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.
This guide has been requested by a number of our younger clients under 50 who are now taking an interest in retirement savings and tax planning but applies to all working SMSF members especially those who can combine Salary Sacrifice with a Transition to Retirement Pension. Please view this short ATO video on super contributions first and then we will go in to detail:
So what is salary sacrifice?
Salary sacrifice is an arrangement between an employer and an employee, whereby the employee agrees to forgo part of their future entitlement to salary or wages in return for the employer providing them with benefits of a similar value.
Contributions made through a Salary Sacrifice Arrangement (SSA) into super are made with pre-tax dollars, meaning they are not taxed at the member’s marginal tax rate.
They are treated as Concessional Contributions (CCs) and tax of up to 15% will usually be payable, so long as the member does not exceed their CC cap. Higher income earners may have CCs within the cap taxed at 30% (refer to our article Will you be paying the new top up tax on your SMSF contributions? )
The difference between your marginal tax rate and the tax rate on contributions is what makes up the benefit of salary sacrifice for the member of your fund. This has nothing to do with investments, it is just income planning and using the tax system legally to your advantage.
Unlike Superannuation Guarantee (SG) or other employer contributions required under an award or workplace agreement, there is no legislative time-frame specifying when salary sacrifice contributions must be made to superannuation. It’s recommended that a time-frame be specified in the SSA. This could be, for example:
at the same time as SG is paid, or
within three business days of being withheld from salary.
An SSA is only valid until the person turns age 75. Salary sacrifice contributions generally cannot be accepted by a super fund after 28 days from the end of the month in which the member turns 75. Only mandated employer contributions can be made for an employee age 75 or older (SIS Reg 7.04).
What makes a Salary Sacrifice Arrangement (SSA) valid?
There is no legal obligation for employers to offer salary sacrifice to employees. To be effective, only prospective earnings can be sacrificed. This means an SSA will only be valid if there is a prospective agreement in place before the employee has earned the entitlement to receive the relevant amount as salary and wages.
Remember, there is no requirement for an SSA to be in writing, nor is there a standard SSA. It is strongly recommended that a written agreement be in place which states the terms and conditions of that agreement. The ATO provides a detailed explanation in tax ruling TR 2001/10.
What forms of income can be salary sacrificed?
Salary or wages are the most common types of payments that are sacrificed into super. As only future entitlements can be sacrificed, an effective arrangement can’t be made for salary or wages that have already been earned.
This means payments to which an employee is already entitled to (such as earned salary and wages, accrued leave and bonuses or commissions already earned), cannot be salary sacrificed into super unless an effective arrangement was in place prior to the employee becoming entitled to that remuneration. For example, annual and long service leave paid on termination of employment can’t be sacrificed.
If an employee has entered into an SSA and takes leave during employment, the SSA is still effective and salary sacrifice amounts can still be directed to superannuation.
What are the tax implications?
Amounts salary sacrificed into super under an effective SSA are not ‘salary and wages’ in the hands of the employee. Accordingly, employers have no PAYG withholding liabilities in relation to the payment.
Although the super contributions are a benefit derived due to employment, it is specifically exempt from Fringe Benefits Tax (FBT). However, this doesn’t extend to salary sacrifice amounts into another person’s super account (eg a spouse).
Super contributions made under an effective SSA are considered employer contributions for the purposes of the Income Tax Assessment Act 1997 and are deductible to the employer.
Usually, an SSA favours taxpayers subject to the higher marginal tax rates, as they pay just 15% contributions tax on the amount sacrificed into super (or 30% for high income earners). See this ATO video below for a short explanation of the Division 293 Tax
However, for taxpayers with incomes under the 19%( + 2% Medicare) tax rate threshold (currently $37,000), the marginal rate is not markedly different to the 15% tax payable on contributions by the receiving super fund for the sacrificed contribution.
A minor saving can still be made of almost 6% as Medicare Levy (of up to 2%) is not payable on the amount sacrificed to super.
An alternative strategy for lower-income earners is to make personal after-tax contributions to obtain a Government co-contribution of up to $500. Note: Salary sacrificed employer contributions do not qualify for the Government’s co-contribution.
What are the Centrelink implications?
An amount of salary voluntarily sacrificed into super is still counted as income for Centrelink / social security purposes. Contributions are assessed as income where a person voluntarily sacrifices income into super and has the capacity to influence the size of the amount contributed or the way in which the contribution is made reduces their assessable income.
