07/05/15: 'Wealthier' retirees to take a hit

Age Pension eligibility tightens...

This morning, the Social Services Minister, Scott Morrison, announced a plan that targets wealthier retirees by reducing the threshold at which part pension cuts out.

Currently, couples can own $1.15 million in assets on top of their family home and still qualify for the part pension. However, starting in 2017, that threshold will be reduced to $823,000 for couples.

To help compensate, the assets test threshold (for the full pension) will be increased from $286,500 to $375,000 for couples who own their own home.

If passed, it is estimated that about 91,000 people will no longer qualify for the Age Pension, while another 235,000 will have their pension reduced.

While we anticipate a significant number of our clients being adversely impacted by this proposal, the bulk of retirees (across Australia) will either see no changes to their pensions, or will receive a small boost.

Thankfully, the Government also stated that the family home would not be included in the asset test, and that those affected by the tighter pension rules will be guaranteed access to the Commonwealth Seniors Health Card, which provides the same concessional access to pharmaceuticals as given to those on the pension.

I'll keep you posted of any further developments.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

13/05/15: 2015/16 Federal Budget

Just the facts...

Last night the Federal Government handed down the Budget for the 2015-16 year, and as foreshadowed, the Budget contained relatively few surprises, with a number of announcements made in the previous weeks.

Of course the most notable announcement impacting clients were the 2017 Age Pension changes and the ‘no new superannuation taxes’ commitment I highlighted last Friday (click here for another copy).

Self-managed super funds also dodged a bullet with no mention of implementing proposed changes to limited recourse borrowing arrangements.

The Government appears to be banking on small business to lead the recovery and has set out a series of generous new tax concessions for businesses with turnovers of less than $2 million. These include a drop in the corporate tax rate to 28.5 percent, immediate tax deductions of up to $20,000 for capital expenses, and FBT exemptions.

Primary producers also do well, regardless of their size with generous depreciation concessions for fencing, water rights and fodder.

So where is the sting in this Budget?

The Government has been careful in its targets. Rather than increasing taxes, the Government has focused on loopholes where there is a clear argument for ‘fairness’.

For example, Multi-national companies who avoid paying tax on business profits in Australia are in the firing line, and GST will be extended to imported digital products and services.

Also, fly-in fly-out (FIFO) clients may lose the zone tax offset, and caps will apply to salary sacrificed meal and entertainment expenses for employees of charities, hospitals and public benevolent institutions.

For a more detailed summary of the Federal Budget Click here.

Even better, feel free to call me personally if you’d like to know whether this year’s budget is likely to impact on you personally.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

12/05/15: Correction time?

Or something worse?

The last few weeks have seen the investment scene hit another rough patch. So is this just a seasonal glitch or something more sinister in the making? Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

06/05/15: Treasurer vows no super tax changes

Encouraging news

As the Federal Budget moves ever closer (next Tuesday evening), the rumour mill is working overtime, so it was encouraging to get some clarity from Treasurer Joe Hockey this morning, with regard to possible tax changes on superannuation. Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

05/05/15: Interest rates cut

A record low...

Today the Reserve Bank of Australia (RBA) finally decided to take the plunge and reduce the cash rate by 25 basis points to 2.00%, a record low.

This wasn't a huge surprise as economists this morning were factoring in a 78% chance of a rate cut today. Interestingly, the RBA provided no outlook statement for interest rates going forward, so unless the Australian economy deteriorates significantly from here, this could be the last of the rate cuts. We'll see.

At the time of writing, the Australian share market was initially up 1.1%, however has since fallen into negative territory as the Australian dollar, surprisingly, went up in defiance of the interest rate cut.

While this is welcome news for borrowers, the decision will put more pressure on investors, particularly retirees, with significant cash/term deposit holdings - interest rates are low and will stay low for some time to come. If you need income, it's time to consider your options.

On a different matter, the Federal Budget will be announced next Tuesday night (12 May) and, as usual, the rumours have been flying fast and furious, from superannuation to negative gearing to pensions.

Our advice is to ignore the background noise. Typically, the lead up to every Federal Budget is a showcase of worse case scenarios and general fear mongering, coming from both side of politics, usually leading to fairly unspectacular, watered-down announcements on the night.

