New Year’s resolutions are hard to keep – especially vague ones to which you never properly commit! With two years of chaos that have thrown our finances into disarray, a common resolution for many this year is to get their finances back on track.
Setting financial goals, or re-evaluating current ones, can help you keep on ttrack to achieve yours. Finance tips and advice are everywhere, so it can be difficult to know what’s relevant or not.
To help set you up for success in 2022, here are our top finance tips and tricks.
Reflect on 2022
Before you even begin to think about the year 2023, you should take a break and think about the year that has just passed. Take a look at the budget for 2022 and evaluate how well you did in meeting the objectives set for the previous year.
If you were unable to accomplish these objectives, it is important that you investigate the reasons behind your failure and identify the areas in which you may have erred.
It is not a terrible thing to make mistakes as long as they are dealt with in a fast and effective manner.
Give yourself some victories in this area to show yourself that you are capable of making positive changes, and then ask yourself, “Now, what small steps can I take towards the larger goals?”
The year ahead
There is no way for us to know for definite what the future contains; nonetheless, there are certain tendencies that we can analyse to make predictions about what the coming year may bring.
Rates are going to go up. There have been instances where the fixed rates have already increased, which indicates that eventually the variable rate would follow suit.
As a result of this, now is an ideal moment to conduct an audit of both your mortgage and your general financial situation in order to establish financial stability and certainty for the subsequent two to three years.
Taking preventative measures today could save you hundreds of dollars in the future.
Goal setting and strategy
Many of us go into the process of goal setting with only a hazy notion of what it is that we would like to accomplish.
On the other hand, you’ll have a greater incentive to stick to your commitment if you physically write down your objective and keep it in a location where you’ll see it frequently.
The execution plan can take the form of a series of more attainable targets to help you monitor your progress.
For instance, if your long-term objective is to save $5,000 in one year, you should divide this more ambitious goal down into something that can be monitored on a more regular basis.Â
This might be accomplished by making a yearly commitment to save one hundred dollars every week for the duration of the year and then setting up the money to be transferred into a savings account automatically.
When you track your goal, you can get updates on how well you are doing towards achieving it in real time. Observing the gradual realisation of your objective is another essential factor in maintaining your motivation.
Be realistic
Check to see if the goal you have set for 2023, whether it be investing your money or saving up for a larger buy, is achievable given your current level of wealth.
If you still have a significant amount of debt, it’s possible that setting a goal to start or expand your investments is not the most practical option available to you.
While it is possible to pay down these debts using the money that is left over after taxes, it can be an extremely expensive endeavour.
Consolidating your bad debt into your mortgage at a much lower rate or into a single credit card with an interest-free term is an option to consider if you have the opportunity to do so and equity in your home.
Review your loans
When was the last time you looked over your loans, particularly your mortgage loan? You may be surprised, but the banks aren’t going to be knocking on your door with a better deal!
The only way to find out is to enquire about it. Have a conversation with your mortgage provider about the possibility of refinancing your loan.
Maintain a loan-to-value ratio that is lower than 80 percent whenever you can, since this will place you in a better position to negotiate with the bank.
One further technique to evaluate your financial obligations is to determine whether or not any of your “bad” debts, as we discussed before, can be rolled into one another as part of the consolidation process.
When you consolidate your debt, you are essentially consolidating all of your existing loans into one larger loan, which means that you will only be responsible for paying interest on that one larger sum.
Goal setting
The results of the study conducted by the FPA indicated that individuals were evenly divided between reaching a savings goal (52 percent) and going on vacation (44 percent) as their top priority for the upcoming year’s worth of objectives. It was also common for people to focus on paying off their mortgage and minimising their credit card debt.
Beginning an investing strategy is also quite high on the list of things that need to be done, particularly in light of the recent great performance of shares and residential property. This is especially true among younger individuals, who are increasingly turning to new digital platforms to take a more active role in managing their finances, both inside and outside of superannuation.
