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Everything You Should Know About Inflation

What is inflation: Everything You Should Know About Inflation in Australia

Inflation is the reason why $100 at the checkout today gets us a lot less than it did 10 years ago. Likewise, it’s how we know that our 100-buck shopping bag will be even smaller and lighter 10 years down the track. Our money gets less valuable over time, by economic design – and this is inflation.

Inflation is one of the most important financial concepts to understand, yet it can also feel like one of the trickiest. There are many powers at bay when it comes to inflation, and if the waters of the economic sea weren’t murky enough already with these powers, the endless, sometimes contradictory or untrue, commentary on inflation is sure to do the trick. You hear about it on the news, see it justifying rising supermarket prices and feel it when your budget suddenly doesn’t stretch as far as it used to. But what exactly is inflation, how does it affect your finances, and what can you do about it?

At Best Financial Planners, we believe the more you know, the better prepared you’ll be to make smart financial choices. So let’s break inflation down clearly, what it is, why it happens and how you can manage its impact on your daily life and long-term goals.

What is inflation in simple terms?

At its simplest, inflation is the rate at which the prices of goods and services rise over time. When inflation goes up, the same amount of money buys you less than it used to.

Let’s think about groceries again: a basket that cost $100 a few years ago may cost $110 or more today. Over the decades, the difference becomes even more dramatic. This erosion of purchasing power is the real “invisible thief” that inflation represents, and suddenly the amount you need to earn to live comfortably increases.

What is underlying inflation?

Underlying inflation is a measure designed to strip out temporary price swings that don’t reflect long-term trends. For example, sudden changes in petrol or fresh fruit prices can cause headline inflation to spike or drop, but these shifts often reverse quickly. Underlying inflation smooths out these short-term fluctuations, giving a clearer picture of persistent price pressures in the economy. In Australia, the Reserve Bank closely monitors measures of underlying inflation when deciding on interest rates, since it provides a more reliable guide to the true trajectory of prices.

How much will $20,000 be worth in 30 years of inflation?

The future value of money depends heavily on the rate of inflation. For example, if inflation averages 3% per year, $20,000 today would have the same buying power as about $8,239.74 in 30 years.

But while we know inflation will mean our money is worth less in the future, the variations in the inflation rate mean we don’t always know by how much. At a higher inflation rate, the erosion of value is even steeper – at 5% inflation, that same $20,000 would shrink in real terms to roughly $4,627.55.

These examples show why long-term financial planning is so important: without investments or growth strategies, savings left sitting idle will lose significant value over time. A financial planner in Sydney, for instance, can help you build an investment approach tailored to the city’s higher living costs and property market trends.

Inflation and rising prices

What causes inflation?

At its heart, inflation is caused when demand outpaces supply or when the costs of producing goods and services increase. In practice, it usually results from a mix of both. For example, if consumer confidence is high and households spend freely, businesses may struggle to keep up with demand, lifting prices. At the same time, if input costs like wages, electricity or raw materials go up, businesses raise prices to protect margins. This happened during COVID-19 when supply chains were totally disrupted – businesses struggled with meeting demand, and inflation accelerated.

However, governments and central banks also influence inflation through policy decisions on money supply and interest rates. So, inflation is both global and local. In areas like Perth where the mining and resources sectors drive higher household incomes, speaking to a financial planner in Perth can help you understand how local market conditions may influence inflation’s impact on your lifestyle.

What is causing inflation in Australia?

Inflation in Australia doesn’t come from a single source. It’s the result of both global and local pressures. Recently, three main forces have been at play. First, international events like supply chain disruptions and rising oil prices have pushed up the cost of goods. Second, strong domestic demand, boosted by government stimulus, low interest rates and household savings, has meant Australians have had more money to spend, putting upward pressure on prices. Finally, local factors like labour shortages and increased housing demand have made certain sectors more expensive. Together, these forces explain why Australians have faced steeper grocery bills, higher rents and pricier fuel.

While these are national forces, the way inflation is felt can vary by state and city, too. Financial planners in Brisbane might focus more on the cost of housing, mining and agriculture linked to Queensland’s economy, while financial advisors in Melbourne may highlight the impact of population growth and demand on rents and mortgages.

The link between interest rates and inflation

Interest rates and inflation move in a delicate dance:

  • When interest rates are high, borrowing is harder, demand cools down and inflation slows.
  • When interest rates are lower, borrowing becomes easier, demand grows and inflation can rise

For households, this means inflation can affect your mortgage repayments, car financing affordability and even credit card debt, adding to your total loan balance to account for the loss in value.

What are the five causes of inflation?

Economists often highlight five key drivers of inflation. These are:

  1. Demand-pull inflation – when demand for goods and services outstrips supply and causes a rise in prices.
  2. Cost-push inflation – when businesses face higher costs (like wages, fuel or raw materials) and need to pass them on to consumers to sustain their offerings.
  3. Built-in inflation – when workers demand higher wages to keep up with rising costs, which then pushes businesses to raise prices further, this is called built-in inflation, and acts like a reaction to the initial inflation ripple.
  4. Monetary inflation – when too much money is circulating in the economy, often due to low interest rates or government stimulus, supply can quickly outweigh demand and cause a general increase in prices.
  5. Imported inflation – when global prices increase (for oil, energy or food) flow into the local economy through trade.

How is inflation measured in Australia?

Since inflation is an increase in the level of prices of goods and services, inflation is measured by the rate of change of those prices. Economists usually measure inflation using the Consumer Price Index (CPI), which tracks the cost of a “basket” of common household expenses like food, transport, housing and healthcare.

In Australia, the CPI is calculated by the Australian Bureau of Statistics (ABS) and published once a quarter. To calculate the CPI, the ABS collects prices for thousands of items, which are grouped into 87 categories (or expenditure classes) and 11 groups. Every quarter, the ABS calculates the price changes of each item from the previous quarter and aggregates them to work out the inflation rate for the entire CPI basket.

Who benefits most from inflation?

Inflation affects everyone differently. Borrowers with fixed-rate loans often benefit because they repay debts with money that is worth less over time. Property owners may also gain, since real estate values and rental income often rise with inflation. Businesses with strong pricing power – like supermarkets or utilities – can pass higher costs on to customers, protecting profits.

On the investment side, those holding assets like shares, real estate or commodities can often stay ahead of inflation. In contrast, savers with cash in the bank and people on fixed incomes tend to lose the most, as their money steadily buys less. For instance, if you’re looking at how much you need to retire at 65 today, that number may have to be higher to account for a lower purchasing power when that time comes – unless it’s protected in investments.

How do you beat inflation?

Inflation is often spoken about in terms of our groceries or goods and services, but our whole financial portfolio is affected. For those saving for a house deposit, inflation can mean the power of your bank account shrinks in time without the right strategies. While you can’t stop inflation, you can reduce its impact on your finances, and the key is to make your money grow faster than prices rise.

On a day-to-day level, smart budgeting and cost control help protect your household cash flow, while regularly reviewing your mortgage, insurance and utility bills ensures you’re not overpaying. Finally, choosing a financial planner for long-term planning can help align your savings, superannuation and investments with strategies designed to outpace inflation.

How inflation affects investments and how to protect your money against inflation

Investing is one of the most effective strategies and assets like shares, property and inflation-linked bonds often keep pace with or outstrip inflation. Building a diversified portfolio spreads your risk and strengthens resilience – here are some foundational investments:

  • Bonds – traditional fixed-rate bonds often struggle when inflation rises, because their payments lose real value. However, Treasury Inflation-rotected Securities (TIPS) and similar products in Australia adjust with inflation.
  • Shares – companies with strong pricing power (like utilities or consumer staples) can pass higher costs to customers, protecting profits.
  • Real assets – commodities, real estate and infrastructure often hold up well in inflationary times.
  • High-yield interest savings accounts – these bank accounts pay you a high sum of money for storing your money, and the passive income from these accounts can offset the inflationary shrinkage of your money.

The bottom line

Inflation is unavoidable. But it doesn’t have to derail your financial future. Understanding what drives it, how it affects your daily life, and the strategies to manage it will put you ahead of the curve.

At Best Financial Planners, we specialise in helping Australians prepare for uncertainty, including the challenges inflation brings. Whether you’re saving for retirement, managing a mortgage, or building a diversified portfolio, our team can guide you toward smart decisions that keep your money working for you.

Talk to us today to learn how we can help you build financial resilience and protect your wealth, no matter what the inflation rates do next.

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Can Debt Consolidation Help You Pay off Your Loans Faster?

Debt Consolidation in Australia to Pay off Loans

The ABS’s most recent findings report a household debt growth of 7.3%, while disposable income is only growing at a rate of around half of the debt growth, at 3.7%. As a collective, if we didn’t feel the pressure from our debt 10 years ago, it’s hard not to feel it today – even if debt is a necessity for many of our life ventures, from surviving financially as a single mother, needing a car for work or to get your family into your own home.

We know that growing our income and funneling more money into paying our debts off faster is a surefire approach to optimising our finances, but we can’t just desire our way into more cash flow or gain instant passive income streams. However, there are alternatives to finding debt relief.

Debt consolidation – rolling multiple debts into a single facility – can be a smart way to simplify your repayments, reduce interest and help you pay less for your loans over their lifespan. Having your debt in one place also helps with mental clarity and organisation, but it isn’t a silver bullet. So, what is debt consolidation, and can it help you pay off your loans faster?

Best Financial Planners are dedicated to helping Australians build wealth and live financially free, no matter what their current circumstances look like. Our team has considered the most pressing questions to ask financial planners. In response, we’ve created this guide to explain how consolidation works in Australia, when it can speed up your payoff timeline, how you can use debt consolidation to optimise your finances and the traps to avoid.

What’s involved in debt consolidation?

