2022/23 Federal Budget Recap

The 2022/23 Federal Budget has been released!

What does it cover you ask? Its a range of measures aiming to reduce the pressure from increased costs of living.

Our Advisors at Endorphin Wealth have watched this news and are here to help you with any questions you have and what initiatives affect your life and financial situation.

Summary – Personal Taxation

  • Cost of living tax offset: The Low and Middle Income Tax Offset (LMITO) will increase, providing an additional $420 to reduce tax payable for eligible taxpayers in the 2021/22 financial year. This offset is non-refundable and available to those earning up to $126,000 per annum.
  • Halving of fuel excise: The excise on fuel will be halved for six months from 30 March 2022. As a result we should see lower fuel prices during this period. Half the current excise on fuel and diesel is 22.1 cents per litre.
  • Indexation of the Medicare Levy thresholds: Each year the Medicare Levy low – income thresholds are indexed. From 1 July 2021, the thresholds are expected to be:
    – Singles $23,365 (increased from $23,226)
    – Families $39,402 (increased from $39,167) plus $3,619 per dependent (increased from $3,597)
    – Single seniors and pensioners $36,925 (increased from $36,705)
    – Family seniors and pensioners $51,401 (increased from $51,094) plus $3,619 per dependent (increased from $3,597)

Summary – Superannuation

  • Continuation of the reduced minimum pension drawdown: The budget proposes to extend the minimum amount that needs to be drawn from account-based income streams to the 2022/23 financial year. Importantly individuals with account-based pensions or term allocated pensions will be required to draw less from their savings, in line with the current year minimums.

Summary – Social Security

  • Paid parental leave changes: Parental leave pay is proposed to be combined with Dad and Partner Pay resulting in a single scheme of up to 20 weeks leave. As a result, this can be shared between parents. This leave can be taken at any time within two years of birth or adoption. The new payment is proposed to be subject to an additional household income test designed to increase eligibility.
  • Cost of living payment: Eligible social security recipients resident in Australia will receive a one-off $250 payment in April 2022. Eligible payments include the Age Pension, Disability Support Pension, Carer Payment and Allowance, JobSeeker Payment. It also includes individuals holding a Pensioner Concession Card or Commonwealth Seniors Health Card. The payments will not be means tested and will be tax-free.

The above is a brief summary and not all initiatives have been outlined as the 2022/23 Federal Budget contained many other initiatives which may impact you.  It is important to reach out to a trusted financial professional to help understand the various initiatives the consequences this may have on you.

For an obligation-free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au

Debt, Debt and More Debt… How to deal with Debt

Everyone loves to spend money, and money that isn’t yours is easier to spend. The lavish lifestyle of hotels, holidays, parties, cars and great food are all good and well until you look at the final bill… that horrible credit card statement. You might not even look at it before throwing it in the bin out of fear of the balance.

Next thing you know debts start to pile up – Credit Cards, Personal Loans, Car Loans, Loans, Debt… It can seem quite overwhelming at times and it becomes very easy to have a love hate relationship with debt. However, it’s very easy to make friends with it and use it to your advantage rather than cutting the cards up.

At Endorphin Wealth, we don’t have a special ‘fix-it’ pill. However, we do have a system which we use to work with our clients to plan out a solution to reduce bad debt, use it to their advantage and get them on track.

1. Budgeting

‘Budget is such a boring word’. But it is a necessary task in understanding where you are financially. Understanding the intricacies of your weekly, daily and yearly spending habits gives you and your advisor perspective of what can be done better.

You will be able to see exactly how much income you have, what your expenses are, how much savings you allocate, and the picture starts to form. This can be an eye opener for some and a chance to realise, you can make a huge difference to your future with some tweaks of the budget.

2. Analyse

Once this budget is complete, you can see that you may already at maximum saving capacity. However in most cases, there is room to improve.

This is where you can identify where you can cut spending and identify where you can do better.

Once complete, start cutting… 10%? 30% reduction? Each situation is different however you need to be honest with yourself to better your situation.

