Liam Shorte

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All posts tagged Self Managed Superannuation Fund

The Hidden Value of Great Financial Planning

Following on from my own article on our main VERANTE website called Services We Provide as Professional Financial Planners I read a great white paper from a UK not-for-profit organisation called Sensible Investing who are committed to promoting clear, concise and independent information about investing and, specifically, the benefits of evidence-based (or passive) investing. I asked for permission to share the ideas and so here is a guest blog from them. A long read but a worthwhile read for anyone doing long-term planning and needing to understand what a financial planner can add in terms of value.

A man who does not plan long ahead will find trouble at his door

Confucius

The equation between the value that a client receives and the fees that they pay needs to make sense. Yet, because the benefits of good advice often materialise in the far-off future, it is sometimes easy to miss, or dismiss, the value received along the way. Market noise, emotions and periods of what may seem like inactivity on an adviser’s behalf, can also impact on the perception of value. This volume of Acuity is a reminder of the seen and, as importantly, the often unseen or unappreciated value that a great financial planning firm can deliver to its clients.

Financial planning: the world’s best kept secret

As you are reading this, we can assume that you are one of the few, lucky people who have discovered proper, lifelong financial planning. Almost everyone worries about time and money, what the future may hold, and the decisions and choices that they face; yet few realise that financial planning is the key to sorting it all out. In the bad old days, people went to IFAs for help and in all likelihood got sold a bag of commission-laden products under the pretext of ‘advice’. Fortunately, today, a small group of high quality, local, boutique financial planning firms has emerged providing truly great financial planning.

The problem is that most people don’t know what ‘financial planning’ is or understand how valuable it could be to them. Instead of trying to define what financial planning is in a few choice words, it is probably more useful to think about it in terms of the questions it answers. Here are some examples:

Lifestyle worries

• What does the future hold?
• Will we be able to maintain our current standard of living when we retire?
• When will I/we be able to retire safely?
• Will we need to downsize the house to survive?

Money worries

• How much is enough?
• Will we run out of money?
• Can we manage financially if one or both of us needs long-term care?
• Can we afford to put our children through private school?
• Can we have more holidays?

Money and life challenges

• What happens to my partner if I die? Will they be alright?
• What happens if the markets deliver really poor returns?
• How can we help out the children and grandchildren?

Good financial planning helps to resolve these kinds of questions. It helps people feel confident that they have the financial flexibility to survive whatever life and the markets may throw at them. It is also comforting for them to know that they have a trusted finance professional on hand, who intimately understands their family’s circumstances and goals, and who will monitor their finances over time and help them to make the tough decisions that they will inevitably face along the way. That’s the true value of financial planning. Cash flow models, sensibly structured portfolios, tax efficiency and contingency planning
are simply the tools that experienced planners use to help them to build and maintain the working plan.

In exchange for the financial planning service, clients pay an annual fee. It is often easy to appreciate the value received in the first year, and easy to forget or appreciate the value on an ongoing basis. The financial planning relationship can be broken down into three
key phases of value.

Value phase 1:

Sorting out the mess and building the plan

New clients often arrive with a proverbial suitcase of bits and pieces collected over the years, such as a number of pension plans, with-profits bonds, endowment policies, life insurance and a stock broker or IFA managed portfolio. They invariably have concerns about what the future holds, and have a strong desire to get their finances in order. Some do not have a clear vision of what they want their future to look like, whilst others lack the confidence that the suitcase full of products will get them there. That’s a stressful place to be.

The first and most vital step is to help clients to set out their vision for the future, both in terms of lifestyle goals and the money needed to fund them. Understanding how important it is that they are achieved is critical. Next comes the analytical work, which may involve using cash flow modelling tools to gauge the magnitude of the gap between the client’s vision and the financial reality (or to plan a range of possible scenarios).

In some cases, the two may be close. In others the gap may be wide. For some this may mean tough choices: saving more, retiring later, downsizing the house or leaving less for the children. For others, this might mean the chance of actually spending more, gifting money early or pursuing philanthropic interests. Empowering clients to make sensible choices is the objective of the planning process.

The resulting ‘plan for the future’ becomes a joint effort between client and planner. The overall strategy is agreed and recommendations are made to reposition the affairs of the client, potentially across a broad range of areas including asset allocation, investments, tax, wills and contingency planning. Once sorted, the client is then back in control of their future and their finances. The actual implementation can be complex, detailed and time-consuming for the financial planning team, as dealing with product companies can be a tortuous process! The value received is easy to see and even sometimes quantifiable,
such as the measurable benefits of restructuring to reduce Inheritance Tax liabilities, other taxes or reducing costs.

Value phase 2:

Plan progress and progressing the plan

Financial planning is not a ‘set-and-forget’ process; far from it, in fact. Regular review meetings help to provide clients with an insight into how things are going relative to the plan. They are also an opportunity for the client to raise issues or discuss changes to their circumstances, and for the financial planner to raise concerns about the progress of the plan and if there are any decisions that need to be made or actions taken. Reviewing past progress is important, but backward looking.

What is more important is the future and how the plan needs to progress from this point forward. Some issues and consequent decisions faced may relate to events in the client’s life, or may be more technical issues that sit in the financial planner’s jurisdiction. The latter may relate to things like new investment ideas or solutions, changes in pension or tax law, and refinements to the long-term portfolio strategy (remember that the true value when it comes to investing lies not just in the initial structuring of a robust portfolio, but the adviser’s role as a foil to avoid the truly dangerous combination of investor emotions and bad, yet often tempting, investment ideas). On some occasions, there will be little new to report, but that does not mean that no value was received: the financial
planner is out there reviewing, analysing and interpreting a wide range of different issues and challenges on the client’s behalf. Clients have better things to be doing with their time!

Over the many years that a client maintains a professional relationship with a financial planning firm, some may be quite uneventful, but they can always be confident that they remain on track and that their adviser has his or her eyes and ears open to issues that may affect them or are of concern and need to be flagged. There will be times when events are momentous, either in the client’s life (divorce, ill-health, an unexpected inheritance or triplets) or in the planner’s world (the markets falling precipitously, as they will do from time to time, or the Chancellor’s new pension regime, for example). Understanding the issues faced, finding a solution that makes sense, facilitating decisions that need to be made and having the fortitude to execute under pressure, is where great financial planners come into their own.

Value phase 3:

Long life, death and immortality!

There are also some more subtle areas of the value of a long-term relationship with a trusted financial planner. For many people, living longer is a two-edged sword. On the upside, we can all now expect to live materially longer than our grandparents’ generation. In fact it has been estimated by the Office for National Statistics that 8% of men and 14% of women age 65 today are projected to live to 100. On the downside, we also know that with longevity comes attendant health problems, not least the rise in dementia. It is a very distressing and worrying time when someone falls ill and often many life and financial decisions need to be made at this difficult time. A financial planner, who has arranged for powers of attorney to be prepared long before they are needed, and who knows the
family and their financial circumstances well, is well-placed to provide advice, support and to facilitate the financial consequences of the new change in circumstance at these stressful times.

Many clients – often one of a couple who takes more interest in the finances than the other – worry about what will happen to their partner on their death. Having a trusted financial planner (and an up-to-date plan), allows them to be confident that, in the event of their death, their partner will be well cared for financially and that their affairs are in order. Probate too, is a far easier process when everything is organised.

Most people would like to feel that they will, in some way, leave behind a lasting legacy. For some, that can mean spending time and money supporting their philanthropic works and for others it may mean passing on wealth from one generation to the next. The proposed changes in pensions legislation have created an opportunity to pass on wealth to future generations in a tax effective manner, for example. Again, financial planners can play an important role in helping clients to make decisions surrounding such issues.

In conclusion

It is easy to forget when you meet with your financial planner for your annual review meeting that the scope and value of the relationship is far deeper and more important than worrying about the 12-month market noise that has resulted in your portfolio going up and down, or the fact that neither your portfolio nor the plan has changed much. Meeting your goals, feeling confident in the future and having the time to enjoy the opportunities that your money provides you, your family and your community are what really matter.

Delivering ‘peace of mind’ may sound a bit trite, but that is the goal, consequence and value of great financial planning.

For access to the White Paper and some other great articles from Sensible Investing visit http://sensibleinvesting.tv

Turned 65 this year? Superannuation Contribution Rules, Limits and Traps

I have had three calls this week on the subject of making contributions for people who turned 65 this year and want to make non-concessional (after tax) contributions to their funds. I have had to tell one to reject the contribution already made. one to go do some work and the other to relax. The lessons to learn are; do not listen to friends, don’t rush in and seek professional advice from your accountant, financial planner or if you are really smart a SMSF Specialist Advisor™.

