Wealth Advisors to Business and Families - Since 1985
Financial Insights
Welcome to the Hoddinott Consulting blog, where we share insights on market trends, economic developments, and key financial issues shaping today's business environment.
The information is general advice only. For personal advice designed for your unique circumstances, please contact us first.
Income Protection Insurance: Is it still worth the premiums?
July 2026
Income protection insurance is a financial tool that’s essential for some people, ‘nice to have’ for others, and possibly quite unnecessary for a third group. In other words, there’s no one-size-fits-all answer to whether the premium cost justifies the risk. It depends on your circumstances, so it’s worth examining what the cover provides and the factors that should influence your decision-making.
What is income protection insurance?
Income protection insurance is meant to replace your income, based on your annual earnings in the year before a serious illness or injury that prevents you from working. It can pay up to 90% of your pre-tax income for the first six months of your disability and up to 70% for a further period.
Note that you will only be covered if you lose your income for medical reasons, not for redundancy or other employment termination, or for taking unpaid leave. Policy terms will vary, so it’s important to read the Product Disclosure Statement.
Cost of income protection premiums
Premiums will vary based on your age, gender, occupation, health, lifestyle, benefit payment period, how long you choose to wait before payments start, and whether you decide on variable or age-stepped premiums. This means the cost can range from as little as $35 per month to over $100 per month. You would need to compare quotes covering your own situation from several insurers.
Reasons for choosing income protection insurance
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Safety net - Having a security buffer when your income stops, so that you can still pay bills and make mortgage repayments, is especially important if you don’t have a large amount in emergency savings.
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Self-employed - Small business owners and other self-employed people may not be able to rely on sick or annual leave if they are unable to work
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Primary breadwinner with dependants - If you’re the main or only income earner with a family that relies on your earnings, losing your income for an extended period could be devastating.
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Risky occupation - Although you’ll pay more in premiums, being covered for an occupation with an above-average risk of illness or injury is reassuring.
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Peace of mind - Financial stress can hinder your recovery from illness or injury. Protecting your income will reduce the additional anxiety.
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Personalised policies - You don’t have to pay for other policyholders’ potential problems. Premium costs will depend on your own situation and choices.
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Tax deductible - Income protection premium costs, for policies held outside your superannuation account, are effectively reduced by the fact that they can usually be claimed as a tax deduction.
Reasons for deciding against income protection insurance
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Age and health status - Young, healthy individuals with no dependants may feel less likely to need this type of insurance.
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Waiting periods - Some policies have long, fixed waiting periods before you can claim, by which time you may be back at work.
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Exclusions and complexity - Conditions, definitions and exclusions regarding certain occupations and types of disability may make it difficult for you to claim.
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Insurance through superannuation - Total and Permanent Disability (TPD) cover may be automatically provided via your superannuation, and you may also have the option to have Salary Continuance Insurance premiums deducted from super contributions made by your employer. However, this type of insurance is less flexible and is not tax-deductible.
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Large emergency savings fund - If you have deep savings and/or minimal financial obligations, you may regard income protection insurance as unnecessary.
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Low risk occupation - Anyone pursuing a desk-bound, low stress occupation as an employee is less likely to make a claim.
Get some help before you decide
With so many pros and cons, not only is it clear that income protection insurance is extremely worthwhile for some but questionable for others, it’s also plain that deciding whether it’s right for you can be complicated. However, your financial adviser can help you create a budget to clarify your financial situation should your income be interrupted, and can also advise on policy types, conditions and premiums.
Strategies to avoid income tax bracket creep in a rising wage environment
July 2026
You earn more money; you pay more tax. So far, so fair.
But what’s not so fair happens when your wage rise bumps your earnings into a higher tax bracket, even though your pay increase may only be in line with inflation. This is known as ‘bracket creep’, and the combination of inflation and a higher tax rate can mean you have less purchasing power than before your pay rise.
However, you can avoid bracket creep by putting your earnings to work in a way that means they won’t be consumed by tax. Here’s how:
Concessional super contributions
Shift some of your income from a higher marginal tax rate into the concessional superannuation environment, where it is taxed at 15%. You can do this by salary sacrifice via your employer, or by making deductible personal contributions of no more than the concessional cap.
Company or trust structures
You may have the opportunity to receive income through a company or a family trust. Small-to-medium-sized businesses (annual turnover of less than $50M) are taxed at 25%. Family trusts can distribute income to family members on a lower tax rate. Be aware, though, of compliance costs and anti-avoidance rules.
Move income or expenses into a different year
Consultants, business owners and investors may be able to control the timing of taxable income and tax-deductible expenses. Income could be deferred until the following year if you expect your income to fall. It’s also possible to claim current-year deductions for some types of prepaid expenses.
