Pensions – Centrelink – New Asset Test Levels and taper rate that could reduce the pension received

Pensions – Centrelink – New Asset Test Levels and taper rate that could reduce the pension received

Centrelink – New Asset Test Levels and taper rate that could reduce the pension received

If you receive or are about to receive an Australian Government pension, there are new asset test levels and taper rates from the start of next year 2017 you need to know about, which could reduce the pension received, as explained at the Humans Services website.

From the first of January 2017, the assets test free area will increase, which means you can own more assets before your pension is affected.

The new asset test free area will increase to:

  • $250,000 for a single homeowner
  • $375,000 for a homeowner couple
  • $450,000 for a single non-homeowner, and
  • $575,000 for a non-homeowner couple

This means some may get more in your pension.

At the same time, on the other hand, the taper rate for pensioners will also increase. This will see a reduction in payments for some, while others may have their pensions cancelled.

The family home is still exempt from the assets test.

Asset limits for allowances will also increase. There will be no reduction or cancellation of allowances as a result of this change.

Read more about the asset test limits.

How the change will work

At present, for every $1000 of assets you own above the assets test free area, your pension is reduced by $1.50 per fortnight.

From the first of January 2017, this doubles, to $3.00 per fortnight per $1000.

If your payment is cancelled on the 1st January 2017 as a result of this change, you’ll automatically get a Low Income Health Care Card. If you’re over age pension age, you’ll also get a Commonwealth Seniors Health Card. In this instance, you’ll not have to meet the usual income test requirements for these cards.

Pension Bonus Scheme

If you’re registered for the Pension Bonus Scheme, your bonus depends on the rate of Age Pension you’ll receive when you claim it. This rate may be different before and after 1 January 2017. You may wish to consider this if you have flexibility as to when to claim.

Read more about the Pension Bonus Scheme.

Aged Care Fees

This change may affect your government subsidised aged care fees. This is because your income, including your pension, affects your fees. If your pension is reduced or cancelled, we’ll send you a letter. You’ll receive a separate letter if your aged care fees change.

Read more about aged care means test assessments.

To read more and see a video or transcript explaining the changes, go to this Humans Services website page.

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 your 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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Masterclass SMSF – Collectables Regulations – Keeping compliant

Masterclass SMSF – Collectables Regulations – Keeping compliant

SMSF – Collectables Regulations – Keeping compliant

Collectables in Self-Managed Super Funds (SMSF) have certain Regulations around them that require you to be aware of new rules about storage and insurance to ensure you are keeping compliant.

The new regulations began in July 2011 with a deadline in July 2016 – the effect has seem more than a 50% drop in the level of collectables held in SMSFs over these 5 years – from $713 mill (0.18%) to $419 mill (0.07%)!.

The Australian Tax Office (ATO) as regulator, as SMSFs explains  –

Definition of collectables and personal use assets

Collectables and personal use assets are:

o      artwork – including paintings, sculptures, drawings, engravings and photographs

o      jewellery

o      antiques

o      artifacts

o      coins, medallions or bank notes    

  • coins and banknotes are collectables if their value exceeds their face value
  • bullion coins are collectables if their value exceeds their face value and they are traded at a price above the spot price of their metal content

o      postage stamps or first-day covers

o      rare folios, manuscripts or books

o      memorabilia

o      wine or spirits

o      motor vehicles and motorcycles

o      recreational boats

o      memberships of sporting or social clubs.

Definition of private residence

A private residence includes all parts of a private dwelling (above or below ground), the land on which the private residence is situated and all other buildings on that land, such as garages or sheds.

Usage

Collectables and personal use assets can’t provide a present day benefit so they can’t be used by members or related parties.

For example, if your SMSF owns a vintage car, related parties can’t drive it for any reason – not even for maintenance purposes or to have restoration work done – because this constitutes use of the asset. However, a person who is not a related party can drive the vehicle for such a purpose.

Display or storage

Collectables and personal use assets must not be stored in the private residence of any related party. If they were acquired before 1 July 2011 you have until 1 July 2016 to meet this requirement.

You can store (but not display) collectables and personal use assets in premises owned by a related party provided it is not their private residence. They can’t be displayed because this means they are being used by the related party. For example, if your SMSF invests in artwork it can’t be hung in the business premises of a related party where it is visible to clients and employees.

Remember to keep a record of the reasons for deciding on where to store the assets.

