CASE STUDY – Paul & Paula – Supporting Elderly Mother and Preparing for Retirement

Paul & Paula – Supporting Elderly Mother and Preparing for Retirement

Paul and Paula had her elderly mother living with them so they could provide the best care they could. He also had his consultancy, and Paula worked part-time around her mother. They knew they needed to plan quickly for retirement to build up the small super they had – and liked the idea of property in their super

(There are 5 easy steps to planning anything – start where you are at, decide what lifestyle you want to have, what that lifestyle state/position will cost in money (to maintain or the living costs) what you need invested to meet that cost of having what you want, and what action we need to take now to get there. (Get the FREE Resource: 5 Easy Steps to Plan your Retirement).

1.   WHERE they were at – Paul enjoyed his consulting work. They wanted to down size and move closer to a sea-change area as well as continue caring for Paula’s elderly mum, and had their eye on a particular development near the coast. They both planned to keep working well into their 60’s unless something changed that. And with property rising steadily, they wanted to work on reducing the loan but still wanted to move house and focus on retirement wealth-creation.

2.   WANT to have – The aim was to retire self-funded as much as possible.

3.   COST of that lifestyle – Estimated in today’s values, the annual income to retire that she desired would be at least $60-70,000. That would be well over the ASFA definition of “Comfortable” and allow dinning out and even occasional trips overseas.

4.   NEED – how much you need invested to cover the income required – To be safe, if a conservative investment return of 5% is used, (one 20^th of 100%) this means at least 20 times the income goal – which rounds to approx. $1,200,000 – 1,400,000 of income-producing assets other than the family home. They already had approx. $200,000 in 2 super funds. The value of the consultancy was considered to a bonus and would hopefully be sold as a going concern. Leveraging by borrowing via an SMSF was an option to help boost their super over regular 5-12% returns the average commercial superfund achieves.

5.   NOW what to do – After meeting their advisor and a Property Advisor and Real Estate Agent who explained the Pros and Cons of SMSF, then met with Paul the Administration Manager at SuperBenefit who supplied FAQ sheets, a Checklist of what was required, and a detailed list of what would be included in the service. Once the Trust Deed was prepared and executed, bank account formed and applications to superfunds signed, it was a simple matter to start organising the investments.

What was liked best of all – that the SuperBenefit Programme made it easy – SuperBenefit manages compliance from the annual documents, storage of records electronically and additionally, has a CONNECT-ASSIST service which provides co-ordination as well as help – with who to talk to for advice and any other help besides the financial advisor.

There was other value in our property investment specialists and private-client share broker, who can supply a list twice a year (after the Australian company reporting seasons) summarising financial data on companies with strong financial health that are likely to perform well. 

Shares would be the main investment.

There is also peace of mind because any queries or compliance issues, could simply be given to the SuperBenefit administrator, who would CONNECT them to the right advisors as required (Connect/Assist Service)

The advisors had put these components in place –

Strategy – to take control of the retirement plan, and build their super

Structure – use an SMSF and the SuperBenefit Programme administration

Support – with resources and all compliance taken care of by SuperBenefit, as well as a team of specialist professionals that the SMSF Connect/Assist service provides, working with the client advisors in unison.

Note – This is a simplified summary of one client – it is not to be taken as advice, as your specific circumstances are not considered – we recommend asking for a consultation and/or seeking further professional advice with our recommended advisors or your own advisor.

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 You – top right hand side above.

If you have any questions, why not give us a call – it’s FREE!

No obligation. 0407 361 596, Paul.

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MASTERCLASS Investment – Difference between Debt and Liabilities

Investment – Difference between Debt and Liabilities

Investors can sometimes mention liability or debt when they mean the same thing.

However more precise –

• debt refers to borrowed money
• liabilities to an obligation of any kind, such as loans, tax or employee super

But when using and comparing company financial ratios – there is a difference between Debt & Liability and one needs to know which is used in the ratio to understand it’s meaning.

For example in the debt-to-equity ratio, debt means the total amount of liabilities both short term (less than 12 months), and long term (over 12 months). This means, debt includes short-term accounts such as overdrafts and credit cards and normally also includes accrued wages and utilities, income taxes due and other liabilities, plus long-term accounts like long-term loans and bonds payable. In other words, sometimes debt means all obligations… all amounts owed… all liabilities.

However, other times, the word debt is used more narrowly to mean only the formal, written financing contracts such as short-term loans payable, long-term loans payable and bonds payable, example – hire-purchase, equipment finance, etc.
As always, keep these in mind to know WHAT is being used – be clear and have it defined!

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

SMSF Basics – How to set up SMSF – Self-Managed Super Fund

SMSF Basics – How to set up SMSF – Self-Managed Super Fund

Setting up an SMSF is an important decision and has several considerations BEFORE you decide an SMSF is for you, or have had discussions with your financial or tax agent advisor and conclude an SMSF may be a suitable part of your strategy for wealth creation and the retirement you want.

