As a business owner, you need to leverage off all the relationships you build as your business develops. You therefore need to make smart choices between service providers to your business and advisors who go that step further to help your business grow by adding their expertise and experience. Many successful businesses have an advisory board to guide them in areas where they know they have weaknesses. However, many entrepreneurs need advice, but feel that they can’t ask for help since they’re “in charge”, so I need to start from a more basic position.
I’ll be very blunt and say you can’t afford to have:
an accountant who simply prepares your financials, processes your BAS and takes your calls from time to time as issues arise;
a lawyer who handles your contract needs for employment or agreements with suppliers and agencies, or who provides those nasty letters to overdue debtors;
a financial planner who updates your insurance every few years and diversifies your superannuation to protect your nest egg; or
regularly changing business bankers or mortgage brokers who only contact you to service your loan and sell you a new service.
I could go on, but these are probably the core of “service suppliers” to any business. If I have sketched a good representation of your relationships, then you are wasting your time and money.
You need to hire advisors who are going to look after and out for opportunities for your business. You are probably focused on what you do best; you should be using the benefit of your advisors’ expertise to guide and protect your business. For example one pro-active accountant I deal with now asks clients if he can end me the details of client’s income and super once over 55 to see if a TTR is suitable for them. I run a quick calculation and as a team we meet the client to discuss this and other savings ideas. Regularly we see savings of over $100,000 in a 5 year period. That’s teamwork.
I regular refer clients back to their accountant or lawyer when I see gaps in their strategies or opportunities for clients to have more certainty in business, finance or estate planning.
Your advisors must have a passion for small business and engage with you, rather than reacting to requests when you to contact them.
They must be thinking ahead. Good advisors should be acting pro-actively for you by:
running workshops and seminars on innovative ideas for business growth or expense reduction;
providing solutions to improve budgeting and sourcing business concessions;
revamping your credit terms or systemising your data processing through “the cloud”;
thinking years in advance on ideas to fund expansion and manage risk;
bringing ideas from other business cases to adapt to your needs;
analysing employment and entity structure options to cater for business growth; and
seeking introductions to each other to develop holistic proposals benefiting from their interaction, in your best interest.
You may often not know what the next steps for business growth entail, but they, as a collective, should be able to share other clients’ experiences as stepping-stones to help you negotiate the rapids.
Don’t be afraid to change. If a member of your advisory team is not up to scratch, look for an alternative. If you are not sure what you are looking for, Google “small business advice” in your suburb and seek out the small business professionals that offer case studies, blogs, networking, advice seminars, forums, checklists and other services that show they are not paper shufflers, but business professionals willing to bring more to the table than a service proposition.
Stalk them! Check them on Google, LinkedIn, their website, blog and Twitter. Also check their Professional Association to make sure they are legit. For financial planners look up Adviser Ratings and Independent source of feedback on Advisers.
In summary, understand what different advisors can do for you. Decide what you need from each advisor, leveraging off their strengths, and encourage them to work as a team to meet your needs.
Now the next step is to develop a Strategic Advisory Board, but that’s for another day!
I hope this guidance has been helpful and please take the time to comment. 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.
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.
Image courtesy of aechan at FreeDigitalPhotos.net
Adapted from my original article on MYOB’s small business blog in 2012 http://myob.com.au/blog/are-your-accountant-financial-advisor-and-lawyer-operating-as-a-team-for-your-benefit-2/
Until recently, I tended to base retirement planning strategies for clients on a book from the late 90s titled The Prosperous Retirement: Guide to the New Reality by Michael Stein.
Stein divided retirement into 3 stages. Each of these stages affected spending patterns differently, so we could plan for clients’ needs at each stage.
Under the accepted system, the first stage is the Active stage — those first early retirement years when most people are looking to see the world (or at least Australia) and/or engage in other active pursuits. They’ve suddenly got 50-60 more hours per week of free time and are still healthy enough to get out there and make the most of life and opportunities.
The second is the Passive stage — a time when they still look forward to some travel and active pursuits but, with the onset of age-related injuries and illnesses, just not as often as when they first retired. Maybe they’d take shorter trips around parts of Australia rather than long overseas trips through three countries at a time.
Then, eventually retirees move into the last stage, the Sedentary stage, when physical or mental limitations — or setbacks like the death of a spouse or close friends — lead to a much more sedentary, home-based lifestyle. It may also involve losing independence and increasing dependency on others.
The new stage of retirement
In my experience, I’m seeing a new stage of retirement forming, that can have a major effect on people. This new stage has to be managed carefully.
It happens between just retired and the first stage, the Active stage. I call it the Family Support stage.
This is a stage where more and more newly retired people are finding themselves as almost full-time carers for their grandchildren, meaning they cannot plan to travel, undertake volunteering or pursue personal activities due to commitments they make to help struggling children.
This is not the traditional, one-day-a-week “day with nanny and pop,” but a full on five, sometimes six-days-a-week commitment. Often this commitment comes the added cost of taking care of the grandchildren. The costs may not be recovered from their parents, who are often battling a huge mortgage and/or an expensive lifestyle, so the grandparents pick up the tab and deplete their own savings in doing so. You just need to plan for these expenses that can blow out a retirement budget.
I am not saying this is a major negative, as many people cherish time with their grandchildren and would not swap it for the world. However, as a result, they need to be aware that too much time spent in the initial Family Support stage may mean they miss out completely on the most active years of retirement. Some of us may move into the Passive and Sedentary stages much sooner than expected due to illness, and in reality, some of us may not live to reach the later stages.
I usually urge clients to put limits on the commitment to family and put aside “me time” throughout the year for some personal travel and other activities. This does not mean going on holidays with the family to be the babysitters while parents relax. I often recommend that you ensure that Fridays and Mondays are free so you can go away for long weekends so make sure your children know this upfront so they can plan what days they need alternative arrangements.
It is important to put these limits in place at the outset, as kids may come to rely on the arrangements and so they are hard to reverse later. If people do not plan, then they can end up at the wrong end of their 70s with no energy left to embark on their dream retirement.
