ASPIRATIONS NEWSLETTER

2016
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Am I better off renting or buying a home?

Hats off to working parents

Will my kids ever leave home?

5 and 6

Am I better off buying Insurance through my Super?

How to take tension out of your building project

8 and 9

Changing rules for SMSF

10

Exactly what is Income Protection and do I need it?

11

W:www.pivotalplanning.amp.com.au

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Am I better off renting or buying a home? - revisited

About a year ago, we took a look at one of the biggest questions in property, whether to rent or buy. We now revisit this debate to examine whether the property market has changed over the
last 12 months and how this might impact you if you were thinking about renting or buying a property.
The debate continues
If youre following the rent vs buy debate, the rental property argument has nudged slightly ahead of the buying property alternative in some parts of Australia, according to AMP Capitals Head of
Investment Strategy and Chief Economist, Shane Oliver:
The picture hasn't really changed that much except in cities like Sydney and Melbourne, where property price growth has been very strong (making buying more expensive) and growth in rents has
been relatively soft so the case in favour of renting (and investing) over buying has actually strengthened.
To invest or not to invest
So, you might be wondering whether or not its still a good idea to invest in property. You might also be thinking that you would love to buy a house, but you cant afford to just now. So one option
might be to rent in the suburb you want to live in, and buy a property (in a more affordable suburb) as an investment.
But like all property investment decisions, youll need to consider your personal situation, your goals and the risks you want to take. You also need to be comfortable about whether youre making a
lifestyle or a financial decision and whats important to you.
What are the options?
Here are some things to think about if youre considering renting or buying:
Renting benefits
Youll have more financial freedom because you dont pay for landlord expenses, such as building maintenance, repairs, rates and property insurance.
Youre more likely to be able to afford to live in the suburb you want (because youre not paying for the expenses of owning a home). Renting downsides
You generally dont have the same freedom to change or renovate the property like you would if it was your own.
Youre never sure how long you can stay in a rental property. This is fine while you are young and flexible, but as you grow older you might want more certainty and stability.
Buying benefits
Youll own your home within 25 to 30 years and start to build long-term wealth.
Because you own your property, you can renovate it, nail pictures into the wall or even remove the walls if you want to!

Buying downsides
The costs of buying a house add up the deposit (up to 20% of the purchase price), the interest over 25-30 years, stamp duty, government fees, loan fees, lenders mortgage insurance (LMI), legal fees, pest and building inspections,
bank valuation fees, rates and title registration.
Selling a property can be expensive and complex whether you use a real estate agent to sell your house or do it yourself, youll need to be aware of whats involved. You may need to pay agents commissions, advertising fees and
moving costs. Youll also need to decide whether to engage a lawyer.
Whats right for you?
Before you make any investment decisions, we recommend you do your research. Whatever you decide, consider seeking professional advice to guide you through the maze of investment options available.

Important note: AMP Life Limited. This provides general information and hasnt taken your circumstances into account. Its important to consider your particular circumstances before deciding whats right for you. Although the information is from sources considered reliable,
AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract,
tort or otherwise) for any resulting loss or damage of the reader or any other person. Those strategies like salary sacrificing which have tax arrangements should be discussed with a registered tax agent.

Hats off to working parents!

Research into skilled workers shows that working parents are more productive employees.

According to the Australian Institute of Family Studies, the number of parents who work is far greater than a few decades ago. Not so long ago in 1983, the number of parents who
both worked full time was just 17%. The most recent Australian Census shows that in 2009 it had increased to 25%.
Given that Australia is the most expensive country to live in the world, its no wonder that more and more parents are working while raising a family. In fact, recent media reports say
Aussie parents work more than parents in other countries and 90% of Australian mothers always or often feel rushed or pressed for time.
But, it may be surprisingespecially if youre a working parent and often feel rushedthat a study into the effects of parenthood on skilled workers found working parents to be the most productive employees.
Tips for balancing work and family
Working parents reportedly have great skills when it comes to time management and organisation. Although if youre busy rushing from work to family and back to work, a sense of achievement may be the last thing
on your mind.
Here are our tips for achieving work-life balance:
1. Delegate
If you have endless to-do lists, consider using an online community noticeboard like Airtasker to post jobs and find people to help you with just about anything from mowing the lawn, and cleaning your home to writing
a letter.
2. Create a supportive network
Pooling your time with that of other busy parents can help you share the loadand ideas for managing everythingwith your community. See if you can share tasks like picking up the kids or minding them with another family or two. It may halve the time you spend while giving your children extra social support.
3. Look after yourself
When youre looking for ways to manage all your responsibilities, be sure to factor in time for yourself. Doing things like exercising and spending a little time doing what you enjoy are as important for your family as
they are for you. A healthy, happy parent is far more likely to raise healthy, happy kids so be kind to yourself too.
4. Set limits
When youre evaluating all the responsibilities you have as a parent and an employee, be sure to set goals that are realistic and achievable. Keep in mind that the intensity of juggling your responsibilities may ease off in the longer term.
For example, once your children reach a certain age they may become more independent which could leave you with more time to concentrate on other priorities.
5. Seek advice
Speak to us to get help to make sure your finances are under control and that the money you earn works hard for you and your family.

