Superannuation, sometimes known as your “nest egg,” is a key part of your lifestyle flexibility and retirement puzzle.
Read our insights to keep up to date with the latest news, trends and changes related to superannuation advice.
I recently turned 30. It’s a strange age. Some of your friends have settled down and have children, whilst others are backpacking around southeast Asia. Some are looking to purchase an investment property, whilst others are hosting big parties in their shared house of ten. Regardless of which stage you are at, the thirties are an excellent chance to take some of that ‘grown-up medicine’ and to look to start to get our finances in order; here are some places to start.
1. Set some goals:
Money is just the vehicle towards helping you live your best life. Everyone will have different goals, so your financial plan should be different. If you’re the type of person who wants to live overseas, then buying a house because you feel like you should and others are telling you to may not be the best option. Once we have goals, it’s easier to know what we must do to achieve them. Otherwise, we can continue on a road to nowhere.
2. Review what you currently have:
Personal finances are usually left or pushed into the too-hard basket. You may not be as passionate about it as I am and, therefore, lack the motivation to think about it (completely normal). Simple things like reviewing what you currently have can pay big dividends.
Review your superannuation and make sure that your fund is appropriate. Check about how your fund has been performing compared to others. Please have a look at your investment options within your super and make sure that it’s appropriate for you. Think about whether or not you would like to be invested in an ethical and environmentally friendly manner and see if your current investments align with that.
You should also review what insurance you have. If you have young children or some debt with a partner, such as a home loan, then life cover could be critical. If you’re working and rely on your income to live, then you need income protection. Insurances aren’t sexy, and not many people like paying for them, but if something goes wrong and you don’t have them, it can create financial pain that can be hard to recover from.
3. Build an emergency fund:
Life is unpredictable, and unexpected expenses can arise at any time. Aim to build an emergency fund with three to six months’ living expenses. This financial cushion will provide peace of mind and help you avoid dipping into your savings or investments during tough times.
4. Look towards the future:
Investing is a powerful tool for building wealth over time. It can be slow to start with, but compound interest is the eighth wonder of the world; the earlier you start, the more rewards you reap. Putting some surplus cash towards investments that have growth potential can help you fund some future goals you may have as well. There are options for all different starting balances, so you don’t need to wait and put it off any longer.
5. Stop paying the lazy tax:
Only some people love to have a strict budget in place, and if that’s you, there are things we can do to get our cash flow under control. Reviewing your expenses is essential; a lot of little savings can add up, especially when everything is getting more expensive.
Have a particular look at your subscriptions, whether they be streaming services or gym memberships and make sure you’re using them and getting value out of them. If not, look at ending them or looking at alternatives.
The lazy tax can also apply to your banking. We often choose a bank early on in life and stick to it. Review your interest rate and ensure that what you are getting stacks up. This can also apply to your home loan if you have one. It can pay to do some research, as there are often no rewards for loyalty in this area.
7. Estate Planning:
It’s never too early to think about estate planning, especially if you have dependents. Setting up a will now can last until your situation changes and doesn’t need to be too difficult or costly. It will mean that your wishes will be carried out if something happens to you.
8. Reach out if you’re unsure:
For some people, discussing personal finances is like speaking another language, but seeking guidance from a good adviser can help simplify the situation. A good adviser should also be able to educate you along the way. Using your money in the best way possible is important, so don’t let it fall by the wayside just because you’re unsure where to start.
As always, we are here to help. If you have any questions, feel free to email me at zac@pekada.com.au
Investor tensions were further heightened in October as war broke out between Hamas and Israel. Despite the conflict, oil prices declined by around 10% during the month, with most of the damage coming in the final trading week. Meanwhile, European gas prices rose on fears of global supply chain disruptions. Commodity prices were a relatively bright spot in October, particularly where safe-haven gold was concerned.