Super contributions that an employer is required to make under the SG Act, an award, a collective workplace agreement or the super fund’s rules are not assessed as income for the member.
What issues should be considered?
Employer or other limitations
It is not compulsory for an employer to allow salary sacrificing, including amounts to superannuation. The first step is for the member to know is if their employer permits salary sacrificing.
Also, even where allowed, the arrangement under which the person is employed may impose limitations. This could be terms in a workplace agreement or award.
For example, some awards specify that a certain level of an employee’s package must be paid as salary. This would effectively place a limit on the amount that could be sacrificed to superannuation
Super Guarantee payments
Salary sacrifice amounts are treated as employer contributions. An employer may decrease an employee’s SG contributions when taxable income is reduced through salary sacrifice.
This is because the minimum amount of SG an employer is required to pay is based on the employee’s Ordinary Time Earnings (OTE). As entering into an SSA reduces an employee’s OTE, it will reduce the amount of SG that an employer is required to pay.
It is also the case that a salary sacrificed amount, being an employer contribution, could meet some or all of employers SG obligations. SMSF members should negotiate with their employer that SG payments are maintained at pre-salary sacrifice levels and include this in the SSA.
Example
Malcolm’s salary and OTE is $105,000 pa. He enters into an effective SSA to forego $20,000 of his salary for additional employer super contributions. Malcolm’s salary/OTE reduces to $85,000 for SG purposes and his employer is only legally required to pay 9.5% on this amount.
Malcolm should have negotiated with his employer to maintain the SG based on his original salary and the salary sacrifice amounts are made in addition.
Entitlements upon ceasing employment
As outlined above, an SSA reduces the salary component of a person’s package. This may also reduce other entitlements when ceasing employment (through resignation or redundancy) such as:
leave loading
calculation of leave entitlements, and
calculation of redundancy payments.
Members of your SMSF should ensure that they understand the impact of entering into an SSA. Where possible, the agreement should ensure no reduction in benefits. However confirmation from the employer is necessary.
Timing of employer contributions
There are clear rules governing an employers’ legal obligation to pay its contributions to a complying super fund either monthly or quarterly.
There are no such rules governing an employer to make a pre-tax voluntary contribution/salary sacrifice contribution into an employee’s super fund when the employee requests it. This means an employer can pay this contribution whenever they want.
SMSF members should include in the SSA the frequency of salary sacrifice contributions to super (eg the same frequency as salary payments).
Reportable employer contributions
Reportable employer super contributions (RESC) including salary sacrifice, are counted as ‘income’ for many Government benefits and concessions, such as:
Government co-contributions
Senior Australians tax offset
Spouse contribution tax offset
10% rule for making personal deductible super contributions
Medicare Levy Surcharge
Family assistance benefits, and
Centrelink and DVA income tests.
RESCs are not added back when calculating the low-income tax offset and Medicare levy.
Termination payments
Long service leave and annual leave paid on termination cannot be salary sacrificed, unless an effective SSA was put in place prior to the leave being accrued.
If termination payments are based on a definition of salary that excludes employer superannuation contributions, the employer can effectively exclude the salary sacrifice amount from the total salary on which these entitlements would be calculated.
As a result, the employee’s termination package would be reduced. SMSF members should ensure that the SSA does not impact on other benefits and entitlements.
Contribution caps
An employer is eligible for a tax deduction for super contributions made on behalf of employees, regardless of the amount.
There is also no limit on the amount that an employee can sacrifice into super. However, salary sacrifice amounts are counted towards the employee’s CC cap. Excess CCs are taxed at the person’s marginal tax rate plus a charge. See the ATO video below for more details
This effectively limits the tax-effectiveness of salary sacrifice to superannuation to the employee’s annual CC cap.
At the beginning of the financial year, it’s critical to review your SMSF member’s existing SSA to ensure they won’t exceed their CC cap.
For example, if a member has received a pay rise, they may now be getting higher SG contributions from their employer. They may therefore need to reduce their salary sacrifice contributions to ensure they don’t breach their CC cap.
Ongoing reviews may also be necessary as the member may receive a pay rise during the financial year or elect to salary sacrifice a bonus which impacts on the total CCs. As well as if the concessional contribution cap increases in future years or the client becomes eligible to use the transitional higher CC cap. We recommend a April or May review of contributions to make sure your SMSF members are under their caps and will stay so up to June 30th.
