Watson and Sons Advisory, Suite 301, Level 3, 3 Columbia Court, Baulkham Hills (2026)

19/10/2021

What happens to superannuation when you break up?

Depending on the situation, you might get some of your ex partner’s super, or they may get some of yours. See what you need to know.
A divorce from your husband or wife, or a separation from your de facto, could mean a division of your assets and debts, whether they’re held individually or together, and superannuation is no exception.
The agreement or decision to split super is part of the overall settlement process, which will consider all of the assets and liabilities of a couple.
Even if one of you hasn’t contributed to super for a long time, that person could still be entitled to a percentage of the other’s super.
Below we explain a few things you may want to know, noting that if you’re a de facto couple living in Western Australia, different rules may apply, as you’re not subject to the same superannuation splitting laws1.
How is super split in a divorce or separation?
There are several ways superannuation can be split.
1. A super agreement can be put in place before, during or after your relationship, as part of a broader binding financial agreement, which can specify how super is to be split upon separation or divorce2.
2. If you don’t have a binding financial agreement in place but have agreed how you’d like your super to be split, an Application for Consent Orders can be filed in court, without your attendance, to formalise the arrangement you’ve both come to3.
3. If you can’t reach an agreement, you may instead consider applying for financial orders, where a court hearing will determine how super is to be split between the two of you, noting there are time limits in place to do this4.
What’s involved in the process?
You may need to get information regarding the value of the super money that could be split between you. You can do this via your or your ex’s super fund, provided the request is for purposes related to the separation5.
To get this information, you’ll need to provide various forms to the super fund, which you can locate in the Federal Circuit and Family Court of Australia’s Superannuation Information Kit.
Once the super splitting order is made, whether by consent or after a court hearing, you’ll also need to provide a copy of the order to the super fund for it to be effective6.
Depending on the situation, if you want to defer making a decision around how super is to be split, or if you have an older style fund where splitting is not available until you’re eligible to start taking the benefit, you could establish a ‘flagging agreement’ where the super fund is unable to pay out super until the flag is lifted7.
What potential costs might you come across?
Super funds may charge an administration fee for carrying out any requests around splitting super. These are separate to any costs for legal or financial advice, or court fees.
With that in mind, it’s worth checking what the super fund may charge for things like:
• an application for information
• a super split
• implementing a flagging agreement
• lifting a flagging agreement.
When will the money be paid?
Because there are rules around when super can be accessed, be aware that splitting super won’t necessarily result in an immediate cash payout, as super is treated differently to other assets and debts.
So, after the agreed amount has been transferred to your or your ex-partner’s super account, the money must remain there until a condition of release is satisfied. What that means is, generally, you can’t access super until you’ve reached your preservation age (which will be between 55 and 60, depending on when you were born) and you retire. Find out more about when you can access your super.
What other things should you consider?
Some couples choose to leave their super untouched. Instead, they factor in the value of their super accounts while dividing up their other assets.
With that in mind, it’s worth knowing the details of all your financial accounts, including your super, noting many Aussies have more than one super account.
You can search for lost or unclaimed super by doing a super search with your current super fund or by logging into your MyGov account.
Where can you go if you need more help?
Working out what you’re entitled to can be complicated which is why it may be a good idea to get independent legal advice, even if things are amicable.
You might also think about consulting with your accountant or financial adviser. At Watson & Sons Advisory, we are very happy to help you with whatever you need to do. We can search for your super funds, combine multiple super funds, etc.
Source: AMP
Photo by Kelly Sikkema on Unsplash

