As we start a new financial year, it’s easy to focus on lodging your tax return and moving on. But your finances aren’t something you can set and forget.
With interest rates elevated, cost-of-living pressures persisting, pending legislative change based on the Federal Budget and markets adjusting to a more uncertain outlook, now is the ideal time to take stock and ensure your money is working as hard as possible.
A regular financial review can help keep you aligned to your goals and better positioned to navigate change.
Mortgage: don’t overpay unnecessarily
In a higher rate environment, even small differences in interest rates can significantly impact repayments. Review your current loan, including features like offset accounts, and compare it with alternatives. If your rate isn’t competitive, speak to your lender. Signalling you want to refinance can often prompt a better offer.
Savings vs investing: strike the right balance
Higher interest rates have improved returns on savings, but not all accounts keep pace. Review what you’re earning and whether your cash could be working harder.
At the same time, holding too much in cash over the long term can erode purchasing power due to inflation. Consider whether a portion could be allocated to longer-term investments such as shares, property, bonds or diversified funds, keeping your risk tolerance and time horizon in mind.
Make volatility work for you
Market uncertainty can be unsettling, but it can also create opportunity. Periods of volatility may allow investors to access quality assets at more attractive valuations, both shares and property.
For those wary of timing the sharemarket, investing gradually can help smooth the impact of short-term fluctuations.
Revisit your asset allocation
With interest rates higher, fixed income is once again appearing more attractive to investors. This may warrant a review of your current portfolio, particularly if it has been heavily weighted towards equities in recent years.
Ensuring diversification across asset classes, sectors and geographies remains key to managing risk and improving long-term outcomes.
Take control of your super
Superannuation remains one of the most tax-effective ways to invest for the future. EOFY is an ideal time to review your balance, investment options and contribution strategy.
Check for multiple accounts to reduce fees, ensure your investment mix aligns with your long-term goals, and consider whether additional contributions could be beneficial.
The move to “Payday Super” will require employers to pay super at the same time as wages, rather than quarterly. While this is expected to improve retirement outcomes over time, it may have an impact on contribution limits, so staying informed is important.
Be aware of potential CGT changes and trust reforms
With the recent Federal Budget placing increased focus on trust structures, capital gains tax and broader tax integrity measures, investors should remain alert to potential changes that could affect after-tax returns and long-term wealth planning.
While no sweeping CGT reforms may be confirmed yet, the heightened scrutiny around discretionary trusts and investment structures is a reminder that the taxation landscape can change quickly.
Now is an ideal time to review your investment portfolio and ownership structures from a tax perspective. This could include crystallising losses to offset gains, reviewing holding periods, reassessing asset ownership structures, and considering whether existing trust arrangements remain appropriate and effective.
Acting early, rather than reactively, can help manage future tax implications and avoid being caught out by policy changes.
Insurance: don’t leave gaps
Rising construction costs and inflation mean the cost to rebuild or replace assets may have increased. Review your home and contents cover to ensure it reflects current values.
Similarly, check your personal insurance, including income protection, to ensure it aligns with your current income and financial commitments.
Refresh your budget
With living costs still elevated, revisiting your budget is essential. Understanding where your money is going can help you identify areas to adjust, manage rising expenses and stay on track with your financial goals.
Think beyond tax time
EOFY also presents an opportunity to review your investment strategy from a tax perspective. This may include assessing capital gains or losses, making additional super contributions, or ensuring your portfolio is structured efficiently.
In a shifting economic environment, staying proactive is critical. By reviewing your mortgage, savings, investments, insurance and super, you can better navigate uncertainty and keep your financial future on track.