The Government’s pre-election budget was brought down in early April. Thankfully, there were no significant changes to the rules around superannuation and family structures and this appears to be the commitment coming from both the major parties in the run up to the Federal election. The only announcement of note was the extension of the 50% reduction in the minimum drawdown for super pensions. This offers increased flexibility to those in the pension phase to draw less income and retain funds inside super.
We are also looking forward to other superannuation changes due to come into effect on 1st July 2022. This includes the removal of the work test for superannuation contributions between the ages of 65-75, opening the possibility to consolidate more wealth inside super, as well as estate planning opportunities to save tax.
In terms of market news, it was a difficult quarter with most asset classes giving up ground in the backdrop of war, inflation and rising interest rates. Valuations of higher “growth” companies, typically in the technology sector, with lower current earnings (and the promise of growing earnings in future years) are continuing to take the brunt of most of the share market losses. The Australian market has outperformed because of its skew to commodities and financials, which has benefited our portfolios given they carry a higher weighting to Australian as opposed to international shares.
Higher energy and commodity prices continued to push inflationary pressures higher, along with COVID supply chain disruptions, most notably now in China. The backdrop for investing is certainly challenging, so growth in asset values is likely to be constrained making income generation very important.
Finally, as the end of the financial year is just around the corner our focus moves to tax planning, which will include superannuation contributions, minimum pension payments and capital gains. It also promises to also be eventful in the lead up to the election!
You will be hearing from me before 30 June, speak soon!
The information provided should not be considered personal financial advice as it is intended to provide general advice only. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions.