Spring 2024 Newsletter
Spring 2024 @ Longreach Private Wealth
As we welcome the warmer weather and longer days, we're excited to share our latest updates with you!
Quarterly Newsletter Update
We’re transitioning to a quarterly cycle for our newsletters. In addition to our regular updates, you can find topical articles on our website’s Insights section. Visit us at longreachprivatewealth.com for more information.
Market Overview
During the September quarter, investment markets saw a notable uptick, with the S&P/ASX 200 rising by 7.79% and the S&P 500 (in USD) up by 5.53%. This positive momentum can be attributed to a broader risk-on sentiment, primarily driven by falling international interest rates. While inflation, interest rates, unemployment, and election results remain hot topics, it’s pleasing to see very strong performance across diversified portfolios over the past year. As always, we maintain a long-term perspective, mindful of the ongoing economic and geopolitical challenges.
Cybersecurity Alert
We’d like to highlight an important article on cybersecurity. As our financial activities increasingly move online, the risk of fraud has risen. Recently, several clients have reported compromised banking and email services. Thankfully, there were no financial losses, but the inconvenience was significant. We urge everyone to stay vigilant and proactive in safeguarding their information.
If you have any questions or concerns, please contact us. We’re here to assist you and welcome the opportunity to help your family, friends, and acquaintances with their financial needs.
Thank you for trusting us with your financial advice!.
Peter, Sharon & Wendy
Cyber Security
With the increasing complexity of cyber threats, it’s more important than ever to stay vigilant and keep informed about emerging threats and how best to protect ourselves.
In light of increasing security threats, we are committed to ensuring the highest level of protection for your account. To enhance our security protocols and prevent unauthorized access, we are implementing an additional layer of verification.
Effective immediately, if you request any changes to your account, we will contact you directly by phone to confirm the request. This includes updates to:
Account Details (e.g., email, phone number, billing information)
Access Permissions
Security Settings
Withdrawal Requests
This step ensures that any changes made to your account are verified and authorized by you, providing an added layer of security against potential cyber threats.
Protecting your personal data at home is more important than ever too. Here are some simple yet effective steps you can take to safeguard your information from cyber threats:
Turn on multi-factor authentication wherever possible
Use strong passwords on your accounts
Keep your software up-to-date (new flaws are discovered all the time, so don’t ignore prompts to update)
Use security software on your devices
Perform a factory reset on any devices before selling or disposing of them
Learn how to spot phishing scams and scam messages
We strongly encourage you to visit the Australian Government – Australian Signals Directorate Website (Protect yourself | Cyber.gov.au) for the most up-to-date and comprehensive cybersecurity advice.
Your safety and the security of your information are our top priorities. If you have any questions or concerns, please don't hesitate to contact us.
Estate Planning Gives You a Final Say
Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess when they’re grieving.
Your Will gives you a say in how you want your possessions and investments to be distributed. Importantly, you should also establish enduring powers of attorney and guardianship as well as a medical treatment decision maker and/or advance care directive in case you are unable to handle your own affairs towards the end of your life.
At the heart of your estate planning is a valid and up-to-date Will that has been signed by two witnesses. Just one witness may mean your Will is invalid.
You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.
Keep in mind that an executor's role can be a laborious one particularly if the Will is contested, so that might affect who you choose.
Around 50 per cent of Wills are now contested in Australia and some three-quarters of contested Wills result in a settlement.i
The role of the executor also includes locating the Will, organising the funeral, providing death notifications to relevant parties and applying for probate.
Intestate Issues
Writing a Will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid Will.ii
While that’s understandable - it’s very easy to put off thinking about your own demise, and some don’t believe they have enough assets to warrant writing a Will - not having one can be very problematic.
If you don’t have a valid Will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.
The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.
Is Probate Necessary?
Assuming there is a valid Will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.
Probate is a court order that confirms the Will is valid and that the executors mentioned in the Will have the right to administer the estate.
When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses then on death your share automatically transfers to your surviving spouse. It does not form part of the estate.
However, if the house is only in your name or owned as ‘tenants in common’, then probate may need to be granted. This is a process which generally takes about four weeks.
Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.
Having a probate is favourable if there is a refund on an accommodation bond from an aged care facility.
Rights of Beneficiaries
Bear in mind that beneficiaries of Wills have certain rights. These include the right to be informed of the Will when they are a beneficiary. They can also expect to hear about any potential delays.
You are also entitled to contest or challenge the Will and to know if other parties have contested the Will.
If you want to have a final say in how your estate is dealt with, then give us a call.
i. Success rate of contesting a will | Will & Estate Lawyers
ii. If you don’t, who will? 12 million Australians have no estate plans | Finder
Tax Update September 2024
New deductions and employer obligations
Employers need to check that payroll systems reflect recent legislative changes, and the ATO is highlighting deduction opportunities available to some small businesses. Here’s your roundup of the latest tax news.
Updated employer obligations
The ATO is reminding employers to stay on top of legislative changes affecting payroll systems.