Get advice – Get it right

GENERAL INFORMATION ONLY: DO NOT RELY ON THIS CONTENT FOR YOUR PERSONAL SITUATION – GET PERSONAL ADVICE.

If you are 64 then you can still make a contribution of up to the $300,000 max up to June 30^thas long as long as you have not triggered your “bring forward” cap previously or exceeded your Total Super Balance Cap.
If you have turned 65 this year already then you can still make a contribution of up to the $300,000 max up to June 30^thas long as you meet the work test this year (40 hours in 30 days) or if you meet the criteria for the Work Test Exemption which applies from 1 July 2019. Again you must not have exceeded your Total Super Balance Cap
If you have turned 65 this year already and have not met the work test yet, then you cannot make a contribution until after you meet the work test this year (40 hours in 30 days).

So here is how each of my callers found my advice essential to making their decision.

Client 1

He turned 65 in January 2018 and had fully retired but made a large contribution on the basis he would be managing their son’s business for 2 weeks in June 2018 and would meet the work test easily. As he had not met the test at the time of contribution I had to tell him as SMSF Trustee, he had to reject the contribution and return the funds to his personal account. They can contribute the funds in late June after meeting the work test.

Client 2

He is fully retired and turned 65 in March and at least called me before making the contribution. He has not met the work test yet but has an offer of part-time work in the “Big Green Shed”. Great way of meeting the 40 hours in 30 day Work Test and I personally would probably pay them to work there as I spend so much time and money in there already.

Client 3

She is still working but turns 65 next week and sent through an urgent request to sell down shares in her personal name and so I called to ask why and “her friend had told her she could not use the bring forward rule after her 65th birthday.” So she had panicked and decided to sell down what are excellent shares but with huge capital gains. I had to tell her to relax and take a breath! We have a term deposit maturing in the May and can use that to make the contribution and avoid the estimated $300,000 CGT on the sale of the shares. As she running her own business, she has met the work test and can make her $300,000 contribution anytime up to June 30th 2020 as long as she does not exceed her Total Super Balance cap..

So here is a breakdown of the specific contribution rules applying at various ages.

If you turn 65 in a financial year the question of whether you are able to make a contribution to superannuation depends on:

• the amount you wish to contribute;

• whether you wish to claim a tax deduction for all or some of the contribution;

• whether you need to meet a work test during the year;

• whether you are under your Total Super Balance Cap.

Here are some tables that put it all together.

Table 1: Non-concessional Contributions

Age at the beginning of the financial year	Work test or Work Test Exemption to contribute?	Maximum non-concessional contribution without penalty
Less than 64	No	As long as you have room in your Ttoal Super Balance cap, $100,000 standard non-concessional contribution; $300,000 two year bring forward rule is triggered if greater than $100,000 has been contributed in year 1.
64	Only required if age 65 when contributing	As long as you have room in your Ttoal Super Balance cap, up to $300,000 if two year bring forward rule is triggered.
65 and up to the person’s 75th birthday*	Yes	As long as you have room in your Ttoal Super Balance cap, $100,000 standard non-concessional contribution.

Table 2: Personal Concessional Contributions*Once a person reaches 75 they can contribute up until 28 days after the month in which they turn 75.

Age at the beginning of the financial year	Work test or Work Test Exemption to contribute?	Maximum concessional contribution without penalty
Less than 64	No	$25,000
64	Only required if age 65 when contributing	$25,000
65 and up to the person’s 75th birthday*	Yes	$25,000

So what is the WORK TEST EXEMPTION?

Work test exemption (applies form 1/7/2019)

Allows an individual’s super fund to accept voluntary contributions made by individuals ages 65 to 74 for an additional 12-month period from the end of the financial year in which they last met the work test, subject to their total super balance being less than $300,000.

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

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

7 Comments

by SMSF Coach - Liam Shorte on April 13, 2015 • Permalink

Posted in Contribution Strategies, Trustee

Posted by SMSF Coach - Liam Shorte on April 13, 2015

https://smsfcoach.com.au/2015/04/13/turned-65-this-year-superannuation-contribution-rules-limits-and-traps/

Tips for Positioning Your SMSF Portfolio for Volatile Times

SMSF Portfolio Management

I am becoming increasingly cautious in the portfolio guidance for clients in the current market where very low interest rates have driven equities and property higher, faster and seemingly without any concern for lack of underlying sustainable growth in earnings.

From what I am reading and from listening to market commentators we are probably going to see the domestic, European and USA share markets thrive over the coming months but the chance of a entrancement has increased significantly for different reasons. Here it is low-interest rates driving our market and alone that is dangerous without economic growth. In the US they also have very low rates but they have a recovering economy which underpins the growth in share prices there as companies improve earnings but if the cost of servicing debt rise that will affect the share market. In Europe they have just started Quantitative Easing (money printing) so easy access to capital will spur on their share and property sectors but that may set them up for more pain in the long-term if they don’t see sustained spending and growth in their economies.

There is plenty of talk of a pull back in share markets when the US Federal Reserve starts increasing its interest rates. We probably already see the first one or two rates priced in to the market and hence the current volatility so it maybe the third or fourth rise that causes a share market pull back.

So how can a SMSF trustee prepare for a short to medium term change in market sentiment and a possible 10-20 per cent drop in markets.

For our clients we are retaining our long-term strategies but reviewing asset allocation. Taking the basic advice to “Sell High Buy Low” but in a gradual movement over 6-18 months. Basically banking some of the profits and re-balancing portfolios with an eye to future volatility.
We are dampening down return expectations: After a sustained period of decent returns post GFC we know share and property markets will revert to the mean as explained by Roger Montgomery in a recent Cuffelinks Article This is mean (-reverting that is) so we are going back to focusing clients on the outcome they were seeking such as a 6% net return in retirement funding a 5% pension drawdown.
Not chasing “Yield” stocks. We are spending a lot of time explaining to clients that you can lose on capital value on “blue chip yield” stocks. Most already have a decent exposure so we are just asking them to be patient and look for opportunities on the dips.
Educating clients that higher volatility will be the norm for a prolonged period: As global interest rates start to revert to their long-term averages this could easily trigger capital losses in the bond markets so not to be complacent about exposure to any sector even if labeled “Defensive”.
As Roger Montgomery mention in the article above “Cash is Ammunition” so we are recommending building cash reserves to capitalise on opportunities from market corrections. Yes rates are low but a good purchase on a dip can swing the return balance significantly in your favour. Patience!

Traditionally, May and June are statistically volatile and weak months as investors review risk exposure, do some tax loss selling as they approach the end of the financial year. There is a market adage “Sell in May and go away” which although not a certainty, does have a history to be aware of when positioning portfolios. Here is a great article by Marcus Padley from 2009 but still relevant that explains this phenomenon in good detail: Sell in May and go away.

Sell in May and Go Away

We are not suggesting exiting portfolios but we are are recommending sitting on the fence ready to buy on significant dips rather than just buying into the current market and diversification and asset allocation is key at present.

I would love to here other’s sentiments so please take the time to comment below with your own strategy, tips or critique.

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

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Leave a comment

by SMSF Coach - Liam Shorte on April 9, 2015 • Permalink

Posted in Investment Strategies, SMSF Management

Posted by SMSF Coach - Liam Shorte on April 9, 2015

https://smsfcoach.com.au/2015/04/09/tips-for-positioning-your-smsf-portfolio-for-volatile-times/

55 No Longer Target Age for Transition to Retirement Pension Strategy

The milestone for when you reach preservation age and can access your super is now starting to change. The gradual move from 55 – 60 for access to Superannuation has begun.

If you are already over 55 then you can ignore this blog and you should be reading Understanding transition to retirement pensions

If you are over 59 and not in a Transition to Retirement pension then you really need to read this article Aged 59 – 64 and not on a Transition to Retirement Pension – SHAME ON YOU

For those approaching 55, listen up! As we approach 1 July 2015, we encourage you to check if you have met your preservation age requirements prior to planning for the new tax year. You may finally be able to make the most of the superannuation and tax systems and open up some lifestyle options for yourself like reducing work hours or pursuing an alternative career while maintaining a steady income stream.

However if you have not met your preservation age, you may not be able to:

open a Transition to Retirement (still working) or Account Based (met other condition of release) Pension Plan account;
withdraw a lump sum super amount (fully retired); or
process a contributions splitting request.

From 1 July 2015, your preservation age can range between 55 and 60 years of age, depending on your date of birth.

