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Vaccination rates as they happen around the world

 

A new resource is now available that shows the rates per country of COVID-19 vaccinations.  We all suffered in many ways as COVID number increased, now, as expected, let's watch them start to drop.

 

             

How many people have received a coronavirus vaccine?

Click here or on the image to go to the live site.

Tracking COVID-19 vaccination rates is crucial to understand the scale of protection against the virus, and how this is distributed across the global population.

Country-by-country data on COVID-19 vaccinations

 

 

Source: ourworldata.org

Returning expats reminded on tax snares with pensions, investments

 

With thousands of Australian expats still hoping to return home following COVID-19, a mid-tier firm has highlighted some important tax implications and considerations, including the foreign pension transfers.

 

           

For expats recently returning to Australia or planning to return, HLB Mann Judd Sydney tax partner, Peter Bembrick warned there can be hefty tax bill involved, depending on the jurisdiction and the length of time spent overseas.

Mr Bembrick said in addition to income tax, expats will need to account for any share holdings, employee share schemes – particularly in the event of a redundancy, cash in offshore banks accounts, and pension funds.

There are a lot of considerations that need to be made with the transfer of money out of foreign pension funds in particular, he said, given the tax nuances in this area.

“You need to make sure you’re across the local requirements and what you need to do to get the money out because there’s usually a fair bit of red tape involved and tax issues on the other side,” he said.

For example, the pension system in jurisdictions such as the UK – where an estimated 40,000 Australians reside at any given time – can create adverse tax consequences, he warned.

In order for an expat to be able to transfer a UK pension benefit to an Australian superannuation fund, the fund must be must be registered with HMRC as a Qualifying Recognised Overseas Pension Scheme (QROPS). If it is transferred to a non-approved fund, a tax of up to 55 per cent may apply.

To be included on the QROPS list, an Australian superannuation fund must agree to provide ongoing reporting to HMRC, and the fund must restrict the payment of benefits to members aged 55 or older, except in instances of retirement due to ill health.

In terms of US pension funds, Mr Bembrick said there is “still a fair bit of ambiguity around whether some the different US funds such as 401k plans and other types of US pension funds are regarded as being equivalent to an Australian superannuation fund”.

He also noted that for some clients, deciding to leave the money overseas may actually be the best option.

“I was speaking to someone with large amounts in the US and there’s going to be a lot of tax triggered in the US if he takes this money out, so for the moment he’s just going to leave it in place,” he explained.

Its also important, therefore, that expats also consider where they want to retire, he said.

“If they’re not sure that Australia is the place where they’re going to retire then moving everything here may not always be the best answer,” he said.

Mr Bembrick said expats should also be aware that there is a six-month rule where the foreign super interest will generally be tax-free if it is transferred to Australia within six months of them becoming a resident of Australia or their foreign employment terminating.

He also stressed the important of expats seeking specialist advice in this area, given the complexity of the tax laws.

Property is another key consideration that they need to make, he added.

“Some countries charge non-residents a higher rate of transaction tax or tax capital gains on profits from property investments and, in Australia, if you’ve retained property while abroad, you may be better to move back first before selling,” he said.

“This applies particularly to the former family home, as non-residents selling property are now excluded from the CGT main residence exemption and the related ‘six-year absence’ rule.”

Mr Bembrick noted that the CGT discount on the sale of investment properties is not available for any period after 8 May 2012, during which someone is a non-resident.

“For investment properties already owned at the time they left to move overseas, there will need to be an apportionment of the CGT discount for the relevant periods. A similar apportionment applies for periods between the date they return to Australia and a later property sale,” he explained.

Shares and managed funds will also need to be carefully assessed, he said, particularly if someone has become a non-resident during their time overseas.

“These types of investments are generally treated under the CGT rules as having been sold at their market value at the time that tax residency changed, triggering deemed capital gains or losses,” he said.

