The changes to the superannuation system, announced by the Australian Government in the 2016–17 Budget, have now received royal assent and the finer details of how to implement them have been released. While the government claim these changes were designed to improve the sustainability, flexibility and integrity of Australia’s superannuation system, they did not work with industry or the ATO before announcing them and as such it has been a nightmare to try to get your head around what the actual changes are and how strategies need to be implemented to manage them.
As a result we are getting last-minute guidance from the ATO and software providers as well as SMSF, Industry and Retail Super providers. The government have back-flipped on some measures, amended others because of collateral damage and tightened other measures for obscure reasons. With most of these changes commencing from 1 July 2017 I have tried to put some useful links together.
A short video overview of the changes is provided below. I have provided more detailed information links and will update these as they are progressively published to help you understand the changes, how they may affect you, and what you may need to know and do now, or in the future as a trustee of a self-managed super fund (SMSF). Even more detailed information is available to help you understand the changes, including for some topics, law companion guidelines (see below) to provide certainty about how the changes will be administered.
For those who wish to dive in to the detail please view the Law Companion Guides below. A law companion guideline is a type of public ruling. It gives the ATO view on how recently enacted law applies. It is usually developed at the same time as the drafting of the Bill.
The ATO normally release a law companion guideline in draft form for comment when the Bill is introduced into Parliament. It is finalised after the Bill receives Royal Assent. It provides early certainty in the application of the new law. Please make sure to look for updates before relying on this information.
The ATO have also released access to answers to some frequently asked questions and they can be found in this document Super Changes Q & As
Example: Q. How are my pensions and annuities valued for transfer balance cap purposes?
ANSWER : You need to contact your fund about the value of your pensions and annuities.
The value of your pension or annuity will generally be the value of your pension account for an account-based pension.
Special rules apply to calculate the value of: • lifetime pensions • lifetime annuities that existed on 30 June 2017, and • life expectancy and market linked pensions and annuities where the income stream existed on 30 June 2017
Lifetime pension and annuities These are valued by multiplying the annual entitlement by a factor of 16.This provides a simple valuation rule based on general actuarial considerations. Your annual entitlement to a superannuation income stream is worked out by reference to the first payment entitlement for the year. The first payment is annualised based on the number of days in the period to which the payment refers. (I.e. the first payment divided by the number of days the payment relates to multiplied by 365).
This means that a lifetime pension that pays $100,000 per annum will have a special value of $1.6 million which counts towards your transfer balance cap in the 2017-18 financial year.
For a lifetime pension or annuity already being paid on 1 July 2017, the special value will be based on annualising the first payment in the 2017-18 financial year. This may include indexation, so may be slightly higher than your current annual lifetime pension payments.
Life expectancy and market linked pensions and annuities being paid on or before 30 June 2017 are valued by multiplying the annual entitlement by the number of years remaining on the term of the product (rounded up to the nearest year).
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 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.
Do you know which asset sector performed best last year, the year before? Do you think those results will guide you for next year? Think again. I don’t think many SMSF Investors would have guessed Global Listed Property would have been the top performers in the last 6 years but in 2016 was a disappointing under performer. Many burnt in the property sector in the GFC had avoided it like the plague and missed some of the upside.
Franklin Templeton Austalia’s annual asset class ladder for 2018 is a great tool to visualise how each asset class/sector has performed over the last 20 years and pour water on ideas that we can reliably predict next years winners.
Click on this picture to access the larger version in PDF pormat
What becomes glaringly obvious after scrutinising the table is that no single asset class consistently outperforms the others. Just in case you subscribe to the ‘last years greyhound is this years dog” or that cycles are predictable, the table shows no clues or discernible pattern into how the previous year’s winners or losers will perform in the following year as the pattern appears totally random.
We coach clients to build a diversified strategy with some tactical allocations when sectors or assets appear oversold or opportunities arise like when the Aussie dollar was getting USD $1.10 a few years back and the opportunity came to overweight international stocks.
I hope this information 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.
Rate for 2026-27 Related Property LRBA is 9.35%and Listed Shares 11.95%
Old Rate for 2020-26FY Related Property LRBA was 8.95% and Listed Shares 10.35%
The ATO have issued long-awaited guidelines providing SMSF trustees with suggested ‘Safe Harbour’ loan terms on which trustees may use to structure a related party Limited Recourse Borrowing Arrangement (LRBA) consistent with dealing at arm’s length with that related party.
