Watch the video below to learn about the market movements of February 2024.
New increased super contribution caps
As the end of financial year gets closer, some investors are thinking about the most effective ways to boost their super balance, particularly with an increase in the caps on contributions from 1 July.
The concessional contributions cap, which is the maximum in before-tax contributions you can add to your super each year without paying extra tax, is increasing to $30,000 from $27,500 in the new financial year.i
The cap increases in line with average weekly ordinary earnings (AWOTE).
It’s a good idea to keep track of your concessional contributions – which include any compulsory contributions made by your employer as well as salary sacrifice contributions – so that you don’t unintentionally exceed the cap. It is particularly important for those with more than one job or super fund because all of the contributions are added together and must not exceed the cap.
You can check your current balance at ATO online services. Log into your myGov account and link to the ATO to see all your details.
It is also useful to be aware of payment and reporting timelines. For example, your employer can make super guarantee contributions up until 28 July for the final quarter of the financial year and salary sacrifice contributions up until 30 June.
Any amounts showing on the ATO website for your account are based on when your fund reports to the ATO.
Carry forward unused amounts
If you haven’t made extra contributions in past years, you may have unused concessional cap amounts.
These can be carried forward, allowing you to contribute more as long as your super balance is less than $500,000 at 30 June of the previous financial year.
You can carry forward up to five years of concessional contributions cap amounts.
Getting close to exceeding the cap?
If you’re worried about going over the cap, you may wish to stop any further voluntary contributions based on an assessment of the extra tax you will pay.
For those with two or more employers, you may opt out of receiving the super guarantee from one of the employers.
Meanwhile, if special circumstances have caused you to exceed your cap, it’s possible to apply to the ATO for some or all of the contributions to be disregarded or allocated to the next financial year.
But, if all else fails and you have exceeded the cap, the excess contributions will be included in your assessable income and taxed at your marginal rate less a 15 per cent tax offset. The good news is that you can withdraw up to 85 per cent of the excess contributions from your super fund to pay your tax bill. Any excess contributions left in the fund will be counted towards your non-concessional contributions cap.
Timing is everything
The upcoming Stage 3 tax cuts, which commence on 1 July 2024, may affect the value of your concessional contributions. For some, tax benefits may be greater if contributions are made before the tax cuts begin. Please check with us about your circumstances to make sure you make the most effective move.
Non-concessional cap also increased
The non-concessional contributions cap is the maximum of after-tax contributions you can make to your super each year without paying extra tax.ii
The non-concessional cap is exactly four times the amount of the concessional cap so it increases from $110,000 to $120,000.
If you exceed the cap, you may be eligible to use the ‘bring forward rule’, which allows you to use caps from future years and possibly avoid paying extra tax. It means you can make contributions of up to two or three times the annual cap amount in the first year of the bring forward period. iii
If your total super balance is equal to or more than the general transfer balance cap ($1.9 million from 2023–24 and 2024-25) at the end of the previous financial year, your non-concessional contributions cap is zero for the current financial year.
We’d be happy to help with advice about how the changes in contribution caps might affect you and whether you are eligible for the bring forward rule.
Non-concessional contributions
Bring-forward cap first year (applying to 2023–24 and later years) | ||
Total super balance on 30 June of previous year | Non-concessional contributions cap for the first year | Bring-forward period |
Less than $1.68 million | $330,000 | 3 years |
$1.68 million to less than $1.79 million | $220,000 | 2 years |
$1.79 million to less than $1.9 million | $110,000 | No bring-forward period, general non-concessional contributions cap applies |
$1.9 million or more | nil | Not applicable |
i, ii Understanding concessional and non-concessional contributions | Australian Taxation Office (ato.gov.au)
iii Non-concessional contributions cap | Australian Taxation Office (ato.gov.au)
Evidence-based ways to hold back the hands of time
You can’t stop the clock, so the saying goes, but humanity has spent a long time trying to slow down or even reverse the effects of aging.
Even today it can be hard to distinguish those measures that work from those that may not work and avoid those that may be downright dangerous! Fortunately, science-based public health research has some of the answers, so for some medically backed ways to stay healthy as you age- read on.
But first let’s look at mankind’s long history of trying to stop the clock, or at least slow it down a little. Anti-aging practices included the Egyptian queen Cleopatra bathing in donkey’s milk, 16th century French courtesans drinking suspended particles of gold, and the Spanish explorer Juan Ponce de Leon’s infamous quest for the legendary fountain of youth. Unfortunately, many of these measures weren’t successful and may have actually shortened rather than lengthened the live spans of those trying them.
Today the quest continues…
The quest for the fountain of youth has not ceased – it’s just taken other forms in today’s society. The anti-ageing market is ever expanding and expected to be more than $119.6 billion globally.i
American tech centimillionaire Bryan Johnson is a significant contributor to that figure, reportedly spending $2 million a year on a complex regime designed to reduce his biological age from 45 to 18, which includes injecting himself with his 17-year-old son’s plasma.
The truth is, aging is natural. Our bodies aren’t meant to stop aging entirely. But the good news is that there are some tried and true, medically proven ways to stave off many of the problems associated with aging and, in some cases, slow down the aging process. While none of these are groundbreaking discoveries, it’s worth keeping in mind that you don’t have to spend all your money or waking hours to stay healthy as you age.
Tips for living well and living long:
Move it!