Debt consolidation just means replacing multiple debts with one loan. So you can combine your credit cards, Buy Now Pay Later, personal loans and even ATO debt into one facility that will hold all or most of your debt. It’s a type of refinancing you can do in a couple of ways. First, you can consolidate debt through an unsecured personal loan, which is used to pay out higher-rate debts. These often come with a fixed rate or are over a fixed term.

Secondly, debt consolidation can be done through a credit card balance transfer. These often come with a low or 0% promotional rate for a set period, so you can make use of a low-interest rate period to pay your principal loan off faster.

If you have a mortgage, another debt consolidation option is a mortgage refinance or top-up that absorbs other debts into your home loan. Your mortgage loan balance will increase, but overall, you could be better off with a higher mortgage at a lower interest rate than your previous loans. All of these options have different costs and typical interest rates and will depend on your current financial situation and loan portfolio.

When consolidation can help you get out of debt faster

Debt consolidation loans can accelerate your payoff, but only if they meaningfully lower your effective interest rate. Consolidation can also help you pay off your debt faster if it shortens your repayment term. And if it does both, and if you make (and keep) a plan to avoid re-borrowing, you’ll be well on your way to a debt-free life and start proactively planning for retirement. We know we’re still speaking in financial lingo, so here is a breakdown of what to look for without the bells and whistles.

Lower rate, same or shorter term

Some loans are designed for high-interest, like credit card debt. Identify if you have any high-rate loans, as these will be key loans to consolidate into a lower-rate instalment loan with a comparable or shorter term, which can reduce interest and push more of each payment toward principal.

Look for promos with 0% balance transfer

Transferring your loan balance to a new lender can dramatically cut your loan interest for the first period, often between 6 to 24 months. If you can manage to pay the transferred balance off before the promo ends and avoid spending on the new card, you can reach debt-free sooner. If you only make minimum repayments, though, and add purchases onto the new loan, the benefit can weaken fast and may not be worth it anymore.

A single fixed repayment builds momentum

Many people find it easier to budget around one fixed repayment. If this is you, consolidating your debt may be a good option simply for the clarity in payments it can offer. You’ll find it easier to avoid missed payments and late fees and improve repayment history reporting over time. Once you get into a routine with budgeting for one repayment a month, you’ll build momentum and may manage to save for a house deposit or any other financial goals.

Lower interest rates on consolidated debt

When consolidation won’t help you pay off debt faster

On the other side of the coin are circumstances where you’re not helping yourself pay off your debt faster, just repackaging the problem. Ultimately, to escape getting stuck in a cycle, choosing a financial advisor fluent in loans will help you consolidate debt in a way that truly serves you. Here are some of the things we look to avoid in debt consolidation:

A longer term that hides a higher total cost

While loans should absolutely be serviceable, be careful of stretching a short-term debt over many years. These shrink the monthly bill but increase the total interest paid, delaying your debt-free date.

Securing previously unsecured debts against your home

If you refinance a car loan, credit card or personal loan balance into your mortgage, your home becomes a liability, and you may put your home at risk if you can’t keep up. This is another reason to tread carefully and maintain a payoff plan that is designed to reduce the consolidated portion quickly.

The other side of balance transfers

Promotional rates end, sadly. As the attractive rate that pulled you in can become the opposite of attractive. So if you still owe a balance when the intro period expires, or if you add new purchases that accrue interest immediately, the debt can end up lingering longer and at a higher rate than you started with, keeping you stuck in the cycle.

Not addressing spending

Consolidation frees up credit lines. This is fundamentally a good thing, but if you keep using them, you can end up with more debt than before (the consolidated debt plus the newly accrued debt). Paying off your debt and living financially free is as much of a mindset shift as a logistical one, so do what you need to do in order to drop unnecessary spending. For example, if you need to take out an unsecured loan to finance a pool, it’s worth taking a moment to think about whether this is in your best interest long-term.

Debt consolidation – smaller than the sum of its parts

Typically, when we talk about things joining forces, they become more powerful. But with debt, you’re battling varying lenders’ requirements, deadlines, rate changes and the mental battleground of multiple debts. Debt consolidation allows you to have one single debt, from one lender, within one repayment system.

But the true power of debt consolidation lies in finding and acquiring the refinancing option that will offer you the lowest interest rate and a reasonable term. When this happens, all of your debt is calculated against the best rate, and you’re in a much better position to pay off what you owe faster.

The process materialises through balance transfers, mortgage top-ups or personal loan refinancing. Remember, mortgage-based consolidation calls for extra caution to prevent a cheap rate from becoming expensive over decades and risking your home itself. Finally, eliminating your unnecessary spending (if it requires you to borrow) is the final piece to becoming free from debt. Done right, consolidation turns a messy pile of debts into a straight line, helping you cut off the ball and chain of debt much quicker. But done poorly, it just repackages the problem to another lender.

For any questions about debt consolidation or your refinancing options, contact us today to speak with a trusted financial advisor.

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Aged Care Financial Planning: Merging Your Current & Future Needs

Managing aged care financial planning

Planning our finances – i.e. channelling your funds into areas of your life in a way that feels supportive for each need and phase – while we’re in the thick of our careers, often revolves around our immediate goals. Food, entertainment, living expenses, kids’ expenses, bills, holidays – the list goes on. What’s hard to work into our budgets is saving for our loved one’s care or our own future when we’ll no longer have employment income, because it’s not at the front of our minds.

Aged care can be an expensive journey. The cost and complexity of using these services when we, or people we love, enter this time of their lives makes early aged care financial planning not just smart, but necessary. At Best Financial Planners, we’re dedicated to providing forward-thinking financial strategies that optimise your investments and budget allocations, and give you more back. Our recommended aged care financial planners are dedicated to identifying all the ways in which they can optimise your finances and protect your wealth today, requiring little budget adjustments in order to have the aged care you deserve.

In this guide, we explore how to create a flexible, forward-thinking financial plan that adapts with life’s changes and ensures the care you or your loved ones deserve.

Why aged care financial planning matters

As we live longer, the need for high-quality aged care continues to grow. This typically means we have more years to support ourselves after we retire. This is all well and good when we think about superannuation and retirement, but aged care is a whole other kettle of fish, with high costs that are often too large to stretch out of our superannuation income.

Without a proper plan, families often find themselves making rushed, emotional decisions under pressure. Unexpected costs, confusion about government entitlements and limited accommodation options can create financial and emotional stress. Or maybe you have current financial stressors like preparing for a divorce or working a job that doesn’t offer superannuation. Aged care financial planning helps avoid these pitfalls by providing clarity, structure and confidence today around one of life’s biggest transitions.

How to approach aged care planning

For most of us, financial planning tends to be segmented. There’s saving for a home, investing for retirement, budgeting for education or travel. But when it comes to aged care financial planning, taking a step to look at the bigger picture can really help us to iron out our priorities. When the time comes when we need supportive aged care, the ship has sailed when it comes to the idea of saving for it. Instead, integrating it into your budget throughout your career and life stages will mean you’re setting yourself up with a decent nest egg for your aged care, without sacrificing too much at any stage.

But when we’ve already got an airtight budget, how do we go about incorporating this into our budgets? Well, let’s not think of it as something we have to save for in the future, but rather, we’re just setting our vision a little broader, and balancing our current and future needs.

Future aged care financial planning

Merging your current and future needs

You don’t need to sacrifice your current lifestyle to prepare for aged care, but you do need to make informed decisions now that will leave room for flexibility later. That might mean:

  • Segmenting a small portion for retirement – your superannuation is a fantastic boost of income when you stop working, but it’s really only designed to support a self-sufficient lifestyle. Aged care should be seen as an additional cost that needs to be funded separately. Any little bit of your monthly budget you can put towards aged care today is very helpful, contributing significantly to your aged care needs.
  • Creating liquidity in your investment portfolio – liquidating your investments, like holding onto stocks, can help you access funds to cover unexpected aged care costs. This could also look at buying an investment property if possible, to give you long-term passive income.
  • Paying down debt strategically – working on reducing your current debt strategically can mean more money in your pocket over the course of your life. It’ll help you enter so that you’re in a stronger financial position earlier, which you can begin setting up the later stages of your life earlier.
  • Maximising government benefits and tax efficiencies through timely asset structuring – remember every dollar counts when it comes to investing in your future, so doing what you can today, like maximising tax benefits in your tax return to help optimise your finances, is always beneficial.
  • Considering lifestyle choices – while you don’t need to make sacrifices in your adult years that limit your quality of life, by considering your current lifestyle choices now that align with longer-term savings, you’ll make a big impact on your aged care financial planning. We’re not even talking about huge changes, just subtle considerations like avoiding luxury holidays or purchases, minimising your subscriptions or holding onto your perfectly fine car for longer than you otherwise would. These savvy financial choices will give you more room in your monthly budget for your future.

The role of financial advisors in aged care planning

Fitting the requirements of life’s later stages into your budget and financial planning is not a simple task. For many of us, we have bucket lists to tick off, dependents to support and retirement plan dreams on top of everyday financial pressures to manage before we begin thinking about aged care.

Thai is when expert financial advisors are invaluable by helping structure your assets to minimise fees, identifying appropriate funding strategies and clearly explaining how your decisions may impact pension entitlements or government benefits. Often, you may not need to make any big budgetary sacrifices, because they can help find avenues to optimise your current situation in a way that pays the dividends towards proactive retirement planning.

They can also assist with complex applications through Centrelink or the Department of Veterans’ Affairs, ensuring you access all available support. Additionally, they play a crucial role in creating estate plans that account for current needs while accommodating the future costs of aged care.

Successful aged care financial planning breaks down your unique circumstances and involves a balance between current needs and future goals. Here are the primary elements to consider:

1. Asset and income assessment

Well, start by taking stock of your current financial situation:

  • Superannuation balances
  • Real estate and property value
  • Savings and investments
  • Pension entitlements
  • Liabilities and debt

As well as helping to plan your aged care funding strategy, a clear understanding of your financial position will help you determine eligibility for government assistance and inform your choices regarding care providers. From here, a planner can assess if you can afford to put more away for your future, like in the form of investments or voluntary super contributions.