Impaired sentiment continued to impact major indices, including the infrastructure and REIT sectors. Higher real yields have continued to detract from property and infrastructure returns, with small-cap returns experiencing a similar fate. The weaker Australian dollar (AUD) was again welcomed by domestic investors with foreign asset exposures. Indeed, the depreciation of the AUD over the last decade has strongly benefited unhedged domestic investors, particularly in developed market equities, where the depreciation has been more pronounced. For example, the annualised return for the MSCI ACWI-ex Australia has been boosted by more than three percentage points compared to its performance in local currency terms (11.9% vs 8.8%).
In fixed interest, government bond returns were negative in most developed markets as yields rose to multi-year highs in October. In Australia, heightened concerns around the path of inflation and interest rates saw 10-year government bonds briefly touch 5% later in the month. Japanese government bonds were not spared from the sell-off, as investors questioned the sustainability of the Bank of Japan’s (BoJ) yield curve control policy. During its October meeting, the BoJ redefined the 1% upper limit on yields from a strict boundary to a more flexible “reference” point.
On the economic front, US data regularly printed stronger than expected. The September nonfarm payrolls report stunned economists with the creation of more than 300,000 jobs (double the consensus estimate). Wage growth remained resilient, and inflation data, while trending lower, remained too sticky in the minds of market analysts. The advance estimate for Q3 US economic growth also shot the lights out, with activity surging at an annualised rate of 4.9%. Consumer spending drove the increase, while residential investment rose for the first time in nearly two years.
In Australia, the September unemployment rate fell to a three-month low of 3.6%, driven by a decline in workforce participation. Meanwhile, the RBA paused official interest rates for the fourth consecutive month in October while retaining a hawkish stance in its commentary. Finally, the CPI inflation data for the September quarter delivered an upside surprise that left economists scrambling to raise estimates. A much stronger-than-expected retail sales print (triple the consensus estimate) added further impetus to the view that the cash rate would be hiked at the November meeting.
Elsewhere, European activity was mixed, with soft German data prints pointing to further weakness. In contrast, the UK economy showed signs of moderate improvement. Turning to China, industrial production, GDP, and retail sales were positive surprises. However, continued weakness in the real estate sector and reports of further US restrictions on AI chip exports dampened investor sentiment.
We hope you find the information useful, and if you want to discuss any details further or discuss your personal investment strategy, then please book a chat here.
Most of us don’t like being asked how much money we make.
We’ve gotten really good, however, at building a material world around us that implies great wealth, even if the reality is something else entirely.
With our cars, our houses, and the clothes we wear, we are constantly signaling what we want the world to think about the very question we hate to answer.
And while we often treat these material things as a sign of our success, in reality, they’re usually just a front. In fact, most of us would be better off (financially speaking) buying a less expensive car and putting the leftover money into mutual funds.
Ironically, if we all just walked around with a big sign around our necks saying how much we make, we wouldn’t have to do all this posturing and pretending. Our relationship with money would change considerably if our financial decisions were transparent to the world.
For instance, what if the home in which we live could no longer hide that we’ve saved nothing for retirement?
Maybe then we would find it easier to focus on the financial choices that help us instead of hurt us.
To maximise the non-concessional contribution (NCC) opportunity, you may consider using the bring-forward NCC cap of up to $330,000, provided your Total Superannuation Balance (TSB) allows you to do so. If you are eligible, the bring-forward is triggered automatically when your total annual NCCs exceed the annual cap (currently $110,000).
From 2022-23 onwards, you are required to be under the age 75 on 1 July of the financial year to be able to access the bring-forward NCC cap. While age may determine whether or not a person is eligible to make NCCs above the annual cap, additional eligibility rules apply.
The maximum amount available under the bring-forward, as well as whether you have a 3 or a 2 year bring-forward period, depends upon your TSB on 30 June prior to the financial year in which the bring-forward is triggered. See table below.
If you make an NCC that exceeds the allowable amount based on your TSB on the prior 30 June, the contribution is assessed as an excess NCC.