What do you think? What are your arrangements like in the family? Are child care costs bringing you down? You can comment if you scroll down further.
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
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.
Image courtesy of photostock at FreeDigitalPhotos.net
OK I am going to be a bit morbid today but based on the lack of preparation by many new clients I think we need to talk death, mental incapacity and other things legal. Why me? Because for some reason many seem scared of lawyers so I want to give you good reasons to overcome that fear!
When did you last review your will, your enduring power of attorney (“EPOA”) and your appointment of enduring guardian (“EG”) documents and of course your SMSF Trust Deed.
As a financial planner we recommend you personally review these documents every 3 years and have a solicitor review them every 5 years. Just take them out (if you haven’t forgotten the “safe place” you put them!) and have a look through them after considering changes to you family circumstances including the following triggers.
So here is a list of the changes to your circumstances that should prompt you to review these documents as soon as possible and which may even require you to create new documents or update existing ones.
These changes include:
1. Setting up an SMSF or making a large or non-standard investment via your SMSF
Ok as a SMSF blog you know I had to deal with this first. When you first set up an SMSF you may have been told to read the deed but did anyone tell you it’s essential to appoint your Enduring Power of Attorney to ensure the SMSF can continue to run smoothly if your health deteriorates.
If you decide to make an unusual investment or loan or arrangement in your fund the you must first know that your SMSF Deed and Investment Strategy allows such a move. So read the SMSF deed and have a written SMSF investment strategy.
2. Marriage automatically revokes a will, unless the will was made in contemplation of marriage. After you marry, you should make a new will.
Your Power Of Attorney is not revoked by marriage. If your EPOA was signed before your marriage it is still effective. However, if, for example, your EPOA appointed your former spouse, you may wish to formally revoke the EPOA and make a new EPOA appointing another person as your attorney.
Your appointment of an Enduring Guardian is revoked on marriage even if you appointed your current spouse as your EG. After marriage, you need to sign a new appointment of EG document.
If you wish to bring your new spouse into your SMSF then you need to follow the rules of appointing a new trustee or director and accepting a new member. Read the deed and the company trustee constitution. Don’t forget to notify ASIC.
Check your Binding Death Nomination and any reversionary pensions.
3. Separation
Unlike marriage, separation does not affect the validity of your will. As a result, there have been several cases where a couple have separated, one spouse has died after separation but before the divorce and their former spouse has been entitled to the whole of their estate either due to their failure to update their will after separating or by not having any will in place at all and the rules of intestacy applying in favour of their former spouse.
Similarly, your EPOA and EG documents will not be affected by separation. You should consider whether you need to revoke the existing appointments and make a new EPOA and appoint a new EG after separating
There maybe some allowances for the transfer of SMSF assets in the event of a finalised property settlement and again you need to understand the exceptions that apply once the financial/property settlement has been agreed and signed off and read the deed before assuming you can move or split assets.
Check your Binding Death Nomination, insurance nominations and any reversionary pensions
4. Divorce
I know I am repeating myself but Check your Binding Death Nomination , insurance nominations and any reversionary pensions.
There are specific rules allowing the transfer of SMSF assets in the event of divorce without triggering CGT or Stamp Duties and again you need to understand the exceptions, the process and read the deed before assuming you can move or split assets.
Divorce does not revoke your EPOA or EG documents appointing your former spouse. In order to cancel these appointments, you need to sign a revocation and serve it on your former spouse.
Divorce only revokes or cancels any gift made in your will to your former spouse. It also cancels your spouse’s appointment as executor, trustee or guardian in your will. It does not cancel the appointment of your former spouse as trustee of property left on trust for beneficiaries that include the children of you and your former spouse. However this will not apply if the Court is satisfied you did not intend to revoke the gift or the appointment by the divorce. Instead of leaving these matters to the Court, if you have not made a new will after separating, it is imperative that you make a new will as soon as possible after your divorce.
5. Birth of an additional beneficiary.
This is likely to necessitate a change to an existing will unless your solicitor has catered for future arrivals. This is another care where being too specific can require frequent updates and legal fees.
6. Death of a spouse, an existing beneficiary, your executor, your attorney or your EG.
Review your will, Enduring Powers of Attorney and Enduring Guardianship, Binding Death Nomination, insurance nominations and any reversionary pensions.
Do you need to appoint a new individual SMSF trustee or director to keep your SMSF compliant?
7. A change to the needs of your children or grandchildren
Review your will and look at Testamentary Trusts or Special Disability Trusts. Last thing you want is for your beneficiary to lose their Disability Pension because of an inheritance.
8. A material change in your financial circumstances.
Have you sold or transferred assets that would have formed part of your estate? Make sure you have not mistakenly left someone with nothing.
If you have been bankrupted or considering filing for bankruptcy then you will not be able to continue as a member of your SMSF. You need to look at rolling to a Small APRA fund or a retail fund.
You also need to have your own parents if still with us to reconsider any direct inheritances to you as your creditors may grab them.
9. A breakdown in a relationship with relatives or friends who you may have appointed as:
the executors of your estate;
beneficiaries under your will;
guardians of your minor children; and/or
your attorney or your EG
10. The decline in health or some other change of circumstances
For example bankruptcy of a child (let’s face it, everyone under 30 thinks they are an entrepreneur and that’s going to lead to trouble!) so that, for example, a beneficiary under your will may no longer be able to manage their own finances,
The person you appointed as your executor, your attorney or your EG may no longer be suitable or capable of administering your estate or managing your affairs or making personal decisions for you.
If it is you or your spouse who have been diagnosed with onset of dementia or Alzheimer’s for example then you need to decide if you should have your EPOA step in now rather than later to help manage your self managed superannuation fund.
11. Retirement
Retirement often results in people restructuring their affairs. This is an ideal time to be proactive in your estate planning and possibly consider setting up tax effective arrangements through your will that you have not done previously.
Have you started a pension in your SMSF? Have you documented it properly including a reversionary pension election or Binding death nomination?
Have you sold assets like a business premises or investment property previously allotted to someone specific in your will? Are they losing that benefit!
