Macarthur Wealth Management - Macarthur Wealth Management

How the Age Pension could be impacted by downsizing

It’s commonly referred to as the great Australian dream – to own a patch of dirt with your name on the title deed.

Perhaps the dream isn’t a three-bedroom brick-and-tile on a quarter-acre anymore, but whether it’s an inner-city apartment or a renovator in the suburbs, some Australians still want a place to call their own.

Our home is likely to be one of the biggest investments most of us will ever make. And even though prices in some areas are currently falling, Australia still rates as one of the least affordable places in the world to buy a house.¹

That can be tough for young people hoping to enter the market, but high prices can be great news for retirees who scrimped and saved for years to put a roof over their head.

Downsize contributions to upsize your super

According to a Start at 60 survey, more than 80 percent of Starts at 60 readers own their homes outright, with 56 per cent owning properties worth more than $500,000^2. Of course, if you’re happy with your income, that’s a great safety net to have.

But if you’re unhappy with the amount you have to spend in retirement, selling your house, buying a less expensive property and using the cash to boost your super balance and thus your income, could make sense.

Those who sell their main residence and satisfy the eligibility criteria may contribute up to the lesser of $300,000 and the amount of the proceeds to their super as a downsizer contribution. If both member of a couple are eligible and the proceeds are $600,000 or more, the downsizer contribution can be up to $600,000 ($300,000 for each member). Downsizer contributions are not assessed against other contribution caps.³

“It may also be more tax-efficient than using the money to invest outside super,” Bryan Ashenden, BT’s head of financial literacy and advocacy, points out.

“If you can’t get it into the super environment, then you’re looking at investing in your own name and you’ll be paying tax at your own marginal tax rate,” he explains.

“But if you can put it into super and then move it across to a pension, then you’re going to be in a totally tax-free environment.”

But while this will increase the amount of income you can draw down from super, it may decrease or even remove your eligibility for the Age Pension. This is an important consideration, so we’ve set out some key points that may help you get a feel for whether it may be worth exploring if downsizing could feature in your retirement income plans.

Some basics on the Age Pension

First, the easy part. Since 1 July 2023, to be eligible for the Age Pension you must be over age 67.⁴

There are also limits on how much wealth you can have and qualify for the pension. We’ll dig into the income and asset tests in a moment but in short, everything you earn and everything you own is considered when you claim the Age Pension. Wages, business income, your super, investments, car, household contents – the lot.

However one major asset is excluded.

The Age Pension’s key exclusion

Your ‘principal home’ as the government calls it, and up to two hectares of land (about five acres in the old money) isn’t taken into account for pension eligibility purposes. It doesn’t matter whether your castle is a $50,000 shack or a $50 million waterfront mansion, it won’t impact your pension entitlement.⁵

Every few years, there are rumblings that the rules need to be tightened, making the family home assessable under the assets test. But millions of retirees – who, as various governments are very aware, all vote – have a strong desire to stay put in the family home. So for now, there hasn’t been a serious push to change anything.

Sometimes, people take advantage of this exclusion and upsize; in other words, buy a more expensive home in retirement to reduce their financial assets in order to maximise their pension entitlement.

Downsizing is far more common, though. But if you sell one home and buy a less expensive one, even if you’re using the new ‘downsizing’ superannuation rules, the money left over after you’ve purchased a new property becomes assessable.

For example, let’s take a retiree who sells the family home for $750,000, buys a smaller property for $500,000 and makes a $250,000 super contribution. The $250,000 paid into super becomes assessable under both income and assets tests.

Age Pension and the income test

When you claim Age Pension, your entitlement is assessed under both the income test and the assets test. The one that calculates the lowest rate of pension is the one that’s used.⁶

Let’s look at the income test first. All of your sources of income are added up, including ‘deemed income’ from financial investments like shares, bank accounts and account-based pensions.⁷

Deeming means that the government assumes your financial assets earn a specific rate of return, even though the real return you receive from them may be higher or lower than the deeming rate. The deeming rate is set by the Minister for Social Services, based on the rates available on a wide variety of financial instruments.

However if you’re looking at downsizing, it’s likely the assets test will apply.

