End of Financial Year Is Coming

Financial Planning

End of Financial Year Is Coming

 

With the end of the financial year fast approaching, now is a good time to review your finances to ensure you have taken advantage of the opportunities available to you.

 

Below we have outlined some tips and strategies you may consider to help minimise tax and maximise your savings.

 

Are you self-employed?

You may be able to claim a tax deduction for up to $30,000 of personal super contributions.

If you are eligible, claiming a tax deduction for your personal superannuation contributions can reduce your tax payable.

 

To be eligible, income from employment as an employee must be less than 10% of your total assessable income. As an added bonus, if you were age 49 or over on 30 June 2015, you can claim a tax deduction for up to $35,000 of contributions.

 

Are you an employee of your own company?

Consider paying profits as tax-deductible employer contributions.

Using profits to pay an employer superannuation contribution instead of salary or dividend payments may provide a tax saving up to 34%. Employer contributions are taxed at only 15% in the fund, instead of paying tax up to 49% on other options. If using this strategy, ensure that the contribution limit of $30,000 per annum (or $35,000 if age 49 or over on 30 June 2015) is not exceeded.

 

Are you retired, a homemaker or unemployed (and under age 65)?

Consider making a deductible superannuation contribution to manage tax payable, particularly if large capital gains are anticipated.

If you are in one of these situations, you could be eligible to claim a tax deduction on your personal superannuation contributions. This can help to offset tax on other income, such as an assessable capital gain that you have realised this year. You should check whether you are eligible to claim a tax deduction and work with your tax adviser to determine how much to claim as a deduction, including consideration of contribution limits.

 

 

Will your spouse earn less than $13,800 this financial year?

Make a spouse contribution to superannuation and receive a tax off set up to $540.

If your spouse has assessable income below $13,800 you could receive a tax offset on the first $3,000 of contributions you make to their account. The eligible offset depends on your spouse’s income and the amount you contribute.

 

Will your income be less than $50,454 this financial year?

Make a personal after-tax contribution (up to $1,000) and get a 50% return if eligible for the Government co-contribution.

If you are eligible for a co-contribution this is the most effective way to contribute to superannuation as it provides an effective return of up to 50% on your eligible contributions. For each eligible $1 you contribute, the government will pay a co-contribution of 50 cents, up to a maximum co-contribution of $500.

 

You should check with your financial adviser to see how much co-contribution you would be eligible to receive and how much you need to contribute.

 

Timing transactions

Timing transactions carefully can also provide tax advantages. For example, where possible:

  • bring forward the payment of deductible expenses before 1 July and delay receipt of investment income until the next financial year
  • prepay interest on margin loans and investment properties before 1 July
  • time the sale of investments so that realised capital gains can be offset against capital losses.

 

Planning for the financial year ahead

Even if you don’t have an opportunity to minimise tax for this financial year, now is still a good time to set up your plans for next year. Your opportunities are greater if you consider tax planning throughout the year, not just at year end.

 

Some ideas that may work for you include:

 

  • Hold investments in the name of the person with the lowest taxable income
  • Review your salary package for any tax effective options
  • Set up a salary sacrifice arrangement with your employer to contribute to super to boost your retirement savings and reduce tax
  • Make a tax deductible donation to charity
  • Hold insurance cover inside your superannuation fund to reduce the effective cost of premiums through tax concessions
  • Gear into growth investments if you can tolerate higher risk and have a long investment timeframe
  • Keep your medical receipts in case you spend over $2,265 (singles) or $5,343 (couples) in a year and are eligible to claim up to 20% as a medical expenses offset (you must have paid for medical expenses relating to disability aids, attendant care or aged care)

 

Please call me on 0413892531   to schedule a convenient time to discuss your personal situation.

 

This may contain general advice. General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Federal Budget 2016: What you need to know

Federal Budget 2016: What you need to know

This year’s Federal Budget includes the most significant changes to Australia’s superannuation system since 2007, plus tax initiatives to support low income earners and small businesses. 

On Tuesday 3 May, Federal Treasurer Scott Morrison handed down the Federal Budget for the 2016–17 financial year. The Budget measures are designed to aid Australia’s transition from a mining-led economy to a stronger, more diversified economy that encourages innovation and supports job growth.

Although the Budget offers tax breaks to support low income earners and small businesses, far-reaching changes to superannuation rules are likely to impact the retirement strategies of many Australians.

