Masterclass SMSF – What happens when a member dies and what are SMSF dependents?

SMSF – What happens when a member dies and what are SMSF dependents?

When a member of a SMSF dies, SIS Reg 6.21(1) directs that the member’s benefits must be ‘cashed’ as soon as practicable. The money is then paid by either a lump sum payout to dependants or to the estate, or an income stream commenced to a dependant (note that a child must be less than 18, or be between 18 and 25 and be financially dependent, or have a severe disability at the time of death for the benefit to be paid as an income stream).

If a member has no surviving dependents – a spouse (or de facto) or children when they die, there may be other people who were dependant on the member (this is defined in section 10 of the Superannuation Industry Supervision Act 1993 (SISA), as any person with whom you have a ‘interdependency relationship’.)

Section 10A of SISA also explains that an interdependency relationship between two people is where:

(a) they have a close personal relationship; and
(b) they live together; and
(c) one or each of them provides the other with financial support; and
(d) one or each of them provides the other with domestic support and personal care.

Subsection 10A(2), further explains that if two people satisfy the requirement of (a), but they do not satisfy the other requirements because either or both of them have a physical, intellectual or psychiatric disability, then they are still classified as having an interdependency relationship.

The SIS definition of a dependant is inclusive and as such under the common law principles, includes any other person who was a financial dependant of the member (i.e. relied on the member for financial maintenance) just before he/she died.

Therefore, unless relatives or co-habitants in the same household, or nieces and nephews satisfy the above at the time of death, they would NOT be classified as SIS dependants under section 10 of SISA, and NOT be able to receive a payout of death benefits.

Where there are no remaining dependants then there is very little choice. The member’s legal personal representative (‘LPR’) will become the trustee of the SMSF (an automatic appointment under well-written Trust Deeds such as what SuperBenefit provides), assets will be realised and paid out to the estate and then paid out according to the will (for example to nieces and nephews).

The only time that a superannuation fund could pay directly out to non SISA dependants is when after reasonable inquiry the remaining trustees could not find a LPR or any dependants.

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

Call for FREE education, or to speak to an advisor about your specific situation. SuperBenefit works with SMSF trustees to CONNECT them with the advisors they need. A call is FREE. If you have any questions, why not give us a call – it’s FREE!

No obligation. 0407 361 596, Paul.

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CASE STUDY – Chelsea over 50yo – Wanted to control her super as a single mum

Chelsea over 50yo – Wanted to control her super as a single mum

Chelsea was a single parent who never re-married, but devoted her life to supporting and raising her 4 children. Not only that, one daughter was a special-needs child with Down’s Syndrome. But she was the love of their lives, of course!

(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).

WHERE she was at – Chelsea was a successful professional, who not only worked full-time, but was also looking ahead at how she would support herself in retirement – and she aimed to rely as little as possible on the Government Pension. In her little spare time, she studied investing, and joined clubs to learn as much as she could. She had even taken control of her super, so she could invest with a goal to achieve better returns as she learned how to invest better. She signed up via an online SMSF supplier, but the basic service and burden of keeping up with collecting and uploading documents for year-end accounting, as well as restrictions on the broker and other suppliers she could use, was not working.

WANT to have – The aim was to be self-sufficient and comfortable in retirement.

COST of that lifestyle – Estimated in today’s values, the annual income to retire that she desired would be at least $50,000 in today’s money. That would be close to the ASFA definition of “Comfortable” and allow meals out and occasional trips overseas.

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 rounded to approx. $1,000,000 of income-producing assets other than the family home.

NOW what to do – After meeting the advisor 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 paying super to the new SMSF.

What was liked best of all – that the SuperBenefit Programme made it easy – they sorted transferring from the online basic SMSF provider and documents, storage of records electronically and additionally, had a CONNECT/ASSIST service which provides co-ordination as well as help with who to talk to for advice and other help besides the financial advisor.

She also saw value in our private-client share broker who supplied 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.  She is mainly using her own research subscription, that works alongside her own analysis and choices.

