EOFY – You Snooze, You Lose

We’re heading towards the 30th June again and Wealthwise adviser Joseph Hoe argues that, like our Mums, our finances are something we should be thinking about all the time, not just one day a year.

EOFY – You Snooze, You Lose?

Let’s face it, most of us are lazy and, when it comes to dealing with our finances, it’s usually an impending deadline that spurs us into action. Sometime before the end of June you’ll probably remember to top up your SG contributions, or look at reviewing your income protection to try and get a bigger tax deduction. The thing is, while doing both of these could be financially beneficial, they should be among several areas of your finances that you review regularly and not treat as a last-minute End of The Financial Year knee-jerk reaction.

Below is a checklist of things you could consider talking to your financial adviser about. It is by no means comprehensive.

  1. We mentioned tax deductible income protection premiums, but also insurance companies are constantly updating and improving their products so it might pay to move your existing cover to a newer policy.
  2. Everybody is raving about Self-Managed Super Funds, but they are a bit like a puppy at Christmas – they are not for everyone, they are a big responsibility, and they need a lot of looking after.
  3. If you already have an SMSF, have you thought about contribution levels and the investments you want to hold there? Have you also looked into the pros and cons (and limitations!) of having life cover inside the fund?
  4. Keeping your estate planning up to date. Have you recently had a new child, got divorced or married, or want to change a beneficiary? These are matters that should be dealt with promptly as we could end up seeing our assets distributed (or redistributed!) in a way that is not according to our wishes.
  5. Millions of Australian have more than one super fund and by leaving their funds fragmented they are often missing out on the opportunity that one well-managed consolidated fund can provide. Time to look for that lost super?
  6. It might seem a silly question, but is your employer paying you the correct amount of super contributions? Until you know what your entitlements are, it’s a question that you can’t really answer.
  7. Related to the last point is salary packaging (aka salary sacrificing). Can you talk to your employer about restructuring your salary so you can pay for certain items with pre-tax dollars? However, be aware that unless you work for specified not-for-profit organisations, what you are eligible for is limited, though still financially beneficial.
  8. Finally, if you are nearing retirement age, have you looked at a Transition To Retirement strategy? The laws in Australia relating to TTR are among the world’s most generous so, if you are looking forward to that dream retirement, this could be one of the major building blocks in your strategy.

If you want to discuss anything in this article, or any other matter relating to your finances, please call your Wealthwise adviser on 9380 6333.

Private Health Insurance – Prepay Before 30th June And Save Money?

Save Money By Prepaying Private Health Insurance

The new financial year starting on July 1st, 2012 will, as usual, bring with it changes to tax legislation.

One of these changes which could affect you is the introduction of means testing on the Private Health Insurance rebate.

At present the rebate is a straight 30% across the board, but from the 2012-13 financial year there will be a sliding scale based on age, marital status and income levels.

Basically, if you are a single person earning over $84,000 pa or a family with an annual income over $168,000 pa, you will be facing a reduction in your rebate.

Above these base income levels there are 3 tiers, with the highest tier ($130,001 pa and above for singles, $260,001 pa and above for families) seeing a complete abolition of the rebate.

Obviously, this change can make a big dent in your finances, so what can you do?

Well, there is still some confusion over how this new system will work with Medicare and the ATO not yet having firm procedures in place.

What IS certain is that several private health insurers are offering their clients the option of getting the whole 30% reduction by prepaying their 2012-13 premiums before the end of the financial year on 30th June.

Obviously, this is not a strategy that is suitable for everybody so, if you think you will be affected by this change, phone your Wealthwise financial adviser on (08) 9380 6333 or get in touch via the Contact Us form on the website. Alternatively, talk to your existing private health insurance provider.

Tomorrow we will look at a case study to see how this means testing could affect you.



The information in this article is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. It should not be construed as financial, taxation or legal advice.

Before acting on the basis of this information, you should consider its appropriateness to your own objectives, financial situation and needs. You should also obtain and read a copy of the relevant Product Disclosure Statement before making any decision to acquire a financial product.


The True Value of Insurance


• Most super funds offer insurance. However, it’s important that you ensure the cover is enough for you and your family.

• As your life changes, your insurance policies may need to change with you.

• We’re here to help. We can review your policies with you.

Research shows that only around 16% of people actually have life insurance.(1) Also, only 6%(2) of consumers have income protection, while one in six men and one in four women are expected to suffer a disability from the age of 35–65 that leaves them away from work for six months or more.(3) While these statistics can be confronting,the flipside is that checking, maintaining and possibly upgrading your insurance coverage can provide tremendous peace of mind.

What’s your most important asset?

Most people have insurance for their home and motor vehicle, but fail to cover their most valuable assets – their life and their ability to earn income over the long term.

Which policies are relevant to me?

There are four main types of personal insurance:

• Income protection – helps you meet your financial commitments by providing regular payments if you are unable to work due to sickness or injury.

