As the economy starts to recover from COVID-19 shutdowns, some sectors may take longer than others to return to their normal operating capacity and some companies may never fully recover. That means there is still the chance that some employees could be made redundant.

If you are offered redundancy, how can you turn a potentially bad situation into a new opportunity?

In the first instance, make sure that you negotiate a good redundancy settlement. By law you are entitled to a certain amount depending on your years of service with the company. You may or may not come under an award, but the Fair Work ombudsman has a calculator so you can work out your entitlement.

You may even be able to negotiate an increased payment (a golden handshake) in order to keep confidential any specialist knowledge that you may have.

Your redundancy payment may include long service leave, holiday pay and sick leave, so it can be a sizeable amount and that creates opportunity.

Pending its timing, if you can also consider pushing it into the next financial year, as this may provide a better cashflow outcome for you.

How Is It Taxed?

But first, how much will you end up with after tax? There is a tax-free element for redundancy payments, calculated as a base amount (currently $10,989) plus a service amount ($5,496) multiplied by the numbers of years of service. So, if you have 10 years’ service, your tax-free amount is $65,949.

Any redundancy payment above this amount is your Employment Termination Payment (ETP) and subject to tax. If you are below your preservation age (the age at which you can access your super) you would pay 30 per cent plus the Medicare levy on this sum or 15 per cent plus Medicare if you are older than your preservation age. In both cases this tax rate applies up to $210,000 with the balance subject to 45 per cent tax plus Medicare regardless of your age.

So what should you do with this money? A large sum can present many opportunities although much will depend on your present circumstances such as how close you are to retirement and what your financial commitments are.

If you are hoping to find another job, assume this could take at least six months, so make sure you have sufficient funds.

Now is the time to take stock of your household budget and look at ways to reduce your overheads to control your immediate demands. For instance, you may look at selling your second car.

But don’t rush to cancel everything. Indeed, your income protection policy, for instance, could still play an important role. Before you act, consult your adviser, to see if there is the opportunity to waive the premiums for a few months. Just because you have lost your job, does not mean you will not be covered if something should preclude you from working in another job. You may well find you are still covered even if you are not currently employed.

Look To The Future

Depending on your circumstances, you could consider using some of your redundancy pay-out to improve your overall financial situation. You could reduce your mortgage and other debts, or perhaps to make an investment or fund a business opportunity.

If you are approaching retirement age, then you might consider putting some of your redundancy pay into super. While this may still be a good idea if you are younger, remember you could be unemployed for longer than six months and you wouldn’t want your money locked in super until you reach preservation age.

If you are still expecting to have a few more years in the workforce, then take the time to seek professional help on your next move and think outside the square. So, rather than just find a similar position to the one you have lost in the same industry, look at widening your horizons. A professional career advisor can help. In many cases, employers provide such assistance as part of a redundancy package.

While redundancy can be confronting, if you think of it as a catalyst for change then you may find it’s one of the best things that has happened to you.

Call us to discuss how to make the most of your redundancy payment on 02 9299 2292 or email us on myadviser@moneyclip.com.au.

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At a time when many people have been focused on their family’s health and livelihood, having adequate life insurance has never been more important. Yet the gap between what we need and what we have, has been growing.

Life insurance is all about ensuring your family can maintain their lifestyle if you were to die or become seriously ill. Even people who do have some level of protection, might discover a significant shortfall if they had to depend on their current life insurance policies.

That’s because 70 per cent of Australians who have life insurance hold relatively low default levels of cover through superannuation.

Default Cover May Not Be Enough

The most common types of default life insurance cover in super are:

• Life cover (also called death cover) which pays a lump sum or income stream to your dependents if you die or have a terminal illness.

• Total and permanent disability (TPD) cover which pays you a benefit if you are disabled and unlikely to work again.

If you have basic default cover and are part of what is considered an “average” household with no children, then it’s likely you only have enough to meet about 65-70 per cent of your total needs. The figure is much lower for families with children. Indeed, a recent study by Rice Warner estimates that while current levels of insurance cover 92 per cent of death needs, they only account for a paltry 29 per cent of TPD needs.

Such a shortfall means that you and/or your family would not be able to maintain your current lifestyle.

A Fall In Cover

The Rice Warner study found the amount people actually insured for death cover has fallen 17 per cent and 19 per cent for TPD in the two years from June 2018 to June 2020. This was driven by a drop in group insurance within super which has fallen 27 per cent for death cover and 29 per cent for TPD cover.