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 components in place –

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

Structure – use an SMSF and the SuperBenefit administration service where ALL is taken care of,

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 – we recommend asking for a FREE consultation and/or seeking further professional advice with our recommended advisors or your own.

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 also!

No obligation. 0407 361 596, Paul.

MASTERCLASS Investment – What is GAAP – ie What are Generally Accepted Accounting Principles (GAAP)?

SMSF – What happens when a member dies and what are SMSF dependents?

Companies listed on the Stock Exchange in Australia finish half-year reporting at the end of February and August.

A common phrase “Generally Accepted Accounting Principles” (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.

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. and our stock broker and some clients sort through all the data and financial ratios to find WHAT companies to buy – searching 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.

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 split into various categories eg “Statement of Cashflows”, “Construction Contracts”, etc and a list with most recent updates/ pronouncements for Australia (and search for GAAP) can be found HERE.

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

Basics about Super – How superannuation works, by ASIC

Basics about Super – How superannuation works, by ASIC

There are lots of sites with information – where can you learn about how superannuation works for someone who can be trusted? ASIC the Australian Securities and Investment Commission can help – Here’s some from their site –

How super works

Superannuation basics

If you’re hoping for a comfortable life in retirement, spend some time learning about your superannuation (super). Taking a few steps now could significantly boost your super and make a big difference to your future lifestyle.

• What is superannuation?
• How to choose a super fund
• How do I make super contributions?
• What happens to my super money?
• When can I access my super?

What is superannuation?

Superannuation is a tax effective way to save for your retirement. It’s similar to a managed fund where your money is pooled with other members’ money and invested on your behalf by professional investment managers. Generally you will not be able to access this money until you retire.

Your employer will make contributions to your super fund and you can top it up with your own money. The government may also make contributions if you are a low income earner.

How to choose a super fund

Most people can choose which super fund they’d like their super contributions paid into. Check with your employer to make sure you can choose the fund your super is paid into and see choosing a super fund for more information. Super comparison websites can help you compare super funds.

Some industrial awards specify a fund or a choice of a few funds that super must be paid into. In these cases you may have limited or no choice of fund.

When you can choose your super fund, tell your employer by filling in a standard choice form from the Australian Taxation Office (ATO) or from your employer. If you don’t (or can’t) choose your own super fund, your employer will put the money into a ‘default’ super fund, known as a MySuper account.

Insurance through super

MySuper funds have a default level of death, disability and income protection insurance that you will automatically be covered for. If you don’t want this insurance you will need to tell your super fund you want to cancel it.

Insurance through super can be cheaper than similar cover outside of super and you can usually request to increase it if the default cover is not enough to suit your needs. See insurance through super for more information.

How do I make super contributions?

There are typically three types of super contributions: employer contributions, personal contributions and government contributions.

Employer super contributions

For most people, your employer must pay an amount equal to 9.5% of your salary into your super fund account. This is on top of your salary or wages. Over the course of your working life, these contributions from your employer add up, or ‘accumulate’, which is why they are known as accumulation funds. Your super money is invested by your super fund so you will earn investment returns on the money.

Employer contributions are based on your ‘ordinary time earnings’. For example, if your ordinary time earnings are $50,000 then you should be paid an additional $4,750 into super. Ordinary time earnings are what you earn for ordinary hours of work including over-award payments, bonuses, commissions, allowances and certain paid leave. See the ATO’s information on using ordinary time earnings to calculate the super guarantee.

Work out how much your employer should be paying into your super fund.

Employer contributions calculator

Super contributions if you’re self-employed

If you are self-employed you are responsible for making your own super contributions, but they are tax deductible. See super for self-employed people for more information.

Personal super contributions

You can make extra contributions by:

• Salary sacrificing – your employer can direct some of your pre-tax income into super. This will be deducted by your employer and sent to the fund with your employer contributions.
• Personal contributions from your pay – you can also ask your employer to make personal contributions from money you have paid tax on. Low income earners who do this may be entitled to government contributions.
• Bank transfer – you can transfer some of your savings into your super account using BPay or direct deposit. Ask your super fund for details.
• Super transfer – transferring all or some of your super from another fund into your main super account.