2. Aged care options and lifestyle goals

There is no one-size-fits-all approach to aged care. Some individuals may prefer to stay at home as long as possible with in-home support, while others may opt for early entry into residential aged care for a more structured environment. Aged care planning should incorporate your preferred living arrangements, desired level of comfort and service, proximity to family, as well as planning for any unexpected difficulties. So, when an advisor considers how much we need to retire at 65, it always depends on what our expectations and preferences are for our lives during this period.

3. Understanding the means test and fees

Residential aged care in Australia involves several types of fees, including a basic daily fee, a means-tested care fee, an accommodation payment and additional service fees. These fees can significantly affect your financial plan. Knowing how they apply to you or a loved one allows you to plan in advance and avoid last-minute surprises.

A plan today means aging comfortably

With smart, steady and early preparation, you can set yourself up for aged care with options, peace of mind and dignity when the time comes. Life moves quickly, and while we can’t always predict the road ahead, we can build a roadmap that gives us confidence to navigate it.

It’s never too early to prepare your life stage financing, whether you’re in your 30s juggling mortgages or budgeting for a house deposit, or nearing retirement and thinking about what’s next, taking a moment to consider your aged care needs today can make all the difference later.

At Best Financial Planners, we’re here to help you merge your current lifestyle with your future goals in a way that feels achievable and empowering. In this guide, we’ve explained how you don’t have to sacrifice big chunks of your monthly budget to set yourself up to age comfortably. By structuring your investments, assessing your current situation, applying for additional support, and understanding your aged care preferences, you can protect your wealth early for a better future. An advisor will work with you to maximise what you have, access the right support, and build a flexible, future-ready aged care strategy that suits your life, not someone else’s. Contact the team today.

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How to Save for a House Deposit: Budgeting Tips for Buying a House

How to save for a house deposit featured image, with a for sale sign

If you’re aiming to step onto the property ladder for the first time, budgeting to upgrade to a bigger place for your growing family or investing in a long-term asset, knowing how to effectively budget and save is the foundation of your homeownership journey. It’s a skill you can take with you when it comes time to comfortably manage your mortgage repayments, too.

At Best Financial Planners, we’ve helped countless Australians with all types of financial guidance, including how to build their savings to purchase their first home or next property. Our team of expert financial advisors understand the challenges buyers face to save enough money to secure a home in the face of rising costs and stagnating wages. But we also know that with the right guidance, the dream of homeownership can become a reality sooner than you think.

In this guide, we’ll cut through the jargon and fluff and deliver real, practical advice and guidance, along with realistic examples and estimated figures – from setting a savings goal and understanding upfront costs, to managing spending habits and finding extra income opportunities. You can also choose a financial planner to analyse your financial situation and create a tailored budget, but you can get started with these smart, realistic strategies that can be applied no matter where you’re starting from.

Know how much you’ll actually need

With all the updates to first homebuyer schemes, advice from non-professionals thrown around on the internet and an intimidating market to go up against, knowing how much you’ll need for a home deposit is still clouded in ambiguity for many people.

Having a target, while being incredibly motivating for savers, also helps you understand how far away you are from your goal of buying a property. In most cases, a deposit that is 20% of the purchase price is the ideal minimum amount of money to buy a house. With a deposit of over 20%, you’ll avoid paying Lenders Mortgage Insurance (LMI), which protects the bank if you default on your loan, but offers you no benefit.

For first home buyers

There are more options for you if this is your first time buying a home. The first home guarantee is a program that involves the government acting as a guarantor of the home loan, which means no LMI is required, and you only need a 5% deposit to buy a home.

Just remember, the smaller your deposit is, the higher your total loan balance and the more interest you’ll need to pay. But on the other hand, the 5% deposit scheme may help you get into the market faster and stop paying rent sooner. Determining which is the most financially wise move is a case-by-case task, depending on the current market conditions, your personal situation and your desires. If you wish to own a home as soon as possible, don’t let this deter you from capitalising on the 5% deposit scheme; it’s designed to get you a home faster!

So, how much do you need?

Let’s break this down against some property prices:

Property price 20% Deposit 5% Deposit (for homebuyers) Likely LMI if deposit <20% for non-first homebuyers
$600,000 $120,000 $30,000 ~$8,000–$15,000
$750,000 $150,000 $37,500 ~$12,000–$25,000
$1,000,000 $200,000 $50,000 ~$18,000–$35,000

While opting for a lower deposit – say 5% as a first homebuyer or 10% for non-first homebuyers – helps you buy sooner, you’ll still need to show a history of strong savings habits to your lending bank and be prepared for extra costs. The financier will also go through your recent spending history to ensure your income minus outgoings results in enough money to service the home loan. 

Don’t forget the upfront costs

In addition to your deposit, you’ll also need to budget for:

  • Building and pest inspections – you may need to purchase multiple inspections for different properties during your search
  • Stamp duty – can be tens of thousands of dollars, depending on the state and purchase price, but there are first homebuyer extensions and concessions. You can use online stamp duty calculators and check the details on your state government’s website.
  • Loan application and lender fees
  • Conveyancing and legal fees
  • Insurances for your new property and strata fees if it’s part of a body corporate
  • Moving and set-up costs

Many of the upfront costs are relative to various states and locations across Australia, the property purchase price and whether this is your first home or not. You can use an online calculator and fill in the form to avoid being blindsided by these additional expenses.

How do you save for a house deposit

Assess Your Current Financial Position

With your targets laid out, the next step is to get a clear picture of where you stand right now.

There are three primary tenets in understanding your financial position – your income, expenses and current savings, assets and liabilities. Here’s what you need to know about each to determine an extensive picture of your circumstances:

Your income

Calculate your net (after-tax) income from all sources. Your primary source of income is most likely your day job. Secondary income streams can include all different types of active andpassive income. Consider if your assets are generating any passive income for you, like bank savings interest, share dividends, digital products you sell online and money from side hustles. Are you receiving any government payment or grant and scholarship money? These can count towards your annual income. 

Your expenses

Take a deep dive into your monthly outgoings. There will be fixed expenses (rent, utilities, phone, internet, insurance, etc), variable outgoings (food, fuel, subscriptions, entertainment, etc) and irregular ones (gifts, holidays, annual bills, etc). You can use one of the many digital apps or platforms to upload your bank statements, and it will categorise your expenses for you. 

Your assets and liabilities

Finally, do an inventory of your assets and liabilities. For your assets, include your savings balances, superannuation, valuable possessions like your car and any shares or other investments you own. Liabilities include any credit card debt, student loans and other debt. 

When these three tenets are determined accurately, you have all of your financial figures laid out clearly – and you easily see what you need to move around to reach your financial goals.

Budget for buying a house

Set a realistic & calculated savings goal

Once you know your deposit target and where you’re starting from through the steps above, turn that number into something manageable by breaking it down.

For example, to save a $40,000 deposit:

  • Over 3 years = ~$1,110/month
  • Over 2 years = ~$1,667/month
  • Over 1 years = ~$3,333/month

If that sounds daunting, remember: this is a long-term goal. What matters is consistency, and if you need to lower the numbers and extend the time to suit your income and expenses, then do that!

Step-by-step: how to save for a house deposit

Now, here comes the real work, saving for your deposit. However we find that, for some people, saving is a mind game, and when you get in the right mindset, holding back on spending on something you don’t need and using the money to invest in your future is super rewarding. Once you feel the thrill that can come from saving money, it can become more of a game. But this is only the case for your disposable income – many people don’t have much left over once all their expenses are paid. So, a tried and tested way to save is to construct realistic savings goals that ensure you can support yourself while building a deposit. 

A successful savings plan hinges on your ability to balance everyday life with future goals. Here’s exactly how to save for a house deposit:

1. Start with a clean sheet

Download a budget Excel template or use an app. List out your monthly income, all fixed and variable expenses and then your minimum monthly savings commitment in the template to outline your cash flow.

2. Portion your spending

The purpose of dividing your spending opens up the door to realigning your spending with popular savings methods of categorisation. The 70/20/10 method has helped many people tighten their budgets and realise how much extra they could hold on to if they made some changes. This method requires you to use 70% for your living expenses, 20% for savings/= (building that deposit) and then 10% for lifestyle/fun.

You can play around with these proportions, depending on how fast you want to save, and if you don’t want to sacrifice too much lifestyle. Finding spending proportions that work for you is a bit of science, and it’s even one of the top financial adviser questions we get asked. But once you’ve determined percentages for each category that will accommodate your savings target, the budget for a house deposit is born.

3. Cut and reallocate costs to align with your savings method

This is where the magic happens. Most of us spend more than we realise and more than we need to on non-essentials, and a few small changes can snowball into thousands saved each year.

Once you do a spending audit, you might see that you’re actually spending 25% of your income on fun/lifestyle. Now is the time to figure out how you can reduce that percentage to your target of 10%. Here are some of our top tips to cut costs for your budget:

  • Meal prep 3 days per week to avoid takeaway.
  • Limit café coffees to weekends or a couple of times per week
  • Meet your friends at one of your houses for dinner or drinks instead of going out to a restaurant or bar.
  • Cancel subscriptions you don’t use. If you have multiple streaming subscriptions, a great way to cut costs is to rotate streaming services each month and cancel them once you move on to the next.
  • Replace music subscriptions with free or ad-supported versions.
  • Practice ‘sleeping on it’ or 24-hour rules when making purchasing decisions. This can really help you cut down on impulse buying. 
  • Switch energy, utility and internet providers – comparison sites often unlock deals that save you some big bucks.
  • Assess your current living situation – can you move to a cheaper rental or get a flatmate?
  • Plan a no-spend weekend once a month – fill it with beach or hike days, library visits and cosy dinners at home.

You can find more financial hints and tips on our website. You don’t need to apply every tip someone shares with you, but if you can identify a few solid ones that are easy enough for you to implement and can help you quantify a reduction in expenses that gets you into the budget target, you’ll make fantastic progress.

