NEWS – Self-Managed Super (SMSF) and Investment Opportunities in Alternative Asset Classes

 

NEWS – Self-Managed Super (SMSF) and Investment Opportunities in Alternative Asset Classes

NEWS – Self-Managed Super (SMSF) and Investment Opportunities in Alternative Asset Classes

Alexander McNab of SMSF Adviser writes about the investment opportunities in alternative asset classes for Self-manages super funds (SMSF):

“…Most self-managed super funds have historically had almost no allocation to alternative asset classes, largely because of a lack of knowledge, understanding and access. Alternative asset classes include private equity and venture capital, hedge funds, private real estate and ‘real assets’ like infrastructure, timberland or farmland. The common thread among these asset classes is a risk, return, liquidity and correlation profile different from the traditional asset classes of equities and fixed income.

Institutional investors overseas have long recognised the benefit of substantial allocations to alternative asset classes. According to Russell Investments, international institutional investors allocate 22.4 per cent of their portfolios to alternative asset classes and some very successful investors, like the Harvard Endowment Fund, allocate 60 per cent or more of their portfolios to alternatives. The Future Fund, an early leader in the Australian market, allocates 36 per cent of its portfolio to alternatives.

These investors allocate so meaningfully to alternatives for a number of reasons. Alternatives are typically uncorrelated with equity markets, providing genuine diversification benefits. Alternative asset managers often invest in relatively illiquid markets where assets are more frequently mispriced, creating the potential for strong managers to generate sustained outperformance. Finally, alternative asset managers have a much more strongly aligned fee structure, concentrated on performance fees that reward absolute performance, not performance relative to a benchmark…”

If you are an SMSF owner – what alternative asset classes have you invested in and considered? My wife and I are invested in a private magazine publisher and are learning about alternative investments, not with an eye for diversification only, but for alternative opportunity with a manageable risk and good potential return.

What is YOUR story? Share some here in the comments.

Got questions? If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and also download your FREE Expert Guide – Self-Managed Super and You Top right hand side above.

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

And book for our next  FREE Seminar – Self Managed Super Fund Roadmap – all you need to know plus bonuses see HERE and our SMSF and Property Boost to Super (combined) Free Seminar HERE

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CASE STUDY – Peter & Deb, wondered if they could get their retirement plan in better shape with Self- Managed Super

CASE STUDY – Peter & Deb, wondered if they could get their retirement plan in better shape with Self- Managed Super

Peter & Deb, wondered if they could get their retirement plan in better shape with Self- Managed Super

Peter and Deb had heard about Self-Managed Super Fund (SMSF) and wondered how to get their retirement plan in shape.

WHERE they were atPeter and Deb were building their wealth as best they knew – they had successfully run small unit developments with family, and had renovated their own homes to move up each time to another level as much as they could stretch. Peter was consulting and his professional engineering training enabled him to use his expertise in the insurance industry – assessing risk for the insurer on the validity of the claims they received. Deb enjoyed part-time in the retail industry, but struggled with a recurring illness at times. They didn’t know very much about shares, but with the stockmarket overall gaining 15-20% in each of the last 2 years, Peter and Deb were keen to understand how shares, in strong growing companies with great managers, could be part of a plan to build a better retirement – especially such as gathering a deposit for property.

What they WANTED to haveTheir experience with investment property development and home improvement led them to enquire of our financial planner if they could perform similar projects with their super. A meeting showed that there were several options but they needed to keep within the strict super laws. They wanted to ensure they could gather enough assets to return a passive income and not rely on the Government as much as possible. They were in their early 40’s and wanted to be in a position to choose whether to work or not by 50 years old or so. They wanted the choice to have a nice holiday in Australia each year and one overseas about every 3-5 years. They had no children and had no plans to, so there were no expenses to account for there. They also needed Income Protection, Life and Total & Permanent Disability Insurance.

What it will COST - They calculated they needed $50-60,000 per annum to live on, which would allow a nice dinner out each week of $60-80 max and allow them to save for the annual holiday, requiring about $3-5,000 for a local trip and $10,000 for overseas every few years. This would also allow them to keep 2 cars, estimated at annual running costs of $4-5,000 each per year, as they wanted to be involved in the community and volunteer work.

What they would NEED – They had a goal for 2 investment properties outside of super and 3 in super of current value $400-500,000 total $1.5 mill which in 10 years (at historical growth of double every 10 years), could be worth $3 mill just in the super. Outside of super the 2 properties would value about another $2 mill. The tax advantages within super, as well as the tax-free income stream of the fund once they were in pension phase, was attractive and they even considered that they may be better to aim for more in super and less outside super where concessions were not possible. They would review this every 2-3 years.

