Basics about Super – Small Business Superannuation Clearing House – How does it help Small Business

Basics about Super – Small Business Superannuation Clearing House – How does it help Small Business

Small Business Superannuation Clearing House – How does it help Small Business

The Australian Tax Office (ATO) has a service called the Small Business Superannuation Clearing House, designed to help small business (with less than 19 employees) meet their super obligations as employers. Here is what the ATO site says –

The Small Business Superannuation Clearing House is a free, optional service for employers with 19 or fewer employees, as well as those businesses with an annual aggregated turnover of less than $2 million.

You can make your super guarantee (SG) contributions as a single electronic payment to the clearing house, which then distributes the payments to employees’ funds.

The clearing house is designed to reduce red tape and compliance costs for small business.

If you register to use this service:

  • Your super guarantee contributions are counted as being paid on the date the clearing house accepts them (so long as the fund does not reject the payments).
  • You have 21 days to pass an employee’s choice of fund on to the clearing house.

The page with links to Register (or Login if you have started) is HERE to use the Small Business Superannuation Clearing House.

Or Phone 1300 660 048 or email SBSCHEnquiries@sbsch.gov.au for information about the Small Business Superannuation Clearing House.

Using the Small Business Superannuation Clearing house will ensure you are SuperStream compliant by 1 July 2015.

For answers to questions such as –

What is SuperStream?

How will SuperStream benefit employers?

Who does SuperStream apply to?

When do I have to start using SuperStream?

What information do I need to collect from SMSFs?

Head to  Employer FAQs on SuperStream

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.

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NEWS – An extra $100,000 is needed for retirement nest egg

NEWS – An extra $100,000 is needed for retirement nest egg

An extra $100,000 is needed for retirement nest egg

The Association of Superannuation Funds of Australia (ASFA), says an extra $100,000 is needed for retirement nest eggs. As Investor Daily reports –

“According to ASFA’s most recent Retirement Standard – for the June quarter – changes to the age pension mean that retirees will fall short on the amount of savings needed to live comfortably in retirement.

“ASFA now estimates that Australians will need a super balance at retirement of $640,000 for a couple and $545,000 for a single, an increase of $130,000 and $115,000 respectively from previous estimates,” an ASFA-issued statement said.

“The June quarter figures indicate a modest rise in the cost of living for retirees, with couples aged around 65 living a comfortable retirement needing to spend $58,784 per year and singles $42,861, a respective 0.6 per cent and 0.7 per cent increase on the previous quarter.

“Budgets for older retirees increased by 0.8 per cent at the comfortable level and by 0.7 per cent at the modest level,” the ASFA statement said.

Commenting on the findings, ASFA chief executive, Pauline Vamos, said that if there are further changes to the age pension eligibility age beyond what is already legislated, retirement savings targets will need to increase further.” Click for More

How are your retirement savings progressing?

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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MASTERCLASS – Company Debt and what effect does it have on a business?

MASTERCLASS – Company Debt and what effect does it have on a business?

Company Debt and what effect does it have on a business?

When a business trades or wants to grow, sometimes it is necessary for a company to borrow and take on company debt but what effect does it have on a business?

Company debt generally refers to something owed by the business, who is the borrower or debtor, to a second party, who is the lender or creditor. Debt is generally written up in contractual terms (loan contract) stating the amount and timing of repayments of principal and interest.

How Does a Company Borrow Money?
There are 2 main different types of debt that a company can take on.

1.     By issuing fixed-income (debt) securities – like bonds, notes, bills and corporate papers

Debt securities issued by the company are purchased by investors. When you buy any type of fixed-income security, you are lending money to a business or government. The issuing company must pay underwriting fees. However, debt securities allow the company to raise more money and to borrow for longer durations than loans typically allow.

2.     By taking out a loan at a bank or lending institution.

Borrowing from a private entity means going to a bank for a loan or a line of credit. Companies will commonly have open lines of credit from which they may draw to meet their cash requirements of day-to-day activities. The loan a company borrows from an institution may be used to pay the company payrolls, buy inventories and new equipment, or keep as a safety net. For the most part, loans require repayment in a shorter time period than most fixed-income securities.

Companies typically fund their operations by a mix of debt and equity, which is like home ownership. With a mortgage, the bank is funding part of the house (debt) and you are funding the rest (equity). But that’s where the similarity ends, because unlike a mortgage, business debt is not always a bad thing. Used well, debt it can boost a company’s return on equity (ROE) – the return shareholders receive on their part of the funding equation – because debt is typically a cheaper form of funding than money supplied by shareholders (equity).

It is important that management gets the debt/equity mix right. Too much debt can place a company in a tight situation when business conditions go down, because, unlike shareholders, lenders demand to be paid in bad times as well as good.