The Super Guarantee rate increased on 1 July 2024 to 11.5 per cent of ordinary times earnings, so all payments (starting with those for the July to September quarter) to super accounts for eligible workers must reflect the new rate.i
Individual income tax rate thresholds and tax tables changed also changed on 1 July 2024 so you may need to check calculations for your Pay As You Go Withholding obligations.
Claims for energy expenses
Many small business are eligible for a bonus 20 per cent tax deduction for new assets (or improvements to existing assets), that support more efficient energy usage.
The Small Business Energy Incentive applies to eligible assets first used or installed ready for use between 1 July 2023 and 30 June 2024.ii
Eligible expenditure for external training courses for employees incurred between 29 March 2022 and 30 June 2024 could also qualify for a 20 per cent bonus tax deduction from the Small Business Skills and Training Boost.iii
Pay less capital gains tax (CGT)
While a business can reduce capital gains made during a tax year by offsetting them with capital losses from the same or previous income years, not all capital losses are eligible.iv
Capital losses carried forward from previous years need to be used first, with losses from collectables (such as artwork and antiques) only permitted to be offset against capital gains from collectables.
Losses from personal use assets (such as boats or furniture), CGT exempt assets (such as cars and motorcycles), paying personal services income to yourself through an entity you set up, and leases producing income (such as commercial rental property), are ineligible as offsets.
Fuel tax credit rates change
Before claiming fuel tax credits in your next Business Activity Statement (BAS), check you are using the latest rates as they have changed twice in the new financial year.v
On 1 July 2024, the rate for heavy vehicles travelling on public roads changed due to an increase in the road user charge, with the rate altering again on 5 August 2024 due to a change in fuel excise indexation.
Different rates apply based on when you acquired fuel for your business’ use, so ensure you use the correct rate. If you are unsure, try the ATO’s online Fuel Tax Credit Calculator to work out the amount to report in your BAS.
Records essential for rental expense claims
Rental property investors without correct documentation to substantiate their expense deductions may find their claims declared invalid.vi
The ATO is warning investors they need all receipts, invoices and bank statements plus details of how deductions were calculated and apportioned for a valid claim.
Lodging a ‘nil’ BAS
While taxpayers registered for GST automatically receive a Business Activity Statement and are required to lodge and pay in full by the due date, businesses with nothing to report are still required to lodge.
If you have paused your business, you are required to lodge a 'nil' BAS by the due date either online or via the ATO’s automated phone service.vii
i. How much super to pay | Australian Taxation Office (ato.gov.au)
ii. Small business energy incentive | Australian Taxation Office (ato.gov.au)
iii. Small business skills and training boost | Australian Taxation Office (ato.gov.au)
iv. Pay less capital gains tax (CGT) | Australian Taxation Office (ato.gov.au)
v. From 1 July 2024 to 30 June 2025 | Australian Taxation Office (ato.gov.au)
vii. Cancelling your GST registration | Australian Taxation Office (ato.gov.au)
Investing Cycles - Lessons from the Magnificent 7
When it comes to investing in shares, it’s often said that time is your friend.
The data shows that investing small amounts consistently over time and riding out the ups and downs of the market by holding onto your investments for the long term, can produce a healthy return.
Over the past two decades, the top 500 US companies averaged a 10 per cent annual return and Australia’s S&P ASX All Ordinaries Index recorded an average annual return of 9.2 per cent.i
Those returns have been delivered despite some catastrophic events that sent the markets plummeting including the dot-com bubble crash, the Global Financial Crisis, and the effects of Covid-19.
It takes grit to hold on as the markets plummet, but the best way might be to avoid the hype and tune out the ‘noise’. It can be a trap checking prices every day and week, causing heightened stress and anxiety about your portfolio, a recent example being the mid-2024 Microsoft outage which impacted briefly investor confidence. We can help you maintain a longer-term view, so it you have any concerns give us a call.
The cycle of endless phases of good and bad times are a constant for markets. Most cycles follow a pattern of early upswing, after the market has bottomed out followed by the bull market, when investor confidence is strong and prices are rising faster than average. Then the market hits its peak as prices level out before negative investor sentiment drives a bear market. Finally, the bottom of the cycle is reached as prices are at their lowest.
There are also certain seasonal market cycles that may be helpful in buying and selling decisions. Note, though, that there are always exceptions.
In Australia, April, July, and December have tended to be the strongest months on the All Ordinaries Index. But these patterns have weakened a little over time, with lower average gains in April, July, and December more recently. Performance is usually the lowest in June.ii
November and April have been the strongest months for US shares for the past 30 years, with average monthly gains of 1.9 per cent and 1.6 per cent respectively.
The Magnificent Seven
The performance of Nvidia and the Magnificent 7 is a real-time lesson in market dynamics and cycles.
Despite the rise and rise of seven US technology stocks in the past 18 months – known as The Magnificent 7 - their price pattern has, more or less, followed these seasonal cycles.
The seven stocks – Nvidia, Alphabet, Microsoft, Apple, Meta, Amazon, and Tesla – returned more than 106 per cent in 2023 alone.iii
In the first half of 2024, their prices rose around 33 per cent on the US S&P 500 index while the rest of the index increased by only 5 per cent.
