With the media constantly talking about the current economic challenges, it’s easy to feel overwhelmed. Sure, you can’t control the share market. But there are other things you could be doing to improve your finances. For example, the government has announced a series of initiatives. Could there be some opportunities in there for you to explore? Here are a few options you might want to consider.

Adjusting your income stream

As they did during the GFC, the government has reduced the minimum account-based pension payments by 50%. This applies for the current financial year and 2020/21. Have a chat with your adviser about your cashflow and possible adjustments to your pension payments. This could be a way for you to preserve in super any money that is not required.

Boosting Centrelink payments

The government has announced a number of measures aimed to support pensioners during the downturn. For example, if you are already with Centrelink, you can update your asset values online at any time. This could result in substantial increases in payments (every $1,000 decrease in asset values = $78 extra payment for a couple). So, talk to your adviser about new estimated balances. If you had previously exceeded the asset test, you may now find yourself able to qualify for a part pension. And if you don’t qualify, you can still look into the Commonwealth Seniors Health Card (CSHC).

Two $750 lump sum payments will be made to income support recipients. The first is based on eligibility for income support (includes CSHC) at 12 March.  A second is due to be paid 13 July, so anyone not currently accessing these benefits has a window to qualify for the second payment.

It’s also worth noting that from 1 May 2020, the deeming rates have been reduced to 0.25% / 2.25%. Make sure you chat to your adviser about how you might be able to leverage that opportunity.

A capital idea

This is the time to look at your Transfer Balance Cap (TBC). A down market is an excellent time to start an income stream. With values down, the amount counted toward the TBC is less. For example, someone who had a $1.8m accumulation account might only have $1.4m today.  This creates an opportunity to get a higher proportion of their capital into pension phase.

Total Super Balance

• Several superannuation measures are only accessible to individuals where they meet Total Super Balance (TSB) requirements. TSB is measured at the 30th June each year.  Therefore, from 1 July, you may become eligible to do certain things that were previously out of reach.
• Non-concessional contributions. As these are only available where TSB is less than $1.6m, you may become eligible to make contributions next financial year. Also, the ability to do the bring-forward is reduced once TSB reaches $1.4m, so it is possible there may be bring-forward opportunities next financial year also.
• Catch-up concessional contributions. These are available where TSB is less than $500,000.  Talk to your adviser about whether you have the capacity to make concessional contributions, if required, in the next financial year.

Condition of release

It’s important to note that ceasing an employment arrangement after reaching age 60 is a condition of release. In this environment, you may be put off, particularly if you have been doing casual work, or working in the most affected industries, but it’s worth having a chat about. Weigh up the pros and cons. It may create the potential for you to access super and/or commence income streams.

Early access to Super

The government has been communicating to people around their ability to access super early under hardship provisions. Access to superannuation savings will be broadened where there’s financial distress because of the Coronavirus, subject to eligibility.  To be eligible, you must meet one of the following conditions.

• You are unemployed
• You are eligible to receive Jobseeker Payment, Youth Allowance (jobseekers), Parenting Payment, Special Benefit or Farm Household Allowance
• On or after 1 January 2020, you were made redundant, hours of work reduced by at least 20%, or if you’re a sole trader, your business was suspended or turnover reduced by at least 20%.

If you’re eligible, you’ll be able to access up to $10,000 before 30 June 2020 and an additional $10,000 from 1 July for approximately three months (depending on the timing of legislation). Payments will be tax free and won’t impact Centrelink entitlements. It is expected that claims will be able to be made from mid-April.  This will be through MyGov. There may be special arrangements for SMSFs. As a general rule, this should really be a last option, as the compounded impact on retirement balances from only a small withdrawal today can be huge.

Recontribution strategies

Here are some things for you to think about.

• With lower super balances, re-contribution strategies can be more effective.
• A smaller withdrawal today will have a magnified impact in future.
• An accumulation account will have a higher tax-free component, as negative returns reduce the taxable component.

What else can you ask your adviser?

Those of us with a few grey hairs who went through the GFC, discovered that it can be very draining for everyone to talk about poor investment returns continuously. So let’s talk about other aspects of your finances – things you can assess, fine tune or perhaps even strengthen.

• Estate Planning. This pandemic definitely has us all thinking about our family’s wellbeing. Rather than dwelling on it too much, try to focus your thinking on plans for the future. Is everything set up just the way you want it to be? Estate planning is often sitting in the ‘too hard basket.’ Now might be just the time to get important family discussions started again.
• Risk insurance. Sometimes, belt tightening now can come at a future cost. Certainly, review your insurance and make sure you’re getting good value. But be wary of discarding cover, without proper consultation, just to save money. It’s an unfortunate fact that the stress of today can contribute to health issues down the track. So make sure you’re properly covered. Your insurance is there to protect you, your family and your assets.
• Your goals. An event like this might cause you to re-think or re-frame your goals.  Having open discussions with your adviser is important. It will enable you to perhaps revisit your investment strategy and this could be a great way for you to move forward with greater confidence.

Elston is here to help

If you’re not sure about tackling any of these issues on your own, feel free to talk to Elston. We are one of Australia’s largest privately owned finance firms. We have offices in Sydney, Brisbane, Canberra, Ballina, Bundaberg, Hervey Bay and the Gold Coast. Elston has been around for 11 years. So yes, we survived the GFC, and we have the wisdom we gained from that time is something we’re happy to share.

Don’t hesitate to have a chat to a member of the Elston team. We’re here to help. To learn more, call 1300ELSTON or email us.