We'll distill the budget details into a simple, easy to understand report for our clients soon after budget night, once we've had a chance to thoroughly weigh-up the proposals on the table. More importantly, we'll contact you individually should there be anything important to discuss.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

27/03/15: $20 oil could be a reality

…if this happens...

Watch video here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

13/02/15: Shares surge to new highs

Planets aligned...

The share market rallied to a six-year high today due to a positive cocktail of factors, including Rio Tinto's massive shareholder returns, rising oil prices, decent company earnings, the potential for more interest rate cuts, and optimism over Greece and the Ukraine.

The market's strongest one day gain in six weeks sent the All Ordinaries and S&P/ASX200 indices to their highest levels since mid-2008.

At the close today, the benchmark S&P/ASX200 index was up 133.9 points, or 2.33%, to 5877.5. The broader All Ordinaries index was up 127.8 points, or 2.24%, to 5835.5.

Interestingly, the big miners led the gains, with BHP up 4.8% to $32.17 and Rio Tinto up 6.5% to $63.79 after announcing a $US2 billion share buyback, while RBA governor Glenn Steven's comments today that more than one further rate cut may be needed if unemployment continues to rise lifted the banks and Telstra as the desperate search for yield continues.

Rick Maggi Westmount Financial

03/02/15: RBA cuts rates by 25bps, shares rally

An 'insurance policy' for growth...

The official cash rate has been reduced to a new record-low of 2.25 per cent after being left on hold at 2.5 per cent since August 2013.

The Reserve Bank’s decision has come as a surprise: a survey of 30 economists and commentators found that 28 expected the cash rate to remain unchanged.

Westpac, NAB and ANZ all subsequently forecast that rates would fall some time in the first half of 2015.

The two survey respondents who predicted today’s cut were Bill Evans, chief economist at Westpac, and Nathan McMullen, head of product and digital at RAMS.

Mr McMullen said that with consumer confidence and inflation low, the Reserve Bank would cut rates to help boost the economy and depreciate the Australian dollar.

Several of the other survey respondents also gave an indication of what forced the Reserve Bank to act, even though they didn’t expect it to happen as early as today.

ME Bank’s general manager of markets, John Caelli, said growth and consumer confidence have been weaker than the board would like.

“Market sentiment has fundamentally shifted over the past two months as oil prices have plummeted and concerns about deflation in Europe grow. This has led to markets expecting 0.50 per cent in rate cuts in the first half of 2015,” Mr Caelli said.

The cut is being seen by many as an 'insurance policy' on growth going forward.

Of course, while this is great news for borrowers, it adds further pressure on investors, particularly retirees, with significant exposure to cash. With that in mind, it will be important for investors in search of a decent yield to be particularly wary of new and wonderful investment products promising higher yields - so please, run it by us before taking the leap!

At the time of writing, the Australian dollar has responded to the rate cut by falling from 0.78 to 0.77, while the local share market has rallied about 1.6%.

Rick Maggi Westmount Financial

02/12/14: Interest rates remain on hold

Where to from here?

The Reserve Bank of Australia has announced the outcome of its monthly board meeting, deciding to leave the official cash rate on hold at 2.5 per cent.

NAB chief economist Alan Oster said he expected no change in the cash rate until the end of 2015.

"The RBA still believes that a period of stability in interest rates is the most prudent policy for the time being," Mr Oster said.

"While there are tentative signs of an improvement in household spending, they do not yet signal a sustained change in household and business conditions," he added. In the absence of any "major surprises", the cash rate is unlikely to rise until late 2015, Mr Oster said.

Westpac chief economist Bill Evans noted that the November monetary policy meeting minutes were "slightly more dovish" than October's. "The growth outlook is a little less optimistic while there appears to be less hysteria around the potential risks associated with the housing market," Mr Evans said. "Indeed there is no implication of a substantial intervention by the authorities. The RBA is clearly in an ongoing ‘wait and see’ mode," he said.

It is also worth noting that in other quarters further interest rate cuts are being predicted for 2015. Deutsche Bank today went on the record predicting two 25 basis points cuts mid and later next year.