Your preservation age is determined using the following table:

Date of Birth Preservation	Age	Preservation age reached in year:
Before 1 July 1960	55	2014-15
1 July 1960 – 30 June 1961	56	2016-17
1 July 1961 – 30 June 1962	57	2018-19
1 July 1962 – 30 June 1963	58	2020-21
1 July 1963 – 30 June 1964	59	2022-23
After 30 June 1964	60	2024-25

Using a Transition to Retirement Pension means you can move your funds to Tax Free earnings phase, draw a tax efficient pension and use salary sacrifice at the same time to build a bigger nest egg for retirement. All without reducing your net take home pay! The other option is to use the TTR to reduce your working hours and supplement your lower earnings with a small pension and really transition to your retirement as the strategy intended.

Either way if you are over or approaching your retirement age then speak to a well rated financial adviser as there are a number of very clever strategies around pensions, tax and debt recycling that they can use for you now that you are UNPRESERVED!

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

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

1 Comment

by SMSF Coach - Liam Shorte on April 1, 2015 • Permalink

Posted in Pension Strategies, Tax Planning

Posted by SMSF Coach - Liam Shorte on April 1, 2015

https://smsfcoach.com.au/2015/04/01/55-no-longer-target-age-for-transition-to-retirement-pension-strategy/

SMSF Loan Arrangements that Contravene Super Laws. SCAM ALERT

With low interest rates and a struggling economy people are often tempted by early release or get rich quick schemes that are promoted on glossy brochures and may look genuine but can destroy your retirement if they go wrong.

This is an excerpt from a speech by Matthew Bambrick, the ATO’s Assistant Commissioner for SMSF Segment of Superannuation to the Tax Institute.

SMSF loan arrangements that contravene super laws are also on our radar at the moment. We’re concerned that some organisations are promoting arrangements where SMSF assets provide members with a current-day benefit using vehicles such as pooled investment trusts. Put simply, an organisation invites SMSF members to invest their fund’s assets in a pooled investment trust type of product where the scheme operator draws a commission and if this condition is met, monies from the trust can be accessed as a loan by the fund’s members.

This is a simple form of such an arrangement but there are variations such as offering fund members’ relatives an opportunity to apply for a partial mortgage to cover the value of an asset and then invite their family to use their SMSF benefits to invest in a pooled investment trust. Their relatives can then be granted a second mortgage to further finance their investment.

We encourage anyone who has been approached to invest their SMSF monies into a trust, company or investment product and then offered some or all of that money back as a loan, to seek independent, professional advice before proceeding.

Keep an eye on our website as we’ll be publishing more information about these arrangements in a future edition of SMSF News

So we are back to the basic advice that if it seems to good to be true then it is very likely to be a scam or carry high risk of penalties and drawing the ire of the ATO.

If in doubt contact a SMSF Specialist member of the SMSF Association in your local area or drop me a line with some detail for an initial feedback. We can usually easily spot a scam

I will also be updating readers on any scams or “arrangements” that they should be aware of. If it sounds too good to be true then Google the promoters and search for “complaint” “alert” “scam” associated with that name.

The full transcript of the speech covering a number of relevant issues is available here

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

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

1 Comment

by SMSF Coach - Liam Shorte on March 23, 2015 • Permalink

Posted in Scam Alert, SMSF Management

Tagged ato, Baulkham Hills, Castle Hill, DIY Super, Dural, early release, fines, Fraud, Hawkesbury, Investment Strategy, protection, scam, scam alert, schemes, Self Managed Superannuation Fund, smsf arrangement, smsf scheme, superannuation, Trustee

Posted by SMSF Coach - Liam Shorte on March 23, 2015

https://smsfcoach.com.au/2015/03/23/smsf-loan-arrangements-that-contravene-super-laws-scam-alert/

How to Qualify for the Commonwealth Seniors Health Card

Deeming Rates have changed again and so that makes it a little easier to access the Commonwealth Seniors Heath Card (CSHC) so I thought I should revisit the way you can access this valuable benefit.

A key change to legislation that commenced on 1 January 2015 impacts the Commonwealth Seniors Heath Card (CSHC) Income Test. Previously the Income Test only looked at a person’s adjusted taxable income, however the new rules include deemed income from account-based income streams. This may mean higher assessable income for some, making them ineligible for the card. For others, it may mean the loss of the card under certain situations from 1 January 2015.

It is important that SMSF Trustees and Self Funded Retirees in general understand how these new rules work and how they can impact them in different scenarios so that appropriate adjustments can be made to their strategies where necessary.

So here in this guide, we look at the rules around the CSHC as they apply from 1 January 2015 and the implications on different client situations. We will also explore options available to those effected from 1 January 2015 that can help them obtain or retain the card.

The benefits

The CSHC is designed to assist eligible self-funded retirees with certain medical and prescription costs. A summary of these concessions and other benefits available to card holders are as follows:

prescription medicines at concessional rates through the Pharmaceutical Benefits Scheme (PBS)
access to PBS prescriptions, generally without charge, for the remainder of the calendar year after reaching the PBS Safety Net
bulk-billed doctor (GP) appointments, at the discretion of the GP (the Australian Government provides financial incentives for GPs to bulk-bill concession card holders)
tax-free energy supplement1 of $366.60 per annum for singles and $275.60 per annum for each member of a couple
tax-free seniors supplement2 of $886.60 per annum for singles and $668.20 per annum for each member of a couple
concessional travel on Great Southern Rail services (the Indian Pacific, the Ghan and the Overland)
other concessions offered by local governments and private businesses at their own discretion. These concessions vary between states and territories.

Eligibility

With the exception of the Income Test, eligibility for the CSHC has largely remained unchanged. To qualify for the card a person must:

have reached the qualifying age for the Age Pension (currently 65 for men and women) or Department of Veterans’ Affairs (DVA) Service Pension (currently 60 for veterans and 65 for non-veterans)
be an Australian citizen, a holder of a permanent visa, or a Special Category Visa holder and meet other residence requirements
reside in Australia
not be receiving a Centrelink pension or benefit, a DVA Service Pension or Income Support Supplement
meet the requirements of an Income Test (there is no Asset Test when determining eligibility for the card)
provide their tax file number.

Applicants are required to be in Australia at the time of claim, however once received, card holders can travel outside Australia temporarily without having their card cancelled providing the period of absence is less than 19 weeks. This will be particularly important for those who wish to retain grandfathering on their account- based income streams (discussed further under the grandfathering provisions section).

The Income Test

From 1 January 2015, the Income Test assesses both a person’s ATI and deemed income from account-based income streams that are not grandfathered.

A person will satisfy the Income Test if their ATI plus deemed income from their account-based income stream is below the relevant income threshold.

Income thresholds

The income thresholds are indexed on 20 September each year and are currently:

Table 1: CSHC income thresholds applying from 20 September 2014 to 19 September 2015

Single	Couple (combined)	Couple separated by illness (combined)
$51,500	$82,400	$103,000

These income limits are increased by $639.60 for each dependent child in the person’s care.

Adjusted taxable income (ATI)

Adjusted taxable income is the sum of:

taxable income
reportable superannuation contributions (salary sacrifice, personal deductible and additional employer contributions)
total net investment losses (including net rental property losses)
target foreign income (income and certain other amounts from sources outside Australia that are not included taxable income or received as a fringe benefit), and
employer provided fringe benefits.

For many people applying for the CSHC, the most important component of their ATI is their taxable income. However, there are circumstances where the other components of their ATI may be important such as where the person claiming the CSHC or their spouse is still working (e.g. on a part-time basis).

To verify the person’s income, Centrelink/DVA will generally require their tax return and/ or tax notice of assessment for the financial year prior to the year of claim. In situations where the person does not complete annual tax returns, Centrelink/DVA will request other documentation to verify the person’s ATI.

For example, where a person only receives tax-free income from an account-based pension and does not complete an annual tax return, Centrelink/DVA will request their latest superannuation statement to work out deemed income (see the following section on deemed income for further information).

For others, an estimate of their income as opposed to their tax return can be used. This is where they are able to demonstrate a change in their personal circumstances, such as retirement and ill-health, which would cause their income to be significantly different to their tax return.

Managing adjusted taxable income

Where a person is expected to exceed the CSHC income threshold for a particular income year, and where they have significant ATI, a few options that may help bring them back below the threshold include:

investing in an insurance/investment bond as earnings are internally taxed at a maximum rate of 30% and are not included in a person’s assessable income for tax purposes
investing in a non-account-based non-superannuation term or lifetime annuity that has a deductible amount for tax purposes
setting up a family trust and distributing income to other beneficiaries
invest in growth assets instead of income producing investments
deferring and/or spreading realised capital gains across multiple income years.