This was largely a result of the introduction of the Protecting Your Super legislation. If you are young or your super account is inactive then you may no longer have insurance cover automatically included in your super. You’ll now need to advise your fund should you require cover.

It may make sense not to have high levels of cover, or even insurance at all, when you are young with no dependents and few liabilities – no mortgage, no debt and maybe few commitments. But if you work in a high-risk occupation such as the mining or construction industries, or have dependents, then having no cover could prove costly.

Another reason for the fall in life insurance cover has been the advent of COVID-19. With many people looking for cost-cutting measures to help them through tough times, insurance is sometimes viewed as dispensable. But this could be false economy as this may be exactly the time when you need cover the most.

There is also the belief that life insurance is expensive which is certainly not the case should you ever need to make a claim.

An Appropriate Level Of Cover For You

It is estimated that an average 30-year-old needs $561,000 in death cover and $874,000 in TPD cover. As you and your family get older, your insurance needs diminish but they are still substantial. So, a 50-year-old needs approximately $207,000 in death cover and $499,000 in TPD.

These figures are just for basic cover so may not meet your personal lifestyle. When working out an appropriate level of cover, you need to consider your mortgage, your utility bills, the children’s education, your daily living expenses, your car, and your general lifestyle.

It’s also important to consider your stage of life. Clearly the impact of lost income through death or incapacity is much greater when your mortgage is still high, your children are younger, and you haven’t had time to build up savings.

While having some life insurance may be better than nothing and acknowledging that it is a grudge expense, that you spend hoping never to use, having sufficient cover is the only way to fully protect your family. So why not call us to find out if your current life and TPD cover is enough for you and your family to continue to enjoy your standard of living come what may?

Now more than ever, in these uncertain times, you may find that you too are significantly underinsured and need to make changes. Contact us on: 02 9299 2292 or myadviser@moneyclip.com.au to have a conversation about insurance.

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Just as we were recovering from the long drought and the worst bushfires on record, the global coronavirus pandemic took hold and changed everything.

Suddenly, simple things we took for granted, like going to the office or celebrating special occasions, were put on hold. While life is still not back to normal, Australia is in better shape financially than many people expected at the height of the economic shutdown.

Take superannuation. Far from being a wipeout, the average superannuation growth fund is on track to finish 2020 with a positive return of 3 per cent. But it’s been a wild ride.

The Big Picture

Globally, the US presidential election and Joe Biden’s victory removed a major element of uncertainty overhanging global markets. As did the UK finally signing a post-Brexit agreement on trade with the European Union. However, trade tensions with China remain an ongoing concern.

The pandemic dragged an already sluggish global economy into recession, and we were not immune. In Australia, drought, bushfires, storms and the health crisis took their toll as we entered recession in for the first time in 28 years.

Final figures for 2020 are not in yet but an annual fall of 2.8 per cent is forecast, putting us in a better position than most developed nations. This is due in part to Australia’s relative success at containing COVID-19, and massive financial support from Federal and State Governments and the Reserve Bank.

Interest Rates Lower For Longer

After starting the year at 0.75 per cent, the official cash rate finished at an historic low of 0.1 per cent. The Reserve Bank has indicated it will keep the cash rate and 3-year government bond rate at this level for three years to encourage businesses to invest and individuals to spend.

While low interest rates make life difficult for retirees and others who depend on income from bank deposits, they gave share and property markets a boost in 2020 as investors looked for higher returns than cash.

Shares Rebound Strongly

In February/March when the scale of the health and economic crisis became evident, sharemarkets plunged around 35 per cent. As borders and businesses closed and commodity prices collapsed, investors rushed for safe-haven investments such as bonds and gold.

But it soon became apparent that there were economic winners as well as losers, with global technology and health stocks the main beneficiaries.

By the end of 2020, US shares were up 16 per cent, with the tech-heavy Nasdaq index up 48 per cent.

Closer to home, the Australian All Ordinaries index was up 0.7 per cent, or 3.6 per cent when dividends are included.

Elsewhere, European markets were mostly lower reflecting their poor handling of the pandemic. While China and Japan performed strongly, up 14 and 16 per cent respectively.

Commodities Boost The Aussie Dollar

China’s economic rebound was another factor in the Australian market’s favour, with iron ore prices jumping 70 per cent. Rising iron ore prices and a weaker US dollar pushed the Aussie dollar up 10 per cent to close the year at US77c.

At the other end of the scale, oil was one of the biggest losers as economic activity and transport ground to a halt. Oil prices fell more than 20 per cent despite OPEC producers restricting supply.