Checklist
While salary sacrifice can be a tax-effective way for people to save for retirement, there are a number of steps that should be taken to ensure it is properly implemented. The following checklist could be used to help ensure all the key issues are addressed.
1.
Check that the employer permits salary sacrifice
2.
Check on limitations placed on an agreement by employment conditions (eg award, workplace agreement, etc)
3.
Ensure agreement is for future earnings and valid
4.
Ensure other employment entitlements are not impacted by agreement (eg SG,
5.
Check available concessional contribution cap and ensure client will not exceed the cap
6.
Establish the agreement in writing (including timing of contributions)
7.
Review agreement and level of contributions at least on an annual basis (around
I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click on the Schedule now link to see some options.
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
Information sourced and valid as of February 2015 from ATO, BT, MLC, Challenger, SIS Act.
There are many reasons to get a superannuation review especially if you are within 15 years of using your super funds more tax effectively (hint over age 45). A lot can be done to dramatically improve your retirement prospects given time. However if you leave it too late, the chances of making significant improvements are limited. Getting good financial advice can make all the difference to the quality of your retirement. You may not want a full advice service but you can just have a Superannuation and Insurance review. So here are a few reasons why a review could be one of the best decisions you make.
You’ve being putting money in to Super for over 20 years and not sure what it’s doing for you. You have more than one superannuation account and cannot keep a track of how them or how they are performing. Consolidating your accounts together could make keeping track of your savings much easier and moving house less of a hassle!
You may be considering adding funds or your tax agent may have recommended some salary sacrifice and you are suddenly more interested in getting value for money.
You may be interested and want to explore the use of a Self Managed Superannuation Fund known as a SMSF (its only one option but we can help you assess if it is right for you).
You may not be satisfied with the level of service and advice you are receiving from your superannuation company and/or your adviser if you are getting any at all. Many people receive no service at all but continue paying fees year after year. Is it time for you to step-up and demand advice, we invite clients for a review at least twice per year.
You are concerned that your super or multiple accounts may not be performing very well. Sadly, most people in superannuation schemes have little or no idea how their funds are invested or performing from one year to the next. Reports get thrown in a drawer because the jargon is mind bending!
You may be unsure how much risk you are taking with your superannuation investments. It is undeniable that in order to increase your nest egg value, some risk will need to be taken. However the risk you are taking may not be suitable for you and categories like “Balanced or Core” don’t actually mean what they suggest!.
And how about just getting general health check on your super and how it is performing.
Like many people you have accumulated lots of accounts over the years from various jobs ( I recently consolidated 12 accounts for a couple). It may be beneficial to consolidate them all together in one account (wait don’t rush in, review insurance and fees first).
Identify poor performing superannuation funds and move them to investments that have greater potential for growth or a more consistent return.
You may have an SMSF or Superannuation account sitting in cash and just don’t know what to do as you have lost confidence.
You may have multiple/duplicate insurance arrangements across many funds and be paying premiums for cover that may never pay out.
How a superannuation review works
You are likely to have one or more personal accounts and they could be an industry fund, an employer group plan, a personal retail account, or even a transition to retirement pension .
The first step is to complete a Risk Profiling Questionnaire; this is designed to help identify what your attitude to risk is and your comfort with different classes of investment.
The second step it to complete a Fact Find about your personal circumstances so that we have a full understanding of you current situation, your future goals and objectives.
The third step is to obtain full details of all of your current superannuation and insurance arrangements. We ask superannuation companies more than 15 questions, so that we get a full and complete picture of your current situation.
The fourth step is to complete a full and comprehensive analysis of your current arrangements, to identify if your super accounts are working as they should be, that insurance cover is valid and will protect you and your family and fees are under control.
Step five is to recommend a suitable investment strategy to move your Superannuation balance forward, should the review reveal that your existing accounts are not working as well as they should be.
Step six is to implement the recommendations, which may mean re-organising and consolidating your accounts into one super or even a pension fund.
And finally step seven is to keep your arrangements under regular review to ensure that it continues to perform and meet your objectives.
Want a Superannuation Review or are you just looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make this the year to get organised or it will be 2028 before you know it.
Please consider passing on this article to family or friends. Pay it forward!
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
OK so here we are with only a few weeks left to the end of the financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a check-list of the most important issues that you should address with your advisers before the year-end. But before we start, one warning:
Be careful not to allow your accountant, administrator or financial planner to reset any pension that has been grandfathered under the new pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences at the current and higher deeming rates.
