Here’s what you need to know today

The Bigger Picture

• Meet our new Australian of the Year: Katherine Bennell-Pegg. Bennell-Pegg is the director of space technology at the Australian Space Agency and the first Australian astronaut to train under our own flag (Paul Scully-Power and Andy Thomas were Australian-born but were astronauts for the US). (The Guardian)

  
  

• Victorian heatwave rivals Black Saturday. Temperatures are forecast to peak at 49°C in parts of Victoria on Tuesday, which would break Victoria’s record temperature of 48.8°C set on Black Saturday in 2009. Multiple bushfires continue to burn and on Sunday, Melbourne recorded the sixth-worst air quality in the world. (ABC)
  
  

• Snowstorm ravages US. More than 1 million homes lost power and more than 10,000 flights were cancelled as snow storms hit across the country. Almost half the states in the US have declared a state of emergency. (BBC)

  
  

• Aussie grain harvest set to break records. Western Australia is set to harvest 27 million tonnes of grain this year, breaking the record of 25.4 million tonnes set in 2022. (ABC)
  
  

• Japan shuts down nuclear power station within hours. Kashiwazaki-Kariwa, the world’s largest nuclear power plant, was restarted last week for the first time since 2012. Within hours it was shut down again following an equipment malfunction. Japan is slowly reopening nuclear power plants after shutting them all down in the wake of the Fukushima nuclear disaster in 2011. 

  
  

• China’s top General accused of leaking nuclear secrets. Zhang Youxia, China’s most-senior General and a childhood friend of President Xi, has been accused of leaking information about China’s nuclear weapons program to the US. Recent investigations into China’s two top Generals has left Xi in absolute control of the armed forces. (WSJ)
  
  

• Saudi’s scale back desert-city Neom. Since being announced in 2017, the world has been skeptical of the Neom projects, including a 170km building The Line and a ski resort Trojena. As Saudi Arabia spending catches up with it and oil prices remain low, the Kingdom is scaling back its ambition in an effort to rein in costs. (FT)
  

Companies in the news

• Vanguard crosses $1 trillion outside the US. The world’s second-largest asset manager and pioneer of passive, index investing has reached the milestone with 17 million international clients. Overall Vanguard has $12 trillion under management, trailing only BlackRock (and its iShares ETF brand) with $14 trillion. (FT)
  
  

• BlueScope shops itself after rejecting $13.2 billion bid. Australia’s largest steelmaker has been discussing a sale with Japan’s Nippon Steel and South Korea’s POSCO. This comes weeks after rejecting a $13.2bn offer from Kerry Stokes-backed SGH and America’s Steel Dynamics. (AFR)
  
  

• USA Rare Earths gets $1.6 billion from US government. The Trump administration’s latest foray into private industry has seen it take a 10% stake in the Oklahoma-based miner. At the same time, USA Rare Earths has tapped Cantor Fitzgerald, the firm run by the son of commerce secretary Howard Lutnick, to raise another $1 billion. (FT)

What the…?

Good news for human workers. In an age of AI and robotics, it is easy to feel that the machines are coming for our jobs. So we wanted to share some good news. One of China’s leading makers of humanoid robots, UBTech, has acknowledged its latest machines are only half as efficient as human workers. 

UBTech makes robots for electric vehicle giant BYD and iPhone-maker Foxconn. So it is on the cutting-edge of the technology. Meaning, at least for now, humans remain superior to the machines. (FT)

What’s got us thinking?

Investing is a lifelong journey. Here’s what you can learn today.

Pros and cons of salary sacrificing

Community Question: What are the major pros and cons of salary sacrificing schemes to cover things like cars, childcare fees etc?

We put this question to Jane Mitchell, Senior Financial Adviser at Esencia Wealth

Your employer may offer you the opportunity to salary sacrifice part of your wage to help fund your superannuation, or your employer may provide a choice to fund your rent, mortgage payments, childcare fees, amongst others, depending on your Salary Packaging offered to you.

Benefits:

• Tax Savings: One of the primary advantages of salary sacrificing is the potential for tax savings. By sacrificing part of your pre-tax salary, you can reduce your taxable income, leading to lower income tax payments. Salary sacrificing into super can offer significant tax benefits, as the sacrificed amount is taxed at the concessional rate of 15%, which is generally lower than your individual's marginal tax rate.

• Building wealth: Making regular contributions into your super from sacrificing a portion of your salary, allows you to build your long-term wealth, averaging the timing of investing into the market and potentially allowing for a more comfortable retirement in the future.

• Access to investment options: Super provides access to a wide range of investment options that can help diversify your portfolio and potentially generate higher returns, maximising the growth of your retirement savings.

• Compound interest advantage: Starting to contribute to super at an earlier age allows you to take advantage of the power of compounding, as contributions have more time to grow, potentially resulting in larger retirement savings.

Things to consider:

• Reduction in cash salary: Salary sacrificing involves forgoing a portion of your salary, which can result in a reduction in your take-home pay. This can impact your immediate financial obligations and may require careful budgeting.

• Superannuation contributions: While salary sacrificing into superannuation can have tax benefits, it is important to consider the impact limiting your ability to access the sacrificed funds until you reach preservation age, which is currently age 60. (born after 30 June 1964).

  It is crucial to carefully consider your current financial obligations as your take home pay is reduced and you can’t access the funds contributed into your super, until at least age 60.

• Impact on certain entitlements: Salary sacrificed amounts may not be considered when calculating certain entitlements such as overtime pay, leave accruals, or other employment benefits. This could potentially reduce the overall value of your employment package.

• Employment dependency: Relying on salary sacrifice for rent, childcare, non-super benefits, could create a dependency on continued employment, as any changes in employment status or income could impact your ability to meet rental obligations.

It's important to consider the long-term implications of salary sacrificing into super and to seek advice from a financial adviser to ensure that your superannuation strategy aligns with your overall financial goals and retirement plans.

Think it is time to speak to a professional financial adviser? Fill out the form on our website and we’ll match you with an adviser that suits your needs.

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