12/10/2021

Planting the seeds of wealth in Spring

As we emerge from the cold of Winter, Springtime often inspires us to relish in the sunshine and enjoy a spot of gardening to reap the rewards of the season. Our finances can also benefit from the same kind of attention.
When getting our garden ready for growth, seedlings will need a well-prepared plot to flourish. We pull out the w**ds and turn up the soil in preparation for planting.
We can do the same thing with our finances – take stock of where our money is invested and determine if it’s appropriately placed to grow. Tidy up any miscellaneous spend that may have crept in like a w**d in the garden. Check for any regular payments heading out of accounts that could strangle our savings efforts like lantana could stifle seedlings.
Do an audit of your finances
One way to do this is to download a couple of month’s transactions from either your regular cash savings account or credit card and become aware of where the money is going regularly. Read through the transactions and tally them up – if any of those transactions irk you like bindies underfoot, (I spent how much on take away last month? Did I really do that much online shopping?) review them and decide if you’re happy for them to continue, or if some of that spend could be allocated to a savings strategy instead.
Maintain good financial habits
Seedlings will need ongoing maintenance and commitment to help them grow, whether it’s daily watering, fertiliser and ensuring they get enough sun. Your finances will benefit from the same due diligence. Start off with some good habits like a regular savings plan into a separate account, securing the best interest rate available via a comparison site like ratecity.com.au, and avoid dipping into savings for spending unless it’s absolutely necessary.
Be mindful of any conditions a savings account or investment plan entails – some savings accounts require ongoing deposits to maintain a higher interest rate, and some investment plans include an account fee for providing the platform you’re investing through.
Missing out on bonus interest or seeing some income return eroded in fees could be as disheartening as experiencing crops being destroyed by local wildlife or impacted by disease.
Transfer savings to your super
Directing some savings to super will also provide benefits in the longer term. We may not be able to enjoy the benefits of super growth until retirement but crops like super are planted for a longer duration harvest, and they can benefit from the power of compounding returns.
Seedlings will grow with enough care and attention, just like savings. Be mindful though it’s going to take time to enjoy the fruits of labour. While seedlings may need daily attention, looking at a savings account every day may bring disappointment. You can’t rush seedlings or savings.
Here’s to planting seeds to grow our garden and our finances and enjoying the fruits and flowers throughout all the seasons of our lives.
Source: Money and Life
Photo by Hello I’m Nik on Unsplash

05/10/2021

Should you merge your finances with your partner?

