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With 2024 underway, Advice Manager Iby Ibrahim delivers a financial checklist for the new year to get you started on the right foot, plus his review of the most important legislative highlights from 2023.  

Your financial checklist and legislative review

New year checklist

The start of a new year is a great time to review your financial plan and get ahead. Here is a checklist to help you get started:

  1. Review your financial goals: Do they still align with your 2023 goals? Have you got new ones? Are there legislative changes that you could take advantage of?
  2. Review your budget: Take a look at your monthly budget and identify areas where you can optimise your expenses. This could include canceling subscriptions you don’t use, and continuing those that keep you healthy, like a golf club or gym membership.
  3. Review your savings accounts – while increasing interest rates may be stressful for mortgage holders, it’s good news for savers. Make sure your account is offering the best savings rate to suit your needs, and take a look at the T&Cs to make sure you’re across any actions you might need to take (such as regular deposits or similar) to access higher rates.
  4. Centrelink details up-to-date? – Make sure Centrelink has your latest financial details. Things like non-financial assets like cars, caravans or boats. If the value of your non-financial assets has depreciated, inform Centrelink as it may affect your entitlements.
  5. Make or review your estate plan: Make sure your estate plan is up to date and reflects your current wishes. For more great insights on the benefits of an Estate Plan read One important decision when planning your estate article.
  6. Review your retirement plan: Make sure your investment strategy and retirement plans are on track to meet your financial goals. Consider increasing your contributions if necessary. It's recommended to talk to your financial planner.

 

By following this checklist, you can start the new year off on the right foot and get ahead financially. Good luck!

Legislative changes

There were quite a few significant legislative changes made to super and living in retirement throughout 2023. Here are the major highlights. Please note: some of these changes can be quite complex, so please talk to your financial adviser to see how they may affect your financial situation.

Selling your home and downsizing

Since 1 January 2023, if you sell your main home, the amount you intend to spend on your new home can be exempt from the assets test for up to two years. This amount is only subjected to deeming at the lower rate.

For home-owners who receive benefits like the Government Age Pension, this change provides more flexibility when considering changes in your living arrangements throughout retirement.

Remember, if you’re considering downsizing, you should think about what impact this could have on your Centrelink entitlements. And keep in mind, you’re also eligible to make a downsizer contribution to super even if you're over age 75.

Get in touch with your planner to see how these changes could benefit you.
 

Superannuation

Minimum drawdown amounts

From a superannuation perspective, minimum drawdown amounts from your retirement income account reverted to their standard minimum rate (which is based on your age). This means you could have additional income, so you might want to think about what you could do with these additional funds to help move closer to your goals.

Transfer Balance Cap

The general Transfer Balance Cap, which limits how much can be held in tax-free retirement savings, was increased to $1.9 million.

This change means that existing retirees who had not used their limit or had never held a pension, can get more into tax free retirement savings. The change to the Transfer Balance Cap also impacts Total Super Balance, which is another threshold that limits the after-tax contributions you can make. The increase in July 2023, and the 2022 removal of the work test for those aged 67 to 74, means that more people can contribute extra to their super.

Total Super Balance

Any unused concessional cap, can be carried forward for up to five financial years. So if you have any unused cap space from the 2018/19 year, you need to use it by 30 June 2024.

To be eligible, your Total Super Balance must be less than $500,000 at 30 June 2023 and you need to be under age 67, or if you’re 67–75, you must meet the work test or work test exemption. This could be good for your situation as concessional contributions can help reduce your tax.

Navigating Total Super Balance, Transfer Balance Cap and contribution caps can be complex and there could be consequences of getting it wrong. If you’re thinking about making use of some of these opportunities, you can access all your personal superannuation information via the ATO and should speak to your planner.

A crystal ball for 2024

Finally, last year the government released plans to apply an additional tax to those superannuation earnings that come from balances over $3 million. Draft legislation has now been released, so you can expect to hear more about this in 2024 as the laws are debated.

With inflation still running quite strong, general Transfer Balance Cap and contribution caps could be indexed in 2024 . If this does happen, you might be able to move more into your pension phase or contribute more into super. As the data is released and changes come to light, we’ll provide further updates.

Time for a check in?

A little time today could mean a big difference to your tomorrow. Regular reviews with a dedicated financial planner can help you keep your plans on track, and adapt to changes in life, investment markets and strategies.

Disclaimer

This is general information only and does not take into account your specific objectives, financial situation or needs. Seek professional financial advice, consider your own circumstances and read our Financial Services Guide, any relevant product disclosure statement & Target Market Determination, before making a decision. Call us or visit our website for a copy.

Issued by Aware Financial Services Australia Limited (ABN 86 003 742 756, AFSL No. 238430), wholly owned by Aware Super (ABN 53 226 460 365) whose trustee is Aware Super Pty Ltd (ABN 11 118 202 672, AFSL 293340). For customer service please call 1800 620 305. Financial planning services are provided by Aware Financial Services Australia Limited, ABN 86 003 742 756, AFSL No. 238430. Estate planning services are provided by Aware Super Legal Pty Ltd (ACN 606 835 170), an Incorporated Legal Practice.