Important information

AMP Life Limited. This provides general information and hasnt taken your circumstances into account. Its important to consider your particular circumstances before deciding whats right for you. Although the information is from sources
considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded,
AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Will my kids ever leave home?

These days it can be natural for kids to stay at home until adulthoodour 7 tips can help ensure your own goals dont pay the price.
If you were expecting to have the house to yourself once your kids reached a certain age, you may have to adjust your expectations.
Because for Generation Yor millennials as theyre often calledmoving out is not the rite-of-passage it once was.
In 2011, around 29% of young adults aged 18-34 years lived without a partner or child but with one or both of their parents.

All under one roof

Almost one in five Australians now lives in a household with two or more generations of related adults aged 18 years or older.
The reasons are complex but rising living costs can make moving-out challengingAustralia is the most expensive country in the world to live. Staying at home can also be a lifestyle choice from the beginning while others may move out
then back in again because of changed circumstances.

Tips for making it work

Having your adult children at home may be something youre comfortable with. But if you find your own goals are on the back burner, consider our 7 tips.
1. Assess the financial impact
Consider the additional costs of having your kids live at home. Use a budget calculator and work through the costs with your children. Consider asking them to pay board for living at home and contribute to the costs. Can you split the
costs of certain purchases or ask your kids to pitch in?
2. Help them help themselves
By helping your children meet living expenses youll be encouraging good money habits and equip them for independent living. If your kids download MoneySmarts TrackMySPEND app theyll see their own spending habits and can
make choices and work towards saving and investinghelpful if theyre saving to buy a car or to move out.
3. Consider government entitlements

Help your children help you help understand any youth allowances they may be entitled toyou can find out more at the Department of Human Services website.
4. Seek advice
Financial advice can help you manage day-to-day expenses while boosting your savings so youll be comfortable in retirement. A good adviser can also help you understand any impact on your own entitlements if your children live at home.

Will my kids ever leave home? Continued

5. Protect yourself and your family
Consider arranging insurance so you have financial protection. The right insurance can help absorb the financial impact of an unexpected eventif you have a mortgage, how would you meet
your repayments if you were suddenly unable to earn an income? How would that impact your loved ones? It can be cost-effective to buy insurance through your super fund. That way you
dont pay for it from your take-home payfind out more about buying insurance through super.

6. Look ahead
Talk with your child about their plans and your own. Let them know about the future life youre aiming for and seek to understand theirs. Help them set goals and guide them in achieving
them. For example, if their aiming to buy their own place, our borrowing power calculator can help them understand how much repayments will be.

7. Live in harmony
At times, living with your children can be stressful for you and them. Consider each others needs, personal space and communicate regularly about the positive things you can both do to support each other. For example, if youd really appreciate it if
youd like your children to help with some of the housework, say so. And consider how you can help them too.

Stay on track
Having your kids at home may suit them and you. Regardless of the living arrangements, make sure you stay focussed and set yourself up for the retirement you want. Think ahead when it comes to your home. Will you sell up and
downsize once the kids move out? Speak to a financial adviser so you can explore all your options and make sure youll have enough super when you retire.

Important information
AMP Life Limited. This provides general information and hasnt taken your circumstances into account. Its important to consider your particular circumstances before deciding whats right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and
should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Am I better off buying insurance through my super?

When it comes to arranging insurance its important to decide what types of insurance are available to you and what youll need for your particular life
circumstances. From here youll need to consider whether you should keep it inside your super fund or set it up separately.

What are the benefits of insurance through super?

Get more for less
It can be cost effective to buy insurance through super. That doesnt mean you wont find cheaper cover outside your super fund. But its likely youll be better off because tax benefits
mean you could end up paying less overall and group buying powerwhich normally comes with insurance through superoften gives you more for less.