Age Pension and the assets test

As we’ve said, your home isn’t counted, but everything else is, including your furniture! (There’s some good news in that, though, because household contents are assessed at market value, not replacement cost.)⁸

Assuming you’re a homeowner, these are some important numbers. A single person can have up to $314,000 in assets and receive the full pension. Between $314,000 and $695,500, a part-pension is payable, and after $695,500, the eligibility to receive any Age Pension cuts off entirely.

A couple can have combined assets worth $470,000 and receive a full pension, between $470,000 and $1,045,500 for a part-pension, before it cuts off entirely at $1,045,500.⁹

If your assets are between the thresholds, making you eligible for a part-pension, you’ll need your calculator to work out what payment you’ll receive. Once your assets reach the lower threshold, your pension starts reducing by $3 per fortnight (single, or couple combined) for every $1,000 worth of assets you own above the threshold.

Putting that differently, if you’re already assessed under the assets test, every $1,000 in extra assets will reduce your pension by $3 per fortnight, or $78 per annum.

If you’ve got a mathematical bent, you’ll have worked out by now that the reduction in Age Pension is 7.8 percent of excess assets, so 0,000 of investments above the threshold will reduce the pension by ,800 a year, even if those investments aren’t earning anywhere near that rate of return.

Sound complicated? It can be!

There are restrictions on who qualifies to use the downsizing-to-super rule.

“You have to meet the requirements of being at least age 60 and must have owned the property for at least 10 years, and qualifying the property for some exemption from capital gains tax,” BT’s Ashenden explains.

“It also doesn’t matter how much money you’ve already got inside super, you’re still eligible to contribute up to $300,000 (or up to $600,000 for a couple).”

If you’re not too sure about any of this (particularly Age Pension rate calculations) then don’t be alarmed, because you’re not alone. Legislation governing Australia’s retirement income is complicated and the rules change reasonably regularly.

What we’ve tried to do here is not make you an instant expert, but to show that although downsizing can be a great way to top up your retirement income, you need to tread carefully when it comes to the impact on the Age Pension.

If you’re not sure how it will affect your personal financial circumstances, seek advice from a financial adviser about your retirement plans. That way, you can make an informed decision about upsizing, downsizing or staying right where you are.

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

References

1 http://www.demographia.com/dhi.pdf
2 This has been based on a survey of more than 1,000 Starts at 60 readers, conducted by Starts at 60 in July 2018.
3 https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/how-to-save-more-in-your-super/downsizer-super-contributions
4 https://www.dss.gov.au/seniors/benefits-payments/age-pension
5 https://www.servicesaustralia.gov.au/real-estate-assets?context=22526
6 https://www.servicesaustralia.gov.au/how-much-age-pension-you-can-get?context=22526
7 https://www.servicesaustralia.gov.au/deeming?context=22526
8 https://guides.dss.gov.au/guide-social-security-law/4/6/6/10
9 https://www.servicesaustralia.gov.au/assets-test-for-age-pension?context=22526

Stay up to date with our latest blog on political, economic and market news:

Understanding how your age pension entitlements are calculated.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

The Age Pension is a social security benefit provided by the Australian government to eligible individuals who have reached retirement age and meet certain residency requirements, income and asset tests. The means testing rules for the Age Pension are designed to ensure that the benefit is targeted to those who need it the most. Here is how the means testing rules work:

Income test: The income test assesses your assessable income, which includes income from a range of sources, such as employment, investments, and superannuation. For singles, the maximum income you can earn before your pension is reduced is $190 per fortnight and for couples, it is $336 per fortnight. Once your income exceeds these thresholds, your pension will be reduced by 50 cents for every dollar you exceed the threshold.

Assets test: The assets test assesses your total net worth, including assets such as cash at bank, investments, and superannuation to name a few. For singles, the maximum asset limit you can have before your pension is reduced is $280,000, and for couples, it is $419,000. Once your assets exceed these thresholds, your pension will be reduced by $3 for every $1,000 you exceed the threshold.

Combined means test: The Age Pension is subject to both an income test and an assets test, and the test that results in a lower rate of pension will be used to calculate your pension entitlement. For example, if your income test results in a pension reduction of $200 per fortnight, and your assets test results in a pension reduction of $150 per fortnight, your pension will be reduced by $200 per fortnight.

