Jacqueline Barton

While the topic of our own mortality is never pleasant, taking the time to plan ahead can significantly ease the burden on loved ones during a difficult time. Here are three critical aspects of estate planning that require attention, complete with practical examples and solutions.

Directing Your Superannuation

Typically, the trustee of your superannuation fund has the authority to decide who receives your super and any associated life insurance benefits. Legislation requires these payments to go to your dependents.

Example: Consider a divorced individual who wishes to leave their super to children from a previous marriage, excluding their ex-spouse. Without specific directives, there’s a risk that the trustees may allocate part of the super to the ex-spouse.

Solution: Some super funds offer the option of a Binding Death Benefit Nomination, which allows you to specify exactly how your super should be distributed, ensuring your wishes are respected and not left to the discretion of the trustees.

Risks of Dying Without a Will (Intestate)

Dying without a will means your assets will be distributed based on state laws, which may not align with your personal wishes.

Example: A 27-year-old unexpectedly dies in an accident, leaving behind life insurance through her super and assets totalling $95,000. Without a will and with no dependants, her assets are divided between her estranged parents, contrary to her likely wishes.

Solution: It’s crucial to have a will that clearly outlines your wishes to prevent unintended distributions.

Ensuring Immediate Support for Dependents

The validation of a will through probate can delay the distribution of your estate, especially if the will is contested.

Example: The primary earner in a family passes away, but their recent will can’t be located, complicating matters for the funeral and legal proceedings. Additionally, a distanced family member contests the will, further delaying the process. The surviving spouse faces financial and emotional strain without immediate access to funds.

Solution: Keep essential documents in a secure but accessible location and inform your executor about where to find these documents. Consider a life insurance policy with a named beneficiary to provide immediate financial support independent of the estate.

Next Steps

Contact your financial adviser today. Effective estate planning is crucial for everyone, and your adviser can help streamline the process, reducing stress for your family and ensuring your final wishes are honoured.

While widely known for managing interest rates, the Reserve Bank of Australia (RBA) holds a pivotal position in securing Australia’s financial stability through diverse and crucial functions. Established from the roots of the Commonwealth Bank of Australia in 1959, the RBA has significantly evolved to address the sophisticated demands of today’s global economy.

This article explores the RBA’s comprehensive role in monetary policy, market operations, crisis management, currency issuance, and international collaborations, highlighting its foundational impact on both national and international financial systems. Delve into how the RBA not only shapes Australia’s economic landscape but also ensures its growth and stability through innovative strategies and governance.

• Monetary Policy and Market Operations: The RBA’s primary function includes managing Australia’s monetary policy. It does this by adjusting the cash rate, engaging in market operations to control the money supply, and intervening in the foreign exchange market to influence the currency exchange rate. These tools help stabilise the economy and manage inflation, ensuring that economic growth is supported without overheating.
• Managing Financial Crises and Currency: In times of financial uncertainty, such as the Global Financial Crisis of 2008, the RBA has played a crucial role in crisis intervention. It also has the sole authority for issuing Australian currency, a task that involves ensuring the security and integrity of Australian banknotes and coins.
• International Collaboration and Innovations: On the international stage, the RBA collaborates with other central banks to improve global financial systems. Projects like Project Dunbar, in partnership with the central banks of Malaysia, Singapore, and South Africa, aim to enhance the efficiency and cost-effectiveness of international transactions. The RBA also engages in initiatives like the Pacific Strengthening Correspondent Banking Relationships Project to support financial stability in the Pacific region.
• Boards and Governance: The governance of the RBA is overseen by the Reserve Bank Board and the Payments System Board. The former handles monetary policy and financial stability, while the latter focuses on policy for the payments system, encompassing risk control and promoting competition in payment services.
• Innovative Technologies in Currency: The RBA has been a pioneer in adopting new technologies, such as the introduction of polymer banknotes in 1988. This innovation, now utilised worldwide, underscores the RBA’s commitment to maintaining a secure and modern currency system.
• The Role of the RBA in Everyday Transactions: Everyday financial transactions, whether tapping a card at a café or making an overseas purchase, are underpinned by the RBA’s regulations and systems. The smooth operation of these transactions, often taken for granted, is a testament to the ongoing work of the RBA in ensuring a stable and functional financial system.