Consider ways to increase your income

If your budget is already tight or you want to reach your goal faster, growing your income is the next avenue to explore. Can you ask for a pay rise at work? Do you have the capacity to take on an extra shift? What side gigs and passive income can you generate? Things like babysitting, working hospitality shifts, doing freelance services or renting out assets like your car or clothes can really help give you extra breathing space when budgeting. Also, make sure your savings are sitting in a high-yield interest account – the interest paid on your savings is passive income and can accelerate your progress.

Or maybe you’re making other sacrifices in your income for your future, like through a salary sacrifice or voluntary super contributions. While these are fantastic for financial wellbeing in your golden years and to give you enough money to retire at 65, you might want to pause them while you’re budgeting for a house deposit to give yourself more saving power.

How to save for a house deposit featured image, sold sign

The best time to start is today

Saving for a house deposit can feel a bit like rolling a boulder up a hill at times – everything feels stacked against you, especially when property prices are high and everyday expenses keep climbing. But with the right planning, budgeting and consistency, it’s absolutely achievable. By understanding exactly how much you need, assessing your financial position, setting a realistic savings goal, trimming unnecessary costs and even boosting your income, you can move from dreaming about owning a home to doing it.

Remember, it’s not about perfection or sacrificing the things that make you happy in the process. It’s better to find budgeting methods and ways to cut costs that suit you. Whether you’re saving for a 5% deposit under a first-home buyer scheme or aiming for the full 20% to minimise loan interest, every dollar counts.

If you want to sit down with the professional advisors at Best Financial Planners, we can help you not only plan a budget but also optimise your income and savings to yield the best progress towards a house deposit. Contact us to get started. Either way, the earlier you start and the more strategic you are, the faster you’ll get there. And once you reach that goal, you won’t just have a deposit – you’ll have financial discipline and momentum that will serve you well into your future as a homeowner, and even start proactive retirement planning for your golden years.

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How to Lodge Your Tax Return & What Else to Do at Tax Time

How to lodge tax return, featured image of Australian Tax Office

Tax time in Australia rolls around every year from July to October, and while it might not be your most enthusiastic date on the calendar, it is one of the most important for your financial health.

The end of the Australian financial year is June 30, with a new financial year starting on the 1st of July – but don’t stress if you’re reading this in July. While the tax year technically ends after June, this date marks the recorded period of income and outgoings, and not the date to submit your tax return.

Whether you’re an employee, freelancer, sole trader or small business owner, lodging your tax return accurately – and on time – helps you stay compliant with the ATO, avoid penalties and possibly even score a refund. But taxes and tax returns are rarely simple. Best Financial Planners is a group of expert financial advisors, helping our clients sift through the mud and confusion of all things finance, including the complexities of tax.

Our expert team has put together a guide that will cover how to lodge your tax return across a range of income types, what documents you need and extra tasks to tick off during tax season.

When do you need to lodge your tax return by?

The standard tax return period in Australia runs from 1 July to 31 October each year, which means the deadline to submit your tax return through MyGov is October 31. During this time, individuals can lodge their return for the previous financial year, covering income earned from 1 July to 30 June. So, this year your tax return will cover your income from the 1st of July 2024 to the 30th of June 2025. If this date falls on a weekend (in 2025, it’s a Friday), the deadline typically extends to the next business day.

Using a registered tax agent gives you extra time to lodge your return, often until 15 May of the following year. This is a great approach to give you more time, especially if you have a more complicated tax return to lodge, like a dual income, an income plus investments or if you’ve moved out or into the country in the financial year. But there’s one catch – you must be registered with your tax agent by 31 October to qualify for this extended deadline. If you’re late engaging an agent or you have overdue returns, your due date may be brought forward.

Who needs to lodge a tax return?

Most working Australians are required to lodge a tax return, including:

  • Employees – if you’ve had tax withheld from your wages, you need to lodge a return – even if your total income is below the tax-free threshold. If you believe you paid the correct amount of tax, you still need to lodge a tax return to have this checked
  • Sole traders and freelancers – if you’re running a business or doing contract work, you’re required to report all income and claim deductions formally through your tax return. For most people working in this capacity, their tax return is very important because their income fluctuates throughout the year
  • Investors – if you’ve earned income through shares, rent, property, crypto or dividends, you’ll need to include that in your return
  • Individuals who received government payments or Centrelink benefits – especially if tax was withheld
  • Anyone who earned above the tax-free threshold – $18,200 for most residents

If you didn’t work or earn any income, you may need to submit a non-lodgement advice to let the ATO know you’re not required to lodge.

Here’s a step-by-step guide to lodging your tax return in Australia

The amount of time and energy that will go into lodging your tax return depends on how much prep you do. If you’ve stayed organised with your documents and receipts throughout the year, the process is usually smooth and straightforward. This step-by-step guide will walk you through how to lodge your tax return, including everything you need to know to get it done right, for first-time lodgers or seasoned tax return pros alike.

How to Lodge taxes, using the online myGov system

1. Gather your documents

Once you gather everything needed, including all financial documents, it’s much more straightforward to lodge your tax return accurately. This ensures you don’t miss any income or deductions – and helps speed up the refund process. Here are the documents you need:

Income statements or PAYG summaries

Most employers now report directly to the ATO, so your income statement will likely already be available through your MyGov account. However, if you’ve had multiple jobs or income sources, double-check that everything has been reported correctly, and if it hasn’t, request and gather the documents from your employers and upload them into MyGov.

If you’re a freelancer, contractor or sole trader, this part is a little more complicated. You need to gather all of your invoices and calculate the total sum of income from your work, uploading the documents into MyGov.

Bank interest, dividends and investment income

Any income earned from savings accounts, rent, shares, managed funds or other investments needs to be declared. You should receive annual summaries from your financial institutions or investment platforms. If you haven’t received or can’t find your summaries, you can request them through the investment platform or the respective supporting agencies, like a real estate agent for rent summaries.

Receipts for business expenses & deductions

One of the more time-consuming tasks of lodging your tax return is gathering the supporting evidence for your expenses and deductions. Review the ATO’s extensive list of deductible expenses to make sure you’re claiming deductions on everything you can – this will minimise your income tax and maximise your return. There is a wide range of services and products that are included, including tax-deductible financial advisor fees. To claim deductions, you will need supporting evidence through receipts and invoices, so keeping a folder of receipts throughout the year can save you a lot of time and hassle during tax time.

Private health insurance statement

If you have private health cover, you’ll need the statement from your insurer to complete your return. It also helps determine your eligibility for the private health insurance rebate and whether you’re liable for the Medicare Levy Surcharge, which comes into effect for people aged 31 and above.

2. Choose a lodgement method

There are several ways to lodge your EOFY tax return in Australia, each comes with its own set of pros and cons and is more suitable for certain tax scenarios than others.

MyGov & ATO online portal

Ideal for individuals with simple tax landscapes, like single-stream incomes and those who held only one job throughout the financial year. The ATO’s online service, MyTax, is free and pre-fills much of your information, including income and health insurance details. You’ll need to link your MyGov account to the ATO if you haven’t already. First-time lodgers will have to do a bit of work to enter any details that aren’t automatically filled in, but seasoned lodgers will have a much smoother ride with most personal details already accurate.

Registered tax agent or accountant

If your finances are more complex – think investment properties, business income, capital gains, job switches, voluntary super contributions or you’ve returned to Australia after living overseas – a registered tax agent can help you make sense of your tax requirements. They ensure you’re compliant and may help you find deductions you’d otherwise miss. Keep in mind there’s a fee, but it’s often tax-deductible. Try to find an agent familiar with your local requirements. So, for Victorian residents, choose an accountant in Melbourne, for example. 

Paper lodgement

This method is still available but is used only in limited circumstances, like for people who are not comfortable with digital platforms or have specific lodging needs. It’s slower and more prone to errors.

Method Pros Cons
MyGov / MyTax Free, fast, pre-filled with your details and easy to use. Great for people with simple lodgings. May not suit complex tax scenarios
Tax Agent Professional advice, maximises deductions and extends the deadline. Helpful for those with complex tax scenarios. Comes with a (tax-deductible) cost and must register early
Paper Lodgement Non-digital option Slow, risk of errors. Not recommended

Table 1: Summary of pros and cons of different ways to lodge tax return

3. Lodge the return

Once you’ve gathered your documents, log into your MyGov account and access the ATO services. From there, you can begin your return. Most fields will be pre-filled with data from your employer, banks and health insurer. But even though data is pre-filled, mistakes can happen and you should always check your income matches your payslips, add any missing income (side hustles, freelance gigs, etc.) and enter your deductions carefully, backed by receipts.

Some things are easier to miss than others, so here are common mistakes to avoid:

  • Forgetting to include bank interest or dividends
  • Claiming work deductions without proof
  • Overestimating home office claims without a clear calculation method (for things like bills that get split against your work hours, use the provided formulas)
  • Missing passive income or income from gig economy work (Uber, Airbnb, bank interest etc.)
Lodging taxes, picture of tax filing forms

4. Confirm submission and track your refund

Once submitted through MyGov or a tax agent, you’ll receive a confirmation from the ATO. In MyGov, your return status will show as ‘Processing’. Most electronic returns are processed within 2 weeks, but paper returns can take up to 10 weeks.

To keep track of your return:

  • Log in to MyGov and go to the ATO portal. They click ‘View my tax return’
  • Check the return’s status (e.g., In Progress, Finalised)
  • The ATO will also notify you once your Notice of Assessment is ready

What else should you do at tax time?

Lodging your EOFY tax return is the more formal part of tax time. But the season is also a valuable opportunity to get your finances in order, maximise your deductions and plan ahead for the new financial year while your financial accounts and circumstances are still fresh in your mind. Here’s what else you should consider doing at tax time:

Check up on your finances and debt

Tax time is the perfect moment to take stock of your overall financial health. We know it’s sometimes stressful to check your total loan balances, but it can really help you understand how to prioritise your budget for the best financial outcomes. 

