Judging the right time for retirement

Source (In the Black 11 Sep 2018)

Actively planning for retirement helps counter the loss of identity, income and status that can accompany the exit from the workforce.

The decision to retire is a personal one that’s often as much about your purpose for working as it is about your finances. We look at the signs that it could be time to move on, as well, as how to plan for a successful retirement.

Signs you should retire

One of the most obvious factors to consider before retirement is financial security.

According to the ASFA Retirement Standard, a single person requires A$545,000 and a couple A$640,000 in superannuation to retire comfortably – but most Australians retire with much less. The average superannuation balances at the time of retirement in 2015-2016 were A$270,710 for men and A$157,050 for women.

Many older workers retire due to declining health – physical or mental.

The decision to retire often requires a degree of soul searching. It’s an unpleasant reality, but cognitive skills often decline with age, even if we don’t notice it. If a worker’s cognitive function is not up to the task, retirement should be considered.

Finally, if the thought of going to work no longer gets you out of bed in the morning, it might be time for something new. Work can become unenjoyable for a range of reasons, whether it’s stress, the physical demands of a role or, unfortunately, ageism in the workplace. Older workers are often subject to negative comments and are overlooked for promotions and learning and training opportunities.

Develop a retirement plan

Actively planning for retirement helps counter the loss of identity, income and status that can accompany the exit from the workforce.

We recommend that everyone should sit down at about age 50 and create a plan that extends into their retirement.

At that age, you can look back and see what’s happened in your life, but you’ve still got plenty of time in the workforce, subject to health, going forward.

A retirement plan is necessary even if you’re determined to continue working past 65. Some people might genuinely love working, but if work is your whole life “when you retire … you could go into depression or drive your partner mad and finish up divorced”.

Transition to retirement

In an ideal world, a worker can transition into retirement on their own terms – but for most, involuntary retirement is a fact of life. A good plan should factor in a range of scenarios – however unpleasant – that could affect your work life in the years ahead, such as illness, loss of a partner, or retrenchment.

At the height of the global financial crisis, many people in their 50’s/60’s were retrenched from their jobs. At this age, you may not be ready to stop working but, having been pushed out, many found it impossible to get back in.

“Ageism is a real discriminator in the world today”.

Retrenchment has forced many to face up to the reality of retirement.

“… if the thought of going to work no longer gets you out of bed in the morning, it might be time for something new.”

The benefit of a long transition between 50 and 65 where you are able to get your financial house in order and choose is priceless”.

Most retirement planning focuses on mapping out a person’s financial future over how they are going to find meaning in life.

The question should be around the other way.

“‘What do I want to do? And then, how do I fund that?’”

What retirement looks like in the 21st century

Retirement does not have to mean a monotonous routine of golf and gardening. With appropriate planning, the post-work phase can be a rewarding one that is tailored to individual needs.

Semi-retirement: Many workers are choosing to scale back work commitments through taking on part-time or freelance work, consulting or mentoring.

Volunteering and philanthropy: According to the learn-earn-serve model, retirement is an ideal time to give back to the community.

Study: Many use the free time of retirement to go back to school, whether through formal study at university, or short courses offered and other adult education institutions.

There is no right or wrong time to retire, it’s what suits you & your loved ones. The key is to plan as early on in your life as possible. Talk to us today to help create that plan for you today. Putting of the planning side of things could affect you greatly.

Rental Property Tax Deductions Available

We are in the process now of completing many tax returns, and many of our clients own rental properties. However, we are fielding many question and there seems to be some confusion on what is possible to claim as a tax deduction, especially with recent government changes.

As a result, please find listed below a comprehensive list of the possible tax deductions available to you, regardless of whether you own an investment property personally or jointly with someone else, or through a structure such as a trust, company or SMSF.

  • Bookeeping fees, accountants fees and fees for accounting software
  • Advertising the property for rent
  • Agents fees ad commissions for property management
  • Bank charges – for accounts used for collecting rent and paying outgoings
  • Body corporate fees (excl special purpose levy contributions for improvements, initial repairs)
  • Borrowing expenses – e.g. search fees, valuation fees, survey and registration fees, broker’s commissions, mortgage insurance, etc. (Note: borrowing expenses are deductible but not all at once – check with your accountant)
  • Capital Allowances (Division 43 claims for bulding, capital improvements) – an annual write-off for the depreciation of the building and/or structural improvements or additions – use a depreciation schedule prepared by a quantity surveyor to report on qualifying works
  • Cleaning – internal and external (windows, pool etc) gardeing, lawn maintenance, pest control
  • Depreciation of fixed assets (division 40 assets e.g. carpet, blinds, hot water system, air conditioning etc) – use a depreication schedule prepared by a quantity surveyor (changes may apply for properties purchased after 7.30pm 9th May 2017)
  • Electricity and gas expenses not paid for by the tenant
  • In-house video service charge (e.g. Foxtel) not paid by the tenant
  • Insurance premiums – sickness/accident, building, fire, burglary, public liability, landlord insurance
  • Interest expense on the loan
  • Land tax or other property related taxes
  • Lease preparation, registration, stamping
  • Legal costs for recovering unpaid rent, seeking damages for breach of agency agreement, reviewing tenant credit worthiness
  • Mortgage discharge expenses and penalty interest on early loan repayment
  • Mortgage insurance – treated as a borrowing expense
  • Postage, stationery, telephone call and rental (when related to dealing with real estate agents, tenants, services and other matters related to the rental property)
  • Pre-payments – full amount deductible up front if less than $1,000 and relates to period less than 12 months (confirm with accountant)
  • Quantity Surveyor report – for claiming Capital Allowances and Depreciation (as referred to above)
  • Rates (council and water) that are not paid for by the tenant
  • Repairs and maintenance during the tenancy (initial repairs will be considered capital improvements and written down over time)
  • Security monitoring costs
  • Travel expenses – to prepare for incoming tenants, to collect rent, to inspect the property during or at the conslusion of tenancy, to action repairs and maintenance, to inspect prior to purchase, visiting agent to discuss the property
  • With all this in mind, paperwork we require to assist you in legally minimising any taxation obligations should include the following:
  • Bank statements for property related accounts – income and expense accounts,
  • Loan statements for property related investments,
  • Statement of income and expenses from your property manager/agent,
  • Rates notices (both council and water)
  • Invoices and receipts relating to your property expenses,
  • Insurance documents outlining your insurance premiums,
  • Tax depreciation schedule (quantity surveyors report),
  • Travel log book,
  • Any other document you normally provide.

Hopefully this helps clarify what you can claim as a tax deduction in relation to your investment property. Any further questions, feel free to contact us to clarify further.

For Your Calendar…

  • 21 Oct Lodge and pay August 2018 monthly business activity statement
    Lodge and pay September 2018 BAS

  • 28 Oct Lodge and pay quarter 1, 2018–19 activity statement
    Lodge and pay annual activity statement for TFN withholding