When we rang in the New Year, no doubt
most of us were hoping that we had left
the uncertainties of 2020 behind us. Whilst
this was not to be, with the first of the
vaccines rolling out in late February, comes
For many, the uncertainties of last year
have caused a shift in priorities, and the
lure of escaping the cities for more idyllic
country lifestyle is tempting. In this edition
we take a look at some key considerations
when contemplating a tree change.
When making these decisions, it is
important to consider the impact of life
changes on your financial future, and the
legacy you are creating. This brings us to
the question what happens to the legacy
you leave behind. How can you ensure
your voice is heard in relation to your
estate? It's important to understand a Will
may be contested. What additional tools
can you consider to ensure your voice is
Talking about changes, the government has
announced the first CPI indexation change
to a number of superannuation caps,
including the Transfer Balance Cap. We
take a look at what these changes may
mean for you.
We need to remember uncertainty and
change can create opportunity, and as the
last year has shown, having a financial
planner by your side, can give you more
confidence in your financial future.
A U T U M N 2 0 2 1
Lending finance at an all time high 2
Ensuring your voice is heard 3
We talked previously about equity markets rallying in
anticipation of the vaccine rollout and the positive impact of the
gradual reopening of economies. The global vaccine rollout is
now well underway. The one concern is that the new COVID-19
variants (UK, South African) will require updated vaccines.
In Australia, the recovery from COVID-19 is well underway and
the economy is not as bad as initially feared. In August, the RBA
forecast unemployment to be around 10% by the end of 2020,
and still be above 7% by the end of 2021. Unemployment
peaked at 7.5% in July 2020 and fell to 6.6% in December.
According to Dr. Stewart Lowe (RBA Governor), the main two
reasons for this being:
Our success in containing the virus which limited the extent
of lockdowns.
Government fiscal policy support has been bigger than
expected, at around 15% of GDP.
The massive Quantitative Easing (QE) program continues in the
US, while in Australia, the RBA doubled its QE program to $200
billion. The program is due to run until September, but there is a
strong possibility it will be ongoing.
Vaccine rollout accelerates as bond yields spike 1
Could a tree change work for you? 3
CAP THAT! Impact of indexation on the Transfer Balance Cap 4
GDP Forecast Unemployment Inflation
to grow at the
above-trend rate
by end of the
zero economic growth
to fall to 5.25%
inflation grew
RBAs target range
Dr. Lowe said the board was not
expecting to increase the cash rate
for "at least three years “, while
the US Fed sees no material
movement in US interest rates
until 2023. They do not expect the
jobs market to deliver strong
wages growth to Australian
workers until at least 2024.
equities (ASX 200) trading at a PE
(price-to-earnings ratio) of 19.5x at
31 December 2020 are now
trading at over 20 times June
earnings. The US (S&P 500) is
currently trading around 22.5x,
well above long term average
levels of around 17 times. Very low
interest rates and strongly
rebounding economies (e.g. US
forecast growth around 6% in
2021) are the main justification for
current valuations.
The major issue in markets right
now is the sharp rise in long-term
bond yields, signalling that
markets are worried about future
inflation. Higher growth can also
lead to higher interest rates.
Whatever the reason, higher bond
yields normally result in lower PE
multiples for stocks.
The US 10-year bond yield has
increased from around 0.8% in late
October 2020 to over 1.3%, which
is about its pre-COVID-19 level.
The move in Australia’s 10-year
bond yield has been even more
dramatic, rising from around 0.8%
to 1.68%. The spike in yields has
led to underperformance in high
PE tech stocks (growth stocks in
A U T U M N 2 0 2 1
general) and prompted a move
into more cyclical or
economically sensitive stocks,
such as financials and resources.
This should be positive for
Australian equities relative to
global equities given the
proportion of cyclical stocks in
our market. One ‘downside’ to
this cyclical recovery has been
the strength of the Australian
dollar which impacts foreign
earnings and is a drag on
domestic economic growth and
employment growth. One of the
major reasons for the QE
program by the RBA is to limit
the rise in the Australian dollar,
a battle it is currently losing.