By implementing these “Safe Harbour” loan terms, SMSF trustees are assured by the ATO Commissioner that
..for income tax purposes, the Commissioner accepts that an LRBA structured in accordance with this Guideline is consistent with an arm’s length dealing and that the NALI provisions do not apply purelybecause of the terms of the borrowing arrangement.
It is absolutely essential that all non-bank SMSF borrowing arrangements (LRBAs) be reviewed prior now extended to 1 Jan 2017
Where has this come from?
The ATO first released and then re-issued ATO Interpretative Decisions in 2015 (ATO ID 2015/27 and ATO ID 2015/28), dealing with Non-Arm’s Length Income(NALI) derived from listed shares and real property purchased by an SMSF under an LRBA involving a related party lender – where the terms of the loan were not deemed to be on commercial terms.
These ATOIDs state that the use of a non-arm’s length LRBA gives rise to NALI in the SMSF. Broadly, the rationale for this view is that the income derived from an investment that was purchased using a related party LRBA, where the terms of the loan are more favorable to the SMSF, is more than the income the fund would have derived if it had otherwise being dealing on an arm’s length basis.
NALI is taxed at the top marginal tax rate, currently 47% – regardless of whether the income is derived while the fund is in accumulation phase where tax is normally 15% or in pension phase when the income would usually be tax exempt.
After that bombshell, the ATO announced that it would not take proactive compliance action from a NALI perspective against an SMSF trustee where an existing non-commercial related party LRBA was already in place, as long as such an LRBA was brought onto commercial terms or wound up by 30 June 2016.
The Nitty Gritty Details of the Safe Harbour Steps
The ATO has issued Practical Compliance Guideline PCG 2016/5. As a result, provided an SMSF trustee follows these guidelines in good faith, they can be assured that (for income tax compliance purposes) their arrangement will be taken to be consistent with an arm’s length dealing.
The ‘Safe Harbour’ provisions are for any non-bank LRBA entered into before 30 June 2016, and also those that will be entered into after 30 June 2016.
Broadly, this PCG outlines two ‘Safe Harbours’. These Safe Harbours provide the terms on which SMSF trustees may structure their LRBAs. An LRBA structured in accordance with the relevant Safe Harbour will be deemed to be consistent with an arm’s length dealing and the NALI provisions will not apply due merely to of the terms of the borrowing arrangement.
The terms of the borrowing under the LRBA must be established and maintained throughout the duration of the LRBA in accordance with the guidelines provided.
Safe Harbour 1
Safe Harbour 2
Asset Type
Investment in Real Property
Investment in a collection of Listed Shares or Units
Interest RateNote: as of 10 Jan 2019: The RBA no longer round the rates to the nearest 5 basis points.
RBA Indicator Lending Rates for banks providing standard variable housing loans for investors. Use the May rate immediately preceding the tax year. (2015/16 year = 5.75%)(2016-17 year = 5.65%)(2017-18 year = 5.8%)(2018-19 year = 5.8%)(2019-2020 year = 5.94%)(2020-2021 year = 5.1%) (2021-2022 year = 5.1%)(2022-2023 year = 5.35%)2024 FY = 8.85% (2024-25 year = 9.35%) (2025-26 year 8.95%) (2026-27 year 9.35%)
Same as Real Property + a margin of 2%
Fixed / Variable
Interest rate may be fixed or variable.
Interest rate may be fixed or variable.
Term of Loan
Variable interest rate loans:Original loan – 15 year maximum loan term (both residential and commercial).Re-financing – maximum loan term is 15 years less the duration(s) of any previous loan(s) in respect of the asset (for both residential and commercial).Fixed interest rate loan:
Rate may be fixed for a maximum period of 5 years and must convert to a variable interest rate loan at the end of the nominated period. The total loan term cannot exceed 15 years.
For an LRBA in existence on publication of these guidelines, the trustees may adopt the rate of 5.75% as their fixed rate provided that the total period for which the interest rate is fixed does not exceed 5 years. The interest rate must convert to a variable interest rate loan at the end of the nominated period. The total loan term cannot exceed 15 years.