It’s important to note that there are a range of other factors that can affect your Age Pension entitlement, including your living arrangements, whether you have a partner, and whether you have any dependents. The rules and thresholds for the Age Pension are subject to change, so it’s important to stay up to date on the latest regulations and seek advice from a financial advisor if you have any questions about your entitlement.

Note: Figures and thresholds effective as of January 2023.

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

YouTube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

What are the different types of superannuation funds?

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

There are several different types of superannuation funds. Knowing the different types of funds will make it easier for you to choose a fund that is appropriate for your purposes. Superannuation funds can be grouped into several categories. Features differ in each category.

Retail Funds

These are usually run by banks or investment companies; their general characteristic are as follows:

Anyone can join;
They often have a large number of investment options, sometimes in the hundreds;
They are usually used by financial advisers who may receive a fee or commission;
They offer both accumulation and pension fund options most Australians have their superannuation in an accumulation fund. They are called ‘accumulation’ funds because your money grows or ‘accumulates’ over time, but with the ageing population, many Australians are now using their superannuation to provide regular income payments in retirement;
Most retail funds range from mid to high cost, but some are now offering a low cost alternative;
The company that owns the fund aims to retain some profit.

Industry Superannuation Fund

Larger industry superannuation funds are open for anyone to join. Some others are restricted to employees in a particular industry. The main features of an industry fund are:

They usually have a range of investment options, which will meet most people’s needs;
They are generally low to mid cost funds although some have high fees;
They are ‘not for profit’ funds which means all profits are put back into the fund for the benefit of all members.

Public Sector Funds

Public sector funds were created for employees of Federal and State government departments. Most are only open to government employees. The main features are:

Some employers contribute more than the 10% minimum;
A modest range of investment choices that will meet most people’s needs;
Many long-term members have defined benefits, newer members are usually in an accumulation fund;
They generally have very low fees;
Profits are put back into the fund for the benefit of all members.

Corporate Superannuation Funds

A corporate fund is arranged by an employer, for its employees.

Some larger corporate funds are ’employer sponsored’ funds where the employer also operates the fund under a board of trustees appointed by the employer and employees.

Other corporate funds will be operated by a large retail or industry superannuation fund (especially for small and medium-sized employers).

Features of these funds include:

Funds run by the employer, or an industry fund will return all profits to members. Corporate funds run by retail companies will retain some profits;
If it is managed by a retail or industry fund it may offer a wide range of investment options;
They are generally low to mid cost funds for large employers but may be high cost for small employers;
Some older corporate funds have defined benefit members, most others are accumulation funds.

Eligible Rollover Fund

An Eligible Rollover Fund (ERF) is a holding account for lost members or inactive members with low account balances. These funds often have low investment returns and may charge high fees.

Your money is likely to grow faster if you consolidate your ERF with your active superannuation fund.

Self-Managed Superannuation Fund (SMSF)

SMSFs are essentially DIY superannuation for those that want the hands-on control with their superannuation. Of course, with added control comes added responsibility and workload.

SMSFs can be suitable for people with significant superannuation savings and skills in financial and legal matters. You must be prepared to research and track your superannuation investments regularly if you want to manage them yourself.

You can set up your own private superannuation fund and manage it yourself, but only under strict rules regulated by the Australian Taxation Office (ATO).

A SMSF can have one to four members. Each member is a trustee (or director if there is a corporate trustee).

Running your own fund is complex so think carefully before setting one up. If you set up a SMSF you must:

Carry out the role of trustee or director, which imposes important legal duties on you;
Use the money only to provide retirement benefits;
Set and follow an investment strategy that ensures the fund is likely to meet your retirement needs;
Keep comprehensive records and arrange an annual audit by an approved SMSF auditor.

If you’re running a SMSF, you will typically need:

A large amount of money in the fund to make set up and yearly running costs worthwhile
To budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advice;
Plenty of time and energy to manage the fund;
Financial experience and skills so you are more likely to make sound investment decisions;
Separate life insurance, including income protection and total and permanent disability cover.