Deemed income

From 1 January 2015, account-based income streams will be deemed and included as part of the CSHC Income Test unless grandfathering provisions apply. Where grandfathering does not apply to the account-based income stream, the entire account balance will be used to work out deemed income.

It is important to note that deemed income is in addition to ATI; meaning a person with no ATI (e.g. a retiree with no other income apart from tax-free income from an account-based pension) may still be ineligible for the card if their account-based income streams have large account balances. The table below shows the amount required in account-based income streams to have deemed income exceed the relevant CSHC income threshold (assuming no ATI). It also highlights how this amount changes from 20 March 2015 and if deeming rates were to rise to 3% and 4.5%.

Table 2: Total account-based income stream balance that would exceed the CSHC income threshold

Applicants are:	Deeming rates as at 20 March 20151.75% and 3.25%	If deeming rates are 3% and 4.5%
Single	$1,606,770	$1,160,445
Couple	$2,572,124	$1,857,645
Couple separated by illness	$3,205,970	$2,315,423

Also worth noting is that, unlike deeming of financial investments for social security pensions (although the same deeming rates and thresholds are used), only the account-based income stream will be deemed i.e. other financial assets are not deemed under the CSHC Income Test.

If you want to know current thinking on the amount needed for a comfortable retirement then read my earlier article How much do I need to live comfortably in retirement?

Feel you are falling behind? Then read 10 Tips For Salvaging Your Retirement Plans and then contact me for personal advice.

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

5 Comments

by SMSF Coach - Liam Shorte on March 20, 2015 • Permalink

Posted in Centrelink, CHSC, Retirement Planning

Posted by SMSF Coach - Liam Shorte on March 20, 2015

https://smsfcoach.com.au/2015/03/20/how-to-qualify-for-the-commonwealth-seniors-health-card/

Stamp Duty on Transfers of Property to an SMSF

Immediately after I published my last blog Stamp Duty Requirements on Change of SMSF Trustees I got questions on stamp duty on property transfers to a Self Managed Superannuation Fund. At first I attempted to the answers myself but to ensure ongoing accuracy I am pleased to have Caroline Harley, one of the best lawyers in the SMSF sector review and update this information.

Caroline Harley | Special Counsel

So here is the current breakdown on stamp duty for property investors or small business owners looking to move property they own personally in to their SMSF.

Stamp duty imposed by State and Territory governments should always be researched and considered before transferring land to an SMSF. Concessions or exemptions from duty may be available depending on the State or Territory in which the land is situated.

This concession can be very significant. If the SMSF purchases NSW land/property from a member with a market value of $500,000, the duty which would apply (but for the concession) is $17,990. With the concession, the saving in duty is $17,240 as concessional duty is only $750.

Reminder: the land/property must be business real property owned in the personal name of the member rather than a company (otherwise the trustee would not be permitted to acquire the real estate).

The provisions of the duties legislation of each State or Territory differ, however where concessions or exemptions are available they generally require the transferor to continue to be the beneficial owner of the land (this relates to business real property as it is the only land which an SMSF may directly acquire from a member).

The following tables set out the details of the stamp duty offices and relevant provisions of the relevant legislation in each State and Territory. This is up to date as at 27 February 2017.

NSW	Transfer to a SMSF
Duty payable	$750 subject to conditions being met. Previously $500 but increased 01/02/2024. Depending on the documentation in place for the transaction you may be able to apply for a retrospective re-assessment and obtain a refund. An SMSF specialist lawyer would be able to advise you on this.
Relevant provisions	62A NSW Duties Act 1997
General description of legislation	Nominal duty is charged on a transfer of dutiable property from a person to a trustee of an SMSF where the: transferor is the only member of the super fund or the property is to be held by the trustee solely for the benefit of the transferor (ie property or proceeds of sale of property cannot be pooled with property held for another member and no other member can obtain an interest in the property or proceeds of sale); and property is to be used solely for the purpose of providing a retirement benefit to the transferor.
Document-ation	Evidence that it is a complying SMSF as at the date of the agreement/transfer, copy of minutes of meetings of the SMSF stating the intention to have the property transferred to it and confirming that the property was owned beneficially by the transferor member, copy of the SMSF trust deed or a variation to it, showing a non revocable clause that the property is segregated for the transferor member’s benefit only (follows wording in section62A(2))
Legislation	Duties Act 1997 (NSW)
Legislation website	http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/
Office	Office of State Revenue
Website	http://www.osr.nsw.gov.au

VIC	Transfer to a super fund
Duty payable	No duty subject to conditions being met
Relevant provisions	Section 41 Vic Duties Act 2000
General description of legislation	No duty is charged in respect of the transfer of dutiable property made without monetary consideration to a trustee of a super fund, where there is no change in beneficial ownership (again, property must be held in the personal name of the member and not a company name). A transfer of property to a trustee of a super fund by a beneficiary of the fund does not, for the purposes of this section, effect a change in the beneficial ownership of the property.
Document-ation	Documents are required – refer to ‘Evidentiary Requirements for Dutiable and Exempt Transactions’ on SRO website
Legislation	Duties Act 2000 (VIC)
Legislation website	http://www.austlii.edu.au/au/legis/vic/consol_act/da200093/
Office	State Revenue Office (SRO)
Website	http://www.sro.vic.gov.au/land-transfer-duty

No luck in QLD

QLD	Transfer to a super fund
Duty payable	$20 subject to conditions being met
Relevantprovisions	You can claim this concession on transfer duty if you: transfer dutiable property between superannuation funds to merge or split the funds create a trust of dutiable property because of the variation or reconstitution of a superannuation fund. (Read more about transfer duty on trusts.) The superannuation fund must become a complying superannuation fund within 1 year. A complying superannuation fund is: a complying superannuation fund under the Superannuation Industry (Supervision) Act 1993 (Cwlth), section 42 or 42A an exempt public sector superannuation scheme under that Act.
General desc-riptionof legislation	A transfer of dutiable property is a concessional dutiable transaction.
Document-ation	Duties office form and documents are required. https://www.publications.qld.gov.au/ckan-publications-attachments-prod/resources/755a8bd9-7134-4a5f-85e7-a54c747ec7bd/form-d2.6-v2-effective-7-jan-2008.pdf?
Legislation	Duties Act 2001 (QLD)
Legislationwebsite	http://www.austlii.edu.au/au/legis/qld/consol_act/da200193/
Office	Office of State Revenue
Website	http://www.osr.qld.gov.au/duties/index.shtm l

WA	Transfer to a super fund
Duty payable	$20
Relevant provisions	Sections 122 – 124 WA Duties Act 2008
General description of Legislation	Nominal duty is charged on a transfer of dutiable property by a person to the trustee of a super fund where –

	▪ there is consideration for the transfer; and
	▪ only the transferor can be a member of the super fund or the property is held in the superfund specifically for the transferor (ie property cannot be pooled with the assets of another member and no other members can obtain an interest in the property); and
	▪ the property (or if sold, the proceeds) can only be held in the superannuation fund to be provided to the transferor as a retirement benefit.
	If the fund subsequently fails to satisfy any of the requirements (above) full stamp duty is payable in respect of any dutiable property still held.
	Nominal duty is charged under section 124 in respect of a transfer of dutiable property to the trustee of an SMSF that is an employer sponsored fund where –
	there is no consideration for the transfer.

