Liam Shorte

Putting people back in control of their wealth
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Taking SMSF & Retirement Questions on Sky Business Channel – Retirement Show

I appear on Sam Henderson’s Your Money Your Call – Retirement Show about once a month and a video copy of the January 24th show is included below.

For those not open to viewing the full show you can catch my comments at the following points by scrolling along the bottom of the video:

6.30 Moving from Cash to other sectors

8.40 Getting International Exposure

15.08 Outlook for Aussie Shares and Property

17.50 Selling out of resource stocks to chase performance – good or bad idea

23.10 Making large contributions at or near age 65

29.00 Off Market Transfer of share in to your SMSF

39.55 Investing through super in your 20’s

41.39 The hidden danger of Life-Cycle funds (Asset Allocation becomes more conservative as your age)

46.30 Investing in your 60’s

http://www.youtube.com/watch?v=GfBG-6QQbRo

To get your own questions answered why not make an appointment at our Castle Hill or Windsor offices of we can meet in the city. always happy to deal with people by email. phone, Skype or a combination of them all. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

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by SMSF Coach - Liam Shorte on February 10, 2014 • Permalink

Posted in Retirement Planning

Posted by SMSF Coach - Liam Shorte on February 10, 2014

https://smsfcoach.com.au/2014/02/10/taking-smsf-retirement-questions-on-sky-business-channel-retirement-show/

How much do I need to live comfortably in retirement? 2017 Update

I wrote an article a few years ago for MYOB’s small business blog called How much do I need to retire at 60? that certainly caused some heated debate and has been viewed over 375,000 times. Just read some of the comments to see how people’s vision of a “budget” and “comfortable lifestyle” is so different depending on their circumstances.

Some of the figures used for sample retirement budgets have been updated so I thought I would provide those figures as guidance for people facing the retirement funding conundrum and not sure where to start.

The latest figures released by the Association of Superannuation Funds of Australia ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a ‘comfortable’ or ‘modest’ standard of living in retirement.

Budgets for various households and living standards for those aged around 65
(December quarter 2016, national)

	Modest lifestyle		Comfortable lifestyle
	Single	Couple	Single	Couple
Total per year	$24,108	$34,687	$43,538	$59,808

Budgets for various households and living standards for those aged around 85
(December quarter 2015, national)

	Modest lifestyle		Comfortable lifestyle
	Single	Couple	Single	Couple
Total per year	$23,603	$34,992	$39,8171	$54,960

Source ASFA Retirement Standard. The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

As you can see from the figures if you are looking at a ‘comfortable’ retirement you need to consider a budget of $59,808 for a couple or $43,538 for a single person household.

In my previous article I talked about retiring at age 60 but as most people will be looking more likely at 65 as their target, I wanted to clarify what I believe you need to fund such a retirement. In my opinion a couple would need a combined superannuation and non-super investment assets balance of around $750,000 minimum and a single individual would need a balance of around $550,000. This at odds with ASFA who have recently increased their requirement by a whopping $130,000 but still have lower figures than mine as they believe you only need $640,000 for a couple or $545,000 as a single person.

My figures are based on No Centrelink Support. I am happy to accept ASFA are correct if you take into account some age pension but I find that many clients do not qualify for this because of non-income producing assets like holiday homes, caravans boats etc reducing their pension entitlements. Also there is an inherent risk that the now reduced Asset and Income Test limits may be reduced further in the search for more Government Budget Savings.

Most people I see in my day-to-day work advising on retirement planning have a “sugar coated view” of how they want to spend their time in retirement. Many have hobbies or interests that cost very little but others who like international travel or partaking in expensive social lifestyles of hobbies often under-estimate the costs.

Another worrying trend is people borrowing in their 50’s to fund lifestyle for fear of missing out or to keep up with the Jones! Others are helping children with home deposits and losing the vital compounding interest on their savings. Many tell me they believe they can live on the Government Age Pension in retirement. Well if you can’t manage on your current wage now without borrowing then you are in for a big shock if you plan to rely on the meager Age Pension.

I see one industry commentator saying that the savings required to live a modest lifestyle in retirement only requires a small amount of retirement savings in addition to the age pension, however that sort of budget leaves you very vulnerable to food and utility price inflation as people will have seen with rising vegetable and electricity pricing in the last few years.

When you look at these estimates of the amount capital or assets you need to achieve the lifestyle you want in retirement, it’s still important to remember that most of these work on the average life expectancy. If your family has a history of longevity or early death, then you need to make allowances accordingly.

The bottom line: It’s never too early and hopeful not too late to start planning. So if you want to see where you stand at present based on your current savings and contributions to super, then use the Retirement Planner on the ASIC’s free Money Smart website.

Once you work out you target you should consider seeing a Financial Planner to see what strategies are available to you to boost your savings such as using a Transition to Retirement Pension and Salary Sacrifice strategy to save on personal and superannuation tax and build your nest egg.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

6 Comments

by SMSF Coach - Liam Shorte on February 7, 2014 • Permalink

Posted in Retirement Planning

Posted by SMSF Coach - Liam Shorte on February 7, 2014

https://smsfcoach.com.au/2014/02/07/how-much-do-i-need-to-live-comfortably-in-retirement/

Will you be paying the top up tax on your SMSF contributions ?

If you are a “High income earning” taxpayer you may receive a tax assessments from the ATO for top-up tax on your concessional superannuation contributions for the previous financial year.

Bleeding Taxpayers Dry!

The “top-up tax” on concessional contributions for high income earners is known as Division 293 tax. It is effective from the 2012/13 financial year. In effect this Division 293 tax reduces the superannuation tax concession they receive.

This ATO explains the tax in sumary and I will detail it afterwards:

https://youtu.be/Woy5kSPwxro

If you want to know now rather than wait for the notice of assessment, then here are the criteria that apply.

What determines that you are subject to Division 293 Tax?

An individual is generally liable to pay Division 293 tax if the sum of their income and their low tax contributions (concessional contributions) is greater than $300,000.

Component s of Income used

To calculate an individual’s income for Division 293 Tax purposes, the ATO will look at the individual’s income tax return and use:

taxable income (assessable income less deductions)
total reportable fringe benefits amounts
net financial investment loss
net rental property loss
amounts on which family trust distribution tax has been paid
super lump sum taxed elements with a zero tax rate.

These elements are summed (except the super lump sum amount, which is subtracted) to give the income amount.

What is the top-up tax rate

The high-income earner will be subject to an additional 15% tax on the lesser of their concessional contributions or the amount above the $300,000.

How is it Calculated

Add the income and low tax contributions.
Compare the amount from Step 1 to the $300,000 threshold to identify any excess above the threshold.
Compare the low-tax contribution amount and the amount from Step 2. Take the lesser of the two amounts, which then become the taxable contributions.
Apply a 15% tax rate to the taxable contributions.

