Top EOFY topics advisers need to talk about with clients

With cost-of-living pressures front of mind for many Australians and the financial year coming to a close, BT’s head of financial literacy and advocacy, Bryan Ashenden, is encouraging advisers to check in with their clients and prepare them for the coming 12 months.

“Retirees, as well as those who are on the cusp of retirement, are all consumers, and many are impacted by cost-of-living increases,” Ashenden said.

“Add to this the fact that one out of two Australian home owners are still paying off a mortgage when they reach retirement, and it becomes very clear that the ‘higher for longer’ interest rate environment is making household budgeting and saving for retirement challenging for some.

“Understandably, back to basics budgeting is top of mind for these clients and their advisers.”

To understand what clients may be concerned about as the end of the financial year (EOFY) approaches, BT has analysed data from adviser queries in the June 2024 quarter to find the most popular themes for this time of year.

According to BT, many in the mass affluent segment are “focused on managing household budgets and boosting income, as well as superannuation and tax strategies”.

Ashenden added: “Whilst financial advisers tend to contact us about technical topics, their questions on super, tax, and social security are often in the context of finding savings and increasing income for their mass affluent clients, in the current environment.”

As Australians continue to live longer and everyday expenses continue to increase, Ashenden said many retirees are looking for ways to boost their income but warns some may not be doing so effectively.

“Clients may be missing out on better returns that equities and other asset classes can produce over longer investment periods,” he said.

“The new financial year is a good time to review investment strategies. Investors might want to weigh up whether riskier but higher return investments are appropriate for those who are investing for the medium to long term.”

Considering changes from the federal budget

Ashenden said that advisers should also be considering whether their client is eligible for any social security payments to help boost their income, paying close attention to changes introduced in the latest federal budget that could benefit their clients.

“When considering how to boost income and find savings, it’s also important to assess whether retirees are entitled to any government support, such as the age pension or concession cards that give them access to more affordable health care and medicines,” he said.

As the stage three income tax cuts come into effect on 1 July 2024, Ashenden encouraged advisers to discuss how the additional income could be most effectively used for their clients.

“The tax cuts will alleviate some cost-of-living pressures, and many clients will put the additional money in their pay packet towards paying the mortgage and household bills,” he added.

“Some people may be able to contribute more towards their super. Anyone making voluntary contributions should be aware of their available cap space and whether they have any carry forward cap space available.”

If passed, from 1 July 2025, the proposed Division 296 tax that will reduce the superannuation tax concessions for those with a balance exceeding $3 million will see clients pay an additional 15 per cent in tax on earnings corresponding to the portion of their super balance above $3 million.

Although at this point it is more than a year away, Ashenden said it may be worthwhile for advisers to start preparing for the change now as it continues to be of great concern for high-net-worth clients.

“While the tax is not yet law, many advisers have been on the front foot and have already discussed this proposed change with clients. For those who haven’t, there is still ample time to do so,” he said.