Document- ation	Application form is required – ‘Superannuation Fund Transactions – Application for Nominal Duty’.
Legislation	Duties Act 2008 (WA) Also refer to Duties Fact Sheet – Superannuation Transactions
Legislation website	http://www.austlii.edu.au/au/legis/wa/consol_act/da200893/
Office	Office of State Revenue
Website	http://www.finance.wa.gov.au/cms/section.aspx?id=209

ACT	Transfer to a super fund
Duty payable	Ad valorem duty applies
Relevant provisions	No provision for exemption or concession from duty
General description of legislation	Duty is charged on a transfer of dutiable property.
Document-ation	Lodgement form and documents are required.
Legislation	Duties Act 1999 (ACT)
Legislation website	http://www.austlii.edu.au/au/legis/act/consol_act/da199993/
Office	ACT Revenue Office
Website	http://www.revenue.act.gov.au

SA	Transfer to a super fund
Duty payable	Ad valorem duty applies
Relevant provisions	No provision for exemption or concession from duty
General description of legislation	A transfer of property to a person who takes as trustee is deemed to be conveyance whether or not any consideration is given (except in certain circumstances regarding the transfer of family farming properties)
Document-ation	Lodgement form and documents are required
Legislation	Stamp Duties Act 1923 (SA)
Legislation website	http://www.austlii.edu.au/au/legis/sa/consol_act/sda1923157/

Office	Revenue SA
Website	http://www.revenuesa.sa.gov.au

NT	Transfer to a super fund
Duty payable	Ad valorem duty applies
Relevant provisions	No provision for exemption or concession from duty
General description of legislation	A conveyance of dutiable property is a dutiable instrument.
Document-ation	Lodgement form and documents are required
Legislation	Stamp Duty Act (NT)
Legislation website	http://www.austlii.edu.au/au/legis/nt/consol_act/sda151/
Office	Territory Revenue Office
Website	http://www.treasury.nt.gov.au

TAS	Transfer to a super fund
Duty payable	$50
Relevant provisions	Section 49 Duties Act 2001 (TAS)
General description of legislation	Where the duties office is satisfied there is no change in the beneficial ownership of the property duty chargeable on the transfer is $50. Also an exemption is available in certain circumstances regarding the transfer of primary production land.
Document-ation	For primary production see ‘Documentary Evidence requirements Guideline’, for other transfers duties office reviews each transfer on its own facts recommend seeking confirmation of eligibility prior to lodgement.
Legislation	Duties Act 2001 (TAS)
Legislation website	http://www.austlii.edu.au/au/legis/tas/consol_act/da200193/
Office	State Revenue Office
Website	http://www.sro.tas.gov.au

If you don’t get an exemption the the rates applicable are:

Moving Property to an SMSF is not something to be done lightly without looking at the pros and cons as well as the procedures in your state or territory.

We have design a 3 part guide to buying a property in an SMSF

Even more information and complimentary strategy ideas are available on our Property in a SMSF page. Contact Caroline for specific legal advice on your proposed strategy.

IMPORTANT

This information is current as at the date of publication but may be subject to change. This article is general in nature and has been prepared without taking into account a potential your objectives, financial situation or needs. Before making a recommendation based on this article, seek personal legal and tax advice and consider its appropriateness based on the your objectives, financial situation and needs.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02 9899 3693, Mobile: 0413 936 299

PO Box 6002 NORWEST NSW 2153
Suite 40, 8 Victoria Ave, Castle Hill NSW 2154
Suite 4, 1 Dight St., Windsor NSW 2756

Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223

Image courtesy of jscreationzs at FreeDigitalPhotos.net

16 Comments

by SMSF Coach - Liam Shorte on March 12, 2015 • Permalink

Posted in LRBA, Property, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on March 12, 2015

https://smsfcoach.com.au/2015/03/12/stamp-duty-on-transfers-of-property-to-an-smsf-as-at-01-jan-2015/

Stamp Duty Requirements on Change of SMSF Trustees

Don’t you just love dealing with different sets of State and Territories legislation when dealing with property. I recently went through a whole strategy with a client before they told me that the property was in a different state and I had to start again as the rules were different in that state.

As someone who highly recommends the use of a Corporate Trustee for SMSFs I thought it would be handy to provide a guide to the various state and territory stamp duty provisions when changing trustees.

The following tables set out the contact details for the stamp duty offices and provisions of the relevant legislation in each State and Territory. Please make sure to check that they are still current with your legal and tax advisers before changing trustees. I remind you yet again that this is General Information only.

In summary the amount of duty payable on the appointment of a new trustee and resignation of a current trustee is:

NSW: Duty of $50 payable

VIC: No duty payable

WA: Duty of $20 payable

SA: No duty payable

QLD: No duty payable

TAS: Duty of $50 payable

ACT: Duty of $20 payable

NT: No duty payable

DETAIL

NSW	Change of trustees
Duty payable	$50
Relevant provisions	Section 54 (2A) NSW Duties Act 1997
General description of legislation	Duty is charged in respect of a transfer of dutiable property to a trustee of a self managed superannuation fund as a consequence of the retirement of a trustee or the appointment of a new trustee.
Documentation	No form required. Cover letter including background to the transaction and return address.Client identification required: Individuals – certified copy of document proving date of birth. Companies – ABN/ACN
Legislation	Duties Act 1997 (NSW)
Legislation website	http://www.osr.nsw.gov.au
Office	Office of State Revenue
Website	http://www.osr.nsw.gov.au

VIC	Change of trustees
Duty payable	Not dutiable
Relevant provisions	Section 33 Vic Duties Act 2000
General description of legislation	No duty is chargeable in respect of a transfer of dutiable property to a trustee of a complying super fund solely because of the retirement of a trustee or the appointment of a new trustee.
Documentation	Refer to ‘Evidentiary Requirements for Dutiable and Exempt Transactions’ on SRO Website.
Legislation	Duties Act 2000 (VIC)
Legislation website	http://www.legislation.vic.gov.au
Office	State Revenue Office (SRO)
Website	http://www.sro.vic.gov.au

WA	Change in trustees
Duty payable	$20
Relevant provisions	Section 119 WA Duties Act 2008
General description of legislation	Nominal duty is chargeable on a transfer of dutiable property to a trustee as a consequence of the retirement of a trustee or the appointment of a new trustee (if the transfer does not confer an interest in trust property to any other person to the detriment of the beneficial interest of any person).
Documentation	Refer to ‘Duties Information Requirements’ – change of trustee.
Legislation	Duties Act 2008
Legislation website	http://www.slp.wa.gov.au/legislation/statutes.nsf/default.html
Office	Office of State Revenue
Website	http://www.finance.wa.gov.au/cms/section.aspx?id=209

SA	Change in trustees
Duty payable	Not dutiable
Relevant provisions	Section 71(5)(d) SA Duties Act 1923
General description of legislation	A conveyance of property for the purpose of effecting the retirement of a trustee or the appointment of a new trustee is exempt from duty, where the beneficial interest of any beneficiaries of the trust has not changed.
Documentation	Application for Opinion form and document that conveys land to new trustee (is stamped as exempt).
Legislation	Stamp Duties Act 1923 (SA)
Legislation website	http://www.revenuesa.sa.gov.au/services-and-information/legislation.html
Office	Revenue SA
Website	http://www.revenuesa.sa.gov.au

QLD	Change of trustees
Duty payable	Not dutiable
Relevant provisions	Section 117
General description of legislation	Transfer duty is not imposed on a dutiable transaction for the sole purpose of giving effect to a change of trustee (where the interests of beneficiaries do not change and transfer duty has been paid on all trust acquisitions for which transfer duty is imposed for the trust before the transaction).
Documentation	Must be stamped. Lodgement form and statutory declaration required.
Legislation	Duties Act 2001 (QLD)
Legislation website	http://www.legislation.qld.gov.au/OQPChome.htm
Office	Office of State Revenue
Website	http://www.osr.qld.gov.au/duties/index.shtml

TAS	Change in trustees
Duty payable	$50
Relevant provisions	Section 37 TAS Duties Act 2001
General description of legislation	Duty of $50 is charged in respect of a transfer of dutiable property to a special trustee as a consequence of the retirement of a trustee or the appointment of a new trustee. Special trustee includes the trustees of a superannuation fund.
Documentation	See ‘Documentary Evidence Requirements Guideline’
Legislation	Duties Act 2001 (TAS)
Legislation website	http://www.thelaw.tas.gov.au
Office	State Revenue Office
Website	http://www.sro.tas.gov.au

ACT	Change in trustees
Duty payable	$20
Relevant provisions	Section 54(4)
General description of legislation	Nominal duty is charged for the transfer of dutiable property to a person as a consequence of the retirement of a trustee or the appointment of a new trustee for a self managed superannuation fund.
Documentation	 Conveyance lodgement form Memorandum of transfer – Form52T Change of trustee deed Evidence that the property was purchased by the fund
Legislation	Duties Act 1999 (ACT)
Legislation website	http://www.revenue.act.gov.au/legislation/
Office	ACT Revenue Office
Website	http://www.revenue.act.gov.au

NT	Change in trustees
Duty payable	Not dutiable
Relevant provisions	Schedule 2, Exemption 6
General description of legislation	A conveyance that is made solely for the purpose of effecting the appointment of a new trustee on the retirement of a trustee or as an additional trustee if – no beneficial interest passes in the property conveyed; and no change of beneficial interest occurs as a result of the transaction; and the property conveyed was acquired by the retiring trustee or existing trustee in the capacity of trustee by virtue of an instrument that was stamped or was exempt from duty. (This rewritten stamp duty provision refers to ‘a discretionary trust’ however the application of the provision remains the same as Item 9A of the repealed Stamp duty Act – which referred to a trust.)
Documentation	Refer to ‘Stamp Duty Lodgement Guide’
Legislation	Stamp Duty Act (NT)
Legislation website	http://www.treasury.nt.gov.au
Office	Territory Revenue Office
Website	http://www.treasury.nt.gov.au

IMPORTANT

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

Image courtesy of jscreationzs at FreeDigitalPhotos.net

4 Comments

by SMSF Coach - Liam Shorte on March 9, 2015 • Permalink

Posted in SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on March 9, 2015

https://smsfcoach.com.au/2015/03/09/stamp-duty-requirements-on-change-of-smsf-trustees-as-of-01-jan-2015/

6 Key Considerations for your SMSF Investment Strategy

So your SMSF Administrator/Accountant is now having to use an Independent Auditor and suddenly you are being asked for more than just the 1 page SMSF Investment Strategy template provided by the Accountant that you used to sign without filling in the blanks and without considering its purpose.