3. Prioritise your debts

If your goal is to reduce debt, make sure that you try to pay that off first. Whether you do this with a direct debit or a manual payment every month, making sure this is the first thing done means less stress. You are able to go about the rest of your month without having to worry if you will be able to pay it.

4.Back up savings

Paying off your debt is great however, what happens if you do go over budget? That stress is going to come and haunt you if there is no back up. Having a little bit extra surplus savings integrated in your budget means you go from super stressed to your own superhero.

Who knows, you may be able to save up to go on that holiday, contribute to your investment property or buy into the share market and start your investment journey.

5. If you get stuck, get help!

Endorphin Wealth is dedicated to helping people achieve their goals. We have systems, documents and a ecosystem of people who can help solve debt problems, create wealth and set our clients on a path to achieve their own life, financial and personal goals.

For an obligation-free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au.

The advisors at Endorphin Wealth are passionate about helping people achieve their life goals with great financial planning. We are not licensed or owned by the big banks and financial institutions, so the advice and solutions we provide is always in our client’s best interests.

We have the advantage of being able to access a range of products from different providers to ensure that our clients’ needs are our primary focus. Our offices are located in Sydney and Melbourne, where you can find a financial advisor suitable for you. 

 

Benefits of an Advisor – The Property Buyble

Property is an area which we do not shy away from here at Endorphin Wealth. Some advice firms you go to are very hesitant to discuss property as an avenue. Endorphin Wealth can add much needed value to your situation and discuss with you your goals to purchase your dream home or investment properties.  We are more than happy to engage in the property conversation and help you get the wheels in motion!

We have partnered up with Kimberley Ackerman from The Property Buyble to outline the benefits which a financial advisor can provide on your property journey. Be sure to check out the latest episode of the podcast. Kimberley and Phillip have a great discussion about the benefits of a strong advice team.

If you like to learn more about property as an investment strategy and the benefits of an advisor, please reach out to Endorphin Wealth for an obligation free initial consultation.

For further advice on the property market and take a deeper dive into areas not commonly discussed or explored, reach out to Kimberley Ackerman from The Property Buyble for some amazing insight.

Phillip Richards 

 

Kimberley Ackerman

 

How To Use ‘Bucket Companies’ To Save On Tax

If you were given a choice to keep the tax rate you’re paying right now or to lower your tax rate by 40%, it’s very likely that you would choose the latter. After all, who likes paying more tax than they need to?

Realistically, the ATO would never help you find ways to pay less tax, so this situation seems very unlikely to happen. Using a ‘bucket company’ is a strategy which you could look to adopt.

Our experienced advisors here at Endorphin Wealth can help you explore this strategy further.

What is a Bucket Company?

A bucket company, also known as a corporate beneficiary, is a company that receives a distribution of wealth from a discretionary trust. The beneficiary who sits below the trust and collects the money poured into it is known as the ‘bucket’.

An individual’s tax rate can be as high as 47% (including Medicare levy). In contrast, the recent base company tax rate has now been reduced to 25%* this year. Obviously, the difference of 22% of is better in your pocket than in the ATO’s. But how can an individual claim this tax benefit?

*For companies with an aggregated turnover of less than $50m.

Example of potential savings by implementing a bucket company strategy.

How to set one up

To set up a bucket company, first you will need to revise the structure of your trust so that it can distribute any profits to the corporate beneficiary. You must sure you keep within the rules of the ATO to ensure you are compliant.

Distributing funds

If the owner of the trust elects to distribute funds to the bucket company for the financial year, a physical distribution for the same amount must be made to the company’s bank account prior to lodging the tax return.

Note: if there are insufficient funds, the ATO will grant a 7-year loan between the bucket company and trust, called a Div 7a loan.

A Div 7A loan has:

  • A maximum term of 7 years
  • A minimum annual repayment plan
  • Interest that is payable at a government-prescribed rate

The trust must physically make payment to the bucket company each year, meeting minimum repayments. However, it may be possible for bucket companies to declare dividends that can be off-set against minimum repayment obligations.

Getting the money out

The most efficient way possible to get the money out is for shareholders to be paid in dividends. The shareholder would then receive a franking credit on the tax already paid, as the dividend had been taxed at the corporate rate.

