8th May 2023

Smart Money Weekly; Shock rate rise, smart money moves in your 40’s and EOFY tax tips

Ben Nash

Hey team,

Happy Monday.

Before we get into it for this week I’ve got a couple of updates to share. Firstly, we’ve just dropped our three new live events, you can check out the details and register here:
Also, through the month of May we’re running a special giveaway for our Smart Money Accelerator. We’ll be giving away free access to our end-to-end game plan to level up your money habits and make success easier through our Smart Money Accelerator.

If you want to get involved, all you have to do is post a review of my new book, Replace Your Salary by investing and share it with us here to get instant free access to our Smart Money Accelerator Money Habits Mastery training. If you haven’t already purchased the book you can grab it here on Amazon | Booktopia

In money news this week, the RBA shocked most Australians this week by rising interest rates. They have raised the official interest rate by another 25 basis points taking the official cash rate now to 3.85%. This is now the fastest tightening cycle that we have seen on record. The Federal Reserve over in the US also followed suit, with a rate rise of 25 basis points.

Data from the Australian Bureau of Statistics shows living costs have reached an all-time high since record-keeping began. Over the past 12 months, all living cost indices have risen between 7.1 per cent and 9.6 per cent for all households, compared to a 7 percent annual increase in inflation. One of the main drivers behind the higher costs of living is the increase in mortgage repayments over the past 12 months.

Smart Money upside #116
Here we unpack the numbers from a recent client we helped, what they were doing with their money when they came to see us, what they chose to do as a result of going through the financial planning process, and the financial impact and upside we helped them achieve. To chat about how to get these sorts of results, you can book an intro chat with us here.

Numbers/Background
Individual, late 30’s; household income ~ $150k; total assets ~ $15k; saving ~ $15k annually.

Frustrations
No clear savings plan in place, feeling behind with finances at the current stage of life, no accountability or structured goals.

What they wanted from us / the advice process
A clear and concise plan, motivation towards goals and accountability to reach those goals.

What success looks like for them
Clarity and direction – particularly with saving and investing.

What money strategy they were following before we went through the planning process
None.

What money strategy they chose to pursue from our planning work
Purchase a new property utilising a guarantor, clarify a new cash flow structure to save better, paying down outstanding debts as fast as possible.

Key benefits of going through the process
Accountability to a plan, a clear plan on a property purchase, knowledge and an action plan on future investing post property purchase.

Value of advice after all advice fees year one: Cost neutral
Year 20 upside after advice fees: $1.6m

If this story resonates you can book an intro call with us here.

Video of the week
Your 40s are an interesting time. It is so important that you know how to make smart investing and money choices when you’re in your 40’s as it is one of the crucial decades for building your wealth and getting ahead. Let’s talk through the tips you need to be doing in your 40s. Check out the full video here.

Client story of the week
Structuring your investments in the right way can be a difficult task. In this week’s client story, we unpack how we helped these clients restructure their investments and adjust their financial plan to drive tax savings of $31K using a debt recycling strategy. Check out the full video here.

Podcast drop
Learn the tips, hacks, and strategies to help you level up your money game. Pods released last week:

Upcoming events:
Free online money education to help you invest smarter and create a life not limited by money:

Blog of the week: How to cut your tax bill before EOFY
Tax is the silent killer, and you often don’t think too much about it until it comes time to do your tax return – but by then it’s often too late to change anything that will have a real impact.

Getting on the front foot with your tax before the end of the financial year can help you make smart moves now so you get a better outcome when you complete your tax return.

I unpack the most important (and often overlooked) areas to cut your tax bill before EOFY here.

Sell investments at a loss
If you’ve made gains on investments through the year, and have other investments that are sitting at a loss position, some considered tax planning can save you serious dollars. Selling investments that are underperforming and sitting at a loss before EOFY creates a loss you can use to offset other investment gains made through the year and reduce your overall tax bill.

This can have the added benefit of improving the overall health of your investment portfolio and adding to your bottom-line returns in the future.