The reason an Investment strategy is required by an SMSF and also required to be reviewed regularly is that personal circumstances changes as do markets and economies. You need to consider your investment portfolio in the light of these changes and this is a way of prompting you to do so as part of the annual review.

Each year we experience a lot of market and political volatility with differing views on where the economy is headed, leading to a subsequent impact on share and property markets.

As an investor is can be easy to get caught up in the short-term noise and lose focus. The SMSF Investment strategy requirement is a way of prompting you, the Trustee(s), to really consider what objectives you are trying to achieve and the strategies and asset allocation that you need to follow to achieve them.

Having a well thought out SMSF investment strategy is a key element in helping you achieve a smooth transition in to and through retirement.

Here are 6 important considerations in establishing your SMSF investment strategy.

Liquidity Needs: What life stage are each of the members in?
The members’ personal circumstances and life-stage will have the most important impact on your SMSF investment strategy. If you are all 20 years out from retirement, you may choose to invest for growth and ride with volatility of the share and property markets to benefit from the risk/return premium attributed to those sectors which are less liquid than cash and bonds. If however one or more of the members is approaching retirement or using a Transition to Retirement Pension strategy you may choose a more cautious approach to ensure sufficient income is available for pensions regardless of market ups and downs. That requires more active management to maintain some liquidity still seek a decent return through a diversified portfolio. For example we always recommend 12-36 months pensions are retained in cash or fixed interest to avoid selling assets in a downturn and reducing your capital value.
What’s the members’ risk tolerance
The ability of all involved to sleep comfortably at night without worrying about their investments should always be taken into consideration regardless of your age. If you or another member have no experience or confidence in certain market sectors, then short-term your investment strategy should be tailored accordingly. But you should then seek more information, education and guidance to build your knowledge and then your confidence in those missing sectors so that you can adopt a well diversified strategy long-term. It is generally accepted that the greater the risk of an asset, the greater the potential returns but this risk abates as time passes so riskier assets can pay off handsomely over time with less risk than perceived short-term. A portfolio designed to reduce your concerns while not providing optimal returns provides THE SLEEP FACTOR!
Asset allocation
Investing in the right asset classes is a major factor in the returns you will receive. Aussie Equities and Cash are not a full solution long-term. Cash and TD rates are currently low and our share market had a poor year last year and our economy is struggling while international equities, property and infrastructure are benefiting from improving economies, low interest rates and the dropping Aussie dollar. Your asset allocation should be reviewed annually and rebalanced to account for the returns from various asset classes and their future forecast. We are not saying make dramatic changes but do take tilts to certain sectors that will benefit from the current economic climate.
Avoid sector bias
The Big 4 Banks, Woolworths and Telstra do not make a diversified portfolio! Once you have decided which asset classes to invest in, it is important to diversify within those asset classes. Frequently I see investment portfolios with a narrow range of large Australian companies just like mentioned above providing very poor diversification – and leaving the overall investment portfolio heavily reliant on the fortunes of one or two sectors. Self Managed Superannuation Funds (SMSF) set up for the benefit of control without the willingness to take advice or learn about portfolio design, frequently lack diversification with an over reliance on one property, Australian shares and/or cash. With Control comes responsibility to learn and adapt.
Tax efficiency
Often the spur to look at complex and structured investments near June 30^th is the tax consideration. The amount of tax you pay on investment has a major impact on your SMSF investment strategy. Here is the tax basics for SMSFs:

15% tax on earnings and capital gains on assets held for less than 12 months in accumulation phase
10% tax on Capital Gains on assets held for greater than 12 months in accumulation phase
0% tax on earnings and capital gains on assets sold in pension phase

For example, if you were lucky enough to have bought 1000 CBA shares during the GFC at $30 and sell them now at $90 in accumulation phase you will pay $6,000 in tax with a net profit of $54,000. While if you were lucky to move in to pension phase you receive the full $60,000 tax-free. Tax is an important consideration and an understanding of the tax impacts which you purchase your asset in, and the tax payable when you dispose of the asset, are very important but should not be the sole driver of your Self Managed Superannuation Fund investment strategy.

Insurance Needs of the Members

Trustees of SMSFs now have to consider, as part of its Investment strategy “whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund.”

This is a significant addition to the previous provisions, and has been prompted by the Super System Review panel noting that less than 13% of SMSFs have insurance. This is a subject on its own so please refer to my earlier article for guidance Self Managed Super Funds must include an Insurance Needs Analysis as part of the fund’s SMSF Investment Strategy.

It is important to update your investment strategy on an annual basis or more often if making large contribution or large investments to make sure you are maximising the probability of achieving your financial goals whilst reducing the risk of capital losses.

You can seek professional advice to help with your investment strategy, but remember: as trustee, you are still ultimately responsible for your fund’s investment decisions so next time you sign off a template provided by your administrator remember it is you that are responsible not them.

Please contact us on 02 9894 1844 or Liam@verante.com.au if you would like to review your current SMSF investment strategy, or need assistance in preparing an SMSF investment strategy that matches your members’ needs.

I’ll leave the last word or should I say video to the ATO

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　96993693, Mobile: 0413 936 299

PO Box 6002, NORWEST NSW 2153. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 41 621 447 345, AFSL 476223

Image courtesy of pakorn at FreeDigitalPhotos.net

5 Comments

by SMSF Coach - Liam Shorte on March 4, 2015 • Permalink

Posted in Audit, Investment Strategies

Posted by SMSF Coach - Liam Shorte on March 4, 2015

https://smsfcoach.com.au/2015/03/04/6-key-considerations-for-your-smsf-investment-strategy/

Multiple SMSFs may be a Smart Strategy for Property Investors

More than one fund! Am I kidding you? No I’m not as there are very valid reasons for using more than one SMSF for your investment needs.

To minimise Land Tax issues as detail further below but subject to State provisions;
To allocate certain assets for estate planning purposes to specific beneficiaries;
To keep a blended family superannuation interests separate;
To keep higher risk assets separate from other SMSF assets. (Retail shop with increased public liability risk);
To cater for separate risk tolerances for member of a family rather than running segregated accounts

So more on uses of multiple SMSFs by property investors

Land tax is a form of taxation applied to the value of any land that an individual or entity may own. For an individual their primary place of residence is normally exempt from Land Tax. Depending on your state or territory, land is a very broad term that encompasses vacant blocks of land, commercial and residential properties. I will be talking about NSW in this article.

Facts on NSW Land tax 2024

The Tax Year Threshold Rate for 2024 is $1,075,000

Tax on land value above the threshold $100 plus 1.6% up to the premium threshold.

Premium Threshold is $6,571,000

Tax on land value above the threshold is $88,036 for the first $6,571,000 then 2% over that

Strategy to manage land tax:

Land tax can be minimised by taking advantage of land tax thresholds that apply per entity not in aggregation. So Land tax can be controlled through the use of a separate Self Managed Super Funds (SMSF) for additional properties once you reach the exempt threshold ; .

Currently the Land Tax Free threshold sits at a land value of $1,075,000. Therefore any land value that exceeds this can be taxed at a rate as high as 2%. However, each SMSF is treated as a separate entity meaning each SMSF has its own $1,075,000 threshold. This allows property investors to hold their land across multiple SMSF’s in order to never exceed the threshold in any of these funds and in effect become exempt from land tax.