When any of these events occur, you should review your SMSF and estate planning documents and, if necessary, create new documents taking into account the relevant change of circumstances. Don’t be afraid to ask advice but make sure you are dealing with a specialist in each area.
If you have been paying attention you will notice I said “12 Triggers”. Well I’ll leave the 12th for you to add in the comments section below. Come on I must have missed a few and I know some really sharp minds read this blog so help us out! I will add the best one to this list after a month or add my own, so why not subscribe to the blog in the “Free email updates” section on the left hand-side of the page.
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
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.
Adapted from an original article “Time for an estate planning “check-up” by BWS Lawyers
Image courtesy of Stuart Miles at FreeDigitalPhotos.net
This guide has been requested by a number of our younger clients under 50 who are now taking an interest in retirement savings and tax planning but applies to all working SMSF members especially those who can combine Salary Sacrifice with a Transition to Retirement Pension. Please view this short ATO video on super contributions first and then we will go in to detail:
So what is salary sacrifice?
Salary sacrifice is an arrangement between an employer and an employee, whereby the employee agrees to forgo part of their future entitlement to salary or wages in return for the employer providing them with benefits of a similar value.
Contributions made through a Salary Sacrifice Arrangement (SSA) into super are made with pre-tax dollars, meaning they are not taxed at the member’s marginal tax rate.
They are treated as Concessional Contributions (CCs) and tax of up to 15% will usually be payable, so long as the member does not exceed their CC cap. Higher income earners may have CCs within the cap taxed at 30% (refer to our article Will you be paying the new top up tax on your SMSF contributions? )
The difference between your marginal tax rate and the tax rate on contributions is what makes up the benefit of salary sacrifice for the member of your fund. This has nothing to do with investments, it is just income planning and using the tax system legally to your advantage.
Unlike Superannuation Guarantee (SG) or other employer contributions required under an award or workplace agreement, there is no legislative time-frame specifying when salary sacrifice contributions must be made to superannuation. It’s recommended that a time-frame be specified in the SSA. This could be, for example:
at the same time as SG is paid, or
within three business days of being withheld from salary.
An SSA is only valid until the person turns age 75. Salary sacrifice contributions generally cannot be accepted by a super fund after 28 days from the end of the month in which the member turns 75. Only mandated employer contributions can be made for an employee age 75 or older (SIS Reg 7.04).
What makes a Salary Sacrifice Arrangement (SSA) valid?
There is no legal obligation for employers to offer salary sacrifice to employees. To be effective, only prospective earnings can be sacrificed. This means an SSA will only be valid if there is a prospective agreement in place before the employee has earned the entitlement to receive the relevant amount as salary and wages.
Remember, there is no requirement for an SSA to be in writing, nor is there a standard SSA. It is strongly recommended that a written agreement be in place which states the terms and conditions of that agreement. The ATO provides a detailed explanation in tax ruling TR 2001/10.
What forms of income can be salary sacrificed?
Salary or wages are the most common types of payments that are sacrificed into super. As only future entitlements can be sacrificed, an effective arrangement can’t be made for salary or wages that have already been earned.
This means payments to which an employee is already entitled to (such as earned salary and wages, accrued leave and bonuses or commissions already earned), cannot be salary sacrificed into super unless an effective arrangement was in place prior to the employee becoming entitled to that remuneration. For example, annual and long service leave paid on termination of employment can’t be sacrificed.
If an employee has entered into an SSA and takes leave during employment, the SSA is still effective and salary sacrifice amounts can still be directed to superannuation.
What are the tax implications?
Amounts salary sacrificed into super under an effective SSA are not ‘salary and wages’ in the hands of the employee. Accordingly, employers have no PAYG withholding liabilities in relation to the payment.
Although the super contributions are a benefit derived due to employment, it is specifically exempt from Fringe Benefits Tax (FBT). However, this doesn’t extend to salary sacrifice amounts into another person’s super account (eg a spouse).
Super contributions made under an effective SSA are considered employer contributions for the purposes of the Income Tax Assessment Act 1997 and are deductible to the employer.
Usually, an SSA favours taxpayers subject to the higher marginal tax rates, as they pay just 15% contributions tax on the amount sacrificed into super (or 30% for high income earners). See this ATO video below for a short explanation of the Division 293 Tax
However, for taxpayers with incomes under the 19%( + 2% Medicare) tax rate threshold (currently $37,000), the marginal rate is not markedly different to the 15% tax payable on contributions by the receiving super fund for the sacrificed contribution.
A minor saving can still be made of almost 6% as Medicare Levy (of up to 2%) is not payable on the amount sacrificed to super.
An alternative strategy for lower-income earners is to make personal after-tax contributions to obtain a Government co-contribution of up to $500. Note: Salary sacrificed employer contributions do not qualify for the Government’s co-contribution.
What are the Centrelink implications?
An amount of salary voluntarily sacrificed into super is still counted as income for Centrelink / social security purposes. Contributions are assessed as income where a person voluntarily sacrifices income into super and has the capacity to influence the size of the amount contributed or the way in which the contribution is made reduces their assessable income.
Super contributions that an employer is required to make under the SG Act, an award, a collective workplace agreement or the super fund’s rules are not assessed as income for the member.
What issues should be considered?
Employer or other limitations
It is not compulsory for an employer to allow salary sacrificing, including amounts to superannuation. The first step is for the member to know is if their employer permits salary sacrificing.
Also, even where allowed, the arrangement under which the person is employed may impose limitations. This could be terms in a workplace agreement or award.
For example, some awards specify that a certain level of an employee’s package must be paid as salary. This would effectively place a limit on the amount that could be sacrificed to superannuation
Super Guarantee payments
Salary sacrifice amounts are treated as employer contributions. An employer may decrease an employee’s SG contributions when taxable income is reduced through salary sacrifice.
This is because the minimum amount of SG an employer is required to pay is based on the employee’s Ordinary Time Earnings (OTE). As entering into an SSA reduces an employee’s OTE, it will reduce the amount of SG that an employer is required to pay.
