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.

Retirement income on the house

Asset rich and income poor is the dilemma faced by many retirees. But there may be opportunities to boost your income in retirement by tapping into your biggest asset – your home.

With property prices booming, many retirees are finding that the home they have lived in for decades is worth a small fortune, but for various reasons they don’t wish to sell or downsize.

What many may not realise is that you can have your cake and eat it too. Or, in this case, convert part of the value of your home into an income stream while you remain living there.

The ability to borrow against the equity in your home without having to repay until you move out or sell comes in various guises, but the result is largely the same – an enhanced lifestyle in retirement. The extra income may allow you to enjoy some little luxuries, travel more, or pay for home improvements.


There are four key types of product on offer:

  • Reverse mortgage
  • Home reversion
  • Equity release agreement
  • The government’s Pension Loans Scheme (PLS).i

None of these strategies should be adopted without careful consideration as they may have an impact on your family, your beneficiaries and – with the exception of the PLS – your Age Pension if you receive one.

As a result, we recommend you speak to us first to discuss whether accessing some of your home equity would be appropriate for you.

This is how these products work:

1. Reverse mortgage

A reverse mortgage lets you borrow money against the value of your home and take it as an income stream, a line of credit, a lump sum or a combination.

The amount you borrow is often determined by age. At 60 you can generally borrow 15-20 per cent of the value of your home. This percentage increases by 1 per cent a year.ii

The interest accrues and is paid when you sell, either on entering an aged care facility or from your estate when you die. The interest rate is usually higher than the standard mortgage rate, but you don’t have to make repayments along the way. Since 2012, reverse mortgages must come with a negative equity guarantee. This ensures you can never end up owing more than your home is worth.

2. Home reversion

Here you sell a percentage of the future value of your property at a reduced rate. It is not a loan, so there is no interest payable. However, there are immediate costs such as a property valuation and an upfront fee. And there is also the cost of losing the full benefit of your home’s increase in value over time. The more your home’s value increases, the more the provider will receive.

3. Equity release scheme

This third option lets you sell a percentage of the value of your home in return for a lump sum or an income stream. You pay fees which are periodically deducted from the remaining equity in your home, so your share diminishes over time.ii

4. Pension Loans Scheme

The Federal Government’s loan scheme is offered through Services Australia and the Department of Veterans Affairs.

You can access a voluntary non-taxable fortnightly loan up to 150 per cent of the maximum Age Pension rate to bolster your retirement income with the loan secured against your home. You don’t need to be on the Age Pension to qualify but even if you are, this government loan does not impact your pension entitlements.iv

Your mortgage increases by the payment amount plus interest which currently stands at 4.5 per cent a year. As with the other schemes, you don’t need to repay the loan until you move out or sell. And if your circumstances change, you can adjust the loan accordingly such as pausing payments.

All four options are variations on a theme of providing a better lifestyle in retirement.

If you want to find out if any of these options might play a role in your retirement income strategy, don’t hesitate to call us on 03 5120 1400 to discuss with our Financial Planning Team or via our website contact page.

Case study

Self-funded retirees Frank (75) and Mary (73) were struggling to maintain their lifestyle after no longer qualifying for the Age Pension. By borrowing $400 a fortnight against their $390,000 home from the government’s Pension Loans Scheme, they would still own 72 per cent of their property after 10 years and 41 per cent after 20 years. In the meantime, they can enjoy a few extra luxuries in life while remaining in their home. v

https://moneysmart.gov.au/retirement-income/reverse-mortgage-and-home-equity-release

ii https://www.ratecity.com.au/home-loans/articles/maximum-amount-borrow-reverse-mortgage

iii https://moneysmart.gov.au/retirement-income/reverse-mortgage-and-home-equity-release

iv https://www.pensionboost.com.au/faqs

https://www.pensionboost.com.au/pension-loan-scheme

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.




What super stapling means for employers

If there’s one certainty in business these days, it’s constant change. Now there’s an extra step you need to take with new employees to comply with the superannuation choice of fund rules.

From 1 November 2021, whenever a new employee starts with your business and they don’t select a super fund for their Super Guarantee (SG) contributions, you will need to ask the ATO for their stapled super fund details.

New fund choice rules

Under the new rules covering choice of super fund, every employee is now stapled (or linked) to an existing super account that follows them for life as they change jobs unless they choose otherwise.