We can all have a little bit more fun next year, and maybe we’ll also be able to get our finances in good shape at the same time as constraints begin to be lifted and the economy begins to improve.
To strike the correct balance in your life, it is essential to provide your personal and financial goals with the attention they merit and to devise a strategy that will assist you in achieving those goals.
Advice for achieving your objectives
Review your daily spending
One of the five pillars upon which one’s financial stability and autonomy are constructed is a budget, which may be thought of as a plan for one’s spending as well as investments. However, things evolve with time, which is why it requires consistent updating.
When people get new jobs, promotions, bonuses, or are laid off, their incomes can fluctuate. Spending patterns also adapt in response to life events such as marriage, divorce, the arrival of children, relocation, and so on.
Make changes to your plan to reflect the new information you have. If the costs have increased, look for ways to cut expenditures in other areas. If you are successful in increasing your income, then you will have extra money to put away or invest.
Think about refinancing
However, you should verify that this is also the case with your mortgage rate. If you don’t ask, the lenders won’t even consider giving you a discount on the interest rate!
As a result of recent increases in the value of your property, you should now have a greater amount of equity in your home. Maintain a loan-to-value ratio (LVR) that is lower than 80% whenever it is in your power to do so.
This means that the sum of all of your loans should be less than 80% of the current value of your home. This will put you in a better position to negotiate with the other party.
Tempting destinations
If you’re anything like me, the closure of borders has given you a bad case of itchy feet. However, you shouldn’t make plans for your next vacation on a whim.
You might be required to provide documentation that you have been vaccinated, which can be difficult given that each nation as well as each state and territory in Australia has its own vaccination standards. As do airlines. You might also be required to go through the quarantine process upon arrival and/or departure.
Be sure to thoroughly examine your trip insurance policy as well; unforeseen shifts in plans brought on by public health restrictions might not be covered.
Living arrangements
As a result of the reopening of borders, many Australians may be considering moving to a new location, whether it be within the country or outside of it, a treechange or a seachange, a larger or smaller dwelling that is more suited to their needs, etc.
Others who are feeling lonely might consider moving in with their lover or their family, while the stresses of the lockdown might cause some partnerships to fail.
If you are considering making changes to your living situation, you should give some thought not just to the associated costs but also to how the changes will affect your money and the estate planning that you and they have done.
Track your online spending
The growth of online shopping is impressive, but you shouldn’t let it lead to unchecked growth in your expenditures.
When you hop from site to site, you might not realise how much you are charging on your credit card until it is too late. In order to keep a bad debt from accruing, check it periodically and pay it off when you can.
Consider the pros and cons of buy-now-pay-later plans as well. They will, without a doubt, split up the payments for your goods into more manageable chunks. However, if you pay late or miss an instalment, the total amount will increase dramatically. Will this have an effect on the rating of your credit?
Super catch-up
You are eligible to make additional contributions to your super fund thanks to catch-up laws, which the Australian Taxation Office refers to as carry-forward provisions for unused concessional contributions.
If you don’t replace that money, you could end up losing as much as $200,000 in terms of your retirement savings.
Save extra money
Those who were able to continue working despite the lockdowns probably saved a significant amount of money. The cost of your daily commute, family activities, coffees, lunches, dinners out with friends, and outings with the family all mount up.
Make good use of the money you have saved. You could:
- Pay off your debts, particularly the ones with high interest rates like credit cards.
- Pay off a portion of the mortgage.
- Make payments for the entire year’s worth of insurance or council rates in advance (which generally attracts a discount)
- Make extra extraordinary donations
- Create new financial investments (e.g., buying managed funds, shares, investment properties)
Consider investment gains
In reference to surpluses, it’s possible that you have more than you realise. The stock market and real estate prices have both seen significant increases in recent years, propelling investment markets to new heights. What are your plans with the money you have gained?
