Connect May 2014
Financial news for tomorrow’s lifestyle
INTRODUCING OYA FINANCIAL DECISIONS
Directors John Osborne and Damien Cooper are very pleased to announce the merger between Osborne Yuille & Associates and Financial Decisions Pty Ltd. This merger brings advantages in having a larger scale of operations.
OYA Financial Decisions is a full service advisory firm including:
• Financial Planning
• Superannuation & SMSF
• Accounting & Taxation
We are a totally independent Financial Services Group, not tied to any bank or insurance group, unlike most financial services groups.
Please be assured that our dedicated and professional team will continue to deliver you the highest quality financial advice along with outstanding service, and all business operations will remain the same.
EXCITING OFFICE MOVE
Due to growth within both our Accounting & Tax and Financial Planning departments, we are closing our Chatswood office to our more modern and spacious City office located in the heart of the CBD. Our big moving day will be 26 May, 2014.
You now have the option to use either our new CBD office or our Head Office in Narrabeen. David Smart and Louie Liu, our Chatswood Accountants, will be relocating to our Narrabeen office. However, if the CBD is more convenient, we would like to introduce you to Chetan Sharma, our City based Accountant. John Osborne, Director and Financial Adviser, will continue to operate out of both Narrabeen and City offices.
City Level 5, 48 Hunter St – Narrabeen 18-20 Waterloo St.
Our City office is a short walk from Wynyard train station, and parking is conveniently located at both offices.
Be assured that all business operations will remain the same and our professional staff will continue to deliver you the highest quality service. If you have any questions, please do not hesitate to contact us on 02 9970 3111.
The outlook for Australia is that growth should be fairly moderate in 2014 at around 2.5 percent moving gradually upwards to 3 per cent in 2015, according to the OECD. While we are seeing the investment in mining at a slower pace, this should be offset by strengthening of investment in non mining sectors. This has been evident by gradual improvement in both business and consumer confidence. The lower exchange rate has also contributed to the gradual improvement in growth and confidence. Growth in the mining sector is slowing. When this cycle reaches an end it will be important the government avoids any heightening of fiscal policy.
Economic Growth in China
While most analysts predict growth in China to be around 7 percent, a Chinese expert, Michael Pettis, Professor at Peking University, predicts growth to be around 3 or 4 percent. He sees this as a positive and that reforms in China are working. This may not be good news for Australia’s resource companies. For years we have relied on the resource sector for Australia’s booming growth. The forecast of iron ore sales this year to China will still be in the vicinity of $80 to $100 billion. China is taking 60 percent of the world’s iron ore.
If Michael Pettis’ forecast of growth dropping to 3 to 4 per cent is realised, this will have a major impact on the mining sector in Australia. The growth in China will not be popular. There will be political opposition to reforms to slow the growth down, especially in the property sector. There needs to be reforms as there has been an over reliance on property. Professor Pettis says that while these reforms are necessary they will slow the economy down dramatically. While the economic growth is more than likely to slow, it is still expected that China will rise as a major world power and perhaps overtake the United States by 2030.
USA’s Economic Outlook
The outlook for US growth remains fairly positive. The housing market has seen a growth rebound and exports to emerging markets have strengthened. There is still some consumer uncertainty and we are seeing this impacting on businesses committing to long term expansion or growth. Companies are still resistant for hiring and purchasing capital equipment. Growth for the US in 2014 is expected to be 2.8 percent to 3 percent, and in 2015, 3 percent to 3.2 percent. Unemployment is slowly dropping and expected to be 6.1 percent to 6.3 percent by end of 2014. Harry Fink of BlackRock
believes the US share market will keep rising this year but will see some volatility.
Europe’s Economic Outlook
Europe’s economic recovery which started in the second quarter of 2013 is expected to continue across a range of countries in Europe. Summary To sum up, the world economy is seeing some improvement and markets are cautiously reacting positively to this. While we see growth this year, we don’t expect a repeat of the growth in 2013
CREATING WEALTH ON ANY WAGE
It’s easy to create wealth if you’re earning $150,000 plus. But if you’re on an income of $60,000 it’s harder, but not impossible. The old rule of paying yourself first and saving 10 percent of what you earn is a good start. By saving $100 per week over 10 years in funds or shares at 5 percent income and reinvesting with a 6 percent pa growth, you could accumulate $85,500. Yes, you need to consider volatility in the markets.
At present with low fixed interest rates you have to ask yourself, do I want to invest in the bank term deposit at perhaps 3.65 percent for 12 months or invest in the bank itself and receive a 6 percent dividend, and franking credits on top of that. Yes, the bank share could drop down at times but you will still receive your dividends and franking credits. And if you are reinvesting these, the credit will buy more units in your investment at bargain prices.
If you are not an experienced investor and don’t have the time to manage a direct portfolio, a portfolio of managed funds will provide a good way to access shares.
SALARY SACRIFICE INTO SUPER
The contribution caps from July 2014 have been increased which may allow you to contribute more through salary sacrificing and also give you some good tax concessions. Concessional (pre-tax) super contributions attract a flat rate of 15 percent compared to your marginal tax rate outside of super.
Be aware when investing in super there are preservation rules and you cannot access your money until you satisfy a condition of release, which is usually retirement. Also be aware of the concessional contribution limits which apply, otherwise excess contributions will effectively increase your tax to 46.5 percent.
INVESTING IN YOURSELF
Putting $100 per week away over a year is $5,000 plus per annum. This could be well spent on investing in yourself and improving your qualifications, which could dramatically increase your ability to create wealth over the long term on a higher income.
Earning a degree or trade certificate could potentially increase your salary by 40 percent. So instead of saving $100 per week, you could now save $400 per week. This basically means you could save in around 3 to 4 years the same amount it would have taken you 10 years on the lower savings rate of $100 per week. Think what this means over a 25 to 30 year period.
There is no magic trick to creating wealth. Avoid get rich schemes. The only person who is probably going to benefit from these is the promoter of the scheme. Creating wealth requires hard work, discipline and good advice. Seek advice from a qualified professional financial adviser.
FINANCIAL HELP FOR CARERS
Australians are working longer and living longer. We have one of the world’s highest life expectancies. It’s good we are living longer, but it also creates problems. We need to support ourselves financially for a longer period. A person retiring in 1965 would expect to live 7 or 8 years after retiring. Today we can expect to live anywhere up to 30 years after retirement.
Think about how much your yearly expenditure is and multiply it by say 20 years, and it gives you an idea of how much you will need if you retire today. Not only is there a financial consideration for the fact that those around us will live longer, but the financial burden it creates in ensuring your nest egg at retirement will be sufficient. Does it mean that living longer may mean we will need to give love and care, or receive love and cash as we get older? There is a core allowance that can be applied for if you are caring for someone who has a disability or medical condition who is frail perhaps due to age.
The Carers Allowance is for those who provide care for someone whether they are living with the person receiving the care or not. Care Allowance is not income or asset tested and is tax free. Medical evidence is required in making the support claim. The rate of Carer Allowance at present is $118.20 a fortnight. You may also receive an additional allowance up to $600 in carer supplement each July. Speak to one of our advisers as to how you receive the carer supplement.