This guide is designed to help you put your personal finances in order before you deploy. We have summarised the issues that members should think about prior to deployment based on our long experience of helping them prepare.
Going on a deployment, while challenging in many other ways, can be a great opportunity to improve your personal financial position particularly if you are able to increase your savings or pay off debts more quickly. In fact, many ADF members have been able to put themselves and their families years ahead of where they would have been financially as a result of a deployment. For example, many ADF members have been able to clear substantial credit card debt and save the deposits for their own homes during deployments, both of which might have otherwise taken 5 or more years to achieve.
On the other hand, we know that some ADF members and families have experienced financial stress at deployment time often because the deploying member neglected to square away an important element of their finances or personal administration beforehand.
The good news is that preparing your finances properly is not that hard or complicated. This guide aims to make the process simpler and easier and should help you ensure that you have done what you need to with minimum fuss – hopefully reducing your stress, putting you in a good position for the deployment financially and freeing up your time for the other things you need to do to prepare.
We recommend that you start by going through the force preparation financial checklist which gives you straightforward actions you can take to before you deploy. If you just do these you will have covered off most of the things we see that can cause people problems:
Below we have briefly summarised the issues we see coming up most often for ADF members prior to and on deployment. This is intended to be an overview. If you have any questions contact us or follow the links provided for more information.
As a wise person once said; ‘money is hard to earn but easy to spend’. On most deployments ADF members have some additional income in the form of allowances and in some cases may also benefit from reduced tax. This represents an opportunity to achieve your financial goals sooner. You worked hard for the money defending our national interests so it would be a shame to waste it. Sadly, we’ve seen people and families in recent years that have gotten themselves into trouble because they have become accustomed to the extra money and have adjusted their spending upwards accordingly.
A prime example is when someone impulsively buys a new luxury motor car immediately upon their return from overseas. We are not saying that buying a car is the wrong thing to do, just that rushing in to it can be. If you are thinking of buying a car take your time and do some solid research first. The MoneySmart Cars app is a great tool for working out exactly how much a particular car is going to cost you and avoiding some of the unnecessary additional costs that can be represented by dealer finance and insurance and other add-ons that car dealers promote. Our guide on buying a vehicle may also help.
Probably the best way to ensure that you don’t fall into the spending trap is to sit down and do a budget or financial plan. MoneySmart’s online budget planner and TrackMySPEND app are both useful tools for the purpose. We also have a guide on doing a budget to help you get started.
It’s a good idea to check your insurance from time to time but this is particularly important when you’re about to deploy. Common types of insurance that members need to check include:
Our guide on insurance has lots of general information on obtaining and maintaining appropriate insurance. Here we will just talk about issues that affect personnel on deployment.
Sometimes home and/or contents insurance and other insurance policies for personal possessions do not provide cover when the owner or occupant is away for more than a certain period. It is important to check with your insurers that you will continue to be covered. There may be conditions placed on you maintaining the cover, for example a friend or family member regularly visiting your home while it’s vacant. These conditions often represent a change to the contract of insurance so make sure you get anything the insurer agrees to in writing.
Likewise, insurance for a laptop or other device may not cover you overseas.
As an ADF member on deployment you are automatically entitled to military compensation administered by the Department of Veterans Affairs (DVA) and death and invalidity cover through your superannuation. In order to work out whether you need additional cover it is worth taking the time to first understand the cover you already have by visiting www.dva.gov.au/benefits-and-payments and depending on which superannuation fund or arrangement you are a member of:
If you have a spouse then it might be a good idea to discuss with him or her the three options that apply if you were to die on deployment. Once a decision is made it can’t be changed so it’s important they have some information so they aren’t making decisions at the worst possible time.
If after reviewing your entitlements you think you might need extra cover, there are a few issues to be aware of before you look for additional insurance as very few insurance policies will cover ADF members on deployment. Our guide on personal insurance cover for ADF personnel has further information on the issues and on how to ensure your insurance will cover you and your family.
It is important to note that if you already have a personal insurance policy, for example many reservists may have group life policies through their non-ADF superannuation, it is very unlikely that this policy will continue to cover you during your deployment unless you fully disclose the activities you’re going to undertake and obtain a written agreement from your insurer that they will continue to cover you.
While almost all personal financial decisions are just that – personal – and therefore completely up to you, wills are different. We think it is simply vital that all serving ADF members have a valid up to date will. A properly drafted will should ensure that in the event of your death your assets and belongings go to the people or causes you care about with the minimum of cost and delay.
In reality a will is not about you. It is about what you own and the other people to whom you wish to leave it.
It is also about making your loved ones lives a bit easier so that the ownership and management of what you own can more easily be moved if necessary.
For ADF members, a will is of additional importance because it may also be used by the Commonwealth Superannuation Corporation to decide how your considerable superannuation death benefits are distributed if you do not have an eligible spouse.
If you need assistance checking that your will is up to date or preparing a new one always see a lawyer – never try to do it yourself or use a will kit. The best place to start is with an ADF legal officer.
Our video Protecting Your Assets: The Legal Issues gives more background specifically for ADF members on wills as well as testamentary trusts and powers of attorney.
Some people will tell you that you must have a power of attorney. This is false. You should only ever give someone a power of attorney if you completely trust them to make decisions about your money and property in your absence. This is not a decision to be made lightly or hurriedly.