Mixing debt and equity

What is the best mix of debt and equity? Investment guru Ben Graham used to say that a company should own more than it owes. One commonly used ratio to measure that is called the debt-to-equity ratio. It quantifies the relative proportion of debt and equity used to fund a company’s operations. Taking this back to Graham’s rule of thumb, that a company should “own more than it owes”, this is the case when the net debt-to equity ratio is below 1. It can also be expressed as a percentage, in which case you would be looking for a figure below 100 per cent. Warren Buffet prefers no or little debt.

Things to look for – 
An investor should look for a few obvious things when deciding whether to continue his or her investment in a company that is taking on new debt. Here are some questions to ask –

Current debt the company has already?
If a company has no debt, then taking on some debt may be beneficial because it can give the company more opportunity to reinvest resources into its operations. However, if the company already has a substantial debt amount, be aware that too much debt is a bad thing because it inhibits a company’s ability to create a cash surplus.

Kind of debt is the company taking on?
Loans and fixed-income securities that a company issues differ in their maturity dates -within a few days of issue, while others don’t need to be paid for several years. Usually, debt securities issued to the public (investors) will have longer maturities than the loans offered by private institutions (banks). Large short-term loans can be harder for companies to repay, as can long-term fixed-income securities with high interest rates may not be easier on the company.

Debt to be used for?
Is the debt a company is taking on, meant to repay or refinance old debts, or is it for new projects with the potential to increase revenues? A company that must refinance existing debt may be doing so because it is spending more than it is making (expenses are exceeding revenues). But it is a good idea for companies to refinance their debt to lower their interest rates.

Can the company afford the debt?
Not all companies succeed in making the ideas work. It is important that you determine whether the company can still make its payments if it gets into trouble or its projects fail. You should look to see if the company’s cash flows are sufficient to meet its debt obligations. And make sure the company has diversified its revenue sources.

How does the company’s new debt compare to its industry?
Many different fundamental analysis ratios can help you along the way. The following ratios are a good way to compare companies within the same industry –

  • Current ratio  – This ratio indicates the amount of short-term assets versus short-term liabilities. The greater the short-term assets compared to liabilities, the better off the company is in paying off its short-term debts.
  • Quick Ratio (Acid Test) – This ratio is the Current Ratio with stock/inventory removed – it tells investors approximately how capable the company is of paying off all its short-term debt without having to sell any inventory.
  • Debt-to-Equity Ratio  This measures a company’s financial leverage calculated by dividing long-term debt by shareholders’ equity. It indicates what proportions of equity and debt the company is using to finance its assets.

Want to learn the core issues of share investing? Our workshopNavigate to Successful Share Investinggives 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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NEWS – More trustees are seeking advice and looking for mentors – Are you aware what SuperBenefit offers?

NEWS – More trustees are seeking advice and looking for mentors – Are you aware what SuperBenefit offers?

More trustees are seeking advice and looking for mentors – Are you aware what SuperBenefit offers?

Do you use others for advice with your SMSF decisions? A recent survey shows that more are, and they are looking for mentors and relationships (just as SuperBenefit provides) –

A survey that reveals self-managed super fund trustees are more likely to seek help highlights future opportunities for small businesses, according to the association behind a new report.

Released yesterday, the  Intimate with Self-Managed Superannuation report, prepared for nabtrade and the SMSF Association by Core Data, reveals a trend towards a new breed of SMSF trustees who are more open to advice when it comes to managing their funds.

It follows recent reports showing a trend towards small business owners choosing SMSFs because they wanted more control over their future.

The report describes three types of SMSF trustees and labels them ‘controllers’, ‘coach-seekers’ and ‘outsourcers’ based on their willingness to seek outside help.

It found controllers comprise around 39% of trustees and outsourcers make up 15%, while the biggest segment was coach-seekers at 46%.

SMSF Association chief executive Andrea Slattery said the findings represent a change in the behaviour of SMSF trustees.

“The early movers in SMSFs were the controllers, who largely took up SMSFs as a DIY alternative to the APRA fund sector in search of greater control and flexibility,” Slattery said.

“While controllers continue to be the biggest drivers for SMSF establishment, coach-seekers and outsourcer trustees now present the biggest growth opportunity for financial advisors given their amenability to financial advice and recognition of the viability of the vehicle as an advised proposition.”

…. “What we’re seeing is as businesses are changing, people are becoming more confident and more engaged in professional services and advice and changing their business models at a more specialist level,” she says.

Slattery says while the report recognises trustees that are controllers are still interested in information, the new form of trustees coming in are “really wanting to have mentoring relationship, seeking to have people to learn and grow with them”. Renee Thompson writes further at Smart Company

This is the mentoring and support relationship that SuperBenefit provides – call for a FREE chat about how we may help you.

And Kate Cowling writes at Smart Investor

Self-managed super fund investors are increasingly handing over the reins to advisers in the midst of low cash rates and barriers to other defensive asset classes, a report shows.