If you’re considering putting more money into your super, let’s chat. Our experienced advisers can help you figure out which superannuation strategies make sense for you.
Successfully claiming a tax deduction for personal super contributions can reduce your taxable income and the income tax payable. The basic concessional contributions cap for the 2023–24 financial year is $27,500. However, it is important to understand that you may be able to claim more than the annual concessional contribution cap in some cases by accessing the carry-forward concessional contribution cap.
You will have a higher available concessional contributions cap (than the basic cap) in the current financial year if you can carry forward and apply available unused concessional cap amounts from previous financial years.
From July 2023, individuals can look back and carry-forward their unused concessional contributions for the previous five financial years. As the measure started on 1 July 2018, individuals could only look back to the ‘start’ and carry forward one previous year from FY2020, then two years from FY2021 and so on.
You are eligible to carry forward unused concessional cap amounts from previous years, and effectively increase your contribution caps in later years, if you have a total superannuation balance of less than $500,000 at 30 June of the previous financial year, and have unused concessional contributions cap amounts from up to five previous years.
Any unused cap amounts are available for five years and expire after this time. If an individual has an unused cap amount from the financial year ending 2019 and does not use that amount by the end of June 2024 it will expire.
If you’re considering putting more money into your super, let’s chat. Our experienced advisers can help you figure out which superannuation strategies make sense for you.
Financial markets took another leg down in September as investors came to grips with the narrative that the US Federal Reserve (the Fed) would need to keep interest rates higher for longer. Excluding dividends and share buybacks, the benchmark S&P 500 was down 4.9% in September, the Dow Jones Industrial Average decreased 3.5%, while the tech-heavy Nasdaq slumped 5.8%. This weakness was not limited to the US, as global indices across developed and emerging markets fell. However, a silver lining for unhedged Australian investors was the Australian dollar trading lower throughout September, partly insulating them from the losses.
In local shares, the ASX could not maintain its momentum from a rally in late August, with the S&P/ASX 200 index falling 2.8% after accounting for dividends. Small caps fared comparatively worse, posting a 4% decline. However, these moves paled compared to the 8.6% drop in listed property stocks, where rising risk-free rates revived valuation concerns and detracted from the impressive rally in A-REITs at the beginning of the financial year.
Fixed interest returns disappointed defensive investors, where exposures to safe-haven cash and high-grade credit continue outperforming government bonds. The ongoing large quantum of debt issuance by the US Treasury is proving to be an overhang. Finally, an extension of cuts in oil production by Saudi Arabia and Russia reignited inflation concerns and drove the price of crude above US$90/bbl.
Global shares accelerated their downward trend in September as the Fed’s ‘higher for longer’ theme rang more loudly in the aftermath of the September FOMC meeting. Upwardly revised economic projections by Fed officials were a case of ‘good news is bad news’, with investors disappointed a further rate hike could occur in 2023 before making way for potentially just two rate cuts in 2024. The Fed’s ongoing resolve to tame inflation was not well received by investors, with matters exacerbated by another lift in oil prices as Russia and Saudi Arabia coordinated their efforts to extend restrictions on output. As a result, transport-related costs were higher during the month.
The malaise in sentiment saw broad declines across major indices, often characterised by poor market breadth as decliners easily outnumbered gainers, culminating in most sectors finishing in the red. Trading volumes decreased significantly, while increased volatility and short positioning became prominent features across financial markets.
Our domestic sharemarket was not spared, as a jump in real yields put listed property to the sword, completely wiping the momentum seen in the sector since mid-July. Global REITs and infrastructure stocks similarly underperformed, with minimal respite to be found outside of energy and value plays.
In fixed-interest markets, the sell-off in US Treasurys continued in earnest, dragging other sovereigns along for the ride, including Australian bonds. Yields at the longer end of the maturity spectrum were particularly hard hit, imposing losses on composite bond indices and stoking anxiety that the bond bear market, which commenced in late 2021 had further to play out. Furthermore, the increase in yields and accompanying strength in the US dollar ensured that the gold sector underperformed.