When will the top-up tax be assessed?

The top-up tax is assessed only after both of the following matters are finalised:

Your individual tax return has been processed, and

Your SMSF annual return or retail, employer or industry fund member contribution statement has been issued.

What is the process for payment

Payment is the individual taxpayer’s responsibility once the Tax Office assessment notice is issued. The individual may also choose to get their fund to pay the top-up amount using the release authority provided by the Tax Office.

Example

Rachel from Baulkham Hills, earned $291,000 in income during the 2012-13 year. In addition, she has employer contributions of $25,000. The total, $316,000, is over the $300,000 threshold. Rachel is subject to the Division 293 “top up” tax.

Rachel is subject to the top-up tax on the lesser of her actual concessional contributions or the amount above the $300,000 threshold. Her concessional contributions are $25,000 while the excess over the threshold is $16,000. The lesser amount is $16,000, therefore Rachel has taxable contributions of $16,000

The amount of Division 293 tax levied on this individual equals $16,000 at 15%, being $2,400.

Once she receives her Notice of Assessment, she can either choose to pay it herself or get her fund to remit the amount directly to the ATO using a form provided with the assessment.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why not contact me at our Castle Hill or Windsor offices in the Northwest of Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

3 Comments

by SMSF Coach - Liam Shorte on January 14, 2014 • Permalink

Posted in Contribution Strategies, Contributions, Tax Planning

Posted by SMSF Coach - Liam Shorte on January 14, 2014

https://smsfcoach.com.au/2014/01/14/will-you-be-paying-the-new-top-up-tax-on-your-smsf-contributions/

SMSFs and Estate Planning: When the documentation does not match

Western Australian has a habit of bringing to light interesting estate issues and one of the2013 cases lives up to that reputation and highlights the importance of really understanding estate planning where a self-managed superannuation fund is involved (Ioppolo & Hesford v Conti [2013] WASC 389).

The background to the case is that a Mrs Conti passed away with large balance in an SMSF, of which her husband was the surviving individual trustee and the only other member.

In the decade before her death Mrs Conti had signed a series of non-binding and binding death benefit nominations (BDBN) directing that her superannuation death benefit should be paid to her husband but these had lapsed. Note, many deeds still unnecessarily refer to the SIS regulations and in specific the need to renew BDBN every 3 years when dealing with Binding Nominations.

However in her Will, Mrs Conti had directed that her SMSF member balance be paid not to her husband but to her children and she specifically expressed her wish that none of her benefit should be paid to her spouse.

Mr Conti, (as the sole surviving trustee of the SMSF) resolved to pay her entire balance to himself. (This would have needed to be done within 6 months of her death under Section 17A(4) of the SIS Act or else a second trustee would have to be appointed).

It is worth reminding you that the Superannuation Complaints Tribunal (SCT) has no authority to review an SMSF trustee decision.

As such, Mrs Conti’s children who were the executors under her Will had to challenge this trustee decision in the Supreme Court of Western Australia.

The Court held that the trustee of the SMSF could pay the death benefit to Mr Conti, and the children failed in their application.

This reinforces the need to consider an overview of the entire estate and other assets like trusts, companies and superannuation to ensure the various documentation required in succession planning is supportive of the clients wishes. Estate planning must consider the full circumstances and specific tailored solutions, especially where there is superannuation and in particular where a SMSF is included.

Some finer points worth noting on this case are that the will which expressed the intention to leave the funds to the children was made in 2005, however she also made a later binding nomination in 2006 where she (again) directed the payment to her husband. So you can see that there was some confusion as to actual wishes. The later nomination lapsed, so at death, there was no binding nomination in force and two conflicting expressions of her wishes (ie the will in 2005 went one way and the BDN in 2006 which went the other).

The central point of the article remains the same, but I don’t think we can be sure what the wife’s actual wishes intentions were at the date of death, given the conflicting and confusing messages she left behind.

The use of a Corporate Trustees, updating the Trust deed to allow for a Non-Lapsing Binding Death Benefit Nomination are some of the measures that may have prevented this outcome.

We can work with you and your solicitor or introduce you to a solicitor with specialist SMSF training to minimise the chances of such problems occurring.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

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by SMSF Coach - Liam Shorte on November 26, 2013 • Permalink

Posted in Binding Death Nominations, Estate Planning

Posted by SMSF Coach - Liam Shorte on November 26, 2013

https://smsfcoach.com.au/2013/11/26/smsfs-and-estate-planning-when-the-documentation-does-not-match/

Do I Need Annual Valuations If My SMSF Has Investments In Private Trusts Or Companies

The new requirement to value all assets supporting a pension at market value annually will have an impact on minimum pension amounts from here onwards. To be precise, SIS Regulation 8.02B requires all SMSF assets to be valued at market value each year. In the past we relied on ATO Taxation Determination TD 2000/29 that required that where an accumulation fund has underlying assets supporting a pension, those assets must be valued at their net market value on the commencement day of the pension.

In subsequent years we found that SMSF assets used to pay a pension may not have been re-valued correctly after commencement of the pension.

The new risk associated with Regulation 8.02B is that failure to mark to market the value of the asset has potential to cause the fund to fail to meet the minimum pension requirements. With normal shares, managed funds, commodities like gold etc this is not too hard as they can be valued quite easily but the danger arises when the fund has investments in private companies or private trusts, patents or unique property assets.

Unlike SMSFs that must value assets at market value, private trusts and companies are generally not subject to the same regulations or requirements. Therefore, those controlling these entities may adopt a different valuation method such as valuing shares or units at cost in their financials. The impact of the different valuation methods is that the fund’s investment in the private company or a unit trust may not be valued at market value, with the implication being that the fund fails to meet the minimum pension payment required to maintain the tax exempt status of the pension.

The problem is that the cost of valuing an unlisted company or trust assets may require a great deal of work and even a specialist to provide a report. This is definitely a matter to consider sooner rather than later as it is most likely to affect larger pensions accounts and therefore the cost of losing exempt current pension income status (ECPI) may be a considerable amount.

Likewise if you have assets such as patents that are hard to value as they may have nothing to compare with or their value is subject to many other factors you need to document your valuation method and be prudent in your assumptions. Not the time for aggressive tactics and I would always suggest speak with your auditor before completing the valuations for the financials to ensure they are happy with your assumptions.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

1 Comment

by SMSF Coach - Liam Shorte on November 14, 2013 • Permalink

Posted in Audit, SMSF Management

Posted by SMSF Coach - Liam Shorte on November 14, 2013

https://smsfcoach.com.au/2013/11/14/do-i-need-annual-valautions-if-my-smsf-has-investments-in-private-trusts-or-companies/

Government Superannuation Proposals Review – What got the flick

The new Tony Abbot led Government advised that soon after they were elected they were informed that ninety-six superannuation and tax announcements had not been legislated in the last 12 years.

