MASTERCLASS Investment – 8 Investment Strategy Review Tips – End of financial year

8 Investment Strategy Review Tips – End of financial year

May and June is a good time to review your investment strategy before End of financial year (EOFY) – an important  stage for the investor, as SOME actions MUST be taken before 30 June!!

Here are 8 tips for end of year investment planning to set you up well for the end of financial year.

1. Review Portfolio

Review the ASSETS & the RETURN achieved, against your investment strategy and goals – are they in line?

2. Consider how your investments are structured

Before purchasing an investment, it is important to get advice and consider how you will OWN the investment. Common structures include individual ownership, joint ownership, SMSF etc, however structures such as Super SMSF, discretionary (family) Trusts and Companies are often miss-used or ignored.

Consider – the investment type, the expected return, the expected size of the investment and also the end goal of the investment before deciding on a structure, as ownership can have a big impact on how it is taxed both now and into the future.

3. Capital Gain offset by concessional contributions

Have you have made a capital gain – you may be able to reduce how much CGT you will have to pay (or more precisely, how much tax you have to pay for the entire year) by making concessional contributions. For example, if you have made a capital gain of $50,000 (reduced personally by 50% to $25,000 for assets held longer than a year for individuals), then a concessional contribution (CC) will generally reduce your taxable income and might allow you to pay less tax on your capital gain, particularly if it reduces your marginal tax rate. But, in any case, a $10,000 CC could save your tax return of up $4700 tax, while you’ll pay a maximum of 23.5% on the capital gain itself.

4. Capital Loss & Gains – solidify before 30 June

Consider disposing of investments that have experienced a capital loss which is not recovering and/or does not fit in your portfolio anymore. This loss can be used to offset any capital gains you have realised this financial year.

5. Capital gains tax relief in pension mode in SMSF

If you had more than $1.6m in pension or transition-to-retirement pension (from 30/6/17), then you were able to potentially take advantage of the CGT relief provisions when selling down assets to meet the Cap., to soften the blow of the new transfer benefit cap (TBC), of $1.6m (increases each year)

Those decisions need to be made soon, if they have not been made yet, before 30 June.

Note – The action required is rarely portfolio-wide, but should be made asset by asset. There will be assets in most portfolios where you want to apply for the CGT relief, while other assets (potentially, where you’re sitting on losses) where you don’t want the CGT relief, so that you can use a future CGT loss to offset other gains.

It is a complex decision-making process, which might go down to evaluating each parcel of a particular share that you bought over an extended period. Don’t leave this complex work until too close to the deadline – sit down with your adviser and/or accountant to work through this process, sooner rather than later. See ATO Here.

6. Bring-forward deductions/expenses

Bringing forward deductions (expenses) are a great way to reduce your tax liability for the current financial year. Examples of this are investment subscriptions, pre-paying interest payments on investment loans or paying an annual premium payment for your Income Protection cover.

7. Defer taxable income

You may be able to defer income until after the 1^st of July, as a useful strategy. This could involve delaying the sale of an asset or considering when fixed term investments will mature.

8. Property Investments

(a) Interest that is part private? – ideally, a separate loan for the investment and private portion saves more work at tax time.

(b) Conveyancing and purchase costs are not deductible, they are part of the cost base for capital gains tax purposes.

(c) Do minor repairs that can be immediately written off before they become major and possible capital repairs (and need to be depreciated) – eg we had a tap that come loose at the base in the upstairs powder room, and a small water leak had developed under the sink. The water travelled to the downstairs study, and took weeks to show by a small stain in the roof plaster in the study. The tenant took weeks to tell us. We thought it was the shower in the ensuite directly above, but the plumber later found it was the powder room sink tap! Renovating the shower would costs several thousand – which was considered capital expense, fixing the tap, and roof plaster was directly deductable.

(d) Rental property visit costs – are no-longer claimable from 1/7/17 tax years onwards like inter-state trips).

(e) Delay large item purchasing, as they are generally depreciated, not immediately deductible – like a new oven, hot water systems etc.

Thinking you need help with your SMSF administration and accounting and timely lodging/compliance?

Call us 0407 361 596 to Connect Assist and Help you.

What are your Thoughts? Comment below!

Pensions – When to retire and how much you can draw from super

When to retire and how much you can draw from super

The stage in life comes to deciding to when to retire and how much we can draw from our super and how much we need to live!

Tony Kaye at First Links explains some important details –

One of the hardest decisions for many people – excluding those who want to keep on working – is choosing when to stop.

There’s no mandated retirement age as such, although there are prescribed preservation ages when people can legally access all or some of their superannuation funds.

Anyone turning 59 on or before 30 June next year, for example, if they choose to fully retire, can legally access their super after their birthday. They can do this by moving their accumulated savings to an account-based pension income stream, making a lump sum withdrawal, or doing a combination of both. Those born after 30 June 1964 will need to wait until they turn 60.

The Federal Government determines the minimum amount that retirees must withdraw from their account-based pension each year, starting at 4% of the balance for those aged up to 64. The minimum amount then rises progressively over 10-year age bands to a maximum of 14% for those aged 95 and over.