Key Budget announcements include:

  • reduced caps on concessional and non-concessional super contributions
  • tax offsets for low income earners and those with low super balances  reduced tax concessions on super contributions for high income earners a reduced company tax rate for small and medium businesses.

 

Superannuation changes

Contribution caps reduced

From 1 July 2017, the cap on concessional contributions will reduce to $25,000 a year for everyone, regardless of age. Currently the concessional contributions cap is $30,000 under age 50 and $35,000 for ages 50 and over.

Individuals with super balances under $500,000 who don’t reach their concessional cap in a given year will be able to carry forward their unused cap amounts on a rolling basis over five consecutive years.

A lifetime cap of $500,000 for non-concessional contributions has been introduced, effective immediately. This replaces the existing annual cap of $180,000 (or $540,000 every three years under the bring-forward rule).

The lifetime cap takes into account all non-concessional contributions made from 1 July 2007. Contributions made after the Budget announcement that exceed the cap (taking into account all previous non-concessional contributions) will need to be removed or will be subject to the current penalty tax arrangements. However, there will be no penalties if the cap has been reached or exceeded prior to the Budget announcement (7.30pm AEST, 3 May 2016).

Contribution eligibility requirements updated

The current work test that applies for people making voluntary contributions between age 65 and 74 will be removed as of 1 July 2017. This will make it easier for older Australians to contribute to super.

Individuals will also be able to make contributions for a spouse aged under 75 without requiring the spouse to satisfy a work test.

Tax exemption on TTR pensions removed

The tax exempt status of income from assets supporting transition to retirement (TTR) income streams will be removed from 1 July 2017, with earnings to be taxed at 15%. This change will apply regardless of when the TTR income stream commenced.

Further, individuals will no longer be able to treat certain income stream payments as lump sums for tax purposes, which currently makes them tax-free up to the low rate cap of $195,000.

Transfer balance cap introduced

On 1 July 2017, a transfer balance cap of $1.6 million will be introduced to restrict the total amount of super that an individual that can be transferred from the accumulation phase to the pension phase. If an individual accumulates more than $1.6 million, they will be able to maintain the excess in the accumulation phase (where earnings will be taxed at 15%).

Those already in the pension phase on 1 July 2017 and whose balances exceed $1.6 million will need to either withdraw the excess or transfer it back into the accumulation phase.

Individuals who breach the cap will be subject to a tax on both the excess amount and the earnings on the excess amount —similar to the tax treatment for excess non-concessional contributions. Threshold reduced for additional contributions tax 

Division 293 tax — an additional 15% contributions tax payable by high income earners with earnings over $300,000 — will also apply to those with incomes above $250,000 from 1 July 2017.

For Division 293 purposes, the definition of ‘income’ includes:

  • taxable income (including the net amount on which family trust distribution tax has been paid)  reportable fringe benefits
  • total net investment loss (including net financial investment loss and net rental property loss)
  • low tax contributions (non-excessive concessional contributions) including super guarantee, salary sacrifice and personal concessional contributions.

Division 293 tax will apply to any low tax contributions that exceed the $250,000 threshold, assuming they form the top slice of income.

The following table compares the tax concessions applicable on concessional contributions at various marginal tax rates.

Marginal tax rate* Contributions tax Tax concession
21% 15% 6%
34.5% 15% 19.5%
39% 15% 24%
49% 15% 34%
49% 30%** 19%

*Including Medicare Levy and Temporary Budget Repair Levy

**Includes additional 15% contributions tax (Division 293)

Low income superannuation offset introduced

A Low Income Superannuation Tax Offset (LISTO) will be introduced to reduce the tax on contributions for low income earners. The LISTO will replace the Low Income Superannuation Contribution (LISC) scheme when it is abolished on 1 July 2017.

The LISTO will provide a non-refundable tax offset to super funds, based on the tax paid on concessional contributions up to a cap of $500. The LISTO will apply to members with adjusted taxable income up to $37,000 that have had a concessional contribution made on their behalf.

The ATO will determine a person’s eligibility for the LISTO and advise their super fund annually. The fund will contribute the LISTO to the member’s account.

Access increased to tax offset for spouses

The current spouse super tax offset will be available to more people when the spouse income threshold changes on 1 July 2017. The threshold will increase from $10,800 to $37,000.