Joe puts the broom to work

Four of these previously proposed measures have been dealt with as part of the repeal of the Carbon Tax and Mining Tax package. The remaining ninety-two measures of unlegislated tax and superannuation measures have been classified into three groups:

• Proceeding
• Not proceeding
• Further consultation required.

Joe Hockey advised they are determined to resolve all policies relating to these matters by 1 December 2013 for inclusion in the Mid-Year Economic and Fiscal Outlook (MYEFO) and intend that the bulk of legislation that is to be progressed should be passed by the Parliament by 1 July 2014. Here we look at the Superannuation related measures that may affect SMSF Trustees and members.

Superannuation proposals that have got the green light

Transfer of lost member accounts to the Australian Taxation Office (ATO)

The Government will proceed with increasing the threshold whereby lost accounts are required to be transferred to the ATO from $2,000 to $4,000, and then to $6,000. This is estimated to add more than $815 million to consolidated revenue.

Superannuation proposals that are getting the flick – red light

Tax on superannuation pensions

The Government will not proceed with Labor’s announcement of 5 April 2013 which would have taxed people’s superannuation pension earnings above $100,000 in the income stream phase. The Government acknowledged that complexity and compliance costs associated with this initiative are extreme and essentially undeliverable. Thank you to SPAA, FPA, ICAA, IPA, CPA and AFA for putting forward such great arguments to dissuade this poorly thought out initiative.

It is estimated that not proceeding with this measure will negatively impact the underlying cash balance by $313 million over the current forward estimates period.

This move will be welcomed by all in the superannuation industry and I do not believe the ordinary member of the public realised how much havoc managing such a proposal would have had caused and the administrative cost would have to be borne by all superannuation members

Establishment of a council of superannuation guardians

The Government will not proceed with the creation of the council of superannuation guardians or the Charter of Superannuation Adequacy and Sustainability. It is estimated that this will save $7.5 million over the current forward estimates period.

This I am disappointed with as a glance at the poorly thought-out tax on pension above would indicate that had the previous government taken time to consult with industry they would have been alerted to the folly of this measure early on and avoided the damage done to the reputation and stability of the superannuation system.

Superannuation proposals that are to be reviewed – Amber light

Clarifying the operation of certain superannuation trust deed clauses

This measure is designed to ensure that trust deed clauses cannot be used to prevent excess contribution amounts from being counted as contributions.

Acquisition and disposal of certain assets between related parties of self-managed superannuation funds (SMSFs)

The May 2011 Budget contained an announcement that there would be restrictive rules for the acquisition and disposal of certain assets between SMSFs and related parties. Although legislation was drafted, it was excised from the relevant Bill, meaning that there were no changes made to the related party acquisition and disposal rules. Hopefully the Government will confirm that other changes to law, including the requirement for all SMSF transactions to be conducted at market value, providing there is sufficient comfort that no manipulation of prices will result in favourable capital gains tax and contribution cap outcomes.

Encouraging the take-up of deferred lifetime annuities

This measure is designed to encourage the take-up of deferred lifetime annuities (DLAs) by providing these products with the same concessional tax treatment that applies to investment earnings on superannuation assets supporting retirement income streams.

Verification of SMSF members and bank accounts

The Cooper review recommended changes to ensure that superannuation money is transferred to a valid SMSF bank account. The recommendation included that a register is provided to enable APRA funds to check SMSF details to meet data and e-commerce standards. This proposal appears quite valid given that often bank officers opening the relevant accounts do not understand the significance of the difference between a personal tax file number (TFN) and an SMSF TFN and ABN. This can often result in personal accounts being opened instead of SMSF accounts to get better rates or lower fees. It is not until the auditor of the fund comes along that often the mistake is recognised. Worse still, the ATO includes fund income in a personal tax return rather than an SMSF return.

Stronger Super measures

Unlawful payments from regulated superannuation funds — promotion of illegal early release schemes
This measure introduces penalties for promoting schemes designed to obtain the illegal release of superannuation benefits.

Unlawful payments from regulated superannuation funds — income tax rates amendment
Superannuation benefits received illegally will be taxed at 45 per cent plus Medicare levy.

Rollovers to SMSFs
Rollovers to SMSFs will become a ‘designated service’ under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF). Superannuation funds will be required to introduce additional checks and safeguards.

SMSF administrative directions and penalties
This measure gives the ATO flexible and cost-effective penalty options to deal with SMSFs that breach the law. This was a surprise exclusion from legislation passed prior to the election, given it appeared to have bi-partisan support, together with broad support from industry.

A big thank you to the IOOF Technical team for the background detail on these measures and content.

As always if you have any comments please add them below or if you wish to discuss your position and strategies for Centrelink and/or Aged Care costs then please contact us for an appointment at our Castle Hill or Windsor office or call me direct on my mobile 0413 936 299.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Leave a comment

by SMSF Coach - Liam Shorte on November 7, 2013 • Permalink

Posted in News & Stats

Posted by SMSF Coach - Liam Shorte on November 7, 2013

https://smsfcoach.com.au/2013/11/07/government-superannuation-proposals-review-what-got-the-flick/

Deeming rates to reduce – relief for SMSF cash investors

Some good news on the Centrelink front at last. We have watched as the interest rates drop but Centrelink deeming rates stayed static. With Term Deposits now paying less than 4% the deeming rate seemed out of touch and the Minister for Social Services has announced a reduction to the deeming rates reflecting those lower returns available to income support recipients from financial investments.

From 4 November 2013 the deeming rates will be:

Deeming rate	Single	Couple
2%	First $46,600	First $77,400
3.5%	Above $46,600	Above $77,400

So deeming rates are now set to reflect returns on cash investments available to pensioners and other income support recipients. It recognises that many pensioners and social security recipients who also rely on own-source income have been adversely affected by the global economic downturn.

Means tested part rate income support recipients paid under the income test, with financial investments mainly in high interest savings accounts, term deposits, shares, bonds and managed investments, may receive an increase in their pension payments, to reflect the reduction in their assessable income. However after a solid year in the share and property markets do not be surprised if the effect is cancelled out or you actually receive a little less once Centrelink updates its values for your portfolio.

This change applies to both Centrelink and Department of Veterans’ Affairs means tested recipients.