These withdrawal amounts are mandatory, regardless of whether a retiree eventually receives full or part Age Pension payments.

But the super access door is also open to people who have reached their preservation age starting at 55 and over for those born before 1 July 1960 and who want to keep on working.

They can start what’s known as a transition to retirement (TTR) strategy, which enables them to transfer some of their super to an account-based pension account and draw down an income stream. Those 60 and over pay no tax on their TTR pension payments, while those aged 55 to 59 are taxed at their marginal tax rate but receive a 15% tax offset on the taxable portion of their income stream. No tax is payable on the tax-free portion.

At the same time, as they’re still working, those using a TTR will continue to receive compulsory super guarantee payments from their employer (which are taxed at the normal rate of 15%) into their super accumulation account.

There are a range of options and considerations, so it may be highly worthwhile consulting a licensed financial planner to go through your personal circumstances.

Weighing things up

One of the key findings from Vanguard’s 2023 How Australia Retires study is that Australians who have low confidence about their retirement generally have low expectations about the amount of income they’ll likely receive during retirement.

The Intergenerational Report 2023 projects that average life expectancies will continue to rise over time, reaching 87.0 years for men and 89.5 years for women by 2062-63.

Meanwhile, it projects that the proportion of people with accounts in the retirement phase, from which they are drawing a superannuation pension, will increase from 8% currently to 19% over the next 40 years.

“Longevity risk – the risk of outliving savings – is a key concern for retirees in deciding how to draw down their superannuation, consequently, most retirees draw down at the legislated minimum drawdown rates,” the report notes.

“This results in many retirees leaving a significant proportion of their balance unspent, for example, a single retiree drawing down at the minimum rates would be expected to still have a quarter of their retirement assets at death.”

How much is enough?

Retirees continue to face significant cost pressures on their household budgets due to historically high consumer price inflation.

Every quarter the Association of Superannuation Funds Australia (ASFA) publishes its estimate of how much retired couples and singles need to spend each year based on them living either a ‘comfortable’ or a ‘modest’ lifestyle.

For the September 2023 quarter ASFA estimated couples wanting a comfortable lifestyle would need to spend $71,723.56 per year, and singles $50,981.27. The expenditure needed to reach ASFA’s modest retirement standard was $46,620.05 for couples and $32,417.48 for singles.

The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement.

See more in his article, about confidence depending on how much planning you do.

Your thoughts? Start or continue the conversation here!

Get your FREE 5 Easy Steps to Plan Retirement One-Page planner from the Resources.

Got questions? If you want experts who have years of helping others, without the hype –

then call for a FREE strategy session today

No obligation call 0407 361 596, Paul

Masterclass SMSF – Binding Death Benefit Nominations in SMSF

Binding Death Benefit Nominations in SMSF

When a member of a self-managed super fund (SMSF) passes away, the SMSF typically distributes a death benefit to a dependent or another beneficiary of the deceased.

It is important for this distribution to occur promptly following the member’s death.

If the recipient is a dependent of the deceased, such as spouse or child (see below), the death benefit can be provided in the form of either a lump sum or an income stream. The income stream may be a new arrangement or a continuation of an existing one.

In the event that the recipient is NOT a dependent of the deceased, the death benefit must be paid out as a lump sum.

SMSF members can nominate who will get their benefits when they die.

Members of SMSFs have the option to specify who will receive their benefits upon their death. A binding death benefit nomination instructs the trustee to allocate the benefit to a legal personal representative or a dependent.

In the absence of a binding nomination, the remaining trustees will determine the distribution of benefits by taking into account the trust deed and superannuation laws. It is essential to adhere to the trust deed, even if it differs from the member’s will.

To understand how death benefits can be paid you need to know who is a dependant.

A dependent is typically defined as a spouse, or someone in a close personal interdependent relationship, or a child who is under 18, has a disability, or is between 18 and 25 and financially reliant on the deceased. A dependent can receive either a lump sum or an income stream, while a non-dependent can only receive a lump sum (payout the member account).

Lump sums paid to a dependent are tax-free, whereas those paid to a non-dependent will incur taxation* (on the taxable portion). These lump sums can be disbursed in the form of cash or non-cash assets, such as shares or property.

*It’s important to note that the trustee may be required to withhold tax from a death benefit, and this process can be intricate, contingent on various factors. If tax withholding is necessary, the trustee must register for PAYG withholding and complete additional ATO forms.

Advance planning is advisable, as unresolved disputes over the payment of death benefits can potentially lead to costly court proceedings.

For more refer to the ATO site HERE as well as – SMSFD 2008/3: Binding death nominations.

Interested to know what self-managed super (SMSF) is all about, and if it is for you?

See the slides SMSF Roadmap Overview.

If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and see how our Super-Connector Service assists you to find the right expert to answer your question – it’s FREE also!

No obligation. 0407 361 596, Paul.

