Moving into an aged care home can be a complicated and emotional process. There are many issues to consider and good financial advice can make the transition easier and minimise costs.
The ageing populationAustralia’s ageing population is steadily increasing, with many of the baby boomer generation born between 1946 to 1966 entering the aged care bracket between 2011 and 2031. At present, 13% of the population (approximately 2.8 million people) is aged 65 years or over and this is expected to increase to 25% over the next 40 years*.
For some of these baby boomers, it may mean looking into alternative accommodation such as aged care homes and other care arrangements. The decision as to which type of accommodation or care arrangements you require may be based on lifestyle choice or a need for assistance with daily living activities if it becomes harder to manage on your own.
If you require assistance with daily living activities, one of the hardest decisions you may have to make is whether to remain in your home or move to a hostel or nursing home. If you remain in your home, there are various community programs available which can help you. On the other hand, if you require accommodation in an aged care facility, you will need to take into account a variety of financial, legal and social security issues.
Aged care in AustraliaLooking into the different types of aged care accommodation available and the associated costs can be quite complex and requires careful consideration. This is where financial planning can help to alleviate these concerns and help potential residents achieve the kind of retirement lifestyle they desire.
Some important aspects you need to consider include payment of accommodation bonds, fees and charges, arranging aged care assessments, tax implications and estate planning.
Hostel and nursing home careAged care facilities are commonly referred to as hostels and nursing homes. The main difference between the two lies in the level of care provided.
People who require some help with daily living activities may require low level care such as hostel accommodation. On the other hand, people who require 24-hour nursing care may be more suited to high level care such as nursing home accommodation provides.
To enter a hostel or a nursing home, you need to be assessed based by an Aged Care Assessment Team (ACAT). The ACAT will make a determination whether low care or high care is required. A financial adviser can help organise an assessment for you.
How much will care cost?Although aged care accommodation is subsidised by the Government, a resident will generally be required to contribute towards their own care by paying various fees and charges.
Aged care fees and charges can often be complex and can vary according to your circumstances. The fees and charges are generally calculated in relation to your level of income and assets.
Residents of hostels and nursing homes are required to pay a daily care fee and income tested fee depending on their level of income, plus an accommodation bond or charge.
According to the Department of Health “Ageing and Aged Care in Australia July 2008” report, the total average cost borne by an individual:
- in a hostel is $18,545 p.a.*
- in a nursing home is $16,350 p.a.*
* Based on 2006/07 costs.
A financial adviser can work out what fees and charges you need to pay for the type of accommodation you require. In some cases, an adviser may be able to put a strategy in place to reduce the fees.
The family home and social security entitlementsOne of the main considerations when entering an aged care facility is deciding whether you should keep or sell your home. Whichever you decide on will have implications for any social security benefits you receive and your estate planning needs.
Many people want to keep their family home to pass onto their children and loved ones. There are a few strategies an adviser can suggest which could enable this to happen, help you maintain your Age Pension and ensure that your family home is not counted as an asset.
If you wish to leave your home to your children or other loved ones, it is vital that you have an up-to-date Will stating your wishes.
Getting assistanceThere are many complex factors to consider when considering aged care accommodation and services, so it is essential that you obtain quality financial advice.
A financial adviser can work through the options with you and help put you in the best financial position. The difference between no advice and good advice can be the difference between the family needing to subsidise the costs or not.
Contact our office for more information.
* Source: ‘Australia’s Demographic Challenges’ 2004, Australian Government Treasury.
There are a lot of uncertainties at present relating to interest rates; exchange rates; property values; unemployment rising; slower debtor payments; rising cost of fuel; tighter lending rules by banks and the Australian Taxation Office's increased scrutiny in the small/medium enterprise market area. All of these uncertainties highlight the necessity for businesses to spend some critical time working "on the business" in planning cashflow forecasts and budgets for the next 12 months.
A budget will show the expected income and expenditure for the business and the emerging profit. You can calculate various "what-if" scenarios to factor in potential changed circumstances e.g. lower interest rates; higher fuel costs and if you are an exporter or importer, changes in currency conversion rates.
