Wealthy Me May 2025 Newsletter
In this edition, we take you through a basic how-to for developing an estate planning strategy, discuss some of the changes to Aged Care following the new act, the case for rational optimism when investing, and a video summarising key market movements during September and October.
In the meantime, we hope you enjoy the read.
Sweeping reforms to aged care are set to begin on 1 November to help improve the quality, transparency and flexibility of care.
With more care levels, clearer pricing, and greater control over how your funding is used, the new system aims to better match services to individual needs. Providers will be required to offer detailed cost breakdowns, empowering you to make informed decisions about your care.
While the reforms are a step forward in care quality, they also come with changes in how services are funded and that may mean higher out-of-pocket costs for some.
What you pay depends on your financial situation – whether you receive a full or part pension or are self-funded – and the services you access.
As the aged care landscape evolves, staying informed is key to making confident choices. Whether you’re planning for yourself or supporting a loved one, understanding the new system will help you access the right care at the right time.
From 1 November the current Home Care Packages will be replaced by a new program called Support at Home.
The key changes include:
Services are expected to remain the same but the way you pay for them may change.
If you were approved for a Home Care Package on or before 12 September 2024, you will be eligible for fee concessions to ensure you are not worse off under the new rules.
The package level you are assigned sets the total funding available to pay for care, with 10 per cent allocated to the care provider to cover the cost of care management.
You then work with your provider to decide how you want to spend the rest of the budget. The provider will set their fees for services and you will make a contribution based on your income.
Room prices in aged care facilities have been steadily rising following an increase in the Refundable Accommodation Deposit (RAD) threshold from $550,000 to $750,000.
Higher RADs mean you may need to use more of your savings or income to cover aged care costs.
From 1 November 2025, anyone who moves into care after this date and pays a RAD, will have two per cent of that amount deducted each year, for up to five years.
You can still opt to pay a Daily Accommodation Payment (DAP), but this will increase every six months in line with inflation.
Other fees include:
The lifetime cap on aged care contributions continues. You won’t pay more than $130,000 (indexed) over your lifetime towards home care and residential care combined.
Understanding how the changes affect your financial future is vital. You’ll need to consider:
Use the government’s fee estimator at MyAgedCare to get a clearer picture of your potential costs.
Navigating aged care can be complex and the upcoming changes add new layers of decision-making.
We can help explain your options, structure your assets, minimise fees and plan for your future care needs.
If you would like to discuss your aged care options, please give us a call.
How to develop an estate planning strategy to deal with your assets in the event of your death.
Estate planning involves developing a strategy to deal with your assets after you die – the legal instruments and structures, such as a will, you put in place to transfer your assets in the event of death.
Tax is a major consideration in estate planning, and strong governance relating to the tax aspects of estate administration can help manage the risks.
Ensure you or your staff have sufficient knowledge and skills to meet your responsibilities. Be prepared to seek assistance from external advisers on more complex tax issues.
Estate planning may be considered as part of your overall succession plan for your business. You may need to seek specialist advice on the most appropriate estate planning strategy.
Have a process in place to periodically review your strategy in conjunction with your advisers, including your legal, tax, superannuation and financial advisers.
Beware of schemes that claim to have estate planning purposes but are merely tax avoidance arrangements. An effective tax governance framework includes processes for evaluating various arrangements and the tax risks involved.
If someone dies without a valid will, this is called ‘dying intestate’, and their assets are distributed according to the inheritance laws of the states and territories of Australia. In this case there is a risk that the undocumented intentions of the deceased person in relation to their estate may not be fully acted on.
Depending on the marginal tax rates of different beneficiaries, intestacy could potentially lead to an overall imbalance in the distribution of an estate due to higher rates of tax payable by some beneficiaries.
Planning ahead can avoid this result. When preparing a will, the will maker and their advisers can assess opportunities to manage the tax implications for beneficiaries.
As executor of a deceased estate, you need to understand your tax obligations, including:
A testamentary trust is a trust established under a valid will, but it’s not the same trust as the deceased estate. A testamentary trust functions in a similar way to a discretionary family trust, with certain provisions of the will operating like a trust deed.
Like any trust, a trustee of a well-governed testamentary trust will:
Depending on who is appointed as the trustee and appointor of the testamentary trust, there may need to be a high level of co-operation between family members to ensure that necessary tax, financial and other information is shared for the trust to operate effectively.
A well governed testamentary trust will ensure that tax outcomes are achieved and, more importantly, complex family or legal disputes can be prevented.
Special capital gains tax (CGT) rules apply to the transfer of any CGT assets from a deceased estate. You should seek specialist advice in relation to the CGT implications of passing on or disposing of the assets of a deceased estate.
Keep complete records of CGT assets. These will be needed by the executor and any beneficiary who receives a CGT asset from the estate.
Ensure you understand the tax issues around estate planning and superannuation.
For example, the tax impact of distributions made under a binding death nomination is usually one of the major considerations in estate planning.