Who should hold the company shares

It is important to establish your intention with who should be put in as a shareholder of the bucket company.

If they are individuals, this does not allow much flexibility in how the dividends are distributed. The dividends must be distributed exactly according to the shareholder percentage of the bucket company.

A smart way of getting around this is to set up a separate trust as the shareholder of the company. That way the trust can distribute dividends in the most tax effective way.

Example of tax-efficient distribution of funds using a bucket company strategy.

Tax tax tax 

A bucket company can be a very good structure to hold long-term investments. The way in which companies are taxed is important to consider. For example, companies are not eligible for a 50% capital gains tax discount after 12 months of holding.

If you have distributed to a company to save tax, it is likely this will still be under your own personal tax rate. This is where a good financial advisor can show you how to create a tax minimisation strategy best suited to your situation.

Where to learn more about tax minimisation

The team at Endorphin Wealth have both the experience and knowledge to help keep your tax liability to a minimum.

For an obligation-free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au.

The advisors at Endorphin Wealth are passionate about helping people achieve their life goals with great financial planning. We are not licensed or owned by the big banks and financial institutions, so the advice and solutions we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers to ensure that our clients’ needs are our primary focus. Our offices are located in Sydney and Melbourne, where you can find a financial advisor suitable for you. 

The Rise of Ethical Investments

In recent years, ethical investing or socially responsible investing (SRI) has become increasingly popular. Driven by the growth in demand for businesses that are profitable and ethical, along with regulatory frameworks to address challenges such as climate change and modern slavery, there has never been a better time to gain exposure to ethical investments. 

With help from our experienced advisors at Endorphin Wealth, you can ensure that your money is invested in a way which aligns with your ethical values and principles.

What are Ethical Investments?

Ethical investments provide exposure to companies with strong environmental, social and corporate governance (ESG) structures and practices.

The Responsible Investment Association of Australia estimates there is almost $1 trillion invested in ethical companies and strategies across the country, equating to 44 per cent of the entire $2.24 trillion managed by professional investors in Australia.

Depending on your risk appetite, there are a range of ways you can invest ethically. You can put capital into an actively or passively managed fund with a focus on ethical investments. Your super fund may also offer investment options that focus on ethical leadership and business practices.

How to pick ethical companies

The research and analysis process for buying stock in ethical companies is broadly no different from regular stock picking. Analysing the typical indicators of financial strength is essential, including earnings per share, the price-to-earnings ratio and dividend yield. You will, however, need to weigh up whether a company’s approach to ESG aligns with your beliefs around important issues. These issues are typically environmental, societal, and political. 

Getting financial advice is the best way to help guide you to the best options and investments available. Experienced financial advisors are aware of the many different options available and can tailor a portfolio which aligns with your preferences and ethical values.

Types of ethical investing

It’s important to note that the screening criteria for responsible investing are different from those used in strict ethical funds. As a comparison, strict ethical funds screen out specific industries such as energy, mining, gambling, pornography and narcotics as a default.

ESG investment funds differ by focusing on stakeholder engagement and shareholder activism to influence change in companies instead of simply divesting or eliminating the option of investing in particular organisations in the first instance.

Whether you put your money in a fund or decide to pick individual stocks to get started in ethical investing, you need to determine what you’ll look for in potential investments. You may look for companies that are carbon neutral, or those that have initiatives such as planting a certain number of trees each year.

Where to get more information on ethical investing

As always, it is important to take your personal situation into account. Whilst ethically investing in the right companies will offer better returns than money not being invested. It is important to incorporate other factors into your investment decisions, such as the return and risk. Endorphin Wealth is able to create personalised strategies taking into account your preferences and needs.  Endorphin Wealth have many experienced financial advisors familiar with ethical investments and the options available.

For an obligation-free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au.

The team at Endorphin Wealth are passionate about helping people achieve their life goals with great financial planning. We are not licensed or owned by big banks and financial institutions. So the advice and wealth management we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers. This means that our advice can be tailored to our client’s goals. We have offices located in Sydney and Melbourne, where you can find a financial advisor that is suitable for you.