RUSSELL DEW FINANCIAL SERVICES Seminar 1st August 2018 Russells seminar will start soon Please help yourself to a drink before we start Topic 1 How to Make the Most of Your Superannuation Australia and Superannuation In 2017, Australia had
a total of $2,259 billion in Superannuation assets What problems are people having with Super funds? Underperformance Multiple accounts High fees
Exit fees make moving funds unattractive These factors can lead to a significant difference in Superannuation amount when a person retires Productivity Report on Superannuation Source: Financial Review What problems are people having with Super funds? What problems are people having with Super funds?
How is the Government helping us? Fees cap (2018 Budget) No exit fees (2018 Budget) No automatic life insurance for customers under 25 (2018 Budget)
Will put duplicate superfunds into one account (2018 Budget) First Home buyer Scheme (2017 Budget) House Downsizing Scheme (2017 Budget) How is the Government helping us? Fees cap (2018 Budget) Super funds with balances below $6,000 will have their administration fees restricted to 3% p.a. of the fund balance
How is the Government helping us? No exit fees (2018 Budget) Exit fees on super funds will be abolished, giving customers greater choice of super funds without costs for transfers How is the Government helping us? No automatic life insurance for customers under 25 (2018 Budget) Members of super funds who are under age 25 will no longer have automatic Life and Total Permanent Disability cover placed into the super funds as a default
Members under age 25 can opt-into this insurance if they want This will mean there are fewer compulsory fees for customers under 25 How is the Government helping us? Will put duplicate superfunds into one account (2018 Budget) Members with a super account with a balance less than $6,000 which has not received a contribution after 13 months will
automatically have their funds reunited into active super funds How is the Government helping us? Source: ATO How is the Government helping us? Source: ATO How is the Government helping us? First Home buyer Scheme (2017 Budget) Up to $30,000 may be put voluntarily into superannuation, thus reducing an individuals tax
Up to $15,000 can be contributed to the scheme each year There is a lower tax rate for putting money into superannuation versus being given wages as normal income Most first home buyers will only pay in total 19c/$1.00 or 24c/$1.00 tax in this scheme, rather than 34c/$1.00 or 39c/$1.00 on their wage
How is the Government helping us? First Home buyer Scheme (2017 Budget) There is no time limit, so contributions can grow at the Bank Bill rate plus 3% p.a. and be withdrawn as part of the deposit for the home, so the deposit could grow beyond $30,000 over time When making voluntary super contributions, you do not need to specify the money is for the First Home Buyers Super scheme Note: the compulsory superannuation guarantee of 9.5% does not
count towards the scheme How is the Government helping us? House Downsizing Scheme (2017 Budget) Allows people aged 65 and over who have sold their principal residence to contribute all or part of the sale proceeds to their superannuation Applies to properties sold from 1 July 2018 (date contracts exchanged)
Properties must have been owned by the person for at least 10 years prior to sale How is the Government helping us? House Downsizing Scheme (2017 Budget) Each person may contribute up to $300,000 from the sale of their home to their super fund ($600,000 for couples) There are no contribution taxes on entry into the super fund or on withdrawal
The scheme allows retirees to build up their investments to improve their standard of living in retirement using their current superannuation scheme Applies to properties sold from 1 July 2018 (date contracts exchanged) Women and Superannuation In 2017, it was revealed that women have significantly lower Superannuation balances than men Women and Superannuation
Average superannuation balance in 2016: $68,000 for women and $112,000 for men Average superannuation balance for those retiring in 2016: $157,000 for women and $271,000 for men However, today we see womens greater involvement in the workforce, which should help fix this disparity Why is the Government helping us? Long term cost of Australians not having sufficient superannuation when they retire will be a huge drain on Australias welfare system How can Australians use their Super effectively before retirement?