Our view at Westmount is that talk of interest rate cuts is premature at this point. Unless the Australian economy significantly deteriorates further, we expect the RBA to simply maintain current rates a little longer than previously expected. Of course, if rate cuts do occur, this would probably be a positive for shares and property, so it is critical to keep your portfolio diversified and flexible at all times.

Watch a full interest rate report from Macquarie here.

Rick Maggi Westmount Financial

01/12/14: China cuts interest rates

…and why it matters

The recent decision by the People's Bank of China to cut rates is a positive for commodities and Australian shares. Read more here

Rick Maggi Westmount Financial

30/10/14: Punchbowl removed: The end of 'Quantitative Easing'

End of an era… After a year long phasing down period, last night the US Federal Reserve finally ended its quantitative easing (QE) program, introduced at the height of the Global Financial Crisis back in 2008.

Since the worst days of the GFC, unemployment has fallen, consumers are spending again, businesses are investing and banks are lending. So after all is said and done, QE seems to have actually worked - the US economy is now well and truly into expansion mode and looking a lot stronger than Europe and Japan that have taken longer to adopt QE.

It would be fair to say that, while the US economy isn't exactly booming, the Fed Reserve's decision to take the economy off life-support was, at least for now, an important sign that the US may now be able to finally stand on its own two feet.

While the punch-bowl may have been removed from the table, the music continues to play. Consistent with the Fed Reserve's softly, softly approach, they've also indicated that interest rates won't be going up in a hurry, even as the US economy continues to recover - an encouraging signal to the US (and the rest of the world) that concrete evidence of a sustainable recovery will be needed before interest rates are finally raised in earnest.

The ending of US QE is also a positive for Australia and removes a source of upwards pressure on the Australian dollar (great for exporters).

Rick Maggi Westmount I Financial Solutions

27/10/14: Deeming Deadline: 1 January 201

Time for action!

Has your financial advisor contacted you about the account based pension (ABP) deeming rule changes effective 1 January 2015?

Don’t miss out If you haven’t, it’s time to act now. If you wish to recommence your ABP before the changes take effect, we recommend you finalise all paperwork by 1 December 2014 to ensure you retain your current income test treatment or you may risk losing it.

Recap of deeming changes On 1 January 2015, ABPs will be added to the definition of financial assets in social security legislation, which means all new ABPs will be subject to deeming rules for both Centrelink and Department of Veteran Affairs income test purposes. Under the new deeming provisions, all financial investments are assumed to earn a certain rate of income, regardless of the income generated.

Grandfathering provisions will be available ABPs commenced prior to 1 January 2015 will retain their current income test treatment where: · The person was receiving an income support payment immediately prior to 1 January 2015 and, from that day, they have continuously received an income support payment. · An ABP automatically reverts to a reversionary beneficiary on the death of the original owner, provided that at the time of the reversion, the reversionary beneficiary is receiving an eligible income support payment.

If you have any questions or if you need help on this extremely important development contact Westmount on 9382 8885.

Rick Maggi Westmount I Financial Solutions

19/10/14: Comment: FOFA amendments disallowed

Should you care?

Back in July, the government negotiated a deal with Clive Palmer to save the 'FOFA' (Future of Financial Advice) amendments. However this morning two cross benchers (Senators Lambie and Muir) did an about-face and joined Labor senators opposing the government's FOFA agenda. We can only assume that we will now see the return of FOFA (the'full-strength' version) unless a compromise can be found.

Considering Senator Lambie's recent clashes with PUP leader Clive Palmer, this seems more like a personal grudge, along with a good helping of political naivety. But for better or worse, that's the system we now have.

So exactly what does this mean for you, as a client of a financial adviser? Hysteria and vested interests aside, probably very little.

If you already have a good relationship with a non-aligned financial adviser who provides an efficient and meaningful service to you at a fair price, you won't notice much (or any) change to the way he or she interacts with you.