On the economic front, data releases provided support that the US economy was experiencing a period of robust growth in the September quarter. In contrast, Europe was struggling with higher oil prices and an unexpected lift in official interest rates.
In the US, jobs market data remained strong despite a rise in the unemployment rate from 3.8%. Nonfarm payrolls exceeded expectations, and wage growth remained firm while job openings continued to outpace the available workers. Underlying inflation showed further signs of stickiness, and there was a reversal in the favourable base effects seen earlier this year. Notably, the US national debt reached US$33 trillion for the first time in September, while “excess” savings by households from the pandemic had now been depleted. This resulted in growing credit card balances, especially among poorer cohorts.
On the domestic front, the RBA again paused the official cash rate at 4.10% at its September meeting, with the minutes revealing that the central bank was concerned with the impact strong population growth was having on rents and house prices. The monthly CPI indicator for August jumped to 5.2%, as rising fuel and utility prices led to a rebound in inflation from a 4.9% gain in July. It was the first increase in annual inflation since April.
In China, the manufacturing sector finally stopped contracting in September, with key indicators pointing to a slight expansion. Another positive sign was that August retail sales exceeded expectations and accelerated from the previous month, posting the largest increase since May.
We hope you find the information useful, and if you want to discuss any details further or discuss your personal investment strategy, then please book a chat here.
If you’re making less than $58,445 in the 2023/24 financial year, and at least 10% of that comes from your job or a business, consider putting extra money into your super after taxes.
If you do and meet specific criteria, the Government might chip in with up to $500 into your super account—which is a fantastic percentage return on investment!
You get the full co-contribution if you make a voluntary non-concessional (after-tax) super contribution of $1,000 and earn $43,445 a year or less. If you put in less than $1,000 or earn between $43,445 and $58,445 a year, you might still get something, but only part of the amount.
Just remember that what you earn, including regular income, certain benefits, and employer super contributions, counts here.
If you’re considering putting more money into your super, let’s chat. Our experienced advisers can help you figure out which superannuation strategies make sense for you.
Despite a weak start to the month as bond yields surged and equities sold off, markets regained their composure and staged a strong rally in July. Emerging market equities led the way, as China’s authorities gave the strongest indication yet that stimulatory measures would be implemented to ensure this year’s growth target would not be missed. Oil markets were a beneficiary of the news, as previously announced production cuts also took effect. Elsewhere, global and domestic shares were led higher by small caps and property stocks – areas of the market that have underperformed over the last year.
Meanwhile, in the US, it was more of the same as the tech sector went from strength to strength. The Nasdaq Composite posted its fifth straight monthly gain, with artificial intelligence once again the primary driver. The benchmark S&P 500 and Dow Jones Industrial indices also performed strongly but failed to match their tech counterparts.
Bond markets welcomed resilient GDP prints and improved inflationary data following a sharp sell-off in the first half of July. Along with a further hike in the US Fed Funds Rate to 5.5%, in line with expectations, investors gained increased comfort that additional tightening would be unlikely. Global bonds finished the month broadly flat, while credit markets held firm as signs of distress were contained to known areas, such as commercial real estate.
Global stocks rebounded in the second half of July, with the MSCI All Country World ex Australia Index up 2.4% in Australian dollar terms. While the US led developed markets higher, small caps and emerging market equities stole the show, with the latter finishing up 5% over the month. Australian investors enjoyed a 10% return from China, partly reversing double-digit losses that have been incurred in the first half of 2023. Some policy easing by China’s authorities and hopes for significant new stimulus were behind the gains.