First Home Buyer Scheme (previously discussed) House Downsizing Scheme (previously discussed) Salary Sacrificing Transition to Retirement
Salary Sacrificing Salary Sacrificing your own wages into Super as pre-tax contributions results in only 15% tax on entry into your super fund For most employees this will create a net saving of 19c/$1 or 24c/$1 tax on these super contributions The amount contributed along with employer contributions (SGC) can only add to a maximum of $25,000 per financial year
to avoid excess tax Transition to Retirement This is a strategy to draw an income from your super fund after you reach your preservation age but you are still working The strategy allows you to draw a partly taxed income that can mean you will be able to Salary Sacrifice a greater amount into super to lower your normal income tax rate on your wage
The net result is lower total income tax and greater super savings The disadvantage is that these contributions can only be accessed after retirement as a lump sum or to derive an income from these investments Conclusion on the Evolution of Superannuation in Australia The initial aim of the Compulsory Super Contribution System that started in 1992 was to provide sufficient assets to live off in retirement
This Compulsory Super System now has morphed into many other objectives: Providing a tax saving vehicle for employees during their working lives Providing a low cost-investment vehicle for employee savings in a heavily regulated and competitive environment
Providing insurance cover for death, permanent and temporary disablement Conclusion on the Evolution of Superannuation in Australia Provide access to a lump sum in the case of a terminal illness Provide a tax free income for retirement from age 60 Provide lump sums during retirement for purchasing cars,
houses, renovations, sickness and travel Provide beneficiaries with a legacy lump sum on death Provide a low cost investment vehicle with tax advantages for retirees if they want to downsize their house and have funds to invest Topic 2 The Economics of Downsizing Your Home
Ageing Population In Australia, we are seeing an increase in people over 65 years. In 1996, 2.1 million or 12% of Australians were over 65 In 2016, 3.7 million or 15% of Australians were over 65 By 2056, its predicted that 8.7 million or 22% of Australians will be over 65!
Ageing Population Australia has seen a 76% increase in people over 65 between 1996 and 2016 Source: ABS Budget 2017/18 Due to the ageing population, from 2018/19 the Government will provide an additional 14,000 home care packages, a further 13,500 residential aged care places and 775 restorative aged care places
The Government will establish a new Aged Care Quality and Safety Commission from 1 January 2019 to regulate the quality of care in Aged Care facilities Retirement Living Code of Conduct Currently a new national Retirement Living Code of Conduct is being created to set high quality national standards Public comment is currently being sought for the draft version of the code
Currently the Commonwealth and each State/Territory have their own legislations, so the code is set to establish a common set of quality standards for all retirement communities to use Once the Code is finalised, retirement communities will be encouraged to sign up to commit to these standards Downsizing For Australians considering downsizing the family home, there are different types of accommodation options depending on a retirees age and needs.
As a retiree, you may consider downsizing your large family home into: Unit, Townhouse or Apartment Retirement Village Aged Care Unit, Townhouse or Apartment: Features
Strata titled Have a body corporate May include shared facilities such as a pool, lifts and gymnasium Stamp Duty is required for the purchase Unit, Townhouse or Apartment: Advantages
Have common facilities Can be in central locations near shopping centres Often have secure parking Usually have high energy ratings because only one or two walls face out to the weather
Unit, Townhouse or Apartment: Disadvantages Costs of common facilities can be high (e.g. lifts, gymnasium and pool) Often the amount put into the sinking fund for major refurbishments every 5-10 years is insufficient (e.g. exterior painting, carpet) Conflict may occur between owners who live there and owners
who rent out the apartments (e.g. rental owners want to keep the costs down) Noisy neighbours Unit, Townhouse or Apartment Unit, Townhouse or Apartment Unit, Townhouse or Apartment: Costs Prices based on a $450,000 unit if money
is not borrowed Type Cost Mortgage Registration in ACT $90 Loan Establishment fee $600 Settlement Attendance fee
