Your Financial Questions, Answered: February '20

General

January came and went as Australia knuckled down to start 2020 on a brighter foot than the end of year brought. Now that February is officially here, we thought we’d take the time to break down the latest developments that may affect your financial world.

As your trusted team of financial experts, we aim to ensure you have the knowledge you need to continue making smart financial decisions.

That’s why this Q&A covers the following topics:

  1. The financial support services available for bushfire victims
  2. The Federal Government’s proposed cash ban and its implications

Financial Support Services Available for Bushfire Victims

Over the Christmas holiday period, scorching temperatures and months of drought resulted in devastating bushfires that affected many rural communities across Australia.

While recent cooler temperatures, rain and the hard-work of our heroic firefighters have managed to defeat the worst of the fires, the damage that was left behind is something that disaster-affected communities are only now beginning to tackle.

At My Wealth Solutions, we know that in circumstances like this money is the last thing you need to be worrying about. That’s why, as your dedicated team of financial experts, we thought we’d make moving forward just a little bit easier and break down the financial support that is currently available for those affected by the bushfires.

In January 2020, the Federal Government announced the establishment of the National Bushfire Recovery Agency, aimed at providing you with the knowledge and financial support you may need to start again with confidence.

Alongside the creation of this agency, the government also announced a number of payments available to bushfire victims designed to help make managing your financial world easier moving forward.

We’ve broken down each payment and how they may help you, depending on your particular financial circumstances, in our answers to your questions below.

Your Bushfire Questions Answered

  • Q. One of my loved ones is a small business owner in a disaster-affected area. Is there any financial support available for them?

    If you or one of your loved ones is a small business owner, you know that the financial success and security of your family depends heavily on the success and security of your business. But if your business was affected by the bushfires, it can be hard to see a road ahead for you and your loved ones.

    In order to help ease the recovery, the Federal Government has designated a portion of funds from the national disaster recovery fund to be distributed as grants and loans to small business owners in disaster-affected areas.

    The top-up grants available can range anywhere up to $50,000 tax-free, while low-interest loans of up to $500,000 are also available for businesses that have experienced a major dip in revenue or lost significant assets as a result of the bushfires.

    Together, these grants and loans are designed to help you restore or replace damaged assets or regain working capital to aid in the recovery of your business.

    While the fine details of these financial relief options are still being finalised, there is currently no cap on the number of grants and loans available. This means that if you are a small business owner that has been affected by the bushfires, it’s important you reach out to an agent of the National Bushfire Recovery Agency to learn how you can benefit from a grant or loan.

    Click here for more information on the financial support options available for small business owners that have been affected by the bushfires.

  • Q. I know someone nearing retirement who has lost everything. What should they do?

    First of all we’d likely advise someone in this situation not to panic, despite this extremely difficult time. We understand that approaching retirement should be a time where you look forward to enjoying the fruits of your hard work, not worrying about money. That’s why, before doing anything, we recommend speaking to your dedicated financial advisor about your options.

    Your financial advisor will be able to give you a comprehensive overview of your current financial situation in the wake of the bushfire, help you adjust your financial goals and create the right path forward based on the needs of you and your loved ones.

    In the words of the Barefoot Investor, during a time of crisis such as you or your loved ones may have experienced, you need to focus on yourself, your family and your friends. Your financial advisor is here to focus on your finances and ensure you get back on track.

    There are also a number of options available to you in the face of extenuating circumstances, such as accessing your super early or establishing a transition to retirement pension. Though it is usually quite difficult to access your super before retirement or age 65, it can be done under circumstances that include severe financial hardship or compassionate grounds.

    Your financial advisor will be able to help you understand whether it is possible to access your super and, if so, how you can best utilise this resource to help aid your recovery.

  • Q. I have a mortgage on a home that was destroyed in the bushfire. What does that mean for my financial future?

    The answer to this question will depend on the policies and offerings of the bank or financial institution that your mortgage is with.

    For Westpac customers, there is good news as the bank has offered to pay one year off the mortgages of customers who lost their their homes as a result of the bushfires. Westpac Acting Chief Executive Peter King announced that customers who took out their mortgage through Westpac will have repayments of up to $1200 a month paid for over a period of one year.

    While this initiative should provide some much needed financial relief to Westpac customers, it’s not certain at this point whether other banks or financial institutions will follow suit.

    If you currently are paying a mortgage on a home that was lost in the fires, we’d recommend contacting your financial provider or keeping your eyes peeled for any further announcements to find out whether mortgage relief could become an option for you.

Implications of The Federal Government’s Proposed Cash Ban

It’s a bill that has split opinions both inside and outside of politics: the Federal Government’s proposed plan to ban cash payments of $10,000 and more.

Its supporters, which include the Reserve Bank’s Head of Payment Policy Tony Richards, say that the ban is what’s needed in the government’s ongoing fight against the black economy and tax evasion.

On the other hand, the ban’s opposition claim that the ban would ultimately push people into the hands of big banks and other financial institutions. There is also a growing fear that the cash ban is a precursor to negative interest rates and the start of the transition to a cashless Australia.