For those managing money for relatives in Aged Care you may find the income-tested fees may have lower costs as a result of the new lower deeming rates.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Leave a comment

by SMSF Coach - Liam Shorte on October 29, 2013 • Permalink

Posted in Age Pension, Centrelink

Posted by SMSF Coach - Liam Shorte on October 29, 2013

https://smsfcoach.com.au/2013/10/29/deeming-rates-to-reduce-relief-for-smsf-cash-investors/

Do You Have Access to Copies of Your Important Personal and SMSF documentation

After a week of “Bush Fire Emergencies”, packing “what we could not do without” into cars and trailers at our home in the beautiful Hawkesbury region of Sydney I have learned a few lessons and had the complacency beaten out of me when faced with having to evacuate our home at short notice and needing to take all essential paperwork with us.

Get Away Folder

Now I have always considered myself to be somewhat prepared for emergencies, mostly because I know I am normally disorganised so if I do not have things pre-prepared then I know I would struggle to find the items needed. So I have a my Get Away concertina folder of essential paper work which includes:

copies of our drivers licences
copies of our passports
car insurance schedule and PDS
home and contents insurance schedules and PDS
bank account and credit card details

I considered this to be enough as I knew I could find copies of most other information online or in my work computer.

In reality, I had considered this only from my point of view and not considered what my wife or family would have needed if I had been injured or worse. Like many couples, we agreed that one of us handles the finance and the other handles everything else that keeps our family going. It was only when actually faced with the reality that I realised how much else I should have included to make sure my family were not burdened with unnecessary paperwork if things went wrong:

contact details for our Accountant, Lawyer, Doctors, Vet and Financial Adviser (yes, i do have one too; my business partner as otherwise you always leave your own needs until last).
copies of our wills
copies of Enduring Powers of Attorneys
copies of our SMSF Binding Death Nominations
certified copies of my SMSF Trust Deed, Corporate Trustee constitution and Family Trust Deed (most are issued with 3 originals and you should always keep one and not leave everything with your Accountant as things can go wrong in their office too)
life Insurance schedules
superannuation statements
rates notice to show ownership of the property
Account numbers, user ids and Password details for personal and SMSF bank accounts, share trading facilities, mortgage providers, electricity and medical insurer among other essential sites.
spare keys for house and car (i am still trying to find the key to the ride-on mower that I removed and put somewhere safe because of looters and I had to ask my wife for a key to the house after 4 years living there!)

Keep the folder updated

We had changed mortgage provider and home insurer in the last 3 months (bet they are sighing with relief!) and had just renewed my sons passport, so make sure to keep your Get Away Folder updated.

Keep a scanned copy

Thankfully we also have another complimentary option and that is to store much of this information on the web to have an additional backup. Now while this is a way to store your essential information, DO NOT use this as the only method as technology has a habit of failing you when most needed. There are numerous portable storage devices and online storage options available to you, including Dropbox, Google Drive and SkyDrive to name a few and they area a pretty easy and reasonably secure option for making sure your stuff is available off site from your home. This option is only advisable after you’ve completed the Emergency pack and be absolutely sure to write down where this information can be found and how to access it in case you can’t be there.

Get organised and don’t delay

This past week was a wake up call for me and I am so grateful that none of this information was actually needed this time. However, I don’t ever want my wife to be put in the frustrating position of searching for paperwork about our finances in the aftermath of an accident or emergency, and I’m pretty sure you don’t either.

I would also urge you to read the following resources; but please feel free to add your own ideas in the comments section below as well.

Emergency survival Kit and Bush Fire Survival Plan.

Last but definitely not least, I would like to thank the amazing people at Kurrajong Heights RFS and all the NSW and interstate personnel and volunteers that are putting their lives on hold to protect others.

IF YOU KNOW SOMEONE AFFECTED BY THE FIRES I AM HAPPY TO HELP THEM FREE OF CHARGE FROM OUR CASTLE HILL OR WINDSOR OFFICES. The FPA also has a free service where victims of the fire can call 1300 626 393 or complete the application form to arrange to speak with a financial planner free of charge and begin to rebuild their lives and financial strength.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

1 Comment

by SMSF Coach - Liam Shorte on October 25, 2013 • Permalink

Posted in SMSF Management

Posted by SMSF Coach - Liam Shorte on October 25, 2013

https://smsfcoach.com.au/2013/10/25/do-you-have-access-to-copies-of-your-important-personal-and-smsf-documentation/

Reminder: Minimum annual payments for Superannuation Income Streams in 2014 / 15 including SMSF Pensions.

Yes the Government have been messing about with the system so much over the last few years that many clients have been totally confused and had to confirm their minimum pension payments for last year so I thought I would just remind everyone of this years limits so they can put their payment plans in place.

How much to take to stay compliant with your pension

If you started a pension or annuity on or after 1 July 2007, a minimum pension amount is required to be paid each year. There is no maximum amount other than the balance of your super account, unless it is a transition to retirement pension in which case the maximum amount is 10% of the account balance.

The minimum payment amounts will not be reduced for the 2014-15 year. The following table shows the minimum percentage factor (indicative only) for each age group.

Age	Minimum % withdrawal (2014-15)
Under 65	4%
65-74	5%
75-79	6%
80-84	7%
85-89	9%
90-94	11%
95 or more	14%

Note that these withdrawal factors are indicative only. To determine the precise minimum annual payment (especially for market linked income streams), see the pro-rating, rounding and other rules in the Superannuation Industry (Supervision) Regulations 1994.

For rules and limits on other Payments from super here are the relevant links to the ATO site.

Low rate cap amount

Untaxed plan cap amount

Minimum annual payments for super income streams

Preservation age

Super lump sum tax table

Super income stream tax tables

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Please reblog, retweet, put on your Facebook page if you found information helpful.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

1 Comment

by SMSF Coach - Liam Shorte on October 1, 2013 • Permalink

Posted in Pension Strategies, Pensions, Tax Planning

Tagged Baulkham Hills, Castle Hill, Corporate, Death, DIY Super, Dural, Individual Trustee, Pensions, Self MAnaged Super, SMSF, Strategy, superannuation, Tax Planning, Transition, TRAP, TRIS, Trustee, Windsor

Posted by SMSF Coach - Liam Shorte on October 1, 2013

https://smsfcoach.com.au/2013/10/01/reminder-minimum-annual-payments-for-superannuation-income-streams-in-2014-15-including-smsf-pensions/

Question on Multiple Progress Payments When Buying a House & Land Package in a SMSF

Question received:

Hi Liam

You recently mentioned that you it’s possible to do construction within a SMSF where there could be draw downs? Did you do an article on this somewhere that I could research?

Answer:

The following is general advice only and you should get very specific advice on your own proposed strategy before spending any money on implementing these strategies. Do not rely on general information in an article to put in place any strategy.