$1,700 Removalist $4,000 Building and pest inspection report $1,090 Connecting telephone and internet $100 Stamp duty
$10,300 Total $18,800 Retirement Villages: Features A multi-unit complex for people aged 55+ Recreational and communal activity areas
Emergency Call Buttons (on-site or off-site staff) Either strata titled or leased Average age of entry is 76 years Often include leisure activities such as caf, pool or even golf courses
Retirement Villages Fees you will have Incoming fees to enter village Recurrent fees for operational expenses while in the village A Departure fee when leaving the village
No stamp duty payable What costs would be involved in Canberra? Retirement Villages Bellerive Retirement Village at Lyons: Features Emergency Call Button (staff onsite 24/7) Security
Car parks for residents No steps Electricity and water are smart metered Retirement Villages Bellerive Retirement Village at Lyons: Costs Homes range from around $450,000 to $850,000 Cost of home includes sublease, service agreement and loan deed Note: no stamp duty payable
because registered as a 99 year Crown Lease, thus exchange is registered as a sublease not sale Homes are registered with the Land Titles office in Residents name Retirement Villages Bellerive Retirement Village at Lyons: Costs Monthly levies: $580-625 Only cost recovery for services (no profit paid to village) Personal care not offered by staff (e.g. showering), but community
carers can come to houses if arranged privately through an ACAT assessment (will be discussed later in presentation) Retirement Villages Grange Deakin Independent Living Retirement Village Townhouses and apartments with 2-3 bedrooms and 1-2 bathrooms Emergency Call Button (staff onsite 24/7) Security
Recreation Centre Swimming Pool and spa Library Retirement Villages
Onsite staff do not offer personal care (e.g. showering). When required, resident arranges this through their own doctor, who may request an ACAT assessment if appropriate Retirement Villages Grange Deakin Independent Living Retirement Village: Costs Homes range from around $500,000 to $900,000 Cost of home includes sublease, service agreement and loan deed Note: no stamp duty payable because registered as a 99 year Crown Lease, thus exchange is registered as a sublease not sale Homes are registered with the Land Titles office in Residents name Retirement Villages
Grange Deakin Independent Living Retirement Village: Costs Monthly fees include rates and water rates: $600-$700/month (or $7,200-$8,400pa) Only cost recovery for services (no profit paid to village) Monthly fees are calculated to be as fair as possible for all residents, and vary according to size of home, whether 1 or 2 residents living in home and whether or not there is a garage Departure fee is calculated as a percentage of the resale price. It is calculated at 6% p.a for the first 6 years of occupation (ie. maximum of 36% after 6 yrs)
Independent Serviced Apartment Grange Deakin Independent Serviced Apartments: Features The only Serviced Apartments in Canberra Home cooked two course lunches and dinners every day in the dining room, breakfast delivered to own apartment Weekly Cleaning
Bed linen changed Heavy Laundry service Community Centre Swimming Pool and spa Independent Serviced Apartment
Grange Deakin Independent Serviced Apartments Serviced apartments offer one bedroom, with a spacious separate living area, large bathroom and modern kitchenette Residents are not registered with the Land Titles Office Independent Serviced Apartment Grange Deakin Independent Serviced Apartments Incoming cost is $350,000
Residents pay regular fees, of $2,100/month which includes all meals, cleaning, assistance with medication, water rates, building insurances and maintenance Departure fee is calculated on the original purchase price of 5% for the first four years and 2.5%p.a thereafter to a maximum of 50% (calculated daily) Abode Woden Serviced Apartment If stay is for 70+ nights, the Abode Woden would cost $143/night or
$52,500 for the entire year (higher fees during Budget period) Casual nightly rate at Abode Woden is $156/night Parking not included, but nearby public parking is $11/day or $4,015/pa Apartment would be serviced weekly
Wifi is included Need to provide 2 weeks rent as bond before arrival Issues with Downsizing High moving costs When moving, fees involved include real estate, legal fees and stamp duty. In Sydney and Melbourne, costs can exceed $70,000
High body corporate levies Costs could include gardening, concierge, lift and air conditioning inspections. Apartment levies may be between $10,000$15,000p.a. High maintenance costs There are more items which require maintenance in an apartment than a home, such as lifts Issues with Downsizing Loss of financial security