“The good news is there would be no further Australian CGT implications if these assets are actually sold while a non-resident. However, if they are still owned when Australian tax residency is resumed, they – along with any new investments – will be deemed to be re-acquired at that time for their current market value, so any future capital gains or losses on sale would relate only to the movement in value during the second period of Australian tax residency.”

 

 

Miranda Brownlee
07 January 2021
smsfadviser.com

 

Approaching the dawn

 

COVID-19 has completely, and mercilessly, dictated the direction of economies and financial markets through most of this year. So, as we rapidly approach the end of an extremely unpredictable and volatile year, what's in store for 2021?

 

         

COVID-19 has completely, and mercilessly, dictated the direction of economies and financial markets through most of this year.

So, as we rapidly approach the end of an extremely unpredictable and volatile year, what's in store for 2021?

It should come as no great surprise that the global economic outlook and the likely behaviour of financial markets remain hinged to COVID-19, and more specifically to health outcomes and responses.

That's a key finding from our just-released report: Vanguard Economic and Market Outlook 2021: Approaching the dawn.

Authored by senior economists and investment strategists from across Vanguard, the VEMO 2021 report highlights that the pace of economic recovery ultimately will be driven by the rate at which populations develop COVID-19 immunity.

As the human immunity gap narrows, the current reluctance gap – the fear of spending – will also narrow, leading to stronger economic growth.

Room for economic optimism

With the rollout of COVID-19 vaccines increasing, there is room for optimism.

In the VEMO report, we outline our base case that major economies will achieve infection immunity (when the person-to-person spread of COVID-19 becomes unlikely) by the end of 2021.

This would result in economic activity normalising by the second-half and output reaching pre-pandemic levels by the end of 2021. If infection immunity does not occur, economies may only see marginal progress from current levels.

But assuming immunity rates do rise, unemployment levels are set to fall, and a cyclical bounce in inflation is expected to occur around mid-year. This brings some risk that markets could interpret higher inflation with a more pronounced, but unlikely, inflation outbreak.

However, overall, there's more upside than downside to our economic forecast based on vaccine developments.

Country-specific economic growth rates will be varied, with our base case forecast for Australia at 4 per cent. This will trail the United States and the euro area, which are both forecast to grow at 5.4 per cent in 2021.

The strongest forecasts are for the United Kingdom at 7.4 per cent, albeit from a low base, and for strong growth of around 9 per cent in China due to its more successful navigation of COVID-19.

The outlook for markets

The key investment lessons to absorb from 2020 are that it's vital stay the course with your strategy and not become distracted by short-term market events, no matter how severe they are at the time, and that portfolio diversification will ultimately smooth out volatility.

The benefits of diversification played out over the most recent market cycle where investors holding a global equity portfolio would have outperformed someone holding an all-Australian equity portfolio by about 5 per cent in year-to-date terms.

In the period ahead, Vanguard predicts the Australian market should slightly outperform globally as economic conditions improve.

Vanguard's Capital Markets Model projections for global equity returns are in the 5 per cent to 7 per cent over the next decade, and in the 5.5 per cent to 7.5 per cent ranges for Australia over same period.

Although below the returns seen over the last few decades, equities are expected to continue to outperform most other investments and the rate of inflation.

In Australia, equity prices have rebounded roughly 40 per cent from the trough in March and valuations are considered to be in the middle of their fair value band.

US and China valuations are not overly stretched but at the higher end of their value bands given the recent stronger rebounds in those markets.

Despite rising equity valuations, the outlook for the global equity risk premium is positive and has increased since last year given record low bond yields.

Low interest rates will remain a feature in 2021, and Vanguard expects bond portfolios of all types and maturities will earn yield returns close to current levels.

But we continue to believe in the diversification properties of bonds, particularly high-quality bonds, even in a low or negative interest rate environment.

An investor holding a diversified portfolio (60 per cent equity and 40 per cent fixed interest) during the most recent market sell-off in March would have fared better than someone with an all-equity portfolio.