Think about whether it’s time to take some profits or whether you can use those assets as leverage to fund new investments. What much of an impact do those gains have on your overall tax burden? Gains are great, but the tax on capital gains is not so great.
Get ready for the upcoming holidays, birthdays, and Mother’s Day by planning ahead
It might seem counterintuitive to start thinking about next Christmas when you’re still getting ready for this one and cleaning up after it.
Boxing Day is the day when stores that have holiday merchandise that hasn’t been sold, such as decorations, wrapping paper, greeting cards, and non-perishable goods, lower their prices. These reductions can be as much as a fifty percent savings!
Why would you want to buy anything a year from now at full price when you can get it far cheaper right now? Put some gifts away for special occasions like birthdays and Mother’s Day.
Visit advisors
Have you ever conferred with a financial adviser, or has it been some time since you last saw the one you currently work with? Now is the time to make the necessary changes. In most cases, the value of quality advise more than justifies its cost.
There have been a lot of changes in the past year that you might not be aware of. Some of these changes include increased super contribution rates and indexing levels, more support for small businesses, new insurance conditions, and increased tax rates.
When it comes to topics pertaining to money, ignorance is never bliss. In most cases, investing in quality counsel pays for itself and assists in avoiding costly mistakes.
To ensure that 2022 is a prosperous year for your finances, it is essential that you have regular consultations with your financial advisor.
Top Tax Tips for 2023
As the year 2022 draws to a close, many of us are currently sitting here pondering ways in which we might be more astute and savvy with regard to our taxes and our finances.
This year, several modifications are being implemented; therefore, it is imperative that you continue reading in order to arm yourself with the foolproof tax artillery for 2023. The following is an overview of what you should anticipate:
- Windfall Gains Tax
- Personal contributions to superannuation threshold for carried forwards contributions
- Contributions to retirement savings plans for downsizers
- Threshold for quick depreciation of assets for small businesses
Windfall Gains Tax
The controversial new tax known as the Windfall Gains Tax (WGT) will be implemented in Victoria on the first of July in 2023. According to the WGT, a capital gains event will be triggered whenever there is an increase in the value of the land caused by rezoning that is greater than $100,000.
The taxable value of the gain will be calculated as 62.5% of any uplift that is greater than $100,000 but less than $500,000, and as 50% of the taxable value of any uplift that is greater than $500,000.
The WGT is a tax that is levied against the landowners whose property is being rezoned. There are a few different exclusions that can be taken:
- At the time of the rezoning, property that is capable of being utilised for residential purposes and up to 2 hectares of such residential land that are all owned by the same owner and were all rezoned by the same planning scheme amendment are considered residential land.
- In regard to rezonings, in order to rectify glaring or technical mistakes in the Victoria Planning Provisions or a planning scheme
- The WGT will not be assessed if the property in question belongs to a charitable organisation and is used for its intended use for a period of 15 years after the rezoning.
If you are found to be responsible for WGT, you will be given an assessment that includes a date by which the tax must be paid. It is fortunate that there are options to defer the payment, which enables the payment of the WGT to be deferred either until a dutiable transaction happens for the relevant land or until 30 years have passed since the rezoning event, whichever comes first.
The Valuer-General of Victoria is responsible for determining the market value of land both before and after a rezoning. Within the first two months after receiving the notice of assessment, you have the opportunity to file an objection in the event that you disagree with a valuation that was determined by the Value-General.
Carried forward personal superannuation contributions threshold
Although it is common knowledge that individuals are permitted to make deductible concessional contributions each financial year up to the extent of the deemed cap ($25,000 for the 2018 to 2021 financial years, and $27,500 for the 2022 financial year and onwards), we would like to shed some much-needed light on the reality that individuals can carry forwards unused cap amounts from up to five previous financial years (beginning with the 2019 financial year) – subject to the individual’s superannuation balance at the time of the contribution.Â
This means that in the best case scenario, you will be able to deduct $102,500 when filing your taxes for the year 2022. This is a significant reduction in the amount of tax you will have to pay as a result of contributing money to your super fund, which you will eventually be able to withdraw (eventually).
