MASTERCLASS Investment – What is Accrued Revenue / Sales / Income?

Investment – What is Accrued Revenue / Sales / Income?

Revenue is the amount of sales a company actually makes over a specific period, including discounts and deductions for returned sales, etc. It is the “top line” or “gross income” figure from which costs of goods are subtracted to determine gross profit.

Accrued revenue is revenue for goods or services that have been sold or completed but may have not yet been billed (sometimes) and/or paid for. Accrued revenue is income that has been raised but not received, for example billing for monthly rent that is due in arrears, or following the monthly rental period. The income has been earned and accrued (since an individual or company rented the item) but the revenue has not been received.

It is recorded on the Balance Sheet as an asset account.

This is important to the valuation of a company, particularly in the service industry, where invoicing/billing typically occurs after the work or service is complete. Without this on financial reports, the company would appear to have much lower revenues, and may not have a fair method to balance expenses associated with the revenue accrued.

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

CASE STUDY – Peter over 50yo – Wanted to control his super

Peter over 50yo – Wanted to control his super

Peter ran his own business for many years and enjoyed the rush and buzz – like any business there were challenges and ups and downs. His children were grown up and married and supporting themselves – he chuckled as many friends still had their adult children at home – and wondered why things had changed in the world this way. Was society encouraging less risk in our children to get out and make it work?

His possible close retirement meant he wanted to use SMSF to control and manage their super by using direct investment expertise. This was part of their Retirement Plan.

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 he was at – Peter was a successful business owner, but at times some years were not as good … as happens in life. He had worked hard and knew that he needed to combine a couple of super funds, and also there was some unrestricted non-preserved part that he could access (need to ensure you get advice about this – it is very RARE!). that could help finance a difficult period.

WANT to have – Peter’s aim was to be self-sufficient and comfortable in retirement and he was not wanting to rely on the Government Pension.

COST of that lifestyle – Estimated in today’s values, the annual income to retire that he desired would be at least $75-90,000 in today’s money. That would be close to the ASFA definition of “Comfortable” and allow meals out and occasional trips overseas.

NEED investment to return the cost – 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. $1.5-1,800,000 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, he 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 handled all the set up 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. He 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.  He thought this would work alongside his 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).

They now had the components in place –

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

Structure – use an SMSF using 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 SMSF – End of Financial Year Review – Ensure the records and tasks are in order!

SMSF – End of Financial Year Review – Ensure the records and tasks are in order!

With only weeks to the End of Financial Year (EOFY) left, it’s time to have a review to ensure all is in order and all papers documenting all transactions during the year, are in hand and ready for auditor and accountant verification. Here are some other tips to consider –

1.      Contribution Caps

The concessional contribution (tax deductible / employer) cap for 2016/17 is $30,000, or $35,000 for 49+ years or over. If you have more than one fund, ALL concessional contributions made to ALL your funds are added together and counted towards the cap. This cap was not indexed. MORE HERE

2.     Minimum Pension taken

If there are members in the pension phase, ensure they have received the required minimum pension amount by 30 June. Failure can result in the investment income derived from your assets supporting that pension no longer being exempt from tax and other penalties could apply. MORE HERE

3.     Claim Tax Deductions for Personal Contributions (Non-Concessional)

If you are claiming a tax deduction for your superannuation contributions, make sure you are eligible to claim the tax deduction – seek advice if you’re unsure. An error in over-contributing or claiming a tax deduction for personal superannuation contributions could have excess tax consequences.

4.     Off-Market Transfers

You are still eligible to conduct in specie contributions of shares to your fund. Listed stock held in your personal name can be transferred to your fund as non-concessional or concessional contributions (if eligible) to your SMSF. Consideration should be given to capital gains tax, contribution caps and the off market transfer procedures.

5.     Government Co-Contribution

Remember to take advantage of the Government co-contribution by making a non-concessional (after tax) super contribution before the end of the financial year. For every dollar of eligible contributions, the Government contributes 50 cents to your superannuation up to a maximum government co-contribution of $500. The maximum government co-contribution (scaled as income rises) is payable is for income between $36,021 to max $51,021.  See Co-Contribution

6.     Investment Strategy was followed

Review your investment strategy and ensure all investments have been made in accordance with it, and the SMSF trust deed. Also, make sure your investment strategy has been updated to include consideration of insurances for members.

7.     Insurance Policies

From 1 July 2014, new rules came into effect that will prohibit superannuation fund trustees from providing an “insured benefit” in relation to a member unless the insured event is entirely consistent with a superannuation condition of release. This means that trauma policies and own occupation Total and Permanent Disability (TPD) policies will not be permitted. However, it is important to note these new rules will not apply to policies taken out prior to 1 July 2014.

8.     In-House Assets

If your fund has any investments in in-house assets you must make sure that at all times the market value of these investments is less than 5% of the value of the fund. Do not take this rule lightly as the new SMSF penalty powers will make it easier for the ATO to apply administrative penalties (fines) for smaller misdemeanors ranging from $820 to $10,200 per breach, per trustee!