Rather than used as a returns enhancer, bonds are a risk reducer to balance out cyclical risks in portfolios.

In 2021, it will be important for investors to remain disciplined and focused on long-term outcomes, and to accept that current macro-economic events may mean medium-term investment returns will be lower than those recorded over recent decades.

 

 

15 Dec, 2020
By Tony Kaye
Senior Personal Finance Writer, Vanguard Australia
vanguard.com.au

 

Retirees need new super investment approach

 

The needs of retiree clients may not be properly serviced by traditional portfolio investment approaches, an investment expert has warned.

 

           

Traditional portfolio investment approaches for superannuation may fail to meet the needs of retiree clients, a retirement investment expert has warned.

Pointing out the bulk of superannuation assets in Australia now sit with people aged over fifty, Fidelity International head of client solutions and retirement Richard Dinham said financial advisers had to ensure traditional portfolio construction approaches evolved to meet this demographic’s financial needs.

“In Australia, the retiree client group is growing in size and it is essential that financial advisers have the right tools and resources to meet their particular needs,” Dinham said.

“As such it is important to understand the motivations and drivers behind the behaviour of retiree clients as they move from accumulation to decumulation.”

He highlighted Fidelity International’s recent research paper, “Building Better Retirement Futures”, developed in conjunction with the Financial Planning Association of Australia and CoreData in an effort to help financial advisers develop better investment strategies for their retiree clients.

“The paper outlines some of the key financial issues and considerations specific to retirees and helps advisers design the best strategies for post-retirement decumulation,” he noted.

“Financial advice is invaluable in helping retirees understand how long their money will last and what steps they can take to minimise the risk of outliving their savings.

“Determining the best strategy, or combination of strategies, is a significant part of the value a planner brings to the table.

“Advisers that understand the types of risk specific to retirees, the fears and challenges they face in retirement, how their needs differ from accumulators, and the strengths and weaknesses of different retirement investment strategies, will be best placed to help their clients throughout their retirement.”

In November, Allianz Retire+ chief executive Matt Rady said retirees needed a more innovative approach to investing than that offered by traditional investment portfolios in order to navigate the current low interest rate environment.

 

 

January 11, 2021
Tharshini Ashokan
smsmagazine.com.au

 

Retirement the ‘number one trigger’ for financial advice

 

Approaching retirement still remains the top reason for seeking advice from a financial planner, with healthcare costs, outliving their savings and aged care costs some of the biggest concerns, according to a recent research paper.

 

       

A research paper developed by Fidelity International in conjunction with the Financial Planning Association of Australia and CoreData, has found that approaching retirement is still the number one trigger for people to see a financial planner.

The Building Better Retirement Futures paper found that almost a third or 31.7 per cent of those who currently receive it as and when needed, nominated approaching retirement as the reason they sought advice.

This was a greater trigger than buying a property at 23.1 per cent and significantly more likely to make people see a planner than coming into a substantial sum of money at 9.8 per cent.

“Around half of these people or 46.7 per cent, seek advice specifically to help them plan a better retirement, as distinct from the more general aims of help with investing and help with managing or growing wealth,” the paper stated.

The paper noted that clients who are nearing retirement find themselves dealing not only with the financial aspects of helping them lead a comfortable and dignified life in retirement, but the emotional and psychological impacts of transitioning into retirement as well.

“Despite the best-laid plans and the most strongly held expectations, around half of Australians do not retire for the reasons they think they will, nor at a time of their choosing,” the research paper said.

The research indicated that in terms of worries in retirement, health was overwhelming the highest at 47.2 per cent.

The research paper noted that those who retired involuntarily due to health issues are likely to have lower incomes to begin with, and that lower incomes are correlated with lower superannuation balances.

“Also, those who have long-term health problems will likely face additional health expenditure in retirement, especially when pharmaceuticals are involved,” it said.

