Economic Update – April 2022

As the Morrison Government clears the decks ahead of a May election, Australians will be weighing up the impact on their household budgets.  

The war in Ukraine added a major new source of uncertainty to the local and global economic outlook in March. Economic sanctions against Russia have cut its oil exports, sending crude oil prices surging 6% over the month to more than US$111 a barrel. This puts further pressure on inflation, already on the rise as global economies recover from the pandemic. In the US, inflation is at a 40-year high of 7.9%. The US Federal Reserve lifted official interest rates in March for the first time since 2018, by 0.25 basis points to a range of 0.25-0.50.  Is this a sign of things to come closer to home? 

In Australia, the lead-up to the Federal Budget added to the uncertainty. The Reserve Bank is taking a “patient” approach on interest rates for now, but with inflation at 3.5% and tipped to go higher it is expected to begin lifting rates later this year.  Australia’s economy grew by 3.4% in the December quarter, the strongest gain since 1976 as the nation emerged from lockdowns. Unemployment fell from 4.2% to 4.0% in February, but rising prices are putting pressure on household budgets. Petrol prices hit a high of $2.12 a litre in March, costing the average motorist an extra $66.20 to fill their tank since the start of the year. Consumer confidence is at an 18-month low, with the Westpac-Melbourne Institute index down 4.2% in March to 96.6 points. And a 20.6% lift in home prices in the year to February has pushed the average mortgage on established homes to a record $635,000. 

Rising commodity prices – iron ore and wheat were both up almost 5% in March – pushed the Aussie dollar to around US75c. 

If you wish to speak to an adviser about any information in relation to our articles, please get in contact via email – moe@rgmgroup.com.au.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

Protecting your business from ID thieves

The COVID-19 pandemic has led to many challenges for small business operators, including a significant escalation in cybersecurity threats.

One of the fastest growing of these threats is identity (ID) crime, with the Australian Competition and Consumer Commission’s (ACCC’s) Scamwatch finding ID theft in Australia increased 234 per cent in 2021.

The scale of the problem is worrying, with a recent survey by the Australian Institute of Criminology finding 19 per cent of respondents had experienced misuse of their personal information.

What identity criminals want

The explosion in ID crime is not just a problem for individuals, it’s a growing headache for businesses. This is due to the increasing amount of personal information they now hold, about their employees, clients and customers.

The ATO has been reminding small businessowners that ID documents are like gold to tax scammers, who can use information such as a driver’s licence, passport and tax file number to steal tax refunds and super.

Cybercriminals can also commit fraud in your name, take over your business and submit amendments to your Business Activity Statements. This makes it vital to protect key information ID thieves target, such as employees’ personal information, business records containing personal information, BAS documents and myGovIDs.

Check your physical records are protected

Worrying about the physical security of your information may seem old-fashioned, but ensuring your business premises and systems are protected is vital.

ID criminals can obtain invaluable business and client details simply by breaking into your premises and photographing business records or employee details.

To combat this, fit physical barriers such as window and door locks, file copies of documents and ID information in lockable storage units, and ensure you install an appropriate alarm system to protect against intruders.

Securing your business online

Strong online security practices are also essential to protect information about your business, employees and clients from ID thieves.

If you hold financial records, confirm the identity of anyone requesting changes to their information and fully verify new payment details. Ensure your employees are trained to identify suspicious requests for personal information, or emails that may link to fake websites built to capture passwords.

It’s also important to secure your email account through multi-factor authentication or a strong, unique passphrase.

Good online security also means changing all the passwords used in the business on a regular basis and ensuring they are not easy for potential thieves to guess. Updated security and anti-virus software needs to be installed on all devices used by the business and by any employees working from home.

When sourcing business software and support (such as payroll services), ask vendors about their system security, including where the data will be stored and their security certification and support services for data breaches.

Reporting cybercrime to the ATO

While your business’s reputation can take a real battering if you don’t have adequate protections for both your own and your clients’ ID information, there are also regulatory requirements when it comes to data breaches.

Businesses have an obligation to report all tax-related security issues to the ATO.

To help you manage your obligations to protect identity information, the ATO has an online security self-assessment questionnaire small businesses can use to check their performance in this area. This can help you identify which online security measures you are getting right as well as potential areas for improvement.