Let's not forget that FOFA (Labor's full strength version) was introduced almost 18 months ago which, among other things, effectively banned investment commissions and ramped-up disclosure requirements, creating a more transparent, trusting environment for investors, retirees and professional financial advisors alike. And contrary to media reports, this law was welcomed by virtually all concerned, including financial advisors, and continues to this day.

The FOFA amendments or FOFA 'lite' (introduced by the Liberals) sought to reduce some of the new law's excessive 'red-tape' without jeopardising the lion's share of consumer protections. Personally, I thought a regulatory adjustment made some sense, but that's history now.

I've spent over 30 years in financial services and I believe that the vast majority of financial advisers I've known over this time are ethical, educated, well-meaning people who sincerely want the very best for their clients, and to also run profitable practices for themselves, their families, and their employees. That's just good business.

So naturally, it has been disappointing to see the reputations and motives of solid professionals being publicly denigrated during this lengthy, polarising process.

My advice is to ignore the cynics with obvious vested interests. If you're comfortable with your current financial adviser, hold on tight and follow your own instincts, chances are you're in very good hands.

Time to move forward.

Rick Maggi

29/09/14: Medibank Private

Get ready….

The share sale process for the nation’s largest private health insurer — covering almost four million Australians — begins on Sunday with a government campaign to get mum and dad investors to pre-register their interest.

The prospectus, which will indicate the price per share, will be available in the second half of October with the enterprise due to list on the domestic stock exchange by December.

The offer will preference registered policyholders, who will be able to get a greater share allocation than non-policy holders. Finance Minister Mathias Cormann said the government anticipated a “large amount of interest” in the sale, which could raise about $4 billion for the federal coffers.

The coalition is hoping to offload 100 per cent of Medibank Private, saying there is no reason why the federal government should be involved in the health insurance market. The proceeds would be invested in productivity boosting measures, he said.

AMP chief economist Shane Oliver said it wasn’t surprising policy holders would get preferential treatment.

“It’s consistent with what happened in the past with privatisation — where policy holders get preference,” he told AAP on Sunday.

“Even AMP, when it demutualised, it’s policy holders got shares initially.” Dr Oliver said at an expected $4 billion, the initial public offering (IPO) was one of largest seen in Australia for some time. “Along with other capital raisings and IPOs in the next few months, this means quite a lot of money will be drained out of the market,” he said.

People wishing to register for the share sale can go to: medibankprivateshareoffer.com.au.

The IPO will also be open to domestic and foreign institutional investors.

The coalition is hoping to offload 100 per cent of Medibank Private, saying there is no reason why the federal government should be involved in the health insurance market.

Finance Minister Mathias Cormann said the government anticipated a “large amount of interest” in the sale. It has often said there is a conflict of interest in the commonwealth being both the regulator and the largest market participant in the sector.

Senator Cormann said Medibank Private would perform better in private hands, but denied privatisation would lead to higher insurance premiums.

“Medibank Private ... will continue to have to compete for customers with 33 other health funds and that of course will put a natural limit on Medibank’s capacity to lift premiums beyond what is competitive,” he told reporters in Melbourne.

The finance minister refused to say how much the government hoped to raise from the float, slated for December.

“The best possible net return for taxpayers — that’s what our objective is with this sale,” Senator Cormann said.

Senator Cormann said the privatisation of Medibank would see it perform better as a business.

“Medibank Private is already performing very well as a business, but there are obviously some restrictions that come with being government owned and we believe that in private ownership, that Medibank private will be able to perform even better,” he told reporters.

He said the public would get first access to buy shares, before the sell-off proceeds into the institutional phase.

But he said no buyer could own more than 15 per cent of the company.

Medibank chairman Elizabeth Alexander welcomed the announcement. “We’re excited for this new opportunity for Medibank and what it may bring and we are pleased to be proceeding with this next step that will lead us to our debut on the Australian Stock Exchange,” she said She assured Medibank customers that they can expect the same service after the sell-off.

“The Medibank you have trusted for years is the very same Medibank that will continue to look after your health well into the future.”

Rick Maggi Westmount I Financial Solutions

04/09/14: How long can interest rates remain on hold?

…perhaps a little longer

An interesting read for a recurring theme out there. Read more here.

Rick Maggi Westmount I Financial Solutions