Property Surprises On The Upside

Despite dire predictions of a property market collapse earlier in the year, residential property values rose 3 per cent in 2020 and 6.6 per cent when rental income is included.

Melbourne was the only city to record a price fall (down 1.3 per cent), with combined capital cities up 2 per cent.

The real action though was in regional areas where average prices lifted 6.9 per cent.

Looking Ahead

As 2021 gets underway, Australia is inching back to a new normal on growing optimism about the global rollout of vaccines.

Our economy is forecast to grow by 5 per cent this year, but there are bound to be bumps along the way. In the meantime, the government stands ready to continue stimulus measures to support jobs and the economy.

After the year that was, a return to something close to normal can’t come quick enough.

Contact us today to see how we can help you to review your circumstances and plan for your future at myadviser@moneyclip.com.au or 02 9299 2292.

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When it comes to decision making, we don’t always get it right. It is human nature to fall for several behavioural traps when making everyday decisions and also when trying to predict the future. Even the smartest people can succumb to their own biases when forming judgements and making choices.

While it’s unrealistic to expect to never again make a bad decision, we can of course recognise and anticipate possible biases so we can make informed decisions. This knowledge helps us to better understand how our mind works so we can use this information to our advantage for our next financial decisions, investments and life choices.

Here are a few of the most common behavioural biases (and therefore traps) to be aware of and tips for how to overcome them.

Loss Aversion

This bias is ruled by fear, as you are focused on what you can lose rather than what you can gain. Mark Twain posed the example of a cat who jumps on a hot stove once and never will again, even though the stove would be cold and potentially contain food later, as a way to illustrate loss aversion.

Overcoming this bias requires confidence and pragmatism, as often the fear and expectation of loss is greater than the loss itself. It can help to lower the cost of failure (for example, if you are investing) and increase the likelihood of success to feel more assured when making decisions.

Overconfidence

On the flipside, overconfidence can cause bad decision making as it means you’ll take greater risks. Facets of this bias include an illusion of control, planning fallacy (such as underestimating how long a project will take) and positive illusions.

This type of bias is often linked to people with high self-evaluations, however anyone can fall into the trap of overconfidence. To avoid it, consider the consequences of the decision and explore all possibilities rather than just the best case scenario. Be open to feedback and advice from others to help balance overconfidence and to give you more options to consider.

Groupthink

Groupthink is where you are influenced by the ideas of others in order to reach a consensus in a group situation – this is also called the bandwagon effect. Something might not sit well with you but rather than voicing your feelings and being at odds with the group, you go along with it.

It is easy to get swept along with group consensus but there are ways you can minimise groupthink. Encouraging conversation and debate allows differing ideas and opinions to be considered – in a group scenario this enables everyone to have their voices heard.

Even when making a decision by yourself you can still be swayed by the opinions of others, so don’t let these overpower your instincts. Think critically and have confidence in your own analysis.

The Primary / Recency Effect

This bias is part of the serial-position effect: why we can often remember the first and last items in a series the most clearly (and forget what comes in the middle). The primacy and recency effect are intertwined for this reason, and they are often used by teachers, speakers, lawyers and advertising, in order to make their message most impactful.

Awareness of this effect can help you understand why you’re likely not using all information presented in your decision making, but only the first and last messages. Keep a record of all information to get a more accurate picture of the situation. It also helps to do your research so you won’t just be influenced by the message from one source either.

These are just some of the biases that impact our decision making, from the day-to-day to the bigger life decisions. Having a trusted adviser in your corner can help improve your financial decision making, by providing market research together with considered advice through an external, unemotional lens. In fact, recent findings from Russell Investments found one significant benefit of an advisers is they prevent clients from making silly behavioural mistakes.

We can offer guidance to help you overcome your biases, and make better choices, so don’t hesitate to get in touch today on 02 9299 2292 or myadviser@moneyclip.com.au.

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What if Christmas, doesn’t come from a store. What if Christmas…perhaps…means a little bit more!” – Dr. Seuss

This year has looked different to other years, as the COVID-19 pandemic impacted our lives in many ways. As we look towards the festive season after what has been quite a challenging year for many, we need to consider how this celebration too might change.

It’s not all doom and gloom. Gratitude has been a real focus to the year, and as a result many people are shifting away from the silly season’s materialism and excess to reassess what Christmas means to them.

Our “new normal” festive season, can be one that is memorable and joy-filled, whether you celebrate this holiday or just enjoy unwinding at the end to the year.