Businesses also have data breach reporting obligations under the Privacy Act. The Office of the Australian Information Commissioner has helpful tips on how to create a solid data breach response plan.

Protect your myGov ID

The government’s push for more online transactions means more and more personal and business information needs to be protected. If you or a key employee accesses the government’s online services on behalf of your business, you will need a myGovID.

This new digital identity key uses encryption technology to protect your identity when interacting with government agencies online. To strengthen protection of your identity and business information online, you can now set up face verification on myGovID.

If you are aware or suspect your myGovID has been inappropriately accessed, you need to report it immediately.

If you need any assistance setting up your myGovID, please get in touch via email drouin@rgmgroup.com.au or contact us on 03 5120 1400.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

Sharing super a win-win for couples

Australia’s superannuation system is based on individual accounts, with men and women treated equally. But that’s where equality ends. It’s a simple fact that women generally retire with much less super than men.

The latest figures show women aged 60-64 have an average super balance of $289,179, almost 25 per cent less than men the same age (average balance $359,870).i

The reasons for this are well-known. Women earn less than men on average and are more likely to take time out of the workforce to raise children or care for sick or elderly family members. When they return to the workforce, it’s often part-time at least until the children are older.

So, it makes sense for couples to join forces to bridge the super gap as they build their retirement savings. Fortunately, Australia’s super system provides incentives to do just that, including tax and estate planning benefits.

Restoring the balance

There are several ways you can top up your partner’s super account to build a bigger retirement nest egg you can share and enjoy together. Where superannuation law is concerned, partner or spouse includes de facto and same sex couples.

One of the simplest ways to spread the super love is to make a non-concessional (after tax) contribution into your partner’s super account. Other strategies include contribution splitting and a recontribution strategy.

Spouse contribution

If your partner earns less than $40,000 you may be able contribute up to $3,000 directly into their super each year and potentially receive a tax offset of up to $540.

The receiving partner must be under age 75, have a total super balance of less than $1.7 million on June 30 in the year before the contribution was made, and not have exceeded their annual non-concessional contributions cap of $110,000.

Also be aware that you can’t receive a tax offset for super contributions you make into your own super account and then split with your spouse.ii

Contributions splitting

This allows one member of a couple to transfer up to 85 per cent of their concessional (before tax) super contributions into their partner’s account.

Any contributions you split with your partner will still count towards your annual concessional contributions cap of $27,500. However, in some years you may be able to contribute more if your super balance is less than $500,000 and you have unused contributions caps from previous years under the ‘carry-forward’ rule.

If your partner is younger than you, splitting your contributions with them may help you qualify for a higher Age Pension. This is because their super won’t be assessed for social security purposes if they haven’t reached Age Pension age, currently 66 and six months.iii

Recontribution strategy

Another handy way to equalise super for older couples is for the partner with the higher balance to withdraw funds from their super and re-contribute it to their partner’s super account.

This strategy is generally used for couples who are both over age 60. That’s because you can only withdraw super once you reach your preservation age (currently age 57) or meet another condition of release such as turning 60 and retiring.

Any super transferred this way will count towards the receiving partner’s annual non-concessional contributions cap of $110,000. If they are under 67, they may be able to receive up to $330,000 using the ‘bring-forward’ rule.

As well as boosting your partner’s super, a re-contribution strategy can potentially reduce the tax on death benefits paid to non-dependents when they die. And if they are younger than you, it may also help you qualify for a higher Age Pension. These are complex arrangements so please get in touch before you act.

A joint effort

Sharing super can also help wealthier couples increase the amount they have in the tax-free retirement phase of super.

That’s because there’s a $1.7 million cap on how much an individual can transfer from accumulation phase into a tax-free super pension account. Any excess must be left in an accumulation account or removed from super, where it will be taxed. But here’s the good news – couples can potentially transfer up to $3.4 million into retirement phase, or $1.7 million each.iv

By working as a team and closing the super gap, couples can potentially enjoy a better standard of living in retirement. If you would like to check your eligibility or find out which strategies may suit your personal circumstance, get in touch with Prue Cox via email:  p.cox@rgmgroup.com.au or via 03 5120 1400.

i https://www.superannuation.asn.au/ArticleDocuments/402/2202_Super_stats.pdf.aspx?Embed=Y

ii https://www.ato.gov.au/individuals/income-and-deductions/offsets-and-rebates/super-related-tax-offsets/#Taxoffsetforsupercontributionsonbehalfof

iii https://www.ato.gov.au/Forms/Contributions-splitting/

iv https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/transfer-balance-cap/

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.