If you’re in a relationship, it can be tricky to work out when to start sharing income and expenses. Here are a few ways to successfully merge money as a couple.
The COVID-19 pandemic has changed many aspects of our daily lives, and romance is no exception. While lengthy separations have led some relationships to end, other couples are choosing to move in together more quickly than they might have expected.
If you’re planning on living together, you might be wondering whether to merge your finances. Combining money is a big step for any couple, and not something that has to be tackled all at once. There are several ways to share money as a couple, and you might like to take it in stages.
Before you merge your finances
It’s important to be honest, open and transparent about your financial situation and expectations upfront. Money can become a source of tension in relationships, often due to mismatched values, poor financial habits or financial infidelity.
Before merging your finances, set aside a time to talk about your current financial situation, including any debts or bad spending habits. Discuss your shared goals and vision for the future. Put a financial plan in place to help you get there. And work out which approach to sharing money will work best for both of you, so that you can set up your accounts to manage household expenses.
Also keep in mind that once you’ve been living together in a relationship for a period of time, you’re considered to have a spouse for legal and financial purposes. This can have implications for your tax returns, government rebates and benefits, and, in the event of a split, can affect how your assets are divided up.
Ways to share money
If you’re planning on moving in together, you’ll need to work out how you’d like to pay for your household expenses. There are a few different approaches to combining money, and each has its pros and cons. Here are some ideas to help you get started:
Proportional method
In this approach, each member of the couple contributes to household expenses in line with what they earn. For example, if one partner earns $100,000 a year, which is 66 per cent of the household income, and the other earns $50,000, which is 33 per cent of the household income they would each contribute accordingly. That means, if the monthly bills come to $3000, then the higher earning partner pays $2000 (66 per cent), while the other partner pays $1000 (33 per cent).
Pros: In this scenario, both partners spend the same percentage of their income towards bills, expenses and entertainment, while keeping what’s left over for themselves individually. That means you can both enjoy a better lifestyle than you could if you kept your money separate. It also relieves the stress of trying to keep up with a higher earning partner, or ‘budget down’ to the level of the lower earning partner.
Cons: One possible drawback to this method is that the higher earning partner could start to feel resentful about contributing more, or you could get into disagreements about whether an expense should be joint, or personal.
Equal shares
In this system, expenses are split down the middle, regardless of who earns what. You keep the rest of your income to spend how you like. That means you’re also responsible for paying down debts you’ve racked up on your own – your finances are essentially separate.
Pros: This is a great option for people who value their independence, especially in the early stages of a relationship. Neither partner feels like they are contributing too much,or being subsidised.
Cons: If there’s a big disparity in incomes, this can limit your lifestyle to that of the lower earning partner. It’s also not a realistic way to manage many of life’s major events, for example, if you want to buy a home you’ll need all of your borrowing power. Or, if one partner needs to take time off work to have children, you’ll need to reassess the arrangement.
Going all in
Another option is to combine all of your finances. Couples who use this method only have joint bank accounts and credit cards, shared loans and so on. Each partner’s income is deposited into a joint account, and all of your household and personal expenses are paid from a joint account.
Pros: Both partners have complete transparency over the household finances. It’s also simple to manage, as you don’t need to worry about splitting bills. Having an overview of your whole financial situation can also help with financial planning and money management.
Cons: This approach can cause friction if your values and spending behaviour aren’t aligned. One partner can become resentful of the other’s spending, or, disagree with individual purchases they want to make.
As you can see, there’s no right or wrong way for couples to share their money. The most important thing is to keep talking regularly about your finances, and review and alter your approach over time, as your needs change.
As you can see, it can be very hard to decide which way is right for you both. If you would like to bounce off a neutral party, please call Watson & Sons Advisory on 02 8806 3553 and we will be pleased to help you work out what is right for you.

