CASE STUDY – Sally felt she needed more self-control of her retirement after her husband passed away

CASE STUDY – Sally felt she needed more self-control of her retirement after her husband passed away

Sally felt she needed more self-control of her retirement after her husband passed away

After Sally’s husband passed away, and the business clients had been on-sold, she felt she needed more self-control of her retirement, and her plan was to have the ability to manage the super and her assets so she had more direct influence.

(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 – Sally’s husband passed away sooner than she had ever imagined. Their children were established in their careers so that was a comfort. Sally had taken care of the house and family finances, so she wasn’t scared to look after herself – but now doing it alone was a bit daunting. In the regular review with the financial advisor, they reviewed her position – assets, cash, investments and super.
  2. WANT to have – The aim was to be self-sufficient and comfortable in retirement, hopefully without Government support.
  3. 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 well over the ASFA definition of “Comfortable and allow meals out and even occasional trips overseas.
  4. NEED how much you need invested to cover the income requiredTo be safe, if a conservative investment return of 5% is used, (one 20th 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.
  5. 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 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, 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.

There was visible value in our property investment specialists and 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. 

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

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 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 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.

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.

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MASTERCLASS Investment – Financial Health Part 2 – What is the difference between Fundamental and Technical Analysis in Share Investing?

 

MASTERCLASS Investment – Financial Health Part 2 - What is the difference between Fundamental and Technical Analysis in Share Investing?

Investment – Financial Health Part 2 – What is the difference between Fundamental and Technical Analysis in Share Investing?

Share investors can tend to fall into 2 groups – fundamental analysis and technical analysis, and here we explain what is the difference between them – our experience is that both fundamental and technical, can help for increased share-market investment success. In Part 1 we looked at how to determine financially healthy companies to invest in.

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 mattersthat 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.  

Fundamental Ratio Cascade GpsA 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

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Pensions and Retirement – New Year Resolutions – 5 Easy Steps to Plan your Retirement

Pensions and Retirement – New Year Resolutions – 5 Easy Steps to Plan your Retirement

Pensions and Retirement – New Year Resolutions – 5 Easy Steps to Plan your Retirement

Studies show that most people spend more time planning the next holiday than ever spent on preparing for retirement – but it is not hard at all!

Consider if you are a –

  • Woman and want to retire at the age of 65, then you need to plan to be living the life of a retired lady for, on average, nearly 22 years – possibly as long as your time in the workforce, or time spent rearing children
  • Man, life expectancy is closer to 20 years at age 65.                  (Sourced from AIHW)

5 Steps to Plan for Retirement

  1. Where you are – what you own, what debts to repay – home loan credit cards, car loans, what you can save (and put extra into super instead of all savings taxed at top marginal rate)
  2. Want to have  – The vision – What type of lifestyle do you want in retirement? An overseas holiday every 5 years, regular local holidays, to dine out, to run mobile phone and internet…
  3. What it will cost –  rule of thumb is that you are likely to require between 60 and 80 per cent of your pre-retirement income to lead the active life that you’re probably expecting in retirement. But you can also calculate your cost of living – simply record and categorise all your spending for 2 months – total food, fuel, dinners out, movies, presents/gifts, insurances (monthly or use the annual amount divide by 12) etc
  4. What you need – Using the ASFA examples of cost of living, assuming you own your own home, cost could be over $44,000 a year (or just over $60,000 per couple) for a comfortable lifestyle
  5. What to do NOW – Calculate where/how that money will be derived – (Centrelink will assess your assets and income). Or plan to have enough invested and saved. – For $45,000 at a conservative 5% return you require $900,000, in assets that return $45,000 eg rental with 5% NET return after expenses.

My 5 Actions to take in the next 5 weeks

    _______________________________________________________________

     _______________________________________________________________

 

Get your FREE 5 Easy Steps to Plan Retirement One-Page planner from the Resources

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

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

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Masterclass SMSF – SMSF Rollover – Important things to consider

Masterclass SMSF – SMSF Rollover – Important things to consider

SMSF Rollover – Important things to consider

You can accept an SMSF Rollover from your commercial super funds (or other SMSF), but it is important to ensure the details are documented properly. The ATO website gives further guidance, and important things to watch –

Receiving a rollover

Before rolling over benefits to your SMSF, APRA-regulated super funds check with our systems to confirm that the person requesting the rollover is a member of your fund. So make sure your fund membership details are up to date in our systems and notify us of any changes.

A rollover from another fund is not included in the assessable income of your fund, unless the rollover amount includes an element untaxed in the fund.

If it does contain an untaxed element, you include the amount of that element in the assessable income of your fund – up to the untaxed plan cap amount – in the financial year the rollover occurs.

If the untaxed element exceeds the untaxed plan cap, the originating fund should withhold tax – at the top marginal rate plus Medicare levy – from the amount over the cap before releasing the rollover to your fund. You add this now-taxed amount to the tax-free component of the rolled-over amount.