CASE STUDY – Doris & Wally had concerns about the small super they had and would it last

Doris & Wally had concerns about the small super they had and would it last

WHERE they were at –

Doris and Wally had put in a lot of effort in their respective jobs. They mainly depended on their pension for income, and were keen to avoid using up the limited superannuation savings that Doris had managed to build up when it became mandatory late in their working lives. William had not been able to contribute to superannuation through his laboring job as it was introduced after he had retired. At the age of 72, Doris reached out to us for assistance. Jim, their financial advisor for may years, had been involved in providing personal insurance for many years and had also served as an advisor to both Dorothy and her husband.

What they WANTED to have –

They aimed to maximize the potential of their limited superannuation savings through conservative growth and some earnings, with the goal of minimizing withdrawals from the principal amount if feasible. Their priority was to support their children and their expanding families, rather than focusing solely on leaving an inheritance upon their passing. They found more significance in providing assistance and support during their lifetime rather than accumulating wealth for the future.

What it will COST –

Doris and Wally were already receiving the full pension. They determined that they required an additional $9,000 per year to complement their pension income in order to sustain their living expenses and provide support to their family as much as possible.

What they would NEED –

To have access to a pension to draw down the super they had.

What to do NOW – To transition from the extensive corporate super fund to a self-managed super fund, she desired a more personalized and approachable approach to managing her finances. She specifically sought assistance from individuals whom she had trusted for an extended period and who were more familiar to her.

Now the components were in place –

Strategy – was to take more control and be more directly accessible to their super without the “Big” institution feeling, but a boutique “local” firm who could work as her team as she needed.

Structure – after careful study and advice, a self-managed super fund (SMSF) ticked many boxes for them.

Support – they appreciated how we would support their needs with an advisor she had known for many years. They also liked that all the compliance would be handled and they didn’t need to concern themselves. They thought it was great to be able to learn about investment with the education SuperBenefit provided, but they really didn’t want to understand the detail and were happy to receive broker advice and recommendation after seeing the rigorous process Jim and the broker undertook to find healthy growth companies, all the while avoiding speculation or too much risk – and that a specific low risk selection would be tailored by the broker for her situation.

Note – This is a simplified summary of one client – we recommend asking for a FREE consultation and/or seeking further professional advice.

If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and see how our Super-Connector Service assists you to  find the right expert to answer your question – it’s FREE also!

No obligation. 0407 361 596, Paul.

MASTERCLASS Investing – Financial Health Part 4 – What is Technical Analysis + how does it work?

Financial Health Part 4 – What is Technical Analysis + how does it work?

Today we have Part 4 of our Company Financial Health Series – What is Technical Analysis

In Part 1 we looked at how to determine financially healthy companies to invest in.

In Part 2 we looked at how share investors can tend to fall into 2 groups – fundamental analysis and technical analysis, and explained what is the difference between them – our experience is that both fundamental and technical, can help for increased share-market investment success. 

In Part 3 we looked in detail on what is.

In this final Part 4, we look in detail about Technical Analysis.

Technical analysis

This analysis involves using technical tools to chart the upward or downward movement of a stock’s share price. This is done in order to anticipate and prepare investors for potential positive or negative price actions, and to make informed decisions about buying or selling stocks based on patterns and volume data.

The practice of technical analysis is based on the belief that a security’s past trading activity and price changes are better indicators of its future price movements than its intrinsic value. It originated from Dow Theory, which asserts that market price incorporates all factors influencing a security’s price and that price movements follow identifiable patterns and trends.

Technical Analysis – How it is used

Technical analysis is used to forecast the future price movements of various tradable instruments, including stocks, bonds, futures, and currency prices. It involves studying supply and demand forces as reflected in market price movements, with a focus on price changes and sometimes other factors like trading volume or open interest figures.

Numerous technical indicators have been developed over the years to predict future price movements accurately. These indicators range from identifying current market trends to assessing trend strength and the likelihood of its continuation. Commonly used technical indicators include trendlines, moving averages, and momentum indicators like the moving average convergence divergence (MACD) indicator.

Technical analysis applies these technical indicators to charts of different timeframes, ranging from short-term charts like one-minute or hourly timeframes to longer-term charts like daily, weekly, or monthly ones.

By example, here is a chart of an Australian stock BHP, share price (jaggered) with 2 indicators, Moving averages of 25 and 50 days smooth lines), volume at the bottom, and the opening and close prices can be found with the mouse anywhere on the chart.

Assumptions

One key assumption of technical analysis is that market price accurately reflects all available information about a security at any given time, representing its true fair value. Another assumption is that price changes are not random, leading to the belief that market trends can be identified and used to profit from investing according to the existing trend.

Want to learn the core issues of share investing?

See our slides SMSF & Shares Overview to get a quick session where you can learn to easily understand Company Financial Statements, how to find healthy companies, what Tools and Ratios to use, work on examples and also includes how to get better investment outcomes.

If you have questions, call 0407 361 596

Pensions Centrelink – Transfer from Disability Pension to Age Pension – Difference between them

Transfer from Disability Pension to Age Pension – difference between them

A woman called seeking advice on whether it was beneficial to switch from Disability Support Pension (DSP) to Age Pension (AP). She was concerned about potential pros and cons associated with the change.