We will be maintaining our
strategic weighting to growth
assets but we would be cautious
in the short-term. It is natural
for bond yields to rise as growth
picks up, but we are closely
watching the current move. We
are still not at a level of interest
rates which would significantly
impact the broader market, but
we would certainly like to see
the trajectory of this rise start to
flatten out.
Chart 1: Investment Returns to 31 January 2021 (% p.a.)
Asset Class 1 month 1 Year 3 Years 5 Years
Australian Shares
Global Shares
Listed Property
Fixed Interest
0.31 11.89 -3.11 7.00 10.03
0.12 7.10 2.11 8.86 11.73
-4.06 9.10 -13.96 5.14 5.88
-0.42 -0.80 1.68 5.36 4.22
3 months
In December 2020, the ABS
reported that new loan
commitments continued to
soar and break records,
driven by owner-occupier
home loans, and first home
Source: Australian Bureau of Statistics
first home buyer loans
construction loans
total value of
new loans
for housing
The implication is
extremely low yields in
fixed interest for the next
few years. These settings
strongly favour Growth
Assets in terms of yield
and total return.
Company earnings are on the up
Economies and companies are
rebounding. Brokers are
forecasting Australian June 30
earnings to get back to pre-
pandemic levels. According to UBS,
with around 40% of the ASX 100
having reported, earnings per
share growth estimates for the
2021 financial year have been
revised up 2.1% to 28.8%.
However, valuation is an issue,
particularly in the US. Australian
Asset Class 3-month return
to 31 January 21
Australian large cap equities
Australian small cap equities
Developed market global equities
Emerging market equities
Australian listed property
Australian fixed interest
A U T U M N 2 0 2 1
City living is not called the rat-race
for nothing. While many thrive in
the big smoke, many are opting
out, choosing to raise their
families in the country instead.
Cleaner air, less traffic, open
spaces, lower cost of livingdid
we mention less traffic? There are
any number of reasons to
consider a tree change, but if
you’re serious, better do your
homework first.
Housing affordability
Buying or renting a home is more
affordable in the country. In rural
Wodonga you can rent a 4-
bedroom, modern family home for
around $390 per week. A similar
home in Glen Waverley would rent
for around $610. You could buy a
similar home in Orange for just
over $500,000, where in Hornsby,
it could cost over $1 million.
While property is generally
cheaper to rent or buy in the
country, you’ll need to consider
other factors. Some rural
municipalities cover large areas.
Higher maintenance costs and
fewer residents can mean council
and water rates are more
expensive. Another point to think
about is bushfire zoning. If you’re
in a high-risk area, insurance
premiums can be higher. Building
in a bushfire-prone area may
require more expensive
modifications to meet the fire
Make sure you do your sums. Talk
to local councils about rates and
levies. If buying land, read your
Section 32 carefully and be aware
of all zoning requirements.
Government incentives encourage
industries and businesses to
move to regional areas. As
employment opportunities in
regional areas grows, so too does
the economic well-being of its
towns. All of this activity provides a
wide range of employment.
Medical facilities
Community infrastructure and
It's a good idea to check the job-
market in the area, and if possible,
have a job lined up before you
make any final decisions.
Could you make it work?
Holidaying and living are two
separate things. Try not to make
the mistake of assuming an idyllic
getaway will be your perfect
permanent tree-change.
On holiday you’re relaxed; you’re
not a taxi for your kidsweekend
activities, you’re not harried by
housework, school and work
If you’re serious about moving to
the country and you’ve a
location in mind, do your due
diligence. Include researching:
If you’re dreaming of a tree
change, do your research and
draw up a plan to make it reality.
challenged. There have been
countless court dramas over Wills
involving claims and counter-
claims. It's important to remember
people can change, form new
relationships, and take advice from
different sources.
While the Will remains the
centrepiece of estate planning,
there are additional tools you may
not be aware of.
The insurance option
An insurance policy taken out by
you on your own life and owned by
you forms part of your estate, to be
distributed in accordance with your
Will, and is subject to challenge.
However, if your life insurance
policy nominates someone other
than you as the beneficiary, it
doesn't form part of the estate. It's
separate from the Will, and not
When you’re here to supervise your
worldly affairs, you can ensure your
voice and current wishes are heard
and heeded. But what happens
when you’re no longer here? What
voice will be heard? Will it be your
most recent voice; an old voice
from several years ago; or the voice
of government legislation?