Budgeting lets you diagnose problems in advance. If the budget you've prepared doesn’t provide you with an adequate profit, then you can decide on appropriate action to take to try to achieve your desired profit, rather than waiting for the events to unfold.
When the budgets are completed, it is then possible to prepare a cashflow forecast. This will reflect the figures contained within the budget as well as taxation commitments; loan repayments; dividends or drawings; capital expenditure; receipts from debtors and payments to creditors.
It is possible to prepare "what-if" scenarios for the cashflow forecast on the basis of likely changes in conditions relative to a slow-down in debtors’ payments; changed investment levels in inventory, using debtors’ finance/factoring, etc. It is recommended that every business should prepare a budget and a cashflow forecast for the next 12-months. If the cashflow forecast highlights that you might need an injection of extra funding, now is the time to talk to your bank/finance company or debtors’ financing company or consider trying to raise capital – not later in the financial year when you have a problem!
Other very important matters to take in to consideration are:-
- What is your creditors' days’ outstanding figure"?
- How does this compare to your major creditor's stated terms of trade?
- What would happen if your creditors' demanded earlier payment?
The management of cashflow is important in normal times, but in difficult trading conditions, it is extremely important. Cashflow Forecasts should be used to track cashflow every week for the next four weeks. The forecasts prepared on a weekly basis should incorporate:
- expected cashflow from cash sales
- debtors' receipts
- payments to be made for wages, suppliers, Australian Taxation Office etc.
In this way you can closely analyse your cashflow position and instigate follow up collection action with debtors, if there is a slow-down in debtors' payments and you have important cashflow considerations which you are concerned about.
1. Protect and grow your revenueContact your key customers and ask them how their business is faring. Meet regularly with high value customers and offer your support. Understanding their situation means you will be better informed about what you can do to assist them and thus protect and potentially grow your business' revenue. To grow your own revenue invest in new innovative (low cost) sales strategies, increase (low cost) sales and marketing programs and show leadership by spending more time with your customers and sales team.
2. Reduce your costsA reduction in revenue and/or profit means you will need to examine your cost structure to maintain your profitability. Be prepared to make some hard decisions. Low fixed and high variable costs is the ideal cost structure for doing business in tough times.
- Non Trading Costs - try to reduce or eliminate non trading costs. For example, examine wage productivity reports and restructure non productive roles or encourage multi-skilling to maximise your employee return per hour. Staff reduction is not necessarily a given in tough times!
- Variable Costs - examine all your expenses and investigate ways to transfer your business's fixed costs to variable costs. Outsourcing is a variable cost strategy.
3. Collect your cashCollecting cash from your customers may become more difficult. Watch your cash flow. Consider amending your policies for debtor collection and stock management.
- Debtors Collection: place tighter limits on the amount of credit you extend to your customers. If you have exposure to large customers, seek assurances and guarantees on how they will pay their account. Enter repayment schedules and offer 'cash only' terms until your customer accounts are in order. If the decision is between being flexible and survival there is really only one choice.
- Stock Management: don't over invest in stock. Place strict controls over stock ordering and management. If customer sales slow down so should your ordering.
Minimise your risksIt is important you move quickly to minimise your business risk. The FIRST STEP is to re-examine or prepare a new Business Plan to review and assess your current situation and plan the future. When preparing your Business Plan obtain independant and objective advice.Your Accountant or Financial Planner is best positioned to provide this advice.
Seeking advice early will mean the difference between your business thriving or simply surviving.
Are you a state employer?
Businesses who are Sole Traders and Partnerships have been currently engaging employees in the State Industrial Relations
System. From the 31st of December 2010, all Sole Traders and Partnerships (essentially any business that does not have a
Pty Ltd Company) will be referred to the Federal System.
Modern Awards for State Employers will commence to apply from the 1st of January 2011. If you are uncertain of how this will impact you, we can complete an assessment of which Modern Award will apply, allowing you to assess the changes and implications on your business, sooner rather than later. Should you wish to retain the current award conditions, you will need to develop and lodge an Enterprise Agreement prior to the 31st of December 2010.