This reform to the super rules was introduced by the Federal Government to reduce duplicate account fees and insurance premiums paid by employees on their super. Up until now, many employees ended up with a new super account each time they started a new job, often losing track of multiple accounts and unnecessary fees along the way.

A stapled fund can be any type of eligible super fund, including SMSFs and defined benefit super funds.

The new stapling rules do not affect your existing employees, so in most situations you will only need stapled fund details if a new employee fails to give you a choice of fund form.

You must, however, request the stapled super fund details for any new employee who is a temporary resident or who is covered by an enterprise bargaining agreement or workplace determination made before 1 January 2021.

If the employee doesn’t have a stapled fund, you can make your SG contributions into your employer default MySuper product (unless they are subject to an enterprise bargaining agreement or modern award stipulating a prescribed super fund).

What to do from 1 November 2021

To ensure you’re ready to request stapled fund details, check you have enabled online services with the ATO and your authorised representative has all the necessary permissions in place.

When you onboard a new employee on or after 1 November 2021, the first step of offering your employee an ATO Superannuation Standard Choice Form within 28 days remains the same. If they fail to choose a super fund, you will then need to check with the ATO whether or not your employee has a stapled super fund.

Before you can make a stapling request, however, you need to have lodged either a Single Touch Payroll (STP) event or a tax file number (TFN) declaration for your new employee with the ATO.

If your new employee has a stapled fund, you simply pay your SG contributions into that fund. Employees always retain the right to change super funds if they wish and their new super fund then becomes their stapled fund.

More than one super fund

If your employee has more than one super fund, they are automatically stapled to the fund that most recently received a super contribution on their behalf. Where there is more than one active super fund, the most appropriate fund (such as the one with the largest balance), will be selected by the ATO.

The new stapled fund rules don’t mean your business can avoid nominating a default super fund to receive your SG contributions.

If your new employee doesn’t have a stapled fund, you will need to make your contributions into this fund.

The reforms mean it’s also a good idea to check whether the superannuation clauses in your employment contracts for new employees cover the possibility of super contributions being made into an employee’s stapled fund.

As an employer, if you fail to meet your obligations under the choice of fund rules – such as checking for a stapled fund – additional penalties may apply on top of the normal SG Charge (SGC) penalties.

If you would like more information on stapling, or the rules about making contributions for your employees’ super in general, please contact our office today and speak to a Financial Adviser on 03 5120 1400 or send any questions you may have via our website contact page.

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.

The new Director ID: Do you need one?

It’s been a busy year for Australia’s two million plus directors dealing with the pandemic and lockdowns and there’s now a new task on their to-do list.

From 1 November 2021, if you’re a director or want to become one, you will need to apply for the new Director Identification Number (Director ID) being rolled out by the Federal Government.

Directors of businesses and entities of all sizes – including directors and corporate trustees of self-managed super funds (SMSFs) – will all need to apply. If you run your business as a sole trader or partnership, however, you won’t need a Director ID.

Director ID: what is it?

The new Director ID is a unique 15-digit identifier most directors will need before they can take up a directorship.

Before you join a board, you will need to apply for your own Director ID which you will keep forever, even if you change boards, stop being a director, change your name or move interstate or overseas.

This new identifier is part of a broader registry modernisation project combining the Australian Business Registry Service (ABRS) with numerous ASIC registers to form a single system overseen by the ATO.

According to the government, unique director identifiers will create a fairer business environment by preventing the use of false and fraudulent director identities.

Who needs a Director ID?

The new regime casts a pretty wide net and will catch most business entities and organisations.

You will need a Director ID if you are an eligible officer of a company, Aboriginal and Torres Strait Islander corporation, corporate trustee, charity or not-for-profit organisations limited by guarantee, or a foreign company registered with ASIC and conducting business in Australia.

Directors of registered Australian bodies (such as incorporated associations registered with ASIC that trade outside the state or territory in which they are incorporated) also need to apply.

If your organisation has an Australian Business Number (ABN), you can use the ABRS LookUp tool to check whether it is registered with ASIC.

Officers outside the ID regime

Some company officers are not required to apply for the new identifier.

If you are a company secretary but not a director, act as an external administrator of a company, or are called a director but haven’t been appointed as a director under the Corporations Act, you won’t need a Director ID.

Neither will directors of charities not registered with ASIC to operate throughout Australia.