I wrote a general article on purchasing House and Land Packages which is linked at the end of this article. But to address the matter of draw downs in specific I will deal with it here. Yes you can engage in construction of a property under a LRBA (Limited Recourse Borrowing Arrangement) or Super Fund Borrowing as it is commonly know. It is also possible to have progress payments if the LRBA is structured properly.

The ATO provides example 10 in SMSFR 2012/1, which concerns the purchase of a house and land package by a SMSF under a LRBA. The ATO had said in that example that “because the contractual arrangement is for the acquisition of land with a completed house on it, and settlement occurs once construction of the house is finished, the deposit and the payment on settlement can be funded under a single LRBA.

This was followed up by a request for more details in a National Tax Liaison Group (NTLG) Superannuation Technical Sub=group meeting in December 2012 where they were asked to confirm more than 2 payments could be made, so not just deposit and final settlement payment but progress payments.

Please read section 7.4 of the NTLG Superannuation Technical Sub-group – meeting minutes December 2012

The result:

So they confirmed that it does not have to be only two payments. There can be multiple progress payments under the one single LRBA HOWEVER only if the terms of the LRBA allows the SMSF trustee to make multiple draw-downs for that purpose or if the SMSF funds the progress payments from its own funds.

You should also read the March 2013 minutes Section 7.5 Limited recourse borrowing arrangements and the payment of deposits. Please note NTLG minutes are for guidance by the ATO and are not binding rulings so get personalised advice..

So in summary:

The non-negotiable components of a successful LRBA for a House and Land package must include:

the single acquired asset is at all times a completed house and land, and
the security for the loan is at all times over the land and completed house, and
the LRBA must allow drawdowns for the deposit, progress payments and settlement.

As this is a very specialised process and requires specific wording to the LRBA agreement you need to work with a SMSF Specialist Advisor, experienced Mortgage Broker and a Lawyers who know how to draft personalised documentation. Do not trust a bank to provide all the documentation on a loan like this as they will only be interested in protecting their interest and that may not provide you with the documentation to meet the Section 67A exemptions.

It may be better to consider arranging a loan with an offset account (never a redraw facility as that would breach the rules) that is draw down in full initially and the excess stored in the offset account and used to fund the progress payments as the build progresses.

Please read my previous blog for more background on this subject Can I borrow to buy a house and land package off the plan in my SMSF?

Why not click here to Schedule a Meeting by phone, face to face or via Skype if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or online via Skype.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

3 Comments

by SMSF Coach - Liam Shorte on September 25, 2013 • Permalink

Posted in Borrowing, Loans, LRBA, Property

Posted by SMSF Coach - Liam Shorte on September 25, 2013

https://smsfcoach.com.au/2013/09/25/question-on-multiple-progress-payments-when-buying-a-house-land-package-in-a-smsf/

Protecting your Retirement and your Grandchildren

Sometimes it pays to think outside the square when wondering how you can help your adult children and at the same time protect your own enjoyment of your retirement. I’ll use a case study to explain this further.

Case Study

Sam & Penny are 63 year-old retirees with two adult children. Both children have their own families and one also owns his own business. Sam & Penny wanted to give their children’s finances a boost now while they had young children and needed help rather than on their death.

Challenge

Although Sam & Penny were keen to help out their children, they also wanted to keep the money in the immediate family (protected from in-laws and creditors).

In addition, they wanted to make sure their grandchildren were protected financially in case something happened to their parents.

They had seen friends having to take over raising grandchildren after a death of a child and saw the health, social and financial effects that had on their retirement so they wanted to put some protection in place.

Solution

We facilitated private loan agreements giving each of their children $100,000 to use towards reducing their mortgage debt. The loan required a minimal amount of interest to be paid yearly and no principal but it was enough to confirm a valid contract was in place. It cost $100 for each completely valid loan agreement

Importantly, if one of their children splits up from their spouse or their son’s business goes under, Sam & Penny can call in that loan, protecting their money from any family settlement and/or creditors. They can then later re-gift the children back the money when appropriate. I know this sounds harsh but they worked hard for their money and want to see it benefit their own children.

Sam & Penny also set up an annual $1,000 super contribution (Non-concessional) for each of their children, and their spouses, on the condition that it’s used to fund life, disability or income protection insurance. The added benefit is that they families also got some additional funds from the Government Co-Contribution which enabled better cover to be purchased on level premiums.

These contributions ensure that Sam & Penny’s grandchildren are financially set up if something happens to their parents. This strategy also protects Sam & Penny’s nest egg, because their grandchildren won’t need their financial support if the worst happens.

They are perfectly happy to step in if needed to care for their grandchildren but they have seen what the added financial worries did to their friend’s health and want to ensure they don’t suffer likewise.

Benefits

Help their children get ahead
Protect the family’s money from ex-spouses, de-facto partners and creditors
Protect their grandchildren’s education and lifestyle
By locking in level premiums at a young age their children will benefit from lower premiums for life.
Keep their own nest egg intact for their retirement and provide a safety net.

Summary

There are ways to pass money to your adult children while protecting it from loss in the event of relationship breakdown.

Sometimes offering funds to insure your children is a far more cost effective way of coping with tragedies protecting everyone’s financial future.

Verante Financial Planning provides comprehensive financial planning services, covering both wealth creation and wealth protection. We help our clients grow their wealth and protect their families and businesses.

Why not click here to Schedule a Meeting by phone, face to face or via Skype if you want to look at your own insurance and family protection options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or online via Skype.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Leave a comment

by SMSF Coach - Liam Shorte on September 13, 2013 • Permalink

Posted in Insurance Strategies, Retirement Planning

Tagged Baulkham Hills, Castle Hill, Dural, family loans, family protection, Granchildren, pension phase, Pensions, resetting, Self MAnaged Super, Strategy, superannuation, Trustee, TTRAP, Windsor

Posted by SMSF Coach - Liam Shorte on September 13, 2013

https://smsfcoach.com.au/2013/09/13/protecting-your-retirement-and-your-grandchildren/

Making the most of the Transition to Retirement Pension over age 59

After my last blog article I have been asked for some guidance on how to maximise the Transition to Retirement (TTR) & Salary Sacrifice strategy under the new SG and Concessional Contribution (CC) limits for those over 59. Also readers wanted to know more about the “resetting” pensions to move each year’s contributions to Pension phase.

This general advice applies equally to those using an Self Managed Superannuation fund (SMSF) , Industry, Retail or Employer fund.

Pensions are not set in stone. Review them regularly

Resetting the pension periodically (eg annually) from age 60, can help TTR users to get more money into a tax-free environment. Also, the additional income payments, which would be tax-free, could be re-contributed into super by utilising any remaining CC cap or by making non-concessional contributions (NCCs).