Boost cash flow

In super you can pay for your insurance using before-tax money rather than dipping into your take-home pay, which can also be a tax-effective way to pay your premiums. Or, you can simply have the premiums deducted from your
existing account balance. Be sure to keep an eye on your super balance thoughless super may affect your lifestyle in retirement.
Access government help
You could make after-tax contributions to your super and use these to pay for your insurance. If you do, you may be eligible for a government co-contribution.

Be covered more easily

Youll usually be granted insurance cover automatically when you buy through super. Outside of super you may have to submit an application, undergo medical examinations and wait for approval.
What are some of the downsides?
Tax on claims
Depending on your circumstances, you may pay tax on disability claim payments when your insurance is held through super. And certain beneficiaries may be subject to tax on death benefit claims they receive.
Limited beneficiaries
Payments (following death) can only be paid to superannuation dependants. If you have insurance outside of super there are generally no restrictions (unless your insurer specifies otherwise).
Longer timing on payments
When it comes to payments for some policies, including life insurance, total and permanent disablement and temporary salary continuance, the money will normally be paid by the insurer to the super fund first. The trustees
can then pass it to you or your beneficiaries in accordance with the funds rules and the Superannuation Industry Supervision Actthis means payments can take longer.
Restricted types of cover
Cover provided through super can be more limited than a policy held outside super. For example, trauma cover is generally not available through super, but funds like those offered by AMP make it easy to link the cover you
have inside and outside super.
Were here to help
After youve considered the pros and cons of holding insurance inside super, you need to determine the level of cover you need. Be sure you have the right type and amount for your needs. Speak to us and we can help.
Important information
AMP Life Limited. This provides general information and hasnt taken your circumstances into account. Its important to consider your particular circumstances before deciding whats right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and
should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

How to take the tension out of your building project

Building projects generally are not easy to get right, so its important to set the right framework from the start.
Proper planning is the key to getting a project done on time and close to budget, and that hinges on laying some basic foundations.
You can take some of the stress out of your project, whether you are renovating or creating something from scratch, by following these six tips.
1. Pick your design
The first thing you need to do to turn your dream into reality is decide on the best design, regardless of whether its a renovation or youre building a home.
If its a relatively simple renovation in a contained area with no obvious complications, you can use a drafting firm or even find a builder with access to drafting services.
With more ambitious projects, its best to use a properly qualified architect who can give you plans and detailed costings. Some may even offer to manage your project.
Master Builders Association NSW Executive Director Brian Seidler says, Getting detailed specifications from your architect or draughtsperson will enable you to cost the job more precisely and help your builder avoid potentially expensive assumptions about materials.

2. Set a realistic budget

Be sure you have a clear reason for renovating or building a new home and are confident you wont over-capitalise.
Once your ideas are mapped out and you can see the scope of the project, you need to work to an overall budget with your architect or draughtsman.
Stress test your budget, as ideas change and problems arise and you need to make room for variations in the expected cost. Remember to allow for over-runs.

3. Talk to a number of builders

Make sure you get a number of quotes.
Its important that you check everyones qualifications through the Fair Trading website in your state by simply entering their licence numbers, Mr Seidler says. You also need to ensure they have the proper insurance.
A telling sign of a good builderapart from the costis one who will provide a draft schedule of work. The one with the clearest idea of how the job will progress usually will be best for you. And always ask questions. No question is
too silly.

How to take the tension out of your building project

Continued
4. Know whos boss
Its critical that youre clear about who will manage the job. If youre leaving most of it to the builder, you will need to trust that they will consult you before making
decisions.
On a big job, it may be worthwhile employing an independent project manager, Mr Seidler says.
If youre not managing the job yourself, you should have a schedule of the jobs and who will be on site, and a detailed budget that includes accurate costings for materials, labour, council fees and payments for the trades and builder.
If you want to do the project management yourself, youll have to be prepared to be on site most days and have a good contact list of tradesmen.
5. Keep to a schedule
Few things are more frustrating than waiting for paperwork or materials to arrive.
You can ensure the project runs smoothly by getting the local council paperwork sorted out well ahead of time.
Check delivery schedules of materials early so that you can work out contingency plans with your builder for work in other areas if there are hold-ups.
6. Be a good communicator
Good communication is essential to getting the most out of the relationship with your builder and getting the best outcome, Mr Seidler says.
You will be your own worst enemy if your management style frustrates your tradesmen or builder either through poor communication, excessive demands or frequent changes.
If you really need to change the way things are being done, make sure you talk it through clearly and openly with the people doing the work. Be firm but polite, as indecision wont be respected.

