Here is a quick snapshot of some of the changes:

Harder tax time for families

This year’s budget was not a typical election year budget instead of vote  pleasing tax cuts, the Government focused on bringing down a “financially responsible budget”, which may be hard on families.

Spending increase for education and health

There are two areas that will see a increase in spending which are :

-  the Gonski Reforms to education at a cost of $9.8 billion over six years and;

-  Disability Care Australia costing $14.9 billion over seven years.

Both are part of the Government’s aims to build a better smarter and fairer nation.

A Huge deficit – more broken promises

Bringing in last year’s budget promise to return a surplus in 2013/2014 the Government revealed a deficit of 19.4 billion. 

The treasurer Wayne Swan is now claiming that this year’s Budget will bring us back in the black – but not until 2016/17.  Not sure how this can be predicted given the government cant even get close to a 1 year forecast?

Medicare Levy will increase

From the 1st of July 2014 the Medicare Levy will be increased by 0.5%, from 1.5% of taxable income to 2% of taxable income. 

This increase in income will fund Disability Care Australia, formerly the National Disability Injury Scheme (NDIS).

Baby Bonus to be renamed and reduced

The Baby Bonus will remain in place until 28 February 2014, nine-and-a-half months from now. Interesting time line. So the current bonus which is applicable to those with:

- incomes of up to $150,000 a year will receive $5000 on the birth of their first child and $3000 for each subsequent baby.

After 1 March 2014, the qualifying threshold will drop significantly.

- Couples earning over $101,000 will not be eligible for a bonus for their first baby.

- The threshold for a second baby will be about $112,000.

Eligible families, the Baby Bonus will be reduced to $2000 for the birth or adoption of a first child or each child in multiple births and $1000 for second or subsequent children. This will be paid through an initial payment of $500 with the remainder paid in seven fortnightly installments.

Changes to Superannuation

 A higher concessional contribution cap of $35,000 will apply to people aged 60 and over from 1 July 2013.Great news! This should help most of our clients although we would of preferred the $50,000 cap.

The higher cap will then become available to people aged 50 and over from 1 July 2014.

The cap will not be indexed in future years and it’s projected that the existing concessional cap will reach $35,000 in July 2018 when the caps will again apply to everyone regardless of age. A long time to wait for everyone else.

The requirement to have less than $500,000 in total superannuation savings has now been scrapped. That’s a great outcome.

Excess super contributions will be able to be withdrawn and can be taxed personally at their marginal tax rate. An interest charge will be levied reflecting the delay in collection by the ATO.

The tax-free treatment of assets in supporting a superannuation income stream will be limited to the first $100,000 of earnings on those assets.

Earnings above the $100,000 limit will be taxed at 15%. We are already starting to work on solutions for our clients.

For those earning over $300,000 in income, will be charged an additional tax of 15% on all your superannuation contributions.

Other budget items:

Net Medical Expense Tax Offset in 2014/15 has been removed.

Personal income tax cuts which were due to begin in July 2015 will be deferred until at least July 2018.

Aged pensioners who wish to downsize their home, can hold up to $200,000 in assets from the sale of their home before the assets test kicks in. That’s a nice initiative.

Here’s a summary of the said reforms:

Superannuation income streams

• The tax-free status of retirement phase earnings remains but the limit is now up to $100,000 for each member. Anything in excess of $100,000 will be taxed at a rate of 15%.
• For notional earnings in defined benefit schemes, the same treatment will be applied.
• Assets acquired after July 1, 2014 will be subjected to a capital gains tax. Meanwhile for those bought before July 1, 2014, special arrangements will apply.
• Tax treatment of withdrawals won’t be affected by these reforms.

Contribution caps

• An unindexed $35,000 concessional cap will replace the $50,000 cap linked to super balances below $500,000. This will apply to all members who are 60 years old and above beginning July 1, 2013. For those individuals aged 50 and above, this will be effective starting July 1, 2014.

Excess contributions tax

• Regardless of the members’ income or the cause of breach, changes to the operation of excess contributions tax with excess concessional contributions will be included in their taxable income and will be taxed based on marginal tax rate. Members, however, do have the option to either pay the tax bill from their own savings or from their superannuation fund.

Other changes

• Transfer of small lost accounts to the ATO as unclaimed money will have an extension. The $2, 000 threshold will increase to $2,500 beginning December 31, 2015 and then after one year, threshold will be at $3,000.
• Beginning July 1, 2014, superannuation pension status will be extended to deferred lifetime annuities.
• A Council of Superannuation Custodians will be created to ensure these reforms are in line with an agreed Charter of Superannuation Adequacy and Sustainability.

