The simple answer is yes, so you don’t get charged interest. If you can’t afford to pay the whole lot off each month, then ensure you pay the minimum so that you don’t increase your debt. What many though don’t realise is how being late on your monthly payment can affect your credit score when wanting to borrow for something significant, like your first house or buying a car. If you don’t know your credit score, an easy way to check is to go online (such as Credit Score Canstar) and find out for yourself.
An inheritance is not taxable unless you are advised by the executor that a part is taxable. However, if you invest the income from the estate, then any earnings will be taxable.
Australia is an outlier, in that we don’t currently have any kind of inheritance tax. Whatever assets are passed down to family members, whether that’s property, cash, shares or otherwise, are exempt from any direct tax.
To find out more, here is a great article that explains inheritance and estate tax in Australia.
You are wise to be cautious. Not all schemes are genuine and often promise large tax deductions that they say will be allowed by the tax office. It is wise to check out any investment scheme before putting your money into them.
If you invest in a risky tax scheme, you could lose some or all of your money, and you may have to pay back any refunds due to over-claimed deductions as well as interest and penalties.
Before investing in any tax scheme it is advisable to seek independent advice from a professional advisor and/or the tax office. Information and warnings about investment schemes and scams can be found on the Australian Securities and Investment Commission and the Australian Competition and Consumer Commission Scamwatch website.
As you approach retirement, one of the challenges is to work out your likely spending habits once you stop work for good.
To make your job easier, we have reviewed some industry reports to see how much retirees are spending. This can be a springboard to help you assess what your own needs and preferences might be.
Breaking down the ASFA Retirement Standard
Since 2004, super industry body ASFA has been producing an online Retirement Standard and budget analysis to identify the likely spending items and costs for retirees.
The Standard uses common terms to present three broad categories: a comfortable retirement, a modest retirement and one based solely on the Age Pension.
- A comfortable retirement involves enough money to pay for house repairs, occasional holidays including overseas trips, a good car, regular leisure and lifestyle activities, and many other discretionary items that form daily living. For couples aged 65 to 85, a comfortable lifestyle is estimated to cost around $62,562 a year. Singles might expect to spend $44,224 a year.
- A modest retirement necessitates cutbacks in many of these areas, with less discretionary spending but still with the ability to afford a car and enjoy most leisure activities. For couples aged 65 to 85, a modest lifestyle is estimated to cost around $40,739 a year. Singles might expect to spend $28,170 a year.
- A retirement based on the Age Pension generally provides a frugal lifestyle on a tight budget, with most spending at a basic level limited to essential items only. An Age Pension will pay approximately $37,014 per year for couples combined, and $24,554 for singles. As you can see, this is below even the modest retirement standard.