It is also the case that a salary sacrificed amount, being an employer contribution, could meet some or all of employers SG obligations. SMSF members should negotiate with their employer that SG payments are maintained at pre-salary sacrifice levels and include this in the SSA.
Example
Malcolm’s salary and OTE is $105,000 pa. He enters into an effective SSA to forego $20,000 of his salary for additional employer super contributions. Malcolm’s salary/OTE reduces to $85,000 for SG purposes and his employer is only legally required to pay 9.5% on this amount.
Malcolm should have negotiated with his employer to maintain the SG based on his original salary and the salary sacrifice amounts are made in addition.
Entitlements upon ceasing employment
As outlined above, an SSA reduces the salary component of a person’s package. This may also reduce other entitlements when ceasing employment (through resignation or redundancy) such as:
leave loading
calculation of leave entitlements, and
calculation of redundancy payments.
Members of your SMSF should ensure that they understand the impact of entering into an SSA. Where possible, the agreement should ensure no reduction in benefits. However confirmation from the employer is necessary.
Timing of employer contributions
There are clear rules governing an employers’ legal obligation to pay its contributions to a complying super fund either monthly or quarterly.
There are no such rules governing an employer to make a pre-tax voluntary contribution/salary sacrifice contribution into an employee’s super fund when the employee requests it. This means an employer can pay this contribution whenever they want.
SMSF members should include in the SSA the frequency of salary sacrifice contributions to super (eg the same frequency as salary payments).
Reportable employer contributions
Reportable employer super contributions (RESC) including salary sacrifice, are counted as ‘income’ for many Government benefits and concessions, such as:
Government co-contributions
Senior Australians tax offset
Spouse contribution tax offset
10% rule for making personal deductible super contributions
Medicare Levy Surcharge
Family assistance benefits, and
Centrelink and DVA income tests.
RESCs are not added back when calculating the low-income tax offset and Medicare levy.
Termination payments
Long service leave and annual leave paid on termination cannot be salary sacrificed, unless an effective SSA was put in place prior to the leave being accrued.
If termination payments are based on a definition of salary that excludes employer superannuation contributions, the employer can effectively exclude the salary sacrifice amount from the total salary on which these entitlements would be calculated.
As a result, the employee’s termination package would be reduced. SMSF members should ensure that the SSA does not impact on other benefits and entitlements.
Contribution caps
An employer is eligible for a tax deduction for super contributions made on behalf of employees, regardless of the amount.
There is also no limit on the amount that an employee can sacrifice into super. However, salary sacrifice amounts are counted towards the employee’s CC cap. Excess CCs are taxed at the person’s marginal tax rate plus a charge. See the ATO video below for more details
This effectively limits the tax-effectiveness of salary sacrifice to superannuation to the employee’s annual CC cap.
At the beginning of the financial year, it’s critical to review your SMSF member’s existing SSA to ensure they won’t exceed their CC cap.
For example, if a member has received a pay rise, they may now be getting higher SG contributions from their employer. They may therefore need to reduce their salary sacrifice contributions to ensure they don’t breach their CC cap.
Ongoing reviews may also be necessary as the member may receive a pay rise during the financial year or elect to salary sacrifice a bonus which impacts on the total CCs. As well as if the concessional contribution cap increases in future years or the client becomes eligible to use the transitional higher CC cap. We recommend a April or May review of contributions to make sure your SMSF members are under their caps and will stay so up to June 30th.
Checklist
While salary sacrifice can be a tax-effective way for people to save for retirement, there are a number of steps that should be taken to ensure it is properly implemented. The following checklist could be used to help ensure all the key issues are addressed.
1.
Check that the employer permits salary sacrifice
2.
Check on limitations placed on an agreement by employment conditions (eg award, workplace agreement, etc)
3.
Ensure agreement is for future earnings and valid
4.
Ensure other employment entitlements are not impacted by agreement (eg SG,
5.
Check available concessional contribution cap and ensure client will not exceed the cap
6.
Establish the agreement in writing (including timing of contributions)
7.
Review agreement and level of contributions at least on an annual basis (around
I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. 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 via Skype. Just click on the Schedule now link to see some 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.
Information sourced and valid as of February 2015 from ATO, BT, MLC, Challenger, SIS Act.
What if you are not sure a proposed investment ticks all the boxes?
While you should make your best effort to ensure that the SMSF investments in your fund are compliant with the legislation, it can often be difficult to tell whether a particular investment strategy would be compliant or not.
For example, an SMSF trustee would be able to acquire a property from a member if that property was deemed to be business real property (BRP) but while for most BRP it is obvious that it satisfies the definition like a stand alone warehouse, for other properties it is far from clear such as a retail shop with 2 residential units above it.
In this case, as trustee, you could either decide not to proceed with the acquisition or else they could seek further guidance. you should initially seek guidance from your fund Auditor and other adviser but you may often get a grey answer. While trustees always have the option of seeking legal advice, they also have the ability to go straight to the ATO to seek their opinion before entering the transaction.
The ATO can provide SMSF specific advice about the following topics:
investment rules including
an investment by an SMSF in a company or unit trust
acquisition of assets from related parties
borrowing and charges
in-house assets
business real property
in specie contributions/payments
payment of benefits under a condition of release.
You should use this service if you want specific advice about how the super law applies to a particular transaction or arrangement for a self-managed superannuation fund, but you cannot use this service for tax related questions so that is when you need to look for a Private Ruling.
Private Ruling for Tax Related Scenarios
As an SMSF Trustee, if you have a concern that your circumstances or those of the fund may put you in an unusual tax position, or that a particular financial arrangement doesn’t fit any known approach for tax purposes, or you simply wants to minimise the risk of an unanticipated tax outcome, you can apply for a ‘private ruling’ from the Tax Office.
A private ruling may deal with anything involved in the application of a relevant provision of the law, including issues relating to liability, administration and ultimate conclusions of fact (such as residency status).When you apply for a private ruling about an arrangement, you can also ask the ATO to consider whether Part IVA (general anti-avoidance rule) applies to the arrangement.