Here is a simplified layout – Step by Step: (sections of the SIS Act and Regulations are given, eg S104A) –

  Preparation – what is involved and suitability

1. Consider options, seek advice, your time, skills
2. What Trustee Type and Eligibility (over 18, no legal disability, not disqualified, no convictions) individuals, corporate (preferred and more stable for succession planning)
3. Member numbers – single, multiple
4. Trust Deed, order/have written
5. Slides – our FREE slides to explain more – SMSF Roadmap Overview

2.   Starting the SMSF

1. Commence the SMSF by executing the Trust Deed
2. Application for ABN, TFN and Regulation by ATO
3. ATO Trustee Declarations signed and kept 10 years S104A
4. Bank Account opened in name of SMSF – MUST segregate super money from personal
5. Roll-in monies – request from your current super funds, and/or contribute own monies and assets as allowed Reg 7.04
6. Decide if you will keep insurance in your current commercial super fund (leaving a small balance there to maintain insurance cover), or get quotes to pay from your SMSF and roll the full super over (call us to find out why this is an important consideration)
7. Organise Employer to contribute to your new SMSF bank account – Complete Standard Choice form, from ATO
8. Investment Strategy decided and write – Reg 4.09.

3.   Operate SMSF – each year from the start

1. Manage contributions from employer or personal, and roll-ins from Super Funds
2. Invest monies as per your Investment Strategy Reg 4.09
3. Life & TPD Insurance Requirements can be paid by SMSF if required
4. Maintain Record keeping, mail, banking – S35B
5. (When later required) – Pensions (benefits) min. payment, documented, application, minutes, actuary certificate (if applic), pension payments – Sub Reg 1.06 (9A)
6. Further Compliance tasks, meeting minutes for major decisions eg change in investment strategy, keep 10 yrs – S103
7. Organise annual return, audit at year end – S35B, S35C(2)(d).

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 You – top right hand side above.

Call 0407 361 596

Masterclass SMSF – BDBN – Binding Death Benefit Nominations that allow more complex planning

SMSF – BDBN – Binding Death Benefit Nominations that allow more complex planning

Last month in our previous post talked about the basics of super death benefit nominations, how tax applies and how they work in general and now we look at how they work for complex estate plans. If the self-managed super (SMSF) trust deed allows more complex estate planning strategies that include death nominations to be made to multiple beneficiaries or specific asset allocations especially with prior and mixed marriage situations, the benefits of SMSF are clearly higher than regular super funds, if this kind of planning is required/desired.

Most common SMSF trust deeds allow simple binding death benefit nominations (BDBN) as a default document that allows little more than nominating one or more individuals to receive a benefit. Where-as a basic nomination is usually the ONLY option available for members of large public offer funds. But these don’t allow for a beneficiary pre-deceasing a member, or leaving specific assets to certain beneficiaries.

For more complex situations, as part of estate planning (remember super does NOT form part of your estate and is NOT controlled by your will directly) a greater range of possibilities should be sought.

This would seek to cater for situations such as:

• Benefits to multiple beneficiaries;
• Allocation of benefits to alternative beneficiaries where one or more pre-decease a member;
• Allocation of specified assets to specified beneficiaries.

Some examples to illustrate the possibilities –

A.     Margaret holds collectable assets in her SMSF, and constructs a BDBN that directs specific assets to certain beneficiaries, and the remainder to another beneficiary, as follows:

• A Monet to son Peter;
• A Ming Dynasty vase to daughter Heather;
• Remainder to husband Phil with a condition that should he pre-decease her, or is no-longer her husband, all remaining benefits will pass to Peter and Heather in equal proportions

B.    Matt and Marsha, with Marsha’s son from prior marriage, Steve, who may not be a dependent of Matt’s at Matt’s death, so Matt prepares a BDBN as follows, that in event of his death, benefits pass as follows:

• First to Marsha;
• Secondly to Steve, if Marsha pre-deceases Matt, with a condition that it is paid ONLY if Steve is a SIS Act dependent at the time;
• Thirdly to Matt’s legal personal representative (LPR or estate) – here they can then pass to Steve under provisions of Matt’s will.

As each situation is different, speaking to an advisor is recommended.

If you require an advisor, call us to arrange a no-obligation discussion.

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 You – top right hand side above.

If you have any questions, we can determine who is best to advise, as general education can only be given – it’s FREE also!

No obligation. 0407 361 596, Paul.

NEWS – Maintain super fund choice and sole purpose

Maintain super fund choice and diversity

Certain characteristics currently embodied in the retirement savings framework, such as fund diversity (free choice of super fund) and the system’s sole purpose (savings for retirement) need to be maintained, according to a panel of senior executives.

Speaking during a panel session at the recent Fairer Retirement Summit in Sydney, SMSF Association chief executive, John Maroney, said it was important for a variety of superannuation funds to be available to manage the retirement needs of Australians.

“I think we would be in difficult areas if everyone said here is the best model [and] everyone has got to look like this,” Maroney said.