Variable interest rate loans:Original loan – 7 year maximum loan term.Re-financing – maximum loan term is 7 years less the duration(s) of any previous loan(s) in respect of the collection of assets.Fixed interest rate loan:
Rate may be fixed up to for a maximum period of 3 years and must convert to a variable interest rate loan at the end of the nominated period. The total loan term cannot exceed 7 years.
For an LRBA in existence on publication of these guidelines, the trustees may adopt the rate of 7.75% as their fixed rate provided that the total period for which the interest rate is fixed does not exceed 3 years. The interest rate must convert to a variable interest rate loan at the end of the nominated period. The total loan cannot exceed 7 years.
Loan-Value –RatioLVR
Maximum 70% LVR for both commercial & residential property. Total LVR of 70% if more than one loan.
Maximum 50% LVR.Total LVR of 50% if more than one loan.
Security
A registered mortgage over the property.
A registered charge/mortgage or similar security (that provides security for loans for such assets).
Personal Guarantee
Not required
Not required
Nature & frequency of repayments
Each repayment is to be both principal and interest.Repayments to be made monthly.
Each repayment is to be both principal and interest.Repayments to be made monthly.
Loan Agreement
A written and executed loan agreement is required.
A written and executed loan agreement is required.
Information sourced from Practical Compliance Guidelines PCG 2016/5.
Potential Trap to be aware of: Importantly, as part of this announcement, the ATO also indicated that the amount of principal and interest payments actually made with respect to a borrowing under an LRBA for the year ended 30 June 2016 must be in accordance with terms that are consistent with an arm’s length dealing.Information sourced from Practical Compliance Guidelines PCG 2016/5.
For the 2017-18 and 2018-19 years the rate is 5.8%
For the 2019-20 year the rate is 5.94%
For the 2020-21 year the rate is 5.1%
For the 2021-22 year the rate is 5.1%
For the 2022-23 year the rate is 5.35%
For the 2023-24 year the rate is 8.85%
For the 2024-25 year the rate is 9.35% until 30 June 2025
For the 2025-26 year the rate is 8.95%
For 2019-20 and later years, the rate published for May (the rate for the month of May immediately prior to the start of the relevant financial year)
It is the applicable rate under Column H of the above spreadsheet (click on link). The rate seems to have started in August 2015 but I assume we must use the May rate from now on.
In referencing the Indicator Rate you can use: Ref: Title: Lending rates; Housing loans; Banks; Variable; Standard; Investor Lending rates; Housing loans; Banks; Variable; Standard; Investor Frequency: Monthly Units: Per cent per annum Source RBA Publication Date 04-Apr-2016 Series ID: FILRHLBVSI
A complying SMSF borrowed money under an LRBA, using the funds to acquire commercial property valued at $500,000 on 1 July 2011.
The borrower is the SMSF trustee.
The lender is an SMSF member’s father (a related party).
A holding trust has been established, and the holding trust trustee is the legal owner of the property until the borrowing is repaid.
The loan has the following features:
the total amount borrowed is $500,000
the SMSF met all the costs associated with purchasing the property from existing fund assets.
the loan is interest free
the principal is repayable at the end of the term of the loan, but may be repaid earlier if the SMSF chooses to do so
the term of the loan is 25 years
the lender’s recourse against the SMSF is limited to the rights relating to the property held in the holding trust, and
the loan agreement is in writing.
We do not consider that this LRBA has been established or maintained on arm’s length terms. The income earned from the property, which is rented to an unrelated party, may give rise to NALI.
At 1 July 2015, the property was valued at $643,000, and the SMSF has not repaid any of the principal since the loan commenced.
If after considering TD 2016/16, it is determined that the income earned from the property is in fact NALI, to avoid having to report NALI for the 2015-16 year (and prior years) the Fund has a number of options.
Option 1 – Alter the terms of the loan to meet guidelines
The SMSF and the lender could alter the terms of the loan arrangement to meet Safe Harbour 1 (for real property).
To bring the terms of the loan into line with this Safe Harbour, the trustees of the SMSF must ensure that:
The 70% LVR is met (in this case, the value of the property at 1 July 2015 may be used).
Based on a property valuation of $643,000 at 1 July 2015, the maximum the SMSF can borrow is $450,100. The SMSF needs to repay $49,900 of principal as soon as practical before 30 June 2016.
