melissamontang

There is a lot of noise in the world of finance at the moment with the hot topic being all about banks and bank collapse.

In the last couple of weeks, the US had their 14^th largest bank collapse. This week the headlines are going manic over Credit Suisse which is a large overseas bank.

This in conjunction with interest rates and inflation news – you can see why people are fearful .

But before we get our knickers in a knot, we need to slow down and get some perspective of what’s happening.

The bank that has been the headline is a Rural Bank from the USA Silicon Valley Bank (SVB).

SVB has put the majority of their money into long-term government bonds, which are typically a lower risk investment.

But then customers had a high withdrawal demand, so to keep up they had to sell off some of these bonds.

The problems here is that they were selling them for less than what was paid for.

This lead to an almost $2 billion loss … :-/.

Once their customers caught wind of that, they got panicked and it caused a ‘bank run’.

Bank runs can cause bank collapse

A bank run is essentially when too many people go to withdraw money at the same time and the bank runs out of cash.

Bang – this causes a collapse.

There are some key points here worth considering.

SVB is a tech sector / start up bank of choice, which is a sector that has been struggling a lot over the past few years.

So it makes sense why higher withdrawals were already happening prior to the ‘bank run’.

Lots of their customers we’re said to have had more than $250,000 in their accounts. What’s the significance of this amount? Like Australia, they have a $250,000 government guarantee.

Think of this like a safety the government has for times like these.

So those who have more than that figure with one institution would panic & consider diversifying their banks.

Hence, panic bank run.

Ok so the question – is history repeating?

Are we headed from another 2008?

Good news is – no it’s not and we’re not.

It’s pretty unlikely that we’ll see a collapse in Australia.

SVB had a pretty high-risk lending to tech companies, unlike our banks that focus more on property.

Our banks also have pretty good liquidity.

We have this $250,000 government guarantee with each financial institution. If your lucky enough to have this sum consider spreading the load across banks.

What we’re seeing is the banks share prices getting a bit of a wobble.

So we’re looking pretty good.

I’ll leave you with one final comment from the Michael Jordan of Investing: “Be fearful when others are greedy and greedy only when others are fearful.” – Warren Buffett

Best,

John

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We’re more frequently asked about parental leave benefits – get the lowdown here.

Many of us and our friends, family and clients are either planning for parental leave, midway through or nearing their return-to-work. Confused about your parental leave benefits and obligations? Let’s see if we can help.

Here are the basics of parental leave (as of 2023) and what you’re entitled to. Remember there are differences between potential employer benefits (some mandatory, some optional) and government benefits.

Getting to know your parental leave benefits

First of all – who can get parental leave pay?

According to Services Australia, to get Parental Leave Pay, you need to be the primary carer of your newborn or adopted child, and one of the following:

• the birth mother of a newborn child
• the initial primary carer of an adopted child placed in your care by an authorised party for the purpose of adoption (but not for foster care unless it’s for the purpose of adoption)
• another person caring for a child under exceptional circumstances
• someone who the previous primary carer has transferred or given some or all of their Parental Leave Pay to.

But you ALSO must meet ALL of the following:

• an income test
• a work test
• residency rules.

There are some further rules

If you’re working, you must be on leave/not working for both when your child’s birth/adoption occurs until the end of your Paid Parental Leave period and when you use a Flexible Parental Leave Pay day.

You can return to work before the end of your Paid Parental Leave period for either:

• allowable reasons
• Keeping in Touch days.

Your payment won’t stop in this situation. You should claim your Parental Leave Pay before you return to work as it may not be paid in the full amount if you claim after you’ve returned to work. You CAN take Parental Leave Pay before, during or after any paid or unpaid employer funded leave, including maternity or parental leave, annual leave or long service leave.