Again, these reforms are subject for approval. So, watch out for more updates.

If you have known about this before yet have doubts about the possible benefits, then now is the time you consider it seriously.

In the past, you only had the choice of providing personal life insurance  products available inside super or establish a stand alone cover outside of super. Either of these drove up costs. You now have an option with Zurich Life Insurance to tailor a policy for your individual needs.

With this new option, creating an optimal mix of protection is a lot easier since you gain more flexibility to structure your  insurance both inside and outside super. But this area of term life insurance is complex so make sure you get advice from a certified financial planner.

So, what type of tailored super structuring should be considered? There are actually two main options for you:

1. own occupation TPD and
2. income protection.

Own Occupation TPD

When one takes TPD own occupation inside super, chances are the narrower super definition of permanent incapacity will not be met in the event of a claim because the definition of “permanent incapacity” under superannuation laws leans more towards the any occupation definition of TPD. This won’t be the case, however, with tailored super structuring. Here, the clients have the flexibility to customize their TPD cover—an “own occupation” benefit taken outside super and an “any occupation” benefit component inside super. The result: an overall equivalent cover of “own occupation” TPD.

Income Protection

When clients consider taking out agreed value income protection inside super, it’s most likely that the claim may exceed the allowed benefit payment under the definition of “temporary incapacity” since this is closely aligned with the “indemnity” policy. They won’t be able to get this value then until they satisfy a condition of release. Again, this won’t be the case with tailored super structuring. Here, the income benefit is divided across two policies: “indemnity” income benefit cover under the policy held inside super and “agreed value” income benefit cover under the policy outside super. The result: an overall equivalent cover of “agreed value” income benefits.

To know more about tailored Life and Income protection insurance super structuring, feel free to contact one of our financial advisers.

Income protection offers you the financial assistance that you need in case you become incapable to work for a certain period of time due to sickness or accidental injuries. However, not all individuals are qualified to get coverage for this particular type of insurance. Insurance companies in Australia carefully consider your occupation and determine whether you meet the minimum working requirements or not.

The minimum working hours for income protection varies from one company to another, but usually they range from 20-25 hours of work per week. To determine the number of hours you need to meet, the insurance provider will take into account your working weeks per year. Of course if you only work for one week per month or 8 hours per week, chances are you won’t get approved for an income protection policy.

So, why the need to put this minimum working hours requirement?

·         Without this requirement, anyone would have easy access on getting coverage—yes, even those who just work a few hours a week.

In   In fact a good quality income protection will inlcude a 10 hour claims defintion. So if you work 10 hours or less you are elgible to recieve your full monthly benefit.

·        To spare other policyholders from an increase in premiums just to cover the administrative expenses of offering small policies.

Based on various company claim experiences, putting a cap somewhere is highly significant so as individuals won’t take advantage of the benefits and delay going back to work. And if you ever wondered why only 75% of your income is protected by this insurance, it’s because it serves as people’s incentive to return to work since this amount is lesser than what you really earn. So imagine if you work just 20 hours a week, do you think you’ll see the need to return to work as soon as possible with the dollar value reduction in your income?

For one, taking life insurance cover in superannuation is convenient. The client no longer has to worry about due dates and paying premiums themselves because here, premiums are paid by regular contributions or by debiting them from the member’s super account. Plus, this offers group life options with auto-acceptance and more affordable premiums and a retail cover that provides customized solutions, which have more detailed benefits and superior claims payment philosophy.

But these are all just funding efficient strategies—advisers must always look into ways where clients are left in a better position. And “in a better position” here means not just monetary improvement but also risk protection, future preparedness, and easy access to product features.

So instead of just recommending clients to hold life insurance in super, here are the specific steps that one is required to do as stated in the Corporations Act s961B(1) and s.961B(2). Advisers must:

1. Identify objectives, financial situation, and needs of client.

2. Know the subject matter of the advice being sought by the client.

3. Identify client’s needs, financial situation, and objectives that are relevant to the advice being sought.

4. Make reasonable inquiries to get accurate and complete information.

5. Assess if the one providing the advice is an expert because if not, better refuse to give advice.

6. Conduct investigation before recommending a financial product.

7. Make judgments according to client’s relevant circumstances ONLY.

8. Take other necessary steps as long as they are in the best interests of the client.

Best interest duties may seem complicated, but with a positive mindset, this change will sure create opportunities for our clients.