A contributing spouse will be eligible for an 18% offset worth up to $540 for contributions made to an eligible spouse’s super account.

Deductions for personal contributions extended

As of 1 July 2017, Australians under 75 will be able to claim an income tax deduction for any personal contributions made to a complying super fund up to their concessional cap. This effectively allows anyone, regardless of their employment circumstances, to claim a deduction for their personal contributions up to the value of the cap.

Individuals will need to notify their super fund or retirement savings provider of their intention to claim the deduction, before lodging their tax return.

These amounts will count towards the concessional contributions cap and will be subject to 15% contributions tax. Individuals can choose how much of their contributions to deduct — however, if they end up exceeding their concessional cap the deduction claimed on the excess contributions will have no effect, as these amounts will be included in the member’s assessable income.

Members of certain prescribed funds would not be entitled to deduct contributions to those schemes. These include all untaxed funds, all Commonwealth defined benefit schemes, and any state, territory or corporate defined benefit schemes that choose to be prescribed. Anti-detriment payments removed

Anti-detriment provisions will be abolished from 1 July 2017, effectively removing the ability of super funds to increase lump sum death benefits when paid to eligible beneficiaries.

The anti-detriment provisions currently allow a fund to claim a corresponding tax deduction where it is able to increase the amount of a member’s death benefit to compensate for the tax paid on contributions. Tax exemptions extended on retirement products

The tax exemption on earnings in the retirement phase will be extended to products such as deferred lifetime annuities and group self-annuitisation products.

This initiative aims to allow providers to offer a wider range of retirement income products. This will provide more flexibility and choice for retirees and help them to better manage consumption and risk in retirement.

The Government also says it will consult on how these new products are treated under the age pension means test.

Changes to defined benefit schemes

From 1 July 2017, the cap on concessional contributions will reduce to $25,000. Individuals with super balances under $500,000 who don’t reach their concessional cap in a given year will be able to carry forward their unused cap amounts on a rolling basis over five consecutive years.

The Government will include notional (estimated) and actual employer contributions in the concessional contribution cap for members of an unfunded defined benefit schemes and constitutionally protected funds. For individuals who were members of a funded defined benefit scheme as at 12 May 2009, the existing grandfathering arrangements will continue.

A lifetime cap of $500,000 for non-concessional contributions has been introduced, effective immediately. Non-concessional contributions made into defined benefit accounts and constitutionally protected funds will be included in an individual’s lifetime cap.

If a member of a defined benefit fund exceeds their lifetime cap, ongoing contributions to the defined benefit account can continue but the member will be required to remove, on an annual basis, an equivalent amount (including proxy earnings) from any accumulation account they hold.

To broadly replicate the effect of the proposed $1.6 million transfer balance cap, the government has announced that pension payments over $100,000 a year paid to members of unfunded defined benefit schemes and constitutionally protected funds providing defined benefit pensions will continue to be taxed at full marginal rates. However, the 10% tax offset will be capped at $10,000 from 1 July 2017.

For members of funded defined benefit schemes, 50% of pension amounts over $100,000 per year will now be taxed at the individual’s marginal tax rate.

Super objective to be enshrined in law

The objective of superannuation is to provide income in retirement to substitute or supplement the age pension. The government says it will embed this objective in a standalone Act, with an accountability mechanism to ensure that new superannuation legislation is considered in the context of the objective.

Tax changes

Company tax rate reduced

Starting from 1 July 2016, the company tax rate will be reduced to 25% over 10 years. Currently, small companies with aggregated turnover less than $2 million pay tax at a rate of 28.5%. Franking credits will be able to be distributed in line with the rate of tax paid by the company making the distribution.

Financial year Companies with turnover below Applicable tax rate
2016-17 $10 million 27.5%
2017-18 $25 million 27.5%
2018-19 $50 million 27.5%
2019-20 $100 million 27.5%
2020-21 $250 million 27.5%
2021-22 $500 million 27.5%
2022-23 $1 billion 27.5%
2024-25 All companies 27%
2025-26 All companies 26%
2026-27 All companies 25%

Small business turnover threshold increased

The small business entity turnover threshold will be increased from $2 million to $10 million so that more businesses can access certain existing income tax concessions. These include:

  • simplified depreciation rules, including immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017 and then less than $1,000
  • simplified trading stock rules, giving businesses the option to avoid an end-of-year stocktake if the value of the stock has changed by less than $5,000
  • a simplified method of paying PAYG instalments calculated by the ATO, which removes the risk of under- or over-estimating PAYG instalments and the resulting penalties that may be applied
  • the option to account for GST on a cash basis and pay GST instalments as calculated by the ATO
  • other tax concessions currently available to small businesses, such as the Fringe Benefits Tax concessions (from 1 April 2017, the beginning of the next fringe benefit tax year).