Source: Money and Life
Photo by Michal Balog on Unsplash

30/09/2021

Staying afloat whilst saving for your children’s future

If you’re putting away money for your child’s future, how do you decided what strategy will offer them the best outcome?
Many parents hope to assist their children and help provide for their future by contributing financially. But with many Australians facing fresh economic uncertainty, concerns about superannuation and funding their retirements, as well as skyrocketing house prices, the question of how to do this without compromising your own financial security can be challenging.
Stevie-Jade Turner, Lead Financial Adviser at Tribeca Financial, has seen investment planning for children become a lot more prevalent among her clients in recent years.
“Five years ago, a lot of clients assumed that whatever wealth they built and had leftover their children would inherit”
However, she says concerns have shifted in recent years to be more focused on helping their children now rather than through inheritance later on.
“It’s become a lot more of ‘I’m scared my child won’t be able to afford a house’”.
What do you want to achieve for your children?
Ms Turner says that while many conversations with clients begin this way, it’s important to be clear on what you actually hope to achieve for your children.
She asks her clients: “what exactly do you want to be able to give your child? Is it a house? Is it a deposit for a house? Is it private education? What are you trying to achieve through the savings and through the investment?”
By having a clear ambition in mind and considering a variety of options, you are more likely to find a solution that benefits your children – even if it may not look like what you had in mind.
Property isn’t always a safe bet
The great Australian dream of home ownership often means that parents believe that helping their child get a foot on the property ladder – whether by assisting with a deposit, purchasing a property for them, or paying off the family home to leave to them – is the best investment they can make for their child. And with property prices skyrocketing across the country, many children may be looking to their parents as their most viable avenue to home ownership.
But Ms Turner explains that in fact, property is just as volatile as shares, but because it is a tangible asset we often believe it to be more stable and reasonably immune to risk.
“Quite often we feel that shares are really risky because we get a price update on them every minute, of every hour, of every day but if we had the exact same price updates on a property we would see similar fluctuations.
“If you’ve invested in property and it’s going through the roof, you’re seeing a really great trajectory it’s great when its doing well, but if it ever does the opposite, it will swing back just as much.”
Another factor to consider if you’re considering purchasing property for your child is that they simply may not like what you buy.
“Maybe your child wants the freedom and flexibility to buy something that they choose, so perhaps locking all your investment away in a property is not the smartest thing for you and might not be something your child wants long-term”, says Ms Turner.
Above all, it’s important to realistic about what you can achieve without overextending yourself or locking yourself into a situation that may disadvantage you if your situation changes in the future.
Don’t put yourself at risk
Ms Turner cautions that while it is lovely that many people want to give their children a helping hand, especially as it becomes increasingly difficult for young Australians to enter the property market, it’s vital that you make your financial security a priority.
“Let’s say that you buy a property for your children, and then you really need access to money at some point and that’s the only other asset that you’ve got. What do you do? Do you sell it? You can’t sell the laundry, so it’s not very liquid and it might not support you as well as an alternative investment might in that situation.
“We can absolutely plan for the children, but let’s make sure you’re not disadvantaging yourself along the way.
That’s where a balanced strategy that includes more liquid assets, such as an index managed fund, education bond or investment bond, can be beneficial, as they achieve the purpose of assisting your child while offering the flexibility to use it for other means if you need to dip in to it.
“We love our children, but I’ve seen clients killing themselves to protect what they’ve built for their children, whether it’s sending them to private school when they can’t afford it anymore, or doing everything they can to pay a mortgage on a property that, in their eyes, is their child’s property.
“And it’s really sad because it constricts and limits all the choices they could be making.”
Instead, Ms Turner stresses the importance of “finding a solution that keeps you afloat, so you’re able to adapt and reposition, and be better off for the longer term so that you’re actually able to give to your children in the future.”
Source: Money and Life
Photo by Piron Guillaume on Unsplash

28/09/2021

To our wonderful clients/friends,

WATSON CORPORATE SERVICES UPDATE

We thought that we would give you an update of what is happening at Watson Corporate Services.

John is transitioning to retirement, starting immediately.

The accounting firm is in the process of being sold to Paul Turner and has moved premises to Crows Nest.

The accounting practice will be continuing with minimal differences for approximately six months. The team is staying the same – you can still talk to Ming about your accounting needs, Racheal will still be looking after the super funds and Deepak will still be assisting us. The only changes will be that John will be working 1 -2 days a week at most, and he will not be checking his emails or answering his phone unless it is a workday for him, and Paul Turner will be calling the shots. We have met with several people who were interested in purchasing the firm, but we both feel that Paul will be the best fit for our clients/friends. We will send a separate email with information about Paul shortly, but I know he is looking forward to meeting everyone and finding out how he can help everyone through the change.

The new contact details are:

Address – Suite 104, Level 1
270 Pacific Highway
CROWS NEST NSW 1585

Postal address: PO Box 935
CROWS NEST NSW 1585

The office phone number will remain unchanged – 8806 3553.

Email addresses will remain the same in the short term.

For those of you who also use our Financial Advice services, Chris will be taking over. He will be located in the new office with the accounting practice. He will help Paul with the transition and will start to introduce you when making contact. The financial advice services will be transitioning to a new business name and will have a new email address. Chris will email everyone these details very shortly.