Expressing Gratitude

Being thankful for what we have is important; especially so in a year in which bad news may have overpowered the good. While perhaps you will be unable to travel to your annual holiday destination or see as many people as you ordinarily would, it’s helpful to focus on what you still have instead of what is missing.

Rather than merely being a buzzword, gratitude has been shown to reduce depression, anxiety and stress. Whether it’s around the table at Christmas or in the lead up to the holidays, tell your loved ones what you’re thankful for, as this can inspire them to also reflect on this. It can also help reframe the year from being one of hardship to also having contained moments of happiness and opportunities.

Creating Memories

As many of us have been separated from loved ones due to restrictions, the holidays provide an opportunity to reconnect in person. Even if you’re unable to continue certain traditions, such as a family road trip or a big indoor gathering, what truly matters is the time you spend with those you care for.

Perhaps even new traditions can be formed as you create memories together. Depending on what the restrictions will become in late December, you might be able to spend time with family and friends trying something different – if there has always been one designated Christmas host, perhaps this year you have a family picnic where everyone brings a dish to share.

Supporting Others

Christmas time is synonymous with extending goodwill to all – and this year there are more people who are doing it tough as a result of the pandemic, as well as the bushfires earlier in 2020.

Give a helping hand to those who have fallen on hard times by volunteering some of your time to a worthy cause (such as a free meal service to those in need) or donating money if you’re able to. These gestures can also reaffirm your understanding of what you have to be thankful for.

Reducing Overspending

Whether or not you were financially impacted by the pandemic this year, there is expected to be a trend of reduced spending over the Christmas period. A recent survey by Finder reported that 37% of Aussies plan to spend less on average this Christmas.

Last year Australians spent about $1000 each for Christmas on presents, decorations, travel, and charity donations. For 28 per cent of us, this expenditure meant using credit cards or buy now pay later (BNPL).

While many will use credit again this festive season, the current economic circumstances may make us think twice about our spending. It’s not just what you spend, but how you spend that could make all the difference.

So, if you plan to use credit to help manage your Christmas spending, what are the options?

Buy Now, Pay More Later?

Even before COVID-19, more and more people were turning away from the traditional credit card and opting instead for a buy now, pay later payment method. BNPL providers in Australia include companies such as Afterpay and Zip, but there are many more.

The use of BNPL may be due to convenience or an aversion to debt, or a bit of both. In a recent report, the Australian Securities and Investments Commission (ASIC) found BNPL transactions jumped by 90 per cent to 32 million in the 2018-19 financial year.

Meanwhile, the number of credit card accounts fell 7 per cent in the 12 months to March 2020 from 14.6 million to 13.6 million. But for those who still use a credit card, it is estimated that more than 2 million Australians have gone over their limit since March this year as the economic slowdown takes its toll on household finances.

Initially BNPL was popular with millennials, but over time more baby boomers and Gen X have opted for this form of credit which boasts that it is interest free. Compare that with interest on credit card balances which are mostly in double digits and can even be as high as 20 per cent.

But don’t be fooled.

Watch For Fees

There may be no interest rates on buy now pay later, but there are fees, and these can quickly add up.

All BNPL providers have slightly different terms and conditions, but fees may include:

• Late fees of up to $15 a month
• Monthly account keeping fees of up to $8 a month
• Payment processing fee of $2.95 every time you make an extra payment
• Establishment fees can range from zero to $90.

Of course, that does not mean you should avoid buy now, pay later offerings. If you meet all your payments on time, then it can be a useful form of credit. The key is to be cautious. For instance, do not run up debt with multiple providers. Not only can that prove expensive, but it can also be difficult to manage. It can soon become expensive if you have late payment fees to pay to several providers.

ASIC research found one in five BNPL users missed payments in the 2018-19 financial year. This translated into fee revenue of $43 million for providers, a jump of 38 per cent over the year and financial hardship for 21 per cent of users. As a result, ASIC said some people were cutting back on meals and other essentials or taking out additional loans to make BNPL payments on time.

Bank Alternative

Now the big banks are meeting the challenge of BNPL to traditional credit cards head on, with the launch of interest free credit cards and partnerships with BNPL providers.

While the new interest free credit cards have no interest charges or late fees, they typically have a minimum monthly payment and a monthly fee in months where you don’t make a transaction.

Finding money for everyday items, let alone festive spending, has become a juggle for many this year. The gradual transitioning away from support payments such as Job Keeper and Job Seeker won’t make things any easier.

To reduce your spending, set and then stick to a budget. Don’t leave gift buying to the last minute when you’re more likely to miss bargains or to panic buy. Also watch your usage of your credit card or buy-now-pay-later schemes so you don’t have a debt hangover in the new year to worry about.

Whatever your financial circumstances, if you monitor your money carefully and make changes to your expectations, then there is no reason why this festive season can’t be just as good this year as last. One of the lasting benefits of 2020 may well be that it makes us more proactive about managing our money wisely.

As this year wraps up, we would like to express thanks for your support during 2020 and wish each and every one of you a safe and happy holiday season.

The post Maybe, Just Maybe, Christmas Is A Little More in 2020. appeared first on Moneyclip - we're with you for life.

With tax cuts and stimulus payments on the way, Treasurer Josh Frydenberg is urging us to open our wallets and spend to kick start the national economy. But if your personal balance sheet could do with a kick along, then saving and investing what you can also makes sense.

One positive from this COVID-19 induced recession, is that it has made many of us more aware of the importance of building a financial buffer to tide us over in lean times. Even people with secure employment have caught the savings bug.

According to the latest ME Bank Household Finance Confidence Report, 57 per cent of households are spending less than they earn. This is the highest percentage in almost a decade.

More troubling however, was the finding that one in five households has less than $1,000 in savings, and only one third of households could maintain their lifestyle for three months if they lost their income.

Whatever your financial position, if saving is a priority the next step is deciding where to put your cash.

Banking On Low Interest

Everyone needs cash in the bank for living expenses and a rainy day. If you’ve been caught short this year, then building a cash buffer may be a priority.

If you have a short-term savings goal such as buying a car or your first home within the next year or so, then the bank is also the best place for your savings. Your capital is guaranteed by the Government so there’s no risk of investment losses.

But with interest rates close to zero, the bank is probably not the best place for long-term savings. So once your need for readily accessible cash is covered, there are more attractive places to build long-term wealth.

Pay Down Your Mortgage

A question often asked is whether it’s better to put savings into super or your mortgage. Well, it depends on factors including your age, personal circumstances and preferences, interest rates and tax bracket.

If you have a mortgage, then making extra repayments can reduce the total amount of interest you pay and cut years off the life of your loan. This strategy has the most impact for younger people in the early years of a 25 to 30-year loan.

If your mortgage has a redraw or offset facility, you can still access your savings if you need cash for an emergency or home renovations down the track. This may be a deciding factor if retirement is a long way off.

Boost Your Super

Making extra super contributions is arguably the most tax-effective investment, especially for higher income earners.

Even so, super is likely to be more attractive as you get closer to retirement, the kids have left home, and your home is close to being paid off.

You can make personal, tax-deductible contributions up to the annual cap of $25,000. Be aware though that this cap includes super guarantee payments made by your employer and salary sacrifice amounts.

You can also make after-tax contributions of up to $100,000 a year up to age 75, subject to a work test after age 67.

Invest Outside Super

If you would like to invest in shares or property but don’t want to lock your money away in super until you retire, then you could invest outside super.

If you are new to investing, you could wait until you have saved $5,000 or so in the bank and then buy a parcel of shares or an exchange-traded fund (ETF). ETFs give you access to a diversified portfolio of investments in a particular market, market sector or asset class.

First home buyers might consider the Federal Government’s expanded First Home Loan Deposit Scheme with as little as 5 per cent deposit. There are limited packages available and price caps on the home value, depending on where you live.

With tax cuts set to flow and a new appreciation of the importance of financial security, now is the perfect time to start a savings plan. Contact our office if you would like to discuss your savings and investment strategy on myadviser@moneyclp.com.au or 02 9299 2292.

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Living through COVID-19 has brought many challenges and shifting priorities as we deal with the financial impacts of the pandemic, and that includes the issue of life insurance. 

On the one hand, the pandemic has highlighted the importance of life cover. On the other, those who may have lost a job or lost income are questioning its necessity. 

Many Australians continue to view life insurance as a discretionary item. This is in stark contrast to car or home insurance which are seen as necessities. It seems we are willing to insure our property but not the thing that matters most – our life and our ability to earn an income. 

CONFLICTING PRIORITIES

A survey by KPMG found that only 35 per cent of Australians thought life insurance was essential and just 30 per cent believed they needed income protection. But when it comes to car insurance, 79 per cent viewed cover as essential and yet, during COVID-19, car usage reduced as many were working from home and restricting their movements. 

