizing to a property in south-western Sydney for about $600,000 and ultimately having little to no mortgage so that…

Even a small difference if fees over the long term compounds into a significant difference in savings You’ve got $50,000 to invest, with a focus on generating income. What to do? Before answering that question, let’s make a few assumptions about what you don’t want. First, you probably don’t want to wake up one morning and find that your $50,000 has become $30,000 overnight. As an income investor, you need security and reliability of returns. That has implications for where you invest. Second, you don’t want transaction costs to eat away at your returns. Investors generally trade too much and pay a price for it, not just in lower returns but higher transaction costs. You want to minimise those costs while maximising potential returns, without too much risk. Third, you…

It’s prudent to have some international exposure for diversification In building a low-risk income portfolio, it’s easy to get caught up with the returns while ignoring risk. My advice would be to spend your time understanding the risks and choose your return based on how much risk you are comfortable with. Over the years we have seen countless failures in products marketed as “low-risk” (property developer Westpoint Corporation, debenture issuer Australian Capital Reserve, etc). The mums and dads who invested in such assets were looking for safe, low-risk investments with regular income; however, what they got were high-risk, complicated products that had a high chance of failure. Had they understood the risks, they would almost certainly not have invested. Fortunately, the basics of understanding risk are relatively simple and it…

HERE’S AN INTERESTING exercise. Next time you’re talking to a bank, ask them what their standard variable rate is. It’s a simple question but it can’t be answered without them asking you a couple of questions too. “Is it for a home or an investment?” “Will you be paying interest-only or principal and interest?” “Are you a new customer?” “Would you be interested in a packaged loan?” And so on. There’s no such thing as a standard variable rate anymore, which makes it very hard for borrowers to compare loans. Take NAB, for example. This month the bank will divide its home loan products into four categories: owner-occupier, investor, interest-only and principal and interest. At the time of writing, NAB had a two-tier price structure – one rate for interest-only…

CLASS ACTIONS ARE A PART OF the legal system that enable disputes and claims involving multiple victims of mass wrongs to access justice. Through them, regardless of the personal resources of the many participants, the actions of large, powerful organisations can be properly challenged. Take the example of a bank overcharging you – and thousands of others – for late credit card payments over months. It isn’t worth taking legal action alone to seek compensation, because it would cost you tens of thousands of dollars. But if all those overcharged join in a single action, legal costs are distributed over a large number of claimants so that you pay costs indirectly through the law firm, which will take a cut of any compensation obtained. Apart from bank overcharging, class actions…

• Money should never be a gift to a child, always a loan. • Don’t rely on a home-made loan agreement. Get a watertight document from a lawyer. Expect to pay from $200 for a straightforward loan or about $1000 if you use the lawyer to register a mortgage. • Tell all family members about any loan given to any child, and how other children without a loan will be compensated. • Keep a copy of the loan document with the lawyer, accountant or financial planner as well as having one at home.…

Banks like to keep their customers. That’s why some accounts are so hard to cancel. DON’T YOU HATE IT WHEN your bank releases a new product that is bigger and better than the one you have already signed up for? It’s almost as if every month there’s a new deal on the market, as banks battle it out to secure new customers. But research shows the competitive behaviour may not lead to the outcome the banks are hoping for. It means that for bank customers, the grass always seems greener on the other side. Roy Morgan Research says the competition has caused a huge fall in customer loyalty. In November last year, the researcher reported that the top 20% of high-earning bank customers were a fickle lot, holding less than…

Contact us To send a letter to the editor, write to Money, GPO Box 4088, Sydney NSW 2001 or email money@bauer-media.com.au For all inquiries and letters, please include name, address and phone details. Letters may be edited for clarity or space. Because of the high number of letters received, no personal replies are possible. How to get Money 1 Subscribe to Money: Phone: 136 116 Online: magshop.com.au 2 Subscribe to the Money digital edition for your iPad at magshop.com.au/digital/subscribe/moneydigital 3 Visit our website moneymag.com.au and sign up for our free weekly newsletter. You’ll get our top money stories plus exclusive finance tips. Follow Money on facebook.com/ moneymagaus @moneymagAUS…