Understanding the multifaceted roles of the RBA is essential for recognising its impact on both the national and global stage. The Reserve Bank of Australia does more than set interest rates; it secures financial stability and fosters innovations that ensure the Australian economy remains robust and competitive. For tailored advice or more detailed information on how the RBA’s policies might affect your finances, consulting a financial adviser is recommended. This ensures you are well-prepared to navigate the financial landscape, influenced by the central bank’s wide-ranging activities.

Since its inception in 1992, compulsory superannuation has become an integral part of Australia’s retirement savings landscape. The concept is straightforward: regularly contribute a portion of your earnings to a complying superannuation fund to secure financial stability in retirement.

However, life doesn’t always follow a predictable path. Understanding how various life events can impact your superannuation is crucial for maintaining your long-term financial strategy. Let’s explore some common scenarios and their implications for your superannuation.

1. In the Event of Death

Superannuation distribution upon death is governed by Australian tax law, not by your Will. The key mechanism for determining beneficiaries is the Nomination of Beneficiary form, which comes in two types:

• Binding Nomination: Specifies beneficiaries that trustees must adhere to.
• Non-Binding Nomination: Indicates your preference, but trustees retain discretion.

Without a nomination, trustees may distribute benefits in a manner that doesn’t align with your wishes.

Recommended Action: Consult your financial adviser or fund trustee to complete a Nomination of Beneficiary form.

2. Dying Intestate (Without a Will)

Even without a Will, fund trustees refer to beneficiary nominations. In the absence of a binding nomination, trustees assess relationships to determine entitlement. If no dependents exist, the death benefit may become part of your estate and be distributed according to intestacy laws.

Recommended Action: Establish a Will and complete a Nomination of Beneficiary form.

3. Divorce Proceedings

In family law, superannuation is considered an asset. Entitlements are determined through negotiation or court order. Your former partner may choose to:

• Open a new super account
• Roll the amount into their existing fund
• Access the amount if they meet release conditions

Recommended Action: Seek professional advice to understand your new financial position and contribution thresholds.

4. Relocating Overseas

Permanent relocation is no longer grounds for early super release. Your savings can be maintained in Australia under normal preservation and release conditions. Alternatively, you may transfer savings to an eligible overseas fund under the Qualifying Recognised Overseas Pension Scheme (QROPS).

Recommended Action: Contact your fund trustee and the Australian Tax Office (ATO) for guidance on managing super when leaving Australia.

5. Early Retirement

The government’s approved early retirement scheme offers limited tax-free payments for individuals over 65 who haven’t reached retirement age. While designed to encourage early retirement in certain employee groups, strict conditions and complex tax structures apply.

Recommended Action: Consult the ATO or visit the government’s Approved Early Retirement page for detailed information.

Conclusion

Your superannuation represents a significant asset. Regardless of life’s twists and turns, making informed decisions about your super management can profoundly impact your financial security in retirement. Seek professional advice to ensure your superannuation strategy aligns with your changing circumstances and long-term financial goals.

In today’s consumer-driven society, every financial decision impacts your future. Before making a significant purchase, it’s crucial to consider whether it will provide lasting value or merely satisfy a momentary desire. Will this expenditure enhance your financial security or potentially hinder it?

Contemporary marketing strategies are designed to create a sense of urgency, often employing tactics such as artificial scarcity, time-limited offers, and social proof to encourage immediate spending. These techniques aim to bypass your rational decision-making process, capitalising on the fear of missing out (FOMO).

However, it’s essential to remember that financial resources are finite. Impulsive purchases can divert funds from more meaningful goals such as savings, investments, and ultimately, financial independence. Before committing to a major purchase, it’s worth pausing to evaluate whether it truly represents the best use of your money.

Five Critical Questions to Ask Before a Significant Purchase

1. Is this a necessity or a desire?

Honestly assess whether the item is essential or if you’re being swayed by the allure of novelty. Our culture often promotes constant upgrades, but it’s important to determine if the purchase genuinely adds value to your life. Consider whether you would still make the purchase without the influence of advertising, social media, or peer pressure.

2. Can I comfortably afford this without incurring debt?

While financing options and buy-now-pay-later schemes can make large purchases seem more accessible, they can often lead to financial strain. A prudent approach is to only make purchases that you can afford in cash or pay off in full at the end of the billing cycle. If this isn’t possible, consider saving for the item and making the purchase when it’s financially comfortable to do so.

3. Have I thoroughly researched my options and alternatives?

Patience in purchasing decisions can lead to significant savings. Before committing to a major purchase:

• Compare various brands, models, and price points to ensure optimal value.
• Consult independent reviews, customer feedback, and product comparisons for informed decision-making.
• Consider timing your purchase around sales events or exploring second-hand options for potential savings.