People are choosing SMSF for the following key reasons

• Having control over there Super Investments and their own retirement destiny
• Flexibility and investment choices
• Ability to purchase property and even borrow under some circumstances
• Able to have cash and direct shares in addition to Managed Funds and ETF’s
• SMSF can also own and pay for insurance on members
• Estate Planning – control rests with the surviving trustee, not the trustee of a major super fund
• SMSF tax returns can be completed in conjunction with personal and business returns to help minimise the excess contribution penalties

New superannuation regulations require SMSF trustees to:

• regularly review the SMSF’s investment strategy
• consider whether the fund should provide insurance for members of the fund
• value fund assets at ‘market value’

The new regulations also empower the ATO to require SMSF trustees to keep money and assets separate from money and assets held by the trustee personally.

What are the key changes?

The New Regulations introduce key changes:

1. Investment strategy – they introduce further requirements relating to the SMSF’s investment strategy, specifically
2. an SMSF trustee must now ‘review regularly’ the fund’s investment strategy – an annual review is preferred
3. as part of the investment strategy, an SMSF trustee must now consider whether to hold a contract of insurance for one or more members
4. Market valuation of assets – they introduce a new requirement for SMSF assets to be valued at their ‘market value’ when accounts and statements of the fund are prepared.

Annual Investment Strategy

An SMSF trustee must formulate and give effect to (and now ‘review regularly’), an investment strategy which considers:

• risk and return: the risks involved in, and likely return from the SMSF’s investments, having regard to its objectives and expected cash flow requirements;
• diversity: the composition of the SMSF’s investments as a whole, including the extent to which they are diverse or expose the SMSF to risks from inadequate diversification;
• liquidity: the liquidity of the SMSF’s investments, having regard to its expected cash flow requirements; and
• liabilities: the ability of the SMSF to discharge its existing and prospective liabilities

Insurance to Protect Members and provide liquidity for the SMSF

An SMSF trustee must now also consider whether it should hold a contract of insurance for one or more members of the fund.  The trustee must do this when it formulates the investment strategy, and when it reviews the investment strategy.

This new requirement seeks to ensure that SMSF members consider their personal circumstances in relation to their need for insurance cover, such as life insurance.

The SMSF can own and pay for the following personal insurance

• Life insurance plus total and permanent disability
• Income insurance
• Critical illness insurance

The insurance needs must be considered in conjunction with the investment review and the members personal insurance benefits held separately to their superannuation.

For further information please contact one of our advisers today.

Advice warning disclaimer

This has prompted an increase in Comminsure income protection premiums and policies. However, the changes will not affect new business rates or policies that date back in 2003 and new business and in-force level premium rates will remain the same.

The expected increases are as follow:

• Premiums for all lifetime benefits – 30%
• Pre-1997 legacy IP and Income Care benefit periods for aged 50-65 – 15%
• 1997-2003 income care policies for aged 49 and above – 7.5%
• All legacy income protection policies for professionals – 15% (regardless of benefit period

A letter will be sent to affected clients informing them of the changes 7 to 11 weeks (starting 2 April) before their policy renewal date. It will include:

-         Premium amount

-         Premium rate change

-         Usual CPI

-         Age based indexation

-         Effective date of changes which is 18 May 2013.

Re-pricing clients in the next 8 to 12 weeks will be given new premium rate and information will be sent to them.

Reviewing policies will ensure right coverage and policy alterations may help with affordability. You may also seek advice about life benefit reduction to Age 65. Make sure you get an up to date income protection quote with us today.

• What is Worker’s Compensation/Work Cover?

As a waged employee not working under an owned ABN, your employer has to have you covered under the Workers Compensation Insurance. It is an employer’s obligation to ensure that employees are protected in case of illnesses or job-related injuries.

Worker’s Compensation is a State Government body that mandates insurance for workers but unlike income protection, it covers medical and rehabilitation (if needed) expenses and an income generally up to $52,000 per annum for up to 2 years then reducing thereafter.

• What is Income Protection Insurance?

It is also called Disability Income Insurance or Income Replacement Insurance which aims to compensate an insured in case of inability to work due to an injury or illness and includes all income generally up to 75% of total personal exertion income. It does not pay for additional medical expenses. Although your monthly benefit can be paid to age 70 increasing every year in line with CPI indexation.