Example:

Sharon and Robert through their Love Property Superannuation Fund own an investment property in Castle Hill with land valued at $802,000 as part of a diversified strategy of their Self Managed Super Fund. Intent on expanding their property empire the couple has recently received pre-approval for an investment loan to purchase an additional property in Rouse Hill with land valued at $813,000. With this purchase the Love Property SMSF would have a combined Taxable land value of $1,615,000 obligating them to $8,740 in land tax.

However on speaking to their “SMSF Association Accredited SMSF Specialist Adviser“ (Yes you guessed ME!), Sharon and Robert set up a second Self-Managed Super Fund, Love More Property SMSF to purchase the second property. This means the land owned in their first SMSF is below the tax threshold and the land in their second SMSF is valued at below the tax threshold which effectively exempts Sharon and Robert from land tax. Running a second fund can be done for less than $2,000 per annum so a net saving of $6,740 per year or at least $67,400 over a 10 year property buy and hold strategy.

So you can see that multiple SMSFs are an effective tool to boost the returns of your property investment.

Be care of State Land Stax Legislation or Provisions

Strategy may not work in if there are grouping provisions. So please seek specialist tax advice.

https://www.sro.vic.gov.au/legislation/grouping

If you want to know see more about property in a Self Managed Super fund the go to the page https://smsfcoach.com.au/property-in-a-smsf/ for articles that cover most of the strategies and questions on this subject including Tips and Traps to be aware of in advance.

Feel you are falling behind? Then read 10 Tips For Salvaging Your Retirement Plans and then contact me for personal advice.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98993693, Mobile: 0413 936 299

PO Box 6002 NORWEST NSW 2153

40/8 Victoria Ave. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223

Image courtesy of cooldesign at FreeDigitalPhotos.net

1 Comment

by SMSF Coach - Liam Shorte on February 27, 2015 • Permalink

Posted in Property, Tax Planning

Posted by SMSF Coach - Liam Shorte on February 27, 2015

https://smsfcoach.com.au/2015/02/27/multiple-smsfs-may-be-a-smart-strategy-for-property-investors/

SMSF Sector Maturing as Services Improving from Industry and Regulator

We are finally seeing the SMSF sector being recognised as the retirement option of preference for engaged investors. Fees and costs are constantly being addressed but what trustees and members need is more confidence in running their funds and that comes through informative content and education.

The industry and the regulator have stepped up a notch in terms of engagement and producing news and educational content for people who want to be active in controlling their future and open to learning more about managing their finances.

Just look at the new content provided by the ATO this year:

For Trustees :

The ATO released 22 short, educational, and entertaining videos, to help you navigate a wide range of events including retirement planning, investment decisions and running an SMSF. We will release more videos next year, covering new topics to help you run your SMSF smoothly and better understand your obligations.
To help people search their website for relevant SMSF information they launched SMSF assist External Link . To use SMSF assist, type in a question or select a topic to get specific information in an instant. SMSF assist and other SMSF services have been added to the ATO app.
News articles, practical case studies and Q&As are now published as they become available and can be accessed anytime through ‘News’ on the left-hand side menu of the SMSF home page.
The ATO quarterly FREE subscription service ‘SMSF News’ has a fresh look and feel, and from 2015 will be issued on a bi-monthly basis.
They will run webinars in 2015 covering different topics for trustees and professionals.

For professionals (in addition to the above services):

The ATO began engaging with SMSF professionals through a live LinkedIn question and answer event hosted by Deputy Commissioner Alison Lendon. The event created dialogue with participants, and we answered SMSF-related questions during the forum.
Building on the success of the LinkedIn forum, they embarked on a series of webinars aimed at SMSF professionals. The webinars highlighted current issues facing the industry and provided an opportunity for participants to ask questions.

Other New Initiatives:

SMSF Association: FREE SMSF TRUSTEE EDUCATION PROGRAM

To help you better understand your role as a SMSF trustee the SMSF Association has launched a free online resource.

By completing this course, you will have learnt;

The basic facts about Superannuation and Self-Managed Superannuation Funds
How an SMSF works
The investment rules for SMSFs
The administration process to keep your SMSF healthy.

If want a source of constantly updated new on what is relevant to SMSFs then you can get subscribe free to The #SMSF News which picks up most relevant SMSF articles across the web daily. Also if you are on Twitter make sure to follow us as @SMSFCoach and subscribe to this blog up on the left hand column.

Liam Shorte B.Bus SSA™ AFP

SMSF Specialist Advisor™ & Financial Planner

Tel: 02　8853 6833, Mobile: 0413 936 299

liam@verante.com.au

PO Box 6002 BHBC, Baulkham Hills NSW 2153

Liam Shorte is a partner in VERANTE Financial Planning, Corporate Authorised Representative of Genesys Wealth Advisers Limited, Licence No 232686, Genesys Wealth Advisers Limited ABN 20 060 778 216 • AFSL No.232686

Important information :

The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are encouraged to seek financial advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Genesys and its representatives receive fees and brokerage from the provision of financial advice or placement of financial products.

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

Image courtesy of cooldesign at FreeDigitalPhotos.net

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by SMSF Coach - Liam Shorte on December 15, 2014 • Permalink

Posted in News & Stats, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on December 15, 2014

https://smsfcoach.com.au/2014/12/15/smsf-sector-maturing-as-services-improving-from-industry-and-regulator/

SMSF Coaching: Busting the Seven Key Myths About Bonds

Many SMSF investors are confident with shares, property and term deposits but when it comes to bonds they are feel like they hit a brick wall when they look for solid reasons to consider this sector.

I found this series of articles from Elizabeth Moran that looks at some of the myths around bonds and addresses them in detail. The series addresses the key concerns that SMSF investors mention to me when suggest a potential investment in a bond issue or bond fund. Most of the concerns are based on misinformation on the web and false rules of thumb. So, if you would like to learn more about bonds, this series of articles which looks at the “Seven Key Myths” is a good starting point.

Myth #1 My portfolio consists of shares and cash and I don’t need a bond exposure

Myth #2 It’s a bad idea to invest in bonds when interest rates or inflation are rising

Myth #3 Bonds are too risky

Myth #4. Fixed Income returns are low and will be a drag on my portfolio’s performance

Myth #5. You need a lot of money to buy bonds directly so go for a managed fund instead

Myth #6. There is too long to wait until maturity

Myth #7 I own hybrids so I already have an allocation to fixed income

Subscribe to keep updated

Subscribe to the SMSF Coach blog on the left hand column so that you don’t miss out educational articles like this.

As a thank you to FIIG I will also add a link to their SMSF Solutions page (Not a paid endorsement just a recognition of a good effort)

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

Join Us Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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by SMSF Coach - Liam Shorte on November 27, 2014 • Permalink

Posted in Bonds, Hybrids, Investment Strategies, Retirement Planning

Posted by SMSF Coach - Liam Shorte on November 27, 2014

https://smsfcoach.com.au/2014/11/27/smsf-coaching-busting-the-seven-key-myths-about-bonds/

Medibank Private Allocations at a Glance – How Much Do I Get?

The full pricing and allocation details for Australian public applicants has been indicated in a Government Press Release. Applicants will be able to get confirmation of their individual allocation from Tuesday, 25 November 2014 by visiting medibankprivateshareoffer.com.au or calling 1800 998 778. Applicants will need to have their Application Reference Number available.

Transaction confirmation statements will be sent to successful applicants from Thursday, 4 December 2014.

The Government has also exercised its right to claw back a further 20 per cent of the shares previously allocated to the Broker Firm Offer which will no doubt annoy the Broking community even further after a huge scale back in their offer. I cannot help feel there will be a huge amount of shareholders with mediocre holdings and headaches for their accountants and advisers trying to track applications, allocations, scale backs and refunds of excess funds.

Medibank Private will list on the ASX at 12.00pm AEDT on Tuesday, 25 November 2014. Its ASX code will be MPL.