Review how you’re tracking toward goals like buying a home, paying down loans or building emergency savings. Take a look at what you earned and spent over the year and identify areas where you might cut back or reallocate funds. For example, if you find that most of your disposable income is being used for unnecessary spending, you might wish to pay off debts faster instead. 

Check and consolidate your superannuation

Your super is a long-term investment, but short-term attention can help boost that investment. One of the easy wins with super if you have multiple accounts, is consolidating them to reduce fees and simplify your super. You should also check if your employer is paying the correct amount and whether your contributions have been processed correctly, which will help you with proactive retirement planning.

Plan for the year ahead

A little preparation now can make next year’s tax time a breeze, especially now that you can see your annual financial landscape so laid out. Firstly, if you don’t already, set up a system for tracking receipts and deductions – you can use apps, folders or cloud storage to organise everything throughout the year. This will help remove the headache of finding and consolidating all our dedication evidence when next year’s tax time rolls around. 

Tax time: a return to your financial portfolio

If you’re a finance geek like us, tax time is a super rewarding and fulfilling time of the year to bring order to your financial life. But, we understand this isn’t the norm! However you feel about tax time, the MyGov platform really does streamline the process for us, and it only gets easier year on year, when we fill in more details that carry through to the following year. And, there is always the option to engage with a helpful tax agent to work through the complications of more complex tax scenarios. Whichever approach you take, the key is to start early, stay organised and take the time to understand what you can claim. 

But remember: tax time isn’t just about submitting forms. It’s a valuable annual check-in with your finances – consider it a return to your financial portfolio and a great time to make any necessary changes that will help you stay on track to retire at 65. From reviewing your income and expenses to consolidating your super and planning for the year ahead, tax season is your opportunity to reset and refocus.

If you’re feeling overwhelmed or unsure where to start, Best Financial Planners is here to help you with any financial questions and set you up for a more confident financial year ahead. You can access learning resources in our Hints & Tips or speak with a financial advisor in Melbourne, Sydney or wherever you’re located to optimise your financial wellbeing.

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Here’s how much you need to earn to live comfortably in these Australian cities

Map of Australia with pins in it
Ever wondered if your salary is enough to live comfortably in Australia? Best Financial Planners has conducted a fun and eye-opening study to reveal the minimum income needed to live comfortably across Australia’s major cities. Sydney is undeniably the priciest city in Australia when it comes to comfortable living. With a hefty required hourly wage of $31.73, that equates to an annual salary of $59,976. Whether it’s the high rent in central areas or the cost of entertainment, Sydney’s lifestyle demands a higher income to keep up. In second place, Canberra, with its well-paying government jobs, requires an hourly wage of $26.98, or $51,000 a year, to live comfortably. It’s followed closely by Brisbane, where the annual wage requirement is $50,088. Brisbane demands a bit more than its southern neighbours, but still offers a more affordable lifestyle than Sydney and Canberra. Tied for fourth place, Melbourne and Perth both require an hourly wage of $25.46, leading to an annual salary of $48,120.

Top 5 Most Expensive Cities

Rank City Hourly Wage Needed to Live Comfortably Yearly Wage Needed to Live Comfortably
1 Sydney $31.73 $59,976
2 Canberra $26.98 $51,000
3 Brisbane $26.50 $50,088
4 Melbourne $25.46 $48,120
4 Perth $25.46 $48,120
As you move down the list, cities like Hobart, Cairns, and Warrnambool show that while still expensive, their cost of living is more manageable. Hobart, requiring $41,928 annually, while Cairns and Warrnambool are similarly priced, at $40,436 and $40,416 respectively, make it easier to enjoy the finer things without the hefty price tag of the major capitals.
Model house with dollar signs around it, representing cost of living in Australia

Middle of the List: Median Cost Cities

Rank City Hourly Wage Needed to Live Comfortably Yearly Wage Needed to Live Comfortably
13Hobart$22.18$41,928
14Cairns$21.39$40,436
15Warrnambool$21.38$40,416
16Townsville$20.62$38,976
17Launceston$20.20$38,184

For those looking to live comfortably on a budget, cities like Bendigo, Bundaberg, and Ballarat offer affordable living options. Bendigo is the most affordable city, with a required annual salary of just $30,276, a far cry from the major cities at the top of the list. Bundaberg follows closely with $33,176, while Ballarat requires $34,296 a year.

The 5 Most Affordable Cities

Rank City Hourly Wage Needed to Live Comfortably Yearly Wage Needed to Live Comfortably
30Bendigo$16.02$30,276
29Bundaberg$17.55$33,176
28Ballarat$18.15$34,296
27Dubbo$18.46$34,896
26Mackay$18.66$35,276

Methodology
The study analysed public data (StudyAustralia and Numbeo) to determine the minimum income needed for a comfortable lifestyle for single individuals across Australia. The study considered housing, food, transportation, taxes, healthcare, utilities, and other essential expenses. The states were then ranked from most to least expensive places for a single person to live comfortably.

About Best Financial Planners
Best Financial Planners is a trusted platform that connects individuals and couples with top-rated financial advisors across Australia. Their mission is to make financial planning accessible, understandable, and tailored to life’s most important moments.

Full Ranking List of Top 30 Cities

Rank City Hourly Wage Needed to Live Comfortably Yearly Wage Needed to Live Comfortably
1Sydney$31.73$59,976
2Canberra$26.98$51,000
3Brisbane$26.50$50,088
4Melbourne$25.46$48,120
4Perth$25.46$48,120
6Darwin$25.31$47,832
7Adelaide$24.77$46,824
8Geelong$24.30$45,922
9Newcastle$24.05$45,456
10Caloundra$23.92$45,216
11Gold Coast$22.74$42,972
12Coffs Harbour$22.46$42,456
13Hobart$22.18$41,928
14Cairns$21.39$40,436
15Warrnambool$21.38$40,416
16Townsville$20.62$38,976
17Launceston$20.20$38,184
18Hervey Bay$19.99$37,776
19Wollongong$19.81$37,436
20Queanbeyan$19.73$37,296
21Shepparton$19.51$36,876
22Port Macquarie$19.48$36,816
23Toowoomba$19.35$36,576
24Ipswich$19.16$36,216
25Bunbury$18.72$35,376
26Mackay$18.66$35,276
27Dubbo$18.46$34,896
28Ballarat$18.15$34,296
29Bundaberg$17.55$33,176
30Bendigo$16.02$30,276
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Salary Sacrifice Vs Voluntary Super Contributions: What Does the Data Say?

Salary sacrifice vs voluntary super contributions featured images

Superannuation grows through a combined effect of investment earnings and voluntary contributions. Your super sum is invested in assets and shares, and your sum grows with the equity. The money that you or your employer add to your super boosts the equity. When you make contributions to your super, any little bit counts because $100 that you add today is transformed through investment growth into a larger sum tomorrow, next week and up until you’re ready to retire and you can begin to access your superannuation.

Beefing up your super can set you up for a more financially free and confident retirement – that’s clear. But how do you grow your super faster and maximise your potential retirement savings?

Most financial planners agree that there are two optimal ways to start growing your super as a young Australian: salary sacrificing and making voluntary super contributions. Below, we’ll break down the difference between salary sacrificing and personal superannuation contributions, helping you boost your financial literacy and start planning for a financially free retirement.

Man handing envelope to another man making personal superannuation contributions

Salary sacrificing

As an employee, you may be able to make an agreement with your employer to transfer some of your gross income directly into your superannuation fund. This is called salary sacrificing or salary packaging. Salary sacrificing arrangements allow you to receive a lower salary and take-home pay in place of super contributions that will sit in your super fund and grow exponentially until retirement. However, it’s not only this delayed gratification of optimising your investments that makes salary sacrificing such a high-value financial strategy.

By salary packaging a portion of your gross wage, your taxable income is lower, and you will be charged lower amounts in tax. The portion of your income that is sacrificed to super becomes a concessional contribution, and these are taxed at only 15%, which is, more often than not, a lot less than an employee’s income tax rate.

Like with everything tax-related, there are caveats to these general figures, like salary sacrifice caps that charge you extra tax as you exceed the concessional contribution cap. So, superannuation financial advice for doctors, dentists, surgeons and other high-income earners would be different to middle and low-income earners.

Does salary sacrificing affect your employer’s legislated super guarantee?

No. Your employer is still mandated to pay an additional 11.5% of your income into your superannuation contributions. When you make a salary sacrifice contribution, it comes from your earnings, not the employer’s pocket. You can make additional contributions without it affecting its standard growth, and then you will see it grow even stronger and faster.

Salary sacrifice in action

Let’s consider a case study to see salary sacrificing in action.

Remi is 35 years old and lives comfortably within her means while on a salary of $80,000 a year before tax. She opts to sacrifice $200 a month from her salary to her super. Before tax, Remi earns $6,666 a month, $200 of which goes to her super, so her taxable income amount is now $6,466 a month. On this amount, she will pay $1,436 in tax and take home a total of $5,030 a month, instead of $1,505 in tax and $5,161 net income without salary sacrificing.

 Gross Salary/MonthIncome Tax/MonthTake Home Pay/MonthThe after-taxed $200
Salary Sacrifice$6466$1436$5030$170
Standard$6666$1505$5161$139
Difference-$200-$69-$131+ $39

The $200 salary sacrificed is taxed at 15%, which makes the final amount entering super $170. As Remi only loses $131 in her take-home pay, this makes her $39 better off by salary sacrificing $200 a month. If she wanted to invest the $200 in her gross salary in shares or store it in savings herself, she would actually only have $139 to use.

If Remi has an average super fund sum for a woman her age before she begins salary sacrificing, she will have about $72,000. When she retires at 67, Remi will have an extra $98,058 at retirement, and will have saved $24,576 in tax reductions over her working life.