Bonus contributions from the government

If you put your own after-tax money into super, you could receive a government co-contribution, depending on how much money you earn. Low income earners can receive up to an extra $500 by making personal after tax contributions.

If you earn up to $37,000 you may also get a ‘low income super tax offset’ of up to $500 from the government. You don’t need to add extra money to your super to be eligible for this payment. Both of these payments will be paid into your super automatically after you have lodged your tax return.

What happens to my super money?

Money in your super fund account is invested by your super fund. Most super funds offer a variety of investment options. These usually include pre-mixed options that will contain a mix of different asset classes, and single sector options such as cash, property and shares.

Your investment returns will impact how quickly your super grows so it’s important to choose an investment option that is appropriate for your investment timeframe and tolerance for market fluctuations. See super investment options for more information.

If you have more than one super fund you can combine them to save fees and make it easier to keep track of your super. Read more about consolidating super funds.

When you retire your super can be taken as a lump sum, a regular income stream, or a combination of both. If you choose to take your super as a retirement income stream, the money that you’re not accessing continues to work for you and earn interest. See income from super for more information.

When can I access my super?

If you retire and have reached your preservation age, you can withdraw your super. The table below shows when you can access your super, according to when you were born. Here are more details on how to get access to your super.

Understanding how super works can help you make the most of it, whether you are just starting out, are close to retirement or have already retired. Learn the basics and you can become your own super hero.

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 finding the right expert to answer your question

– it’s FREE also! No obligation. 0407 361 596, Paul.

 

NEWS – Insurance in Super to closer meet Member needs at different life stages

Insurance in Super to closer meet Member needs at different life stages

Rod Myer writes at The New Daily –

Insurance cover in superannuation could be redesigned to closer meet the financial needs of members, research house Rice Warner believes.

Because insurance in super needs depend on age and family situation, insurance products could be designed around such variables as age and family type.

Currently insurance is pretty much a ‘one size fits all’ arrangement with everyone paying the same premium in the same category getting the same level of cover. Even those that choose to pay more get the same upgraded cover as others in their category.

However as the following table from Rice Warner shows, people’s insurance needs vary dramatically with their life circumstances.

 

Chant West says all this could change with smart design.

“Using the above statistics, we could shift the default sum insured to one based on needs – all without changing the premium or getting any additional information from members” the research says.

“We would simply assess the amount of the claim based on the dependants at the time of death.”

The super industry has begun to move on the discrepancies within super that see younger people erode their accounts by paying for insurance they don’t need.

Recently Cbus and AustralianSuper have announced moves that will reduce the cost of super for young members by reducing or eliminating coverage of various types of insurance for those under 20. Other industry funds such as HOSTPLUS and First Super have been working to reduce the cost of insurance without compromising cover.

And, according to another researcher, Rainmaker, an average 20-year-old now would receive around $175,000 in default death cover, down from from a high of $210,000 in 2014, Fairfax Media reported.

But the average level of cover offered to younger fund members has dropped by 20 per cent over the past two years.

(Read More)

Our comment – It all makes good sense for commercial super – but how long will change take?

Another possible solution is an SMSF (seek advice for suitability, or ask us to refer a helpful advisor for you) where you can select the insurance to suit your needs, sometimes at competitive prices – this is the flexibility and comfort an SMSF may provide you.

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 Investment – Difference between Fundamental and Technical Analysis in Share Investing?

Investment – Difference between Fundamental and Technical Analysis in Share Investing?

Investors in shares can tend to fall into 2 groups – fundamental analysis and technical analysis, but we have come to learn and to understand what benefits BOTH stock-analysis disciplines, both fundamental and technical, can bring for increased share-market investment success.

To analyse, is to measure, or to count. But to analyse well, you must measure what matters, and count what counts. 