Budgeting for success in 4 easy steps

With all eyes on the Federal Budget and balancing the nation’s books, it’s a good time to review your personal balance sheet. If it’s not as healthy as you would like, perhaps it’s time to do a little budget repair of your own.

Just as governments need to set policy objectives and budget for future spending commitments, households need to feel confident they can meet their current and future financial commitments.

So no matter how much you earn, it’s always a good strategy to check that your spending doesn’t exceed your income. It’s also important to think about how much you need to save today to pay for all the things you want to achieve in the future.

Before we look more closely at your personal finances, it’s worth understanding how you may be affected by the big picture.

Cost of living pressures

The big economic issues for everyone right now, from the federal government and the Reserve Bank to businesses and households, are inflation and interest rates.

While economists talk about inflation, individuals experience this as an increase in their cost of living. Inflation increased by 3.5% in the year to December, with the price of fuel and the cost of buying a new home the biggest contributors. Prices of food, transport, health and insurance are also rising.i

Rising prices also put pressure on the Reserve Bank to lift interest rates to dampen demand. Lenders respond by increasing interest rates on mortgages and other loan products. While the Reserve Bank has indicated it is unlikely to lift rates before late 2022, homeowners and investors need to be prepared for an inevitable increase in mortgage repayments.

While higher prices are not a major concern if your income is growing faster than inflation, annual wages growth is lagging inflation at just 2.3 per cent.ii In other words, unless you’re lucky enough to secure a big wage rise your finances could be going backwards in real (after inflation) terms.

Given these challenges, what can you do to get ahead?

Start at the beginning

Money may not buy you happiness, but having enough to afford the life you want to lead certainly helps. So how much is enough?

A recent survey by Finder found 25 per cent of Australians wouldn’t feel affluent unless they earned at least $500,000 a year.iii Not only is this almost nine times the average income of around $60,000, many of today’s rich listers started out with far less.iv

There’s nothing wrong with dreaming big but you are more likely to achieve your goals by being realistic and to start with, making the most of what you already have.

Before you can build wealth, you need to understand what’s coming in, where your money’s going and where you could make savings, by following these four steps:

  1. Add up your annual income from wages, investments and government benefits.
  1. Add up your spending on essential living expenses including mortgage or rent, groceries, utilities, transport and insurances; and discretionary spending on the fun stuff like clothes, dining out, entertainment and holidays. If you don’t have receipts, try tracking your spending over three months or so using one of the many free online budgeting apps.
  1. Subtract your total spending in step 2 from your total income in step 1. If you spend more than you earn or barely break even, then look for areas where you could save. Things like cutting back on takeaways, impulse spending online, and streaming services you rarely use. Ring your mortgage lender to negotiate a better interest rate and when insurances come up for renewal, shop around.
  1. Draw up a budget to track your spending and put a savings plan in place to achieve your goals. Even a simple plan will help with discipline and make regular saving automatic.
Putting it all together

Some of the most popular budget strategies take a bucket approach, with separate money buckets for needs, wants and savings.v Most aim to set aside around 20 per cent of your income as savings and paying yourself first by setting up regular debits to a savings account. If you have debts or don’t have an emergency fund, then these should be attended to before you direct savings to investments or other goals.

To be successful, a budget needs to be one you can stick to, tailored to your personal goals and financial situation. If you would like us to help plan your personal budget strategy, get in touch with Joe Auciello via email: j.auciello@rgmgroup.com.au or 03 5120 1400.

i https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release

ii https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release

iii https://www.finder.com.au/average-aussie-needs-330000-to-feel-rich

iv https://www.abc.net.au/news/2021-06-20/are-you-middle-income-see-how-you-compare/100226488

v https://www.finder.com.au/best-budgeting-strategies

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.