Example: Strategy Changes for those age 59 or over

When strategy commenced Marie, an Administration Manager in Castle Hill, is 60 years of age and earns a salary of $90,000 pa plus Employer SG for a total package of $98,100. On 1 July 2012, she:

used her entire super balance of $250,000 to start a TTR pension
based on our recommendations elected to receive TTR pension payments of $10,703, and
arranged with her employer to salary sacrifice $16,900 in to super to use up her full $25,000 limit applying that year.

The key point to mention is that using this strategy Marie maintained her exact same after-tax income but selected it from the most tax effective sources..

Then we had the latest government changes to Super from the Budget.

SG increased to 9.25%
Concessional Contribution limit for those over 59 on 01 July 2013 increased to $35,000

So strategy changes were needed. On 30 June 2013, she had $22,101 in her accumulation account and $260,387 in her pension. On 1 July 2013, she:

stopped her current TTR pension, merged the money with her accumulation balance and started a new TTR pension with $282,488. (Resetting)
elected to receive pension payments of $17,105 from the Transition to Retirement pension, and
increased her salary sacrifice contributions to $26,675 again to use up the $35,000 limit and maintain the same Net Take Home Pay.

The outcome

The table below summarises her income and super contributions in 2012/13 (with and without using the TTR strategy) and the changes she made in 2013/14 in response to the super changes.

	In 2012/13		Adjustments in 2013/14
	No TTR	With TTR	with TTR
Salary	$90,000	$73,100	$63,325
TTR Income	Nil	$10,703	$17,105
Tax	-$22,597	-$16,400	-$13,027
Net Take Home Income	$67,403	$67,403	$67,403
SG	$8,100	$8,100	$8,325
Salary Sacrifice	Nil	$16,900	$26,675
Total CCs*	$8,100	$25,000	$35,000

*CCs = concessional contributions (SG + Salary sacrifice or Self Employed Contributions)

By making the adjustments, she will:

get an extra $22,101 into the tax-exempt pension to take greater advantage of the 0% tax rate that’s payable in the fund on investment earnings
salary sacrifice an extra $9,775 into super taxed at 15% instead of her marginal 38.5% rate
take full advantage of the higher Concessional cap of $35,000, but also taking into account the SG increase to 9.25%
reduce her income tax by $3,373
reduce the total tax paid by $1,873, after taking into account the 15% tax that will be deducted from the additional $10,000 of concessional contributions, and
maintain the same after-tax income or net take home pay

Marie can also restart her pension at the beginning of each financial year until she retires at age 65 to maximise the amount in pension phase and make any further changes required as a result of future rule changes.

This is a strategy that has very little to do with the actual investments in your fund so you can see it as a “low/no risk” strategy that enhances your retirement savings without taking on additional investment risk.

Now to make the most of the tax-exempt pension environment you may alter your investments to seek more income or franking credits but it is not compulsory.

It’s not too late to get your plan in place for 2013/14 tax year so why not click here to Schedule a Meeting by phone, face to face or via Skype if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or online via Skype.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

1 Comment

by SMSF Coach - Liam Shorte on September 10, 2013 • Permalink

Posted in Contribution Strategies, Pension Strategies, Tax Planning

Posted by SMSF Coach - Liam Shorte on September 10, 2013

https://smsfcoach.com.au/2013/09/10/making-the-most-of-the-transition-to-retirement-pension-over-age-59/

Aged 59 – 64 and not on a Transition to Retirement Pension – SHAME ON YOU!

Yes, that’s me shouting!. In this day and age with utility prices rising , people struggling to save and interest rates so low that it is making pensioners weep, we are still finding many people not using the simple, relatively risk-free strategies available to them to reduce their income tax and tax on the earnings of their superannuation savings.

Day in day out I meet new prospective clients, some with SMSFs and some in industry or retail superannuation funds who worry about paying Advice Fees but have ignored the ability to save ten of thousands of dollars in tax, over those pre-retirement years, using the same system that most of their peers are enjoying in a tax-free pension environment.

DON’T WASTE MONEY PAYING TAX WHEN YOU DON”T HAVE TO.

In fact I am willing to promise that you can improve your annual retirement income by on average 5% by implementing the Transition to Retirement Pension coupled with a Salary Sacrifice strategy for 5-10 years before retirement.

Benefits of a Transition to Retirement Strategy

Give your retirement savings a boost – your super balance will keep growing as you make self-employed contributions or your employer continues to make contributions into your super account.

Lower you taxable income – If you choose to salary sacrifice some of your pre-tax income into your super, you can further boost your retirement savings. This is because your salary sacrifice contributions are taxed at a lower rate (15% for those earning less than $250K) when they go into your super so that saves an immediate:

19.5% for anyone earning more than $37,000 and less than $80,000 as your marginal tax rate is 34.5% inclusive of Medicare on every dollar over $37,000
24% for anyone earning more than $87,000 and less than $180,000 as your marginal tax rate is 39% inclusive of Medicare on every dollar over $80,000
34%* for anyone earning more than $180,000 and less than $300,000 as your marginal tax rate is 49% inclusive of 2% Medicare and 2% Temporary Budget Repair levy on every dollar over $180,000

Oh yes, that 2% extra Temporary Budget Repair levy applies to those earning over $180,000 per year.

July 1 2017 changes: From this date by moving to pension phase your balance in the transition to retirement pension account no longer moves to a “tax exempt” status so it will continue to pay tax at up to 15% on dividend income, rental income or capital gains. That is why it is essential you look for or are aware of triggers to move to a full Account Based Pension

A Transition to Retirement (TTR) strategy remains valid after the changes announced in the 2016 Budget.

Pay less tax and keep the same take home amount
You can enjoy generous tax concessions for both retirement income streams and super contributions while still taking home the same net amount. you are just taking the money from the most tax effective source. Remember after you turn 60, you won’t pay any tax on your pension income stream payments.

Pre July 1 2017 Case Study: Ann aged 59 on 01 July 2013 has $300,000 in Superannuation. She has an annual income of $95,000 and wants to keep her take home pay the same but look at a TTR combined with salary sacrifice to improve her retirement savings.