 StandardSalary Sacrifice 
Extra Super Contributions/Month0200 
Total Extra Super Contributions0$76,800 
Superannuation at retirement$533,753$631,811+$98,058

The total benefit from salary sacrificing = $98,058 + $24,576 = $122,634

Using salary sacrificing to enter lower income tax brackets

Salary sacrificing becomes even more lucrative when a salary sacrifice drops your taxable income into a lower tax threshold. This won’t apply to Remi because her nearest income tax threshold is $45,000, and it’s unlikely she could sacrifice that much salary while still living comfortably. But for someone who is on $47,000 a year and could sacrifice $200 a month, they could move into a lower tax bracket and save more money on income tax each year.

For anyone who earns over $45,000 a year, making concessional contributions is still generally a tax-effective way to contribute to your superannuation. For higher income earners, note that there is a cap of $30,000 in salary sacrifice contributions per year. If you fall into this category, you could benefit from speaking with an accountant in Melbourne, Sydney, Brisbane or wherever you’re located to help find an alternative solution.

Remember, though, anything you can add will grow, so if things are tight, or maybe you’re budgeting for an apartment or house, you don’t need to add large sums to your super for the payoff to be effective.

Piggy Bank Savings for super contributions

Voluntary super contributions

Voluntary or personal contributions into your super refer to when workers use their after-tax pay to directly add to their super fund. In contrast to salary sacrifice contributions, personal contributions are non-concessional, and they’re not further taxed.

Tax-deductible contributions

From the outset, voluntary super contributions seem like a less beneficial approach because the money has already been taxed at an income tax rate, which is between 16% to 30%, depending on your salary. But importantly, you might be able to claim a tax deduction for after-tax super contributions, in which case, this would work out to be similar to salary sacrifice contributions, as it would reduce your taxable income by the amount of the contribution.

There are restrictions and eligibility requirements to meet in order to claim a tax deduction on your personal super contributions, like fund requirements, submission and acceptance of a notice and age requirements. Like with salary sacrificing, your super contributions will be taxed at 15%, so if you were to add $200 a month in personal contributions, only $170 will go into your super.

Government co-contributions

If you’re earning under $60,400 a year before tax, when you make voluntary super contributions, the government may chip in up to 50% more. This is a great way of boosting your super, and getting free government co-contributions that will compound over time and result in a higher amount when retirement comes.

Voluntary super contributions in action

If Remi decided not to practice salary sacrificing, she could instead take her full net salary and then make the same voluntary super contributions. In this case, she would need to give her superfund a notice of intent and have it acknowledged by them. She would then pay $200 directly into the fund and file for the total $2,400 tax deduction when lodging her tax return.

The fund will have to pay the ATO 15% of the contribution, so only $170 per month will go into her super. As with salary sacrificing, she is better off with this 15% tax on her contribution than the 16% to 30% income tax on the money. Similarly to her salary sacrifice position, Remi would have $98,058 more money in her superannuation nest egg when it comes time for her retirement, and she would save $24,576.

Man reviewing salary sacrifice vs voluntary contributions for super

Salary sacrificing vs voluntary contribution

So, Remi would end up with the same financial benefit in both scenarios, so what’s the difference? This is one of the more common questions for our financial planners. Salary sacrificing is much simpler and requires a lot less admin work. However, it requires you to come to an agreement with your employer, who may reject the conditions. If your agreement is met, you can set and forget your sacrifice and get used to your new take-home pay, while your super grows much stronger in the background.

If a dedicated, consistent sacrifice seems too constraining to you, voluntary super contributions allow you to take home more of your pay and contribute the money yourself. This means that if you do need a financial buffer in case the notorious rainy day comes along, you will have direct access to your own money before contributing. This can work great for people with dependents, like single mums. And, if not, you can send the money to your super refund and let it grow. The challenges with voluntary contributions are the dedication and consistency required to maintain your contributions, if reaching the same level of superannuation payoff is your goal.

While voluntary contributions give you full access to your money until you make the contribution, you won’t get the income back from your tax return until the end of the financial year. Not having immediate access to the tax amount you pay on the total $2,400 of contributions you make throughout the year is a disadvantage for wealth generation. If you’re planning on investing your spare money, it means your money has less time to grow. If you’ve been dependent on your partner’s income and are planning financially for a divorce, personal superannuation contributions can be a great option to protect your finances come retirement.

Review your approach to super regularly for the best retirement possible

Both salary sacrificing and voluntary super contributions are powerful tools to grow your retirement savings, and each has its own advantages depending on your personal financial habits and flexibility needs. Salary sacrificing offers a streamlined, tax-effective set-and-forget strategy, reducing your taxable income and boosting your super consistently with minimal effort.

On the other hand, voluntary contributions give you more control and liquidity, allowing you to contribute on your own terms, especially if you need access to your full income in the short term. For those who cannot arrange a salary sacrifice with their employer, you might be relieved to know they work out the same for your net pay, but you won’t get your income tax money back until the end of the financial year.

Working out how much you need to retire at 65, 67 or whenever you plan on hanging up the boots can help strengthen your goals and motivate you to plan accordingly. Ultimately, the best option comes down to your individual circumstances, discipline and financial goals. Whether you choose to automate your contributions through salary sacrifice or prefer the flexibility of voluntary top-ups, the key is consistency.

You can check and review your super through the government’s super health check. Or if you want to learn more about whether salary sacrificing or super contributions are the best option for you, then we highly recommend you consult with your local financial planners.

Here at Best Financial Planners, we’ve found that a lack of resources and knowledge is one of the biggest barriers to proactive retirement planning. We’re committed to helping Australians make smarter financial choices, not just through advice and guidance, but through education.

Whether you’re looking to connect with a financial planner in your city or even learn more about any of the hints and tips we’ve shared here or across our website, simply get in touch with one of the team members at Best Financial Planners, and we’d be glad to help you find the solution for you.

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What is Passive Income?: How to Boost your Earning Power

What is passive income, balance between time and money

Our time and energy are limited, and spending our spare hours on things that matter most is key to a balanced and rewarding life. Thankfully, with passive income streams, working Australians can balance their productive and restful hours whilst still bolstering their earning power.

Making money through our assets and skills via streamlined or automated income streams is an effective way to strengthen our finances without burning the candle at both ends. This is what we call passive income – making money from money, or money from assets we don’t need for ourselves.

For many, the hard part is saving and accumulating the sum or asset itself, but once you do have something that can generate passive income, knowing how to establish and optimise that income stream is key to maximising your passive income. It doesn’t matter where you place yourself on the wealth ladder or what your primary source of income is – increasing your revenue streams is helpful for and most importantly accessible to everyone, from the unemployed to those budgeting for an apartment or house.

At Best Financial Planners, we often see clients with assets and skills going unused, and with a little effort and planning, they could generate a steady and consistent passive income.

What is passive income?

Passive income is a way to generate money without your active involvement, like working for it regularly. It can involve optimising your assets, ongoing sales from something you created, renting something of yours and much more.

Passive income requires some upfront work to set up the income channel and make sure it’s best positioned to earn you money, but it’s classified as a way to make money inactively. For those looking to grow their income streams and their savings or retirement fund, any way you can create passive income is especially helpful because they don’t demand your time and energy.

how to make passive income online

How to make passive income

As passive income relies on having some form of asset or investment to begin with, the best place to start is to look at your current situation, portfolio or skills. You might have a car space you don’t use, a growing savings account, an eye for good graphic design or a passion for writing, for example, that can be utilised towards creating passive income.

Expanding your perception on how you can earn money can help you reach your savings goals faster, get out of the paycheque-to-paycheque cycle, and even overcome the barriers to proactive retirement planning. So, here are some common ways you can generate passive income:

Savings interest

We’ll start with something every reader should have: a savings account. You may or may not have a large sum of money in your savings account, but this account generates passive income for you through interest. The bank pays a percentage of interest on the sum of money in your account, as compensation for you storing your money with them, and giving them the chance to use those finances for their own services.

If you have significant savings that you want to use to generate passive income, it’s well worth exploring the bank market and comparing which savings account will offer the best interest returns. A competitive savings account will yield around 4-5% interest, while transaction or everyday accounts can offer as little as 0.1% interest rates. So make sure you’re storing your savings in a high-yield savings account to generate the most passive income and keep your money compounding on itself.

Dividends on stocks

Another, often more worthwhile, platform to generate money from your money is through investing in shares of ETFs. When you invest in stocks in a business, many, but not all, will offer you dividends on your equity. The ATO has stated that the average dividend yield for the All Ordinaries Index is 3.65%. This means that if you were to invest $10,000 in a large corporate company that offered a 3.65% dividend yield, you would receive a passive income of $365 over the course of the year.

While this rate is lower than the high-yield interest rates, share investment is considered a better wealth management avenue because your equity grows with the company’s value. If the same large corporate company you invested in follows a typical growth path, your base investment will inflate, so when you want to sell your stocks, they will be worth more, and you’ll still receive passive income from the investment.

Rental income

If you own a property, you’re likely already aware of the rental income opportunities available to you. Often, when people rent out their property, the money from the rent goes towards the mortgage repayments, but if you don’t have a mortgage, this can become immediate passive income for you.

What many people don’t consider are the countless other ways to generate rental income. These days, there are modern platforms that allow you to list and rent all kinds of assets from cars, car parking spaces, bikes, furniture, clothes, textbooks, tools, cameras and even artwork. In these instances, you’ll be lending your assets and possessions that people find valuable for a specific event or task, and you’ll earn money that you don’t have to actively work for.

Sales and royalties

If you have no assets to get a rental income from or funds to put into high-yield savings or shares, you can create something that generates passive income over time. Consider how authors and artists make money from their book and song sales indefinitely. You don’t have to be an award-winning artist to do the same. Lean into your creative qualities, technical skills and unique perspective to discover what you can give to the world.