If a conservative return of 5% is used, (one 20th) meant they would need at least 20 times the comfortable income aimed for – from $1,000,000 to $1,200,000. The goal for 3 properties in super at projected value $1.5 mill should adequately cover this. And any extra would mean a very comfortable buffer!

What to do NOW – Peter and Deb investigated the information they could find about SMSF and we explained the law and responsibilities. Most importantly, it was the investment restrictions that they needed to consider, especially with residential property, but they did not see that as a problem – it was to ensure the Sole Purpose Test was maintained, and they felt the law was only for everyone’s own protection. They also wanted to invest in strong growing companies to build a deposit for each property, and would come to one of our Share Workshops in a few months to learn how to identify these sorts of companies. We would arrange for our Life Insurance expert to arrange quotes for the best product to suit their needs, as well as cover Deb’s illness in the best way possible.

They now had the components in place -

Strategy – To take control and pool their super, and contribute extra as they could

Structure To set up an SMSF together, alongside their non-super investments

Support With our resources and all compliance taken care of by SuperBenefit, it meant they could learn more about investment in property & shares as well as focus on managing the investment plan. This meant they felt in control and it felt very manageable to them. They could see a well-planned future and had a team to support them.

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

Interested to know what self-managed super (SMSF) is all about, how to get setup FREE and if it is for you? Come to a FREE seminar with bonuses every month Self Managed Super Fund Roadmap (all you need to know) for the next monthly event, see  SMSF – FREE Seminars or call us 0407 361 596

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MASTERCLASS Investment – GAAP – What Are The Generally Acceptable Accounting Principles Companies Use?

 

MASTERCLASS Investment – GAAP – What Are The Generally Acceptable Accounting Principles Companies Use?

MASTERCLASS Investment – GAAP – What Are The Generally Acceptable Accounting Principles Companies Use?

Companies finished half-year reporting at the end of February, and our financial planner and stock broker have been busily sorting through all the data and financial ratios to find WHAT companies to buy – filter out strong financially-healthy growth companies (fundamental analysis) that will then be put through the filter of WHEN to buy, by spotting those in upwards momentum cycles (technical analysis). The fundamental analysis is based on the key financial reports – Balance Sheet, Profit & Loss, Cashflow Statement which are reported under standard accepted guidelines.

There are general rules and concepts that are followed in the field of accounting. These are referred to as basic accounting principles and guidelines and are the foundation on which more detailed, complicated, and legalistic accounting rules are based. In Australia, the Australian Accounting Standards Board (AASB) uses the basic accounting principles and guidelines as a basis for their own detailed and comprehensive set of accounting rules and standards.

A common phrase Generally Accepted Accounting Principles (or GAAP)consists of three important sets of rules: (1) Basic accounting principles and guidelines; (2) Detailed rules and standards issued by AASB; and (3) The generally accepted industry practices.

When a company distributes its financial statements to the public, it is required by the Australian Stock Exchange (ASX) to follow generally accepted accounting principles in the preparation of those statements. Additionally, if a company’s shares are publicly traded, federal law requires the company’s financial statements be audited by independent public accountants. Both the company’s management and the independent accountants must certify that the financial statements and the related notes to the financial statements have been prepared in accordance with GAAP.

GAAP is useful for us because it attempts to standardize and regulate accounting definitions, assumptions and methods. Because of these principles we are able to assume that there is consistency from year to year in the methods used to prepare a company’s financial statements. And although variations may exist, we can draw reasonably confident conclusions when comparing one company to another, or comparing one company’s financial statistics to the statistics for its industry. Over the years the generally accepted accounting principles have become more complex because financial transactions have become more complex.

The Accounting Standards are spilt into various categories eg “Statement of Cashflows”, “Construction Contracts”, etc and a list with most recent updates/ pronouncements for Australia can be found HERE.

Want to learn the core issues of share investing? Our workshop Navigate to Successful Share Investing gives a 2.5 hour practical session to 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. Other Bonuses as well. Check the next one see Share WORKSHOP or call 0407 361 596.

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Pensions – Planning for Retirement – Free Government Resources to Help

 

Pensions – Planning for Retirement – Free Government Resources to Help

Planning for Retirement – Free Government Resources to Help

 

Are you aware of the FREE resources available to help in planning for retirement and your pension availability? The Australian Government Department of Human Services has online information to assist with retirement planning, income support, concession card availability and other support services.

Planning for Retirement – Seminars and Phone Help

You can attend a free Financial Information Service (FIS) seminar to help with your retirement planning. FIS seminars provide information about how to prepare for retirement, understanding your pension and living in retirement. You can also phone 132 300 and ask to speak to a FIS officer. If possible, your questions will be answered over the phone. If there are complex issues to be discussed, the FIS officer may offer to arrange an appointment for you.