Understand what you can (and can’t) claim
One of the first steps in maximising your deductions is understanding what you can claim. Work-related expenses, study costs, investment & tax-related advice expenses, interest costs, and the list goes on…

Being clear on all the things you can claim is crucial so you can track these through the year and set yourself up for success when it comes to putting together your tax return. The ATO has some really helpful (and easy to digest) guidelines and occupation-specific deductions on their website, so take the time to educate yourself so you’re claiming everything you possibly can (and nothing you can’t).

Track your deductions better
This is a simple one that many people ignore, but it’s an area most people don’t do as well as they could (or should).

If you don’t keep good records of your tax deductions throughout the year, it means you can’t claim them at tax time. Once you know exactly what you can claim, the next step is to have an effective way to keep track of your deductions that works for you.

There’s no one right way, but there are a lot of tools that can help track your deductions. The ATO has an app that’s completely free, there is a heap of paid (but cheap) tech options, you can go old school and use the shoebox method, or you can track with a spreadsheet – the key here is finding a way that will work for you, so you don’t miss out on claiming something just because you didn’t keep records.

Bring forward deductible expenses
While a day doesn’t seem like much, having an expense drop on 30 June compared to 1 July will mean you get the tax deduction a full year sooner. If you’ve got a tax-deductible expense planned for the near future, think about making the purchase before 30 June so you get the deduction in the current tax year.

Note that because you only get part of the expense back, this only works if you’re going to spend the money anyway. Even though the expense is tax deductible, it will still cost you money – so buying random stuff you don’t need isn’t a smart play here.

Contribute to super
Under the current super rules, you can make up to $27,500 in tax-deductible contributions to your super fund each year. This amount includes any compulsory payments made by your employer, but for most people, there is still a lot of room to make some chunky contributions and get some chunky tax deductions.

Making contributions to your super has the added advantage that once the money is inside the super, the maximum rate of tax applied to future earnings is 15%. This rate is much lower than marginal tax rates, meaning your super investments will grow faster than investments held in your personal name.

Keep in mind that once your money is inside super it is effectively trapped until you reach the age of access (currently 60), so this is unlikely to be your go-to investment strategy. But given the tax deductions on the way in, and lower tax moving forward it can be a way to save some serious tax dollars.

Get (good) advice
Advice around your tax or building investment income can give you tax deductions and help you save more tax or build your investments faster. Good advice can also set you up for better results in the new tax year, so in the lead-up to EOFY think about whether this is an opportunity for you.

The wrap
The tax rules can be confusing and complicated if you don’t know how they work, but building your knowledge around tax is a skill that will benefit you this year and every year to come.

Every dollar of tax you save is an extra dollar you can put to work somewhere else – this is something that’s valuable at any time, but in the current environment it can have an even bigger impact.

To your success,

Ben

PS: Pivot Wealth exists to help people invest smarter to create a life not limited by money. If you want help to make your next steps easier, you can book a 10 minute, no BS chat with us here.

 

Ben Nash
Founder and Adviser
Pivot Wealth
Disclaimer:

The information in this note is not personal advice, a guaranteed pathway to that elusive beach bod, or the lost script of Edna St. Vincent Millay’s Pulitzer Prize-winning Conversation at Midnight. This is just a bulk communication pushed out into the internet, and it doesn’t even have your name on it. Your personal situation, needs & objectives, and financial situation have not been considered in putting this together – nor have we considered your dietary preferences, the way you like your hair cut, or your favourite travel destination – but we have spent a lot of time thinking about the future of urban society, whether there is other intelligent life in the solar system, and the pervasion of soy and linseed bread in Australian metropolitan hubs. You should consider the appropriateness of any general advice in relation to your own objectives, financial situation and needs and seek advice before taking any action. You should also consider using a variety of eau de toilette fragrances to keep your partner interested and colleagues on side, not using plastic straws, and minimising your screen time. Where information relates to a financial product, you should read and understand the relevant product disclosure statement. Where information relates to your own potential for awesomeness, you should consider backing yourself totally and completely. Past performance is definitely not an indicator of future performance when it comes to investments and financial products, as well as the likelihood of your children sitting still and quiet for an hour being satisfied playing with a used piece of wrapping paper. Financial services guide.