In fact a lot of the proposed SMSF projects or strategies we are asked to advise on do not have a clear definable answer. Specific advice is often required on unusual scenarios for contributions involving residency or the work test or benefit payments for those under age 65. Asking for a private ruling can be a good way to ‘test-drive’ a tax arrangement you may be considering, especially where the already existing information from the Tax Office doesn’t seem to adequately cover all the bases and you are concerned about the level of tax or penalties if you get it wrong.
You can apply for a private ruling on behalf of your SMSF yourself but I would recommend using your tax agent or tax law specialist (click here for access to the private ruling instructions, plus additional ATO guidance).
Each ruling is specific to the entity that applied for it, and only to the specific facts and situation considered by the ruling, and can’t be picked up as a standard by any other taxpayer. These are one-off decisions, made only about a certain set of circumstances, and they set out how the Tax Office views that situation.
Binding If you get a private ruling, and base your SMSF tax affairs on that advice, the Tax Office is bound to administer the tax law as set out in that ruling. But, if later, the ATO issues a public ruling and the tax outcome conflicts with the one in your private ruling, you generally have the choice of which one to apply.
A ruling made in respect of a particular tax law will be changed if that law is altered by legislation or by the result of a court decision. But it’s worthwhile remembering that if you follow a ruling’s advice, and that ruling is later found to have not applied the law correctly, that you’re protected from having to repay any tax that would have otherwise been owed, as well as interest and penalties.
If a private ruling affects one of your earlier tax assessments, the Tax Office will not automatically amend it unless you make a point of submitting a written request for an amendment.
But just because you apply for a private ruling doesn’t mean you are going to get one. The Tax Office can refuse if it thinks a ruling would prejudice or restrict the law, if you are being audited over the same issue, or if it deems your application to be ‘frivolous’ or ‘vexatious’.
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.
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.
I deal everyday with people’s money and more importantly their dreams. Often we have to question clients about what they really want out of life and yes we encourage responsible saving but also a balanced lifestyle to ensure they are healthy enough to enjoy retirement and wise enough to keep relationships strong to share that retirement with loved ones and friends. This is an excellent video that shows money and fame are not the be all and end all of achieving happiness in life.
What keeps us happy and healthy as we go through life? If you think it’s fame and money, you’re not alone – but, according to psychiatrist Robert Waldinger, you’re mistaken. As the director of a 75-year-old study on adult development, Waldinger has unprecedented access to data on true happiness and satisfaction. In this talk, he shares three important lessons learned from the study as well as some practical, old-as-the-hills wisdom on how to build a fulfilling, long life.
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
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.
I am always on the look out for interesting tips for clients and while this may not necessarily SMSF related, many of my readers are also involved in family or discretionary trusts. I came across a blog from Dr.Brett Davies at Legal Consolidated over the weekend and found it useful for my own circumstances so, with his permission, I am “paying it forward”.
In his blog Son lost the farm to his sisters – Family Trust guilty he explained how the best intentions of a person in setting out their wishes and division of their assets on death can be overturned by not understanding how control of assets is managed and passed on properly to the intended beneficiaries when dealing with companies and trusts. I’ll leave you to read the blog yourself but I will point out the key 11 issues Brett and his team identified from reviewing thousands of trust deeds over the last few years. Take the opportunity to review your trust deed and look for the ability:
For the Commonwealth Bank and other lenders:
· indemnify out of trust assets
· allowing conflict of interest under both statute and common law
· increasing the class of investments including exotics, warrants, derivatives and options
Allowing greater powers and methods of amending the trust deed
Improve Asset Preservation, strengthen bankruptcy protection and ensure no Partnership relationships
Changing trustee with minimum stamp duty, especially for land rich trusts
Managing Division 7A issues and avoiding automatic breaches
Change the vesting date pursuant to the new taxation cases
Change jurisdictions to allow forum shopping and ease of litigation
Change beneficiaries and classes of beneficiaries (but subject to CGT rules)
Allowing changes to the trust to be verbal and via minute or any other mechanism
to adapt the general ‘Streaming provisions’ based on ATO’s latest rulings:
· franking credits
· streaming different classes of income and capital for minors for deceased estates, life insurance and super funds
· attribution relating to distributing capital gain to beneficiaries
· Bamford Decision including defining ‘income’
· Loss Recoupment
to decide if the majority of Appointors should be able to take all the proceeds of the trust over the minority or not.
Maybe take this list to your advice team (solicitor, accountant and financial planner) and ask them to review your trust deed and estate planning to ensure you have a trust that can confidently meet your needs and manage your affairs for you while alive and for your ultimate beneficiaries. If you are not sure your legal advisers are up to it then ask us to put you in touch with Brett and his team at Legal Consolidated or to liaise with your current solicitor.
Looking for an adviser 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. Do it! make 2016 the year to get organised or it will be 2026 before you know it.
Please consider passing on this article to family or friends. Pay it forward!
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.
Image courtesy of Stuart Miles at FreeDigitalPhotos.net
There are many reasons to get a superannuation review especially if you are within 15 years of using your super funds more tax effectively (hint over age 45). A lot can be done to dramatically improve your retirement prospects given time. However if you leave it too late, the chances of making significant improvements are limited. Getting good financial advice can make all the difference to the quality of your retirement. You may not want a full advice service but you can just have a Superannuation and Insurance review. So here are a few reasons why a review could be one of the best decisions you make.
You’ve being putting money in to Super for over 20 years and not sure what it’s doing for you. You have more than one superannuation account and cannot keep a track of how them or how they are performing. Consolidating your accounts together could make keeping track of your savings much easier and moving house less of a hassle!
You may be considering adding funds or your tax agent may have recommended some salary sacrifice and you are suddenly more interested in getting value for money.
You may be interested and want to explore the use of a Self Managed Superannuation Fund known as a SMSF (its only one option but we can help you assess if it is right for you).
You may not be satisfied with the level of service and advice you are receiving from your superannuation company and/or your adviser if you are getting any at all. Many people receive no service at all but continue paying fees year after year. Is it time for you to step-up and demand advice, we invite clients for a review at least twice per year.
