The New Year is here: Financial tips for 2021
14 January 2021
Last year, we faced some of the most difficult challenges in recent memory. There’s hardly a person alive who’s lived through anything like the global public health issues we experienced in 2020. Of course, there have been a variety of economic consequences stemming from this issue as well.
As we enter 2021, there are several financial tips that you may find beneficial, depending on the circumstances you have endured during the past year. Keep reading for some helpful reminders and practical advice that can prepare you to start 2021 from a position of strength.
We faced several unique challenges last year. Be prepared to start 2021 from a position of strength.
Potential working environment changes in 2021
The economic impact of COVID-19 and associated lockdown measures had a drastic impact on the economy. Many people changed jobs, and a large number of businesses shifted rapidly to a remote work environment in order to curb transmission rates. If you experienced either of these situations, we have some financial tips that you need to know.
Starting a new job
Citing figures from the Australian Bureau of Statistics, a December 2020 article from the ABC noted that unemployment totals recently fell from more than 1 million in July down to about 961,000. The economic outlook is getting more promising overall, but a full recovery will take some time.
That means many Aussies have changed employers last year, and others will find new work in the days ahead.
If you started a new job last year, you’ll want to make sure to combine your super. Having multiple accounts means paying several sets of fees, which can decrease your overall retirement savings. If you’re an LGS member and starting a new job this new year, LGS accepts any member from any industry so why not take us with you?
Shifting to a home office
In 2020, many people changed from everyday commuters into work-from-home experts. This could result in a couple of different outcomes, both of which have their own financial implications.
- Some employees faced higher expenses. For example, if you had to upgrade the available technology in your home office, or you incurred other ongoing costs, you may have been eligible for a simplified deduction on your taxes. The government-approved shortcut method that was established for the most recent tax return you lodged — 80 cents per work hour — can be applied up until 30 June 2021. This may be extended depending on when work patterns return to normal.
- Other employees may have saved some money. Perhaps spending less on petrol or public transport has been truly beneficial for your bank account. If you’ve lowered your expenses due to this shift, adding those savings right back into your super can be a smart saving strategy. You may want to consider adjusting your salary sacrifice contributions in the new year.
Household arrangements and spousal employment
We faced the challenges of 2020 together, but not everybody was impacted in exactly the same way. Various members of your household may have experienced slightly different circumstances. Here are a couple of common scenarios.
Did your spouse change jobs?
In families where the household is headed by two working adults with high incomes, spousal contributions might not even be an afterthought. However, given the particularities of the year we’ve just had, many couples have had to make do with one salary. An interruption in employment can also lead to a setback in super savings, since the superannuation guarantee and any salary sacrificing will cease.
Making contributions on behalf of your spouse can have two advantages:
- It allows you to keep pace with your super savings together.
- Some tax offsets are available. There are several restrictions on this, so be sure to read carefully when determining if you qualify.
Delaying a wedding
Many couples have also had to postpone their nuptials due to the public health situation. If you’re in this boat, take the extra time to make sure that you and your partner are well prepared for a financially responsible wedding. In order to ensure that you receive every financial benefit possible as you adjust the plans for your big day, review what the Australian Competition & Consumer Commission had to say about your rights during wedding cancellations.
If you or your spouse changed jobs last year, there are some steps you should follow to make sure you’re in a good financial position in 2021.
COVID-19 government support schemes
There were several government schemes deployed in 2020 in order to provide economic relief to those who struggled as a result of COVID-19. We already mentioned a couple of these initiatives, but we figured it would be useful to highlight a couple more below.
Early super access
Some individuals were eligible last year to receive early access to their super. If you accessed your super early last year, be sure to accelerate your concessional contributions to make up for the early withdrawal as soon as you’re able. You don’t want to gamble with your retirement!
Other financial considerations to watch
In addition, the Australian Taxation Office has information about further support related to COVID-19 that you may want to review. Some of the topics covered include:
- JobKeeper payments
- Super drawdown rates
- Tax consequences for employment payments
- Potential deductions for COVID-19 charitable contributions
- Residency, income and rental property considerations.
Financial tips for 2021 and beyond
To say that 2020 was a unique year is an understatement. No matter what your financial situation is, it’s possible that you’ll need to make some adjustments as we enter the new year. By seeking out expert advice from the financial planners at Local Government Super, you’ll be taking a proactive step towards a comfortable retirement and lasting financial security.
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