The Modern Awards do have higher penalties across a lot of industries so please don't delay, speak to your HR expert now. Don't have an HR expert? Marcia Cunningham from East Coast HR Group can assist you with determining your obligations. Call her on 0418 947 290 to assess your position.
Work disputes increase 30% (excerpt from Courier Mail 25/09)
Days lost to workplace disputes have increased 30% since the Fair Work Act was introduced last year. Australian Bureau of
Statistics data found 126,500 working days (an average of 3.3 days per 1,000 workers) were lost in the first year of the Fair
Work Act to June 2010. This is compared with an average of 2.7 days per 1,000 workers under the WorkChoices era from
2006 – 2008. Gadens Lawyers Workplace Relations Partner John Anthony Hodgens said there had been a marked increase
in workplace disputes following the global economic crisis. He said Employees were now more willing to take action
against their bosses and one another than before the economic downturn. It costs employees as little as $56 to lodge an
Unfair Dismissal Claim, yet could cost you as much as 26 weeks pay.
Hodgens said performance management was the most common reason for Employees taking action against their bosses over the past year, followed by stress-related claims. "A lot of people make claims around hours of work, workloads, bullying and harassment", he said. "The current hot case involving David Jones illustrates it (legal action) does happen and it's something that will continue to affect employers and they way they run their businesses."
It costs employees as little as $56 to lodge an Unfair Dismissal Claim yet could cost you as much as 26 weeks pay.
To Ensure you are protected against any possible workplace disputes, please contact your HR expert. Or if you need specialist advice Marcia Cunningham from East Coast HR Group is available to assist you. You can call her on 0418 947 290 or email her at firstname.lastname@example.org
It's that time of year again where the "bro's" in the office start looking especially handsome. The lads in the office will be putting on a fine display of moustachery for the month of Movember. Movember is about raising funds and awareness for men's health, specifically prostate cancer and depression in men. Close to 3,300 men die of prostate cancer in Australia each year and one in eight men will experience depression in their lifetime.
To read more about the impact Movember is having please visit the Movember Foundation website http://au.movemberfoundation.com/research-and-programs.
In a twist this year, all of the males in the office will be participating for the PWA All-stars team. It should be a bit of fun and it is for a great cause so please support the fundraising effort if you can.
|Before Movember - no mo's||Week 1|
|Week 2||Week 3|
The Australia Taxation Office is using benchmarking tables, in particular industries, to monitor information disclosed in income tax returns. The ATO has compiled the benchmarks over the last few years based on income tax returns lodged and some industry participation. The ATO has indicated that the benchmarks provide a snapshot of what, on average, is happening in businesses operating in a particular industry by providing a measure of various business costs in relation to turnover in regional areas and in capital cities. The ATO has commenced taking action against some tax payers where the ATO considers that the information declared in the taxpayers tax return has a significant variance to what the ATO believe is the benchmarked business model for that type of business.
There is nothing to fear if full disclosure has been made of all income and expenditure and the end result for a particular tax payer just happens to be significantly different to what the ATO consider the benchmark for that industry is. However, if a business lodges a tax return which is of significant variance to the benchmark for that particular industry then, in all probability, a detailed review will be undertaken by the ATO into all aspects of the individual taxation return. Industries that the ATO has announced that benchmarks have been established for are as follows:
If you would like to receive details as to the ATO benchmark for your industry, or a more detailed list of industries in the various services, please contact us.
Look at the bigger picture. Investing often appears complex, but growing your wealth doesn’t have to be hard. The key is to focus on the bigger picture. Knowing what you are doing, why you are doing it and how you are doing it can help you build a bucket list that’s filled to overflowing.
Check out our 10 tips for some easy ways to get started.
Tip 1 – Seek good financial advice
A good financial plan takes a holistic approach to your wealth, and a good financial planner can help you build a financial plan that creates and protects your wealth.
Tip 2 - Give yourself some time
Time is one of the best ways to build wealth — it reduces the risk of negative returns and lets your investments harness the full power of compounding returns. Understand how long you want to invest for, and work with your financial adviser to choose the most appropriate investments.