Additionally, explore alternative solutions that could meet your needs while being more cost-effective:

• Consider second-hand purchases through platforms like Facebook Marketplace or Gumtree.
• Explore rental or borrowing options for temporary needs.
• Investigate whether upgrading or repairing an existing item could be a viable alternative to replacement.

4. What is the opportunity cost of this purchase?

Every expenditure represents a trade-off. For instance, a $3,000 furniture purchase might necessitate postponing a holiday, reducing investment contributions, or limiting your ability to handle unexpected expenses. Reframe your thinking from “Can I afford this?” to “What am I sacrificing by making this purchase?”

5. Will this purchase still hold value for me in six months?

Reflect on past purchases that you believed would bring lasting satisfaction. Do they still serve a purpose or bring joy? A useful strategy is the ’30-Day Rule’: when considering a major purchase, document it and wait 30 days. If the desire persists and remains financially viable after this period, it’s more likely to be a worthwhile investment.

Conclusion

While spending is an inevitable part of life, how you allocate your resources significantly impacts your financial future. Each purchase either propels you towards financial security and freedom or potentially hinders your progress.

The next time you’re tempted to make a significant purchase, remember that the most sound financial decisions are rarely made impulsively. Take the time to carefully consider your options, weigh the trade-offs, and ensure that your hard-earned money aligns with your long-term goals. Your future self will likely appreciate this thoughtful approach.

For personalised guidance on aligning your spending habits with your long-term financial objectives, consider consulting a qualified financial adviser who can help create a tailored plan for your future.

Securing a business loan can be a crucial step in driving growth or managing unexpected challenges.

However, many business owners make common errors during the application process that can lead to delays or even rejection.

To improve your chances of success, here are five key mistakes to avoid and tips on how to address them.

1. Overlooking Your Credit Score

Your credit score plays a pivotal role in loan approval, as it reflects your financial reliability. Unfortunately, many business owners fail to check their personal and business credit scores before applying for a loan. A lower-than-expected score can raise red flags for lenders and impact your eligibility.

Tip: Review both your personal and business credit scores before submitting an application. Address any inaccuracies or take steps to improve your score if necessary. There are several services available that provide detailed credit reports to help you assess your standing.

2. Submitting Incomplete or Outdated Financial Documents

Lenders require up-to-date financial records to assess the stability and repayment capacity of your business. Missing or outdated documents, such as profit and loss statements, tax returns, or cash flow reports, can delay the process or lead to rejection.

Tip: Ensure all financial statements are accurate, current, and complete before applying. This includes documents for the business as well as any directors, partners, or guarantors involved. If your business operates through trusts or self-managed super funds (SMSFs), be prepared to provide additional documentation.

3. Lacking a Detailed Business Plan

A clear and well-organised business plan is essential for demonstrating how the loan will support your goals and contribute to growth. A vague or incomplete plan may leave lenders unconvinced about your ability to manage the loan effectively.

Tip: Prepare a comprehensive business plan that outlines your objectives, strategies, and how the loan will be utilised. Include realistic projections and growth plans to showcase the viability of your business. Resources like Business.gov.au offer free tools to help you get started, while financial advisers or accountants can provide tailored guidance.

4. Ignoring Cash Flow Management

While profitability is important, lenders also want assurance that your business generates sufficient cash flow to cover day-to-day expenses and repay the loan. Poor cash flow management can raise concerns about your ability to meet repayment obligations.

Tip: Focus on maintaining healthy cash flow and prepare projections that demonstrate how you’ll manage income and expenses post-loan approval. Strong cash flow is a critical factor in securing funding.

5. Navigating the Process Alone

Applying for a business loan without professional advice can lead to costly mistakes, such as choosing the wrong loan product or overlooking critical details in your application.

Tip: Work with a financial adviser, accountant, or mortgage broker who specialises in business loans. They can guide you through the process, help you compare options, and ensure your application is thorough and well-prepared.

Final Thoughts

Avoiding these common pitfalls – checking your credit score, ensuring accurate financial records, preparing a solid business plan, managing cash flow effectively, and seeking professional advice – can significantly improve your chances of securing the right loan for your business needs.

Before submitting an application, take time to consult with a financial expert who can tailor advice to your specific circumstances and ensure that you’re on track for success. A well-prepared application not only increases approval odds but also positions your business for sustainable growth in the future.