Income Support

If you have reached age pension age, the Age Pension may help to support you. To qualify you must first satisfy age and residence requirements. How much you can get depends on your income and assets and other circumstances. If you are a self-funded retiree or still working part time, you may be able to get a partial pension. If you have lived or worked outside of Australia and are claiming or receiving Age Pension here, the Australian Government may also ask you to apply for a pension from other countries you have lived or worked in.

If you are legally blind, you may get an Age Pension (Blind) which has no income or assets test.

There are other payments and supplements available as well. For instance, the Pension Loans Scheme can help you if your capital is tied up in assets and you need more income to live on.

There is also the Online Estimator there – what Age Pension you may be able to get – click the button on the page

Working Past Age Pension Age

You may want to continue to work past age pension age.

There is the Work Bonus - an incentive for pensioners past age pension age to remain in the workforce by increasing the amount you can earn before your pension is reduced. You do not need to apply for the Work Bonus. If you receive eligible employment income, we will automatically apply the Work Bonus to your income test.

For people who reached age pension age before 20 September 2009 the Pension Bonus Scheme & Pension Bonus Top-up which provide a lump sum incentive for older Australians to remain in the workforce and defer claiming Age Pension. To be eligible, you must be a registered member of the scheme. Conditions apply.

Pensioner Concession Card

If you receive Age Pension you will be able to get a Pensioner Concession Card[11]. This gives you access to Australian Government health concessions and helps with the cost of living by reducing the cost of certain goods and services.

You may also get a Pensioner Concession Card if you are aged over 60 and have been receiving other certain income-support payments for nine months or more.

Other Government and Community Support Services

There are a range of government and community organisations that provide support services and useful information you may find helpful, and worth exploring. If you are struggling with depression, anxiety or stress, you may find it helpful to talk to somebody about your situation, and several avenues of help are listed with links to contact their offices. At myagedcare there is information on a wide range of community, aged care and support services. You can find advice about what help is available, assistance at home, aged care homes, and caring for someone. MoneySmart offers tips and useful tools to support people make better financial decisions and help manage their money.

Other useful links include:

What are your thoughts? Start or continue the conversation here!

Got questions? If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and also get your FREE Expert Guide Self-Managed Super and Youtop right hand side above.

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

And book for our next  FREE SeminarSelf Managed Super Fund Roadmap – all you need to know plus bonuses see HERE and our SMSF and Property Boost to Super (combined) FREE Seminar HERE

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NEWS – Self-Managed Super Owners Ahead of the Rest Being ‘Super’ Happy

 

Self-Managed Super owners ahead of the rest being ‘super’ happy

Self-Managed Super owners ahead of the rest being ‘super’ happy

An article by Damon Taylor in SMSF Essentials reports on findings about those with and without self-managed super –

When it comes to being ‘super’ happy in the future, having control of their retirement funding is putting those with a self-managed super fund (SMSF) ahead of the rest, according to the 2013 RaboDirect National Savings and Debt Barometer. According to Greg McAweeney, group executive manager of RaboDirect, being in control of their financial future was clearly a big driver for respondents with an SMSF, with the survey indicating that SMSF trustees were not only happier but also in better health than those with another form of superannuation.  “While a self-managed super fund isn’t for everyone – you need a certain level of knowledge, money, time and interest to do it well – there is clearly a keen interest and appetite among Australians for this hands-on control of super and ultimately their retirement,” he said. “In fact, our research shows that 14 per cent of the nation researched SMSFs online last year.” READ MORE HERE

Got questions? If you want caring experts who have years of helping others, without the hype – then call for a FREE strategy session today. It costs nothing to see what possibilities are available. Also get your FREE Expert Guide – Self-Managed Super and Youtop right hand side above.

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

0407 361 596, Paul.

And book for our next  FREE SeminarSelf Managed Super Fund Roadmap  monthly – all you need to know, plus extra bonuses see HERE and our SMSF and Property Boost to Super (combined) Free Seminar every few months HERE

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Masterclass – SMSF – How Self-Managed Super Funds are Buying Property – Steps for SMSF Property Purchasing

Masterclass – SMSF – How Self-Managed Super Funds are Buying Property - Steps for SMSF Property Purchasing

SMSF – How Self-Managed Super Funds are Buying Property – Steps for SMSF Property Purchasing

The legislation for Self-Managed Super Fund (SMSF) allows for borrowing to acquire properties when specific criteria are met. There are 2 main ways self-managed super funds are buying property.

  1. Outright – If there is enough money to cover the purchase price and legals and costs by the SMSF, there is no special structure and the property can be owed directly.
  2. Borrowing – a special structure (Custodian) is required where the property title must be held in a Custodian or Bare trust whose trustee must be different to the SMSF trustee.