Answer –

While the payment amount remains the same, transitioning from DSP to AP may result in the loss of certain benefits such as incentive allowance, mobility and rent assistance, as well as services and concessions from other providers. It is advisable to carefully assess the benefits and drawbacks of each payment before making a decision.

The Department of Human Services website provides an overview of the process when reaching age pension age. Centrelink will invite individuals to transfer to Age Pension just before reaching the eligible age. The individual needs to communicate their preference and disclose any superannuation they may have. Certain aspects remain unchanged whether one transfers to Age Pension or stays on Disability Support Pension, including the rate of payment, income and assets tests, concession card, access to the Work Bonus, taxable payments and rules for assessing permanent blindness.

There are specific benefits associated with each payment. Transferring to Age Pension eliminates medical eligibility rules and medical reviews, provides better rules for international travel and allows for more land exemption from the assets test if living on a single title of land covering more than 2 hectares. On the other hand, staying on Disability Support Pension may entitle individuals to the Pensioner Education Supplement and Education Entry Payment if they study, the Incentive Allowance, a higher rate of Mobility Allowance, and a higher rate of Rent Assistance if they are single and sharing privately rented accommodation.

Before deciding to transfer to Age Pension, it is important to verify continued eligibility for any services or concessions currently received from other providers. Additionally, individuals can obtain a free one-page planner for retirement planning and seek expert advice by calling for a free strategy session.

Read more about how to transfer to Age Pension.

Get your FREE 5 Easy Steps to Plan Retirement One-Page planner from the Resources

Got questions? If you want experts who have years of helping others, without the hype –

then call for a FREE strategy session today

No obligation call 0407 361 596, Paul

Basics about Super – What you need to know – Superannuation Australia

What you need to know – Superannuation Australia

Superannuation is an important part of the Australian retirement system. It is a way for workers to save money for their retirement and it is compulsory for most employees. Superannuation is also a tax-effective way to save for retirement, with contributions and earnings taxed at a lower rate than other forms of investment.

Understanding Superannuation is essential for anyone who wants to plan for their retirement. There are different types of super funds, such as industry funds, retail funds and self-managed super funds, each with its own benefits and drawbacks. Making contributions to your super fund is also an important part of building your retirement savings, and there are different options available, such as salary sacrificing and after-tax contributions.

Key Takeaways

• Understanding the different types of super funds is essential.
• Making contributions to your super fund is important for building your retirement savings.
• Superannuation is a tax-effective way to save for retirement.

Understanding Superannuation

What Is Superannuation?

Superannuation, or “super” for short, is a long-term investment that grows over time. It is a way of saving for retirement and is designed to provide you with an income stream when you stop working. Super is important because the more you save, the more money you will have for your retirement.

The Superannuation System in Australia

The Australian superannuation system is regulated by the Australian Taxation Office (ATO) and the Australian Securities and Investments Commission (ASIC). The Superannuation Guarantee (SG) is a compulsory system that requires employers to contribute a minimum of 11% of an employee’s earnings into a superannuation fund. This contribution will rise to 12% by 1 July 2025.

Superannuation funds can be managed by a range of entities, including industry funds, retail funds and self-managed super funds (SMSFs). Industry funds are typically run by unions or employer groups and are designed to benefit members of a particular industry. Retail funds are run by financial institutions and are open to the general public. SMSFs, on the other hand, are self-managed and are run by the members themselves.

Key Superannuation Terms

There are a number of key terms that are important to understand when it comes to superannuation. These include:

• Contribution: This refers to the money that is put into your superannuation fund. Contributions can be made by you, your employer or the government.
• Balance: This refers to the amount of money that you have in your superannuation fund.
• Investment Options: Superannuation funds offer a range of investment options, including high-growth, balanced and conservative options.
• Fees: Superannuation funds charge fees for managing your account. These can include administration fees, investment fees and insurance fees.
• Insurance: Many superannuation funds offer insurance, including life insurance, total and permanent disability insurance and income protection insurance.

Overall, superannuation is a crucial part of planning for retirement in Australia. Understanding the basics of how it works and the key terms involved can help you make informed decisions about your future.

Types of Super Funds – There are 4

When it comes to superannuation in Australia, there are several types of super funds that individuals can choose from. These include retail super funds, industry super funds, public sector super funds and self-managed super funds. Each of these super funds has its own unique features, benefits and drawbacks.

Retail Super Funds

Retail super funds are offered by financial institutions such as banks, insurance companies and investment companies. These funds are open to anyone and are designed to provide individuals with a range of investment options. Retail super funds can be structured as either accumulation funds or defined benefit funds.

Accumulation funds are the most common type of retail super fund. These funds allow members to accumulate savings over time through contributions made by their employer and/or themselves. The investment returns earned on these savings are reinvested back into the fund.