The loan term cannot exceed 11 years from 1 July 2015.
The SMSF must recognise that the loan commenced 4 years earlier. An additional 11 years would not exceed the maximum 15 year term.
The SMSF can use a variable interest rate. Alternatively, it can alter the terms of the loan to use a fixed rate of interest for a period that ensures the total period for which the rate of interest is fixed does not exceed 5 years. The loan must convert to a variable interest rate loan at the end of the nominated period.
The interest rate of 5.75% applies for 2015-16 and 5.65% p.a. applies from 1 July 2016 to 30 June 2017. The SMSF trustee must determine and pay the appropriate amount of principal and interest payable for the year. This calculation must take the opening balance of $500,000, the remaining term of 11 years, and the timing of the capital repayment, into account.
After 1 July 2016, the new LRBA must continue under terms complying with the ATO’s guidelines relating to real property at all times.
For example, the SMSF must ensure that it updates the interest rate used for the loan on 1 July each year (if variable) or as appropriate (if fixed), and make monthly principal and interest repayments accordingly.
Option 2 – Refinance through a commercial lender
The fund could refinance the LRBA with a commercial lender, extinguish the original arrangement and pay the associated costs.
For any period after 1 July 2015 that the original loan remains in place, the SMSF must ensure that the terms of the loan are consistent with an arm’s length dealing, and relevant amounts of principal and interest are paid to the original lender.
The SMSF may choose to apply the terms set out under Safe Harbour 1 to calculate the amounts of principal and interest to be paid to the original lender for the relevant part of the 2015-16 year.
Option 3 – Payout the LRBA
The SMSF may decide to repay the loan to the related party, and bring the LRBA to an end before 30 January 2017.
For any period after 1 July 2015 that the original loan remains in place, the SMSF must ensure that the terms of the loan are consistent with an arm’s length dealing, and the relevant amounts of principal and interest are paid to the original lender.
The SMSF may choose to apply the terms set out under Safe Harbour 1 to calculate the amounts of principal and interest to be paid to the original lender for the relevant period.
Each option will have many advantages and disadvantages – so it is important to understand what the practical implications of each option are, and how physically you will approach each option. Seek specialised advice on this matter as it is not a strategy suitable for DIY implementation
Important Note to 13.22C or Unrelated Unit Trust Investors
The guidelines provided in this PCG are not applicable to an SMSF LRBA involving an investment in an unlisted company or unit trust (e.g. where a related party LRBA has been entered into to acquire a collection of units in an unrelated private trust or a 13.22C compliant trust). As such, trustees who have entered into such an arrangement will have no option but to benchmark their particular loan arrangement based on commercial loan terms, or to bring the LRBA to an end.
Please visit out SMSF Property page to get details on all available strategies for SMSF property investors.
UPDATE (Relief for those caught by Budget measures)
In a letter to an industry association, the Treasurer, Scott Morrison, has outlined transitional arrangements to allow additional non-concessional contributions above the proposed lifetime limit in certain limited circumstances. Contributions made in the following circumstances may be permitted without causing a breach of the lifetime cap:
where the trustees of a self managed superannuation fund (SMSF) have entered into a contract to purchase an asset prior to 3 May 2016 that completes after this date and non-concessional contributions were planned to be made to complete the contract of sale. Non-concessional contributions will be permitted only to allow the contract to complete provided they are within the relevant non-concessional cap that was applicable prior to Budget night, and
where additional contributions are made in order to comply with the Australian Taxation Office’s (ATO) Practical Compliance Guideline (PCG) 2016/5 related to limited recourse borrowing arrangements, provided they are made prior to 31 January 2017.
Additional non-concessional contributions made under these proposed transitional arrangements will count towards the lifetime cap, but will not result in an excess.
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. Click here for appointment options.
Liam Shorte B.Bus FSSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 9899 3693, Mobile: 0413 936 299
PO Box 6002, Norwest NSW 2153
U40, 8 Victoria Ave., 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.
Do you know which asset sector performed best last year, the year before? Do you think those results will guide you for next year? Think again. I don’t think many SMSF Investors would have guessed Australian Listed Property would have been the strongest in 3 out of the last 4 years but in 2016 was a disappointing underperformer. Many burnt in the property sector in the GFC had avoided it like the plague and missed some of the upside.