Unless youre specifically asked, get out of the way and let the tradesmen do their job.
Managing the relationship with your builder may require some compromise. But if youre properly prepared, the pressure will be easier to handle and youll end up with a much better result.

Important information

AMP Life Limited. This provides general information and hasnt taken your circumstances into account. Its important to consider your particular circumstances before deciding whats right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or
complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other
person

Changing rules for personal-use assets and self-managed super

When it comes to assets like artwork and wineto name a fewyou need to make sure your fund complies with new rules.
On 1 July 2011, new regulations stipulating the way trustees of a self-managed superannuation fund (SMSF) hold and use collectibles and personal-use assets took effect. A five-year period of
transition, giving trustees time to ensure existing assets are compliant, will expire on 30 June 2016.
That means all collectables and personal-use assets held by an SMSF need to be compliant with these rules from 1 July 2016.

The purpose of the regulations

There are two key purposes of the collectables and personal-use assets regulations. They seek to:
Prevent SMSF trustees from gaining current-day benefit from a personal-use asset
Ensure any personal-use asset is held solely for genuine retirement income purposes.
Which assets do the changes apply to?
The personal items and collectables that need to comply with these regulations include: Artwork
Jewellery
Memorabilia
Antiques
Wine
Artefacts
Motor vehicles
Coins and medallions
Recreational water vehicles including boats
Postage stamps
Sporting and social club memberships.
Rare folios, manuscripts and books
What if my assets fail to comply?
Since 1 July 2014, the Australian Tax Office (ATO) has had the ability to impose financial penalties directly on individual trusteesand the trustee cannot pay for these fines using SMSF assets. Fines can range from hundreds of dollars
to more than $10,000, so it pays to be compliant.
Were here to help
Theres a lot to consider when managing your own super fund and ensuring it meets the regulations. Were here to guide you, speak to us.
Important information
AMP Life Limited. This provides general information and hasnt taken your circumstances into account. Its important to consider your particular circumstances before deciding whats right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and
should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

What exactly is income protection insurance and do

I need it?
Have you ever wondered how you and your family would cope if you had an injury or illness and couldnt work for several months or even years?
For some people, income protection insurance might be the answer.
So what is income protection insurance?
Income protection insurance (or temporary incapacity or salary continuance insurance) provides cover if you cant work due to illness or injury. It generally pays up to 75% of your monthly income for your chosen benefit period to
help you pay the bills and maintain your familys quality of life.
Income protection insurance can:
cover daily living expenses, such as the mortgage, groceries, school fees
pay your medical expenses and rehabilitation costs
provide access to support services to help you return to work or find a new job, depending on your insurer
Generally, you can purchase income protection insurance via your super or through a financial adviser for example.
If you choose to purchase your income protection insurance through your super the premium comes out of your super, which is in pre-tax dollars.
Alternatively, if you pay directly, youll have to pay with after-tax dollars, but you may be able to claim your insurance premiums on your tax return.
For more information check out our article Am I better off buying insurance through my super?
How long do I have to wait to get paid?
Firstly, youll need to provide to your insurer all the necessary documents for your claim to be considered, such as your personal details, financial situation and medical information.
Most insurers have a waiting period (usually 30 to 90 days), before they will start paying your claim. You may be able to select the waiting period when you take out the policy. Additional waiting periods may apply when insurance is
purchased through your super, so its best to check with your insurer.
Is income protection insurance right for me?
Income protection insurance has helped many Australians to get through a difficult time without the added stress of worrying about how to pay the bills and look after their family.
Everyones situation is different, so you need to think about whats right for you.
If you are employed by an organisation, you may already have income protection insurance included in your super (sometimes called salary continuance or temporary incapacity cover), so check with your super fund. Make sure the
amount you are covered for would provide enough to cover your everyday expenses, as well as any medical or rehabilitation bills.
If youre self-employed, you may not have income protection insurance, so you may decide to buy it separately. Check what it covers, how much it costs and how long youll be paid for.
Benefit periods and premiums can vary depending on your individual circumstances and the insurer.
Were here to help
So now might be a good time to review your income protection situation. If you still need help in deciding if income protection is right for you, speak to us.