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Archives for June 2018

Insurance Is Not A Dirty Word

Let’s be honest, have you ever cringed when you hear the word insurance? I’m not specifically talking about life insurance, I mean all insurances. This includes home and contents, motor vehicle, health, life, public liability; they all get wrapped up into one ugly, frustrating ball of confusion. In addition to this, we have the all-encompassing doubt that if we go through the process of applying for cover, are the insurance companies even going to pay out?

In October 2016, ASIC was tasked in developing a report following the scandals involving life insurance companies not paying claims. The result of this report uncovered a number of interesting findings. Some of you may be shocked to know that out of the total 11 insurers investigated, only an average of 7% of claims were declined and an average 76% were approved in full.

The statistic that I found most interesting was the rate at which claims were being declined on policies with no adviser linked. A staggering 12% of non-adviser claims were declined compared to only 7% of claims held with an adviser.

During my short time as an adviser, I have assisted a number of my clients through claims, all of which have been successful. I’m not going to deny that the claims process can be tedious and sometimes drawn out, but can you imagine going through this all by yourself?

The role of a Risk Adviser is among other things, to assist a client through one of their most harrowing times to ensure the cover you’ve funded is paid to you in your time of need. We are there to take away the burden and stress of speaking with claims assessors and insurance companies so you can focus on taking care of yourself and your family.

So if you’ve been considering life insurance but haven’t yet made the right moves or don’t know where to start, contact The Investment Collective and speak to one of our friendly specialist Risk Advisers.

Please note that this article provides general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Electric Cars

Should we go out and buy shares in Tesla? We have had a few questions from clients asking for ethical investments in their portfolios and Tesla is a name that comes up amongst these discussions. Tesla heavily promotes itself as the green future of transport. So, is this a ground breaking technology that will save the environment? Let’s take a look under the hood.

No prizes for guessing what powers an electric car and surely electricity is cleaner fuel than petrol, right? Teslas are charged via a hook up to a power outlet in your house and that electricity comes from a power station which, for the most part, is generated from burning coal. There are also losses in transmission along the power lines, and losses in the battery as it is charged. I have not included those losses in my calculations below as they are difficult to quantify.

I will base my comparison on the amount of Carbon Dioxide (CO2) that is emitted. There are plenty of other pollutants for both Electric cars and Petrol engines but for the purpose of this assessment we will just look at CO2. The average amount of CO2 per kilowatt-hour of electricity generated varies from state to state due to the differing ways electricity is generated. In Queensland, it averages out at 0.79kgs of CO2 per kilowatt hour, whereas in Victoria it’s a whopping 1.08kg of CO2 per kilowatt hour. Down in Tasmania it comes in at 0.14kg of CO2 per kilowatt-hour due to the use of hydroelectric power.

If we look at the Tesla Model 3 (below), which is a similar size to a Toyota Corolla, it has a range of 352kms on a full charge and its battery power is 57kwh. Therefore, a full charge in Queensland will emit 129g CO2 per kilometre and in Victoria that would increase to 177g CO2 per kilometre. That is about 100 litres of CO2.

According to the Green Vehicle Guide (www.greenvehicleguide.gov.au) published by the Australian Government, a bog standard Toyota Corolla 1.8l Manuel will release about 196 grams of CO2 per kilometre in an urban environment. So, based on the Tesla emissions of 177g CO2/km above, there really is not a lot in it for Victorians.

Ideally, if you own a Tesla, you need a solar panel on the roof of your house and a battery to store the energy during the day so you can recharge overnight. Then you really are a greenie.

Please note, the above had been provided about general advice. If you would like more tailored advice about investing or any financial services, please contact us today. One of our advisers would be delighted to speak with you.

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Your EOFY Super Checklist

With the close of another financial year upon us, apart from being one year closer to retirement and living the dream than you were 12 months ago, it’s an opportune time to attend to one or all of the following:

1. Give your super a free kick

Now is a good time of the year to make additional contributions into super especially if you intend to claim those contributions as a tax deduction as well as lodging your tax return early in the financial year.

Why is that, you may ask?

Well, any surplus cash you have sitting in a bank account earning an abysmal rate of interest can be contributed into super before June 30 as a “personal” contribution and claimed as a tax deduction.

Providing you haven’t exhausted your $25K concessional contribution cap, that increased tax deduction, all things being equal, will most likely result in you obtaining an increased refund from the ATO once your tax return is lodged and assessed.

The benefits are twofold; you get an increased tax refund which can be directed however you wish whilst increasing the wealth you have accumulating in super.

2. Share the wealth

If you have a partner you should be thinking about your finances together and make the most of opportunities that present.

For instance, if your partner has taken time out of the workforce or is a low-income earner, there’s every chance their super could do with a boost.  If your partner earns below $37,000 you can claim the maximum tax offset of $540 if you contribute $3,000 into their super before 30 June.

You get $540 off your tax bill whilst increasing the wealth accumulating inside super.

3. Check in on your goals

As we traverse life our needs and circumstances change, hence it is important to check in on your life and financial goals every 12 months to see how you’re tracking.

Are you on target for making your dreams a reality or do expectations need to be revised to take account of changes to your circumstances?

In relation to your super, at the end of the day, your super is your money.  You are ultimately responsible for how it performs and grows.  You need to ensure it is being invested wisely and in line with the timeframe you intend to access it.

As we enter winter and move another year closer to retirement, check in on one or all of the above…you might just get a good outcome in the future and surprise yourself.

Please note the above has been provided as general advice. If you would like more tailored financial advice, please contact us today. One of our advisers would be delighted to speak with you.

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Investing For Your Children & Grandchildren

I’m often asked how best to invest for children and grandchildren. My clients are looking for the best long-term strategy to provide a gift to their children or grandchildren on their 18th birthday.

The best gift we can give children is educating them about the value of money and the benefits of saving and investing.

Prior to choosing an investment, we need to consider a few aspects including tax, fees and the complexity of the structure.

A major consideration for parents and grandparents is the tax rate children have to pay. To prevent Australians investing money in their children’s name to save tax, special rules apply to income earned by children under 18. Income derived from investments and savings account is taxed at 66 percent once it exceeds $416 a year until it reaches $1,445, after which 47 percent tax applies.

We can safely say that investing in the child’s name will incur the highest marginal tax rate.

The simplest approach is to invest in your own name, preferably the lowest earning parent or grandparent.

  • You pay the tax at your marginal rate
  • The first $18,200 earned is tax-free
    • You may be eligible for the low-income tax offset
    • If you meet the age requirements for Age pension, you may be eligible for the seniors and pensioners tax offset
  • Income derived from the investment may have franking credits

Another structure that can be used is a family trust, however, they are costly to establish and maintain, and time-consuming to administer.

As you can observe, the decision on the most appropriate investment vehicle for your children or grandchildren can vary depending on your circumstances. It is best to speak to your financial adviser at The Investment Collective.

Please note that this article is provided as general advice, it has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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