Franklin Templeton Austalia’s annual asset class ladder for 2016 is a great tool to visualise how each asset class/sector has performed over the last 20 years and pour water on ideas that we can reliably predict next years winners.
What becomes glaringly obvious after scrutinising the table is that no single asset class consistently outperforms the others. Just in case you subscribe to the ‘last years greyhound is this years dog” or that cycles are predictable, the table shows no clues or discernible pattern into how the previous year’s winners or losers will perform in the following year as the pattern appears totally random.
We coach clients to build a diversified strategy with some tactical allocations when sectors or assets appear oversold or opportunities arise like when the Aussie dollar was getting USD $1.10 a few years back and the opportunity came to overweight international stocks.
I hope this information 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.
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.
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.
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
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.
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 cooldesign at FreeDigitalPhotos.net
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.
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)
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 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
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 cooldesign at FreeDigitalPhotos.net
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 $1,150 including and ASIC charge of $636 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).
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 $70 (up $18 in 5 years – inflation!).
The annual fee for all other proprietary limited companies is $342 (2026-27). 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 $102 and if two months past the deadline date it will have to pay an additional $428.
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 $482, a discount of $218 on 10 years of the standard $70 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 $2,538, a discount of $882 on 10 years of the standard $342 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.
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.
Following on from my previous article How a SMSF can Purchase a Property with a Related Party – Using a 13.22c Trust , another strategy for those wishing to engage in property development with their SMSF involvement is for the fund trustee to invest in a unit trust that holds the development land / existing property by subscribing for units in the unit trust with partners so that no related entity group owns more than 50% of the units in the trust.
Where the fund trustee invests in an unrelated trust the trustee for the unit trust is not required to comply with the requirements of regulation 13.22C of the SIS Regulations. This means that the trustee for the unit trust can borrow to fund the land development without the fund trustee breaching the in-house asset rules in s71 of the SIS Act.
To make it very clear the unit trust will be unrelated if the fund trustee and its associates do not:
exercise Sufficient Influence; or
have a fixed entitlement to more than 50% of the income and capital of the unit trust; or
have the power to remove or appoint the trustee for the unit trust.
So each SMSF or related group of investors can own exactly 50% in combination between them and still maintain an unrelated trust and meet the above requirements.
Keep it simple as it is important that the units in the unit trust carry equal rights to income and capital so that you do not also trigger the non arm’s length income provisions under s295-550 of the Income Tax Assessment Act 1997 (1997 Act).
The diagram below shows 2 unrelated Self Managed Superannuation Funds investing in a unit trust equally (50/50) to carry out a property development. One of the SMSFs uses as related party loan to fund their purchase of the units. Remember it is only the units that are offered as security not the property in the trust.
Each SMSF contributes $350,000 and the property is developed for a total cost of $700,000 and sold for $1m. The$300,000 profit flow back through the Unit Trust to the unit holders equally.
Sufficient Influence
Where two unrelated SMSFs each hold 50% of the units in the unit trust, it is important that the trust management decisions are decided on a 50/50 basis. It should be very clear from documentation and minutes of the trust that decisions are made jointly.
How to avoid distributions to the SMSF being treated as non-arm’s length income?
Where the SMSF invests by way of a unit trust structure, any income received by the fund trustee may be treated as non arm’s length income and taxed at 47% under s295-550(5) of the Income Tax Assessment Act 1997 (1997 Act), where:
the parties are not dealing at arm’s length terms; and
the fund trustee receives an amount it would not otherwise have received if the parties were dealing on arm’s length terms.
Similarly, income the SMSF derives as a beneficiary of the trust, other than because of a fixed entitlement to income, will be treated as non arm’s length income and taxed at 47%.
Therefore, it is important to ensure that the unit trust is a fixed trust, meaning that the entitlement of unit holders to receive income and/or capital from the unit trust is fixed and indefeasible. However, even with a fixed trust it is necessary for the income to be no more than the income that would have been derived if the parties were dealing with each other at arms-length (s295-550(5)).
Managing powers of trustee appointment or removal
Again to avoid falling foul of the legislation, the constitution of the trustee company of the unit trust should be designed to ensure that the SMSF trustee and/or its associates do not have the power to control the trustee by effectively having the power to appoint and remove the trustee for the unit trust by reason that they hold a majority of the shares in the trustee. One trap is a constitution that allows the chairperson to have a casting vote where the chairperson is a SMSF Trustee or representative of the SMSF trustee.