• Trauma cover – provides a lump sum payment after the occurrence of a serious medical condition (such as cancer, stroke or heart attack).

• Disability cover – total and permanent disability (TPD) cover provides a lump sum payment if sickness or injury leaves you totally and permanently disabled.

• Life cover – a lump sum payment to your nominated beneficiary in the event of your death or a terminal illness.

How can I be sure I’m covered?

Given the various types of insurance available, it can become overwhelming or confusing about what is best for you. You also don’t want to be stuck paying for cover that you don’t actually need. We can review your polices with you and provide practical and ongoing advice on personal insurance.

I already have a personal policy, isn’t that enough?

If you already have personal insurance you may appreciate some of the peace of mind it can bring. The most important thing is that you keep your policy in mind and not just tucked away in a drawer. Do you know how much you’re covered for? As your life changes, it’s vital to ensure that your policies change with you. If you get married, take out a mortgage or have a child, take a look at your coverage. You may find that you are still covered sufficiently or that you wish to upgrade some or all of your policies.

But aren’t I covered by my super fund?

It’s true that most super funds offer some level of income protection and death or disability cover. However, it’s important to read the ‘fine print’ and ensure that the coverage you have is enough to provide for your family if the worst were to happen. In some cases, the default coverage simply isn’t enough if you have children or other family members in your care. For example, the average amount of lump sum death cover is just over $150,000.(4)  Would this be enough for your family? Also, policies like income protection may have waiting periods for payment. Therefore, you need to know what these waiting periods are and how long you and your family can survive on a reduced or non-existent income.
Things like mortgage payments, car repayments, school fees and everyday expenses keep occurring no matter what. If you were to become sick, injured or if the very worst were to happen, you would want your family to be able to carry on as normal.

Case study – Tom’s story

Tom is a successful lawyer and is married to Janette. He has worked hard over the past ten years to accumulate valuable assets. To support his desired lifestyle, Tom decided on a $300,000 trauma policy to protect him against cancer and heart attack.

Unfortunately, last year Tom was diagnosed with prostate cancer and was unable to work for six months while he underwent treatment and recovered from the illness.

Tom was paid a trauma benefit of $300,000 from his policy which assisted with Tom’s recovery. The insurance policy replaced his income and paid his medical expenses. Without it, Tom would have had to rely on Janette’s income.

Tom continued to pay his annual policy fee and 12 months after the initial payment of the trauma benefit, Tom bought back his $300,000 trauma policy at standard premium rates.

Unfortunately, six months later Tom had a serious accident, suffering a major head trauma.
Tom and Janette were relieved that, as a result of the trauma policy, he qualified for another trauma benefit of $300,000.

Again, they were able to meet their expenses and Tom was able to recuperate with some peace of mind.


Source: CommInsure, Protection and peace of mind for life (based on CommInsure average claims in 2008 calendar year), page 18, 2011.

1 Roy Morgan Research, 6 months to April 2009, Australian population aged 14+.
2 Roy Morgan Research, see footnote 1.
3 Institute of Actuaries, Table IAD 89-93 – white collar males and females.
4 CommInsure, Protection and peace of mind for life (based on CommInsure average claims in 2008 calendar year), page 9, 2011.

Are you wasting money on insurance?

It’s the middle of the night and you’re jolted awake by extreme pain in your chest. You feel like the life is being crushed out of you … you immediately realise you’re having a heart attack. Your partner frantically phones 000 and as you lay clutching your chest waiting for the ambulance to arrive all you can think about is how your family will be supported if you die.

The pain intensifies.

Hopefully this will never happen to you, but what if it did? Take a moment to think about how your family’s living expenses would be met if your income stopped tomorrow.

The average Australian household spends up to one third of its gross income on mortgage repayments. Most of us would rely on our regular income continuing indefinitely in order to meet such an expense. And at this point we haven’t even got to putting food on the table.

Income protection (or “salary continuance”) insurance policies usually provide up to 75% of your salary or business income in the event that you cannot work due to illness or injury. Of course, you might have sick leave, other compensation arrangements or perhaps a cash reserve to rely on for a while, but what happens when these run out?

Transfer the risk

Just like any other insurance, protecting your income is about transferring risk to someone else. By paying a premium each month, you have the security of knowing that should anything happen – your car is stolen, your home damaged by fire or you suffer a serious illness or accident – your financial loss will be minimised.

Interestingly, almost 90% of Australians consider the cost of car insurance worth having, yet only 6% of us insure our income. And what about the apparent contradiction that when you buy insurance you hope you never actually have to
use it? Does this mean it is a waste of money? Why take that risk when having peace of mind is worth far more than dollars? Once you have insurance in place, you can get on with enjoying life, and if you do get sick or badly injured, money will be one less thing to worry about.

Sources: HIA / Commonwealth Bank Affordability Report, February 2008
Insurance Council of Australia, Consumer Tracking Survey, January 2006.
Roy Morgan Research Insurance Report, September quarter 2006