Small business tax discount increased

The unincorporated small business tax discount will be increased in phases over 10 years from the current 5% to 16%. The following table indicates when the discount rates will apply.

Financial year Discount rate
2016-17 8%
2017-18 to 2024-25 10%
2025-26 13%
2026-27+ 16%

Personal income tax reduced

From 1 July 2016, the 32.5% personal income tax threshold will increase from $80,000 to $87,000.

This measure will reduce the marginal rate of tax on income between $80,000 and $87,000 from 37% to 32.5%. For example, a taxpayer earning $87,000 will save $315 per year as a result.

This will ensure the average full-time wage earner will not move into the second highest tax bracket in the next three years.

  Current tax rates 2015–16
Taxable Income ($)   Tax Payable ($)*
$0 – $18,200 0%
$18,201 – $37,000 19% over $18,200
$37,001 – $80,000 $3,572 + 32.5% over $37,000
$80,000 – $180,000 $17,547 + 37% over $80,000
$180,000+ $54,547 + 45% over $180,000

*Excludes Medicare Levy and Temporary Budget Repair Levy

 

 

Proposed tax rates 2016–17
Taxable Income ($) Tax Payable ($)*
$0 – $18,200                                                                          0%
$18,201 – $37,000                                                                 19% over $18,200
$37,001 – $87,000                                                                 $3,572 + 32.5% over $37,000
$87,000 – $180,000                                                              $19,822 + 37% over $87,000
$180,000+                                                                             $54,232 + 45% over $180,000

*Excludes Medicare Levy and Temporary Budget Repair Levy

 

Social security changes

Payments simplified and savings introduced

Means testing arrangements for students and other payment recipients will be simplified from 1 January 2017. The changes include aligning the:

  • assets test for all Youth Allowance and Austudy recipients, including those partnered to a Social Security or Veterans’ Affairs income support recipient
  • means test rules used to assess interests in trusts and private companies for all student payment recipients, including independent Youth Allowance and ABSTUDY recipients
  • social security benefit and ABSTUDY income test treatment of gift payments from immediate family members with existing pension rules
  • Family Tax Benefit (FTB) income test and youth Parental Income Test, and authorising the use of FTB income details for the youth Parental Income Test low tax contributions (non-excessive concessional contributions) including super guarantee, salary sacrifice and personal concessional contributions.

A range of social security measures aimed at savings to fund the National Disability Insurance Scheme are also proposed. These include:

  • new welfare recipients from 20 September 2016 will not be eligible for carbon tax compensation.
  • backdating provisions for new Carer Allowance claims will be aligned with other social security payments. From 1 January 2017, Carer Allowance will be payable to eligible applicants from the date of the claim, or the date they first contact the Department of Human Services.
  • increased reviews of Disability Support Pension recipients by assessing their capacity to work.

 

 

 

Talk to your Gold Adviser

The 2016–17 Federal Budget contains a range of measures that could affect your current and future financial position. To learn more about what the Budget means for you, contact your Gold Adviser.

 

© Colonial First State Investments Limited ABN 98 002 348 352 AFS Licence 232468. This document has been prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) based on its understanding of current regulatory requirements and laws as at 4 May 2016. This document is not advice and provides information only. It does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement available from the product issuer carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision.

This may contain general advice. General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

 

 

 