Defined benefit funds, on the other hand, guarantee members a specific retirement benefit based on a formula that takes into account factors such as salary and length of service. These funds are less common than accumulation funds and are typically offered to employees of large corporations.

Industry Super Funds

Industry super funds are designed for workers in specific industries, such as hospitality, construction or healthcare. These funds are run by industry associations and unions and are typically not-for-profit. Industry super funds are open to anyone, but certain funds may have eligibility requirements based on the industry or occupation of the member.

Industry super funds are generally structured as accumulation funds and offer a range of investment options. These funds are known for their low fees and strong investment returns.

Public Sector Super Funds

Public sector super funds are designed for employees of the federal or state government, as well as employees of certain government agencies. These funds are typically defined benefit funds, which means that members are guaranteed a specific retirement benefit based on a formula that takes into account factors such as salary and length of service.

Public sector super funds are known for their low fees and strong investment returns. These funds are generally not open to the general public.

Self-Managed Super Funds

Self-managed super funds (SMSFs) are managed by the members themselves, rather than by a financial institution or fund manager. SMSFs are typically used by individuals who want greater control over their superannuation investments and who have the time and expertise to manage their own investments.

SMSFs can invest in a wide range of assets, including shares, property and cash. However, they are subject to strict regulatory requirements and members must ensure that they comply with all relevant rules and regulations.

Overall, when choosing a super fund, it is important to consider factors such as fees, investment options, and performance. Individuals should also consider seeking professional advice before making a decision.

Making Contributions

Superannuation is a way to save for retirement and making contributions is an essential part of the process. There are several ways to contribute to your super fund, including employer contributions, personal contributions, salary sacrifice and government contributions.

Employer Contributions

Employers are required to make contributions to their employees’ super funds. This is known as the Superannuation Guarantee (SG) and is currently set at 11% (2024, rising each year 0.5% to 12%) of an employee’s ordinary time earnings. Employers are required to make SG payments at least quarterly and must also provide a Superannuation Guarantee Statement to their employees.

Personal Contributions

Personal contributions are amounts that individuals contribute directly to their super fund. There are two types of personal contributions: Concessional (before-tax) and non-concessional (after-tax). Concessional contributions are tax-deductible, and the contributions are taxed at a rate of 15% in the fund. Non-concessional contributions are not tax-deductible and there is no tax on the contributions.

Salary Sacrifice

Salary sacrifice is an arrangement where an individual agrees to have a portion of their pre-tax salary paid into their super fund. This can be an effective way to boost retirement savings as the contributions are taxed at the concessional rate of 15%.

Government Contributions

The government provides several types of contributions to help individuals save for retirement. The most common type of government contribution is the co-contribution, where the government matches personal contributions made by low to middle-income earners. The government also provides a Low Income Superannuation Tax Offset (LISTO) to help low-income earners save for retirement.

Overall, making contributions to a superannuation fund is an important part of planning for retirement. Individuals can make voluntary contributions, including concessional and non-concessional contributions and may also receive contributions from their employer and the government. It is important to understand the different types of contributions and their tax implications to make the most of your retirement savings.

Superannuation Benefits

Superannuation is a long-term investment that grows over time. It is a way of saving for retirement that provides many benefits to individuals in Australia. This section will cover some of the most important benefits of superannuation.

Preservation Age and Access

Access to superannuation benefits is restricted until the individual reaches their preservation age. Preservation age is the age at which a person can access their superannuation benefits. The preservation age varies depending on the individual’s date of birth. For individuals born before July 1, 1960, the preservation age is 55. For those born after June 30, 1964, the preservation age is 60. For those born between July 1, 1960, and June 30, 1964, the preservation age gradually increases.

Withdrawal Options

Superannuation benefits can be withdrawn in several ways. One option is to take a lump sum payment. Another option is to receive regular payments, either as a pension or annuity. A third option is to take a combination of both lump sum and regular payments. The choice of withdrawal option depends on the individual’s circumstances, including their retirement goals, financial situation and tax considerations.

Superannuation and Retirement Income

Superannuation provides a reliable source of retirement income. The amount of retirement income depends on the individual’s superannuation balance, the investment returns earned on that balance and the choice of withdrawal option. Superannuation income can be supplemented by other sources of retirement income, such as the Age Pension or other investments.

In order to receive superannuation benefits, certain conditions must be met. These conditions include meeting the preservation age, meeting a condition of release and being eligible to withdraw benefits. The conditions of release include retirement, permanent incapacity, terminal illness and severe financial hardship.

Overall, superannuation is an important investment tool for individuals in Australia. It provides many benefits, including access to retirement income and should be considered as part of any retirement planning strategy.

Investment Options and Performance

Superannuation is a crucial part of retirement planning for Australians and understanding the investment options and performance of their super fund is essential. The investment options available within super range from managed funds to listed equities, term deposits, bank accounts, SMAs, ETFs, MDAs, IMAs, listed property, unlisted property, direct property, unit trusts, private equity and everything in between.