All major services must be paid for by the body corporate committee, regardless of individuals financial situation. Communal decisions to proceed with upgrades may be difficult for some to afford Home Support or Home Care Packages Instead of downsizing, people could consider Home Support Program (HSP) or Home Care Packages (HCP) Allows people to stay at home while receiving the care they need They are delivered to people by Commonwealth approved
providers Clients also contribute towards the cost Cheaper for the Government to provide than Age Care services Home Support Program (HSP) HSP helps people with less complex needs
Not tailored to meet specific needs Simple assessment carried out Assessment done through My Aged Care Home Care Package (HCP) Helps people remain at home for as long as possible
Enables customers to have choice in the way that support is provided at home Caters to specific needs of an individual Comprehensive assessment through My Aged Care is necessary to determine eligibility
Customer pays fees and funding also provided by Commonwealth Government Package is carried out by approved Home Care Provider Home Care Package (HCP) Home Care Level 1 help people with basic care needs Home Care Level 2 help people with low level care needs Home Care Level 3 help people with intermediate care needs Home Care Level 4 help people with high care needs Home Care Package (HCP) What the Commonwealth Government will Pay
Home Care Level 1 basic care - $8,045pa Home Care Level 2 low level care - $14,633pa Home Care Level 3 intermediate care - $32,171pa Home Care Level 4 high care - $48,906pa Home Care Package (HCP) What you will Pay Full Pensioner No Income Tested Care Fee Part Pensioner Part Income Tested Care Fee, capped Self Funded Retiree - Full Income Tested Care Fee, capped Aged Care Not a housing option
Eligibility must be ACAT assessed through My Aged Care Centrelink will apply assets and income means test contributions Aged Care Residents pay their accommodation costs in one of the following ways: Full lump sum by a Refundable Accommodation Deposit (RAD) This is the price of a room that residents have agreed with their aged care home to pay. This cost is borne entirely by the
resident. Refundable Accommodation Contribution (RAC) RAC is when a person contributes partially to the lump sum cost. The remainder is funded by the Australian Government as assistance with their lump sum accommodation costs. Aged Care Daily payments by Daily Accommodation Payments (DAP) The resident makes this payment on a regular basis, up to a month in advance, similar to paying rent. This cost is borne by resident.
Daily Accommodation Contribution (DAC) The regular contribution for accommodation if they also receive Australian Government assistance with their accommodation costs. Aged Care Means testing for Australian age care costs $50.16 Source: AMP Techspeak Webinar
Aged Care Residential Permanent Baptist Care Carey Gardens Centre (Red Hill) Jindalee Aged Care Residence (Narrabundah) Queanbeyan Residential Care Facility
1 17m2 1 18.2m2 1 11m2 10
8 4 $650,000 $450,000 $345,000 Maximum daily payments $111.84 $77.42
$59.36 Room or part room offered on an extra service basis X X $0.00 $49.16
$0.00 Single room + ensuite Commonwealth govt subsidised Max occupancy Room size Number of rooms in this type Maximum refundable deposit Extra service fee Conclusion
There are many factors to consider when downsizing a home. People need to consider both their physical and mental wellbeing as well as the financial costs There are numerous options when downsizing including Unit, Townhouse or Apartment Retirement Village For people with physical limitations they may consider Home Support Program or Home Care Package
Aged Care If you would like a soft copy of this presentation, please email Russell at: [email protected] General Advice Warning This seminar contains information that is general in nature. It does not take into account the objectives, financial situation and needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, Russell Dew ph. (02) 6232 4252 and other companies within the AMP Group may receive fees and other benefits. The fees will be a
dollar amount and/or a percentage of either the premium you pay or the value of your investments. Please contact us if you want more information. This seminar is presented by Russell Dew Director Authorised Representative and Credit Representative Russell Dew Financial Services Pty Ltd as a trustee for Dew Family Trust (ACN 106 711 068), is a Corporate Authorised Representative of Charter Financial Planning Limited, Australian Financial Services Licensee and Australian Credit License
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