It’s quite rare for a Technical Analyst (“TA”) to delve into the “fundamentals” of stock-picking, as this is the territory of a Fundamental Analyst (“FA”).

So, what is the difference between fundamental and technical analysis?  And how do they each help investors to make better share-savvy decisions? 

Fundamentals assess a stock’s underlying business operation and its profit-related activities/outcomes – its financial returns.  An “FA” places the business under a “financial-ratio microscope” to measure all possible issues relating to its operational profit-growth momentum and, as a consequence, its potential share-price growth.   

Technicals chart a stock’s share price upward or downward momentum.  A “TA” follows share prices in order to align investors with on-coming positive or negative price action – that is to prepare investors to BUY when share-price patterns and volume data are indicating potential sustained rising, and to SELL when charting is indicating a potential meaningful fall in a stock’s (or the market’s) share price/s.  

In a nutshell, fundamental analysis “spots” academic reasoning for business earnings growth (business profit), and technical analysis charts and “spots” buying and/or selling (investor profit) share-price trends.

Measuring what Matters and Counting what Counts 

It is only “measuring what matters” that enables investors to “count what counts”.

An investor’s ultimate count is the net-profit outcomes resulting from the timely, technicals-triggered, “when-to-buy” and “when-to-sell” trades of fundamentals -measured & identified investment-grade “what-to-buy” stocks. 

SuperBenefit’s investing/trading advisor method involves combining regular stock-market philosophies of longer-term “buy & hold” investing (fundamentals) and, shorter-term “buy & sell” trading (technicals) that will help investors construct investment-grade “quality-stock” portfolios with bullish long-term run-with-the market growth objectives, and bearish short-term retreat-to-safety cash options as time-to-time situations would warrant.  

The below schematic shows a typical range of fundamental analysis financial ratios that would be applied by a “FA” to measure and assess the operational strength and profit-growth momentum of a business.  

A positive fundamental analysis assessment relative to these below financial ratios would point up a:     

• Financially Healthy;
• Rationally-Valued “Growth” Company;
• With “Standout” Superior Management.

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 – Beware of scams to watch out for targeting pensioners and older Australians

Centrelink – Beware of scams to watch out for targeting pensioners and older Australians

The Australian Government Department of Human Services (DHS) has some great tips on scams to watch out for targeting pensioners and older Australians, June 2017 –

Older Australians keep a step ahead of the latest scams

Scams are on the rise. We have details about the recent scams to keep you and your family safe.

We know there’s an increase in scams that pretend to be from us.

You could get a phone call, email, SMS or social media messages from a scammer. Scammers ask for personal details to get money or steal identities, and their questions can look and sound genuine.

Some of the recent scams targeting older Australians include:

Age Pension calculator offer

Keep clear of fake social media messages, such as Facebook posts, using our logos to advertise a link to an Age Pension calculator. If you use the calculator, a scammer may charge a fee to your mobile phone account without your permission.

Phone calls offering higher pension payments

Be cautious of phone calls advising you can get an increased pension. Scammers will pretend to be our staff and may ask you to call them back on a private number. They may also ask you to pay a fee to get a larger payment or back pay.

We will never ask you to:

• send us personal information by email, SMS or social media;
• click on internet links or open attachments sent to you online;
• pay a fee to get a payment or service;
• give password or PIN numbers to your bank accounts;
• buy gift cards or vouchers, such as iTunes cards.

If you are contacted and you think it’s suspicious, ask for the caller’s contact details and call one of our payment lines.

Next steps

Stay informed about scams.

Read more about:

• protecting yourself from scams for older Australians on the ScamWatch website;
• the Australian & New Zealand’s National Identity & Cyber Support Service on the IDCARE website;
• Scams and warnings for Aboriginal and Torres Strait Islander People on the MoneySmart website.

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

Call for FREE education, or to speak to an advisor about your specific situation. SuperBenefit works with SMSF trustees to CONNECT them with the advisors they need. A call is FREE. If you have any questions, why not give us a call – it’s FREE!

No obligation. 0407 361 596, Paul.