That treadmill at the gym may not be a time machine but it can play a part in slowing down the clock. In fact, research showed that those who ran a minimum of 30-40 minutes, five days a week, had an almost nine-year “biological aging advantage” over those who lived a more sedentary lifestyle.”ii Doctors call physical exercise a “polypill” because it can prevent and treat many of the chronic diseases associated with aging and it’s never too late to start getting the benefits from regular exercise. Even a daily walk can do wonders!
Stress less
It’s no secret that being in a constant state of stress is wearying and can make you feel older than your biological age, but recently scientists confirmed that exposure to stress can cause inflammation and damage to DNA in cells, which in turn can accelerate aging.iii The good news is this can be reversed using stress busting techniques such as mindfulness meditation, breathing exercises and progressive muscle relaxation which can lead to improvements in various biological markers associated with aging.
Nourish yourself
While there is plenty of hype around the plethora of “superfoods” that are touted to possess anti-aging qualities there is no one food that will significantly impact the aging process and turn back the clock. However, the food and drink we put in our bodies day after day does make a difference to our health as we age. Research from the worlds “Blue Zones” – areas where people tend to reach the age of 100 – demonstrate the benefits of a relatively plant-focused diet consisting largely of vegetables, fruits, grains, and legumes.iv
Maintain a positive mindset and embrace aging
Finally, it’s also worth considering that as we can’t beat the clock, we might as well accept, if not embrace, the gifts that come with age (wisdom and a longer-term perspective come to mind!).
And moving through life with a positive mindset about the aging process might also give you more days to enjoy. A study recently confirmed that those with a positive view of growing older lived seven years longer than those who complained about it.v
All in all, life is to be lived to the fullest and it’s precious because it’s finite. Do what makes you feel healthy and gives you joy now and that will also help you to enjoy life in the future.
i https://www.globenewswire.com/en/news-release/2022/03/29/2412093/0/en/Anti-aging-Market-Size-to-Worth-Around-US-119-6-Bn-by-2030.html
ii https://news.byu.edu/news/high-levels-exercise-linked-nine-years-less-aging-cellular-level
iii https://www.healthline.com/health-news/stress-can-increase-your-biological-age#How-stress-ages-the-body
iv https://www.everydayhealth.com/diet-nutrition/the-blue-zone-diet-a-complete-scientific-guide/
v https://pubmed.ncbi.nlm.nih.gov/12150226/
Insurance is a sound investment
Managing risk is an essential part of investment strategy to reduce the potential for losses.
Risk is not just associated with investing though – life can throw a curve ball or two and insurance is one way to manage risk in a broader context.
It’s a matter of weighing up your risks and thinking about what you would do if the worst happened. Could you afford to build a new house, buy a new car or support your family if you became too ill to work?
Various insurance products or self-insurance can help to mitigate these types of risks.
Underinsurance
While many Australians have some form of life insurance through their superannuation, the level of cover is rarely sufficient. The standard offering within the super framework is well below what your family need to live comfortably should you die or lose your ability to earn an income.
A Financial Services Council report, estimates that as many as one million Australians are underinsured for death and total permanent disability (TPD) and 3.4 million for income protection.i
Rice Warner estimates that insurance cover for a 30-year-old with dependents should equal eight times the annual family income for life insurance, four times the family income for TPD and 85 per cent of the family income for income protection. The default superannuation offering falls well short of this figure.ii
Home and contents
But it’s not just life insurance. There is also a fair amount of underinsurance in home and contents.
With the growing incidence of bushfires, floods and storms, protecting your home and possessions with insurance is more important than ever.
The biggest mistake is insufficient cover to rebuild your property particularly with the recent surge in building costs. You should also consider the costs associated with demolition and removal of debris, the cost of architects and builders and the need to find alternative accommodation while your home is being rebuilt.
It is important not to head for the cheapest policy as this may well fail to meet your needs. Read the product disclosure statement to make sure the cover delivers exactly what you need.
Health and travel
Health insurance and travel insurance are also important considerations.
You will pay a Medicare Levy surcharge if you do not take out private health insurance and have a taxable income above $93,000 for singles or $186,000 for a family, couple or a single parent (increased by $1,500 for each dependent child after the first child). This starts at 1 per cent of your taxable income and goes up to 2.5 per cent. So, it is worthwhile weighing up whether taking out private health insurance is the better option.iii
When it comes to travel insurance, if you can’t afford it, you can’t afford to travel overseas, according to the Federal Governments Smart Traveller website.iv The cost of medical care in other countries can be exorbitant and you may need to be transported back to Australia. The expenses can be enormous.
Of course, travel insurance can also help to compensate for cancelled or delayed trips and lost luggage.
Self-insurance alternative
An alternative to taking out an insurance policy is to self-insure. That means putting money aside regularly to build up a big enough fund to help keep a roof over your head or replace a vehicle.v
The upside is that these funds are yours and, properly invested, can grow over time. The downside is that you may not have enough money together when a disaster happens.
Insurance can be the difference between successfully recovering from an event and changing your life forever. If you would like to discuss your insurance needs, call us.
i https://fsc.org.au/resources/2537-fsc-australias-life-underinsurance-gap-research-report-2022/file page 18
ii https://www.ricewarner.com/life-insurance-adequacy/
iii https://www.ato.gov.au/individuals-and-families/medicare-and-private-health-insurance/medicare-levy-surcharge/medicare-levy-surcharge-income-thresholds-and-rates
iv https://www.smartraveller.gov.au/before-you-go/the-basics/insurance
v https://www.investopedia.com/terms/s/selfinsurance.asp
Economic Update Video: March 2024
After a summer of quite extreme weather in many places around Australia, we can hopefully look forward to the cooler, calmer weather that Autumn brings.