Another type of insurance is Sickness & Accident, also called Accident & Illness or Injury Illness insurance, which works like Income Protection in an inferior way.

A tradesman who wants to know which cover would work best must understand that each type works differently for an employee, a sole trader, a subcontractor or a business owner.

Generally, sole traders and most subbies do not qualify for Worker’s Compensation, only for Income Protection. Those who qualify for Worker’s Compensation must remember that Income Protection may be better due to its offer of long term financial solutions. Also, compared with Sickness & Accident Insurance, Income Protection policy offers a more comprehensive coverage.

An expert trade insurance financial or insurance adviser can help give a better understanding of how each type of cover works and which one will work best for you.

The effects will be felt by certain clients and those who are re-pricing on the following:

Lifetime benefits                         ____________________________                         30%

Age 50-65 benefit periods (IP and Income Care written pre 1997)                            15%                               

Income Care policies written between 1997-2003 for Age 49 +                                7.5%

Legacy income protection for professional occupations       ____                              15%                      

The effective date of the changes is on 18 May 2013 and starting 2 April, affected clients will receive information letter that would include new premium amount, rate changes, CPI and age based indexation.        

Monthly, over the next 8-12 weeks, information will be disseminated accordingly. You may need to talk to your financial planners and advisers about the changes, allowable procedures, right coverage or reduction of lifetime benefit period to age 65.

Recently, more men in Australia are being diagnosed with prostate cancer, said to be the primary cause of cancers. Reportedly, it was the reason for about 30% of tumours in 2006. This is likely the result of prostate specific antigen (PSA) testing in asymptomatic men. Normal and abnormal tissues produce PSA that increases with the growth of prostate in older men, in benign conditions like Benign Prostatic Hypertropy or in prostate cancer.

There are pros and cons in PSA testing hence the controversy behind its purposes. Understanding them could help you understand the risks and the treatments involved in prostate cancer.

In every 100 men with prostate cancer who undergo radical prostatectomy, 1 dies after the operation. A big percentage suffers from erectile dysfunctions while about 20% may encounter urinary incontinence.

The Pros:

• PSA testing can detect early prostate cancer that has no symptoms.
• Early detection could stop the progress of cancer and treatment is likely to be potentially curative.
• Treatment side-effects and risks are unlikely as significant as that of advanced cancer stage.

The Cons:

• Slow growing prostate cancers may not immediately threaten life but treatments may affect quality of life.
•  PSA test can have an abnormal result even when there is no cancer or be normal even with the presence of cancer.
• Clinical evidence of lives saved or lives prolonged by PSA testing & monitoring is yet to be established.

The statistics in 1000 men:

For a man in his 40s – 1 in 1000

For a man in his 50s – 12 in 1000

For a man in his 60s – 45 in 1000

For a man in his 70s – 80 in 1000

Understanding PSA

While the value of PSA is being established, understanding what it is and its terminologies is important.

Single PSA Level – this is the assessment of the possible progress of prostate cancer based on a single PSA test. According to the Baltimore Longitudinal Study of Ageing, an over 75 year-old man is likely to succumb to prostate cancer while 25% of men with a PSA of 3-4 are with prostate cancer.

Free to Total PSA Ratio (FTTR) – this differentiates high PSA caused by malignant reasons from non-malignant reasons. Cancer-derived PSA affects plasma proteins hence a low FTTR may indicate that the PSA was caused by cancer.

PSA velocity (PSA-V) – with a PSA that is lower than 10, it is better to group it in 3 based on increase rate.

PSA <10 and PSA-V <0.3 ng/mL/yr      -   Unlikely a significant prostate cancer

PSA<10 and PSA –v>0.75ng/mL/yr      -   Possible malignancy; for further investigation

PSA<10 and PSA-V>1.0ng/mL/yr         -   Prostate biopsy recommended

PSA Doubling Time (PSA-DT) – this increase may indicate possible metastasis of the disease applicable before or after a radical surgical treatment. Its reliability is still questioned but the results are used as reference.

PSA-DT >1 year                            -   Tumour (if present) is likely to be confined to prostate

PSA-DT <9 months                       -   Suggests metastatic disease

PSA <3 in men aged <75 years     -   Patient unlikely to die from prostate cancer

PSA 3-4                                         -    25% may have prostate cancer

Source: Prostate Cancer Foundation of Australia