Example: Rollover with an untaxed element

On 5 September 2014, Tom asks his fund to roll over his super interest of $1.5 million. This is an untaxed element. The untaxed plan cap amount for 2014–15 is $1.355 million, meaning that Tom’s rollover amount exceeds the cap by $145,000. The originating fund must withhold tax of $71,050 (49% of $145,000).

The amounts reported by the originating fund on the rollover benefits statement will be $73,950 ($145,000 − $71,050) at the ‘tax-free component’ label and $1.355 million at the ‘element untaxed in the fund’ label. Tom’s SMSF will report the $1.355 million as income at the ‘personal contributions’ label in the SMSF annual return.

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 – Can you transfer property “in-specie” from one SMSF to another?

NEWS – Can you transfer property “in-specie” from one SMSF to another?

NEWS – Can you transfer property “in-specie” from one SMSF to another?

If a self-managed super fund (SMSF) is short on cash to roll over a member’s benefits, it is possible for a member to transfer a property ‘in specie’ to another SMSF? (Query posted at Advisor Voice.com).

In NSW, transfers of property from one SMSF to another SMSF can be transferred with only concessional stamp duty of $500 payable if the relevant requirements of the Duties Act are met.

This method of transfer may be suitable where the SMSF does not have enough liquid assets to roll out a member’s benefits by way of cash only.

A combination of a transfer of property to the relevant member’s new SMSF with the remainder of the rollover to occur by cash is also possible.  This would mean that the SMSF would not have to liquidate its assets in order to have sufficient cash available for a rollover.

Some important things to consider prior to affecting a transfer include:

  • Ensuring the relevant trust deed of the SMSF contains powers to transfer property owned by the SMSF ‘in specie’
  • Whether the property meets the definition of “business real property” if the transfer is occurring from a SMSF who is considered a related party to the receiving SMSF
  • The current market value of the property to be transferred cannot exceed the total value of the member’s benefits to be transferred out of the SMSF

Our contacts can assist with the preparation of concessional stamp duty documents as well as attending to the lodgement of documents for stamping with the Duties Office and registration with the Titles Office.

Prior to proceeding with a transfer it is important that a member seek advice from their financial adviser and accountant as to whether such a transfer would be suitable.
Similar concessions or exemptions are available in other states, for example, Vic and WA.

Want to know the options and how property works in SMSF? See our FREE slides SMSFProperty 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. 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 – Financial Health Part 1 – How to determine a healthy company to invest your SMSF money

MASTERCLASS Investment – How to determine a healthy company to invest your SMSF money

Investment – How to determine a healthy company to invest your SMSF money

Whether for your SMSF investments or not, investors want to know how to determine a healthy company, that is, the financial health, as it helps investors (either those buying shares in listed and other companies, or business owners in their own companies) to be confident that the investment is worthwhile or going as expected, or improving or declining (which means it’s time to exit!).

Generally, a healthy company, financially, can be summarised in 4 main areas

liquidity, solvency, operating efficiency  and profitability.

And out of the 4 main areas, possibly the best measurement of a healthy company is the level of its profitability.

Investors and business owners often search for one key measurement that can be obtained by looking at a company’s financial statements for evaluating a stock or their business, but one is really not enough. To efficiently evaluate the financial health and long-term sustainability of a company, a number of financial ratios must be considered, the same as blood pressure doesn’t tell if there is diabetes or cancer – other tests reveal different elements.

There are a multitude of financial ratios that can be used to gauge a company’s overall financial health and determine the likelihood of the company continuing as a viable business. Single numbers such as total debt or net profit are less meaningful than financial ratios that connect and compare the various numbers on a company’s balance sheet and profit and loss. The general TREND of financial ratios – whether they are improving or declining over time, is the most important consideration, as well as comparisons to the ratios of general businesses in your industry.

Let’s look at one or two main ratios of each main area of a healthy company

Liquidity

Liquidity is a key factor in assessing a company’s basic financial health. Liquidity is the amount of cash and “easily-convertible-to-cash” assets a company owns, to manage its short-term (current, in 12 months) debt obligations.

The two most common metrics used to measure liquidity are the current ratio and the quick ratio which takes out inventory. Generally, a current or quick ratio lower than 1.0 is a danger signal, as it indicates current liabilities exceed current assets. Two is the preferred level for plenty of buffer.

Solvency

Similar to liquidity is solvency, a company’s ability to meet its debt obligations on an ongoing basis, not just over the short term. Solvency ratios calculate a company’s long-term debt in relation to its assets or equity.

The debt-to-equity (D/E) ratio is generally a solid indicator of a company’s long-term sustainability, because it provides a measurement of debt against stockholders’ equity, and is therefore also a measure of investor interest and confidence in a company. A lower D/E ratio means more of a company’s operations are being financed by shareholders and is low by creditors. This is positive for a company since shareholders do not charge interest on the financing they provide.