The next biggest worry was outliving retirement savings at 12.2 per cent and aged care costs at 9.9 per cent. Nineteen point three per cent of the respondents stated that they had no worries and were very comfortable in retirement.

 

 

Miranda Brownlee
06 January 2021
smsfadviser.com

 

2020 is coming to an end. Phew!!

 

Some fireworks and a great Advent Calendar to help you celebrate. On behalf of all our staff we wish our clients and their families a Merry Christmas, a Happy New Year and a great holiday period.

 

         

Our annual Advent Calendar. 

Come back each day and click on the next date for another inspirational quote or poem from some of the greatest writers and poets.

(Please click on the image to open the Advent Calendar and then click on a date)

 

 

Super, death, and taxes

 

An interesting finding in the federal government's Retirement Income Review report is that many Australians are dying with the majority of the wealth they had when they retired.

 

         

Having enough superannuation to enjoy a financially comfortable lifestyle in retirement is the aspiration of most Australians.

As the super system continues to mature, and with the benefit of compounding investment returns, average retirement savings balances are rising.

But an interesting finding in the federal government's just-released Retirement Income Review final report is that many Australians are dying with the majority of the wealth they had when they retired.

Concerned about outliving their superannuation savings, the report found that the majority of retirees tend to spend less rather than use financial products to better manage their longevity risk.

In other words, rather than wanting to spend up, many retirees are keen to watch their savings balance grow.

And that's pointing towards a huge blow-out in the payment of super death benefits, which actuarial firm Rice Warner projects in the Retirement Income Review report will rise from the current level of around $17 billion per annum to just under $130 billion by 2059.

Projected value of superannuation death benefits

Unintended consequences

When there's superannuation still left over at the end of your life, it's most commonly inherited by your surviving spouse or children, or bequeathed to other nominated beneficiaries.

If you don't have a spouse, and intend to leave your super to your adult children, there may be serious tax consequences for them.

It all comes down to whether your beneficiaries are entitled to access your super funds tax free or not after you're deceased.

So, having an understanding of the tax rules around super death benefits is extremely useful. With proper estate planning before you die, it may be possible to reduce your after-death super tax liabilities.

The tax rules around super death benefits

While there is no formal inheritance tax in Australia, super death benefits are taxed in some cases.

Essentially, superannuation can only be passed on tax-free when it is left to a spouse or dependant children under the age of 18.

A death benefit dependant, as determined by the Tax Act, can also include de factos, former spouses, those with whom you have shared an interdependency relationship immediately prior to death, and others who were financially dependent on you just before you died.

Beneficiaries who fall outside of these parameters, such as adult children, are often caught up in the ATO's tax dragnet.

Superannuation benefits are generally comprised of both taxable and tax-free funds, based on the nature of contributions that have been made over time.

Those contributions made by your employer at the concessional tax rate of 15 per cent form part of the taxable component, while after-tax contributions made by you separately as non-concessional contributions make up the tax-free component.

It's the taxable component – usually where the bulk of an individual's super funds reside – that will carry the tax liability for any adult children receiving your super payout on your death.

Avoiding an after-death tax experience

Transferring super wealth is a non-issue from a tax perspective if you have a spouse or dependant children to leave it to.

If you don't, there are ways to reduce your potential super tax burden for non-dependent beneficiaries.

One of them is through the use of what's known as a super recontribution strategy.

If you've reached an age where you can legally access your funds, this enables you to draw out the taxable component of your super as a lump sum and then recontribute it back into your super fund in the form of after-tax contributions.

Any taxable super withdrawn will be liable for tax at your marginal tax rate, however if you are aged over 60 and have stopped working (are retired) then your marginal tax rate is effectively zero.

Current laws allow individuals to contribute up to $100,000 per financial year as non-concessional (tax-paid) contributions, or up to $300,000 in one year using what's known as the three-year bring forward rule.

Keep in mind however that there are restrictions on personal super contributions for those aged 67 and above.