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.

Pensions Centrelink – Reinstatement of Pension Concession Card

Centrelink Reinstatement of Pension Concession Card

The latest 2017 Australian Government Budget put forward a measure that restores the Pensioner Concession Card (PCC) to people who stopped being eligible for a pension payment due to changes to the assets test. (Still to be approved by legislation).

The Human Services website describes the measure –

This measure restores the Pensioner Concession Card (PCC) to people who stopped being eligible for a pension payment due to changes to the assets test.

Pensioners who lost eligibility on 1 January 2017 were given:

• a non-income tested Low Income Health Care Card (LIC); and
• if they were over pension age, a non-income tested Commonwealth Seniors Health Card (CSHC).

This measure will allow these non-pensioners to access:

• hearing services from the Department of Health; and
• discounts and concessions offered by states, territories and private providers.

It will not be income-tested or assets-tested. PCC card holders will need to meet other eligibility requirements. These include portability conditions.

These non-pensioners will also keep their CSHC. This will maintain their current Commonwealth benefits. This will make sure they continue to receive the Energy Supplement.

The LIC will be deactivated.

Questions and Answers

Whom does this measure affect?

This measure affects people who had their pension cancelled on 1 January 2017 due to changes to the pension assets test.

What date will this measure start and finish?

The start date of this measure is subject to the passage of legislation.

For more, contact Centrelink – 132 300 Older Australians

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.

Masterclass SMSF – Borrowing in SMSF – Careful with Apartments and Car Parks!

SMSF – Borrowing in SMSF – Careful with Apartments and Car Parks!

Last month we covered an overview of the Cans and Can’ts with Borrowing in an SMSF.

CAUTION – However when it comes to apartments, be careful – get the facts BEFORE you commit!

Several clients have found that when the loan is being organised and the Custodian/Bare Trust prepared needs to specify exactly the asset by address and title, that it comes to light the apartment and car park are often separate titles! This means there must be 2 loans, because with SMSF borrowing, the Law states only ONE asset (or a group of ALIKE assets, such as a parcel of shares) can be acquired with lending, this way.

This is called Limited Recourse Borrowing Arrangement – LRBA – limited because the lender ONLY has RECOURSE in a time of default and calling in the loan, to the asset that the money was loaned for – not any other super assets/money – but the lenders cover themselves by making the Trustees PERSONALLY liable by signing as Guarantors for the SMSF!!! So understand what is involved!!

And in some cases the lender may not lend to purchase a car park!

The solution – talk to an accredited SMSF loan specialist or Real Estate professional such as Gaetano or Uwe BEFORE you sign anything!

And not just anyone (we find some brokers have little understanding of this COMPLEX area) so if you need a referral, that is what our CONNECT service provides – both for clients and non-clients – so don’t hesitate to get another opinion – 2-3 will give you peace of mind!

Another solution, is that the SMSF may buy the car park out-right, and just organise borrowing for the apartment.

Talk to someone about the property and what is potentially involved! MOST people don’t and the double loan fees and costs eat into any gains and profits!

Want to know the options and how property works in SMSF?

See our FREE slides SMSF & Property Overview

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.

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

0407 361 596, Paul

NEWS – Super changes coming 1 July 2017! – In summary

NEWS –Super changes coming 1 July 2017! – In summary

The Budget, last year has had many reforms legalised, and many begin on 1 July 2017. Here is a summary of key changes.

What are your Thoughts? Comment below!

Want to learn more, know the options and what we need to retire on, the super system in Australia and what is self-managed super ? To get the answers, see our FREE slides Super & SMSF for Business owners

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. No obligation. 0407 361 596, Paul

MASTERCLASS Investment – What is PEG – Price to Earnings Growth

Investment – What is PEG – Price to Earnings Growth

In an earlier Masterclass we covered the PE Ratio – Price to Earnings Ratio. From that, a variation of PE is the growth of the PE – ie PE growth. This takes into account the stock’s value while considering the company’s earnings per share growth.

                Price/Earnings ratio

PEG =    Annual EPS growth

It is sometimes favoured over the price-earnings ratio because it also accounts for growth of earnings. It is similar to the P/E ratio in that a lower PEG means that the stock is more undervalued. One should keep in mind that the numbers used in the calculation are considered projected and therefore are only estimates. Also, there are many variations using earnings from different time periods (e.g., one year versus five years), and whether the annual growth is projected (a future prediction) or trailing (past history), so you need to know the exact method and time-frame the source is using.

As an example, consider two companies

The first has P/E ratio 50 and annual earnings growth rate 20 = PEG ratio of 50/20 = 2.5

The other has P/E ratio 15 with annual earnings growth rate 10 = PEG ratio of 15/10 = 1.5

Comparing these two, the first doesn’t have the growth rate to justify the higher PE and the stock price is considered over-valued.

If you use future earnings figures you are looking at projected PEG.

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