Documentation
When the transaction is structured by way of an unrelated unit trust arrangement, the following documents should be prepared by an experienced legal expert (not off the shelf):
purpose specific unit trust deed and accompanying minutes of meeting; and
unit holders’ agreement all ensuring none of the requirements breached..
Gradual acquisitions of more units by the SMSF
Where a fund trustee invests in an unrelated unit trust the fund trustee may acquire the units held by the other party over time, subject to complying with the provisions of the SIS Act and keeping their related entity group to less than 50% of the overall trust units. Keep in mind that where the unit trust is land rich, there may be a corresponding stamp duty liability and there may be capital gains tax implications for the initial owner as well as valuation fees at each transaction date.
Remember the Sole Purpose Test
In the zest for undertaking any strategy I always remind clients about the reason for undertaking any investment. Your aim should be to provide for a better retirement. If that is not the core purpose then you are breaching the sole purpose test and should reconsider the whole strategy. Also you must review or amend your fund’s investment strategy to ensure this investment falsl within it’s guidelines..
Important information (emphasised for use of this material):
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, tax and legal advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Magnitude, Verante and its representatives receive fees from the provision of financial advice.
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 Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557
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 hywards at FreeDigitalPhotos.net
The Australian Tax Office (ATO) has launched a great selection of short educational videos dealing on all matters to do with self-managed superannuation funds (SMSFs). The short animated videos are only 2 -3 minutes each and cover topical subjects as well as key responsibilities for SMSF trustees in an easy to understand format.
The headline for each video contains a link that will take you to the appropriate Tax Office web page, which also publishes the full transcript of the contents of each video if you prefer reading.
This video deals with how SMSFs (or as they used to be known, “do-it-yourself” or DIY super funds) are not really very DIY at all. The video introduces the different people an SMSF trustee will have to work with, or who can help trustees meet their obligations.
SMSF trustees – individual or corporate
Deciding on the type of SMSF trustee is important. This video will help explain the difference between individual trustees and corporate trustees.
SMSF – trustee declaration
A trustee declaration must be completed and kept on file by SMSF trustees. Find out more about it here.
Video currently being updated by ATO
Learn more about the sole purpose test and what it means to your SMSF investments.
Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.
Contravening the sole purpose test is very serious. In addition to the fund losing its concessional tax treatment, trustees could face civil and criminal penalties.
It’s likely your fund will not meet the sole purpose test if you or anyone else, directly or indirectly, obtains a financial benefit when making investment decisions and arrangements (other than increasing the return to your fund).
When investing in collectables such as art or wine, you need to make sure that SMSF members don’t have use of, or access to, the assets of the SMSF.
Your fund fails the sole purpose test if it provides a pre-retirement benefit to someone – for example, personal use of a fund asset.
What are super contribution caps? Learn about the types and limits on super contributions and SMSF trustee responsibilities.
Click here for written version while video unavailable
SMSF investment strategy
Your SMSF’s investment strategy is the framework that guides your investment decisions. It pays to have a good investment strategy that is regularly reviewed. Learn what factors your SMSF’s investment strategy needs to take into account.
Watch this video to learn how tax applies when you pay benefits from your SMSF.
Being updated by ATO
SMSF – arm’s length
All SMSF transactions must be on an arm’s-length basis. This means that fund assets must be bought and sold at market value, and income on the assets should show a true market rate of return.
Here the ATO have focused on SMSF loans and early access, with the perceived problem being that people mistakenly think that an SMSF can provide them with a loan, or that they can access their super savings whenever they like.
Thinking about winding up your SMSF? Here are some common reasons for winding up and the steps to follow to get it done.
I will keep this list updated as more videos are released
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.
Here are some ways to salvage a decent retirement:
Get back in control of your finances now. The first step is to actually sit down (with your partner if you have one) and list out your assets and liabilities and work out what you are actually saving *or not) at present. Understand how you are financing your current lifestyle and then think about what sort of lifestyle you want in the future. If you are borrowing for todays lifestyle then you have little chance of funding the same standards in retirement.