Insurance

Collectables and personal use assets purchased by the fund must be insured in the name of the fund within seven days of the purchase.

As part of the decision to invest in collectables and personal use assets, you need to consider the availability and cost of insurance. If your fund has made the investment and you find you can’t obtain insurance, contact both your fund’s SMSF auditor and the ATO to try to rectify the situation.

Your fund’s collectables and personal use assets may be insured under separate policies or collectively under the one policy, but it must be in the name of the fund. You can’t, for example, insure the assets as part of a trustee’s home and contents insurance.

If you acquired a collectable or personal use asset prior to 1 July 2011, you must insure it in the name of the fund prior to 1 July 2016 to comply with the rules.

Leasing

You can only lease collectables and personal use assets to an unrelated party and the lease must be on arm’s length terms.

For example, your SMSF can lease artwork to an art gallery provided the gallery is not owned by a related party and the lease is on arm’s length terms.

Selling

Collectables and personal use assets can be sold to a related party provided the sale is at market price as determined by a qualified, independent valuer.

  • A valuer is qualified either through holding formal valuation qualifications or by being considered to have specific knowledge, experience and judgment by their particular professional community.
  • A valuer is independent if they are independent of the interests of the fund. This means the valuer should not be a member of the fund or a related party of the fund (for example, an investment partner).

If your fund acquired the collectable or personal use asset before 1 July 2011 and sells it before 1 July 2016, the transaction does not need to be supported by a valuation determined by a qualified independent valuer. However, the transaction must still take place on arm’s length terms.

Valuations are discussed and explained here – Valuation guidelines for self-managed super funds

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 YouTop right hand side above.

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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NEWS – Do you feel in the dark about super tax changes?

NEWS – Do you feel in the dark about super tax changes?

NEWS – Do you feel in the dark about super tax changes?

Did you know, almost one-third of Australians surveyed by ASFA reported they had ‘no idea’ about the government’s proposed super tax changes to the taxation of superannuation. Do you also feel in the dark?

The Association of Superannuation Funds of Australia (ASFA) commissioned CoreData to conduct a survey of 1,000 Australians to gauge consumer attitudes towards superannuation.

While one-third of respondents said they had ‘no idea’ about impending changes to the taxation super, the number of people with multiple accounts has halved since ASFA’s 2013 survey.

Sixty-five per cent of respondents said they were happy with their superannuation fund, but 70 per cent of super members have not read the associated product disclosure statement and are either making decisions based on emotion or opting to use default funds, ASFA research has found….

The Australian Institute of Superannuation Trustees similarly noted a majority of Australians relied on default super funds in its submission to the Productivity Commission regarding proposed changes to default super arrangements.

Additionally, ASFA said that while more than half of Australians thought the superannuation system was a good way of managing retirement income, 50 per cent were unsure of how much super they’ll need for retirement.

A Mercer study released last week found that only 53 per cent of men and 41 per cent of women were on track to reach a super balance that could support a comfortable retirement, with millennials among those “not doing so well” with regard to super savings. Read MORE from Investor Daily.

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

Posted in News & Stats, Pensions / Income Streams, Retirement Planning, SMSF Info, Superannuation General | Tagged , , , , , , | Leave a comment

MASTERCLASS Investment – Ratio Analysis – What it is, where to get the data and how to use the ratios

MASTERCLASS Investment – Ratio Analysis – What it is, where to get the data and how to use the ratios

Investment – Ratio Analysis – What it is, where to get the data and how to use the ratios

In this Masterclass explain Ratio Analysis of companies/stocks, including what it is, what data and where to get what we need and how to use the ratios.

What is Ratio Analysis?

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication of a firm’s financial performance in several key areas by using ratios (simply, one number divided by another). The ratios are categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset Management Ratios, Profitability Ratios, and Market Value Ratios.

Ratio analysis involves comparing different numbers from the balance sheet, income statement / profit and loss and cash flow statement. It’s most effective when comparing these numbers against previous years, other companies and the industry while bearing in mind the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, which may indicate how it might perform in the future.
As an example, current assets alone don’t tell us a whole lot, but when we divide them with current liabilities we get the Current Ratio an indication of whether the company has enough money to cover short-term debts.
In this class, we’ll show you how to use ratio analysis to analyse financial reports and get an insight into companies by comparing these ratios against previous years, other companies and industry averages to see how they can tell you a lot about where a company might be headed. Evaluating a company is no easy task, so let us help shed some light on how it can be done and, ultimately, help you to make more informed choices as an investor.