You are concerned that your super or multiple accounts may not be performing very well. Sadly, most people in superannuation schemes have little or no idea how their funds are invested or performing from one year to the next. Reports get thrown in a drawer because the jargon is mind bending!
You may be unsure how much risk you are taking with your superannuation investments. It is undeniable that in order to increase your nest egg value, some risk will need to be taken. However the risk you are taking may not be suitable for you and categories like “Balanced or Core” don’t actually mean what they suggest!.
And how about just getting general health check on your super and how it is performing.
Like many people you have accumulated lots of accounts over the years from various jobs ( I recently consolidated 12 accounts for a couple). It may be beneficial to consolidate them all together in one account (wait don’t rush in, review insurance and fees first).
Identify poor performing superannuation funds and move them to investments that have greater potential for growth or a more consistent return.
You may have an SMSF or Superannuation account sitting in cash and just don’t know what to do as you have lost confidence.
You may have multiple/duplicate insurance arrangements across many funds and be paying premiums for cover that may never pay out.
How a superannuation review works
You are likely to have one or more personal accounts and they could be an industry fund, an employer group plan, a personal retail account, or even a transition to retirement pension .
The first step is to complete a Risk Profiling Questionnaire; this is designed to help identify what your attitude to risk is and your comfort with different classes of investment.
The second step it to complete a Fact Find about your personal circumstances so that we have a full understanding of you current situation, your future goals and objectives.
The third step is to obtain full details of all of your current superannuation and insurance arrangements. We ask superannuation companies more than 15 questions, so that we get a full and complete picture of your current situation.
The fourth step is to complete a full and comprehensive analysis of your current arrangements, to identify if your super accounts are working as they should be, that insurance cover is valid and will protect you and your family and fees are under control.
Step five is to recommend a suitable investment strategy to move your Superannuation balance forward, should the review reveal that your existing accounts are not working as well as they should be.
Step six is to implement the recommendations, which may mean re-organising and consolidating your accounts into one super or even a pension fund.
And finally step seven is to keep your arrangements under regular review to ensure that it continues to perform and meet your objectives.
Want a Superannuation Review or are you just looking for an adviser 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. Do it! make this the year to get organised or it will be 2028 before you know it.
Please consider passing on this article to family or friends. Pay it forward!
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.
I know that many SMSF Investors manage their cash very carefully to eek out the best possible returns so this is just a warning for those that don’t fund share purchases until the last moment.
On 7 March 2016, the Australian Securities Exchange (ASX) is shortening the trade settlement period for Australian share market trades from three days to two days.
This means that SMSF investors buy and sell trades will settle one business day earlier.
The new Settlement Date will be the Trade Date (T) +2 business days. For example, if the order executes on Tuesday, settlement will take place on Thursday
Source: CommSec Adviser Services
When the ASX moves from a T+3 to T+2 settlement period, you will need to ensure that for buy trades, cleared funds are available in their settlement account one day earlier on the morning of T+2. You will also receive proceeds from sell trades one day earlier.
I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. 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 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
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.
So you have a great idea to move some assets to your SMSF but you want to stay within the rules and keep your fund compliant. Then you hit the jargon associated with Superannuation rules and regulations.
You need to understand who are “related parties” of your SMSF for two reasons, to ensure compliance with the acquisition from a related party rules and to determine the in-house assets.
A related party is defined in the Superannuation Industry Supervision) Act 1993 known as the SIS Act. This is the bible when it comes to Superannuation so you should save that link above. Anyway in the SIS Act sec 10(1) a related party is defined as:
Fund member
Standard employer-sponsor of the fund or
Part 8 associate of a fund member or a part 8 associate of a standard employer-sponsor of the fund.
Ok the first one is easy. Any member including you yourself is a related party.
Standard Employer
A standard employer sponsor of a fund is an employer who contributes to the fund due to an agreement between the employer and the trustee of the fund. These were common in the early days of SMSFs but largely non-existent now.
Where an employer only contributes to a fund due to an agreement between the member and the employer such as under a salary sacrifice arrangement, they will not be considered a standard employer sponsor.
If an SMSF has a standard employer sponsor, which would be uncommon, the relationship will be noted either in the trust deed or in an attached schedule to the deed.
Part 8 associate
Now prepare for a headache to hit you hard after reading this one.
Part 8 associates are broken down in the legislation to Part 8 associates of individuals, companies and partnerships. However, if there is no standard employer sponsor, we only need to examine the part 8 associates of the members who will always be individuals.
The part 8 associates of a member are:
a relative of the member (parent, grandparent, brother, sister, uncle, aunt, nephew, niece, linear descendant or adopted child of the member or their spouse or a spouse of the aforementioned)
other members of the SMSF (a person who is not a member but acting as individual trustee or director under an Enduring Power of Attorney is not necessarily a Part 8 associate)
a partner of the member (legal partnership, not ‘business partners’ i.e. company directors) and their spouses and children
the trustee of a trust the member controls and
a company sufficiently influenced by, or in which majority voting interest is held by the member and their Part 8 associates either individually or together.
A member of the fund will be deemed to control a trust where the member and/or their part 8 associates are:
entitled to a fixed entitlement of more than 50 per cent of the capital of the trust,
entitled to a fixed entitlement of more than 50 per cent of the income of the trust,
able or accustomed (formally or informally) to direct the trustees to act in accordance with their directions or
able to appoint or remove trustees.
A company will be deemed to be controlled by a member where the directors are accustomed or under an obligation to act under the instructions of the member and/ or their Part 8 associates or the member and/ or their part 8 associates have more than 50 per cent of the voting rights.
OK, so I warned you to beware of the headache inducing nature of dealing with “Part 8 Associates”. Was I right or was I RIGHT!
The best advice I can give you is to get advice before transferring assets and ask for the advice and get that advice in writing so all parties are sure of the scenario and no mistakes are made.
Are you looking for an adviser 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
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.