Get out of debt. One of the hardest things about debt is that it feels so overwhelming. The reality is you can’t ignore it and you know deep down that delaying the inevitable only piles on more trouble. Better just to take on your debt and get through it often starting with the high interest rated debt first. A great place to start is the Managing Debt section of the Money Smart government website.
Look to transition to retirement rather than pulling the plug. See if you can extend your savings by working part-time or doing some contract work during the year. Every dollar you earn means a dollar saved from your retirement fund. More and more people are opting to cut back to 4 then 3 days before finally retiring rather than the traditional retirement strategy of working full-time until the day you retire. ask about using a combined Transition to retirement and Salary Sacrificing strategy to boost your retirement savings.
Find a trusted financial adviser. A fee for service financial planner who is recommended to you by someone you know and trust can help you plan for retirement and make the most of your resources in ways you might not have anticipated. Often using the superannuation , tax and social security systems can add as much value as the return on the investments. you may look at consolidating your superannuation, moving investments in to a lower-income earner’s name, leveraging the equity in your home or investments or taking more control of your future using a Self Managed Super fund or a Member Directed Option in your industry or retail fund.
Don’t dip in to your super.Just because you reach preservation age you should not be tempted to dip into your retirement savings. You can use strategies like Transition to Retirement pensions combined with Salary Sacrifice to actually receive the same take home income but in a more tax effective way and also better after tax returns on your savings.
Think twice before indulging the kids.High property prices , unemployment and career breaks to start a family have made it hard for many in their 20s and 30s to get an independent head start, and many families are getting through tough times by living together. But too many parents are giving adult children financial support for house deposits, new cars, medical and school bills and worse still spending money. This is teaching them nothing about saving and parents need to teach life lessons not be their children’s best mate! This financial assistance without teaching about saving and budgeting may be undermining their children’s ability to ever become independent. It also may be dooming parents’ retirement. The kids have more time than you do to make up financial losses. Get your own retirement funding in order before splashing out on the children. Set rules, limits and targets for them and make a loving, firm plan teaching them how to budget and reduce the siphoning from the bank of Mum and Dad while giving wholehearted support in non-financial ways.
Save more and save smarter. Follow the basic rules for retirement savings, including minimising taxes, working longer, investing regularly and keeping on top of your investments. Boost savings by every cent you can and pre-tax if possible Keep increasing your salary sacrifice contributions to meet your retirement goal. Don’t have a goal? Use the Money Smart retirement planner calculators to decide how much you’ll need and what to save to get there.
Don’t touch the equity in your home unless it is adding income. If your retirement is looking shaky, don’t even consider using home equity for non-essentials like renovations or as new car. Use the equity to build wealth rather than destroying it. Talk to a financial planner for strategies and then your accountant to confirm tax consequences when using the equity in your home to work for your retirement. Educate yourself on the pros and cons of any investment so you are comfortable with the strategies as that provides the Sleep factor!.
Plan for the unforeseen and protect your greatest asset.Plan for the unexpected and don’t wait until you’re in trouble to take action. Insurances are an essential part of any long-term plan and your earning capacity is your biggest asset so protect it. See the warning lights. If you’re struggling with mortgage repayments and debt now, even if you want badly to stay in your home, start right away to figure out a fall back plan if you cannot. Pride can prevent you from taking needed action when you’re in trouble. Don’t spend retirement savings or home equity trying to repay unmanageable debt.
what about number 10? Well that’s up to you , let me know what are you doing to rescue your retirement? Just comment blow, you never know who or how many people your idea may help.
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 98993693, Mobile: 0413 936 299
PO Box 6002 NORWEST NSW 2153
Suite 40, 8 Victoria Ave. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
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.
Regardless how old you are now, it’s likely you will have a tougher time managing a financially secure retirement than your parents. There is an old saying that “the best time to plant a tree was 20 years ago, the second best time is now!” .
Struggle to Save
Most people just are not putting away enough to fund their retirement or aren’t saving regularly. However the goal posts are also moving and that makes it a bigger task for pre-retirees to plan for and achieve a comfortable lifestyle once they retire
1. We’re living longer.
The proportion of the population aged 65 years or more will increase from around one in seven Australians in 2012 to one in four Australians by 2060, and close to 1 in 3.5 at the turn of the next century[i]
In 1960, a 65-year-old male would live on average another 12 years. Today, according to the Australian Bureau of Statistics (ABS) the average man at 65 can expect to live another 19 years. The average woman will get 22 more years.[ii]
Living an extra 7 years without working takes a lot more savings and better budgeting. Remember these are averages so If there is a history of longevity in your family your retirement savings may need to stretch 30 years or more.
