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Aaron Downey

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FEDERAL GOVERNMENT'S COVID-19 SPENDING MEASURES

What does it mean for you?

As you will have noticed, the Federal Government is moving quickly releasing new spending measures during this difficult Covid-19 period. They are designed to prop up the economy during the inevitable downturn, and I wanted to summarise these measures for you.


In total, in the past 2 weeks, the government has released measures totaling $189 billion, including $90 billion of bond purchases by the RBA. These are designed to help small businesses, families and those that require income assistance from the government.


CENTRELINK PAYMENT SUPPORT 


A new ‘Coronavirus Supplement’ will be paid to people who receive the Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment and Farm Household Allowances will be increased by $550 per fortnight. This may also be available to self-employed business owners. 


Separately, people who receive social security, veteran and other income support recipients, and concession card holders will receive two separate $750 payments – on 31 March and 13 July. 


ACCESS TO SUPERANNUATION


The government also announced that it will allow people to access their superannuation to support their income during this period. There is still more detail to be understood, but essentially people will be able to access up to $10,000 form their super fund before 30 June, and another $10,000 after 30 June. These withdrawals will not be subject to the usual preservation or tax rules for those who have not yet reached retirement age. They will also not be taxed or assessed as part of other government payments.


SMALL BUSINESS SUPPORT


There are also a raft of measures that will apply to nearly all businesses in Australia. These are varied and complex, but in summary:  


(1) Businesses with revenue under $50 million per year will receive cash flow support calculated on their salary costs, between $20,000 to $100,000, calculated at BAS time. 


(2) Businesses who employ apprentices or trainees can apply for a wage subsidy up to 50% of the cost. 


(3) Businesses can utilise the tax benefits of instant asset write off which has been increased from $30,000 to $150,000. There are also accelerated depreciation benefits for new business investments.


(4) There will be an increase in the the level in which creditors can initiate bankruptcy proceedings from $5,000 to $20,000. 


(5) The ATO will allow tax payment deferrals and reductions and not begin enforcement action on struggling businesses. 


(6) Finally, there are new lending initiatives to support businesses during this challenging period. 


For small business owners, we recommend you read more at: www.business.gov.au 


WHAT DOES IT MEAN FOR ME 


Whilst the economic impact of this virus will be severe, the government has acted swiftly to prop up the economy. It is also reassuring to see that banks and other institutions have stepped up to support Australians.


Importantly, if your income has been impacted please get in touch. We can work with you to help manage your budget and finances to ensure your needs are met.


For those of you receiving income support from the government, these payments will be automatic, requiring little additional effort from you. 


If you are considering making a withdrawal from superannuation please get in touch also. Given many superannuation balances have been hit hard, we can review your account to ensure the right assets are being sold. 


Finally, with self-employed business owners don’t hesitate to get in touch for support with managing personal finances and cash flow.

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LIFE INSURANCE ISN'T ONLY ABOUT LIFE AND DEATH

When most people consider life insurance they see it simply as cover that will provide for their loved ones once they’re dead. 

But it’s not that black and white. Critical Illness cover is one type of personal insurance that can help protect you while you’re still alive.

In 2019, it is estimated that 144,713 new cases of cancer were diagnosed in Australia. That is equivalent to approximately 1 new case every 4 minutes. ________________________________________________________ 


In 2017, 27% of all deaths in Australia were attributed to diseases of the circulatory system and 1.1 million (11% of all hospitalisations) were due to cardiovascular disease.  _________________________________________________________     


In 2016, coronary heart disease (11%) and stroke (8%) were 2 of the top 3 leading causes of female deaths. The incident rate for stroke rose among younger women by 16% aged 35-44, and by 12% for those aged 45-54.   

_________________________________________________________ 


Last year, cancer was the top claim (using TAL Insurance for statistical purposes - though numbers are not dissimilar across the industry) for men and women alike, accounting for 63.1% of overall claims. Looking at women individually, cancer claims accounted for 80% of total claims, and 51.5% for men. 


These numbers are hard to ignore, which is why it’s important to be aware that life insurance isn’t only relevant when you’re dead. Let’s take a closer look at Critical Illness cover - insurance for the living. 