WOULD YOU LIKE TO BE ABLE to invest in real estate the same way as you do in shares? Instead of buying an individual property, you could buy stakes in different properties and sectors, including residential, commercial and rural, building a portfolio as you would buying shares in ASX-listed companies. Real estate crowdfunder DomaCom aims to enable investors to do this. In December it launched a $250 million campaign to buy the pastoral empire S. Kidman & Co. “DomaCom democratises property investment and makes it similar to the equity market where you can get a lot of diversification with limited funds,” says founder and CEO Arthur Naoumidis. “We are the next evolution of syndicates, where investors can pool together to invest in properties with a minimum of $2500. It puts…

SO YOU’RE THINKING ABOUT turning your home into an investment property? Maybe it’s because you’ve decided to upgrade and want to hang on to the old property or maybe you plan to move overseas temporarily. If you intend to do this, you should let your lender know and be aware that your interest rate might be higher as an investor. You could stick with your current lender or refinance with a new one. You may also think about changing your loan from principal and interest to interest-only. Make sure you keep this loan and any loan for a new property completely separate so you can be clear about what part of your debt is tax deductible and what isn’t. There are, of course, tax issues – a key one being…

EVENTUALLY MOST PEOPLE HAVE to fly the nest and start a life of their own. For some, it’s a necessity; for others, it’s a lifestyle choice. Whatever the reason, opting to rent is a major step towards independence. I’ve been living away from home since I was 19 and in that time I’ve learnt a lot about what it takes to survive the rental experience. Actually securing a property is one of the hardest tasks. Sometimes it’s like a sales auction and you find yourself bolting from a 10am inspection with a pack of other people who are all desperately trying to get their application in to the agent. It can be a sordid business. But I can offer a few tips to avoid too much pain. The first thing…

THE CURRENT ARGUMENT OVER superannuation leaves me cold. For some reason a system that should encourage more people to have more money in super – and to leave future governments and the age pension alone – has turned into class warfare about whether it’s “fair” that wealthy people have more money in their funds. Of course wealthy people have more money in their funds. They get paid more. They can afford to have more money in their funds. The last time I looked, this was a free-enterprise-based economy and system of government. Because the blindingly obvious fact is that people who cannot afford to put more in their superannuation fund (or who run out of money more quickly in retirement because they did not have as much in the pot)…

THERE’S A LOT OF NOISE WHEN it comes to advice and free stuff on the internet for retirees. The challenge is finding trusted sites that provide genuine value for your zero dollars. But no need to worry – I’ve done the research for you. Hands down the best and most recommended site is MoneySmart, the consumer and investor website of ASIC, our financial services regulator. It provides free information on what questions to ask financial advisers, warnings against scams, recommended financial apps, budgeting tools, retirement planning calculators and the ability to check financial services licensees and those who have been suspended or disqualified. If you invest, you must go to this site. The Association of Superannuation Funds of Australia (ASFA) website publishes a quarterly report on retirement standards. It bases…

The Australian sharemarket is confronting earnings headwinds, particularly at the very large-cap end, says David Cassidy, Australian equity strategist for UBS. Outside the top 20, the picture is slightly better, although the backdrop is for moderate growth overall. Cassidy outlines stars from the latest reporting season as well as some disappointments: Strong performers Harvey Norman: Beneficiary of strong physical housing market. We see upside risk to consensus estimates. JB Hi-Fi: Strong trading into year-end and Dick Smith woes should buoy outlook. Likely upside to consensus estimates, though somewhat discounted. BlueScope Steel: Global steel production falls should help outlook. Star Entertainment Group: Beneficiary of strong NSW economy and inbound visitors. Queensland poker machine reform will assist. Expect strong result. Wesfarmers: Supermarkets and Bunnings to perform well. Qantas: Strong result largely expected…

THERE WAS A RASH OF scaremongering about the Australian property market in February that pushed the banks as cheap as they’ve been since the depths of the GFC. NAB, ANZ Banking Group and Bendigo and Adelaide Bank were yielding more than 11%, with franking (see table). The main problem was an article on the front page of The Australian Financial Review about two Americans, posing as a gay couple, unearthing a rash of bad practices among mortgage lenders and extrapolating that into a systemic collapse of the Australian property market. Another article followed the next day from America: “Australia’s monumental housing bubble – in the grip of insanity.” It contended that Australia was in the grip of “collective madness” as “everyone is borrowing more than they should” and “what happened…