But another story has been emerging in recent months. The Magnificent 7 has now become the Magnificent 3, thanks to intense excitement around artificial intelligence (AI).
Nvidia, Alphabet and Microsoft leapt into the lead on the index, doubling the performance of the other four.iv
Nvidia has been the market darling, with its price almost tripling in 12 months. But prices have been volatile at times. A correction in June knocked the company from the biggest in the world, a title it held briefly before the plunge, to number three after Microsoft and Apple.
Some describe the activity as a bubble that is due to burst. Others say the Magnificent 7 stocks are undervalued and have further to go.
Either way, be wary about getting caught up in the hype that surrounds rapidly rising prices.
Keeping a cool head and taking the time to understand what you are investing in, and the potential risks will help you stay focused on your long-term investing goals.
Get in touch if you’d like to discuss your investment portfolio and to review in the context of your long-term investment goals.
i. 2023 Vanguard Index Chart: The real value of time - Vanguard
ii. The ’best’ and the ‘worst’ months for shares - asx.com.au
iii. The magnificent 7: A cautionary investment tale - Vanguard
iv. The Kohler Report - ABC News
Holidaying off the Tourist Trail
When we dream of an overseas holiday, our minds often drift to iconic landmarks, bustling cities, and well-trodden tourist paths. While these destinations have their allure, travel to popular destinations is booming and comes with challenges so there are advantages to venturing off the beaten track and seeking out the hidden gems.
Travel is booming – and creating some headaches
It’s no secret that we Aussies love to travel outside our own country. Last year nearly 10 million of us headed overseas, marking a 12 per cent increase from the previous year, and this year is shaping up to continue the trend.i And it’s not just us enjoying getting out there and travelling the world, global figures anticipate international travel will soon exceed pre-pandemic levels and surpass 2 billion for the second time ever.ii
That adds up to a lot of people out there travelling and some popular destinations are showing the strain with skyrocketing prices, excessive queues, damage at historical sites and environmental impacts all being felt.
Tensions are high in some areas with tourists in Barcelona, Spain recently doused in water by frustrated locals and authorities in the historic city centre of Florence banning new short-term holiday rentals to try to relieve some of the pressure of over-tourism.
Taking the road less travelled can help areas suffering from over-tourism and support those communities who would welcome more visitors.
Supporting Communities That Need It
Tourism plays a significant role in the economic growth of many communities around the world and there are many places that would really benefit from the tourist dollar. The money you spend as you travel can contribute meaningfully to local economies and help support small businesses, artisans, and entrepreneurs, ensuring that future generations can continue to enjoy unique destinations.
But there are plenty of less altruistic reasons to seek out the hidden gems when you travel though.
Authentic Encounters
One of the lovely aspects of traveling to less touristy places is the opportunity to immerse yourself in local cultures. Away from tourist hotspots, communities maintain their unique traditions, cuisines, and ways of life. Imagine strolling through a market where locals gather to sell fresh produce, handicrafts, and homemade delicacies, or stumbling upon a hidden café where the owner shares stories of their town's history. These encounters create lasting memories and offer a genuine glimpse into the daily lives of people from different corners of the world.
Unspoiled Natural Beauty
Nature enthusiasts will find bliss in exploring destinations that are off the typical tourist radar. Picture deserted beaches with powdery sand and crystal-clear waters, hiking trails winding through lush forests, or breathtaking untouched landscapes. Whether you're seeking solitude in nature or hoping to capture stunning photographs without a sea of selfie sticks in the background, less touristy places often boast natural beauty that remains unspoiled and awe-inspiring.
Affordable Adventures
Traveling to less touristy places can also be kinder to your wallet. Accommodation, dining, and activities in popular tourist hubs tend to come with inflated price tags due to high demand. In contrast, destinations that are yet to be discovered by the masses often offer more affordable options. You might find charming family-run guesthouses, budget-friendly eateries serving local dishes, and reasonably priced excursions that allow you to stretch your travel budget further.
Destination Dupes
Doing a little homework can point you in the direction of alternatives to popular destinations.
For example, instead of Venice - which is literally sinking under the weight of tourism -consider visiting the town of Trieste, an old port town by the Adriatic Sea. If you are after stunning beaches and clear aqua water, Palawan in the Philippines is a good alternative for the Maldives. Or for an alternative to over touristed St Tropez in France, Turkey's Bodrum coast offers comparable glamour and affordable luxury. Doing a little research can uncover similar destinations that offer the experience you are seeking, with all the benefits and none of the problems of the overhyped placed.
While the allure of ticking off the list of famous places is understandable, exploring less touristy places offers a wealth of unique experiences to the visitor, and benefits the local communities. So, the next time you plan an overseas holiday, think outside the square of the obvious destinations, and discover the hidden gems.
i. CATO reveals new trends with Australia's 10m international travellers - Travel Weekly
Please Note:
The views expressed in this newsletter does not constitute advice in any way. If you would like advice on your current situation please contact us.