Digital products are a great example of a modern way to earn passive income from an asset you create. These refer to graphics or artwork that you can post on marketplace sites, and people can purchase the digital file and print the graphic for themself. The money comes in like royalties without the artist having to do anything once listed, and anyone who can use a design platform can create these assets to generate passive income.

Other ways to generate passive sales and royalties income are through technical guides, ‘how-to’ books, selling your photography or creating an app and other types of valuable resources.

best savings account Australia for passive income earnings

How to choose the right passive income ideas for you

The goal with passive income is for it to cause as few interruptions and demand as little energy and attention from you as possible. After all, you’ve probably still got your main income stream occupying most of your time and attention. Choosing a passive income stream that already matches your skills, interests and asset base is the best approach for success. Here are some criteria to assess your situation and help you identify how you can make passive income:

What resources do you have?

If you have a car that you don’t use often, rent it out. If you have a few thousand dollars sitting around, invest it or store it in a high-yield savings account. Maybe your rental has a car space, but you don’t have a car, or you’ve got some fantastic formal clothes that people would love to borrow – all of these are passive income opportunities.

Assess your skills

Stand back and take an objective look at your skills, interests and strengths. If you love cooking, DIY, art or photography, you can lean into any of these interests and create resources for people to buy.

Understand your financial goals

Maybe you’re preparing financially for a divorce, wanting to put extra money into your super or take a holiday that your budget just won’t allow. When you define what you want to achieve financially, you’ll understand how much work you need to put into generating passive income streams initially.

If you’re just trying to optimise what you already have, you can do that with some tweaks in where you store your money, but if you’re looking to build wealth, you will be better suited to investments.

Consider your time capacity

Some passive income ideas require a little more maintenance or upfront work than others. Writing an ebook is more suited to someone who has a significant amount of spare time, whereas creating simple graphics that take under an hour is better for someone working full time. Or if you’re really time–poor due to work or family commitments, see what assets you can rent out in and around your home.

Think big, but start small when planning for passive income

When all the opportunities to create a second or third income are listed out like this, you might be eager to jump in and get started with as many as possible. That’s great. But be careful not to overwhelm yourself too soon and get frustrated if that payoff takes a while to come in. You’re better off starting small, assessing your resources, trying a few different options and growing your passive income streams over time. This way, your streams are more sustainable as you’re able to maintain your involvement once the initial enthusiasm wears off.

Once your passive income starts coming in, it might be less exciting, but it is always a better financial decision to reinvest this money by placing it in high-yield savings or shares. If you consider your passive income as a wealth generator and continue living within the means you had previously done, this money will grow over time and the whole process will become even more rewarding.

For financial advice on organising your assets for passive income or wealth generation, contact us to find expert guidance in your local area from the team here at Best Financial Planners. We’ll help you choose a financial advisor or point you towards some invaluable resources for your financial journey.

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Australia’s Barriers to Proactive Retirement Planning

Barriers to retirement planning featured image

Avocado on toast, as it turns out, is not what’s causing Australians to feel more worried about their financial future than ever before.

We have a growing cohort of the population heading into retirement over the next five years who have to wait longer to be paid a pension, and fears within the younger workforce that they will be working longer than their predecessors while being increasingly put in charge of managing their own retirement funds. Financial shifts like these are a result of years of economic movements, and there is little point in blaming the moon for the tide.

However, only 27% of Australians have ever received financial advice. This is not because we’re educated on financial concepts throughout our lives or that we’re given the toolkit to manage finances. In fact, data shows that we score lower on financial literacy than comparable countries and that many more see the value in financial advice. But there are Australian-specific barriers to engaging with financial consultancy that can counter the disadvantages many younger Australians face.

Australia’s low financial literacy rates (the understanding of financial concepts and how they play out in the real world) are one barrier to better retirement planning and aged care. Women and lower socio-economic classes are at a steeper disadvantage with gender and class gaps further reducing their financial literacy rates and affecting their ability to counter the disadvantages. Alongside this, Australia’s stigma around personal finances inhibits the free flow of knowledge that can help us optimise our money, early and intentionally.

Over the years, policymakers have leveraged Australia’s self-sufficient attitude to many aspects of life and livelihood to drive self-efficacy in retirement planning, yet they have not filled in the knowledge gaps for the workforce. This culture of self-efficacy leaves Aussies with a lack of awareness of assistance programs, not knowing where to go for help and not knowing who to trust. It needs to change in order for us to become a nation that can deliver the income needed for a comfortable retirement after a career of hard work.

Isolated in confusion

From a cultural standpoint, Australia is conservative about personal money matters, and there is a negative class stigma that inhibits Aussie consumers and households from asking for help. We’re encouraged to achieve the nuclear family with picket-fence housing, and homeownership is a life goal for over half of Australians, no matter how long it takes to pay it off.

With such high financial goals, it would make sense for it to be a hot topic of discussion. But 28% of Australians don’t like talking about their finances openly with others, the topic comes only second most uncomfortable after sex. 96% of Australians have experienced financial hardship, and as the topic comes with shame for many, Australians are isolated in managing their finances, paying off their mortgage and planning for their retirement.

Breaking down financial literacy

Before we get any further into breaking down the impact of illiteracy rates on Australian retirement funds, let’s directly break down the stigma.

In a study of Financial Literacy and Retirement Planning in Australia, Agnew et al. implemented a survey to measure financial literacy in a range of countries and relate it to retirement planning. Their benchmark for financial literacy is measured against consumer understanding of three tenets: inflation, interest and risk diversification. Below, we’ll briefly explore these tenets and how they impact money management.

Inflation

Inflation is the rate of increase in goods and services over time. It won’t tell you the exact increase rate of eggs over the last year, it should be looked at as more of a broad measure of the rise in the cost of living in a country. It’s considered to be positive for the economy and is caused by a matrix of factors. Without knowing inflation rates, the workforce is financially worse off in many ways, one example is that workers aren’t motivated to negotiate higher wages and salaries to combat inflation.

Interest

Interest is the money it costs to borrow money or the money earned in lending money. Banks pay interest when you hold money in an account with them because they technically have access to this money to lend to others. This can sound like a good deal, but your interest rates are competing with inflation where $10 yesterday means more than $10 today. This is why many financial advisors would encourage you to invest instead of save because investing in the economy itself means your money grows with inflation. Of course, it’s not that simple when you’re investing in the growth of one company, which introduces the concept of risk diversification.

Risk diversification

Risk diversification refers to the splitting of your investment portfolio across different companies and industries. By diversifying your investments, you mitigate the impact of when a company or industry you’ve invested in regresses because the remainder of your portfolio should increase enough to more than cover the losses.

Learning these concepts is foundational to Australian consumers being able to make their money work for them and for the economy.

Australians are among the least knowledgeable in financial literacy and retirement planning

By default, we exist within our economic system. There isn’t a step to take that leverages us into the merry-go-round, we’re either actively involved or passively. It should follow then, that financial literacy and education should be an inherent part of education, so we can all take active steps to optimise our income early and live comfortably in retirement. While that makes logical sense, it’s not the reality.

So where does Australia place in Agnew et al.’s study against the three tenets of financial literacy?

Their data shows that the average Australian’s financial literacy is the equivalent of “the young, least educated, unemployed and those not in the labour force most at risk, of comparable countries”. While their knowledge of inflation and interest is on par with that of other surveyed countries, they fall behind in risk diversification knowledge.

Financial literacy survey results by age infographic
Results of surveyed Australians answering questions within three categories of financial literacy, separated by age: Agnew, Julie & Bateman, Hazel & Thorp, Susan. (2012).

What Australia’s age literacy rates tell us

Australians start behind comparable countries, but the trend line in the graph above shows that our knowledge increases with age. The over 65 category scores close to other countries, with over half of this cohort answering correctly in all three categories. As Australians approach retirement age, their growth in financial education may stem from the pressure of saving for retirement, just as their years earning an employment income that could have had a powerful impact on their retirement come to an end.

For younger Australians, more than half of those aged under 35 showed a lack of understanding in one or two of the three categories. Young Australians without a proper understanding of financial concepts are working within an economy that has seen inflation rates over the past three years at three times the average and a wage price index far below. With this financial illiteracy, there is little opportunity to counter the economic conditions other than use their savings to pay their bills, leaving increasingly less left over to invest in their future at a time in their lives when it will produce the biggest retirement dividends.

Male v Female financial literacy survey results infographic
Results of surveyed Australians answering questions within three categories of financial literacy, separated by gender: Agnew, Julie & Bateman, Hazel & Thorp, Susan. (2012).

Women have lower literacy rates which impacts their retirement funds

There is also a dramatic difference in financial literacy in the gender category. Around 34% of women demonstrated an overall understanding of interest rates, inflation and risk diversification as the three tenets of financial literacy. During retirement, the ABS tells us that this gender gap continues, with superannuation contributing to 33% of income for men and 21% for women.

Yet, Australians are increasingly pushed to take responsibility for their finances and retirement

Australia’s culture has long been known for its pull-yourself-up-from-your-bootstraps mentality and valuing self-sufficiency. This lack of interpersonal dependence and community values plays into the culture of you-can’t-talk-about-money, and it has also paved the way for policies moving away from retirement plans and pensions and Australians being increasingly pushed to manage their own retirement.

In The Australian Journal of Management’s study, the authors state that “ there has been a push to make [you] responsible for [your] own financial retirement planning in an environment of greatly increased longevity, a declining number of employer pension plans and defined benefit pensions (Holzmann, 2013) and an increasingly complex financial services industry.”

The average age of retirement for Australians is 56.9 years old. In 2017, the minimum age to qualify for a pension increased to 67 years old. This means that there are 10 years that retirees need to live off their superannuation on average, which is the longevity the researchers are talking about. If you’re currently in employment, it’s hard to visualise and estimate how much money you will need to retire and live comfortably in ten years, but anywhere between a couple of hundred thousand to just under a million dollars constitutes a comfortable retirement. It’s no wonder only around 30% of retirees have enough for the retirement they had planned for.