Mandatory Employer Benefits

Your employers are required to allow employees (including regular casual employees) who’ve worked for the employer for at least 12 months to take 12 months of unpaid parental leave when they or their partner are to give birth or adopt a child. You can also request for an additional 12 months of unpaid leave in writing at least 4 weeks prior to the end of the first 12 months. The return to work guarantee gives you the right to return to the position you held before your leave started – if your old position doesn’t exist when you return, you’re entitled to an available position which is nearest in status and pay to your pre-parental leave position (and for which you’re suitably qualified).

Optional Employer Benefits

Some businesses, especially larger ones might have additional parental leave benefits as part of their Employee Value Proposition (EVP). These can include things like paid parental leave at your full rate for a specified length of time, additional unpaid leave or super payments, and flexible working options/leave options upon return to work.

Government Benefits

This is a payment from the government for up to 18 weeks paid leave. This is at minimum wage, which is currently $812.45 per week, but it is taxable. Be prepared to either have tax taken out, or potentially owe tax at the end of the year.

The above payment isn’t guaranteed however, you need to meet the following criteria:

• In the financial year prior to your maternity leave, you need to earn under $156,647 (FY21/22 figures). This isn’t based on the family income, just the parent taking the maternity leave.
• You need to have been working in the year leading up to your maternity leave, at least 10 of the previous 13 months. If you haven’t been working, you may not qualify.

Dad and Partner pay: This is up to 2 weeks paid ($812.45 per week before tax), from the government at the same pay rate as the paid parental leave payment. This means your partner can take 2 weeks off within the 50 weeks after the birth or adoption of your child. If you are the birth parent, you can’t also get this payment on top of the paid parental leave.

To get this, you’ll need to meet the criteria:

• care for a newborn or newly adopted child
• have met the income test and work test
• not be working and not be taking paid leave during your Dad and Partner Pay period except for allowable reasons
• have registered or applied to register your child’s birth with your state or territory birth registry, if they’re a newborn.

Newborn upfront payment and newborn supplement: If you are going to qualify for Paid parental leave above, then you don’t need to worry about these, but if you don’t you may qualify for:

• Newborn Upfront Payment – a lump sum one time payment of $595, not taxable
• Newborn Supplement – an ongoing payment for up to 13 weeks, dependant on # of children and family income, with a maximum over the period of $1,785.42 (up to $137.34 per week), not taxable.

These are a lump sum and an increase to your Family Tax Benefit Part A payment when you start caring for a baby or child that’s recently come into your care (eligibility criteria still apply). They often apply if you are non-working or have lower income.

Changes to family payments

• Cheaper child care – from 10 July 2023 if your family earns under $530,000, you’ll get increased Child Care Subsidy (CCS)
• Parental Leave Pay and Dad and Partner Pay are combining into one payment from 1 July 2023, and will increase from 90 days (18 weeks) to 100 days (20 weeks), and a combined family income limit will be introduced (taxable income of $350,000 or less per financial year for family or $156,647 per individual)

That’s our summary of parental leave benefits and the changes heading our way. As always, get in touch with us to discuss your specific circumstances and we’ll help you put a winning plan in place.

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The quality of your financial plan depends on its adaptability to changes that happen in your life.

Even small things, left unchecked, can have big impacts.

As part of our work together, if any of the events below happen in your life, reach out and let us know, so we can quickly assess whether tweaks are needed to ensure you remain on track to getting the financial and lifestyle results you want.

INTRODUCING THE “LET US KNOW” LIST

“Let us know” list content from above image:

• Any significant health issue that could require financial support, regardless of how minor it seems.
• Changes in income.
• Changes to your health status.
• Changes to debt structure or proposed lending arrangements.
• Changes in household expenses.
• Developments in marital status.
• Unplanned financial windfall or hardship.
• Change in your working arrangements.
• Change of residence or living arrangements.
• Plans in the works for significant capital purchases.
• Plans to sell or purchase a business, or enter into similar commercial arrangements.
• Plans to sell or purchase property.
• Family additions or new dependent arrangements.
• Major financial purchases.
• Financial gifting.
• Change in any social security/arrangements or status.

Book in an appointment to discuss further

Click here to book in an appointment now and talk about your specific situation.