As the COVID-19 health crisis has reinforced our vulnerability in terms of health and the fragility of life, the need for life and income protection insurance has probably never been greater. 

What would happen if you became too sick to return to work or if you passed away? Who would pay the mortgage, living costs, health insurance and utility bills for you or the family you left behind? For those with outstanding debt and dependants, life insurance will always be an important consideration. 

It should also be remembered that the current health crisis does not rule out people getting sick with other illnesses, some linked to COVID-19 and some not. Mental health is one these health issues and is becoming increasingly prevalent. 

CLAIMS ON THE RISE

In the June quarter, the life insurance industry reported a net after-tax loss of $179 million on its individual income protection products, driven largely by claims for mental health issues in the wake of COVID-19. Mental health claims are expected to grow even further as it is thought most people take more than a year to report such issues. 

With claims on the uptick, this has meant the insurance industry is either looking to increase premiums or already has. This, in turn, may discourage people from keeping their cover. 

Indeed, the KPMG survey said that 38 per cent of policy holders were looking to cancel their income protection insurance in the next 12 months, and 25 per cent were planning to drop life cover. 

On the plus side, many Australians have some level of life and income protection insurance in their super. However, if you were to lose your job, then paying premiums on your insurance in super would come out of your fund balance, reducing your retirement savings over time. 

Also, your insurance might well cease when you lose your job unless you opt to take out a private policy. You generally have 60 days to take up this option. 

REDUNDANCY PAYMENTS

If your income protection insurance is outside super, then be mindful that not all policies include redundancy claims. And those that do may have restrictions. For instance, there is usually a wait period of up to 28 days before any payments will be made. 

If you are thinking of taking out a policy now to cover you in case of redundancy given the current economic environment, then you will probably have to go through a six-month no-claim period before you can benefit. During that six-month period, there must be no indication from your employer that redundancy may be on the cards. 

Many insurance companies recognise the financial and personal difficulties many people currently face and some have offered to reduce or even suspend premiums without any loss of continuity to your policy. 

One alternative may be to look at reducing the cover you have so that your premiums reduce. But it’s important to be mindful of your needs and ensure you have adequate cover. 

THE ROAD AHEAD

The insurance industry, like many others, is being forced to look at a different way of doing business in a post-COVID-19 world, with simpler policies and flat premiums all being discussed. 

In the meantime, making quick decisions on whether you still need insurance, or your current level of insurance, may prove a mistake. If you are thinking about altering your cover, give us a call first to discuss your insurance needs. 

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There’s no doubt we live in a curated world. Online algorithms serve up content designed to meet our needs based on what we’ve liked and engaged with in the past. And while this can help us find what we’re looking for, the problem is that while these algorithms reflect our interests, they also reinforce them. 

As a result, we see little of what’s different and unfamiliar – our beliefs are unchallenged and our biases strengthened. 

Thankfully with a little awareness we can break out of our respective bubbles and gain a fresh perspective. 

THE IMPACT OF ONLINE ALGORITHMS

Online algorithms can save us time searching for the information we are after. They can seemingly anticipate our needs before we even know we have them, for instance, presenting us with an ad for contact lens refills just before you run out, or a reminder to get a health check based on your age and gender. 

Yet there is a more serious impact as well, as evident in The Wall Street Journal’s 2016 US politics experiment where they created a blue (liberal) and red (conservative) Facebook feed side-by-side.ⁱ This illustrated just how dissimilar reality is for different Facebook users, and offered a rare side-by-side look at real conversations from different perspectives. 

Algorithms can reinforce biases, which Amazon discovered when its hiring tool chose candidates based on their use of certain phrases more commonly associated with men.ⁱⁱ This lack of gender-neutrality in hiring meant that female candidates would miss on opportunities due to the system’s algorithm. 

BEING AWARE

Back in 2015, a study found that 62.5% of respondents were unaware that Facebook curated its news feed to present content based on user’s interests.ⁱⁱⁱ These ‘filter bubbles’ have since been identified as problematic, with Bill Gates speaking out about them several years ago.^iv Living in these bubbles makes it easy to forget that not everyone thinks the way we do, which can increase polarisation. 

We now have a better grasp of the powers of algorithms and how they can warp our online experiences. This awareness means we can more critically think about what we are presented with and look beyond our feeds to see what other views and opinions are out there. 

BROADEN YOUR HORIZONS

While our online experience may be narrowing our world view, if approached mindfully it can also provide access to an incredible range of social groups, conversations and opinions that may challenge our preconceived notions and broaden our horizons, if we seek them out. 