Choosing Investment Options

Choosing the right investment option is an important decision that can significantly impact retirement savings. Conservative investment options typically have lower risk and lower return potential, while growth investment options have higher risk and higher return potential. Defensive assets such as cash and fixed interest investments are generally less risky than growth assets such as shares and property, but they typically offer lower returns over the long term.

Super funds typically offer a range of investment options with varying levels of risk and return potential. It’s important to consider personal circumstances, investment goals and risk tolerance when choosing an investment option. Some funds may also offer the option to mix and match investment options to create a diversified portfolio that aligns with individual goals and risk appetite.

Understanding Performance and Risks

Super fund investment performance is measured by the returns generated by the investment option over a specific period. Investment returns can be positive or negative and can vary significantly depending on market conditions and asset allocation. It’s important to understand the risks involved with each investment option, as higher returns often come with higher risk.

Super funds typically provide performance data for each investment option, including past returns, fees and risk profiles. It’s important to review this information regularly to ensure the investment option is still aligned with personal goals and risk tolerance.

In conclusion, choosing the right investment option and understanding investment performance and risks are critical to maximizing retirement savings. It’s important to consider personal circumstances, investment goals and risk tolerance when selecting an investment option and to regularly review performance data to ensure alignment with individual goals.

[1] Source: Superannuation Investment Options & Mix: How To Best Invest Your Super

Superannuation Fees and Taxes

Superannuation is an important aspect of retirement planning in Australia. It is essential to understand the fees and taxes associated with superannuation to make informed decisions about your retirement savings.

Types of Fees

Superannuation funds charge various fees for managing your retirement savings. These fees can include administration fees, investment fees and insurance fees. According to a study by Canstar, the average fees charged by super funds in Australia range between 0.91% and 1.21% of an account balance per year. It is important to compare different funds and their fees to ensure that you are not paying more than necessary.

Tax Implications

Contributions to superannuation are taxed differently than regular income. Before-tax contributions are generally taxed at 15%, while after-tax contributions are not taxed. The investment earnings on your super are also taxed at 15%. However, if you are 60 or older, your withdrawals are tax-free. If you withdraw your super before you turn 60, you may be subject to additional taxes.

It is important to understand the tax implications of your superannuation contributions and withdrawals to ensure that you are making the most of your retirement savings. Seeking professional advice can help you navigate the complex tax rules and make informed decisions about your superannuation.

Insurance Within Superannuation

Superannuation is not just about building a retirement nest egg. It also provides insurance cover to protect you and your family in case of unexpected events such as illness, injury, or death. Understanding how insurance within superannuation works can help you make informed decisions about your cover.

Types of Insurance Cover

There are three main types of insurance cover offered by most superannuation funds:

1. Death cover: Pays a lump sum or regular income to your beneficiaries if you die or become terminally ill;
2. Total and Permanent Disability (TPD) cover: Pays a lump sum if you become totally and permanently disabled and are unlikely to ever work again;
3. Income Protection: Pays a regular income for a specified period if you are unable to work due to illness or injury.

The amount of cover you have and the cost of premiums will depend on your age, occupation, health, and other factors. It is important to review your insurance cover regularly to ensure it meets your needs.

Insurance Terms and Conditions

Insurance within superannuation comes with terms and conditions that you should be aware of. Some of the key terms include:

• Waiting period: The period of time you need to wait before you can make a claim;
• Exclusions: Certain events or conditions that are not covered by your insurance;
• Beneficiary: The person or people who will receive the benefit payout if you die;
• Premium: The amount you pay for your insurance cover;
• Automatic acceptance: Some superannuation funds offer automatic acceptance of insurance cover without the need for medical checks, up to a certain level of cover.

It is important to read and understand the terms and conditions of your insurance cover within superannuation to ensure you are fully protected. If you have any questions or concerns, speak to your superannuation fund or a financial adviser.

Managing Your Super

Managing your super is an important aspect of securing your financial future. It involves keeping track of your super account, consolidating super accounts and planning with a financial adviser.

Keeping Track of Your Super

It’s important to keep track of your super account to ensure that your employer is making regular contributions and that your balance is growing. You can do this by checking your super account statements or by logging into your account online. You will need your tax file number to access your super account online.

If you have lost track of your super accounts, you can use the ATO’s online services to find your lost super. This will help you consolidate your super accounts and avoid paying unnecessary fees.

Consolidating Super Accounts

Consolidating your super accounts can help you save money on fees and simplify your finances. You can do this by transferring your super balance from one account to another. Before you do this, it’s important to compare the fees and investment options of your super funds to ensure that you’re making the right decision.

Planning with a Financial Adviser

Planning with a financial adviser can help you make the most of your super and achieve your financial goals. A financial adviser can help you understand your investment options, manage your risk and plan for retirement. It’s important to choose a financial adviser who is licensed and qualified to provide financial advice.

In summary, managing your super involves keeping track of your super account, consolidating super accounts and planning with a financial adviser. By taking control of your super, you can secure your financial future and enjoy a comfortable retirement.

Frequently Asked Questions

How is superannuation calculated and what factors influence it?