Final price per share paid by institutional investors	$2.15
Discount per share on final insto price for retail investors	15 cents or 7%
Final price per share paid by retail investors¹	$2.00

Proceeds
Total proceeds returned to Commonwealth	$5.679B

Allocation of shares as a % of total shares
Retail allocation	60.0%
Total institutional allocation	40.0%
Domestic institutional allocation	22.9%
Offshore institutional allocation	17.1%

Details of Retail Offer
Total number of individual Applications	Approx. 440,000
Dollar amount allocated to Retail Offer	$3.311 billion
Average shareholding for Retail Offer	Approx. $5,850
Policyholder Applicants’ allocation²	33.2%
General Public Applicants’ allocation²	66.7%

Medibank Private Share Offer – How Much Will You Get

General Public Offer

Applicants who applied under the General Public Offer have received allocations as follows:

General Public Offer Applicants who did not pre-register who applied for	Receive*
$2,000	The full amount you have applied for
$2,001 to $7,000	$2,000 + 75.00% of your Application within this band
$7,001 to $14,000	$5,750 + 20.00% of your Application within this band
Over $14,000	$7,150 + 5.00% of your Application within this band

General Public Offer Applicants who pre-registered who applied for	Receive*
$2,000 to $2,300	The full amount you have applied for
$2,301 to $7,000	$2,300 + 86.25% of your Application within this band
$7,001 to $14,000	$6,353.75 + 23.00% of your Application within this band
Over $14,000	$7,963.75 + 5.75% of your Application within this band

Policyholder Offer

Applicants who applied under the Policyholder Offer have received allocations as follows:

Policyholder Offer Applicants who did not pre-register who applied for	Receive*
$2,000 to $2,300	The full amount you have applied for
$2,301 to $7,000	$2,300 + 86.25% of your Application within this band
$7,001 to $14,000	$6,353.75 + 23.00% of your Application within this band
Over $14,000	$7,963.75 + 5.75% of your Application within this band

Policyholder Offer Applicants who pre-registered who applied for	Receive*
$2,000 to $2,600	The full amount you have applied for
$2,601 to $7,000	$2,600 + 97.50% of your Application within this band
$7,001 to $14,000	$6,890 + 26.00% of your Application within this band
Over $14,000	$8,710 + 6.50% of your Application within this band

For example, a General Public Offer Applicant who did not pre-register who applied for $10,000 will receive:

Application band	Receive*
$2,000	$2,000 (100% of $2,000)
$2,001 to $7,000	$3,750 (75% of $5,000)
$7,001 to $14,000	$600 (20% of $3,000)
Over $14,000	n/a
Total	$6,350

* The final allocation of Shares will be subject to rounding and application of the Final Price to any allocation above $250,000.

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 23, 2014 • Permalink

Posted in Retirement Planning

Tagged Baulkham Hills, Castle Hill, Hawkesbury, Investing, Investment, Investment Strategy, Medibank, Medibank Private, pension phase, private company valuations, Self Managed Superannuation Fund, share Offer, SMSF, superannuation

Posted by SMSF Coach - Liam Shorte on November 23, 2014

https://smsfcoach.com.au/2014/11/23/medibank-private-allocations-at-a-glance-how-much-do-i-get/

ATO Rules Out Cross-Insurance Arrangements within SMSF Borrowing Strategies

The Australian Taxation Office (ATO) on the 17th November 2014 confirmed that new regulations which came into effect on 1 July 2014 do not permit new insurance products acquired on or after 1 July 2014 to be used as part of a cross-insurance arrangement. This was a common strategy used to protect SMSFs engaging in Limited Recourse Borrowing Arrangements from being forced to sell a property if a member of the fund died or became disabled.

Insurance strategy rejected

The ATO confirmed that these types of arrangements are not permitted under the new rules as “the insured benefit will not be consistent with a condition of release in respect of the member receiving the benefit”.

Impact on SMSFs with existing cross-insurance arrangements

Where a trustee acquired insurance products prior to 1 July 2014 to implement a cross-insurance strategy, the ATO’s announcement seems to imply that those arrangements will continue to be permitted as those policies would be grandfathered and therefore exempt from the new regulations.

According to Colonial First State’s FirstTech team, where a trustee acquired a new policy to implement a cross-insurance strategy on or after 1 July 2014, the new rules will apply and the trustee will need to restructure their fund’s insurance arrangements in consequence of the ATO’s announcement. In this case, trustees may wish to contact the fund’s auditor or seek legal advice to confirm their options.

SMSF Trustees may wish to seek SMSF specific advice from the ATO before proceeding with any other debt reduction and liquidity strategies

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

Image courtesy of cooldesign at FreeDigitalPhotos.net

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by SMSF Coach - Liam Shorte on November 19, 2014 • Permalink

Posted in Retirement Planning

Posted by SMSF Coach - Liam Shorte on November 19, 2014

https://smsfcoach.com.au/2014/11/19/ato-rules-out-cross-insurance-arrangements-within-smsf-borrowing-strategies/

Pay SMSF Corporate Trustee ASIC Fees 10 years in Advance – Save on Fees and Fines

I have made it very clear for many years that I believe that it’s much better for a self-managed super fund to use a corporate trustee rather than individual trustees. Yes there is an initial set up fee of between $600 to $850 including and ASIC charge of $576 but that is a one-off and I would hope that ASIC in a move to promote use of Sole Purpose Corporate Trustees might reduce that fee. (wishful thinking maybe).

Tips for Trustees

ASIC also charges these companies annual fees. They have two different charges for proprietary limited companies. One applies to companies that only perform a special purpose and another charge applies to all other companies.

Special-purpose companies include those whose sole function is to be the trustee of a super fund regulated under the laws. These types of super funds would include SMSFs.

Special-purpose companies are only charged an annual fee of $67 (up $18 in 5 years – inflation!).

The annual fee for all other proprietary limited companies is $329 (2025-26). As an example, this higher fee applies to companies that at are a trustee of an SMSF and also trustee of your family’s discretionary trust.

Because people often use their Accountant or Administrator as a mailing address it can be easy for these annual fees to be missed or a delay to occur in notifying people to pay them . So for people who are a bit lax about checking emails or opening snail mail from their fund administrator it’s very easy to miss the deadline to pay these annual ASIC fees.

If any company pays its annual ASIC fee more than a month late the late payment fee is $98 and if two months past the deadline date it will have to pay an additional $411.

I have a number of clients who have been caught in this trap and went looking for a solution. To avoid these penalties all annual ASIC fees can be paid 10 years in advance and obtain a decent discount and peace of mind that late fees are avoided.

For example, the fee for 10 years in advance for a super fund trustee company is $463, a discount of $207 on 10 years of the standard $67 annual fee for SMSF trustee companies. This discount is equivalent to a 31% discount per year. Sounds like a good deal for a forgetful, busy or even the prudent trustee.

Bare Trustee Companies

The fee for 10 years in advance for a normal trustee company is $2,438, a discount of $852 on 10 years of the standard $329 annual fee for SMSF trustee companies. This discount is equivalent to a 26% discount per year and avoids future rises.

The relevant instructions on how to pay and the required Remittance form are available here.

Note for Accountants and Administrators:

Best practice treatment of the payment is to amortise over 10 years.

In Class you can set it up as a Custom Holding asset (non-investment) and amortise 1/10th every 30 June (or company review date if that’s your preference).

in BGL SF360, you can use the existing 66000 Prepaid Expenses account in the Chart of Accounts or create a Custom Asset Account e.g. Prepaid ASIC Fees. Then amortise the ASIC fees over the prepaid period i.e 10 years. Users can refer to https://360help.com.au/x/NgNiAQ

In BGL SF360 as an extra time saver, use the SAVE & COPY function in the Journal Screen each year to copy the Journal. SF Desktop clients could use the Standing Journal function.

Liam Shorte B.Bus FSSA™ AFP

Financial Planner & Fellow SMSF Specialist Advisor™

Tel: 02　9899 3693, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

40/8. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Advisory Pty Ltd (ABN 34 605 438 042) (AFSL 476223)

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by SMSF Coach - Liam Shorte on November 19, 2014 • Permalink

Posted in SMSF Management

Posted by SMSF Coach - Liam Shorte on November 19, 2014

https://smsfcoach.com.au/2014/11/19/pay-smsf-corporate-trustee-asic-fees-10-years-in-advance-save-on-fees-and-fines/

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In conclusion

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So here is a breakdown of the specific contribution rules applying at various ages.

Here are some tables that put it all together.

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So how can a SMSF trustee prepare for a short to medium term change in market sentiment and a possible 10-20 per cent drop in markets.

We are not suggesting exiting portfolios but we are are recommending sitting on the fence ready to buy on significant dips rather than just buying into the current market and diversification and asset allocation is key at present.

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This is an excerpt from a speech by Matthew Bambrick, the ATO’s Assistant Commissioner for SMSF Segment of Superannuation to the Tax Institute.

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Income thresholds

Adjusted taxable income (ATI)

Managing adjusted taxable income

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Caroline Harley | Special Counsel

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DETAIL

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So more on uses of multiple SMSFs by property investors

Facts on NSW Land tax 2024

Strategy to manage land tax:

Example:

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For Trustees :

For professionals (in addition to the above services):

Other New Initiatives:

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Medibank Private Share Offer – How Much Will You Get

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Impact on SMSFs with existing cross-insurance arrangements

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