The borrowing must be non-recourse, that is the lender has no recourse for compensation (should the loan be defaulted or called in) to any other assets or money in the SMSF. The only security is the property asset itself. A Custodian/Bare trust is a trust where the title holder, holds the property for a specified beneficial owner in this case the SMSF trustee, and has NO other role. Then the SMSF trustee is the operator of the property and receives the rent and meets the expenses as if the trustee was the title holder.

What is involved in setting up the gearing structure that is accepted by both the banks and the Regulator (ATO) to be approved by the Auditor?

1.  Ensure the SMSF is allowed to purchase the property. Review the trust deed to ensure that borrowing is allowed and also check or update the investment strategy to allow for property holding and the possible risk that the strategy will be mean low diversity with the property being predominant. Ensure there are sufficient funds to meet the leveraging requirements.

2.  Most lenders prefer a Corporate Trustee, so set up the company (Custodian Trustee) that will be the bare trustee and holder of the property. Note the bare trustee cannot be the superannuation fund trustee, but can be any other existing company or individual trustee. 

3.  Find the property, assess the numbers – potential growth in the location, likely yield, amount of deposit, length of loan.

4.  Note the following restrictions:

  • Residential properties in an SMSF cannot be purchased from members or related parties;
  • Residential properties in an SMSF cannot be leased to members or related parties;
  • Banks will not usually lend on vacant land;
  • The property cannot have improvements or be developed while the mortgage exists over the property that changes the nature of the asset, eg. from domestic to boarding house;
  • Existing properties in an SMSF cannot be geared or borrowed against (no recourse on other assets of SMSF).

5.  Obtain approval in principal from the bank for the borrowing  by your SMSF.

6.  Have a conveyancer review contract for sale and prepare the bare trust documentation that gives beneficial ownership from title holder to the superannuation fund trustee and other conditions as required by the SIS Act.    

7.  Secure the property in the name of the bare trustee (not the bare trust nor SMSF nor SMSF Trustee names!).  Any deposit is to be paid from the superannuation fund’s bank account (this is important for stamp duty purposes at the conclusion of the loan to avoid another payment of stamp duty on transfer to the SMSF).

8.  Submit the loan application to the bank.  This will require – the bare trust documents, SMSF Trust Deed, and SMSF financials 

9.  Complete the purchase with the fund paying all of the acquisition expenses from its bank account.

Interested to know what self-managed super (SMSF) is all about, how to get setup FREE and if it is for you? Come to a FREE seminar with bonuses, run every month Self Managed Super Fund Roadmap (all you need to know) for the next monthly event, see 1 SMSF – FREE Seminars or our other seminars above Navigate Shares and Property Boost or call us 0407 361 596

Also Get our FREE Expert Guide – Self-Managed Super and You– it has all the info you need to know, with bonus TIPS and CHECKLISTS  to determine if SMSF is for you and what steps are needed to set up, as well as how to get your SMSF set up FREE. It also gives you ALL the Aust Tax Office publications about SMSF (NAT XXXX). Get you copy now – click “Download” top right hand side above. You’ll also get monthly SMSF news, investment teaching and upcoming seminar and workshop briefs! Download your FREE Guide now!

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CASE STUDY – Dorothy was concerned that their small super amount would not last

 

CASE STUDY – Dorothy was concerned that their small super amount would not last

Dorothy was concerned that their small super amount would not last

WHERE they were at – Dorothy and William had worked hard at their jobs. They relied predominantly on the pension, but wanted to avoid eating into the small amount of super Dorothy had only managed to accumulate when super became compulsory late in their working careers. William had not been able to get super in his labouring work – it came in after he retired. Dorothy was 72 when she called us. Jim had assisted with personal insurance for many years, and also been advisor to her and her husband.

What they WANTED to have – They wanted to do more with the small super that was there – but with conservative growth and some earnings to avoid drawing on capital if possible. They wanted to help their children with their growing families, rather than aim just to leave a sum at their death – enjoying helping was more important than hoarding.

What it will COST Dorothy and William already received the full pension. They calculated they needed $9,000 per annum to supplement the pension to live on, and help their family as they could.

What they would NEED – To have access to a pension to draw down the super they had.

What to do NOW To roll out from the large corporate super fund and into a self-managed super fund. She wanted more “close to home” and friendlier people to help her with decisions. Especially with people they had trusted for years.

Now the components were in place -

StrategyWas 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.

Interested to know what self-managed super (SMSF) is all about, how to get setup FREE and if it is for you? Come to a FREE seminar with bonuses every month – Self Managed Super Fund Roadmap (all you need to know) for the next monthly event, see 1 SMSF – FREE Seminars or call us 0407 361 596

Posted in Case Studies of Clients, Investing - Stock Fundamentals, Superannuation General | Tagged , | Leave a comment