2. Older workers lost out in the GFC. While Australia escaped most of the hurt in the GFC, many companies cut back staff and let go older employees who have failed to find new work opportunities and therefore the earning power from men and women in their late 50s and 60s has been stifled.
Investment savings also plummeted, affecting people of all ages but older Australians have less time to make up those losses by making additional savings or share portfolios recovering over time. The ASX 200 is still below 5400 having dropped during the GFC from 6840
3. Age Pensions are coming under pressure. The increase of the pension access age and the change to the indexing of pensions by CPI rather than average wages as well as the reduction in asset test of thresholds mean that access to the part-pension will be tougher in future years meaning using up more of your own capital earlier.
4. Interest rates are low and look to be lower for longer. Retirees in previous generations earned fairly consistent higher interest on savings and low-risk investments. Today’s retirees must take risks in search of income or endure historically 40 year low fixed-income returns. Five years ago you could get Term Deposits paying 7.5% and now you are lucky to get more than 2.5%
5. People are carrying more debt in to retirement. The standard Aussie family always tried to enter retirement without a mortgage on their home. That’s harder to achieve today. It is common now to see older Australian’s dipping into their superannuation to pay off the mortgage on retirement and more are finding they are increasingly accessing credit card debt and personal loans to fund one-off purchases.
6.We’re working longer. Australians’ average age at retirement is creeping up. The ABS advise that the average retirement age for those who retired within the past five years was 63 for men and 59 for women.[iii].
The upward trend in retirement ages is confirmed in the figures measuring the expectations of those aged 45 and older – around two-thirds intend to retire at or over 65 years of age, with 17 per cent expecting to work until they are 70 or older.
A quarter of workers expect to finish work between 60 and 64 years of age, while only 9 per cent expect to retire before they are 60. But poor health, job loss and the need to care for older parents, grandchildren and ill spouses can cut that short.
7. Rise in Grey Divorce means more retirees are single. Divorce is rising among older Australians, and women tend to outlive their husbands. More than half of retired women in Australia are living in households where the annual income is less than $30,000 with divorced and widowed women among the worst off, according to 2011 research – conducted by the Australian Institute of Superannuation Trustees (AIST). It costs more for a single person to support a household than to share overhead.
Have I shattered your dream or jolted you back to reality? there is no use in pointing our the problems without offering some solutions so check out this post where I outline 10tips for salvaging that retirement dream.
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.
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
Have you recently or are you currently looking at setting up an SMSF. There will be loads of paperwork to sign and sometimes the importance of some documents are not stressed enough in the process.
The ATO Trustee Declaration is one of those key documents not to be taken lightly:
The declaration aims to ensure that new trustees understand their obligations and responsibilities.
The declaration lists key matters that you must understand in order to effectively manage an SMSF, including information about:
the sole purpose test
trustee duties
investment restrictions
record-keeping, reporting and lodgement obligations
Watch this video from the ATO for a little more detail then read on below.
I recommend that all new Self Managed Superannuation Fund Trustees complete a short FREE online course about their duties before signing this document. the course is available here at www.smsftrustee.com and yes it is really free with no obligations.
You even get a nice little certificate to put on file once completed. It’s not rocket science but it will clarify how important it is to be aware of your obligations as Trustee of your own fund.
Remember you must complete this compulsory declaration if you become a new trustee (or director of a corporate trustee) of:
a new self-managed super fund (SMSF)
an existing SMSF.
You must sign this declaration within 21 days of becoming a trustee or director of a corporate trustee of an SMSF.
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.
Not sure who to trust for information about setting up and running an SMSF. Well I hope after following my blog for a while you will trust me but I know that takes time so your first port of call might be the regulator for self managed super funds , the ATO.
They have lots of webinars that you can attend live, download a recording to listen at your pleasure or if you prefer to read you can download the transcript.
SMSF trustees
Note: there are no live sessions currently scheduled for these webinars.
However, recordings of past webinars are now 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
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