Super boost: How to get the most out of salary sacrificing

superpiggy

Super boost: How to get the most out of salary sacrificing
Arranging to salary sacrifice super contributions might sound like taking a voluntary pay cut, but don’t let the name fool you. Salary sacrificing can be a tax-effective way to make your income go further, and it can also be a great option for boosting your super.
How does salary sacrificing work?
Salary sacrificing (or salary packaging) is an arrangement you make with your employer to withhold a portion of your pre-tax salary. In exchange, you get another type of benefit — for example, a car or a computer — which is paid for out of your pre-tax salary.
With a salary sacrificed super contribution, your employer agrees to pay part of your salary straight into your super account. This is on top of the compulsory Superannuation Guarantee (SG) contributions your employer makes, which are currently 9.25% of your pre-tax salary.
Even if your retirement is still a long way off, paying a little extra into your super now can make a big difference in retirement
Why salary sacrifice?
Of course, everyone likes to get more for their money while paying less tax, and salary sacrificing can help you do that.
Salary sacrificing super contributions can allow you to take advantage of tax benefits while helping to boost your super balance because they come out of your pre-tax earnings and are not counted as assessable income for taxation purposes, which means you could pay less income tax each year.
What’s more, if you make super contributions through a salary sacrificing arrangement, they’re taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than what you would pay if you did not enter into a salary sacrifice arrangement.1
This means salary sacrificing can be an especially useful strategy if you’re in a higher tax bracket. Just say your income is taxed at 46.5% (including the 1.5% Medicare Levy). You could save 31.5% in tax on the amount you put into your super via salary sacrifice, rather than by topping up your super from your after-tax earnings.
How much super will I need?
You may think that it’s enough that your employer contributes to your super — but in reality, these payments are unlikely to provide a comfortable lifestyle in retirement.
According to the Association of Superannuation Funds of Australia (ASFA) Retirement Standard, a single person will need about $430,000 in today’s dollars for a comfortable retirement, while a couple will need $510,000.2 Even with compulsory SG contributions set to rise to 12% by 2019, the unfortunate reality is that many Australians will come up short.
If you end up in this situation, you may have to keep working longer than you’d planned or adjust to a more frugal lifestyle.
Paying a little bit extra into your super now by salary sacrificing super contributions means that your salary sacrificed contributions increase your super balance, helping to fund your retirement. And chances are, it will probably only make a small difference to your take-home pay.
Case study
Julia is 40 years old and single. She is currently working full time and earns $60,000 a year. Over the years, she has had a couple of career breaks and now her super balance is $50,000.
If Julia relies on compulsory employer SG contributions alone, by the time she turns 65 she’ll have around $401,000 in her super account. But with a weekly pre-tax salary sacrifice of $50, she could end up with an extra $100,000 by the time she turns 65.3
How do I get started?
Ask your employer whether they offer the option to sacrifice part of your salary into super. If they do, it’s usually just a matter of filling in a form. It can also be a good idea to speak to a professional financial adviser to find out whether salary sacrificing is best for your situation and retirement goals.
1 The concessional tax treatment is limited to a set amount of contributions made each income year.
2 AFSA (2013) Retirement Standard, p4. http://www.superannuation.asn.au/resources/retirement-standard
3 See calculation assumptions at http://findyourfuturecalculator.com.au/cfs/calculator.

This may contain general advice. General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Do you have all the protection you need?

insurance files

Do you have all the protection you need?
As a qualified or skilled workers, you need to be physically fit and healthy to make a living. That way you can maintain the lifestyle you and your family have worked so hard for.

So when you’re looking at insurance, you need to make sure you have cover that takes into consideration the work you do and the unique risks you face. It’s important to feel confident knowing that whatever happens, your family will be looked after.

Workers compensation may not be enough
Workers compensation helps part of the way, but you could be waiting a long time and it only covers some of your medical bills.

What if something happens outside work or you suffer heart disease or cancer? When your income stops, the last things you need to worry about are your loan repayments, bills, and everyday expenses including your children’s schooling.

Here are the facts:
• According to Safework Australia, labourers and related workers had the highest incidence rates of work-related injury – nearly three times the rate of all occupations.1
• 48% of claims from tradespeople relate to having an accident.2

Let’s make sure you have the cover you need
I encourage you to make an appointment with my office. If you can’t afford comprehensive cover, you can cover yourself for accidental injury only. Considering the majority of claims are due to accidents, it’s a pretty sensible option.

1 “Key Work Health and Safety Statistics Australia, 2010”
Safework Australia
2 Source: Asteron Life, based on 2011 income protection claim statistics.