Where is the data?

There are several different places you can find the latest financial figures for a particular company. Finding financial reports is easier than ever now, with the Internet, and here are some sources:

  • Company Websites Most public companies have a website or investor relations department. For the most current half year (Aust) quarterly (USA) or annual report you find them on their websites and also look for their investor relations sections.
  • Australian Stock Exchange (ASX)(Aust)Have their offices in major cities Melb, Syd etc, and also their website http://asx.com.au/ there are Free member offers announcements, education, company search, market statistics and more. The company search is also invaluable – http://www.asx.com.au/research/company-research.htm
  • Securities and Exchange Commission (SEC) (USA) – The information posted in the electronic gathering, analysis and retrieval (EDGAR) database includes the annual report (known as the 10-K), quarterly report (10-Q), and a myriad of other forms that contain every type of financial data.
  • Yahoo! Finance – A great resource for many individual investors, Yahoo! Finance is great for financial news, and lays out ratios and performance data for individual companies.
  • Trading room in Aust http://www.tradingroom.com.au/apps/index.ac  – A great site for company info, charts; some basic analysis as well as market info and current intra-day news.

How to create and use the ratios

There are 70-90 or more possible ratios. A ratio is simply taking one number from a financial statement and dividing another number into it. Quite simple, no complicated maths. Over time a core dozen or so ratios have been considered essential and some of these are – (click names to learn about them)

Debt to Equity

Current Ratio – one sign of business health

Price to earnings

ROE – Return on Equity – also see Why avoid companies with low ROE

ROA – Return on Assets

Want to learn the core issues of Ratios and share investing?

Our slides SMSF & Shares Overview gives a quick 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.

If you have questions, call 0407 361 596

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NEWS – Better to focus on what Retirement Super savings can deliver, and how to get the most from super

NEWS – Better to focus on what Retirement Super savings can deliver, and how to get the most from super

Better to focus on what Retirement Super savings can deliver, and how to get the most from super

A recent report says we should focus on how to get the most from what Retirement Superannuation savings can deliver. At Financial Observer, Daniel Paperny writes –

In the wake of incoming reforms to superannuation tax concessions, the industry must shift its focus from accumulation to the retirement phase to help retirees make the most of their savings, according to a new KPMG and Challenger white paper.
Titled Guiding members safely down a path in retirement, the paper argues that the messaging around adequacy in retirement should refocus on engaging members on the importance of their super, and by extension the role of their super fund, throughout their later years.
“Without an understanding of what super can deliver in retirement, there is a danger that many people will discount the importance of super, relying only on the age pension instead of maximising and making the most of their savings,” the report states.
Living off your super in retirement needs to be positioned as a solution and not a problem.”
The white paper argues that super funds face a “pressing” challenge to develop new products and solutions that integrate engagement and advice to meet the changing needs of fund members – including providing steady returns in the retirement phase in increasingly volatile market conditions.
“With the purpose of super clear in providing income throughout retirement, members need a safe path down the mountain,” the report states. “For funds that successfully achieve this, the result will be successful outcomes for retiring members and better engagement with members throughout their membership based on a clear understanding of the whole super journey.”
The white paper noted that while the government should be lauded for accepting many of the key recommendations of the Financial System Inquiry, there was still a lack of awareness among members surrounding the link between the investment success of their funds and their retirement benefits.
Too many members were disengaged, but KPMG and Challenger argued that this could change as the industry continued to mature and realised the need to provide better retirement solutions.

What are your Thoughts? Comment below!

Want to know the options and what we need to retire on, the super system in Australia and what is self-managed super? 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

Posted in News & Stats, Pensions / Income Streams, Retirement Planning, SMSF Info, Superannuation General | Tagged , , , , , , | Leave a comment

Basics About Super – An overview of the Superannuation system in Australia to save for your retirement

Basics About Super – An overview of the Superannuation system in Australia to save for your retirement

Basics About Super – An overview of the Superannuation system in Australia to save for your retirement

The Superannuation system is a long term savings arrangement by the Australian Government to save for your retirement, and help ensure Australians have enough income in retirement.

The Money Smart website is a great source of information, and some key exerts from the site are included in this article –

Super money is predominantly paid in by employers, the self-employed for themselves, and your own top-up as employees and for family members (on behalf of others) by making contributions to a super fund. The Government will sometimes also add to your super with co-contributions and the low income super contribution.