Japanese equities remain the top-performing regional market in 2023 but underperformed in July. The TOPIX gained a more modest 1.5% in local currency terms as the Bank of Japan loosened its yield curve control framework. Some investors fear that the stage is now set for further adjustments that would push discount rates higher. On the ASX, a broad-based rally was underpinned by a rebound in the banks and consumer-facing sectors as interest rates remained on pause at the RBA’s July Board Meeting. Utilities performed strongly, while Healthcare was again weaker.
Global fixed income was volatile throughout July but finished the month largely unchanged as weakness in US Treasuries and European government bonds was offset by upward moves in most other regions, including Australia. Credit spreads tightened on improved economic data, thereby boosting returns and reducing losses incurred over the previous three-month period. It was a similar story for commodity prices, with some year-to-date losses being reversed in July. The broad Bloomberg Commodity Index lifted by 6.3% over the month. Higher oil prices and Russia’s cancellation of the Black Sea grain export deal buoyed the prices of certain soft commodities.
The Australian Dollar rallied against the US Dollar in early July, rising 3.8% due to momentum and lower-than-expected US CPI data. This rally faded in the second half of July to finish the month up 0.8%.
Despite data that showed US manufacturing was continuing to contract, the world’s largest economy strengthened on a booming services sector. First quarter growth was revised upward and slightly faster growth was revealed in the advanced estimate for second quarter GDP. This came despite the signs of slowing in the jobs market as June nonfarm payrolls missed expectations for the first time in over a year. The key data print for the month was the June CPI, which fell by more than expected. While core CPI remained stickier downward, US Fed Chair Powell’s current preferred inflation measure (core services ex housing) fell to just below 4% over the year.
On the domestic front, the RBA paused the official cash rate in July, having raised rates in May and June. The move came hot on the heels of weaker monthly inflation data. The RBA reiterated its concerns around low levels of labour productivity, but noted that wage growth currently remained consistent with its long term inflation target. A stronger than expected jobs market report for June led to expectations of further rate hikes by markets and economists alike. However, markets reversed course when the June quarter consumer inflation figures came in below consensus.
Finally, the European Central Bank (ECB) raised rates in July to 3.75%, in line with its guidance. Weak economic activity throughout key parts of Europe saw markets increase bets that the ECB would pause in September. Meanwhile, UK wage data remained strong and further interest rate hikes by the Bank of England were priced in by money markets. The peak is now expected to reach 6% in 2023.
We hope you find the information useful, and if you want to discuss any details further or discuss your personal investment strategy, then please book a chat here.
Investors experienced mixed results in June as bond markets lost ground on sticky underlying inflation while the AI boom continued to drive returns across equity markets. For the quarter, the benchmark US S&P 500 added 8.3%, while the Dow Jones rose 3.4%. The Nasdaq jumped 12.8% to register its strongest first-half performance in forty years, soaring more than 30%. Notably, Apple leapt 50% in the first half and surpassed $3 trillion in market cap, while Meta (i.e., Facebook) and Tesla both more than doubled.
Closer to home, the S&P/ASX 200 returned 1.8% inclusive of dividends, easily outperforming its domestic small-cap peers. While global property and infrastructure stocks produced a solid monthly gain, the same could not be said for A-REITs as valuation concerns continued to permeate the sector. Over the quarter, domestic shares underperformed global peers on banking and resource sector weakness. Nearly two-thirds of the quarterly 1% total return came from dividends. For the financial year, domestic shares delivered a 14.8% return to investors, including income of 5.1% (plus ~1.5% in franking credits).
Cash returns continued to grind higher as the Reserve Bank raised the cash rate in June to 4.1%. This prompted economists to raise their forecasts for the peak rate to 4.6%, with money markets behaving in a similar fashion. Meanwhile, surging tax receipts have swollen the Federal Government’s budget surplus to $19 billion and boosted the prospect of a second straight surplus being delivered next year.