Despite the name “DIY investors”, a growing cohort are relinquishing the control element – which was heavily marketed as a key tenet of self-managed super funds.

They are outsourcing part or all of the investment decision-making to professionals, such as financial planners and accountants, showed research by the SMSF Association and nabtrade.

The proportion of funds outsourcing investments has more than doubled from 7.3 per cent in 2012 to 15 per cent in 2014, the research showed.

Meanwhile, those after advice from advisers on how to invest dropped from 54 per cent to 46 per cent.

The segment of self-managed fund investors who made their investment decision alone remained fairly static at just below 40 per cent.

Most selfies still followed their own research in deciding how to invest, but the trend over three years showed the appetite for advice was rising. In 2012, more than 61 per cent made their own calls on asset allocation. That number now sat at 51 per cent.

On the advice side, 39 per cent said they decided on asset allocation based on advice from advisers last year, compared with 30 per cent in 2012. Part of the reason for the shift was the desire for advice on how to invest when cash rates were low, the research showed.

More than two in five held more than 10 per cent of their portfolio in cash, compared with about a third in 2013. The key reason was they were “waiting for a better investment option”.

But the low cash rate also drove reallocation to Australian equities and other non-traditional asset classes, with 49 per cent looking to alternatives to push up returns.

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.

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Masterclass SMSF – Insurance in SMSF – What is possible and what is not

Masterclass SMSF – Insurance in SMSF – What is possible and what is not

Insurance in SMSF – What is possible and what is not

Part of the Trustee compliance responsibilities include consideration of holding insurance in SMSF but need to know what is possible and what is not (section 4.09 (2(e)) Superannuation Industry (Supervision) Regulations 1994). However trustees are not compelled to take it out, but provide evidence it was considered.

There are four differing types of insurance that Trustees need to consider.
1. Income Protection (Salary Continuance) Insurance
This provides a benefit if you’re unable to work due to an illness or injury and cannot meet ongoing financial commitments. The premiums are tax deductible to both the SMSF or individual. If the SMSF receives insurance proceeds the member will need to have temporarily ceased work due to physical or mental ill health, to be eligible to receive the benefit in the form of an income stream from the super fund and proof will apply.
2. Life Insurance
Life insurance provides a lump sum in the event of death to dependents and can help increase the amount payable to cover for loss of earnings and ongoing financial commitments. The premiums are tax deductible to the SMSF, but NOT to an individual. Life insurance is commonly provided together with Total and Permanent Disability (TPD) insurance.
3. Total and Permanent Disability (TPD) Insurance
Total and Permanent Disability (TPD) insurance provides a benefit in the event of becoming totally and permanently disabled.
The premiums are tax deductible to the SMSF, but not to an individual. However, the extent of the premium’s deductibility for the SMSF depends on whether the TPD insurance relates to ‘any occupation’ (
From 1 July 2014, the only definition that will be permitted will be the ‘any occupation’ definition, meaning the ‘own occupation’ definition of TPD will be prohibited from any new policies after July 1 2014 or ‘own occupation’ (which are grandfathered, can remain if set up before 1 July 2014).
‘Any occupation’ pays a benefit if the insured person is unable to be employed in any occupation for which they are reasonably qualified, educated or experienced, due to ill health. If the policy is based on ‘any occupation’, then the premium remains 100% tax deductible.
‘Own occupation’ is a policy which will pay a benefit if the insured person is unlikely to be employed in their own specific occupation due to ill health. If the policy is based on ‘own occupation’, 67% of the premium is tax deductible. Where a policy bundles TPD ‘own occupation’ with life insurance, the premium is 80% tax deductable to the SMSF.
Typically ‘any occupation’ policies often require a superannuation conditions of release so access to
any benefit payment is often not an issue.
4. Trauma Insurance
Trauma insurance is designed to pay out a lump sum of money if you are struck with a major medical event or condition covered by the policy.
The events and diseases vary between insurance providers and depend on what level of policy you buy, but typically cover – Heart attack, Stroke, Cancer, Loss of limbs, Quadriplegia. The premiums are not tax deductible to either the individual or to the SMSF. If the SMSF receives insurance proceeds that does not coincide with the member satisfying a condition of release
under superannuation legislation, the proceeds may be trapped in the SMSF until such time that the member meets a condition of release.

The advantages of Insurance in the SMSF

  • Contributions into the fund can be used to pay the insurance premiums;
  • Trustees can customise their insurance to suit their specific needs;
  • Assists with cash flow outside of super, personal living costs;
  • Net cost saving on premiums in some cases

The disadvantages of Insurance in the SMSF

  • Sometimes more expensive due to missing wholesale cost savings which commercial funds can access;
  • Members may need to qualify for insurance (via medical tests etc) which they were not subject to in a retail or industry fund.