Irregular income earners, in particular, will benefit from this because it will allow them to catch up on their superannuation contributions if they have the financial capacity to do so. For instance, individuals who have received money from a sale and/or incurred a taxable capital gain will be in a position to do so.
| Financial Year | Financial year Concessional cap | Maximum deduction with no concessional cap used in the previous year |
| 2019 | $25,000 | $25,000 |
| 2020 | $25,000 | $50,000 |
| 2021 | $25,000 | $75,000 |
| 2022 | $27,500 | $102,500 |
| 2023 | $27,500 | $130,000 |
Imagine it as an exceptionally long-lasting term deposit, with a return on investment equal to the rate at which your marginal tax rate applies to your income (if you can stand to wait a few years to access the principal). Speaking of holding off, if you want to put this tax advice on hold for a while, you are free to start using it whenever you like throughout the following few years.Â
You should be aware, however, that the amount of unused cap that is available to you will never exceed the sum of the five most recent fiscal years.
In any case, the majority of the large player super funds require an excruciating three- or four-week notice if you want your contribution to be received and processed before the cut-off date of June 30, 2022; consequently, you should make sure that your contribution is received and processed as soon as possible.
A word of caution before you start thinking about how you’re going to spend all of that delicious tax return money: your concessional cap will be eaten away by employer contributions (whether it be the statutory 10% SGC or otherwise), as well as personal contributions.
Downsizer superannuation contributions
You are able to make a contribution to your super fund from the proceeds of the sale of your home for up to $300,000 if you are over the age of 65 and meet the eligibility requirements*.
This contribution will not count towards your contributions cap or superannuation balance, and you can make it even if your total super balance is more than $1.6 million.Â
There is no requirement to buy a new home if you are planning on moving into your firstborn’s granny flat for some well-deserved pay-back free rent. It is a great opportunity to top up what you’ve saved in super if you haven’t had the chance (or if you’ve just been dedicated to traversing Europe), and there is no need to buy a new home if you are planning on topping up what you’ve saved in super.
Several significant aspects that must be taken into account are as follows:
- It will be deducted from your available transfer balance cap.
- Only one contribution to the downsizer will be accepted from each individual.
- The contributions cannot be deducted in any way.
One of the benefits of selling a house that was exclusively owned by one partner is that the other partner is eligible to make a downsizer contribution as well, provided that all of the other requirements for eligibility are satisfied (see the list of requirements that follows for more information). When it comes to love and property, anything goes!
In addition, there is talk of lowering the minimum age limit for downsizer superannuation contributions from 65 to 60, which would make the programme more accessible to baby boomers.
Small business immediate asset write-off threshold
The good news for owners of small businesses is that we still have a full five months to deduct the full value of any assets that qualify for the deduction. Businesses that have an aggregated turnover of up to $5 billion can claim an instant deduction for the value of the following items until the 30th of June, 2022:
- New assets that will depreciate over time;
- The expense of making enhancements to existing assets that are eligible; and
- For sole proprietorships, partnerships, limited liability companies, and corporations that have a combined yearly turnover of less than $50 million. – used property and possessions
- By the 30th of June in 2022, all assets must be installed and ready for usage; thus, you should start your buying as soon as possible. A high-cost asset purchase could cause your business to incur losses that could be carried back to the preceding year’s profits, allowing you to receive a tax refund in addition to the tax reduction it would otherwise provide.
It is important to keep in mind that the luxury car limit for the 2022 fiscal year is $79,659 for fuel-efficient vehicles and $69,152 for other vehicles. This means that only the business portion of this amount can be immediately deducted in the year that the vehicle is purchased. Before you go to the Lamborghini dealerships, keep this information in mind.