Powers of attorney can be very convenient for some ADF members because they allow their spouse or partner to take care of their affairs when they are away. However, this convenience can pose a risk if the person with the power of attorney is untrustworthy or not capable of making sound financial decisions because it gives them the power to deal with all of the member’s property as if they were the owner of it. For example, they could withdraw all of the funds from the member’s bank accounts and sell their properties and shares.
It is sometimes technically possible to unwind illegal or unconscionable transactions that your attorney wrongfully performs on assets. In our experience, once this happens it is very difficult and time consuming and sometimes impossible for the ADF member to get their money back.
It is important to seek independent legal advice if you are considering giving someone a power of attorney so that you fully understand what you are signing and how the power of attorney may be used, and that the documents are property drafted and executed.
Also just a word of warning – sometimes other organisations such as government departments or financial institutions refuse to recognise power of attorney documents unless they have been lodged with them personally by the member.
Our video Protecting Your Assets: The Legal Issues gives more background specifically for ADF members on the pros and cons of powers of attorney.
You probably don’t think about it too much while you are at home, but if you are like most people you will have a range of bills, credit card and loan payments that you need to pay on a regular or one off basis.
Some of your bills might be delivered to you via Australia Post while others might come into your email inbox.
We have seen far too many ADF members inadvertently damage their credit rating or incur large penalties simply because they forgot one or more bills or loan repayments. To avoid this, make a list of all of the things you will need to pay while you are away and put arrangements in place for it to happen.
Your list may include things like:
Once you have made your list consider whether some of the services you normally pay for when you are home can be suspended. For example, some phone and internet contracts, subscription services and memberships can be suspended for a period. This could save you some money and also means that you don’t need to worry about paying the bills while you’re away. However be careful as sometimes ADF members have been told that a service has been suspended but the monthly bill keeps on turning up.
If for whatever reason you think your system has broken down and you’ve missed a payment it’s important to deal with it urgently. Make contact with the organisation that you owe the money to immediately and sort it out before the missed payment affects your credit rating or costs you more.
If you want to check your credit rating you can do so within 3-4 weeks for free through www.creditsavvy.com.au, www.mycreditfile.com.au, or www.checkmyfile.com.au (you can also pay a fee to receive your report more urgently).
In Australia, we arguably have some of the most comprehensive and enforceable consumer protection and product safety laws in the world. You have rights conferred by the national harmonised Australian Consumer Law as well as additional protections under State and Territory laws covering specific markets and occupations like rental accommodation, the sale and purchase of land and real estate agents. If you have a problem with a product or service you can do a range of things including contacting the Australian Competition and Consumer Commission for information on your rights and your local office of fair trading or an applicable ombudsman to make a complaint or ask for assistance. There are also tribunals that can often deal with disputes between consumers and businesses in a quick and cost effective fashion.
This is usually not so when you buy goods or services while you are deployed. Here the Latin saying ‘Caveat Emptor’ or let the buyer beware holds sway.
For example, if you buy expensive jewellery overseas for a loved one which turns out to be fake there will usually be no practical recourse. You just have to wear the loss. Literally. Likewise when you buy goods online from an overseas trader while you are located in a third country (not Australia) and the goods don’t show up, there may be little you can do.
The moral of the story is just to be extra careful. Do your homework, shop with reputable traders and don’t spend more money than you’d be prepared to lose if the goods turned out to be fake or defective.
There are a couple of additional points to note on using your credit card to shop overseas. We have heard from ADF members on previous deployments that:
For further information on any of these credit card related issues we recommend that you speak to your card provider before you deploy.
Whether you are serving in Australia or overseas, your annual tax return is due to be lodged by 31 October each year. If you are going to be away when your tax return is due and you will not submit it in time then contact the Tax Office.
If you use a registered tax agent then your personal tax return is not due until 15 May in the following year if you can’t meet this deadline then you need to speak to your tax agent.
There is much more information on lodgement including a tax guide written especially for ADF members at www.ato.gov.au.
Depending on where you are deploying to, for how long, when and the particular tax and other arrangements that are in place for the deployment, you may be paying a lower rate of tax on some of your earnings. While paying a lower rate (or no) tax for a period is generally a positive for you, it can throw up a range of issues which you may need further information and advice on, for example if you:
All of these issues can be complex and need to be approached with caution and in a fully informed manner in order to avoid incurring unforeseen debts to agencies, taxes or other charges. We suggest that if you think you may be affected by any of these or other taxation issues, you seek independent professional tax advice from a suitably qualified accountant.
The professional accounting bodies will be able to help you find a suitable accountant if you do not have one already.
Chartered Accountants Australia & New Zealand:
Certified Practicing Accountants (CPA) Australia:
If you have salary packaging arrangements as an ADF or Defence APS member and have any questions about your salary packaging you can contact Smart Salary:
Some members, particularly when they have a reasonable period of notice, seek financial advice before they deploy. Financial advice is broader than advice on specific tax issues and would normally include clarifying financial goals, identifying your attitude to financial risk, creating a financial plan and advice on specific investment strategies and products.
We have a range of resources to help you decide whether you want or need financial advice, get the most out of financial advice and even to find a suitable adviser. These include the:
We also suggest that you have a look at the comprehensive MoneySmart content on financial advice and investment including the Financial Advice Toolkit which has been designed by MoneySmart to show you:
We wish you the best of luck for your deployment. We hope that this guide has helped make preparing a little easier for you. If you have any questions please contact us.
Applications to join the Program in 2015 are now closed. Contact us if you would like more information on upcoming applications.