Read and watch a variety of news sources rather than just your one media outlet of choice. Try to access and appreciate both sides of an issue. Procon.org can help you there, as it presents opposing arguments to controversial issues. You can click on the ‘more issues’ tab to read through different takes on everything from politics and society, science and technology, health and medicine, and education. Each topic is split into pros and cons so you can decide for yourself what you believe after weighing up the arguments – perhaps you might even change your mind on some issues! 

Technology firms have even developed tools that adjust your ‘filter bubbles’ via sliders that control content filters.^v For instance, the “politics” slider ranges from “my perspective” to “lots of perspectives.” Choosing the latter end provides access to media outlets that would not normally be displayed in your feed. 

Then there are apps like Earbits, which allow users to discover new music by clicking on different genres, as opposed to music platforms that recognise your preferences and serve up more of what you already like. 

It’s about choosing to be active, curious and explorative in your online travels. After all, being exposed to new ideas is at the heart of learning, understanding and personal growth so resist going down that narrowing information highway. 

i http://graphics.wsj.com/blue-feed-red-feed/ 

ii https://www.reuters.com/article/us-amazon-com-jobs-automation-insight/amazon-scraps-secret-ai-recruiting-tool-that-showed-bias-against-women-idUSKCN1MK08G 

iii http://www-personal.umich.edu/~csandvig/research/Eslami_Algorithms_CHI15.pdf 

iv https://qz.com/913114/bill-gates-says-filter-bubbles-are-a-serious-problem-with-news/ 

v https://www.media.mit.edu/projects/gobo/overview/

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As expected, the focus is on job creation, tax cuts and targeted spending to get the economy over the COVID-19 hump. 

The Treasurer said this Budget, which was delayed six months due to the pandemic, is “all about helping those who are out of a job get into a job and helping those who are in work, stay in work”. 

THE BIG PICTURE

With official interest rates at a record low of 0.25 per cent, the Reserve Bank has little firepower left to stimulate the economy. That puts the onus on Government spending to get the economy moving, fortunately at extremely favourable borrowing rates. And that is just as well, because debt and deficit will be with us well into the decade and beyond. 

After coming within a whisker of balancing the budget at the end of 2019, the Treasurer revealed the budget deficit is now projected to blow out to $213.7 billion this financial year, or 11 per cent of GDP, the biggest deficit in 75 years. The Government forecasts the deficit will fall to $66.9 billion by 2023-24. Net debt is expected to hit $703 billion this financial year, or 36 per cent of GDP, dwarfing the $85.3 billion debt last financial year. Debt is expected to peak at $966 billion, or 44 per cent of GDP, by June 2024, dare I say $1 trillion may even occur. 

The figures are eye-watering and how the large deficit will be repaid has not been addressed.

ITS ALL ABOUT JOBS

As we transition away from the JobKeeper and JobSeeker subsidies, the Government announced more than $6 billion in new spending which it estimates will help create 450,000 jobs for young people. These measures are targeted at Youth unemployment as it currently stands at 14.3 per cent, more than twice the overall jobless rate of 6.8 per cent. 

Measures include: 

• A new JobMaker program worth $4 billion by 2022-23, under which employers who fill new jobs with young workers who are unemployed or studying will receive a hiring credit of up to $10,400 over the next year. Employers who hire someone under 29 will receive $200 a week, and $100 a week for those aged 30-35. New employees must work at least 20 hours a week to be eligible.
• A $1.2 billion program to pay half the salary of up to 100,000 new apprentices and trainees taken on by businesses.

PERSONAL TAX CUTS

As widely tipped, the government will follow up last year’s tax cut by bringing forward stage two of its planned tax cuts and back dating them to July 1 this year to give mostly low and middle-income taxpayers an immediate boost. This is great news indeed.

As the table below shows, the upper income threshold for the 19 per cent marginal tax rate will increase from $37,000 a year to $45,000 a year. The upper threshold for the 32.5 per cent tax bracket will increase from $90,000 to $120,000. 

The impact of this is about 1% to 1.5% extra. For example, for someone on $100,000, they will have $1,500 more in their pocket to spend.

No changes were made to the stage three tax cuts due to start in July 2024 which will introduce a flat 30% tax bracket for income between $45,000 to $200,000.

BUSINESS TAX RELIEF

In another move that will help protect jobs in the hard-hit small business sector, business owners will also get tax relief through loss carry back provisions for struggling firms. This will allow them to claim back a rebate on tax they have previously paid until they get back on their feet. 