Interested to know what self-managed super (SMSF) is all about, and if it is for you? Book for a FREE webinar with bonuses NEXT month Self Managed Super Fund Roadmap (all you need to know) for the next monthly event, see SMSF – FREE Seminar  or call us 0407 361 596.

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.

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CASE STUDY – Ian & Jillian wanted control of their super investment and planning help as needed

CASE STUDY – Ian & Jillian wanted control of their super investment and planning help as needed

Ian & Jillian wanted control of their super investment and planning help as needed

WHERE they were at – Just starting retirement slowly by working part-time, Ian & Jillian wanted to have more control of their super investments as well as planning-help as they needed it. Ian wanted to follow the share market closely and learn how to invest for a good return. Jillian was happy to keep busy working part-time. But the complexities of understanding eligibility and applying for Centrelink benefits seemed daunting. They wanted to know who to turn to, and receive trusted recommendations

What they WANTED to have – They had paid their house off and had no car loans any more. The home was in good maintenance, but some small projects always waited, and some money would be required. The cars were maintained and were not too old, so no pressing need to upgrade yet, but maybe in 5-6 years. They wanted to have 1-2 trips to the sunny north states if possible per year, and be able to dine out once a week or fortnight, but not too expensive.

What it would COSTKnowing their weekly and monthly expenses, their retirement that they wanted was modest, and they calculated that $50,000 would be comfortable for the living standard they required.

What they would NEEDTo be safe, if a conservative investment return of 5% is used, (one 20th of 100%) this means one requires at least 20 times the income/return goal – that rounded to approx. $1,000,000 in assets that can generate a return. Having $300,000 in super combined they were short of being totally self-funding in full retirement.

What to do NOW Ian & Jillian spoke to their advisor. They found there were options and a Government Pension was possible, so there was no need to panic about low super. Ian liked the opportunity that he would be able to watch, learn and make decisions about what companies their super was invested in. He liked that the SuperBenefit Programme recommended broker supplied a list twice a year of companies with strong financial health that are likely to perform well.

We were instructed by the planner to set up the SMSF and applied to the super funds to roll-over to the new SMSF bank account. Then they spoke to the stock broker about the list he had created for SuperBenefit clients, of healthy Aust companies based on the 12 financial health criteria. Since 2010 they have made returns ranging from 8-18%.

They also had peace because any queries or compliance issues, could simply be directed to the administrator, who would  CONNECT them to the right advisors as required (SMSF Connector Service)

They now had the components in place –

Strategy to take control of the retirement plan, and

Structure an SMSF using SuperBenefit administration, alongside part-time work and later Government pension

Support with resources and all compliance taken care of by SuperBenefit, as well as a team of specialist professionals that the SMSF Connector service provides

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 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.

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MASTERCLASS Investing – Return on Equity (ROE) of a company – Compared to its Industry Average

MASTERCLASS Investing – Return on Equity (ROE) of a company - Compared to its Industry Average

Investing – Return on Equity (ROE) of a company – Compared to its Industry Average

One important ratio investors like to consider is the Return on Equity (ROE) of a company when compared to its industry average. From the Balance Sheet, we have learned that Equity is the value of the Assets less Liabilities. And from the Profit and Loss we found that the Return is the net Profit – sales less cost of sales, less overhead expenses.

ROE is then the Return divided by Equity – ROE = Return/Equity.

A business that has a high return on equity is a business that is capable of generating cash well. For the most part, the higher a company’s return on equity compared to its industry, the better. And there is a good chance the business that has a good history of ROE may continue to do so. This favours investors who will want to back a good company, and can help drive share price up – and hence returns for the investor.

As an example, a business with $5 mill in profit and equity (shareholder worth/equity) of  $100 mill has a ROE of 5/100 which is 5%. And the higher the Return the better.

Next, ROE needs to be considered alongside other factors. These include the industry the firm operates in – some industries can produce higher ROE than others. It is also important to consider the debt the company carries as this can inflate ROE but also increase the riskiness of the company.

A high ROE suggests a company may be generating superior profits from its operations (its equity), while a low ROE may suggest a company is producing a sub-par return from its operations.

Generally, financial sites and reports calculate return on common equity by taking the income available to the common stock holders for the most recent twelve months and dividing it by the average shareholder equity for the most recent five quarters. Some analysts will actually “annualize” the recent quarter by simply taking the current income and multiplying it by four. The theory is that this will equal the annual income of the business. In many cases, this can lead to disastrous and grossly incorrect results. If you are looking at a retail company, fifty-percent or more of the store’s income and revenue is generated in the second quarter during the traditional Christmas shopping period. An investor should be cautious not to annualize the earnings for seasonal businesses such as these.

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. It also gives you ALL the Aust Tax Office publications about SMSF. Get you copy now – click “Free 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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