Assets held by a person in their superannuation fund are not automatically included in their estate. In the absence of a binding death benefit nomination, the trustee has the discretion to pay the benefits of the deceased to any of their superannuation dependents instead of the estate (rather than according to the will, which only deals with the estate assets), and of deferring tax consequences. Where a nomination is in place, the benefits will be paid to the nominated beneficiaries.
It’s good practice to regularly review the need for any nominations to ensure your superannuation benefits will be passed on to your nominated beneficiaries, and that the nominations are valid and effective. Seek advice on the tax implications.
Example: Reviewing your strategy as circumstances change
As part of your estate planning strategy, you make a binding death nomination to provide for your under-age children who would receive the benefit tax free. You get advice to ensure that the nomination is valid and effective.
You provide for your older children, who would be taxed on receipt of superannuation death benefits, in your will.
After some years, when all of your children are older, you review your strategy and make a new nomination that better suits your family’s tax situation.
Because your personal circumstances change from time to time, it’s important that you regularly review the estate planning and income tax consequences when it comes to the distribution of your superannuation assets to your beneficiaries. Areas that warrant attention include:
Feel free to contact us if you have any questions.
Source: ato.gov.au
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/newsroom/smallbusiness/ . Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
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When you think about the markets, do you see promise or peril? Are you the type to believe the glass is half-full, or do you focus on the half that is not there?
Your investing outlook can shape your decisions, influence your risk tolerance, and impact your long-term results. But which approach truly works best? Should investors lean into optimism or prepare for the worst?
Historically, optimism has served investors well. Over the past century, markets in developed economies have consistently trended upward. Despite wars, recessions, political turmoil, and financial crises, the long-term direction of major stock indices like the S&P 500 has been positive. Investors who maintained confidence during turbulent times and stayed invested often reaped the rewards of compounding growth. This pattern suggests that a fundamental belief in human progress and economic expansion is more than just hopeful thinking.
Optimism encourages long-term thinking. It allows investors to endure volatility, view market declines as temporary setbacks, and see opportunities where others may only see risk. Warren Buffett, one of the world’s most successful investors, has repeatedly emphasised the importance of having faith in the future. As he famously said, “I am an optimist. It doesn’t seem too much use being anything else.” That sentiment reflects a mindset that has allowed him to stay the course through numerous economic cycles, always betting on the long-term resilience of markets and the human spirit.
However, optimism alone is not enough. Investors who ignore risk in favour of hope can find themselves vulnerable when markets correct or when unexpected events occur.
Pessimistic investors tend to focus on risk management, as a pessimist always keeps in mind the possibility of the worst outcome. A pessimistic outlook helps investors anticipate potential downsides and implement strategies to mitigate risks, such as diversification and hedging. This cautious approach reduces exposure to unnecessary risks and prepares them for uncertain times.
Additionally, pessimistic investors are more likely to develop contingency plans for various scenarios, including economic downturns or unexpected personal events.
Thinkers like Nassim Taleb have built entire investment philosophies around recognising fragility and preparing for the unexpected. He is quoted as stating, “Invest in preparedness, not in prediction.” His approach emphasises the importance of stress-testing ideas and maintaining a strong margin of safety.
Many of the best investors are neither permanent optimists nor permanent pessimists. Instead, they are what we might call rational optimists. They believe in the long-term potential of markets and innovation but constantly evaluate risks and remain grounded in reality. This blend of forward-looking confidence and present-day caution allows them to stay invested without becoming reckless.
Rational optimism is not about predicting every up or down in the market. Rather, it is about applying common sense, preventing avoidable mistakes, and trusting that the long-term trend of progress will continue, even if the road is sometimes rough.
In practice, rational optimism means staying invested during downturns while managing risk thoughtfully. It involves having a plan that includes diversification, consistent rebalancing, and emotional discipline. It also means resisting the urge to overreact to headlines, hype, or fear.
The optimistic side helps investors believe in the future and recognise long-term opportunities in innovation, global growth, and improving productivity. The cautious side ensures they are not overexposed, overleveraged, or overconfident.
The most successful investors are those who combine the belief in long-term progress with a realistic understanding of their tolerance of risk and risk management strategies. Investors should lean toward optimism to build wealth but temper it with a healthy scepticism to protect it. The ideal mindset is neither naive nor cynical. It is confident, but not careless. Hopeful, but prepared.
As Buffett suggested, it does not do much good to be anything other than optimistic. But as the great investors remind us, that optimism must be paired with careful thought and strategy. Believe in sunshine but carry an umbrella. The markets, much like life, reward those who prepare for the storms but never lose sight of the clearing skies that follow.
Stay up to date with what’s happened in the Australian economy and markets over the past month.
Australia’s economy showed resilience in September, with inflation remaining sticky and the RBA holding rates steady at 3.6%.
Despite the August/September period noted for being seasonally weak, markets remain at near record levels.
Click the video below to view our update.
Please get in touch if you’d like assistance with your personal financial situation.