Avg age of retirement infographic

Experts are also estimating a retirement surge in the near future, with a spike in the number of people set to retire in the next five years. For younger people, the sentiment seems to be that the pension age will increase further “unless the government can meet the financial requirements of the growing cohort of retirees.”

These factors increase the need for workers to seek professional financial advice. Yet financial illiteracy itself is a barrier to engaging with financial advice. Many people want to hold on to as much savings as they can, which, for many, is misguided financial management, as they could be seeking advice, investing or contributing to their superannuation.

How illiteracy affects retirement planning in Australia today

Aussies are putting off our retirement plans

75% of Australians find the retirement system complex, fueling a lack of confidence in having enough income during their retirement to live comfortably. Retirement literacy is directly related to financial literacy, and with this literacy, Aussies could turn to better retirement planning measures. Instead, they are planning to retire later in life than ever before, as the workforce believes they have to earn more lifetime income instead of optimising their money and are anxious that the retirement age will increase again before they reach that age.

We had an open-source experiment on the attitude towards retirement funds recently when the government enabled early access to superannuation during COVID-19. While this was necessary for some to pay bills, financial illiteracy may have caused others to access it without knowing the risk to their retirement fund as 12.5% of people who made deposits put it in their savings account.

Even more recently, the approved First Home Super Saver Scheme has allowed aspiring home buyers to withdraw from their voluntary contributions in their superannuation to help pay for their home. However, anyone is free to make voluntary contributions to their superannuation, so all that this scheme does is incentivise Australians to contribute to their superannuation so that the money is invested into the Australian economy. While early contributions to superannuation are a powerful way to grow retirement funds, as the scheme only allows you to withdraw it for a mortgage, it leaves younger Australians locked into a, sometimes life-long, debt.

Over 5 million Australians have struggled to make their loan and debt repayments. When we consider this volume of people and the sheer size of mortgage debt, we can see how loans are irresponsibly pushed beyond people’s capabilities. And with enforced self-efficacy and stigma around money matters, Aussies aren’t asking for help. This scheme leverages the self-efficacy in personal finances that Aussies are bound by while harnessing financial illiteracy to take from their retirement funds and invest in a multiple-decade debt that will rule their working life.

Financial illiteracy in men vs. women

The gender financial literacy gap affects many women in retirement. However, the gender gap in other areas contributes to a less prosperous retirement for women on average, too. Many cultural and policy factors contribute to women earning a lower lifetime income, and as proportional salary contributions are currently the only compulsory funnel into superannuation, it leads to a lower income for women in retirement.

Some examples of how the gender gaps cause a lower lifetime income for women include:

With an even lower rate of understanding concepts like compounding interest and risk diversification in investments than men, there is little motivation to prioritise superannuation, even if their income allows them to make contributions, which is a markedly lower possibility for women. On top of this, the average woman in Australia is less likely to seek out advice due to gender bias. This is why women financial planners and advisors are critical.

Barriers to financial literacy and advice

We don’t know what we don’t know. Socrates’ phrase echoes through the financial realm, where the wealthy benefit from the lack of understanding of the remainder of the population. Without knowing where your money is best placed and why, you default to giving it to someone else to grow it for themselves like your bank using your deposits for their own lending power. Thus, financial illiteracy itself is a primary barrier to expanding your financial literacy.

Beyond this, many Australians distrust financial institutions. They know these institutions are making money from them, so they’d prefer to keep their distance. This mistrust is amplified through media-lead fear-mongering where scandals, as you would see across any industry, are emphasised, knowing personal finances are a sore and triggering point for viewers and readers. This has compounded the ‘Us vs. Them’ situation between the finance sector and the rest of Australia. When all of this is mixed in with a lack of financial education in the schooling system, Australians are in a bind where they remain uninformed and have a distrust holding them back from acquiring the knowledge that will help them live a prosperous retirement.

Boost your financial literacy to prepare for Australia’s cultural shift on all things money management and retirement planning

As Australians, we need to create a shift in culture. If we are thrust into self-efficacy to build a retirement fund, then continuing the narrative that supports money stigma and financial illiteracy is doing us all a disservice. Instead, we can work together to share knowledge and educate ourselves, removing the remnants of media-lead distrust and seeking advice for the benefit of yourself and your well-being in retirement.

On an individual level, illiteracy like not understanding risk diversification indicates that Aussie consumers may struggle with the concept of superannuation and the safety it offers in investment diversification. Realising that financial illiteracy may be holding you back from seeking advice and education and keeping you in a financial cycle that you can’t leverage your way out of can be enough to dismantle the barrier. From here, you can start to bolster your financial literacy by seeking advice that will benefit your retirement and optimise your money as early as possible so you have the means to manage your retirement responsibility proficiently.

Ultimately, Australians do want to engage with and see value in financial advice, but distrust is the main barrier. The best step you can take is to begin educating yourself and finding the right support. Get started with your own learning today with our Hints & Tips or you can explore our suggested books or podcasts to financially upskill and optimise your money for retirement.

For anything else, contact our team at Best Financial Planners and we’ll be in touch with more information.

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Are Financial Advisors Fees Tax Deductible?

Are Financial Advisors Fees Tax Deductible

It’s tax season once more, but knowing what you may deduct can be difficult, especially when it comes to expenses for financial advice.

Financial advisors may also recommend tax-related advice to their clients. This is likely the case and occasionally inevitable given that we are dealing with financial problems.

Whether the price of financial advice is tax-deductible, however, is not that clear-cut. Financial advising costs are subject to the general deductibility rules.

This is because there are no special rules governing their deductibility. Which can make filing your tax returns a bit of a headache.

So, are financial advisors fees tax deductible? In this article, we are going to discuss which financial advisor fees are deductible and which fees aren’t.

How Do You Know When A Financial Advisor Fee Is Tax Deductible?

Advice fees are not subject to any special regulations regarding their deductibility. Thus, they are covered by the standard deductibility rules for other expenses.

According to these regulations, you are entitled to a tax deduction for any costs incurred in acquiring or producing income that is subject to taxation (officially referred to as “assessable income”).

With the exception of expenses that are made for capital, private, or domestic purposes.

In general, you can deduct the costs connected with investment advice from your taxes. As long as the advice you receive results in an investment that generates assessable income or is closely linked to one.

Additionally, fees that are not connected to a specific investment that generates assessable income are not deductible.

For example, the cost of a conference you attended to learn how to invest would not qualify as a tax deduction.

However, it is tax-deductible if you go to the conference to enhance your present investing portfolio.

Which Fees Are Not Tax Deductible?

The advisor fees are not tax-deductible if the goal of the financial advice is to create a plan, or if the advice is unrelated to assets or investments that currently provide taxable income.

Due to their lack of connection to the production of assessable revenue, the following fees are not tax-deductible:

  • Upfront Fees
  • Financial Plan Preparation
  • General Financial Advice
  • Non-Assemble Pension
  • Income Advice
  • Initial Investment Advice

This is due to the fact that the aforementioned costs have not yet increased your taxable income (annual taxable income).

These charges may be exempt from tax, if you obtain advice to modify an established investment portfolio that produces taxable income as a portion of your continuous portfolio management.

Are Financial Advisors Fees Tax Deductible

Common Financial Advisor Fees

Below are some of the more common financial advisor fees you may come across, and whether these fees are tax-deductible or not.

Investment Loan Arranging Fees

This is regarded as a borrowing expense, thus it is deductible from income tax over the course of 5 years or of the loan’s term.

The goal of this loan must, however, be to generate income, which would then be taxable.

Advice On Managing An Existing Investment Portfolio

Tax deductions are available for the cost of financial advice related to managing an existing investment portfolio.

The fees must, however, be connected to generating income in order to be fully deductible.

This means that only a portion of the costs will be deductible if the advice also refers to some goods that don’t generate an income.

This includes insurance premiums, managing pension funds, or private loans.

You could occasionally get suggestions to change the combination of investments you own.

These expenses will be deducted if managing your investments includes them as a necessary component.

However, if the expenses are related to creating an investment plan, they are not deductible.

Establishing An Financial Plan/Investment Portfolio

As a capital expense, this cannot be deducted from taxes. The Australian Taxation Office (ATO) issued a Tax Determination (TD 95/60) on this topic back in 1995, however this topic is currently under review so may be changed soon.

It claimed that there is insufficient correlation between making investments and profiting from such investments.

The expenses related to creating a financial plan also comes under this topic as well.

Advice On Cash Flow And Other Areas

Any advisor costs that have to do with management of cash flow or other matters, for example, like the need for insurance.

These are not related to producing assessable income for tax purposes and cannot be deducted as a business expense.

Financial Advisor Fees

Your financial advisor should ideally break down their fees.

This is so you have some supporting documentation for what may and cannot be declared as a tax deduction.

The ATO will approve a reasonable approximation, if your financial advisor isn’t able to offer you a complete breakdown.

For instance, 15% of your advisor’s fees would be tax-deductible, if they spent 15% of their time analysing your present income-producing investments.

The financial advising sector has been advocating for tax deductibility of all advice fees, including commissions, for over 30 years.

All of this appeal has so far gone unanswered by the government. Although, as mentioned above, the ATO is currently reviewing some of its regulations, so changes may be coming.

Are Financial Advisors Fees Tax Deductible - Final Thoughts

Unfortunately, it isn’t clear which fees are and aren’t exempt from tax. However, we have mentioned some of the most common financial advisor fees above, and discussed whether they are tax-deductible.

At the end of the day, if your financial advisor fee is related to ongoing advice for an existing portfolio or for an investment that is generating assessable income, then it is tax-deductible.

It is important that you have a clear breakdown of all the fees of all the work your financial advisor has completed.

This will help you to understand how much tax you may be able to deduct. Otherwise, you are allowed to provide a rough yet reasonable estimate.

We hope this article has been informative. Hopefully, you now have a clear understanding and can answer the question: are  financial advisors fees tax-deductible?

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