The start of a new financial year is the perfect time to get your financial affairs in order. Whether it’s tidying up your paperwork, assessing your portfolio or dealing with outstanding issues, there are plenty of practical actions you can take.
Here are some strategies for starting the new financial year on the right foot.
Tidy Up Your Paperwork
Dealing with the paperwork is the task most of us love to hate. But taking a day to trawl through the ‘To Do’ pile and the growing mountain of filing could be a good investment in yourself. What’s more, you might identify some savings.
Set Your Budget
A lot can happen in a year, so it makes sense to review your budget to ensure it still works towards your goals in the new year. This will help you track your changing expenses and ensure you’re not overspending. And if you haven’t got a working budget, now is a great time to start. There are plenty of budgeting apps and tools available online that can help you get started.
Assess Your Portfolio
Another important step to take as you start the new financial year is to assess your investment portfolio.
Some important questions include:
- Why did you start investing and have your circumstances changed? For example, you may have started investing to receive a better return than your term deposits but now that term deposits rates have increased and share markets are challenged, should you revisit that goal?
- What is the investment performance? Is it in line with your expectation and the benchmark?
- Should you consider diversifying into different asset classes?
- Is dividend reinvestment the best option for you or should you take the dividend income into cash?
- Is your risk appetite still the same, or should you be aggressive or more conservative?
Check Your Insurance
Now is a good time to examine your insurances closely and to consider whether they match your needs and risks. It is also a good reminder to take note of policy renewal dates so that you can shop around to make sure you get the best price.
Understand Federal Budget Changes
Keeping up to date with the commentary about Federal Budget initiatives may be useful.
The measures aimed at easing the cost of living will provide a boost to some. They include energy bill relief for concession card holders and energy saving incentives. Meanwhile those with chronic health conditions will benefit from a number of changes announced in the budget.
The Budget also included support for families with cheaper childcare and a more flexible Paid Parental Leave scheme, and incentives for some types of new home building projects.
Review Your Superannuation
A review – at least annually – of your super account is vital to make sure that:
- Your investments and risk strategy are still right for you
- The fees are reasonable
- Any insurance policies held in your super account are appropriate
- Your employer contributions are being made
- Your death benefit nomination is relevant
- You don’t have multiple accounts incurring unnecessary fees
As your superannuation balance grows larger, it’s even more important to keep track of the many rule changes that have recently happened or are coming soon, to ensure success this financial year. Some of these changes can be seen below:
Super Bonuses For Workers
The new financial year kicked off with an increase in the Superannuation Guarantee paid by employers. It is now 11 per cent of eligible wages, and will increase by 0.5 per cent each year until it reaches 12 per cent in 2025.
With these changes you may want to consider a salary sacrifice strategy, where you ask your employer to make extra super contributions from your pre-tax salary. These additional contributions are taxed at 15 per cent within the super fund, plus an additional 15% if Division 293 tax applies to you (income over $250,000).
Transfer Balance Cap To Be Lifted
From 1st July 2023, the maximum amount of capital that can be transferred to your super pension has increased to $1.9 million.
This transfer balance cap limits the total amount of super that can be transferred into a tax-free pension account in a lifetime, and is tied to CPI movements.
Downsizer Contributions
The minimum age for those able to invest some of the proceeds of the sale of their home into super has decreased, this is known as ‘downsizer contributions‘.
From 1st January 2023, if you are aged 55 or older, you can contribute up to $300,000 (or £600,000 for a couple) to your super from the sale of your home; providing that you have owned your Australian home for at least 10 years.
Minimum Pension Drawdown Increased
On 1st July 2023, the COVID-19 measure implemented to reduce the minimum drawdown required on super pensions ended.
Investors receiving super pensions and annuities must withdraw a minimum amount each year. The federal government reduced this amount by 50 per cent over the last four financial years, to help those wanting to protect their capital as the markets recovered from the pandemic. However, this has now ended and the minimum pension standards are in effect.
Expert advice is important to help navigate these changes over the coming year. To arrange a review of your current circumstances, and to create a plan to best prepare you for success in this new financial year, contact Moneyclip on myadviser@moneyclip.com.au or 02 9299 2292.