Superannuation contributions are calculated as a percentage of an employee’s ordinary time earnings (OTE). As of 2024, the minimum contribution rate is 10% of OTE, but some employers may choose to contribute more.

The amount of superannuation an individual receives is influenced by several factors, including their age, income and the amount of time they have been contributing to their superannuation fund.

What are the benefits of contributing to superannuation in Australia?

Contributing to superannuation in Australia has several benefits, including:

• Tax advantages: Contributions to superannuation are taxed at a lower rate than most other forms of income, which means that individuals can save money on their taxes by contributing to their superannuation fund;
• Retirement income: Superannuation is designed to provide income in retirement, which means that individuals who contribute to their superannuation fund are more likely to have a comfortable retirement;
• Employer contributions: Most employers in Australia are required to contribute to their employees’ superannuation funds, which means that individuals can receive additional contributions to their superannuation fund without having to contribute any additional funds themselves.

What are the current superannuation contribution limits?

As of 2024, the concessional contribution cap is $27,500 per year, and the non-concessional contribution cap is $110,000 per year.

How can I access my superannuation funds and what are the conditions?

Individuals can access their superannuation funds when they reach their preservation age and retire or if they meet certain conditions of release, such as a terminal medical condition or severe financial hardship.

What should I consider when choosing a superannuation fund?

When choosing a superannuation fund, individuals should consider factors such as fees, investment options, performance and insurance options. It is recommended that individuals compare several superannuation funds before making a decision.

How does superannuation impact retirement planning?

Superannuation is an important part of retirement planning, as it is designed to provide income in retirement. Individuals who contribute to their superannuation fund throughout their working life are more likely to have a comfortable retirement. It is recommended that individuals regularly review their superannuation fund and retirement plan to ensure that they are on track to meet their retirement goals.

Interested to know what self-managed super (SMSF) is all about, and if it is for you?

See the slides SMSF Roadmap Overview.

If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and see how our Super-Connector Service assists you to find the right expert to answer your question – it’s FREE also!

No obligation. 0407 361 596, Paul.

Also get your FREE Expert Guide – Self-Managed Super and You – Top right hand side above.

Masterclass SMSF – Related Party Transactions & Investments

Related Party Transactions & Investments

The Australian Taxation Office (ATO) imposes various investment restrictions on transactions involving ‘related parties’ of a superannuation fund and the ‘relatives of members’. This is to ensure that no one associated with the fund receives immediate benefits from its investments, as the fund should be maintained solely for providing death or retirement benefits to its members or their dependents.

A ‘related party’ of the fund encompasses:

• All members;
• Associates of fund members (including their relatives, spouse, child and business partners);
• Standard employer-sponsors, and associates of standard employer-sponsors. The definition also covers entities controlled or influenced by the members or their associates.

The term ‘relative of a member’ includes various family relations, such as:

• Parents;
• Siblings and lineal descendants, brothers, sisters, uncle, niece;
• As well as spouses of the specified individuals.

It’s important to note the distinction between an ‘in-house asset’ and a ‘related party investment’.

An ‘in-house asset‘ refers to a fund’s asset that involves a loan to, investment in, or lease with a related party of the self-managed superannuation fund (SMSF).

On the other hand, a ‘related party investment‘ is a subset of an in-house asset and is subject to exceptions under the ‘in-house asset’ rules. Is also an asset of the fund that is a loan to, an investment in or a lease with a related party of the SMSF that meets one of the exceptions of the ‘in-house asset’ rules. Notably, a fund cannot invest more than 5% of its capital in an ‘in-house asset’, while no such limit applies to a ‘related party investment’.

Exceptions to the ‘in-house asset’ rules include investments in (ie these are allowed):

• A life policy issued by a life insurance company;
• Pooled superannuation trusts;
• Business real property subject to specific lease arrangements;
• Widely held unit trusts;
• Non-geared related unit trusts or companies, and;
• Certain property ownership structures.

Additionally, an SMSF can invest in a unit trust or company without it being considered an in-house asset if certain conditions are met, such as not acquiring assets from a related party other than business real property, not leasing assets to related parties other than business real property, and not conducting a business.

Interested to know what self-managed super (SMSF) is all about, and if it is for you?

See the slides SMSF Roadmap Overview

If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and see how our Super-Connector Service assists you to find the right expert to answer your question – it’s FREE also!

No obligation 0407 361 596 Paul

Also get your FREE Expert Guide – Self-Managed Super and You – Top right hand side above

NEWS – ATO concern over SMSF loans to members

News – SMSF loan members ATO

Concern over SMSF illegal loans

Loans from an SMSF to its members are causing the ATO concerns as an indication individuals are participating in illegal early access of their retirement savings benefits.

ATO superannuation and employer obligations director Paul Delahunty revealed the fact this practice ranks highly among the most common SMSF compliance contraventions is causing some angst.

“It is worth pointing out, as a starting point, loans to members are prohibited under [the Superannuation Industry (Supervision) Act], and that includes relatives, under section 65 and where there are payments being made to members, the ATO is obviously concerned there may be an inappropriate access of the SMSF’s funds,” Delahunty confirmed.