There has been a huge increase in Self Managed Super Funds being set up by people in their 30’s and 40’s according to ATO statistics, with 42.7% of new trustees under the age of 45. So I am going to address an issue that until now has rarely been mentioned with SMSFs strategies, as previously they were seen as the territory of crusty old men.
Maintaining momentum with your super during times out of the workforce
There finally seems to be a push on at the moment to improve the superannuation of all women in Australia. They have been lagging behind when it comes to their superannuation due to breaks in their careers as mothers or carers or because they have chosen professions that are crucial to the economy but underpaid. Statistics repeatedly show, women will retire with a super balance that’s almost half that of men. The problem of this lower level of retirement savings is compounded when you understand that women live longer and therefore need more not less super that their male cohorts.
Taking time to raise a family as a stay-at-home-mum or having part-time employment to allow for caring for a sick family member leads to loss of contributions in those critical early and later years of superannuation savings. Money that could have been invested in their 20’s or 30’s that would have compounded year on year up to retirement has been foregone. The women who also take on the burden of carer for their parents or ill spouse in later years can miss the boost in savings capacity when the mortgage has been paid off.
But what can you do for your super while we wait for politicians, business and unions to come up with a long-term solution. If you are in the position of having to take a break in your career here are five strategies for continuing to build your super during those years where employer contributions are not available.
Personal contribution to access the Government Co-Contribution
Pregnancy and illness rarely fall in line with financial years so as long as you have worked any period during a tax year you can contribute up to $1,000 of your own savings to super and also be eligible to receive a government superannuation co-contribution of up to $0.50 for every $1 of non-concessional (after-tax) contributions you make to your super account.
You will be eligible for the super co-contribution if you can answer yes to all of the following:
you made one or more eligible personal super contributions to your super account during the financial year
you pass the two income tests
your total income for the financial year is less than the higher income threshold($53,564 for 2019-20)
10% or more of your total income comes from eligible employment-related activities or carrying on a business, or a combination of both
you were less than 71 years old at the end of the financial year
you did not hold a temporary visa at any time during the financial year (unless you are a New Zealand citizen or it was a prescribed visa)
you lodged your tax return for the relevant financial year.
have a total superannuation balance less than the transfer balance cap ($1.6 million for the 2019–20 financial year) at the end of 30 June of the previous financial year
A spouse contribution is an after-tax super contribution made by your partner directly into your superannuation account. This is a good for both parties as you get a boost to your super and your partner gets a tax offset to lower their taxable income.
Your partner may be able to claim an 18% tax offset (maximum $540) on spouse contributions of up to $3,000 if:
the sum of your spouse’s assessable income, total reportable fringe benefits amounts and reportable employer super contributions was less than $37,000 from 1 July 2019
the contributions were not deductible to you
the contributions were made to a super fund that was a complying super fund for the income year in which you made the contribution
both you and your spouse were Australian residents when the contributions were made
when making the contributions you and your spouse were not living separately and apart on a permanent basis.
As is currently the case, the offset is gradually reduced for income above this level and completely phases out at income above $40,000.
For SMSF Trustees, make sure you clearly nominate in the reference or accompanying minute that this is a spouse contribution so the administrators can allocate it correctly.
Superannuation contributions splitting
This is a great way for partner to show commitment to maintaining your financial equality and showing taking care of family is a team effort. Contribution splitting which is fully explained in the linked article involves your partner directing a portion of their concessional superannuation contributions into your super account. The split occurs as a lump sum rollover and must be made in the financial year immediately after the one in which the contributions were made.
In any financial year, it is possible to split the lesser of:
Contribution splitting can be a highly effective way to build your super while you take a career break and can work even if you had done some work before the pregnancy in the tax year or if you worked part-time afterwards.
Within an SMSF you should just minute the request to split the contributions and confirm the receiving member’s eligibility and then pass that minute to the administrators or accountant. They may have template minutes available to make this easier.
Choose the right long-term investment strategy
If you are in your 20’s to early 40’s then you should not just accept the standard “core” or “balanced” asset allocation in your Superannuation fund. You have the right to choose your profile and especially as an SMSF trustee. With the preservation age of 60 and likely to rise towards 65 or 70, you should be choosing an investment asset allocation that is growth or high growth orientated to make the most of compounding returns on growth assets like shares and property during those earlier years.
Of course if you personally cannot take on that much risk without worrying then you may need to be more conservative but with some guidance and education on long-term returns and investing I believe you can step up to the higher allocations to shares and property confidently.
Personal Non-concessional contributions
Now this one may be a stretch as when you have had a baby or are caring for a sick family member, you may not be flush with savings or may be focusing on paying off the mortgage. However ,if you do have a surplus, then boosting your retirement savings with personal contributions is a good move.
Non-concessional super contributions are made by you out of your take-home (after-tax) pay, savings or for example an inheritance. You can add as little as you wish and whenever you wish subject to a maximum of $100,000 in any one year from 1 July 2017 or $300,000 if you are so lucky! using the 3 year bring forward rule.
The first $1,000 may be assessed for the government co-contributions as mentioned above, further boosting your savings.
So if you are one of the new breed of younger SMSF trustees who has to take time out for family or health reasons, you are not alone. You can maintain momentum with your super and use some or all of the above strategies to ensure your Superannuation powers ahead during time out of the workforce.
Budget 2016 had some positives for those with broken careers and one will be that you will be able to use unused contributions over a rolling 5 year period to play catch up on concessional (SG and salary sacrifice) contributions from 1 July 2018.
Are you looking for an adviser 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
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.
Image courtesy of Stuart Miles at FreeDigitalPhotos.net
I know plenty of people prefer video content when learning so when colleagues at Eviser.com.au (free trial still running) sent me a short video link on “sloth” as an “Investment sin” I did a bit of searching and came across the whole series of these short videos below from Aberdeen Asset Management’s “Thinking Aloud” website I thought they were excellent and worth sharing to Self-Managed Super Fund Trustees. Their preface to the video series says “Don’t be led astray or make decisions for the wrong reasons.” So I encourage new and experienced SMSF Trustees to watch Aberdeen Asset Management’s guide to the seven deadly sins of multi-asset investing narrated by Joanna Lumley below
Multi-Asset Investing – Sin 1: Lust
Tip: Seeking immediate satisfaction can encourage impatient and shortsighted behavior. While a short-term view has its place, an overall less lusty approach, weathering up’s and down’s, can prove to be more fruitful in the long term.