Using a recontribution strategy can effectively reduce or eliminate the taxable portion of your super, meaning non-dependant beneficiaries of your super may not have to pay any tax if it's received as a lump sum after your death.

Careful planning

When you're looking at who you want to leave your super to, it's very important you consider things carefully as some proper planning needs to be done.

Without planning there could be some unexpected and significant taxes bestowed upon your heirs, which could be exacerbated if any life insurance payout from your super fund is made to someone who is not a spouse or dependant.

To discuss your estate planning needs, including around your super death benefits and potential tax liabilities, it's important to consult a licensed financial adviser.

 

 

By Tony Kaye
Senior Personal Finance Writer
Vanguard Australia
01 Dec, 2020

ATO flags key deadlines for early release of super

 

With the end of the year drawing closer, the ATO has outlined some of the cut-off dates and deadlines applying for members wanting to apply for the early release of their super.

 

       

In an online update, the ATO said that for superannuation members who are eligible for COVID-19 early release of super and intent on applying, they may apply through ATO online services in myGov before 11 December 2020.

“In most cases, this should allow enough time for us process their application and for you to release the money,” said the ATO update.

Access to COVID-19 early release of super closes on 31 December 2020. Members can apply online up to this time, the ATO reminded members and professionals.

“Applications cannot be backdated or accepted after 31 December 2020,” it cautioned.

The ATO assured members that as long as applications are submitted by the deadline, they will be processed.

“As long as we receive your members’ application by the deadline, we will process it. However, confirmation notifications from us and payments from [funds] may be delayed due to the holiday season and can continue into January 2021,” it said.

The ATO also added that if members require a compassionate release of super determination letter before Christmas, they will need to apply through ATO online services in myGov by 4 December 2020.

Members should also take into consideration the time it will take for funds to receive the determination and make the payment, it said.

 

 

Reporter
26 November 2020
smsfadviser.com

 

Behind the dash in new market listings

 

There's been an unexpected surge in new listings on the Australian share market over recent months. So, what is driving this IPO boom?

 

         

There's been an unexpected surge in new listings on the Australian share market over recent months.

The sharp fall on global financial markets over February and March saw Australia's initial public offering (IPO) activity almost come to a complete standstill as the COVID-19 pandemic deterred many companies from undertaking public listings.

Only 12 companies completed IPOs on the Australian Securities Exchange (ASX) during the first half of the year.

But it's been a vastly different story in the second half despite the worsening spread of COVID-19, which continues to severely impact economies and financial markets globally.

While volatility on markets is ever-present, these very uncertain conditions are not discouraging some companies from going down the public listing route.

From 1 July to the end of October a total of 24 new companies have listed on the ASX, and between now and the end of this year there will be another 20.

That will bring the total number of ASX floats undertaken this year to 56, which will be only slightly down on the 63 listings completed in 2019.

Global IPO activity spikes

This uptick in IPO activity is certainly not confined to Australia.

On a global level, the three months to the end of September was the most active third quarter in the last 20 years by investor proceeds, and the second highest third quarter by deal numbers.

Data from financial services firm EY shows the acceleration in activity over the quarter brought the total number of IPOs completed this year to 872, with total investor proceeds rising by 43 per cent over the previous year to $230 billion.

In the U.S., the boom in new market listings in the second half has been largely driven by technology, industrials, and health care IPOs. These sectors continue to generate very strong investor interest.

So, what is driving this IPO boom?

In the face of record low interest rates, investors worldwide are hunting for higher returns and increasingly are shifting their cash holdings into other asset classes including equities.

Last week the Reserve Bank of Australia followed the line of many other central banks by cutting our official cash rate to just 0.1 per cent. Cash returns after inflation are negative.

As such, record investor inflows are continuing into exchange traded funds (ETFs) and managed funds, with capital primarily coming from people wanting to achieve strong asset diversification through broad exposure to equity and bond markets.