26/09/2021

Spring clean your credit rating

Is your credit rating looking a little worse for wear? Here are our tips to help you get it back into shape ahead of your next big purchase.
Nearly everyone needs to borrow money at some stage, to fund the purchase of a vehicle, home and contents or even a holiday. That’s why your credit score, also known as a credit rating, is so important.
What is a credit score?
Lenders use your credit score to work out how reliable you’re going to be as a borrower. Whether it’s for a home loan, personal loan or credit card, having a good credit score means lenders will be more likely to lend you money. A poor credit score will make it harder for you to borrow money, as lenders might view you as a higher risk. You may even have to pay a higher rate of interest than someone with a good credit score.
How can I check my credit score?
Your credit score is found in your credit report, which is held on file by credit reporting agencies. You’re entitled to a free copy of your credit report once every three months. You can get it from these three credit reporting agencies:
• Experian
• illion (formerly Dun & Bradstreet)
• Equifax
Each agency calculates your score slightly differently, and may hold different information about you, so it’s worth checking with each.
How is my credit score calculated?
Your credit score is based on your personal financial information, which is collected from lenders, service providers and public records. Things that can influence your score include:
• how much you owe and the type of borrowings
• how many credit applications you make
• whether you make repayments on time
• whether you’ve defaulted on any debts in the last 5-7 years
• any bankruptcies, court judgments or personal insolvency agreements in your name.
From 1 July 2021, comprehensive credit reporting (CCR) became mandatory for the major lenders, requiring them to provide more detailed information about your financial history, such as:
• any credit products you’ve held in the last two years
• your usual repayment amount
• how often you make repayments and whether you pay on time.
From 1 July 2022, lenders will be required to also provide financial hardship information. The CCR scheme aims to give lenders a more accurate picture of your capacity and ability to repay credit.
Great, so how can I improve my credit score?
Finding out that you have a low credit score can be worrying. Fortunately, there are steps you can take to improve your credit score and keep it high:
1. Pay your bills on time
Always pay bills like utilities, rent, mortgage, tv, internet and phone services on time, especially if the bill is worth more than $150. If a bill costs over $150 and is at least 60 days overdue, a default can be listed on your report, which remains there for five years.
Related: Top negotiating tips to reduce your bills now
2. Pay credit card, loan and other debt repayments on time
Making debt repayments on time and in full shows lenders that you can be trusted to meet your obligations. Having a good repayment history can even help boost your credit score, for example, paying off your credit card in full each month.
3. Limit how many credit applications you make
Every time you apply for credit, such as a new loan, credit or store card, the application is listed on your credit report. Making lots of applications in a short space of time may affect your score, as it looks like you’re in credit distress. Only apply for credit if you genuinely need it.
4. Pay off your debts
It’s generally the case that the less debt you’re carrying, the better your borrowing capacity is. So pay off your personal loans, close credit and store cards that you’re not using and reduce the limits on any other credit cards you hold.
5. Fix errors on your report
Finally, it’s worth checking your full credit report carefully to make sure that it’s accurate. From time to time, incorrect information can be added to your report, which can negatively impact your credit score. If you do notice an error on your report, contact the credit provider and/or credit reporting agency and ask them to amend your report. Avoid using a third party ‘credit repair’ company to clean up your report, as they are only doing what you can do yourself for free.
By taking these simple steps, you can expect to see your credit rating improve gradually, over time. However, if you’re having trouble paying your bills on time, struggling to manage debt or having other financial difficulties, seek help from a financial counsellor as soon as possible.
Watson & Sons Advisory is always happy to talk to you and help you make your life better. We are glad to see people that we help make a plan and stick to it, improve their lives for the future.

Source: Money and Life
Photo by Oliver Hale on Unsplash

23/09/2021

Millennials and money: what does the future hold?

