Wednesday, May 26, 2010

Unlike car insurance, income protection is tax deductible!

We all have some kind of plan for the future.  Whether it is to pay off our debts, buy a house, get married, have a family or travel the world, but what happens to those plans when something unforseen like an injury or an illness happens?  How do you survive each week let alone realise your goals?

Have you considered how you would pay your bills if you could no longer work?

Income Protection insurance can help by replacing up to 75% of your income if you are unable to work due to injury or illness.  It can help your replace lost income to meet ogoing living costs and generate savings to help realise your goals in the future. Income protection eases the financial stress during traumatic times so you can concentrate on your recovery.

Tax Deductible Premiums
Premiums for your Income Protection may be tax deductible making it more affordable.  If you take out a policy before June 30 and pay your annual premium you can bring forward an expense that would otherwise be tax deductible to you the following year.  So right now is a great time to look at Income Protection. Plus your cover will be in place for the next financial year!

Click Here if you would like any information about the benefits of Income Protection.

Wednesday, May 5, 2010

Make Saving a Habit

Learning to save money from your take home pay every week is an important skill in reaching financial goals. As a rule you should try to save a minimum of 10% or your income, of course if you have high interest debt it is probably a good idea to use your allocated savings to help pay it off quicker.

While 10% may not sound like much, especially if you are not earning a lot at the moment, it can quickly add up! For example, say your take home pay is $800 a week and you open a high interest savings account with a $100 deposit and then add to it $80 a week. At a return of around 5% by the end of five years you will have $23,695.

If you can't afford 10% try 5% it doesn't really matter, what you are trying to do is to develop a habit of saving. Once you get the habit it becomes quite addictive, this is why it is a good idea to train your kids at a very early age to save a little of everything they earn or are given for birthdays and Christmas.

Check out the online savings and investment calculator.

Water for Life - Healthy Living

Water - a vital nutrient

The human body can last weeks without food, but only days without water. The body is made up of 55–75 per cent water. Water forms the basis of blood, digestive juices, urine and perspiration and is contained in lean muscle, fat and bones.

As the body can’t store water, we need fresh supplies every day to make up for losses from lungs, skin, urine and faeces. The amount we need depends on our metabolism, the weather, the food we eat and our activity levels.

Facts about water in our bodies
  • Body water is higher in men than in women and falls in both with age.
  • Most mature adults lose about 2.5–3 litres of water per day. Water loss may be more in hot weather and with prolonged exercise.
  • Elderly people lose about two litres per day.
  • An air traveller can lose approximately 1.5 litres of water during a three-hour flight.
  • Water loss needs to be replaced.
  • Foods provide about one litre of fluid and the remainder must be obtained from drinks.
  • Water is needed for most body functions
  • Water is needed to:
  • Maintain the health and integrity of every cell in the body.
  • Keep the bloodstream liquid enough to flow through blood vessels.
  • Help eliminate the by products of the body’s metabolism, excess electrolytes, for example sodium and potassium, and urea which is a waste product formed through the processing of dietary protein.
  • Regulate body temperature through sweating.
  • Keep mucous membranes moist, such as those of the lungs and mouth.
  • Lubricate and cushion joints.
  • Reduce the risk of cystitis by keeping the bladder clear of bacteria.
  • Aid digestion and prevent constipation.
  • Work as a moisturiser to improve the skin’s texture and appearance.
  • Carry nutrients and oxygen to cells.
  • Serve as a shock absorber inside the eyes, spinal cord and in the amniotic sac surrounding the foetus in pregnancy.

Dehydration occurs when the water content of the body is too low. This is easily fixed by increasing fluid intake. Symptoms of dehydration include headaches, lethargy, mood changes and slow responses, dry nasal passages, dry or cracked lips, dark-coloured urine, weakness, tiredness, confusion and hallucinations. Eventually urination stops, the kidneys fail and the body can’t remove toxic waste products. In extreme cases, this may result in death.
Recommended daily fluids
Approximately six to eight glasses (at least 150ml each) of a variety of fluids can be consumed each day. More than eight glasses may be needed for physically active people, children, people in hot or humid environments, and breastfeeding women (who need an extra 750–1,000ml per day). Less water may be needed for sedentary people, older people, people in a cold environment or people who eat a lot of high water content foods.

Are you ready for tax time?

With the end of the financial year just around the corner, now is the time to make sure your financial affairs are in order.  There are a number of smart strategies you could consider to help you streamline you finances and minimise your personal tax liability.

Insurance Premiums - Some insurance premiums, such as those for income protection are generally tax deductible as an expense incurred in earning your income.

Work Related Expenses - Don't forget to keep any receipts for work related expenses such as uniforms, training courses and learning materials, as these may be deductible for tax purposes.

Prepay Margin Loan Interest - If you have a margin loan, you can prepay up to 12 months interest in advance (subject to prepayment rules). You can claim a tax deduction for the prepayment in this financial year, further reducing your taxable income.

Tax Deductions for Investment Expenses - Expenses you incur while earning assessable investment income may be a tax deductible.  These expenses can include fees for financial advice, account keeping and management fees and interest payments on margin loans.  Claiming a tax deduction for these expenses could reduce your assessable income for the financial year, although not all expenses are immediately deductible. your tax adviser can help your determine what can be claimed.

Review Ownership Structure of Investments - Transferring the ownership of your investments to your self managed super fund (if your fund accepts this) or to your spouse, could reduce the tax you pay on future investment income and capital gains.  However, these transfers have capital gains tax implications so you should seek tax and legal advice from a qualified professional before proceeding.

Managing Capital Gains - It's important to assess if you have made any capital gains or losses from your investments.  The most common way you make a capital gain (or capital loss) is by selling assets such as real estate, shares or managed fund investments.  Managed funds also distribute capital gains which you must report. The Australian capital gains tax system is quite complex so it's important to consult with your tax adviser.

Contributions to Super - Contributing to your super can be one of the most tax effective ways of building your retirement savings.  However you need to be extra careful not to exceed your concessional contributions cap and incur excess tax.

The government limits how much you can contribute to super in any one year.  The annual contributions caps as of 1 July 2009 until 30 June 2012 are:

  • $25,000 per year for pre-tax contributions (concessional) if you are under age 50 on the last day of the financial year.  If you're aged 50 or over on the last day of the financial year, a transitional cap of $50,000 per financial year applies until 30 June 2012 (commencing the year you turn 50).
  • $150,000 per year for after tax contributions (non concessional) or $450,000 over a three year period if you are under 65 in the financial year the contributions are made.
It's important to keep your financial planner informed about any contributions you make so they can ensure you don't exceed these caps.  Contributions made over these caps are taxed at a hefty 46.5%.

If you currently have a salary sacrifice or transition to retirement strategy in place, or are self-employed and make personal deductible super contributions, you should speak to your financial planner to discuss whether you can boost your contributions this financial year or review your current arrangement.

If you would like to know more about which end of year tax strategies may be appropriate for you, you should contact your financial adviser.  If you dont' have a financial adviser you can call our office on 02 4925 6125 Monday to Friday.  In conjunction with your tax adviser, we can work with you to ensure you are taking advantage of any available tax concessions and that your investments are structured in the most appropriate way.

Disclaimer: This general advice has been prepared without taking into account your particular financial needs,, circumstances or objectives, and is based on Financial Wisdom Limited's understanding of current law as at 14 April 2010.  While every effort has been made to ensure the accuracy of this information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication. We are not tax agents and this article is not intended to be taken as taxation advice.