Global shares enjoyed a solid first half to 2023, with the MSCI AC World ex-Aus index delivering over 16% to Australian investors, led primarily by gains in the US and Japan. Most notable was the AI-led rally in a handful of tech names. The so-called “Magnificent Seven” mega-tech stocks staged a strong reversal of the weakness experienced at the end of 2022, in which the Nasdaq lost a third of its value, with the focus on cost-cutting and efficiency. Chipmaker Nvidia led the way, riding the AI boom to a 190% rally and a $1 trillion market cap. Not since 1983 have tech stocks performed so strongly in an opening half to a year. For context, Apple was then touting its Lisa desktop computer, IBM was the most valuable tech company in the US, and Microsoft had yet to list on the sharemarket.
In local markets, the ASX 200 began the year 4.5% higher, with nearly half of that return coming as dividends. Banks and materials stocks comprise about half of the ASX 200 and traded sideways in 2023. For the banks, investors feared that steepling interest rates would sharply increase debt provisioning. At the same time, the resource-heavy materials sector stalled on a failure for China’s recovery to gain more substantial traction. The latter also led to more muted returns in emerging markets. This year, the tech and gold sectors have been the clear standouts, delivering double-digit returns.
In the more defensive asset classes, 2023 has seen cash outperform the domestic bond sector due to sticky underlying inflation. However, traditional fixed interest has had a solid year overall and has recouped some of its steep losses from the previous calendar year. Elsewhere Bitcoin had an astonishing start to 2023, gaining more than 80% in USD terms. The rebound in the Nasdaq and the regional banking crisis saw risk-loving investors re-enter the crypto space after a shocking 2022.
Improving inflation data allowed the Federal Reserve (the Fed) to finally hit the pause button on official interest rates at the June FOMC meeting. This was the first such move in fifteen months. Fed officials, on average, now expect two more rate rises in 2023 and upgraded their estimates for the economy’s growth prospects. Official data later in the month revealed large upward revisions for first quarter GDP on stronger household spending. Meanwhile, Fed chairman Jerome Powell reiterated that interest rates will need to move higher to contain price pressures over the medium term.
On the domestic front, the Reserve Bank of Australia (RBA) raised the official cash rate by 25 basis points in June for the second consecutive month, having paused in April. The RBA remains concerned about the negative impact of high inflation on the economy, family budgets and savings, as well as business planning and investment. Poor labour productivity was again highlighted by the RBA, with strong rises in labour costs per-unit-of-output an ongoing risk to the inflation outlook. Elsewhere, March quarter GDP slowed significantly and missed expectations. GDP also contracted on a per capita basis due to Australia’s surging population. Both discretionary consumption spending and household savings also contracted due to the impact of rising debt repayments on disposable income.
In Europe, Germany moved into recession as its industrial sector contracted and, notably, its lower import spending flowed through to weaker exports from China, where the reopening continues to miss expectations. China remains one of the few large economies where inflation is close to zero.
Our experienced financial planners provide tailored strategies and guidance to suit your unique needs and financial goals. If you’re seeking expert investment advice and management, book a chat with a Pekada financial planner today.
While running an SMSF seemed like an obvious choice when you initially set it up, situations change, and it is a good thing to review this regularly to assess whether this is still the best option. If it remains the best option, then play on, and you rest easy knowing you have the right structure and strategy.
On the other hand, if you assess that there are more appropriate options that are a better fit for your current circumstances, it makes sense to take action promptly.
Some of the most common reasons we see from Trustees deciding to wind up an SMSF include the following:
While there may be genuine reasons to wind up your SMSF, there are some important considerations before taking action.
So if you have done your due diligence and decided to wind up your SMSF, here are some essential things to action. This list is not exhaustive, and it is worth getting professional advice and support to complete an SMSF wind up.
We know that financial matters can sometimes feel overwhelming, especially when winding up your SMSF. That’s why our experienced team is here to guide you through the entire process, providing clear explanations and support for every part of the process.
Please book a chat with one of our advisers if you want to discuss your needs.