Professional Investment Services

Accommodation Bonds and Centrelink Benefit Entitlements

With the ageing of the Australian population it is becoming increasingly common for people to look at alternative accommodation arrangements for when they are no longer able to live in their own home.

A number of aged care housing options are available including retirement villages, hostels, and nursing homes. This article addresses a recent change that affects residents of hostels.

The fees and charges associated with hostels can be quite costly and tend to vary from one hostel to another.

Hostels traditionally have two types of fees payable by residents.

The first is a daily care fee, and the second is an accommodation bond.

The daily care fee comprises a basic fee and an income tested fee.

For residents receiving a full age pension, they only pay the basic daily fee, however residents on a part pension, or who are fully self funded (i.e. receiving no age pension) will pay the basic daily fee plus an income tested fee.

The current maximum daily fee for a person on full age pension is $27.86 per day, but a non-pensioner may be paying up to $83.58 per day.

Where an accommodation bond of more than $119,500 has been paid, the daily care fees for pensioner and part pensioners may be higher than that stated.

The accommodation bond is an amount a person entering a hostel may be asked to pay as a charge for accommodation.

This is generally charged as a lump sum and will vary from hostel to hostel. There is no upper limit and accommodation bonds may run into hundreds of thousands of dollars.

However, for those self funded retirees who have previously been precluded from receiving any age pension entitlement because their assets exceeded the upper assets test threshold, the exclusion of the accommodation bond from the assets test assessment from 1 July 2005 may now give rise to entitlement to at least a part age pension.

This, in turn may also give rise to a potential reduction in the income tested daily fee.

The Minister for Family and Community Services has announced that for those hostel residents who do not currently qualify for the age pension but will become eligible now that the accommodation bond has been excluded from the assets test, they will have their age pension entitlement back-dated to 1 July 2005, provided an application is lodged before 30 September 2005.

If you are currently a resident of a hostel and don't qualify for an age pension, or you are thinking of entering a hostel and want to know how best to structure your affairs in order to access Government benefits, speak with your financial planner today.

Source: Peter Kelly - Professional Investment Services

Insights into Successful
Investing – Seek Advice

If senior executives, sports stars, politicians and entertainers all get expert help to manage their money, why shouldn't you?

There are many reasons why it makes sense to seek advice. Some are just common sense.

Expertise

In an increasingly specialised world there are an ever-increasing number of experts we call on to help us. If you listed the experts you consult every year it would probably include mechanics, accountants, doctors, dentists, pharmacists, optometrists, travel agents and gym instructors. Even sports stars rely on expert coaches to remain at the top of their game.

Why do we rely on these experts? Because they are trained to do certain tasks that we are not – book flights, fix teeth, devise a fitness program, fit contact lenses etc. That training means that we can rely on them for advice and services that make our lives better and easier. It's no different with managing our money.

Efficiency

Given time, a certain amount of natural talent and a lot of training, we could do a lot of things we pay others to do. We could spend time researching nutrition, biomechanics and anatomy and devise our own exercise program. Or sweat over books till we knew enough of the latest tax laws and accounting legislation to do our own taxes.

The reason we don't is that it's inefficient. It's more cost effective – in time and money – for us to specialise in what we do best and use other experts when we need help.

The so-called “father of economics”, Adam Smith, called this “the division of labour”. He made the point that experience in doing a particular task plus the time saved by concentration on this task, produces many times more than if an individual made a complete article. Smith's famous example involves 10 men, each performing one or more of the 18 operations necessary to make a pin, together producing 48,000 pins a day. Whereas, working separately, they could not make even 200.

Look at it another way. Tiger Woods makes a lot of money from playing golf. Which is the best use of his time and energy? Learning international tax law or improving his putting? Researching investment products or practicing his bunker shots? Part 2 of “Seek Advice” will tell you how a financial adviser can help you in planning for your financial future. This will appear in the next edition of Timely Tips.

Source: BT Financial Group – Extract from “Ten Investing Truths ”

New “Financial” Year Resolutions

These days we often hear of the financial difficulties people get into because they spend every cent they earn, and sometimes even more.

It is such an easy trap to fall into. Credit is so easy to come by and we are constantly being confronted with an array of offers to “buy now…and pay later”. Everything from clothing to plasma screen TV's, mobile telephones to holidays. But can we really afford such a lavish lifestyle?

Whilst Australia has enjoyed unprecedented economic success over recent years we have all been caught up with a euphoric sense that the good times will continue forever…..but will they?

Perhaps the time has come to step back and take a closer look at where we are going financially. At the start of each year we often set a new year's resolution or two. Of course most of us have forgotten about them by the end of January but at least we go through the motions of thinking about what we would like to achieve in the coming year. With the new financial year having just commenced, now is the time to give a moments thought to what we would like to achieve financially during the next year. Here are a couple of simple tips to help you along the way:

•  Prepare a realistic family budget and get “buy-in” from the entire family;

•  Resist the urge to make impulsive buying decisions. Go shopping without your credit card. If you see something you really must have, go home and think about it overnight. You can always go back and buy it the following day if the desire is still there;

•  Open a “low fee, high interest” savings account and have your savings diverted to that account each pay day (preferably before you get hold of the money); and

•  Once funds build up in your savings account, look at investing them in an appropriate longer term investment.

If a family were to forego one take-away meal each week, they could save between $1,000 and $2,000 in a year (based on a saving of between $20 and $40 per week). What a great way to kick off the savings habit!

Source: Peter Kelly - Professional Investment Services