Results for 2016-17 Year
Without Transition to Retirement Strategy
Drawdown Percentage 0.000 %
Package $104,025
Plus Assessable Pension Income $0
Less Concessional Contributions $9,025
EQUALS TAXABLE INCOME $95,000
Less tax and Medicare $24,682
Plus Rebate $0
EQUALS AFTER TAX INCOME $70,318
Plus Exempt Pension Income $0
Less Non Concessional Contributions $0
EQUALS TAKE HOME INCOME $70,318

Accumulation Start Balance $300,000
Plus 85% of Concessional Conts $7,671
Plus Non Concessional Conts $0
Plus Interest $13,701
EQUALS ACCUM END BALANCE $321,372
FUND ASSETS END BALANCE $321,372
With Transition to Retirement Strategy
Drawdown Percentage 5.600 %
Package $104,025
Plus Assessable Pension Income $0
Less Concessional Contributions $35,000
EQUALS TAXABLE INCOME $69,025
Less tax and Medicare $15,361
Plus Rebate $0
EQUALS AFTER TAX INCOME $53,664
Plus Exempt Pension Income $16,800
Less Non Concessional Contributions $146
EQUALS TAKE HOME INCOME $70,318 (so same net take-home pay)

Pension Start Balance $300,000
Less Pension Payments $16,800
Plus Interest $14,585
EQUALS PENSION END BALANCE $297,785
Accumulation Start Balance $0
Plus 85% of Concessional Conts $29,750
Plus Non Concessional Conts $146
Plus Interest $782
EQUALS ACCUM END BALANCE $30,678
FUND ASSETS END BALANCE $328,464

In this example Ann keeps the same take home pay of $70,318, adds an extra $7,092 to her Retirement Savings and pays $4,071 less in tax. That’s just one year with no change to her investment profile as it has nothing to do with the actual investments. If you do not need the pension income then just put it back in to the fund as a non-concessional contribution,

Don’t ignore these crucial annual savings as they add up to that extra holiday a year in retirement.

There are benefits to this strategy for anyone over 55 but it becomes a “win-win” situation once in the 59-64 age group. So don’t ignore this strategy and please pass it on to others you think it may suit.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

7 Comments

by SMSF Coach - Liam Shorte on September 4, 2013 • Permalink

Posted in Contribution Strategies, Pension Strategies, Retirement Planning, SMSF Management

Posted by SMSF Coach - Liam Shorte on September 4, 2013

https://smsfcoach.com.au/2013/09/04/aged-59-64-and-not-on-a-transition-to-retirement-pension-shame-on-you/

Using an Anti-Detriment Payment vs. Recontribution Strategy in your SMSF

I have used the anti-detriment payment strategy to improve death benefit payments over the years but they are dwarfed by the number of SMSFs using recontribution strategies.

No clear winner

With the implementation of the Simple Super legislation in July 2007, many strategies have been published regarding re-contributing into your superannuation fund with the benefit of avoiding the 17% tax on death benefits to non-dependants. However this may not always be beneficial as paying no tax may result in no anti-detriment payment being received which is an additional / alternative strategy available.

The recontribution strategy involves a member of a superannuation fund, normally after age 60 or if fully retired after age 55, withdrawing a lump-sum, and then recontributing the amount back into the fund as a non-concessional contribution. The result of this process increases a member’s tax free component of their benefit and reduces the taxable portion.

The advantages of this include:

Members under age 60 become eligible for an increased tax-free portion on their pension;
Non-tax dependent beneficiaries of a deceased member’s account pay no tax on the tax-free portion but 16.5% on the balance.

There are also considerations that must be taken into account before implementing such a strategy, such as:

by withdrawing lump sum benefits from super below the age of 60, you will only be able to receive the first $185,000 of your taxable portion at a concessional tax rate;
Your ability to recontribute is restricted. For the current financial year, you may contribute up to an annual cap of $180,000. For members under 65, they may contribute up to $540,000 in a financial year by using the “3 year bring forward” rule.

An anti-detriment payment is effectively a refund of contributions tax paid by a member during the accumulation phase. It is an additional payment that may be made to an eligible dependant if a death benefit is taken as a lump sum. The anti-detriment payment is calculated based on the taxable portion of a deceased members balance so a reduction in the taxable component through a recontribution strategy will effectively reduce any anti-detriment payment available. The effect of either strategy can be seen below.

Consider the following example:

Member with $600,000 in their account all from SG Contributions and Salary Sacrifice i.e. no Tax Free component – 100% Taxable Component. He has a son and daughter who each earn about $90,000 per annum.

In this case not only has the deceased member’s dependant received an additional $105,882, the relevant Fund will be able to apply $705,880 in deductions against its income going forward. Where, for example, the deceased’s adult son and daughter choose to become members of the SMSF and, on average, the SMSF earns $40,000 a year in investment income, a deduction of this size could shield the Fund from tax (on concessional contributions and investment income) for over 8 years!

Anti-Detriment		Without Anti-Detriment
Tax Free Component	Nil	Tax Free Component	Nil
Lump sum death benefit	$600,000	Lump sum death benefit	$600,000
Anti-detriment payment	$105,882	Anti-detriment payment	Nil
Total death benefit	$705,880	Total death benefit	$600,000
Tax deductions going forward ($105,882/15%)	$705,880	Tax deductions going forward	Nil

The following table looks at the effect of implementing a re-contribution strategy on death benefits paid to a non-dependant for tax purposes (such as adult children) and a dependant (spouse) compared to an anti-detriment payment is as follows:

Strategy 1: No Recontribution Strategy (lump sum paid to adult child)

Strategy 2: No Recontribution Strategy (lump sum paid to spouse)

Strategy 3 Full Recontribution Strategy used

	Strategy 1	Strategy 2	Strategy 3
Taxable Component	$600,000	$600,000	Nil
Tax-free component	Nil	Nil	$600,000
Anti-detriment payment	$105,882	$105,882
Total benefit (pre-tax)	$705,882	$705,882	$600,000
Tax payable by non-dependant	$116,471	Nil	Nil
Total benefit (after-tax)	$589,411	$705,882	$600,000

Generally, the recontribution strategy is worth considering if the benefit is likely to be paid to a non-dependent for tax purposes, such as an adult child unless they will make use of the SMSF for their own future superannuation strategy. This is because the tax savings generally outweigh any potential anti-detriment payment they would otherwise receive.

For a spouse or dependant child, you will usually be better off relying on the anti-detriment provisions – because they pay no tax on death benefits. However this requires prior planning and willingness to pay additional administration costs and taxes on anti-detriment reserve even when you reach pension age.

Where the anti-detriment payment tax deduction causes a tax loss in the fund, the full quantum of the loss may not give a benefit to remaining members. In circumstances where for example the spouse is in pension phase, it is important to recognise that “Exempt Current Pension Income” absorbs carry forward losses (other than carry forward capital losses) before it is available to offset income of the Fund. Also, an anti-detriment reserve can affect the calculation of exempt pension income in the fund. Therefore, the full benefit of the anti-detriment may not be able to be utilized.

An alternative solution for those looking to use an Anti-detriment strategy and with a terminal illness or shorter expected life expectancy is to roll-over the member’s account to a retail or industry superannuation account provider that have a policy of making anti-detriment payments as their set up means they will have more flexibility to fund anti-detriment payments.