The IPO boom, on the other hand, is being fuelled largely by speculators who are seeking out short-term profits.

Australia's 2020 IPO scorecard

ASX trading data confirms that many IPO investors are buying into companies during their initial offer process and then selling out very quickly, often on the first day of listing.

This is obviously high risk. Although quick gains can be made, so can quick losses.

An analysis of the IPOs undertaken on the Australian share market so far this year shows that while some companies have generated strong first-day gains for investors, others have done the opposite.

In fact, less than 20 per cent of Australian IPOs this year are trading above their opening day closing price. Several companies, which recorded strong first-day gains, are now in negative territory.

Overall, more than 40 per cent of the companies that have listed on the ASX this year are currently trading below their initial offer price.

Other new listings, while they are trading above their IPO share issue price, have actually not matched the strong gains of the broader Australian share market over the time they have been listed.

A number of new ASX listings have strongly outperformed the broader market on a percentage basis, and several companies have more than doubled in price.

By contrast, an equal number of IPOs are trading more than 30 per cent below their share issue price.

Taking a long-term approach to IPOs

Many IPOs invariably do have a high level of risk and are prone to speculative trading.

What's important to keep in mind is that every listed company in the world – including the very largest – has at some stage come to their market through an IPO listing process.

As such, participating in an IPO can certainly form part of a broad, long-term investment strategy.

Just like any investment, it's crucial to undertake extensive due diligence before committing capital to an IPO. This includes reading the company's prospectus thoroughly and conducting other market research.

Even the very largest, established listed companies are susceptible to market and specific risks.

Which is why diversification, both within and across asset classes, is vital.

Rather than speculating on IPOs, many investors are now moving away from having individual company exposures and diversifying their investment risk through broad market ETFs and managed funds.

 

 

By Tony Kaye
Senior Personal Finance Writer, Vanguard Australia
10 Nov, 2020
vanguard.com.au

 

Retirement costs rising despite COVID impacts

 

The cost of a comfortable retirement in Australia has gone up over the September quarter despite COVID-induced lifestyle changes, new research has revealed.

 

         

Research by the Association of Superannuation Funds of Australia (ASFA) has shown that couples aged around 65 living a comfortable retirement needed to spend $62,083 per year, up 0.3 per cent, and singles $43,901, up 0.5 per cent on the previous quarter.

The increase from a year earlier was 1.8 per cent for couples and 1.6 per cent for singles.

“COVID-19 has had a substantial impact on Australia’s financial and economic conditions, but there has been a partial unwinding of both price increases and decreases that immediately flowed from the impact of the pandemic,” said ASFA CEO Dr Martin Fahy.

ASFA noted that retiree lifestyles were yet to return to normal as restrictions on travel and changes to entertainment and dining-out options had a significant short-term impact on retirement lifestyles.

During the September quarter, health insurance premiums remained unchanged but would have increased from 1 October by around 3 per cent for many retirees.

“Recent reductions in interest rates and dividends are having an impact on the financial position of many Australian retirees,” Dr Fahy said.

“Dramatic changes in our lifestyles had a big impact on demand and prices right across the economy, but for at least some categories of expenditure, there is a return to something closer to normal.”

Dr Fahy noted that the increase in the cost of retirement despite lifestyle changes means members who are currently still working require greater accumulation of superannuation during their working lives.

“For wage earners, the increases in costs in retirement have highlighted the need for the superannuation guarantee to move from 9.5 per cent to 12 per cent as legislated. Over the year to September 2020, official figures indicate that wages grew by only 1.4 per cent on average for the entire economy, and by only 1.3 per cent in the private sector. Over the September quarter, increases in wages in the private sector averaged just 0.1 per cent,” the ASFA statement read.

Increases in retirement costs are outstripping growth in wages and higher contributions are needed for future retirees to achieve the standard of living they want and deserve in retirement.

 

 

Cameron Micallef
23 November 2020
smsfadviser.com

 

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