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

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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

Masterclass SMSF – How super death benefit nominations work and how binding applies

SMSF – How super death benefit nominations work and how binding applies

When an SMSF member has died, your super (applies whether in commercial fund or SMSF), is NOT controlled by your WILL. It is controlled by a nomination and the surviving SMSF trustees must comply with the applicable super and tax laws for paying out death benefits. A death benefit payment is generally made by the SMSF to another person after the death of a member of the fund.

For a dependant of the deceased, the death benefit can be paid as either a lump sum or income stream. Income streams (super pension) are usually either a new income stream that is paid to a dependant, or a reversionary income stream that is the continuation of an existing income stream and paid to a dependant.

For those not a dependant of the deceased the death benefit must be paid as a lump sum.

You can nominate the beneficiary for your super with your super fund (a death benefit nomination) instead of leaving the trustees to decide. If you have NOT nominated a beneficiary then the estate can access your super and distribute it (now as part of your estate), according to the instructions in your will. Note a will does not control your super directly – super is outside your estate, and is BEST controlled by death benefit nominations or agreements.

A death benefit nomination is a statement by a member of a super fund to the trustees of the super fund directing them on how to deal with their super account when they die. A death benefit nomination is supplied to the trustee of the SMSF by the member requesting the fund pay their benefits to a nominated beneficiary/ies. It is either:

• binding – it directs the trustees to pay the member’s death benefit to a legal personal representative or dependant;
• non-binding – it notifies the trustees of the member’s preferred beneficiaries, leaving the trustees to make the final decision.

Super law does not require an SMSF member to have a death benefit nomination to pay out death benefits. But, if an SMSF does have one, it will need to first follow the rules of the SMSF’s trust deed (the deed must allow them) and the rules of super law. For more refer to the ATO site HERE as well as – SMSFD 2008/3: Binding death nominations

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.

CASE STUDY – Brian and Stephanie working the business as well as preparing for retirement

Brian and Stephanie working the business as well as preparing for retirement

Brian and Stephanie had lovely children in Primary school and a busy consulting business they had started from scratch, which was growing well. They loved property and had explored how super could be used to invest in property and wanted to know if that could work for them.

(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 she was at – Running her own business, Nicole had supported herself and family offering healthy food methods and loved helping people acquire healthy products. She had used our advisor for decades, to assist with many financial decisions and appreciated his advice and sounding-board ear but wanted to be sure about more control of her future.
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 $70-90,000. 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. $1,600,000 – 1,800,000 of income-producing assets other than the family home. They already had approx. $250,000 in 2 super funds. The value of the business 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 Gaetano Fina, a Property Advisor and Real Estate Agent (one of our core property experts we can recommend), 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

SB Programme educates and coaches you in connection with all the key SMSF admin issues. Where “advice” becomes necessary, we can refer you to a financial advisor. Or alternatively if you have your own financial advisor, please talk with them.

This is a simplified overview and does not constitute advice, nor consider your circumstances, and should not be solely relied upon.

MASTERCLASS Investment –Company Health Ratios – Profit Margins

Investment – Company Health Ratios – Profit Margins

In the Profit & Loss Statement or Income Statement, (one of the 3 Financial Reports Companies issue) there are four levels of profit or profit margins –

Gross profit (after cost of sales deducted from sales/revenue),

Operating profit (after expenses deducted),

Pretax profit (before tax and other non-regular items) and

Net profit (Final).

Note that “profit”, “earnings” and “income” are all used interchangeably, and mean the same thing.

When the term “margin” is stated, it can apply to the absolute/actual number for a given profit level and/or the number as a percentage of net sales/revenues, taken as 100%.

The absolute amount, the dollar amount, is on the Profit & Loss. The profit margin uses the percentage calculation to provide a better comparison of a company’s profitability compared to prior periods (months and year to date) and in comparison to peer companies and industry benchmarks. The margin is the amount of profit (at the gross, operating, pretax or net level) as a percent of the total sales generated.

So the formulas are –

Gross Profit margin is Gross Profit / Sales (GP divided by sales).

Operating Margin is Operating Profit / Sales (OP divided by sales),

and so on.

Monitoring the profit ratios / margins over months and years can detect consistency or positive/negative trends in a company’s earnings. Positive profit margin analysis translates into positive investment quality. To a large degree, it is the quality, and growth, of a company’s earnings that ideally should see a rising Earnings per Share and Return on Equity these ultimately drive a stock price up.

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 – Choice of Super Fund for your staff – Know what to do

Basics about Super – Choice of Super Fund for your staff – Know what to do

Employers should be aware that employees who are eligible for super, in many cases are also eligible to choose the super fund you pay into for them. But if they aren’t eligible to choose or don’t make a choice, you must pay their contributions into your employer-nominated or default fund.

The ATO website explains further, as repeated here –

Step 1: Identify employees who are eligible to choose

When you employ new staff, check if they’re eligible to choose a super fund.

Your new employee is eligible to choose their super fund if they are:

• Employed under a federal award;
• Employed under a former state award, now known as a notional agreement preserving state award (NAPSA);
• Employed under an award or industrial agreement that does not require super contributions;
• Not employed under any state award or industrial agreement (including contractors who are regarded as eligible employees for super purposes).

If you’re not sure what, if any, award or industrial agreement covers your employee:

• Visit the Fair Work website at fairwork.gov.au;
• Phone the workplace relations department in your state or territory;
• Check with your employer association.

From 1 July 2015:

• You don’t need to offer choice to employees on temporary working visas. Your employee retains the right to request a standard choice form from you;
• You no longer have to provide a standard choice form to employees whose superannuation fund undergoes a merger or acquisition. Employees retain the right to request a choice form from their employer should they not wish to be placed in the successor fund.

Step 2: Provide a standard choice form

You must provide employees who are eligible to choose a super fund with a Standard choice form (or equivalent) within 28 days of their start date, unless they give you details of their chosen fund first.

You don’t have to use the Standard choice form, but any alternative document must cover all the information that the Standard choice form covers.

Existing eligible employees are entitled to change their choice of fund as often as they want to, but you have to accept a new choice from them only once in any 12-month period. If your employee asks for a choice form you have 28 days to provide it.

You need to keep a copy of the completed Standard choice form for your own records for five years. You don’t have to send a copy to us or to your employee’s chosen super fund.

You also have to give an employee a Standard choice form within 28 days if you:

• Can’t contribute to their chosen fund or it’s no longer a complying fund;
• Change your employer-nominated fund and you’re paying the employee’s contributions into that fund.

Step 3: Pay into your employer default fund until the choice form is returned

If your employees don’t choose a fund or haven’t provided the necessary information, and a super contribution is due, you must make the payment for them into your employer-nominated fund by the due date.

Step 4: Act on your employee’s choice

Once an employee advises you of their choice of super fund, you have two months to start paying contributions into that fund.

You may be penalised if you don’t offer your eligible employees a choice of fund or you don’t pay their super to their chosen fund.

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.