Welcome to the June issue of "Smart Money".

There has been rather a time lag between this and the last edition, so we had to make this newsletter a "bumper" issue.

There are a number of legislation changes affecting Power of Attorney, aged pensions, and the conduct of financial services. These changes apply to Australia only. Of course, the information on reducing your mortgage should be helpful no matter where you reside. Remember that being aware of your rights helps to prevent others from exploiting you and separating you from your hard-earned cash.

If you need help with your budget or to get your financial affairs back on track, why not have a money makeover?

Sheila Freeman

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Let us show you, step by step, how you can take back control of your money and your life!

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To receive this bonus, you must register with Centrelink within 13 weeks of the date you reach pension age. No income and assets test is applied to this bonus. However, people who have previously received ‘income support’ from Centrelink or Veterans’ Affairs are not eligible to receive this bonus (the exception being those on the Carer pension).

For further information, contact Centrelink.

1. Pay fortnightly rather than monthly – This allows you to make the equivalent of one extra monthly payment each year, i.e. 26 fortnightly payments instead of 12 monthly payments.
2. Make extra payments – If possible, and your loan allows it, pay more than your contracted payment or make extra payments. There is no point in having money sitting in a savings account earning almost no interest when it could be put towards your mortgage – a regular extra payment of $50 or $100 could trim years off your mortgage period and dramatically cut the amount you pay in interest.
3. Consolidate your debts – Mortgages generally have lower interest rates than other loans; check with your bank/lender whether the terms of your mortgage and your current equity allow you to refinance and consolidate other debts (e.g., personal or car loans, credit cards) into your mortgage.
4. Take advantage of bank discounts – Some banks offer discount packages to customers whose mortgage, credit cards and transaction accounts are all held with their bank.

Look for cheaper alternatives – Research other lenders, taking into account all costs, as well as other features and the flexibility of loans. Low interest rates do not necessarily mean lower overall costs; sometimes application and maintenance fees can push the actual payments above the rates of other financial institutions.

• Line rental will increase from $23.50 to $26.95 per month, from $26.50 to $29.95 per month, to $35.95 or to $45.50, depending on your plan
• The call connection fee for times calls from home phones to a mobile, national long distance or international number, will increase from 33¢ to 35¢ per call
• STD capped calls will be reduced from $2.25 to $2.00 per call
• A 20-minute limit will be introduced on the $1.50 capped call rate to Telstra mobiles between 7 pm (4pm Saturday) and midnight. Per minute rates will apply until the cap is reached, after 20 minutes, and outside these times.

On 26^th July, 2004, Telstra will introduce a payment processing fee on bills paid using a credit card. The fee will vary depending on the credit card used, and GST will be applied -

• Diners 1.68%
• Visa (ANZ) 0.65%
• Visa (non-ANZ) 0.63%
• Bankcard 0.63%
• Mastercard 0.63% (plus applicable GST).

When an item still under guarantee is faulty, the shop that sold it to you must exchange it, refund your money, or, if some time has elapsed since the purchase, send it back to the manufacturer for a free repair. If the seller has gone out of business, you can go directly to the manufacturer for compensation.

Most products are guaranteed for a set period of time, after which any faults or breakdowns are the owner’s responsibility. However, in certain circumstances, you may be able to claim compensation or repair, even though a guarantee has expired. For example, if you buy a new sofa carrying a 2-year guarantee, and the springs collapse at the end of the guarantee period, you may be able to demand compensation or a free repair, provided you can prove that the problem is a manufacturing fault (and not because your children have used it as a trampoline). In these circumstances, you could not claim a refund or a new sofa, as too much time has passed.

It is always wise to fill out the guarantee cards provided with new products and send them back to the manufacturer, as this provides a record of when and where you made a purchase.

If you are offered an ‘extended’ warranty, always check the wording carefully, because some only cover labour and not parts and are not worth the extra cost. Similarly, depending on the product, a ‘lifetime’ guarantee may not be worth the extra money.

Note: When goods are delivered to your door, be wary of signing for them immediately. Most delivery dockets read: "I acknowledge that the goods have been delivered in good order." If you later find that your purchase is scratched, broken or otherwise damaged, you may have signed away your rights to redress. Delivery people will not wait while you inspect the goods, so it is advisable to write ‘Goods not examined’ on the docket before signing.

To summarise very briefly, consumers seeking advice should receive a financial services guide (naming their adviser, their qualifications and how they are paid), a statement of advice (a financial plan that details recommended products and strategies and states why they are recommended), and relevant product disclosure statements (detailing fees, charges and commissions for each individual product).

While higher standards in financial planning are welcome, this new legislation may cause irritation to some consumers. For example, you may not be able to obtain certain information from big general insurers or bank employees or your accountant because this is now considered “advice” and they are not licensed under FSRA to give financial advice. Consumers will have to compare products and make judgements on their own needs or consult a qualified financial planner.

The changes to the Victorian enduring Powers of Attorney now require the appointment to be accompanied by a Certificate of Witness, which has to be signed by two witnesses over the age of 18 stating the person creating the enduring Power of Attorney signed the document freely and voluntarily in the presence of the witnesses.

The witness must also be satisfied that the person making the Power of Attorney has the mental capacity to do so. The new laws include a test of legal capacity, so there can be no grey areas. The witness must also be a third party and cannot be the person who created the enduring Power of Attorney.

In NSW, changes have been made to the form of a power of attorney, gifts and taking of benefits by attorneys and enduring powers of attorney.

The new Act will only apply to newly created powers of attorney, and will generally not affect existing powers of attorney. However, there are two exceptions:

First, the new Act will apply to a power of attorney created in another State or Territory before the commencement of the Act.

Second, Part 5 of the new Act will apply to powers of attorney created before its commencement. Part 5 deals with review of the operation and effect of powers of attorney by the Guardianship Tribunal or the Supreme Court.

One of the changes that the new Act will bring relates to enduring Powers of Attorney, that is, Powers of Attorney that continue to be effective when the donor suffers loss of mental capacity. Under the new legislation, a Solicitor will need to sign a Solicitor’s Certificate stating that he/she is convinced that the donor has the mental capacity to sign and not only will the appointer, or nominator, be required to sign the Power of Attorney, but also the nominated attorney to accept the nomination.

Every effort has been made to ensure that the information on this newsletter is accurate. However, the information is not intended as professional advice and the authors shall have neither liability nor responsibility to any person or entity with respect to any loss or damages arising from the information contained in this newsletter.

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Copyright 2004 Sheila Freeman Consulting