Currently the employer (concessional) contribution is 9.5% from 1 July 2014, called the Super Guarantee, and is increasing to a proposed 12% by 2019. Over time these contributions add up or “accumulate” which is known as accumulation phase, and the money is invested so it grows over this time, as a life-time investment.

Contributions can be made to either of 3 types of fund accounts (you have choice of fund):

  • Independent Large Super Funds – retail, industry, bank and financial institutions (APRA – Australian Prudential Regulatory Authority is the regulator)
  • Retirement Savings Accounts (RSA) banks, institutions (rare)
  • Self-Managed Super Fund (SMSF) you manage it (ATO – Australian Tax Office is the regulator), also known as SMSF or DIY funds. See our education slides SMSF & Shares Overview as well as Superannuation and SMSF for Business Owners.

Super is a low tax saving environment – currently 15% on contributions in from employers etc, and 15% in income earned on the invested super money – eg dividends, interest etc.

The 9.5% 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 employees earn for their 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.

You can make extra contributions by:

  • Putting some of your savings into your super account
  • Asking your employer to deduct extra money from your pay (before tax is taken out) and pay this into your super account – this is called contributing extra to super.
  • Transferring super from another fund into your main super account on a regular basis

For self-employed people, your super contributions may be tax deductible. To calculate what amount of super you should be receiving form employment, the ASIC (Australian Securities and Investments Commission) MoneySmart website has a calculator.

Most people can choose which super fund they’d like their super contributions paid into. If you want to choose your super fund, tell your employer by filling in a Standard choice form from the Australian Taxation Office (ATO) or from your employer.

In some cases your employer will decide which fund your super is paid into. If you don’t (or can’t) choose your super fund, your employer will put the money into a ‘default’ super fund, a fund nominated under an industrial award or by your employer.

See choosing a super fund at MoneySmart for more information.

Money in your super fund account is invested by your super fund. Most super funds offer a variety of investment options.

For example, if you choose a market-linked investment, the value of your super will move up and down with market movements. Or you might select a stable option with lower expected returns but fewer ups and downs.

You can choose how you’d like your money invested, if you want to. You can also transfer your money to a different investment option within the fund, or transfer to another super fund at any time.

See super investment options for more information.

When you retire and have reached your preservation age (i.e. 55 to 60), you can withdraw your super. There are three ways you can get your super:

  • As a lump sum
  • As a retirement income stream (e.g. a monthly payment)
  • 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.

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 assist finding 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 Youtop right hand side above.

Posted in 2 Past Newsletter Topics, Retirement Planning, Superannuation General | Tagged , , | Leave a comment

Masterclass SMSF – Risk Profile – Importance and tools to assist but cautions to consider

Masterclass SMSF – Risk Profile – Importance and tools to assist but cautions to consider

SMSF – Risk Profile – Importance and tools to assist but cautions to consider

Part of compliance for SMSF trustees is the Investment Strategy, which considers the investment risk – but you also need to keep in mind each member’s Risk Profile as well as the importance of it – here we also look at tools to assist, but also cautions to consider in the process!

As part of the investment strategy the investment risk needs to be considered, but also risk relates to the members – what is THEIR Risk profile (tolerance/general group they fall with)? All investments are a trade-off of risk and return, so risk profiling may help measure a person’s willingness to take more or less risk – in other words their tolerance from low to high risk. Often trustee/members believe they know how much risk they want to take and invest narrowly in one major class eg property or shares (or worse, with many SMSF – only cash and term deposits/fixed interest).

So are you like a Volvo driver (safe and conservative), or Rally Car Driver (eager for speed and adventure)? A financial advisor, or other sources can supply tools to help determine a person’s profile. Knowing this means trustees can invest more academically to align with member profiles.

A generally agreed grouping suggests 6 risk profiles, and examples of investment spread in the following table might be –

risk-profiles

The amounts above are %, and each column/profile totals to 100%, that is, all the monies and how much in each asset class.

Some good free risk-profile tool can be found online – BT Risk Profiler, Suncorp, and 10thousandgirl as examples.

Mistakes with risk profiling can include forgetting to review profiles over time as people’s attitudes change, forgetting to consider future investment changes, misinterpreting tool results, forgetting the time horizon etc. For more detail about mistakes, go HERE.

What mix do you consider fits your member profiles?

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.

Posted in Masterclass SMSF - advanced issues, Super Tax, Superannuation General | Tagged , , , | Leave a comment