1. It’s all about timing!
First thing to note is that June 30th falls on a Thirsday this year so be careful about doing anything for your fund after the 27th as funds transferred risk not reaching the destination account before the deadline. Remember it is when the funds are received by the Superannuation fund that counts.
2. Review Your Concessional Contributions – 30K under 49 and $35K if you were 49-64 this year and then work test applies for 65+.
Maximise contributions up to concessional contribution cap but do not exceed your Concession Limit. The sting has been taken out of Excess contributions tax but you don’t need additional paperwork to sort out the problem. So check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.
3. Review your Non-Concessional Contributions (consider before May 3rd – budget night)
Have you considered making non-concessional contributions to move investments in to super and out of your personal, company or trust name. Maybe you have proceeds from and inheritance or sale of a property sitting in cash. As shares and cash have increased in value you may find that personal tax provisions are increasing and moving some assets to super may help control your tax bill. Are you nearing 65? then consider your contribution timing strategy to take advantage of the “bring forward” provisions before turning age 65 to contribute up to $540,000 this year or $180K this year and up to $540,000 next year before you turn 65.
4. Co-Contribution
Check your eligibility for the co-contribution and if you are eligible take advantage. Note that the rules have changed and it is not as attractive as previously but it is free money – grab it if you are eligible.
To calculate the super co-contribution you could be eligible to receive based on your income and personal super contributions, use the Super co-contribution calculator.
5. Spouse Contribution
If your spouse has assessable income plus reportable fringe benefits totaling less than $13,800 then consider making a spouse contribution. Check out the ATO guidance here
6. Over 65? Do you meet the work test? (The 40 hours in any 30 days rule)
You should review your ability to make contributions as if you if you have reached age 65 you must pass the work test of 40 hours in any 30 day period during the financial year, in order to continue to make contributions to super. Check out ATO superannuation contribution guidance
7. Check any payments you may have made on behalf of the fund.
It is important that you check for amounts that may form a superannuation contribution in accordance with TR 2010/1 (ask your advisor), such as expenses paid for on behalf of the fund, debt forgiveness or in-specie contributions, insurance premiums for cover via super paid from outside the fund. See here for more discussion on this topic
8. Notice of intent to claim a deduction for contributions
If you are planning on claiming a tax deduction for personal concessional contributions you must have a valid ‘notice of intent to claim or vary a deduction’ (NAT 71121). If you intend to start a pension this notice must be made before you commence the pension. Many like to start pension in June and avoid having to take a minimum pension but make sure you have claimed your tax deduction first.
9. Contributions Splitting
Consider splitting contributions with your spouse, especially if:
• your family has one main income earner with a substantially higher balance or
• if there is an age difference where you can get funds into pension phase earlier or
• If you can improve your eligibility for concession cards or pension by retaining funds in superannuation in younger spouse’s name.
This is a simple no/low-cost strategy I recommend everyone look at especially with the Government moving on taxing higher balance accounts. See my blog about this strategy here.
10. Off Market Share Transfers (selling shares from your own name to your fund)
If you want to move any personal shareholdings into super you should act early. Here are the links to the Standard Forms for Computershare and here is the Link Market Services Form
11. Pension Payments
If you are in pension phase, ensure the minimum pension has been taken. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
The minimum payment amounts have been by 25% for the 2012-13 years. The following table shows the minimum percentage factor (indicative only) for each age group.
Age Minimum % withdrawal (in all other cases)
Under 65 4%
65-74 5%
75-79 6%
80-84 7%
85-89 9%
90-94 11%
95 or more 14%
Sacrificial Lamb
Think about having a sacrificial lamb, a second lower value pension that can sacrificed if minimum not taken. In this way if you pay only a small amount less than the minimum you only have to lose the smaller pensions concession rather than the concession on your full balance. When combined with the ATO relief discussed in the following article “What-happens-if-i-don’t-take-the-minimum-pension” you will have a buffer for mistakes.
Before reading the following:Be careful not to reset a pension that has been grandfathered under the new deeming of pension rules that came in on Jan 1st 2015 without getting advice.
12. Reversionary Pension is often the preferred option to pass funds to a spouse or dependent child.
You should review your pension documentation and check if you have nominated a reversionary pension. If not, consider your family situation and options to have a reversionary pension. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children
13. Review Capital Gains Tax Position of each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to government changes in legislation like those proposed this year. Remember if you plan to sell an asset for the next 2 years the Temporary Budget Repair Levy may mean 2% extra tax
14. Review and Update the Investment Strategy not forgetting to include Insurance of Members
Review your investment strategy and ensure all investments have been made in accordance with it, and the SMSF trust deed. Also, make sure your investment strategy has been updated to include consideration of insurances for members. See my article of this subject here. Don’t know what to do…..call us.