Negative gearing
Rental property losses and the cost of borrowing to invest in shares can be offset against your employment income, in a situation known as ‘negative gearing’. This could lower your marginal tax rate.
However, negative gearing should not be your primary investment motive: prioritise long-term returns such as capital gains.
Permitted income splitting
Although Australia, unlike some other countries, does not allow joint spouse tax returns, there are permitted ways to split income and thereby lower marginal tax rates, beyond the family trusts already mentioned. These include:
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Investing in the name of a lower-income spouse
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Paying your spouse a reasonable amount as a genuine working employee of your business, after obtaining financial advice about Personal Services Income (PSI) rules.
Tax offsets and rebates
Offsets and rebates don’t lower your marginal tax bracket, but they do reduce the amount of tax you will pay. You may be able to claim an offset for making a contribution to your spouse’s super, as well as an income-tested private health insurance rebate.
Tax-effective benefits
If possible, negotiate tax-effective benefits with your employer if you can afford to take them in lieu of taxable income increases. These might take the form of employer super contributions above the mandated 12% Super Guarantee rate, or fringe benefits such as a company car (although this may increase your Medicare levy or affect your eligibility for other government rebates or benefits).
Stay informed about tax changes
Plan ahead by staying up to date on proposed tax threshold adjustments.
Get professional advice
Don’t be too alarmed if a pay rise puts you in a higher tax bracket. Remember that it’s only the marginal extra income that is taxed at a higher rate, not your entire salary. But you can take a strategic approach by getting professional financial advice to help you shift your income into lower tax environments and maximise the effect of your legitimate deductions.
Blended families and money: How to protect assets fairly
July 2026
About one in 10 families in Australia is a blended or step family, according to census data, and this trend has increased in recent years. Blended families can work well, but it’s best to aim to avoid any potential problems with the division of money and other assets. These may occur when there are children from previous relationships, a new spouse, shared assets and sometimes former partners in the background, making the question of what is ‘fair’ quite complex.
Here are the most important principles for protecting assets fairly in a blended family.
Define what ‘fair’ means to you
Fair does not necessarily mean equal. You may want all children treated equally, or to prioritise financial security for your current spouse while ensuring children from a previous relationship eventually inherit family wealth. Without clarity, assumptions take over, and assumptions are where disputes may begin.
Therefore, before preparing documents, be clear about your priorities:
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Is lifetime security for your current partner your primary goal?
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Do you (and perhaps your new partner) want to preserve particular assets for biological children?
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Should jointly-created wealth be treated differently from pre-existing assets?
Having a clear understanding of your intentions yourself makes it easier to create a legal structure that reflects them.
Avoid relying on goodwill
A person in a second marriage may leave everything to their surviving spouse, trusting they will “do the right thing” later for their deceased partner’s children.The problem with this is that they are not legally obliged to do anything of the sort.
They could change their own will or enter a new relationship. Assets may be consumed by healthcare or aged care expenses. If any assets remain, their own children may ultimately inherit them instead. Relying on verbal understandings can be precarious.
Legally binding solutions are a better option
You can achieve a balance between asset preservation for your children and financial security for your spouse by incorporating a testamentary trust in your will. This could, for example, allow you to provide income or a life interest in the family home for your spouse, while protecting ownership of the underlying capital for your children.
Superannuation needs special care
Superannuation does not automatically form part of a deceased estate, but you do have the option of making a binding death benefit nomination to indicate how you would like your superannuation benefits to be distributed. If you do not have a valid nomination in place at your super fund, the trustee will decide who receives it. In blended families, this can create tension and disputes.
Review and renew your nomination regularly – at least every three years – to ensure that it remains valid and aligns with your will. There are also tax implications: super paid to a spouse is usually tax-free, but non-dependent adult children may pay tax on some parts of the benefit.
Consider protecting pre-existing assets
You may need to protect assets – such as a family business, investment property or inheritance – brought into a second or later relationship. A Binding Financial Agreement (‘prenup’), created before or during marriage (either formal or de facto), can clarify what happens to assets if the relationship ends.
Communication and transparency will help
Some estate disputes may occur simply because those who expected to inherit are taken by surprise. Adult children who are caught unawares by a will’s provisions are more likely to challenge it.
You don’t need to disclose exact details, but you can reduce conflict by explaining the reasoning behind your decisions at the time you make your will.
Seek advice and review regularly
Protecting assets fairly in a blended family requires accurate planning, clarity, and transparency about intentions, supported by legal structures that will encourage family harmony.
And because blended families change, and assets grow or diminish, estate plans should be reviewed every few years, and certainly after major life events such as remarriage, divorce or the birth of a child. Your financial adviser can help you with the relevant procedures to ensure that your assets are safeguarded and equitably distributed in accordance with your wishes.