Even though loans to members are prohibited by law, he pointed out there is still a structural consideration of which auditors and trustees need to be aware in order to rule out an act of blatant illegal early access of fund assets.

“That is whether there is a legitimate loan in place. A payment that is neither related to a loan nor a superannuation payment which meets a condition of release would be considered illegal early access and that’s where the issue escalates in terms of potential compliance risk and how we treat it,” he noted.

To this end, he warned against the practice of trying to make illegal early retirement savings drawdowns, even if performed as a genuine error, appear as loans in an attempt to give them a degree of acceptability.

“Our position on that is you can’t rewrite history. So if the fund has been in a position, and by some means it might have been a mistake in certain circumstances, where an inappropriate payment [has been made] outside the scope of normal conditions of release and it’s not a loan arrangement, then we wouldn’t want trustees going through the process of trying to replicate a loan agreement for the purpose of satisfying the ATO in trying to avoid potential reporting of contraventions,” he said.

While he acknowledged Self Managed Superannuation Funds Ruling 2008/1 provides guidance on factors indicating if an arrangement involves giving financial assistance, he suggested common-sense principles, such as duration and interest payment terms, should be used to determine if a loan agreement is actually in place.

(As reported in smsmagazine.com.au)

Here is what the ATO instructs –

You can’t lend money or provide direct or indirect financial assistance from your fund to a member, or a member’s relative. For example, you can’t use fund assets to guarantee a personal loan for a member.

Loans made by your SMSF must be in the best interests of members and comply with your investment strategy. If a loan arrangement is not in your members’ best interests, your SMSF could be made non-complying and ineligible for concessional tax rates.

Get advice before entering into loan arrangements. If you still decide to lend money from your SMSF, make sure the loan is conducted on a commercial, arm’s length basis.

Remember, you are ultimately responsible for running your SMSF.

News SMSF loan members ATO video

See & Read at the ATO site.

What are your Thoughts? Comment below!

SuperBenefit works with SMSF trustees to CONNECT them with the advisors they need for a better result. A call is Free.

If you have any questions, why not give us a call – it’s FREE! No obligation. 0407 361 596, Paul

MASTERCLASS Investment –Financial Health Part 3 – Fundamental Analysis & how it works

Financial Health Part 3 – Fundamental Analysis & how it works

This is Part 3 of our Company Financial Health Series

(click for Part 1 Find and Invest in a Healthy Company and Part 2 Difference between Fundamental and Technical)

Fundamental analysis

Fundamental analysis assists when investing in companies. It works as a process of analysing the financial statements of a business (Balance Sheet, Profit & Loss, Cash-flow Statement), as well as creating ratios of some of the figures, to determine the financial health and assess the management of the business before making an investment by comparing the results with other businesses.

Fundamental analysis works to determine the value of a company by analysing the financial data from the annual reports and using other qualitative data about the company and the environment in which they operate. This value is often called ‘intrinsic value‘. Fundamental analysis assumes that over the long term, a stock price will reflect the company’s intrinsic value.

Definition

A sound fundamental definition comes from Investopedia. They define fundamental analysis as:

…a method of evaluating a security in an attempt to measure its intrinsic value by examining related economic, financial and other quantitative and qualitative factors. Fundamental analysts attempt to study everything that can affect the security’s value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management) For further reading and an online video from Investopedia go to the fundamental analysis page.

Quantitative factors are those capable of being measured or expressed in numerical terms, measures such as

• Revenue and growth of Revenue from year to year
• Earning / Profit
• Assets
• Debts

These financial measures are commonly combined to produce fundamental or financial ratios that analysts can use to compare the company they are analysing to

• Prior trading period results
• Other companies in the same industry
• The overall market

Well-known Ratios include

• Debt to Equity(DE)
• Return on Capital (ROC)
• Return on equity (ROE)
• Dividend yield
• Price to earnings ratio (PE)

Qualitative factors are those that are not in numbers – more like assessments and opinions/evaluations. So they can be subjective, and may include

• Management performance and experience
• Competitive advantage
• Economic environment and head/tail winds/changes
• Business model
• Branding strength

Pros and Cons

Some Pros of fundamental analysis include that it can be objective (the quantitative parts), has a long-term focus, provides a guide to real stock value.

Some Cons include being subjective to our own biases, the time involved to prepare/study, that market sentiment doesn’t always follow our own reasoning, the assumptions used, data looks back so the future can easily change the outcome.

Summary

Fundamental analysis is used as an aid to successful investing and is a process of analysing the financial statements of a business (Balance Sheet, Profit & Loss, Cash-flow Statement), as well as creating ratios of some of the figures and assessing  to determine the financial health and assess the management of the business before making an investment.

Want to learn the core issues of share investing?

See our slides SMSF & Shares Overview to get a quick session where you can learn to easily understand Company Financial Statements, how to find healthy companies,  what tools and ratios to use, work on examples and also includes how to get better investment outcomes.

If you have questions, call 0407 361 596