This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Hindsight bias

hindsight

Hindsight bias

Introduction
After an event has occurred, people often look back and convince themselves that the outcome was obvious and likely, and that they could have predicted it. This is known as ‘hindsight bias’, or the ‘knew-it-all-along’ effect. In actual fact – particularly in the investment world – outcomes can rarely be reasonably predicted ahead of time.
Hindsight bias is common and can be attributed to our natural need to find order in the world. We create explanations that allow us to make sense of our surroundings, and that help us to believe that events are predictable.
The human ability to find patterns and to link cause and effect can be useful – for example, to a scientist carrying out experiments. However, finding false links between an event and its outcome can sometimes result in unreliable over-simplification.
Studies have also shown that hindsight bias occurs because it’s easier for people to understand and remember the actual outcome than it is to consider the many other possible outcomes that, in the end, didn’t come to pass.
Given how important investment decisions are in our everyday lives, hindsight bias is frequently observed among investors.

Impact on investment decisions
One of the most significant effects of hindsight bias is the way in which it can influence investment decisions.
It does this by encouraging investors to over-estimate the accuracy of their past forecasts. This leads to a false sense of security, causing investors to assume that their future forecasts and decisions will be equally accurate.
As a result, investors often make decisions based on future investment outcomes which may seem obvious and highly likely to them, but actually involve much more uncertainty and risk than they realise.
Philip E. Tetlock, a professor of management at the Wharton School of the University of Pennsylvania, has studied people’s tendency to exhibit hindsight bias. “Even after it has been explained to you 100 times, you can still fall prey to the bias” he has said. “Indeed, even after you’ve written about it 100 times.”
The ability of investors to identify a bubble after it has burst is a classic case of hindsight bias. In both 1999 and 2007, for example, very few investors correctly forecasted that stock markets were about to fall. However, when we now look back at those times, it’s often felt that the signs of what would happen next were clear and there for all to see.

Case study
Hindsight bias can be illustrated by the following case study and above chart. In this example, our investor William invests in two managed funds during 2013.
In January, after much research, William decides to invest in Managed fund A. The Managed fund unit price soon increases substantially in value. William is delighted – his research has paid off! He congratulates himself on his perception and investment insight.
In December, William decides to invest again. His success with Managed fund A gives him confidence that he will be able to pick another winning stock. This time, William invests in Managed fund B.
Of course nobody can be certain how Managed fund B’s unit price will perform, including William. But he is more confident in his expected (positive) outcome for Managed fund B – and less focused on the wide range of other possible investment outcomes for its unit price – than he might have been before his success with Managed fund A.
In short, hindsight bias has led William to become over-confident in his Managed fund-picking skills.

Eliminating hindsight bias

The first rule of avoiding the common investment pitfalls associated with hindsight bias is to be aware that it exists.
Even experienced investors can never be certain how particular investments will perform in the future. Investors must always balance risk and return, placing equal emphasis on all factors that have impacted previous investment decisions, both successful and unsuccessful.
Doing so will provide investors with a clearer and more balanced perspective to their decision-making process. Maintaining this focus can enable investors to avoid the unfounded over-confidence in their predictive abilities that hindsight bias can trigger.
An alternative approach would be to invest in a managed fund, run by a professional investment manager. Investment managers tend to follow consistent, repeatable investment processes which can help eliminate hindsight bias from investment decisions.
Speak to your financial adviser if you have any questions about hindsight bias.

This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Females to take the lead on insurance

insurance files

Females to take the lead on insurance

The gap between men and women is closing in most facets of life. But it seems there’s one area females still have some catching up to do – protecting themselves with insurance.

That’s my view I believe the problem lies in the historical notion of the male being the primary breadwinner.

There was a time when you only took out insurance on the husband. But not only does this ignore the value of what women do – both at work and at home – it doesn’t reflect the changing nature of the Australian family.

Women now earn 92% of male salaries . And despite making up 45% of the workforce, females represent only 15-20% of all insured incomes .

The lack of insurance for women doesn’t make sense – particularly when you consider how much more vulnerable women often are financially.

This vulnerability stems from less time in the workforce, with women often assuming the role of primary carer of children and/or elderly relatives.

As a result women typically have less savings, and less superannuation than men. And considering women will statistically live longer, they can ill-afford extra setbacks.

Add illness or injury to the mix, and women can find it incredibly hard to recover financially if something happens to them,That’s where insurance can be so valuable.

All women, particularly those with a family and/or a mortgage, to review their insurance needs regularly with their financial adviser.

Your cover has to keep up with your changing circumstances. There’s no point putting it off until it’s too late.

‘Australian Social Trends, 2005 – ABS
‘Australians at risk’ – IFSA, 2006

This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product