Tip 3 - Understand investment risk
All investing involves a trade-off between risk and return, and the higher the risk the higher the potential long term return. It’s important to understand the level or risk in your investments and how this affects your investment strategy and goals.
Tip 4 - Diversify to boost returns, reduce risk
Diversifying your investments over a range of asset classes is a really powerful way to reduce risk. Various types of investments perform better at different times, so it makes sense to balance your investment to take advantage of different asset classes as they move through different market cycles.
Tip 5 - Avoid chasing returns
History tells us that if you invest in the asset class that performed the best last year, it’s unlikely you’ll enjoy top performance again this year. Instead, you should assess each investment on its own merits. Look forward, not backwards.
Tip 6 - Stick to your plan
It’s wise to have regular reviews of your strategy and portfolio, but resist the temptation to chop and change your strategy each year. Seek advice and look to the long term. A written financial plan, clearly outlining your long-term investment goals, is the perfect antidote to short-term panic.
Tip 7 - Focus on the after-tax return, not the tax
An easy trap to fall into is to concentrate on tax savings and not on why you invested in the first place. There are many good ways to invest tax-effectively - like holding your investment for more than one year, investing through your super and paying interest on your investment loan in advance — but saving tax shouldn’t be your primary reason to invest.
Tip 8 - Don’t Panic
We live in an uncertain world, with unexpected natural, political and economic events all shaping the direction of share markets. So how should you react to an unexpected event? The answer is simple — don’t panic. It’s important to think long term when crisis strikes. There is compelling evidence that panic selling is bad for your wealth in the short term.
Tip 9 - Employ experts
Even the smartest investors use managed funds. Why? Because managed funds employ disciplines many investors lack. Investing through a managed fund can increase your discipline, utilises expertise of investment professionals, removes personal investor bias, and increases simplicity, economies of scale and choice.
Tip 10 - Find hidden value
Finding hidden gems is every investor’s dream. The problem is, hidden gems are hard to find. The beauty about investing through a managed fund is that fund managers are trained to seek out value. Fund managers have greater research resources, more analysts, better investment technology and more experience. In short, they’re in the best position possible to hunt hidden gems on your behalf.
Like to know more?
Make an appointment to talk to one of our financial planning experts about some of the simple things you can do today to set you up for tomorrow.
What’s the most valuable thing in your life? Your family? Your business? Your super? Or is it your earning power? And if you have a high earning power, it’s even more important to protect it because you tend to have higher levels of debt and commitments.
The earning power of you and your businessInsurance can protect your earning power and the earning power of your business. What this allows you to do is to transfer any losses to a company that specialises in it. If you have higher earning power, then choosing the right type of insurance is critical and challenging. While it can be confusing, a financial adviser can look at your earning power and the financial impact of death and disability on your business and recommend a policy that is most appropriate to you. Here is a brief outline of the types of insurance.
Life and total and permanent disability insuranceThis insurance pays you a lump sum amount if you lose your life or suffer a total and permanent disability and are unable to work again.
Critical illness insuranceCritical illness insurance pays a lump sum if you suffer or contract a specified critical condition that is covered by the policy (eg. Heart attack, stroke, cancer etc.). You then can use this lump sum to cover medical costs.
Income protection insuranceIncome protection insurance pays a fixed monthly payment (usually up to 75% of your income) if you are temporarily unable to work due to a disability. These payments can be used to meet everyday living expenses such as the mortgage and other household costs.
Business expenses insuranceBusiness expenses insurance can reimburse certain regular business expenses while you are temporarily unable to work due to a disability (for example rent, utilities, lease costs, depreciation etc.). This can help to cover your fixed business costs and keep your business afloat while you are recuperating.
Finding the right Insurance is something that often gets overlooked – but having the correct insurance in place can provide you and your family with peace of mind. Make an appointment to speak with one of our Advisers about the best insurance to suit your needs.
The information provided by PWA Financial Group Pty Ltd is general advice only and does not take into account your personal circumstances. Please contact your advisor to discuss your personal situation before relying on this information.