You can pay an adviser a fee to do the administration or help with the investment decisions for your SMSF. However, you cannot pass on the responsibility of being a trustee or director.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

Youtube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

What is superannuation?

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Superannuation is a tax advantaged way of saving for retirement and makes up two of the three “pillars” of the Government’s retirement income policy. The three pillars are:

A Government funded means-tested age pension
Compulsory superannuation contribution (i.e., the Superannuation Guarantee)
Voluntary superannuation contributions

Superannuation is often simply referred to in everyday conversation as “super”. The Australian superannuation sector has grown to become one of the largest private pension funding arrangement in the world with assets exceeding $3.5 trillion as at the end of December 2021.

Superannuation consists of two distinct components:

Are over 18 years of age, working on a full-time, part-time, or casual basis; or
If under 18 years of age, you are employed for more than 30 hours per week.

Compulsory Superannuation

If you work in Australia, your employer may have to contribute to a superannuation fund for you under the Superannuation Guarantee system if you:

In certain limited situations, and industrial award or workplace agreement may impose additional superannuation obligations of an employer.

Superannuation payments are paid by your employer in addition to the salary or wages you receive. If you are eligible for superannuation, your employer will pay your superannuation directly into a superannuation fund.

Voluntary Superannuation

In addition to compulsory superannuation contributions, individuals may make their own personal and tax-deductible contributions and employers may make additional contributions for an employee, generally structured under a “salary sacrifice” arrangement. Salary sacrificed contributions are made from an employee’s pre-tax salary

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

Youtube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

What are the different investment styles?

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Growth or Value Investing

Investors must consider whether they prefer to invest in fast-growing firms or under-priced industry leaders. Each will have varying risk and return characteristics and will perform differently at different times in a market cycle. Investors must determine which strategy best suit their individual needs.

The growth style of investing looks for high-quality companies that have high earnings growth rates, high return on equity, high profit margins and low dividend yields. There are however no guarantees going forward. Companies that have all of these characteristics are often innovators within their field/industry and make lots of money. It is thus growing very quickly, and reinvesting most or all of its earnings to fuel continued growth in the future.

The value style of investing is focused on buying strong companies at reasonable prices. Their price however has fallen due to the company or industry falling out of favour with investors or perhaps the economic cycle not favouring a particular industry at that point in time. Investment managers look for a low price to earnings ratio, low price to sales ratio, and generally a higher dividend yield. The main ratios for the value style show how this style is very concerned about the price at which investors buy in. The idea behind value investing is that stocks of good companies will bounce back in time when the true value is recognised by other investors and the market.

Quality and Lower Volatility Investing

In recent years, we have noticed an increase in other styles of investing. These styles include Quality and Lower Volatility investing and, in many cases, some products will focus on both.

Investing in Quality companies is usually associated with companies with efficient management, sound balance sheets, low debt, profitability, and strong cash flows. Quality strategies seek to provide excess returns by investing in companies that are better positioned for short- and long-term growth.

Lower Volatility investing targets companies with less volatile share prices that typically fall less than the share market during share market declines.

Higher quality and lower volatility portfolios aim to deliver strong up-market participation and down-market protection. These portfolios also tend to blend well with growth and value portfolios to improve overall portfolio diversification.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

Youtube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

Benefits and disadvantages of managed funds

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Benefits of Managed Funds

Managed funds have a number of advantages that allow you to select options that suit your specific needs and objectives. These benefits may include:

Diversification: Managed funds can provide you with a diversified portfolio that may invest across a range of asset classes and securities
Wide choice of investments: Wide choice of asset classes and diversified portfolios
Specialists: Access to specialist investments and investment styles
Tailored portfolio: Can have a tailored portfolio where specialist managed funds are chosen (e.g. infrastructure, emerging markets, small caps)
Professional investment manager: Team of professional investment managers responsible for the investment selection, review and monitoring. This also includes risk management
Active performance: Active managed funds will actively manage investments to take advantage of the changing market outlook and therefore have the potential to outperform their index
Low level of participation: There is a low level of participation and time involvement required by you in the management of the managed fund compared to investing directly
Regular investments: Many managed funds allow regular investments including small minimum amounts. This can assist you if you are investing using a ‘Dollar cost averaging’ approach and/or a regular savings plan
Tax statements: Managed funds provide tax statements to assist with you with completing your tax returns