The officers of an unincorporated association, cooperative or incorporated association established under state or territory legislation (unless the organisation is also a registered Australian body), are also exempt.

Applying for your Director ID

From November 2021, you will need to apply for your Director ID on the ABRS website and log in using the myGovID app. The myGovID app is downloaded on your smart device to verify your digital identity and is different to your existing myGov account.

When applying for your Director ID, you are required to personally make the application so you can verify your identity.

There are varying application deadlines for the new identifier, with current directors (on or before 31 October 2021), having until 30 November 2022 to obtain their Director ID.

While existing directors have plenty of time, if you become a director between 1 November 2021 and 4 April 2022, you must apply for your Director ID within 28 days of your appointment to the board.

Directors appointed after 5 April 2022, must apply prior to taking up their directorship.

If you are unable to apply for your Director ID by the relevant deadline, you can apply for an extension.

Once you receive your new Director ID, you will need to pass it on to your company recordholder who is usually the company secretary or authorised agent. The ABRS is not permitted to disclose Director IDs to the public without consent and your details won’t be searchable on the register.

If you would like more information about Director IDs, whether you need one and how to go about applying, please get in touch with one of our advisers on 03 5120 1400 or via our website contact page.

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.




Future proofing your career with professional development

“The only thing that is constant is change” – so said the ancient Greek philosopher Heraclitus and it continues to ring true today.

Industries are changing, continuing to evolve in response to challenges (such as the COVID-19 pandemic), technological disruptors and customer expectations. As a result, there is a greater need for the workforce to continue to adapt and develop. We need to be agile to stay on top of these changes, continue developing and learning, which will work towards future proofing our careers.

While some industries have formal professional development programs, there are many ways to foster your own development for those who don’t have formal pathways. Here is how you can take the lead to future proof your career.

Enrol in a course

Some workplaces offer both in-person and online courses, for example LinkedIn Learning, so take advantage of what’s on offer. You can also seek out professional courses relevant to your industry to upskill, keeping you abreast of the changing environment – not to mention that further education is a great additional to your CV as it showcases your engagement within the industry and your proactive approach to your career.

Attend webinars or seminars

While COVID restrictions have halted many in-person seminars, there are plenty of online webinars you can attend, some which are specifically on the topic of future proofing your career. While there are a number of free webinars you can attend, others may be offered by organisations to their members. Paid membership to these organisations be they industry groups, or groups centred around a common goal, can be a worthwhile investment assisting with not only educational sessions but networking opportunities.

Not only are webinars accessible from your office or living room, they tend to be more budget-friendly than seminars. However, seminars offer face-to-face learning and networking opportunities, so they are great to utilise where possible.

Pick up a book or listen to podcasts

It doesn’t get easier than picking up a book to arm yourself with new knowledge. There is a wealth of information out there, some which will be general advice discussing trends and management styles, others that will be tailored to your industry.

If you don’t have much time to read, opt for an audio book to listen to in the car or during exercise. Podcasts are also excellent ways of getting helpful information in a format that is convenient and can be tapped in and out of. As they are regularly created, you’re likely to get more up-to-date information this way.

Enlist the help of a mentor

It’s clear that a mentor can help you stay on top of your industry or explore new opportunities by providing support and guidance. A 2019 survey showed that while 76% of people thought mentors are important, only 37% actually have one.i

The study also found that 61% of mentor-mentee relationships developed naturally, with 25% happening after someone offered to mentor, and 14% when someone asked for a mentor. This means that there’s likely to already be someone in your life who could be your mentor. Think about who is dynamic in facing industry changes and don’t be shy to ask if they’re open to mentoring you.


Join peer groups

An extension of having a mentor, peer groups provide you with the support of others who are also dedicated to professional and personal growth. If you are someone who thrives on peer support, it will be invaluable to be part of a group of people rather than going it alone.

You can give each other feedback, check in on each other’s goals and share helpful experiences and resources such as great books or webinars. This is also a fantastic way to make real-life connections – you might even meet someone who helps you land a new job or open doors to a new industry. Online tools such as Meetup can help you find a group near you and keep an eye on industry meetups as well.

Life is full of change, but rather than feeling overwhelmed, embrace it. By furthering your education, you’ll future proof your career and feel more empowered tackling the changes you face.


https://online.olivet.edu/research-statistics-on-professional-mentors

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.