Multi-Asset Investing – Sin 2: Gluttony
Tip: When it comes to information, less is very often more. Having the discipline to screen out market noise is likely to be key to rich investment pickings.
Multi-Asset Investing – Sin 3: Greed
Tip: Whether its equities, bonds or property, if everyone is rushing to invest, it’s probably best you don’t. The greed of the herd should always be treated with caution, take a breath, be patient. It may take a while for others to come round to your point of view, so wherever you invest, invest for the right reasons.
Multi-Asset Investing – Sin 4: Sloth
In investment, there are few shortcuts. Understanding what you’re investing in means doing the hard work, even though it’s rarely the quickest way. Only once due diligence has been done, can you truly rest comfortably.
Multi-Asset Investing – Sin 5: Wrath
Tip: When markets are plummeting and everyone is selling, it’s easy to panic, but if your portfolio is properly diversified, you can afford to be an oasis of calm. Keep a portfolio of varied assets, and you’ll be able to withstand the wrath and unpredictably of the markets.
Multi-Asset Investing – Sin 6: Envy
Tip: Imitating the index is the poorest form of flattery. Benchmark hugging is driven largely by fear. Instead of investing in assets which have just done well in the past, you should invest in those that offer the best potential for future returns.
Multi-Asset Investing – Sin 7: Pride
Tip: As we know, pride can become before a fall. Overconfidence and ignoring the warning signs can be fatal. Investors often make the same mistakes over and over again.
Are you looking for an adviser 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
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.
If you want to add the ultimate in flexibility then look a the use of a Self Managed Superannuation Fund ( SMSF ) to allow access to a greater range of investment options for your pension, with the flexibility you need and the control you want!
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
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.
Stepping out of my comfort zone and doing some video as I am told that is what people are looking for now. I am fine when I do TV, Seminars or meetings as they are live and not scripted.
I have always been more comfortable with just speaking my mind than trying to follow my own scripted content or reciting. Takes me back to my childhood Religion class in the Christian Brothers School in Ireland when I struggled to stand up and recite the Hail Mary (a prayer we said many times each day but when I had to stand up an recite on my own I would blank and be chastised by the Brother Kenny for my lack of religious conviction). I know now that I am a story-teller and a good listener but not good at recitation!
Dave Power and his team from Power Creative let me have a delicate balance by guiding the conversation but letting me ad-lib. Hopefully the message gets through that we love helping clients achieve their goals and dreams.
If you want to add the ultimate in flexibility then look a the use of a Self Managed Superannuation Fund ( SMSF ) to allow access to a greater range of investment options for your pension, with the flexibility you need and the control you want!
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
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.
Image courtesy of digitalart at FreeDigitalPhotos.net
With all the talk of the government bringing out rules to tax superannuation or limit balances, I have been having some very interesting conversations with colleagues and clients, especially those whose retirement savings are expected to be in the $600,000 $900,000 level.
Many are conservative investors and would hold 30-40% of these funds in Cash and Term Deposits normally, which at current levels would earn them 2.0-3.1% at best.
They are concerned that they may not qualify for the Age Pension when the Asset Test limits apply in 2017 or lose a substantial portion of what they currently receive. Further they don’t trust that the rules for the Commonwealth Seniors Health Care card won’t tighten further so that offers no solace. Now with the added worry that the government may tax or tighten superannuation pension rules and affect them, they are looking for some alternatives that offer more security.
So I did the figures on one option I had discussed with my colleague Richard Livingston at Eviser.com.au (our online General Advice service). I looked at a couple who are currently retired and have $850,000 in assets that for example purposes are all deemed and of which $400,000 is in Term Deposits.
They currently receive $6,104 each of Age Pension per year which has helped them as the rates on their Term Deposits have dropped significantly in the preceding 5 years. The problem is that with the new asset test in 2017 they will lose that Age Pension completely or $12,208 as a couple per year.
The table below summarises these changes and the likely impacts for a home owning couple:
Table 1: Age Pension Asset test changes and impact on our clients
Asset test threshold
Couples -Home Owners
Impact on combined pensioners increase (decrease)
Announced lower threshold
(current threshold)
$375,000
($286,500)
$49 pf or $1275 p.a. extra
Announced Cut-off threshold
(current cut-off threshold)
$823,000
($1,151,500)
($510) pf or ($13,260) pa
Calculations are based on pension rates as at 20 September 2015.
Strategy to both secure some Age Pension and provide a better return that Term Deposits.
Note: this is not a recommendation to implement this strategy and you should seek personal advice before doing anything like this with your savings.
So what if instead of keeping $400,000 of their funds in Term Deposits as they currently do, they put that $200,000 in to a value adding extension to their current home (say a kitchen or extra bathroom and bedroom extension). To be clear, THEY DO NOT NEED THE EXTRA ROOM!.
Well even at the best current Term Deposit Rates, say 3%, they would lose $6,000 per year in investment income. However as their assets for Centrelink Age Pension purposes have now dropped from $850,000 to $650,000 their Age Pension would increase to $10,004 each per year until January 2017 and they would receive $6,747 each or $13,554 as a couple from 2017 onward based on current rates.
Can you see the perverse nature of using this strategy. They reduce their assessable assets by $200,000 and probably add significant value to their home if a smart extension is done while at the same time getting over $13,554 from the Age Pension as opposed to only foregoing $6,000 of investment income.
So instead of the 3% return on that Term Deposit they are getting a 6.78% per year return plus potential for increased value in their property going forward.
Is this really what we want to see? Clients refusing to downsize or actually pumping more of their savings in to their family home which is exactly what the country does not need in terms of housing affordability issues.
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
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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The SMSF Coach 