15. Collate and Document records of all asset movements and decisions
Ensure all the funds activities have been appropriately documented with minutes, and that all copies of all statements and schedules are on file for your accountant/administrator and auditor.
16. Double Dipping! June Contributions Deductible this year but can be allocated across 2 years.
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording!
17. Market Valuations – Now required annually
Regulations now require assets to be valued at market value each year, ensure that you have re-valued assets such as property and collectibles. Here is my article on valuations of SMSF investments in Private Trusts and Private Companies. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
18. In-House Assets
If your fund has any investments in in-house assets you must make sure that at all times the market value of these investments is less than 5% of the value of the fund. Do not take this rule lightly as the new SMSF penalty powers will make it easier for the ATO to apply administrative penalties (fines) for smaller misdemeanors ranging from $820 to $10,200 per breach.
21. Check the ownership details of all SMSF Investments
Make sure the assets of the fund are held in the name of the trustees on behalf of the fund and that means all of them. Check carefully any online accounts you may have set up without checking the exact ownership details. You have to ensure all SMSF assets are kept separate from your other assets.
22. Review Estate Planning and Loss of Mental Capacity Strategies.
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid (check the wording matches that required by the Trust Deed) and still in accordance with your wishes. Also ensure you have appropriate Enduring Power of Attorney’s (EPOA) in place allow someone to step in to your place as Trustee in the event of illness, mental incapacity or death. Do you know what your Deed says on the subject? Did you know you cannot leave money to Step-Children via a BDBN if their birth-parent has pre-deceased you?
23. Review any SMSF Loans
Have you provided special terms (low or no interest rates , capitalisation of interest etc.) on a related party loan? Then you need to review your loan agreement and get advice to see if you need to amend your loan. Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low. Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF Trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue.
Don’t leave it until June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
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.
Happy EOFYS!
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.
The Government has announced that from 20 March 2015, Centrelink will reduce the deeming rates applicable to allowances and pensions. The lower deeming rate will be reduced from 2 per cent to 1.75 per cent for pensioner and single allowees for financial investments of up to $48,000 and for pensioner couples with investments of up to $79,600.
The higher deeming rate will fall from 3.5 per cent to 3.25 per cent for amounts over the deeming threshold.
This is estimated to affect 770,000 pensioner and allowee recipients according to the Minister for Social Services, Scott Morrison. In the media alert, the Minister suggests that part-pensioners will receive an average increase of $3.20 per fortnight or $83.20 per annum.
In summary the new deeming rates will be as follows:
Deeming Rates from March 2015
This will be received as welcome news to those pension, aged care users and Commonwealth Seniors Health Card recipients who, from 1 January 2015, have been caught by the extension of the deeming rules to account-based pensions.
It may also allow some people who were previously in receipt of the Low Income Health Card to become eligible for it again.
Future changes
The lower deeming rates may not be the end of Centrelink changes with respect to deeming. The Social Services and Other Legislation Amendment (2014 Budget Measures No. 5) Bill 2014 was introduced into the House of Representatives on 2 October 2014. One of the measures contained within this bill was to reset the deeming thresholds to $30,000 for singles and $50,000 combined for pensioner couples from 20 September 2017. This was part of the measures proposed in the May 2014 Federal Budget. To date, the Government hasn’t had any success in moving this Bill through the House and on to the Senate.
Does it make a difference?
Overall, the changes to the deeming rates are a welcome measure for all pensioners and allowees who are not in receipt of the full allowance or age pension. This is especially so for those who own direct shares and/or who are not beneficiaries of the grandfathering of account-based pensions. What will be interesting looking forward is whether there are any interest rate cuts in the near future which affect the deeming rates.
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.
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.
Join Us Image courtesy of Stuart Miles at FreeDigitalPhotos.net
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 $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).
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 $63 (up $15 in 5 years – inflation!).
The annual fee for all other proprietary limited companies is $310 (2023-24). 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 $87 and if two months past the deadline date it will have to pay an additional $362.
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 $436, a discount of $194 on 10 years of the standard $63 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 $2,298, a discount of $802 on 10 years of the standard $310 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 require 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
The SMSF Coach 