D/E ratios calculations vary widely between industries, but regardless of the specific nature of a business, a downward trend over time in the D/E ratio is a good indicator a company is on increasingly solid financial ground.

Operating Efficiency

A company’s operating efficiency is key to its financial success. Its operating margin/profit is the best indicator of its operating efficiency. This shows a company’s basic operational profit margin after deducting the variable costs of producing and marketing the company’s products or services; but is also an indication of how well the company’s management controls costs.

Profitability

While liquidity, basic solvency and operating efficiency are all important factors to consider in evaluating a company, the bottom line remains in the company’s bottom line: its net profitability!. Companies can survive for years without being profitable, operating on the goodwill of creditors, loans and investors, but to survive in the long run, a company must eventually attain and maintain profitability.

The best metric for evaluating profitability is net margin, the ratio of profits to total sales/revenues. It is important to consider the net margin ratio because a simple dollar figure of profit is inadequate to assess the company’s financial health. A company might have a net profit figure of a hundred million dollars, but if that dollar figure represents a net margin of only 1% or less, then even the slightest increase in operating costs or marketplace competition could plunge the company into the red and possible difficulty. A larger net margin, especially compared to industry peers, means a greater margin of financial safety, and also indicates a company is in a better financial position to commit capital to growth and expansion.

Want to learn the core issues of 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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Masterclass SMSF – Are SMSF setup costs deductible according to the ATO? What expenses are claimable?

Masterclass SMSF – Are SMSF setup costs deductible according to the ATO? What expenses are claimable?

SMSF – Are SMSF setup costs deductible according to the ATO? What expenses are claimable?

One important consideration we are asked concerning self-managed super funds (SMSF) is “are the set-up costs such as the Trust Deed, tax deductible for the SMSF?”

In taxation ruling TR 93/17 the ATO gives a number of explicit examples of the sorts of expenses that are tax deductible to an SMSF; as follows;

  • actuarial costs;
  • accountancy fees;
  • audit fees;
  • costs of complying with Government regulations;
  • costs in connection with the calculation and payment of benefits to members (but not the cost of the benefit itself);
  • investment adviser fees and costs in providing pre-retirement services to members;
  • other administrative costs incurred in managing the fund.
  • the fund’s annual lodgment fee, however a late lodgment penalty is not deductible;
  • legal expenses, although this usually depends on whether the expenses are of a capital or revenue nature;

While this list is not exhaustive, the deductablility of other expenses that a SMSF may incur will need to satisfy the general principles stated by the ATO at the beginning of this ruling as follows

General principles

  1. The tax deductibility of expenditure incurred by a superannuation fund is determined under section 8-1 unless a specific deduction provision in the income tax law, such as section 25-5, applies.
  2. Expenditure of a superannuation fund, which is not of a capital, private or domestic nature, is deductible under section 8-1 to the extent that:
  • it has the essential character of an outgoing incurred in gaining or producing assessable income; or
  • it has the character of an operating or working expense of a business or is an essential part of the cost of the fund’s business operations.

Further clarification of this issue is specifically covered in Taxation Ruling 2672. Basically, costs incurred by a trustee of a superannuation fund in amending the fund’s trust deed are not deductible under subsection 51(1). Rather, they are classed as outgoings of capital or of a capital nature.

Specific examples that the ATO give of amendment costs which are not deductible are costs incurred in:

  • establishing a trust; and
  • executing a new deed for an existing fund; and
  • amending a deed to enlarge or significantly alter the scope of the trust’s activities.

But if the amendments are needed due to changes in Government regulations, and are made to ensure that the fund’s day to day operations continue to satisfy its compliance obligations, then costs incurred by a SMSF trustee in amending a trust deed are deductible.

What else IS deductible?

  • life insurance premiums
  • “Any occupation” TPD total and permanent disability premiums
  • partial deduction for “own occupation” TPD total and permanent disability premiums (Click Here for more info on TPD and tax deductibility).
  • investment research subscriptions

What else is NOT deductible?

  • upfront fees incurred in investing money are of a capital nature and are not deductible;
  • investment or administration charges levied by a life assurance company;
  • costs attributable to the earnings of assets backing tax exempt income streams

Notes about Aportionment – Any expenditure incurred in gaining or producing exempt income only (such as an SMSF income stream/pension) is not deductible. Now what happens when there is both an accumulation and a pension account within the SMSF? Expenditure (e.g. general administrative expenses of managing your SMSF) which is incurred partly in producing assessable income and partly in gaining exempt income must be apportioned. Remembering the general principle, the expenditure is deductible only in proportion to which it is incurred in producing assessable income. Therefore, each of the expenses listed above would need to be apportioned if it is incurred partly in producing assessable income and partly in producing exempt income. This is when an actuary certificate is required by law to determine the proportion of exempt  pension income and expense.

GO to the ruling HERE

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.

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