Unfortunately, it's often voice
number two, or worse, three.
If your Will and other estate
arrangements have not recently
been reviewed, you risk your
current voice not being heard. If you
have overlooked making a Will
altogether, the government decides
how your estate is to be distributed.
This reinforces the importance of
keeping all of your estate
arrangements current. That said,
even with the best of intentions, the
most up-to-date Will can be
subject to challenge. This feature
can make insurance an important
part of sound estate planning. If
there's any possibility your
wishes may not be carried out
after you’re gone, it might be
useful to seek professional advice
about the value of a life
insurance policy.
The super solution
You may think super is included
in your estate and dealt with
through a Will. Not so. The
trustee of your superannuation
fund determines how your super
is paid upon your death. You may
identify apreferred beneficiary’,
however, the fund trustee can
override this decision. If you
don’t want this to occur, you
should complete a Binding Death
Benefit Nomination, and ensure
this is kept current.
AFSL 229892 ABN 23 065 921 735 lifespanfp.com.au
Level 23, 25 Bligh Street, Sydney, NSW, 2000
Tel. 02 9252 2000 Email: advice@lifespanfp.com.au
Your financial planner is an AR or CAR of Lifespan Financial Planning
Disclaimer: The articles in this newsletter are of a general nature only and are not to be taken as recommendations as they might be unsuited to your specific
circumstances. The contents herein do not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the
basis for making any financial or other decisions. Your Lifespan adviser or other professional advisers should be consulted prior to acting on this information. This
disclaimer is intended to exclude any liability for loss as a result of acting on the information or opinions expressed.
A U T U M N 2 0 2 1
How might this increase impact you?
If you have any questions about changes to these
caps, or believe you may be impacted by these
changes, please call me to discuss.
Individuals may be able to benefit from this
CPI increase if they have started using their
retirement income stream, but have not fully
utilised their current TBC by 1 July 2021.
Individuals who may be considering starting
their retirement income stream soon may be
better off deferring starting this income
stream until after 1 July 2021.
Individuals wanting to make Non-
concessional contributions to superannuation
will have an increased cap to determine their
eligibility to make these contributions.
Individuals wanting to access Government co-
contribution or Spouse tax offset government
benefits will have an increased cap to
determine their eligibility.
The government introduced a Transfer Balance Cap
(TBC) in July 2017, which effectively limits the total
amount of super able to be transferred into a tax-
free retirement phase pension. 1 July 2021 will be
the first time this cap has been increased, in line
with CPI, so the threshold will increase from its
current level of $1.6 million, up to $1.7 million.
Depending on personal circumstances, every
individual will have their own TBC, between $1.6
million to $1.7 million. An individuals’ TBC is equal
to the general TBC at the time of commencing a
superannuation income stream. If an individual
uses a proportion of their TBC, their personal TBC is
calculated to proportional indexation in line with
the CPI increases to the general TBC. Details of the
level of an individual’s TBC will be available through
their myGov account.
Other changes to caps
Indexation of the general TBC will also change the
cap that applies to eligibility criteria to make
Non-concessional contributions and to access the
Government co-contribution and the Spouse tax
offset. Commencing 1 July 2021, the new cap for
these arrangements will also be $1.7 million
(currently $1.6 million). For capped defined benefit
income streams, the cap will increase to $106,250
(currently $100,000).
Binding Death Benefit
Superannuation legislation allows
you to specifically nominate, with
certainty, who will receive your
super following your death. These
nominations must be in writing
and clearly state the names of
beneficiaries and any split details
To ensure it’s your voice that
takes final control of what you
have worked hard for, it’s
important to seek professional
advice, which may include
consulting an estate planning
specialist. If you have any
questions, give us a call and we’ll
be able to point you in the right
between multi-beneficiaries.
Some funds offer non-lapsing
binding nominations. However,
many binding nominations must
be renewed every three years and
are only valid if you nominate a
dependant. You may also
nominate your estate. Binding
nominations are still relevant if
you have an SMSF.