WHAT IS CRITICAL ILLNESS COVER?


If you suffer from a serious illness, Critical Illness cover can provide a lump sum that you can use to keep your household running or cover medical expenses, leaving you to focus on your recovery.  


WHICH HEALTH CONDITIONS DOES IT INCLUDE? 


Critical Illness insurance will cover a wide range of health problems, including  (but not limited to) cancer, heart attacks, strokes, paralysis and gynecological conditions. Make sure you compare the different products available as they may cover different conditions. Generally speaking, there are approximately 50 different conditions that are covered by Critical Illness insurance.


WHO SHOULD GET CRITICAL ILLNESS COVER? 


If you’re financially supporting yourself or others and don’t have emergency savings to cover unexpected medical costs it might be worth considering Critical Illness cover. 


The impact of a critical illness often extends further than the individual who is unwell. Let’s consider a family member who suffers a heart attack. They will need to take significant time off work to recover, and their partner may also sacrifice income by taking time off work to care for them. A huge change in circumstances, and with debts still to pay, could quickly leave them financially compromised.  


HOW CAN I USE THE CRITICAL ILLNESS PAYOUT? 


Critical Illness insurance is paid out in a lump sum. Unlike health insurance or Medicare, you are free to decide how to spend your Critical Illness payout. 


People often use the funds to cover the ongoing costs of suffering from a critical illness – as well as the things they need to get them back on their feet. For example, you can pay for any therapy, rehabilitation or home modification you require after your illness. You could also use the lump sum to replace lost income and keep up with regular payments like mortgage installments or utility bills.  


SOME COSTS OF CRITICAL ILLNESSES 


- Out of pocket cancer costs can range from around $37,000 - $95,460 depending on the type of cancer suffered.    


- The direct health cost of a heart attack is $25,000.  


- A stroke costs an average of $100,000 to the individual and the community.


Critical Illness cover is often included in insurance packages such as Recovery Insurance and can be tailored to suit your personal situation. 


Speak to us to find out more about your options and which package will best suit you.

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WHO WILL THRIVE IN THE NEW COVID-19 ENVIRONMENT

As the spread of COVID-19 rapidly gains momentum, the world is in flux. Which sectors will struggle and which will thrive?
Businesses are scrambling to make the best of a ‘new normal’, but travel restrictions, public lock-downs and forced closures have left whole industries reeling. It is difficult to know how this crisis will unfold, but it has been clear in recent weeks that while some sectors will struggle, others are set to thrive.


SOME OF THE HARDEST HIT INDUSTRIES INCLUDE:
 
1. Airlines. With increased restrictions on domestic travel, Australia’s carriers are being forced to cut back. Virgin Australia has reduced its domestic capacity by 90%, and Qantas is grounding 150 aircraft, cutting back both its domestic and international capacity. 

 2. Sports. The global sports industry has ground to a halt due to the virus. Since many professional clubs were already struggling with their balance sheets, we may see drastic changes to the Australian sporting landscape in the wake of COVID-19. 

3. Tourism and hospitality. Accounting for nearly 8% of employment in Australia, the tourism and hospitality industry is doing all it can to weather the storm. Government stimulus should help, but forced closures have left many businesses on the brink. 

 IN TURBULENT TIMES THESE SECTORS LOOK SET TO GROW: 

1. Online communication. As we find ourselves in the midst of self-isolation, online platforms like video conferencing service Zoom are providing us with some welcome relief - and business is booming. Zoom has seen its stock gain 100% since January. 

 2. Ecommerce and delivery services. With takeaway or grocery delivery the only option for many, ecommerce and food delivery services like Menulog have an opportunity for growth – but only if their business operations can handle the increased demand and hygiene requirements. 

 3. Entertainment streaming services – video streaming platforms like Netflix are providing a much-needed escape for those in quarantine or isolation. In fact, demand is so great that they have reduced video quality to standard definition to avoid monopolising global bandwidth. Despite current success, we must be mindful of the longer-term impact of COVID-19 on businesses like Netflix or Amazon Prime, as the virus disrupts the production of upcoming shows. 
 
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Aaron Downey

Principal / Financial Adviser

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