Which4U – Finance Blog

1. Keep your tyres fully inflated and cut down air-conditioning usage

There are a significant number of people that drive their cars with under-inflated tyres. Doing so increases the resistance and therefore increases fuel consumption, therefore saving money. Studies show that fuel bills will go up by around to 2% if your tyres are not inflated to the recommended pressure.

To avoid this, ensure your tyres pressure is kept at the correct level by checking them once a week. You can find out the recommended pressure readings for your tyres in your car manual. Read the rest of this entry »

The taxman has long had a reputation for having an endless appetite for our money, but after years of generous pickings throughout the boom times experienced over the last 10 years, his sources have been drying up.

The worst share market downturn in over 3 decades has pushed capital gains tax down, many business profits have significantly fallen, and income tax has taken a hit from the new breed of workforce that are more concerned about holding on to their jobs than getting a pay rise.

One thing remains unchanged. There are still a number of traps that can catch out people when filling out their tax return forms.

Some have only recently been introduced, while others have been catching out unsuspecting taxpayers for many years.

Here are the 10 commandments you need to be aware of when avoiding tax-traps:

1. Don’t lose interest in your income

A common mistake made by taxpayers is to inadvertently fail to declare income earned from interest paid on savings accounts.

Gone are the days when this type of error is missed, as the ATO now use sophisticated systems that can cross reference all kinds of data, making it easier to track income. Read the rest of this entry »

Weighing up your savings choices

When it comes to investing your money, it is generally true that higher the returns carry the most risk. Most investment options come with some element of risk, but if you don’t mind reducing your possible returns in exchange for a safe investment, consider term deposits.

Term deposits can be found in most bank and credit unions and are designed to provide savers with a guaranteed fixed rate for a fixed length of time. Because your money is locked away for the agreed term with no access provided to your money, these accounts tend to offer higher rates of interest than regular savings accounts. Another main difference between these accounts and your average savings account is that they normally require a high opening balance, so to you will need an initial investment if you wish to  consider this option.

If you require your money before the term deposit matures, you are likely to be charged penalty fees. Terms range from as low as 7 days, up to 7 years, with different rates offered for different bonds, making these investments short to medium range. The rule seems to be that the longer amount of time your money is deposited for, the higher the rates offered.

By fixing your rate for a specified term you are able to protect your return from declining or volatile interest rates, while guaranteeing a predefined return on  your investment. On the flip-side, this could also work against you, as increases in interest rates could also occur during the fixed term, which gives us our risk factor.

Returns from term deposits are usually calculated daily and can be paid either monthly, every six months, annually or when the bond matures.

The downsides to term deposits is that unlike an instant access account, you can’t withdraw your money early without being penalised, and unlike stocks, they don’t offer capital growth.

You should consider the following before investing in term deposits :

• Match the amount you invest and the term you decide on with your current financial status to ensure you don’t require access to your money within the chosen duration.
• Never put all of your eggs in one basket. It is important to keep some money available, possibly into an instant access savings account allowing yourself to be prepared for the financially unexpected.
• Alternatively you could also open several term deposits at different times, allowing you to spread out the maturity dates and amounts invested.

Superannuation is a method of financially preparing yourself for your retirement. Both yourself and your employer can contribute to it over time and this money is then invested into a variety of  appropriate investments such as shares, property, savings accounts and government bonds.

When you retire, or qualify for your superannuation due to disability or death you will receive the money (less charges and taxes) either as regular payments made periodically, a lump sum payment, or a combination of the two.

The Superannuation Guarantee came into effect on July 1, 1992, making it compulsory for employers to contribute to an employee’s superannuation fund.

The minimum amount of the contribution is 9% of an employee’s wages. This excludes overtime, fringe benefits and leave loading).

However, not all employees are covered by this “guarantee”. The Superannuation Guarantee Act states that employers are not required to contribute to the Superannuation Guarantee in certain circumstances.

Some of these exceptions are:

• If an employee earns less than $450 per month;
• If an employee works 30 hours per week or less and is under the age of 18;
• If an employee is over the age of 70;
• If an employee is paid to do domestic or private work for 30 hours per week or less.

Can the employer make contributions above the compulsory limit?
An employer is allowed to make higher contributions than the amount specified in the superannuation guarantee, but only as:
• a reward based on the performance of an employee;
• an employers contribution that increases in line with the employees voluntary contribution;
• a ‘salary-sacrifice’ – this is where the employer makes a contribution which tend to be benefits such that would otherwise be paid as salary.

By seeking advice from a financial advisor you can find out how to get your employer to pay more, but you have to remember that employers are limited by the amount that can be claimed as a deduction for superannuation contributions made.

These limits can change annually so check with your superannuation fund or the Australian Tax Office to find out.

Should employees contribute too?
If you have more disposable income than you require, and feel you are in a position to save this money towards your future, it may be wise to consider making superannuation contributions as opposed to investing it elsewhere.

There are aged limits that dictate whether or not you can contribute to superannuation – for more information on this, see the Australian Taxation Office web site.

Some of the advantages are:

• you generally pay less tax on interest accumulated from superannuation savings than you would on interest from a bank, although it is worth looking into a decent savings account as interest rates can work out higher, thus providing better rewards in the long-run; Read the rest of this entry »