The ban passed in the Lower House in late 2019 and was due to be put into action on January 1st. However, the implementation of the cash ban has been put on hold until the senate inquiry, that was recently called, into it has been completed.

Your Cash Ban Questions Answered

  • Q: Why does the government want to ban cash?

    The idea behind the cash ban is simple: the government hopes that banning cash transactions of $10,000 and over will effectively fight the black economy, stamp out tax evasion, stop money laundering and prevent other criminal activity that is hard to track due to cash payments. A cash limit would potentially hinder criminal activity by stopping gangs from using large amounts of cash to purchase houses, cars, jewellery and other money-laundering schemes.

    Banning large cash transactions is also intended to stop the black economy, which includes activities such as underpaying wages or paying for work cash-in-hand, ABN and GST fraud and sham contracting.

    However, if made into law, the cash ban would only apply to payments made to businesses with an ABN for goods or services. It doesn’t apply to individual-to-individual transactions, such as private sales or cash payments to financial institutions.

  • Q: What is the punishment for violating the cash ban?

    Currently, the punishment for violating the cash ban if it is made into law is a mandatory two-year prison sentence.

    This seemingly harsh punishment is designed to discourage average Australians from being tempted to ignore the ban in favour of keeping their hard-earned cash out of the hands of the big banks.

    However, the current punishment for violating the cash ban does leave older generations of Australians – who aren’t as tech savvy and familiar with online banking as their younger counterparts – vulnerable to accidentally violating the ban without intending to.

    This being said, it’s important to remember that, at this stage, the ban is only proposed and so may not be made into law. If it is, your financial advisor will be able to guide you through the process of ensuring that you are not violating the cash ban while continuing to work towards achieving financial success and security.

  • Q: How will this proposed ban affect me if it is made into law?

    Currently, the amount of cash in the Australian economy is near a 50-year per-capita high, according to data from the RBA. Much of this cash wealth is held in large denominations of $50 and $100 bills, despite the lessening number of people using cash in their day-to-day transactions.

    The number one group that may be affected by this ban is those among the older generation, especially pensioners, who have opted to keep a large portion of their accumulated wealth in physical cash. With interest rates at an all time low – meaning there is little difference in keeping savings in cash versus in a bank account for the average person – this proposed cash ban may impact on the financial mobility of those who prefer to use cash for large purchases.

    The cash ban will also leave those who primarily receive payment in cash, either as tips or because a bank refuses to work with them, vulnerable to experiencing a drop in income if it is made into law. Examples of workers that may be affected by the cash ban passing into law include vape or e-cigarette shops, adult shops and workers in the legal sex industry, who often experience discrimination from the big banks and other financial institutions.

    If you’re concerned about how the proposed cash ban may affect you if it is passed into law, your financial advisor should be your first port of call. Working together, we’ll be able to help you understand the implications of the cash ban in relation to your particular financial circumstances while developing a new path forward.

CLIENT TESTIMONIAL

I was referred to My Wealth Solutions during an informal conversation with an acquaintance about consolidating superannuation accounts and financial advice in general. After some research, my wife and I decided to contact My Wealth Solutions and signed up. Following a number of friendly, focussed and professional conversations with Nikki about financial goals and priorities, My Wealth Solutions presented us with a well-researched and comprehensive report that detailed a number of options that we could consider. My wife and I have since decided which options and financial goals to pursue, and have been impressed with the prompt, courteous and professional service provided by Nikki and her team.

Joerns
CLIENT TESTIMONIAL

Fabulous team. Incredible personalised service. I have been with MWS for a number of years now and recommend to everyone! 5 stars.

Jessica J
CLIENT TESTIMONIAL
Nikki and the team at My Wealth Solutions have been extremely helpful in building a savings strategy for my wife and I, as well as tuning our superannuation and life insurance to make the most of our money and get the best coverage for us. Nikki explains everything in a clear and easy to follow way, and we didn’t feel at any point that we were being lost in the jargon or terminology. My wife and I are very happy with the service that we are being provided, we are glad that My Wealth Solutions are helping us reach our savings goals, and we would definitely recommend them for any financial planning or advice.
Tony B
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I believe whole heartedly everyone needs to take their wealth and future in their own hands and not just rely on their industry super fund. Financial industry professionals like Ben are key in helping us all achieve the goals we need looking beyond retirement. We were grossly under insured and had a poor idea about what insurance could really do for us as a family. He was so friendly and very approachable…Big tick from us!

Kristy R
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We have found the team at My Wealth Solutions to be professional and extremely knowledgeable within their field. Ben has taught us so much about how to better our financial situation. Dallas and I highly recommend Ben and the team to anybody wanting to take their finances to the next level.

Renee W
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Excellent service, very professional and great attention to detail. Highly recommend Ben and the team at My Wealth Solutions to take care of any of your financial needs.

Ilija S
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Ben and the team have been such an asset to our wealth building journey. They’re always readily available for help and advice, specific to our particular scenario. It has been a pleasure working with this team and look forward to many more interactions in the future.

Erika D
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We had an outstanding experience in dealing with My Wealth. They have set us up for the future and educated us all things finance. Couldn’t recommend more.

Danny K

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