Disadvantages and Risks of Managed Funds

There are a number of risks and disadvantages of managed funds to be aware of. The key risks will be determined by the nature of the managed fund including the asset classes and securities that it invests in. The risks and disadvantages include:

Market risk: The performance of the managed fund will be affected by the assets and securities that it invests into. If it invests in ‘growth’ assets like shares and property, it has the potential to provide higher returns over the long term but will also have a higher level of risk including the risk of capital losses compared to more secure investments like cash and bonds.
Limited control: You have no control over the individual investments that are bought and sold.
Tax management: You have no control over the timing of sales and purchases of assets or assets selected to be sold. This may affect the capital gains tax outcome of the managed fund.
Capital gains in distributions: The distributions paid from a managed fund may include a return of capital which can be less tax effective for investors.

Limited transparency: There is limited transparency of the underlying portfolio and investments. A managed fund will tend to report of the securities and assets held in the portfolio but this tends to be reported with a lag.
Higher fees: Fees can be high due to the management and administration fees and buy-sell spreads.
Currency risk: Movements in the relative value of international currencies can influence the value of international assets.

Gearing risk: Some managed funds may borrow funds to increase potential returns. This gearing can magnify both gains and losses.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

Youtube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

What is a managed fund?

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

A managed fund is a professionally managed investment portfolio that pools the money of multiple investors. Investment/fund managers are appointed to manage the money within the fund including the selection, buying and selling of the underlying investments.

By pooling money with other investors you may gain access to investments not normally available if you invested directly or enable you to achieve a greater level of diversification. The managed fund structure also allows for the professional management of your money.

If you invest money into a managed fund you will receive a number of ‘units’ in that fund. The number of units you receive is calculated as the amount of money you invest divided by the ‘entry’ unit price on that day. This is why managed funds are also often called ‘unit trusts’. The unit price may increase or decrease in line with the value of the underlying assets.

Investment Options

The investment/fund manager or administrator of the fund, may offer a range of investment options that you can choose to invest in. Each option has different investment goals, timeframes, risk profiles and underlying assets.

Some managed funds may provide a diversified allocation to asset classes based on a risk level. Examples of these include a ‘balanced’ fund which invests approximately half of the money within the portfolio in growth assets such as share and property, with the remainder in more defensive assets such as cash and bonds.

Other funds might invest in a specific type of asset (e.g. Australian shares, international shares, property or cash). There may be different investment styles used to manage the portfolios such as value or growth investing.

When investing in a managed fund you need to choose which options are best suited to your personal preferences and financial goals. This includes consideration for:

Your risk profile
Your investment time horizon
Your need for diversification across asset classes
Your preference to invest in a particular type of investment or asset class

The Product Disclosure Statement (PDS) provides you with information on the investment options and may help you to determine the suitability.

Investment Returns and Taxation

The underlying assets of the managed fund might produce income (including interest, rental income, realised capital gains and dividends) and/or capital growth.

The fund manager will deduct any applicable fees and expenses from the income generated and the remainder is more often than not, distributed to investors (unit holders).

This income is included in the investor’s own tax return and is taxed at the investor’s own marginal tax rate. If franking credits have been derived these will be passed onto investors and can help to reduce tax payable.

If units are sold, this may create a capital gain or loss depending on how the fund unit price has changed since your initial investment and any investment thereafter. If a capital gain has been realised on units held for more than 12 months a 50% capital gains tax discount will apply unless the units were owned by a company.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

Youtube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

Risk Profiling

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

There are a number of factors that you need to consider to determine the most appropriate investment for your personal preferences and financial goals. A key driver of this decision is your risk profile which measures your attitude towards risk. Your risk profile will depend on how you feel about a range of different issues such as:

Your comfort and knowledge of investment markets. The higher your knowledge, the more comfortable you may be investing in riskier assets like shares and property.
Your preference for capital growth (compared to capital preservation and/or income). The higher your preference for growth may be better suited to investing in riskier assets that offer a higher potential for capital growth.
Your level of concern when markets suffer a loss. If you are likely to sell and feel stressed from this loss, then a lower exposure to risky assets may be suitable.
How important it is to you for your investments to keep pace with inflation. If this is important to you, then shares and property are more likely to meet this need.
Your investment time horizon. If you are investing for the long term (at least 5-7 years), then you may consider investing in shares and property. Generally, risky assets are not suitable if you are investing for shorter periods of time and a higher level of investment in cash and bonds may be more suitable.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

Youtube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

Direct investing versus Managed Funds

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

You can access assets and/or securities by buying the investment directly or via a managed trust.