With the rising cost of housing, an aging population, climate change and now a pandemic falling squarely on the shoulders of Australia’s millennials, how is this generation faring financially?
The first millennials (born between 1981 and 1996) are turning 40 this year. Still, despite more than twenty years in the workforce, it seems their financial wellbeing isn’t guaranteed.
A Commonwealth Bank study has found that almost two thirds (61 per cent) of millennials (also known as ‘Gen Y’) don’t have a regular savings plan, while 1 in 10 are still living pay cheque to pay cheque. A third (31 per cent) say they don’t feel comfortable talking about money.
Yet, millennials haven’t let go of the great Australian dream. More than half (58 per cent) are holding out hope they’ll be able to buy a house in the next five years. Currently only 28 per cent of millennials own their own home, according to the study.
Structural challenges
After a decade of slow economic growth, little to no wage growth and spiralling housing costs in our major cities, it seems millennials are feeling the pinch.
While older households have done well from rising house prices and superannuation, research by the Grattan Institute shows that the wealth of millennial households has barely moved since 2004.
“Poorer young Australians have less wealth than their predecessors and are far less likely to own a home,” the study’s authors say. “In contrast, older households’ wealth has grown by more than 50 per cent over the same period because of the housing boom and growth in superannuation assets.”
Contrary to popular belief, the report’s authors say there’s no evidence that millennial spending habits are to blame for stagnating wealth.
“In fact, younger people are spending less on non-essential items such as alcohol, clothing and personal care, and more on necessities such as housing, than three decades ago.”
No issue with soy lattes and avocado brunches then it seems.
A COVID-19 legacy?
Adding to the financial worries, more than a third of millennials (37 per cent) say they’ve been affectedfinancially by the COVID-19 pandemic, the highest of any generation.
And, while the pandemic has further stifled wage growth, it’s also is forcing many to ‘shelter in place’, choosing job certainty over career advancement. It’s unclear what the longer term impact of this will be, but redundancies and lack of career progression in some industries is likely to shape our workforce for years to come.
Resilience in the face of hardship
Despite the cards being (economically) stacked against them, it seems Gen Y are a resilient bunch. There’s evidence to suggest they’re more financially savvy than previous generations.
A study by Afterpay[1] found that more than 80 per cent of millennials budget, compared with only two-thirds of older generations. They’re also 30 per cent more likely to save regularly than their parents.
UBank agrees, saying that Aussie millennials take an active interest in managing their own finances, and are the most likely to budget.
“Despite 45% of the population admitting their finances have been negatively impacted in the last six months [by COVID-19], we’re seeing millennials emerge as being quite resilient,” said UBank executive, Philippa Watson.
“They’re taking the opportunity to implement budgeting and saving strategies to keep their financial goals, such as buying a home, on track, with many putting away half their salary each month,” Watson said.
A transfer of wealth
While the wealth of millennials pales in comparison to older generations, that could be about to change. According to the experts, Australia is on the verge of its largest ever handover of wealth, with up to $3.5 trillion in assets set to pass from baby boomers to millennials over the next 20 years.
Boomers are said to be the wealthiest generation in history, having lived through some of the most prosperous years on record. How much of that wealth they’ll pass down to their heirs is anyone’s guess though? Boomers will spend close to thirty years in retirement on average, so they’re just as likely to spend their ‘hard earned cash’ rather than gifting it to their heirs.
Financial wellbeing top of mind
With the millennial generation now hitting their thirties and forties, major life events like home ownership, marriage, children and saving for retirement are taking centre stage. Good money management and financial planning are becoming increasingly important, especially given the structural, economic and environmental challenges they face.
It’s a positive sign then that 1 in 2 millennials say they want to have more open discussions about money, with more than half of those (54 per cent) keen to know how to get ahead financially, according to the Commonwealth Bank research.
For a generation that came of age during the global financial crisis, a global pandemic just over a decade later might feel doubly unfair. But it seems millennials are nothing if not adaptable, and resilient. Getting the right financial planning advice now will help millennials navigate the challenges that come with this stage of life and ensure their financial wellbeing far into the future.
[1] Afterpay Touch Group Limited (2020). How Millenials Manage Money: Facts on the spending habits of young Australians. Retrievedfrom https://www.aph.gov.au/DocumentStore.ashx?id=185d5f3a-88fb-455e-b939-36daf31e66a7. Accessed 29 August 2021.

Source: Money and Life
Photo by Austin Distel on Unsplash

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