Businesses with turnover of up to $5 billion a year will be able to write off the full value of any depreciable asset they buy before June 2022. 

HOUSING AND INFRASTRUCTURE

As part of its job creation strategy, the government also announced $14 billion in new and accelerated infrastructure projects since the onset of COVID. 

The projects will be in all states and territories and include major road and rail projects, smaller shovel-ready road safety projects, as well as new water infrastructure such as dams, weirs, and pipelines. 

The construction industry will also be supported by the first home loan deposit scheme being extended to an extra 10,000 new or newly built homes in 2020-21. This scheme allows first home buyers to purchase with a deposit as low as 5 per cent and not need to pay Lenders Mortgage Insurance (LMI) as the government guarantees 15%.

CASH BOOST FOR RETIREES

Around 2.5 million pensioners will get extra help to make up for the traditional September rise in the Age Pension not going ahead this year. 

Age pensioners, people on the disability support pension, Veterans pension, Commonwealth Seniors Health Card holders and recipients of Family Tax Benefit will receive two payments of $250 from December and from March. This is in addition to two previous payments of $750 earlier this year. 

Disappointingly, self-funded retirees won’t necessarily get anything specific.

HEALTH AND AGED CARE

After the terrible toll the pandemic has waged on aged care residents and the elderly, the Government will add 23,000 additional Home Care packages to allow senior Australians to remain in their home for as long as possible. 

Funding for mental health and suicide prevention will also be increased by $5.7 billion this year, with a doubling of Medicare-rebated visits to 20 sessions. 

LOOKING AHEAD

As the underlying Budget assumptions are based on finding a coronavirus vaccine sometime next year, Government projections for economic growth, jobs and debt are necessarily best estimates only. 

Only time will tell if Budget spending and other incentives will be enough to encourage business to invest and employ, and to prevent the economy dipping further as JobKeeper and JobSeeker temporary support payments are wound back. 

It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change.

If you have any questions about any of the Budget measures and how they might impact your finances, don’t hesitate to contact us. 

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Welcome to the new financial year 2021! Well, what a year we’ve had so far, I don’t think it needs a recap with so much coverage in the media.

From a personal point of view, the COVID-19 lockdown ended up being a period of taking part in home schooling, (which was quite interesting if you are a parent and you experienced that) but it was also an opportunity to spend more time with the family and to do more exercise. For me, the lock down period was actually good from an exercise perspective, in fact I actually lost three kilos, so I’m pretty proud of that. It also allowed us for the first as a family, to cycle around Sydney CBD without any traffic; something that is impossible normally, so at least there were some positives.  Needless to say, there were many negatives too, but at least we were able to experience something extraordinary that we couldn’t under usual circumstances. Our heart goes out to all clients and their friends and family who have been affected during the past months, whether it’s through death, illness, or changes to their employment circumstances. We are here for you and are eager to help in any way that we can.

During the last quarter, the Moneyclip team has been working very hard at keeping clients informed and implementing actions tailored to their programs, certainly the end of financial year was quite flat out. From a professional perspective, one thing I do know is that our stock markets and economy are moving somewhat in different directions and we are of course staying abreast of that on a day to day basis.

Looking ahead to the 2021 financial year, we will continue to work through tweaking clients’ portfolios and cautiously moving forward with any actions we take. Yours truly is now part of a panel of experts in ‘Business INsights’, who deliver updates every Monday afternoon. I cover the areas of investments, super and interest rates (banks and home loans). Be sure to subscribe here.

Feel free to browse through prior week’s episodes where you will find other updates, such as accounting, property market, insurance, business advisor and HR for business. You’ll find some really great nuggets, even if I do say so myself!

We also want to thank our clients for their support and understanding during this period, in particular, those who have referred new clients to us over this last quarter. It certainly is a great vote of confidence to the manner that we deliver our services and look after our clients. We look forward to being of service to them in due course.

The premise for the next 12 months is playing the ‘patient game’, moving forward, softly, softly. As always, don’t forget to exercise some key practices over the next 12 months, such as:

• Only use your credit card when you have the money to pay it off.
• If you are deferring loans at the moment, where possible try to at least pay the interest on the loan.
• Save before spending.
• Don’t forget to still smell the roses – we know that life is fragile.

If you would like to discuss matters about your program or engage us at any level, please don’t hesitate to contact us at 02 9299 2292, or myadviser@moneyclip.com.au

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