Another alternative for those dealing with a death of someone well before retirement age is the use of a Future Service Benefits Deduction so click on the link to read more about that.

If you believe that setting up a recontribution and/or an anti-detriment strategy could be beneficial to your superannuation fund and to the your beneficiaries, then now is the time to plan for this and put in place the appropriate structures and strategies. Contact me at our Windsor or Castle Hill offices or by phone or email if you would like to discuss your options.

Keep updated by putting an email address in on the left hand column and pressing the “Sign me up!” button. Happy to take comments or questions in the section below.

Bye for now.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

2 Comments

by SMSF Coach - Liam Shorte on August 5, 2013 • Permalink

Posted in Anti-Detriment, Estate Planning

Posted by SMSF Coach - Liam Shorte on August 5, 2013

https://smsfcoach.com.au/2013/08/05/using-an-anti-detriment-payment-vs-recontribution-strategy-in-your-smsf/

Using your SMSF to plan now for a future downsize and a seachange

Living in Sydney and I have many clients who dream of retiring up or down the coast or inland to more suitable and often slower paced areas of Australia.

Many plan to downsize and sell their Sydney home in retirement and purchase a place on the coast. The issue that arises is that they often feel they have identified the area or actual property they want to live in during retirement and want to secure it now. Others are afraid that the selected area will be priced out of their budget in future years with so many baby boomers retiring over the coming decades.

So here is a solution we used for a few of our clients wanting to plan ahead and reduce that risk.

Jeff & Joan (of course it’s not their real names!) came to see me in 2006 and they had a lovely house in Hills District of Sydney but it was 2 storeys and with Jeff’s knees playing up they knew that they would need a single level property later. Also they planned to move to Lake Macquarie in 10 years to be nearer their children and hopefully future grandchildren in Newcastle in retirement.

They could not borrow to buy a property in their own names as they had business and family commitments that reduced their borrowing capacity.

They had a decent sized SMSF and could afford to buy a property as part of their diversified strategy so we put this strategy to them.

Sole Purpose Test issues

Due to the issues with the sole purpose test we convinced them that rather than looking for a specific property in the range of $750,000 they might use themselves but stretch their budget, they should identify a suitable investment property with good rental and capital growth prospects to deliver the best possible return for their retirement. Our argument was that the debt burden would be too high and their personal circumstances and needs can change but a good investment property could deliver the result they need to fund a better retirement regardless of those changing circumstances.

They identified a good investment property in Lake Macquarie that ticked all the boxes including affordability and was currently tenanted. We revised the SMSF Investment strategy and put the trustees reasoning for investing in residential property and the projected returns and maintained a diversified investment portfolio with the other funds. We also looked at options and exit strategies as part of the analysis and the investment stood up as a sound one for their portfolio.

There SMSF purchased the property in early 2007 for $400,000 and it was a sound investment over the following 5 years providing a reasonable rental income and about 3% capital growth per year over that time which was decent for a single level property just one street back from the water.

In 2012 Jeff decided to retire early and Joan agreed to reduce her hours. They put their house in Castle Hill on the market on reviving their needs thy believe it would be prudent not spend too much for their dream home and settle for the current investment property. gave the Lake Macquarie Tenants 4 months notice which they felt was fair. Their Sydney property sold a few months later for $850,000.

We got a professional valuation on the Lake Macquarie property and it was valued between $480,000-$500,000, so we agreed a market value of $490,000. The couple elected for a lump sum pension commutation from their SMSF paid “in-specie” as the Lake Macquarie property from their Self Managed Super fund and because it was in NSW they did have to pay Stamp Duty on the transfer. I believe on Victoria and WA there are exemptions that apply on such transfers as long as it is the same Beneficial Owners after the transaction. We sought legal advice here in NSW and were unable to get this concession.

The couple then used $150,000 to renovate the property and kept $150,000 in Term Deposits in their own name. This left approximately $500,000 which they contributed as Non-Concessional contributions equally to the SMSF.

What were the benefits?

If they had stretched to the mor expensive property they would gave had to take on debt and could not have considered the early retirement.
Secured a foothold in the property market in their area of choice for future retirement. The relief of having some certainty should not be underestimated by advisers.
They did not over extend their personal debt which would have left them very exposed during a downturn in their business from 2008-2010
Rental income from 2007 to 2012 was taxed at only 15% rather than their higher marginal rates.
Secured a $90,000 tax-free gain on the investment property as they were in pension phase.
Turned their superannuation accounts from mostly a Taxable component to accounts with more than $250,000 each of non-concessional components and Tax Free to their adult children as part of their Estate Planning.
Oh and they missed the GFC effect on this portion of their investments!

Downside:

Yes we had to pay Stamp duty but that was highlighted from the start as a possibility
The house prices did not run away from them in Lake Macquarie but at least they were not worried.

I must also mention a comment the clients made in their latest review and that was that in the 12 months since they moved they realise a waterfront property comes with higher rates and maintenance costs that would not have suited their retirement budget so well. Oh and they now have 2 grandchildren that they look after 2 days per week while enjoying the Lake Macquarie lifestyle they wanted.

Why not checkout my article “ What can my SMSF invest in?” as a good place to start.

As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or online via Skype.

Keep updated by putting an email address in on the left hand column and pressing the “Sign me up!” button. Happy to take comments in the section below.

Bye for now.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

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by SMSF Coach - Liam Shorte on July 31, 2013 • Permalink

Posted in Property, Retirement Planning

Posted by SMSF Coach - Liam Shorte on July 31, 2013

https://smsfcoach.com.au/2013/07/31/using-your-smsf-to-plan-now-for-a-future-downsize-and-a-seachange/

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Superannuation proposals that have got the green light

Transfer of lost member accounts to the Australian Taxation Office (ATO)

Superannuation proposals that are getting the flick – red light

Tax on superannuation pensions

Establishment of a council of superannuation guardians

Superannuation proposals that are to be reviewed – Amber light

Clarifying the operation of certain superannuation trust deed clauses

Acquisition and disposal of certain assets between related parties of self-managed superannuation funds (SMSFs)

Encouraging the take-up of deferred lifetime annuities

Verification of SMSF members and bank accounts

Stronger Super measures

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Get organised and don’t delay

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Question received:

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Sometimes it pays to think outside the square when wondering how you can help your adult children and at the same time protect your own enjoyment of your retirement. I’ll use a case study to explain this further.

Case Study

Challenge

Solution

Benefits

Summary

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DON’T WASTE MONEY PAYING TAX WHEN YOU DON”T HAVE TO.

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So here is a solution we used for a few of our clients wanting to plan ahead and reduce that risk.

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