Direct investments involve buying the security such as a specific share or property such that you are a part or full owner of the security. As an example, you can become an owner in a specific company by buying its shares on the Stock Exchange which entitles you to receive dividends and vote at General Meetings (depending on your share structure).

An alternative means of gaining exposure to assets is via a managed fund. A managed fund is a professionally managed investment portfolio that pools the money of multiple investors. A fund manager is appointed to manage the fund including selection of the underlying investments and maintaining client records. By pooling money with other investors you may gain access to investments not normally available if you invested directly or enable you to achieve a greater level of diversification.

If you invest money into a managed fund you will receive a number of ‘units’ in that fund. The number of units you receive is calculated as the amount of money you invest divided by the unit price on that day. This is why managed funds are also often called “unit trusts”. The unit price may increase or decrease in line with the value of the underlying investments.

Each investment approach has its advantages and disadvantages that you should consider. These will include the implications for fees and investment control.

Investing directly in securities may require you to actively review and manage the investments in your portfolio on a regular basis. You may be required to make decisions and changes to account for corporate action events in the case of buying shares directly such as takeovers, rights issues and share purchase plans. This can require you to have the time and inclination to manage your direct investments portfolio. On the flip side, the advantage provided by a managed fund is that you do not need to devote the time to be actively involved in the investment decisions.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

Youtube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

Diversification in an investment portfolio

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

You can invest in a mix of asset classes or securities as a means of ‘diversifying’ your portfolio. Diversification is a key investment principle used to manage the risks of a portfolio and involves investing in a variety of assets and investments that perform differently to each other over time. It is often described by the proverb “Don’t put all your eggs in one basket”.

It also allows you to have an exposure to a spread of assets and securities including both ‘growth’ and ‘defensive’ assets. It means that you avoid taking big bets in one or a few asset class and/or investments that may adversely affect your returns if it underperforms.

Diversification can reduce the risk in your portfolio but it will not eliminate the risks. Your portfolio is likely to experience ups and downs in returns over time but by a lower level of variability.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

Disclaimer

Macarthur Wealth Management Links

Blog https://www.macarthurwealth.com.au/insights/

Facebook https://www.facebook.com/macarthurwealthmanagement

Youtube https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter https://twitter.com/MacarthurWealth

Pinterest https://www.pinterest.com.au/MacarthurWealth/

Linkedin https://www.linkedin.com/company/macarthur-wealth-management

Instagram https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

Author: Macarthur Wealth Management

How the Age Pension could be impacted by downsizing

It’s commonly referred to as the great Australian dream – to own a patch of dirt with your name on the title deed.

Downsize contributions to upsize your super

Some basics on the Age Pension

The Age Pension’s key exclusion

Age Pension and the income test

Age Pension and the assets test

Sound complicated? It can be!

References

Understanding how your age pension entitlements are calculated.

What are the different types of superannuation funds?

What is superannuation?

What are the different investment styles?

Benefits and disadvantages of managed funds

What is a managed fund?

Risk Profiling

Direct investing versus Managed Funds

Diversification in an investment portfolio

Search

Recent Posts

Recent Comments

Enjoy
the ride.

Company

Services

Location

Author: Macarthur Wealth Management

It’s commonly referred to as the great Australian dream – to own a patch of dirt with your name on the title deed.

Downsize contributions to upsize your super

Some basics on the Age Pension

The Age Pension’s key exclusion

Age Pension and the income test

Age Pension and the assets test

Sound complicated? It can be!

References

Search

Recent Posts

Recent Comments

Enjoythe ride.

Company

Services

Location

Enjoy
the ride.