“And there is a risk over the next five years that could be the process [where] someone says this type of fund is the best fund and every other sort of fund really doesn’t match up, [so] let’s get rid of all the others and force everyone into one type of fund.

“I think that’s very dangerous so I’d keep that diversity area. Like in the environment diversity of species, potential for evolution, innovation, creativity and engagement are all by-products of having a good healthy ecosystem of different types of funds.”

Fellow panellist Cameron Ralph Khoury consultant Lynn Ralph expressed her wish for the system not to stray from the role it was designed to play.

“Over the [past] 30 years there have been various times where people have argued that people should be able to access their superannuation savings for various purposes. We’ve been talking about housing and how people should be able to access [super] for housing if they haven’t got a deposit yet,” Ralph said.

“But in a minute it’s going to be about healthcare, aged care and a whole bunch of other things.

“I’ve been one of those people that says as soon as you open the door, the door is open and we’ll be accessing it for everything.”

She pointed out there are already early-access provisions in the current system that are strictly monitored for people who need to use their retirement savings for a different purpose, suggesting a degree of flexibility currently exists.

“The system is there for your retirement. That’s its purpose. It’s not meant for 16 other things,” she noted.

Reported by Darin Tyson-Chan at Self-Managed Super Magazine online

SuperBenefit agrees – fund diversity (free choice of super fund) and the system’s sole purpose (savings for retirement) need to be maintained for the integrity and confidence of the system.

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 – What is Debt to Equity Ratio and how Investors can use it

Investment – What is Debt to Equity Ratio and how Investors can use it

When looking for financially strong companies to invest in, one fundamental ratio, Debt to Equity (D/E) gives us a measure of a company’s financial leverage (borrowings) calculated by dividing its total liabilities by stockholders’ equity. It indicates what proportion of equity and debt the company is using to finance its assets.

The ratio formula is:

***Note – Sometimes only the interest-bearing, long-term debt is used instead of total liabilities in the calculation.

How It Works/Example:

Let’s assume Company ABC has:

1. Total liabilities were $10,000,000;  and
2. Shareholders’ equity of $20,000,000, and

then we can calculate Debt to Equity as:

D /E = $10,000,000/$20,000,000 = 0.5 or 50%

This means that Company ABC has Debt that is 50% of shareholders’ equity.

Having a high debt/equity ratio generally means investors say the company has been aggressive in financing its growth with debt. However, his can result in volatile earnings as a result of fluctuating interest rates.

But if debt is used to finance increased operations (high debt to equity), the company has the potential to generate more earnings than it would have without this outside financing.

The D/E ratio is also closely monitored by the lenders and creditors of a company, since it can provide early warning that an organization is too weighted by debt that it is unable to meet its payment obligations. There can also be a funding issue. For example, the owners of a business may not have/want to contribute any more cash to the company, so they acquire more debt to address the cash shortfall. Or, a company may use debt to buy back shares, thereby increasing the return on investment to the remaining shareholders.

To see why under 50% D/E can mean to a company, more examples with Telstra, and Buffet’s take on Debt, see our other article MASTERCLASS Investment – Debt to Equity explained

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

Centrelink – The MyGov account for centralized assistance

Centrelink – The MyGov account for centralized assistance

The Department of Human Services website explains –

Your myGov account gives you:

• Secure access to a range of government services using one username and password;
• A single inbox for your messages from Centrelink, Medicare, Child Support and the Australian Taxation Office;
• A quick and easy way to advise selected member services about changes to some of your personal details.

These features will continue to grow and develop over time.

With myGov, your security and privacy is protected.

Use your Centrelink account through myGov now

It’s quick and easy to sign in to your Centrelink online account with myGov. Join 11 million myGov users today!

If you:

• Have a Customer Reference Number (CRN) you can register for a Centrelink online account through myGov;
• Want to use the Express Plus Centrelink mobile app or don’t have a CRN, you need to register for a Centrelink online account directly.

Once you’ve registered for a Centrelink online account, and created your myGov account, you need to link your Centrelink online account to myGov.

With a myGov account, you can access all of our online accounts – Centrelink, Medicare and Child Support – as well as other government online services in one place, with just one username and password.

Use the myGov Access app

myGov Access is an app which gives you an alternative secure way to sign in to myGov. It creates a one-time access code on your mobile device.

You can use it instead of the SMS code or answering one of your secret questions.

myGov Access creates a one-time access code. Enter this code after your username and password.

It’s a great option if you can’t get the SMS code to sign in. For example, if you’re overseas or in a remote area can’t get an SMS to your mobile phone number.

You only need Wi-Fi to sign in to your account.

myGov Access is available for free from the App Store and Google Play. If you’re heading overseas, you need to download and set up myGov Access on your mobile device before you go. (see website for links to Apps)

Use our myGov Access online guide to help you set up myGov Access with your myGov account.

You can find more help information at the myGov website.

Find a myGov shopfront

myGov shopfronts are your first stop to connect with more government services. Click here to find them.

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