Your end of financial year
stock take

The end of the financial year is always a good time to take stock of where your finances are, how far you’ve come and what you need to adjust, especially in light of changed circumstances. Here are some suggestions to help you make sure you’ve ticked all the boxes, before stacking them away for another year.

Your budget

Your spending and savings targets will have changed.

It’s no secret that for many the next holiday will be in Australia. Overseas travel will be more difficult and so your travel budget will be impacted. Whether it goes up or down depends on your plans.

Also, a great deal of your discretionary spending has been, and will continue to be, reduced during the restrictions over the next few months.

You might find you’ll need to adjust your pension drawdowns and checking your budget is a great way to work out by how much.

Review your insurance

It will also be a good time to review your:

  • motor vehicle
  • home and contents, and
  • health insurances.

Use comparison sites to see if you can reduce your premiums, but always read the policy details to make sure you’re covered appropriately for all the services you need.

Drawdown and spending

The Government has halved the minimum drawdowns for this financial year and the next (visit the ATO’s website for more information). This helps you to avoid the need to drawdown on your retirement savings when returns have been poor, allows you to adjust for your lower spending and will help you batten down the hatches through this period.

Review your strategy and think about how much money you’ll need, and where it’s coming from over the next 6 to 12 months.

One option is to draw on your cash savings instead of drawing on your super or maximising your pension drawdown. This will give any money exposed to the share market a chance to recover from the current downturn.

Helping the kids

You might be considering helping family members through this time with a cash gift. If you receive any social security payments, and gift any more than $10,000 in any one year, or more than $30,000 over five years, the amounts above these limits will still count towards your assets test.

Otherwise, you are free to gift as much as you like to family members without any impact on your social security payments but make sure this doesn’t leave you in a financially difficult situation as well.

You should talk to a financial planner about alternatives to gifting a big amount. These days, one in three marriages end in divorce, and this gift becomes part of the assets divided between the separating parties. To protect your gift against this, a low- or no-interest loan is one way to protect your gift.

If you want to gift your grandchildren some money towards their education, there are investment bonds you can invest in, in their name. Again, a financial planner can help you explore this.

Have you downsized?

If you’ve sold your home recently, you’re able to make a contribution to your super of up to $300,000. For couples the maximum is double. These contributions are not subject to the normal caps on your super, the $1.6 million limit and you don’t have to satisfy a work test to make the contribution.

There are many other requirements to satisfy such as:

  • you’re 65 years of age or older
  • your home was owned by you or your spouse for 10 years or more
  • the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT)
  • you provide your fund with the Downsizer contribution into super form before or when making your contribution
  • you make your contribution within 90 days of receiving the proceeds of sale.

For more details on making a downsizer contribution, talk to a financial planner or refer to the ATO’s website.

Investment strategy

You should review your investment strategy at least annually to make sure it’s still in line with your long-term strategy. Avoid overreacting to short-term movements, unless you’re determined to take advantage of them.

Even in retirement your investment in a pension fund will have a longer-term horizon. You need to keep focussed on your long-term goals and strategy. As you know, these times will pass.