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Archives for December 2019

The Afterpay Christmas

Are you being smart this silly season? Shop now, enjoy now and pay later.

This Christmas will be a bit different for many Millennial and Gen Z’s globally. The buy now, receive now and pay later revolution has taken the world by storm. Afterpay is just one of the buy now, pay later service companies and it already has over 6 million active customers with 15,000 new accounts opening daily and over 40,000 retail businesses from clothing, travel, experiences and health are offering this type of layby service[i].

What are the benefits of buy now, pay later?

Unlike layby where a customer puts goods on hold that they could not otherwise afford. Buy now, pay later allows customers to receive their goods with a small down payment and future interest-free instalments. The majority of the purchase is other people’s money, but you’re not forced to save and wait.

The service is “free” to the consumer but the costs associated are priced into the product as the service company takes a small cut from each transaction. Retailers pay for the service.

Why would a retailer allow this type of payment?

Retailers want to do business and have seen an increase in average basket size and people shopping more frequently. It’s estimated that retailers have seen more than a 25% increase in transaction values[ii].  Or put another way, users of this payment service are spending more money than they have.

Here are 3 tips to help you avoid a small initial late fee and spend 25% less this Christmas

  • Use cash to pay for Christmas gifts
  • Get your family, friendship group and workplace to embrace Secret Santa. It’s the idea of only gifting to one person
  • Set dollar limits in addition to Secret Santa

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

[i] 2019 CEO and CRO Presentation (afterpay touch)
[ii] FY2019 Results Presentation (afterpay touch)
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Westpac Bank Controversy (WBC)

AUSTRAC has recently begun civil proceedings against Westpac Bank (WBC) in relation to the alleged contraventions of its AML/CTF obligations. In particular, AUSTRAC has accused Westpac of $23 million breaches, including a small number of transactions that appear to be linked to child exploitation in the Philippines.

Although difficult to estimate, it is expected, WBC will receive a large fine well in excess of what CBA was given earlier his year.

Since the announcement on 20th November, Westpac’s share price has fallen approximately 7.5%.

Despite the immediate issues facing the company, it is still a good cash generating business and there may be future opportunities that warrant further investigation and as the old saying in financial services circles goes, ‘don’t try and catch a falling knife – let it hit the floor and then pick it up.’

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

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Strategies to equalise super

In most relationships it’s common for couples to have different super balances, especially where one partner has taken time out of work to rear children or for whatever reason, has not been engaged in full-time employment.  For employees, the amount of employer sponsored contributions made for us is also influenced by salary level, which generally increases the longer we’re in the workforce.

Changes to super since 1 July 2017 have put this issue under the spotlight and provided a real incentive to plan appropriately.  It only seems like yesterday the $1.6M cap on the amount of super that could be held in the tax-free pension phase came to life but it’s been in force for almost two and a half years.  Time flies when having a ‘super’ amount of fun…terrible attempt at humour…

‘Equalising’ the super balances between couples can help to avoid the need to hold amounts in excess of the $1.6 million transfer balance cap in an accumulation account, where profits are taxed at 15%, or worse, be held outside the tax-friendly super environment which could expose profits to the larger marginal individual rates of tax.

Another change to the super rules that are now available to individuals with a super balance less than $500,000, is the ability to carry forward unused concessional contributions i.e. before tax contributions, and make a ‘catch-up’ contribution in the future. This rule provides a real opportunity to maximise retirement savings and gain a personal tax deduction, especially once the nest becomes empty, the mortgage paid and surplus cash accrues.

Couples can also consider contribution splitting, which allows one member to rollover up to 85% of their concessional contributions made in the prior year to their spouse.

Another strategy available is where a member’s income from personal exertion is below $37,000.  Their spouse may receive a tax offset of up to $540 if they make a spouse contribution of up to $3,000.

A strategy we employ at The Investment Collective that is specifically appropriate for couples who have reached 60, is the recontribution strategy.  This involves withdrawing super from one member’s account and then recontributing some or all of the withdrawal into the other member’s account.  This is really beneficial where one member’s balance is above the $1.6M transfer balance cap.  The strategy can also mitigate the impact of death benefits tax when the remaining balance of super passes through to a deceased estate on the death of the surviving partner.

Equalising super balances between couples can bring tax benefits, assist with estate planning and boost the retirement nest egg.  Come in and have chat with us…you never know where it will lead…

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

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